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Hello Readers,
Since the last Newsletter, we closed seven positions; five for gains and two for losses.
HEALTH GRADES (5/20/09). Closed position 9/24/09 at $5.20 for a 56% GAIN.
DIGIRAD (8/20/08). Closed position 9/24/09 at $2.82 for a 52% GAIN.
HEALTHSTREAM (10/20/06). Closed position 9/23/09 at $5.50 for a 51% GAIN.
ONCOLYTICS BIOTECH (6/5/07). Closed position 9/18/09 at $3.18 for a 56% GAIN.
PDF SOLUTIONS (7/5/09). Closed position 9/17/09 at $3.86 for a 58% GAIN.
PROXIM WIRELESS (11/5/06). Closed position 9/16/09 at 19 cents for a 92% LOSS.
NEOSE TECH (12/20/06). Closed position 9/16/09 at 10 cents for a 96% LOSS.
Many times, a lot of our picks just sort of laze around, and, then, for no obvious reason they bolt upward, as were the cases with Oncolytics Biotech, PDF Solutions, HealthGrades, and Digirad. HealthStream got a nice pop on news that it was partnering with Quorum Health to deliver solutions to support healthcare organizations. And, we closed Proxim Wireless and Neose Tech for some ugly losses.
Do we need to say it, again? This market continues to remain way over-bought, courtesy of the Federal Reserve, which we believe has created a massive equity bubble thanks to near zero interest rates. Most of the participants have been momentum daytraders and institutional short sellers. As we have been warning for months: be careful; be very very careful.
Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about stocks on the “Endangered List” unless we feel the news to be significant.
BioSante Pharmaceuticals (BPAX)(9/20/09). Company and Cell Genesys announce final exchange ratio for merger.
Adept Technology (ADEP)(9/5/09). Company’s Quattro s650H robot to be showcased at Taiwan International Photovoltaic expo October 7-9. Unveils new USDA accepted robot for high speed food handling. Demonstrates advanced packaging management software solution and advanced packing solutions.
Evolution Petroleum (EPM)(8/20/09). FY revenues improve year-over-year but 4thQT revenues drop during same period; balance sheet still looks okay.
Anadys Pharmaceuticals (ANDS)(8/20/09). To present at the JMP Securities Healthcare Focus Conference on October 5.
Occam Networks (OCNW)(8/5/09). Expands into European FTTP markets.
BioClinica (BIOC)(8/5/09). Acquires Tourtellotte Solutions.
Salary.com (SLRY)(7/5/09). Enters sales incentive compensation market with acquisition of Makana Motivator Technology.
USA Technologies (USAT)(6/5/09). Recent downturn in revenues about what was expected; balance sheet still looks okay.
Ligand Pharmaceuticals (LGND)(2/20/09). To present at the JMP Securities Healthcare Focus Conference on October 6. Company and GlaxoSmithKline collaboration identifies new compound and Ligand receives $500,000 payment from Glaxo.
Market Leader (LEDR)(12/20/08). Unveils new Growth Leaders product.
The Orchard (ORCD)(11/20/08). CEO steps down; interim CEO named, as company lays off 20% of its staff.
Oilsands Quest (BQI)(10/20/08). Files shelf registration.
SCM Microsystems (SCMM)(10/5/08). To acquire Swiss company Bluehill ID in an all-share transaction. Announces portable smart card reader and software development kit for multiple contactless applications. CFO steps down.
ICAgen (ICGN)(8/5/08). Announces initiation of Proof-Of-Concept study of ICA-105665 in photosensitive epilepsy. Extends licensing partnership with Pfizer for one year.
U.S. Geothermal (HTM)(8/5/08). Starts two new drilling programs at Neal Hot Springs project.
Hythiam (HYTM)(7/20/08). Closes $7 million registered direct offering. This is on the “Endangered List”.
Neurobiological Technologies (NTII)(7/5/08). Receives NASDAQ minimum bid notice.
Energy Focus (EFOI)(6/5/08). Acquires lighting energy services company. Awarded $3.1 million to develop high efficiency solar module with DARPA consortium.
Bridgeline Software (BLSW)(6/5/08). iAPPS version 2.8 delivers search engine optimization and blogging capabilities. Releases iAPPS Rapid Site for what it says enables quick, low-cost deployment of website, intranets and portals.
Microvision (MVIS)(5/20/08). Receives purchase order and begins shipping world’s first laser Pico Projector, SHOWWX.
Ziopharm Oncology (ZIOP)(5/5/08). To present at the JMP Healthcare confab on October 5. Files registration statement for secondary offerings.
Biolase Technology (BLTI)(4/5/08). Announces distribution agreements in China.
Hollis-Eden Pharmaceuticals (HEPH)(12/20/07). Receives NASDAQ minimum bid notice.
Linktone (LTON)(11/5/07). Schedules annual meeting for October 19. Establishes exclusive partnership with Major League Baseball Advanced Media.
American Technology (ATCO)(10/5/07). Receives an opening order for 17 LRAD systems from the Japan Coast Guard. Company LRAD supports Pittsburgh law enforcement at G20 Summit.
XATA Corp (XATA)(9/20/07). Signs partner services pact with Digi International.
Pharmacyclics (PCYC)(6/20/07). Recent balance sheet still looks okay.
ECtel (ECTX)(5/5/07). Receives NASDAQ minimum bid notice.
VocalTec (VOCL)(4/20/07). Achieves milestone with over 100 deployments of its Essenta VoIP solutions on IBM system X Platform. This is on the “Endangered List” but we are rethinking it.
Urologix (ULGX)(2/20/07). Receives deficiency letter from NASDAQ.
