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Hello Readers,
Since the last Newsletter, we closed one position for a loss.
COMPLETE GENOMICS (2/20/12). Closed position 9/26/12 at $3.15 for a 22% LOSS.
We did not envision ending our drought of closing Current Positions with a loss, but we had to such it up as Complete Genomics was acquired by BGI-Shenzhen at $3.15 a share, which we think is a steal; and judging by the number of law suits being filed against the acquisition, we are not alone in our thinking.
So QE3 came and went and the markets have remained pretty much unchanged, as has much of our Current Portfolio. Why haven’t the markets screamed even more? Europe and the pending U.S. elections may have something to do with it, although Europe is still the biggest drag. The problems there are worsening. The major snag with all of this worldwide quantitative easing is that the money is not going to the people; it is being directed to the financial institutions who are basically funneling it into equities, which is creating a great deal of distorted stock prices. In the meantime, the dollar is being shredded slowly but surely and this cannot be tolerated much longer.
Here are the headlines since our last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be high significant.
Meru Networks (MERU)(8/20/12). Delivers campus-wide Wi-Fi for Texas A&M University Commerce.
Novatel Wireless (NVTL)(8/5/12). Introduces MiFi2.
pSivida (PSDV)(8/5/12). Recent balance sheet looks pretty good.
Rare Element Resources (REE)(6/20/12). Reports positive 2012 drilling program results. Company is added to S&P/TSX Small Cap Index.
Avanir Pharmaceuticals (AVNR)(6/5/12). Achieves commercial milestones and provides clinical updates.
Capstone Turbine (CPST)(5/20/12). Receives 5MW follow-on order from Canada’s Genalta Power.
Senomyx (SNMX)(5/20/12). To present at the Telsey Advisory Group confab on October 3.
Zogenix (ZGNX)(4/20/12). Announces availability of new resources for migraine sufferers.
Air Media Group (AMCN)(4/20/12). Increases share repurchase program to $40 million.
Axcelis Technologies (ACLS)(4/5/12). Lands global support contract for leading chip manufacturer valued at $30 million over five years.
Ballard Power (BLDP)(3/20/12). Ships initial 100 ElectraGen Systems for backup power in wireless telecom networks.
Nexus Lighting (NEXS)(12/5/11). This one is still on the “Endangered List” but the company has settled patent litigation with Philips and closed on a $6 million investment by Aston Capital, which raises some hope here.
Synthesis Energy Systems (SYMX)(8/20/11). Recent balance sheet still looks pretty good as company closes on $8.7 million equity investment.
Cover-All Technologies (COVR)(7/20/11). Company’s BlueWave claims recognized in Aite Claims Report.
Idera Pharmaceuticals (IDRA)(6/5/11). To present at the 3rd annual Cancer Immunotherapy Conference.
GSE Systems (GVP)(4/20/11). Receives $3.7 million payment from international customer. Announces release of Virtual Flow Loop Trainer.
ThermoGenesis (KOOL)(4/5/11). Latest numbers could have been better; balance sheet still looks good. Announces new cord blood products distribution agreements,
Oculus Innovative Sciences (OCLS)(3/5/11). Announces publication of results from study of Microcyn technology-based antipruritic hydrogel; a reduction in itch as early as day three was reported by 14 of 17 patients. See faster path to positive EBITDAS as a results of recent partnership.
Sprint Nextel (S)(1/5/11). Sets earnings call for October 24. Also, the usual several dozen news stories and articles about the company.
Astex Pharmaceuticals (ASTX)(12/5/10). DACOGEN approved in the European Union for treating acute myeloid leukemia. Stops developing possible cancer treatment, but stock holds pretty steady.
ProPhase Labs (PRPH)(10/5/10). Rejects non-binding proposal to be acquired for $1.40 per share from Matrixx Initiatives.
Rexahn Pharmaceuticals (RNN)(7/20/10). Granted European patent for novel anti-cancer isoquinolinamine compounds.
NovaBay Pharmaceuticals (NBY)(4/20/10). Receives $2.6 million from partner Galderma as both companies enroll first patients in Phase 2b clinical study of NVC-422 for Impetigo.
Novavax (NVAX)(4/5/10). Presents RSV vaccine data that reinforce previous clinical and preclinical studies; Phase 2 studies to begin in the 4thQT of 2012.
Performance Technologies (PTIX)(7/20/09). NewCore Wireless selects company’s signaling solution for network growth and evolution.
YM Biosciences (YMI)(11/5/06). Recent balance sheet looks real strong. Company is advised that licensees for nimotuzumab are evaluating the drug in trials.
Our picks for this Newsletter are another one of those small biotechs and a social media name that most of you have heard of, both trade on NASDAQ.
