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Hello Readers,
Since the last Newsletter, we have closed two more positions, both for some nice gains.
INTERACTIVE INTELLIGENCE (12/5/03). Closed position 11/26/03 at $5.38 for a 65% GAIN.
DIEDRICH COFFEE (7/20/03). Closed position 11/18/03 at $4.84 for a 61% GAIN.
There appears, for now, to be no reason as to why Interactive Intelligence climbed almost $2.00 since the last Newsletter, so why question a 65% gain? We also haven’t a clue as to why Diedrich Coffee rose over 70¢ in one day, but the 61% gain was sort of tasty.
Now, onto a sour note, and, yes, it is about V.I. Technologies (VITX) that we recommended in the last issue. In our nearly seven years of publishing, we never had a stock blow up on us the same day we picked it. We posted the 11/20 issue at 3:20 p.m. Eastern Time on Monday, 11/16. About sixty minutes later, after the market closed, the company announced that is had stopped the Phase 3 trial due to safety concerns from an independent panel. Why they didn’t uncover any safety problems during Phase 1 and Phase 2 is anyone’s guess. The next day, 11/17, the stock dropped like a rock to its present levels. Much of the selling appears to have come from a micro cap fund that had been high on the company. Some of you bought the stock down here in hopes of a dead-cat bounce. The jury is still out as to if that was a good move. In the last few weeks, VITX cut its staff by 50% and announced it will need new funding pretty fast, and that, no doubt, is the key to the company’s existence. It would be a huge help if VITX could fix the safety issue, pronto. The developments of the next month or two could well determine their future.
Until a few weeks ago, we didn’t expect Dow 10K or Nasdaq 2K until sometime in January. Then, we heard that investor optimism took a big jump last month. In other words, things are looking better for a Santa Claus rally, barring any major terrorist incident or something else.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Draxis Health (DRAX) (3/20/00). Company and University of Toronto agree to drop anipryl lawsuits, which appears to have removed a big millstone from DRAX’s neck.
DOR Biopharma (9/20/02). Announces 3rd QT results. Closes private placement which helps balance sheet.
Arotech (ARTX) (6/5/01). Receives over $500,000 in orders from colleges, academies and police departments. Files shelf registration statement allowing it to raise up to $20 million. Armoring subsidiary awarded GSA contract. U.S. Army publishes tender for up to 150,000 zinc-air batteries on a sole-source basis (who says Halliburton is the only one who gets these kinds of deals?).
ViroLogic (VLGC) (7/20/01). Announces N.J. Medicaid initiates policy covering HIV drug resistance tests. Remember when VLGC dropped to under a buck?
Access Pharmaceuticals (AKC) (11/5/01). Quarterly results show big hike in revenue compared to last year; balance sheet still looks okay.
VASCO Security (VDSI) (2/5/02). Launches Digipass pack for Lotus Domino. Digipass 800 selected by MasterCard and Barclaycard (UK) to be part of the first EMV-CAP project in Europe.
Diomed (DIO) (7/5/02). Stockholders okay $23.2 million equity financing. This one is on the “Endangered List”.
Hemispherx (HEB) (7/5/02). Quarterly numbers; balance sheet still appears to be viable.
Jacada (JCDA) (6/20/03). RDC in The Netherlands re-engineers vehicle support system with Jacada.
Allos Therapeutics (ALTH) (6/20/03). Says RSR13 Phase 3 results in patients with breast cancer and brain metastases will be highlighted at symposium on December 3, which yielded positive results. Completes $12 million private placement.
Art Technology (ARTG) (8/5/03). Opens education center for IBM software. Casual Male picks ATG as foundation for commerce site re-launch. Enters web services fray.
MetaSolv (MSLV) (10/5/03). mobilkom austria chooses company’s Network Mediation to bridge generation gap for various services. Partners with Ericcson for IP VPN service activation. Forges strategic alliance with Wipro Ltd. to address global OSS market.
Nuvelo (NUVO) (10/20/03). Says Phase 1 Alfimeprase results was safe and well tolerated with no drug related adverse events. Brokerage firm begins coverage on stock.
Insmed (INSM) (11/5/03). Presents positive data on anti-cancer drug candidate.
V.I. Technologies (VITX) (11/20/03). See comments up above. We have removed the target price, but have not put stock on “Endangered List” just yet; want to see how the next few months unwind.
Our picks for this Newsletter are another biotech and another one of those alternative energy providers, of sorts.
AVANT IMMUNOTHERAPEUTICS CORP (NASDAQ: AVAN) – $2.60. Twelve-month hi-low has been $3.45 – 88 cents. Based in Needham, MA, with about 60 employees, this biotech has 64.7 million shares outstanding, $24.7 million in total current assets, $35.1 million in total assets, little debt, and $3.25 million in total liabilities. Institutional ownership is around 16%. http://www.avantimmune.com
Sometimes picking biotechs, as with most stocks, is like catching knives. However, it helps if they have half-decent balance sheets and a variety of products in the hopper, as does AVANT Immunotherapeutics Corp.
