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Hello Readers,
The first half of October felt as if the market had made a long-overdue prison break. The question is if this is the start of a new bull market or a rally in a bear market. The consensus, for now, rests with the latter opinion. We, of course, haven’t a clue, sorry to say. Our gut tells us that much of the near to mid-term market action depends upon what happens in Europe. Are France and Germany really prepared to bail out their troubled neighbors, as they boast, and are the European bankers ready to back them up? We hear what they have been saying, but actions are always another matter. Yes, this is just more ‘kicking the can down the road’, but it has let us sleep a little better, lately.
And, with the risk of sounding like a broken record, we did not close any positions in the Current Portfolio, which, though it looks a tad better, is still beaten to a pulp, despite positive news from many of the companies. As we said in the last Newsletter, and will keep saying it for a while, it will take smaller stocks much longer than the others to recover from the market mayhem of the last several months.
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 companies on the “Endangered List” unless we feel the news to be significant.
Keryx BioPharma (KERX)(10/5/11). Phase ½ clinical trial results of KRX0401 plus bortezomib and Dexamethasone in patients with relapsed/refractory multiple myeloma published in the Journal of Clinical Oncology. Journal also publishes Phase 2 clinical trial results of same drug plus capecitabine in patients with metastatic colorectal cancer.
Celldex Therapeutics (CLDX)(9/20/11). To present at the NewsMakers in the Biotech Industry confab on October 21.
Glu Mobile (GLUU)(9/5/11). To release earnings on November 3.
NetList (NLST)(9/5/11). Files $40 million mixed securities shelf. Names former Intel executive to board.
SatCon Technology (SATC)(8/5/11). Signs master service agreement with Borrego Solar to provide 35 megawatts of utility-ready solar power solutions. Helps Southern California Edison generate over 48MW of solar polar. Selected by Q-Cells for the second largest solar plant in North America.
Antares Pharma (AIS)(8/5/11). Granted new U.S. patent covering VIBEX injector technology.
Cover-All Technologies (COVR)(7/20/11). To present at 6th Annual Singular Research “Best of the Uncovereds” conference on October 26. Describes partnership with IBM.
Somaxon Pharmaceuticals (SOMX)(7/5/11). Announces FDA feedback on Silenor OTC regulatory pathway and changes to commercial team.
On Track Innovations (OTIV)(6/20/11). C. Silk & Sons reports 10.4% stake in company; may ask for sale. MTS, a leading Russian communications group, selects COPNI Mobile Payment product for its NFC program.
Idera Pharmaceuticals (IDRA)(6/5/11). Presents preclinical data of its gene-silencing oligonucleotides (GSO) at Cell Symposium on Regulatory RNAs.
Neostem (NBS)(5/20/11). To present at several conferences during October, one of which is 10/17, the day we post this Newsletter.
MediciNova (MNOV)(5/20/11). Closes $7.5 million private stock sale to Kissei Pharmaceutical.
Innodata (INOD)(5/5/11). To report 3rdQT numbers on October 26.
Energy Recovery (ERII)(5/5/11). Sets earnings news for November 3.
Biostar Pharmaceuticals (BSPM)(4/20/11). Agrees to acquire Shaanxi Weinan Huaren Pharmaceuticals for $9.62 million. Acquired company owns drug approvals and permits for 86 drugs and one health product.
ThermoGenesis (KOOL)(4/5/11). Announces acceptance of AXP submission by regulatory body in China.
Jamba, Inc. (JMBA)(3/20/11). Reiterates FY2011 guidance.
Great Basin Gold (GBG)(1/5/11). Provides mineral resource update for its Burnstone Gold Mine in South Africa. Sets earnings news for November 16.
Sprint Nextel (S)(1/5/11). The usual avalanche of news; of particular note is that company sells out new iPhone.
Astex Pharmaceuticals (ASTX)(12/5/10). To present at NewsMakers in the Biotech Industry on October 21.
Pixelworks (PXLW)(11/20/10). Sets earnings news for October 20.
RELM Wireless (RWC)(11/5/10). Receives $1 million military orders.
Inovio Pharmaceuticals (INO)(10/20/10. Company and VCX International to advance therapeutic hepatitis C and hepatitis B synthetic vaccines into clinical studies. INO’s synthetic vaccine for cancer recognized as most promising research at Global Vaccine Congress.
Rexahn Pharmaceuticals (RNN)(7/20/10). Granted U.S. patent for novel anti-cancer Isoquinolinamine compounds. Announces publication of study validating mechanism of action of Serdaxin.
NovaBay Pharmaceuticals (NBY)(4/20/10). Spotlights NeutroPhase at the Symposium on Advanced Wound Care.
Novavax (NVAX)(4/5/10). Provides update of results from Phase I trial of respiratory syncytial virus vaccine candidate. Wins $1.3 million Department of Homeland Security contract to develop foot-and-mouth disease vaccine.
Cerus Corp. (CERS)(3/20/10). To release 3rdQT results on November 1. Obtains credit facility.
Cytokinetics (CYTK)(2/5/10). Coverage initiated by Rodman & Renshaw.
CytRx (CYTR)(1/5/10). ENABLE Phase 2 trial results with Bafetinib in relapsed B-cell chronic lymphocytic leukemia to be presented at the 53rdannual ASH Meeting on December 11.
Anadys Pharmaceuticals (ANDS)(8/20/09). Announces positive 12-week data for Setrobuvir in Phase 2b hepatitis C study. Upgraded by JMP Securities.