Lantronix (LTRX)(12/5/06). Selected by Secura Key for its next-generation secure entry access products.
YM Biosciences (YMI)(11/5/06). Recent balance sheet still looks good.
Hydrogenics (HYGS)(9/20/06). Announces order for six electrolyzers in India. This is on the “Endangered List”.
8×8 (EGHT)(1/20/06). Several news releases about products improving various workplaces.
RAE Systems (RAE)(10/5/05). To exhibit gas detection products at ISA Expo October 6-8.
Nova Measuring Instruments (NVMI)(11/5/04). Leading foundry selects Nova as provider of Optical CD for 22/32nm technology nodes.
Our picks for this Newsletter are another biotech and a medical device maker for the plastic surgery market, both trading on NASDAQ.
AVANIR PHARMACEUTICALS, INC. (NASD: AVNR) – $2.05. Twelve-month hi-low has been $4.09 – 23 cents. Based in Alisa Viejo, CA, with about 20 employees, this drug maker has 78.5 million shares outstanding, $26.67 million in total current assets, $29.27 million in total assets, little debt, and $14.11 million in total liabilities. Institutional ownership is around 11%. www.avanir.com
Sometimes small biotechs, like Avanir Pharmaceuticals, Inc. have a product that actually brings revenue to help offset the steep losses usually incurred by such companies. It also helps that AVNR has other products in the hopper and a decent balance sheet, which will be strengthened by its recent $10.6 million secondary offering; this is not reflected in the above numbers.
Founded in 1988, and public for over fifteen years, Avanir focuses on developing and commercializing product candidates for treating chronic diseases in the central nervous system and inflammatory disorders. Its lead product candidate, Zenvia, is in Phase III clinical development for treating pseudobulbar (PBA), also known as involuntary emotional expression disorder (IEED), and also for treating peripheral neuropathic pain (DPN pain). Avanir’s first commercialized product, “abreva”, is marketed in North America by GlaxoSmithKline and is billed as the leading over-the-counter product for treating cold sores. The company’s inflammatory disease program, which targets migration inhibitory factor is partnered with Novartis. Avanir had a portfolio of human anthrax antibodies but has licensed these to Emergent BioSolutions.
In August, a late-stage clinical trial showed that Zenvia treating for PBA, the neurological disorder that causes unprovoked emotional outbursts, successfully addressed FDA safety concerns. Also, at this time, Beacon Equity released an investment report that said “if ultimately approved by the FDA, the market for Zenvia could reach $500 million to more than $1 billion at its market saturation. Zenvia is in Phase III clinical trials, with the prospects of reaching commercialization being about 90% following successful completion of this phase of development”.
For its last FY, ending 9/30/08, revenue was $6.95 million with losses of $17.5 million. For the current FY, we expect that revenues will be on the light side and losses to be about the same, if not a little worse.
So, what’s the big deal about a two or three-drug company? It just closed a $10 million offering, so, some people believe that this is real. GlaxoSmithKline and Novartis also seem to think this is real.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact AVNR’s Eric Benevich at 949-389-6700; ir@avanir.com
SOLTA MEDICAL, INC. (NASDAQ: SLTM) – $2.10. Twelve-month hi-low has been $2.05 – 60 cents. Located in Hayward, CA, with about 260 employees, this medical device maker has 47.9 million shares outstanding, $47.88 million in total current assets, $141.59 million in total assets ($48.35 million is goodwill), and $36.55 million in total liabilities, of which $2.4 million is long term debt. Institutional ownership is around 10%. Two analysts give the stock a “strong buy” and one has it as a “moderate buy”. www.solta.com
Yes, we may be in difficult economic times, but plastic surgery will still go on, and Solta Medical, Inc. looks like it will have even a better year than it did last year. It has a pretty ‘tight’ balance sheet and several analysts don’t see many wrinkles in the company.
Founded in 1995 as Thermage, Inc, and trading on NASDAQ for just under three years, Solta makes and markets energy-based medical device systems for aesthetic applications. Its products include the Thermage NXT system that provides non-invasive treatment options for skin tightening and contouring, body shaping, and enhancing the appearance of cellulite; the Fraxel re:fine and the Fraxel re:store systems, which offer treatments for skin conditions, such as fine lines and pigmentation; and the Fraxel re:pair system for dermatological procedures requiring ablation, coagulation, and resurfacing of soft tissue, as well as for rhytids, pigmentation, and vascular dyschromia.
Solta’s Fraxel re:store system also offers treatments for acne and surgical scars, deeper lines and wrinkles, and actinic keratoses. Its systems consist of one or more handpieces, a console that incorporates a graphical user interface, an energy source and electronics, and a disposable treatment tip. The company’s customers include dermatologists, plastic surgeons, general and family doctors, gynecologists, and opthalmologists.
Over the last several months, Solta introduced as new Thermage CPT and Fraxel re:store dual laser system.
For FY2008, ending 12/31/08, revenue was $56.68 million with $16.4 million in net losses compared to FY2007 revenues of $63.1 million and $2.7 million in net income. Now here is what looks promising. So far, for the first six months of the current FY, ending 6/30/09, revenue has been $52.66 million with $4.7 million in losses.
Looks to us as if the company could top FY2008 revenues, while keeping its losses much lower than FY2008, even though 3rdQT revenue may be impacted due to product delays. What this comes to is that in good times or bad, people want to look good.
Our 24-month target for the stock is $3.50 to $4.00.
For more information contact SLTM at 510-259-7117; ir@solta.com
Look for the October 20, 2009 Newsletter to be posted on 10/16 or 10/19.
Thank you,
George