Trading on NASDAQ for over a dozen years, AVANT is developing a broad portfolio of vaccines and immunotherapeutics targeting a wide variety of applications, including bacterial and viral diseases, cardiovascular diseases, biodefense, and food safety. These include single doses, oral vaccines that protect against disease-causing agents, a proprietary vaccine candidate for cholesterol management, and an immunotherapeutic to improve patient outcomes after cardiac surgery. Currently, six of the company’s products are in clinical development.
AVANT’s product pipeline, and partners, where applicable, include: CETi-1, a cholesteryl inhibitor, in Phase 2; TP10, for cardiac surgery, in Phase 2; CholeraGarde, a single dose oral vaccine, in Phase 2b; Ty800, a vaccine against typhoid fever, in Phase 1; ETEC E.coli, a vaccine, in Preclinical; Shigella, a vaccine against dysentery, in Preclinical; Campylobacter, a vaccine, in Preclinical; Injectable Anthrax vaccine, in Phase 1, partner is the Defense Department (DOD); Oral Anthrax/Plague vaccine, in Preclinical, partner is the DOD; Oral Anthrax vaccine, in Preclinical, partner is the NIH; Rotarix, in Phase 3, partner is GlaxoSmithKline; AVANT Pfizer Vaccines, in field studies, partner is Pfizer; MeganVac, a vaccine against salmonella in broilers, partner is Lohmann Animal Health; and MeganEgg, vaccine to protect against salmonella in hens and eggs, partner also is Lohmann.
Last month, AVANT received licensure from the USDA of its MeganEgg vaccine to protect commercial breeders and egg layers from salmonella. Also, the company announced the results of a Phase 2 trial of its TP10 complement inhibitor significantly decreased heart attacks and death in men following cardiac surgery.
It is worth repeating that small biotechs usually have lousy financials and AVANT is no exception. For example, during the nine months of this FY, ending 9/30/03, revenue was $3.77 million with $8.66 million in net losses.
There is a lot going on here, and the company seems to have a balanced and very interesting product pipeline.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, call AVAN at 781-433-0771; info@avantimmune.com
SATCON TECHNOLOGY CORP (NASDAQ: SATC) – $2.45. Twelve-month hi-low has been $4.30 – 36 cents. Located in Cambridge, MA, with about 270 employees, this power products developer has 19.2 million shares outstanding, $15.64 million in total current assets, $27.1 million in total assets, $559,000 in long-term debt, and $19 million in total current liabilities. Institutional ownership is around 10%. http://www.satcon.com
Sometimes a weak balance sheet doesn’t deter us if there are other compelling reasons behind a company, and such seems to be the case with SatCon Technology Corp. This is what is known as an “MIT Company”, and, because of that, SatCon shouldn’t have difficulties in raising funds, if needed. Also, most of you will see similarities with a pick from the last Newsletter, Active Power (ACPW).
Trading on Nasdaq for nearly ten years, SatCon develops technologies and products for the critical power marketplace. Its critical power products convert, store, and manage electricity for business and consumers, the U.S. government and the military that require reliable electronics and controls and uninterruptible power. The company’s specialty motors are typically designed for unique customer requirements, such as high-power-to-size requirements or high efficiency. With over 120 patents, SatCon’s power products are used in multiple applications, including power quality, manufacturing, factory automation, aircraft, satellite, telecommunications, silicon wafer manufacturing, automotive, and distributed power generation systems.
SatCon sells its products through three divisions, which are Power Systems, Electronics Products, and Applied Technology. Its Blue Chip customer base includes Applied Materials, Boeing, Siemens, Compaq, Ford, Chrysler, Dell, GE, Ericsson, GM, TRW, General Dynamics, Northrup Grumman, Motorola, and Raytheon.
The company announced a half dozen key developments during November. United Solar Ovonic selected SatCon power converters for their large photovoltaic power generation systems. It successfully installed a 250-kilowatt UPS to provide back up power to 80,000 online students at the R. Jan LeCroy Center For Educational Telecommunications. The company completed installation of its 2.2 megawatt Rotary UPS at the Toronto facility of Deluxe Film Labs. SatCon’s Power Conditioning System was ready for installation at Greenpoint Manufacturing Center in New York City. The company was awarded $1 million from the Department of Energy to develop a photovoltaic inverter. Finally, the company closed a $7.7 million equity financing transaction.
For the FY ending 9/30/02, revenue was $41.63 million with $20.76 million in net losses.
During the first nine months of the current FY, ending 6/28/03, revenue was $18.9 million with $24.3 million in losses.
The last few income statements have not been pretty, which is expected of a company that spends a ton on R&D. However, SatCon has an arsenal of patents/products and Blue Chip customers, that, over the long haul, could prove to be very rewarding to the company.
Our 20-month target for the stock is $4.00 to $5.00.
For more information, call SATC’s Mike Turmelle at 617-661-0540; investor.relations@satcon.com
Look for the December 20, 2003 issue to be posted on 12/16 or 12/17.
Thank you,
George