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Hello Readers,
Since the last Newsletter, things have deteriorated more, and, again, we all know the reasons why. One of the main impediments to breathing new life into the markets is a sense that nothing is being done to resolve the credit crunch, however, that’s not true. Steps are being taken to alleviate the crisis, but most of us want this to be resolved now! In the words of a great philosopher, “Ain’t gonna happen”. In the meantime, small stocks keep getting pounded the worst, and even more technical damage is being done. To have a better understanding of this is that the Dow and NASDAQ averages are only down 5% from their July highs while the Russell 2000 index is down over 10%. In the previous Newsletter we said that our Current Portfolio hadn’t looked this bad since Fall, 2001, right after 9/11. Now, it looks even worse.
Are there any rays of hope? Maybe. The market usually forecast conditions six months from now, and how the market moves in January is a pretty good barometer as to its movement for the rest of the year. The unknown for this January are the primary elections. But, maybe, just maybe.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them. NOTE: There are not many headline updates simply because it’s the holiday season, which is just as well, since this market is even ignoring most good news.
DigitalFX (DXN)(12/5/07). The day we posted the last Newsletter, the company announced it had concluded a $7 million private placement, and the stock got whacked. Seems like a little too much overkill.
Santarus (SNTS) (11/20/07). Licenses its heartburn drugs to GlaxoSmithKline for over 100 countries outside the U.S. and Europe for $11.5 million upfront fee and royalties. This news sent the stock up a little, but in a better market this news probably would have sent it flying.
Continucare (CNU) (11/20/07). Opens its first ValuClinic locations.
Linktone (LTON) (11/5/07). To establish exclusive advertising partnership with Tianjin Satellite Television.
Sunesis Pharma (SNSS) (11/5/07). SNS-595 shows clinical activity in patients with relapsed refractory acute leukemia.
Wave Systems (WAVX) (9/5/07). Surpasses the 20-million mark for shipments of EMBASSY Trust Site software. EMBASSY software now built into new NEC hardware-based laptop.
SIGA Technologies (SIGA) (8/20/07). Completes 21 day multi-dose human clinical safety and dose-ranging trial of its lead smallpox drug ST-246.
Pharmacyclics (PCYC) (6/20/07). Announces presentation of results from Phase 1/2 trial of Xcytrin plus Zevalin and preclinical data with novel BTK and HDAC inhibitors. Company claims results show progress.
Alphatec Holdings (ATEC) (6/20/07). Sees FY2008 revenue above analysts’ expectations.
Xenonics (XNN) (6/5/07). Slates 4thQT and FY2007 earnings news for December 19. Receives contract to develop high-intensity light for a new unmanned aerial vehicle under development for the U.S. government.
Oncolytics (ONCY) (6/5/07). Announces issuance of 25th U.S. patent.
Hana Biosciences (HNAB) (5/5/07). Presents Marqibo data at 49th hematology confab.
Gene Logic (GLGC) (4/20/07). Shareholders approve Genomics Assets sale and company name change to Ore Pharmaceuticals. New stock symbol will be ORXE, probably by the end of this month.
VocalTec (VOCL) (4/20/07). Company and Technology Bureau to target telecommunications community co-ops in Argentina. Telecom Italia San Marino expands VoIP network using VocalTec’s solutions.
Immunicon (IMMC) (3/20/07). Presents data at breast cancer symposium. Transfers stock listing to NASDAQ Capital Market (that’s okay, usually). Announces filing for FDA clearance of the CellSearch circulating tumor cell kit for monitoring patients with Metastatic Androgen-Independent prostate cancer.
TTI Telecom (TTIL) (3/5/07). Announces agreement to acquire Telesens LLC for $2.7 million.
Eon Communications (EONC) (2/5/07). Quarterly numbers not great; balance sheet still seems okay. To purchase Cortelco Systems for $11 million in stock and cash.
Neose Tech (NTEC) (12/20/06). Presents GlycoPEGylated Factor Vlla data at annual hematology meeting.