Performance Technologies (PTIX)(7/20/09). Expands Xpress product portfolio with next-generation Guard Protection.
USA Technologies (USAT)(6/5/09). Continued growth moves company to 5th in U.S. and 19th worldwide for POS terminal shipments in 2010. Suspends CEO while company probes internal postings.
MicroVision (MVIS)(5/20/08). Receives $3.5 million order for its PicoP display engine.
LRAD Corporation (LRAD)(10/5/07). Says it will report record revenues of $26 million and record profits for FY ending 9/30/11.
Our picks for this month are another NASDAQ-listed biotech and an NYSE-listed mortgage insurer.
BIOCRYST PHARMACEUTICALS, INC. (NASDAQ: BCRX) – $2.75. Twelve-month hi-low has been $5.86 – $2.30. Based in Durham, NC, with about 75 employees, this biotech has 45.15 million shares outstanding, $79.87 million in total current assets, $108.41 million in total assets, and $69.15 million in total liabilities, of which $32.34 million is long-term debt (non-recourse notes payable). Institutional ownership is around 34%. Four analysts rate the stock a “strong buy” and two have it as a “hold”. www.biocryst.com
And yes, we add another biotech to the Current Portfolio. As with many others we have picked over the years, BioCryst Pharmaceuticals, Inc. has a pretty healthy balance sheet, an interesting pipeline of product candidates, and an array of analysts following the company.
Founded in 1986, and public for over seventeen years, BioCryst is developing small-molecule pharmaceuticals that block key enzymes involved in infectious diseases cancer, and inflammatory diseases. It uses structure-based drug design to develop new therapeutic candidates. The company has three novel late-stage compounds in development, which include Peramivir, a neuraminidase inhibitor for potentially treating influenza; BCX4208, a purine nucleoside phosphorylase (PNP) inhibitor for gout; and Forodesine, a PNP inhibitor for cutaneous T-cell lymphoma (CTCL) and chronic lymphocytic leukemia (CLL).
Peramivir is being developed under a contract from the Biomedical Advanced R&D Authority within the U.S. Department of HHS. Forodesine has been granted orphan drug status by the FDA for three indications, which include T-cell non-Hodgkins lymphoma, including CTCL; CLL and related leukemias, including T-cell prolymphocytic leukemia, adult T-cell leukemia, and hairy cell leukemia; and for treating B-ALL. The FDA has also granted fast track status to developing forodesine for treating relapsed or refractory T-cell leukemia, and special protocol assessment from the FDA for forodesine to conduct a pivotal clinical trial in CTCL with an oral formulation.
Earlier this month, BioCryst announced positive top-line results from BCX4208 Phase 2b gout study in patients who had failed to reach the clinically important serum acid on allopurinol alone. In other words, the company claims its gout drug worked for patients who were not helped by standard treatment.
BioCryst is another small biotech that has heavy losses and little revenue, i.e. for the quarter ending 6/30/11, revenue was $3.74 million with $16.27 million in losses.
The stock is trading near its 52-week low and the company seems to have a lot going on here, so, it may be worth a shot at this level.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact BCRX’s Robert Bennett at 919-859-7910; investorrelations@biocryst.com
MGIC INVESTMENT CORPORATION (NYSE: MTG) – $2.35. Twelve-month hi-low has been $11.79 – $1.80. Based in Milwaukee, WI, with about 1000 employees, this mortgage insurer has 201.15 million shares outstanding, $1.35 billion in total current assets; $8.26 billion in total assets, and $6.76 billion in total liabilities, of which $666.62 million is long-term debt. Institutional ownership is around 98%. Five analysts rate the stock a “strong buy”, one a “moderate buy” and one as a “strong sell”. mgic.com
Since MGIC Investment Corporation is tied to the housing industry, it is fair warning that this is one of our riskier picks that is going into the Current Portfolio. Of course, all of our picks have a degree of risks, but any more slippage in the home finance market can send this stock even lower than it is now.
Founded in 1984, and public for over 20 years, MGIC, simply stated, provides private mortgage insurance to the home mortgage lending industry. It offers primary insurance coverage that provides mortgage default protection on individual loans and covers unpaid loan principal, delinquent interest, and various expenses associated with the default and subsequent foreclosure. And, this is where the main risk lurks; if foreclosures keep rising, the company will feel the pain. The company’s primary insurance is written on first mortgage loans secured by owner-occupied single-family homes, first liens secured by non-owner occupied single-family homes, and on vacation or second homes. Its primary insurance is written on a flow basis, in which loans are insured in individual, loan-by-loan transactions, as well as on a bulk basis, in which each loan in a portfolio of loans is individually insured in a single, bulk transaction.
In addition, MGIC provides an Internet portal that enables mortgage industry participants to access products and services of wholesalers, investors, and vendors necessary to make a home mortgage loan; and Web site hosting, design, and marketing solutions for mortgage originators and real estate agents.
For FY2010, ending 12/31/10, revenue was $1.52 billion with $363.74 million in losses. During the first six months of the current FY, ending 6/30/11, revenue was $720.12 million with $185.39 million in losses. So, this FY is probably going to be pretty the same as last year.
Now, despite the risks we have mentioned above, there is the other side of the argument. What if the bottom is near on the foreclosure mess? One needs to think that is the case before taking a piece of MGIC.
Our 24-month target for the stock is $3.75 to $4.25.
For more information, contact MGIC’s Katie Monfre at 800-558-9900, ext. 2650; Katie_monfre@mgic.com
Look for the November 5, 2011 Newsletter to be posted on 11/1 or 11/2.
Thank you,
George