ANTHERA PHARMACEUTICALS, INC. (NASDAQ: ANTH) – $1.00. Twelve-month hi-low has been $8.42 – 60 cents. Based in Hayward, CA, with about 35 employees, this biotech has 79.1 million shares outstanding, $23.19 million in total current assets, $24.66 million in total assets, and $43.21 million in total liabilities, of which $15.92 million in long-term debt. Institutional ownership is around 55%. Two analysts rate the stock a “strong buy”, three as a “buy”, and two as a “hold”. www.anthera.com
The first thing you notice about Anthera Pharmaceuticals, Inc. is the long-term debt, and, usually, we avoid companies with this much red ink. But the company still has a decent cash position along with major institutional backing and almost a half dozen analysts have some sort of “buy” on the stock. So, we are thinking they may know something we don’t know.
Founded in 2004, and public for nearly three years, Anthera is developing products to treat inflammatory diseases. The company’s development programs focus on anti-inflammatory therapeutics for cardiovascular diseases, lupus, and other serious diseases. Its main product candidate is blisibimod, which is in clinical trials for treating systemic lupus erythematosus (SLE). In addition, blisibimod targets B-lymphocyte stimulator (BLyS), also known as B-Cell Activating Factor (BAFF), which has been associated with a range of B-cell mediated diseases. The company’s other drug candidates, varespladib and varespladib sodium, are designed to an enzyme target known as phospholipase A2 (sPLA2), which have been implicated in a range of inflammatory conditions, including acute coronary syndrome and acute chest syndrome associated with sickle cell disease, as well as in chronic diseases, including stable coronary artery disease (CAD).
Anthera has license agreements with Eli Lilly and Shionogi & Co. to develop and commercialize SPLA2 inhibitors for treating cardiovascular disease and other diseases; and Amgen to develop blisibimod for treating systemic lupus erythematosus (SLE).
In mid-September, Anthera announced the advancement of blisibimod into Phase 3 development for patients with SLE.
Anthera is pretty typical of most small biotechs in that it makes very little or no money and has a ton of losses, i.e. for the quarter ending 6/29/12, income was zilch and losses totaled $17.6 million.
Other than our above reasoning, we also like the alliances that Anthera has made with some major biopharma names.
Our 24-month target for the stock is $1.80 to $2.20.
For more information, contact ANTH’s Bianca Nery at 510-856-5586, bnery@anthera.com
ZYNGA, INC. (NASDAQ: ZNGA) – $2.84. Twelve-month hi-low has been $15.91 – $2.66. Based in San Francisco, with about 2800 employees, this social media gaming company has 759.6 million shares outstanding, $1.45 billion in total current assets, $2.72 billion in total assets, little debt, and $861.74 million in total liabilities. Institutional ownership is around 44%. Two analysts rate the stock a “strong buy”, two as a “buy”, and sixteen others as a “hold”. www.zynga.com
We’ll be blunt. Zynga, Inc. is a crap shoot. We ourselves have never been enamored with the social media stocks because trading them is like catching falling knives. This one, though, may have already bloodied enough people and could see a dead-cat bounce. The company has a very strong balance sheet to its credit, then, again, it hasn’t had much time to spend its recent IPO money.
Founded in 2007, and public for less than a year, Zynga is a social game service with nearly 240 million average monthly active users in over 175 countries. The company offers games under the names, probably familiar to many of you, CityVille, Zynga Poker, FarmVille, CastleVille, FrontierVille, Mafia Wars, Word with Friends, Hidden Chronicles, Zynga Bingo, Scramble with Friends, Slingo, and Dream Heights. Its games are available on various platforms, including Facebook and other social networks, as well as Apple iOS and Google Android worldwide.
Zynga operates its games as live services and all are free to play, as it generates revenue through the in-game sale of virtual goods and advertising. In March, the company acquired OMGPOP, makers of the cultural hit mobile game, Draw Something, and over 35 additional social games. In an effort to re-juice its gaming inventory, Zynga, last month, acquired A Bit Lucky for an estimated $20 million to $25 million.
We should mention that the company is locked in a lawsuit with Electronic Arts over the likeness of The Ville and The Sims Social.
For FY2011, ending 12/30/11, revenue was $1.14 million with $404.3 thousand in losses. During the first six month of the current FY, ending 6/30/12, revenue was $653.46 thousand with $108.16 thousand in losses.
As we said above, this is a dice roll. The bet being that Zynga puts that large pile of money to better use.
Our 24-month target for the stock is $5.00 to $5.75.
For more information, contact ZNGA’s Michelle Kramer at 415-503-0303; press@zynga.com
Look for the October 20, 2012 Newsletter to be posted on 10/16 or 10/17.
Thank you,
George