Proxim Wireless (PRXM) (11/5/06). Latest Dell’Oro Group report says Proxim has achieved unit share leadership for the Wi-Fi mesh market in the Europe, Middle East, and Africa (EMEA) and Rest of World (ROW) geographies.
Hydrogenics (HYGS) (9/20/06). To supply on-site hydrogen generation and storage unit to support Ford’s fuel cell center test laboratory.
Advanced Life Sciences (ADLS) (7/20/06). Completes $20 million private placement, and, as most of us know, these usually do not help the stock short-term, which seems evident here.
NTN Buzztime (NTN) (7/5/06). SeeSaw Network adds NTN’s interactive entertainment to its national signage network.
02Diesel (OTD) (5/20/06). Enters final phase of U.S. Air Force testing prior to deployment. This one is on the “Endangered List”.
8×8 (EGHT) (1/20/06). Receives 2007 Product of the Year award presented by Customer Interaction Solutions Magazine (yes, it appears there really is a magazine for everything).
Westell (WSTL) (10/20/05). Receives notice of SEC probe into trading of its securities. Company says it will cooperate.
EntreMed (ENMD) (9/5/05). Announces FDA acceptance of IND application for Panzem in rheumatoid arthritis. Presents results for ENMD-1198 and Vincristine in preclinical leukemia models. Commences Phase 2 study with MKC-1 in pancreatic cancer.
N.A. Scientific (NASI) (8/5/05). This one is on the “Endangered List”. Announces agreement for private placement of common stock. NASDAQ accepts company’s plan for continued listing. Gets bridge loan agreement.
Vion Pharma (VION) (5/20/05). Presents data on Cloretazine clinical results. This, too, is on the “Endangered List”.
B.O.S. (BOSC) (1/5/05). Announces $2 million private placement. Receives order from a ‘strategic’ U.S. customer for development and implementation of a “SharePoint” based logistics project.
American Micro Circuits (AMCC) (11/20/04). Effects 1 for 4 reverse split, which may have helped this particular stock, but not in this market. Several product announcements. We may be closing this one soon.
Nova Measuring (NVMI) (11/5/04). Expands relationship with leading flash and DRAM manufacturer.
OpenTV (OPTV) (3/20/04). Extends partnership with Sky Italia. This is also on the “Endangered List”.
Our picks for this Newsletter and two more small biotechs, both trading on NASDAQ.
CATALYST PHARMACEUTICAL PARTNERS, INC. (NASDAQ: CPRX) – $3.10. Twelve-month hi-low has been $7.43 – $2.06. Located in Coral Gables, FL, with unknown number of employees, this drug developer has 12.5 million shares outstanding, $17.44 million in total current assets, $17.53 million in total assets, little debt, and $405,000 in total liabilities. Institutional ownership is around 11%. Two analysts rate the stock a “strong buy” and one as a “moderate buy”. www.catalystpharma.com
It isn’t too often when we stumble across a small biotech with a big tie-in to a national institute and a unique drug platform, but such is the case with Catalyst Pharmaceutical Partners, Inc.
Founded in 2002, and public for just over a year, Catalyst is developing drugs for treating drug addictions. The company is developing vigabatrin, which it has designated CPP-109, for treating addictions to cocaine, methamphetamine, and other substances. Most of the research on vigabatrin to treat drug addictions stemmed from work performed over the last dozen years at Brookhaven National Laboratory, which holds various patents relating to its findings. Catalyst has obtained from Brookhaven an exclusive worldwide license for nine patents and two patents pending in the U.S. for all rights to use or sell vigabatrin. In addition, the company’s license includes rights to Brookhaven’s foreign patents or patents pending in more than 30 countries.
In 2005, the FDA accepted Catalyst’s Investigational New Drug application (IND) to commence a Phase 1 vigabatrin human clinical trial in the U.S. Recently, the company initiated its first U.S. Phase 2 clinical trial to evaluate CPP-109 as a treatment for cocaine addiction, and in the first quarter of 2008 it expects to initiate a Phase 2 clinical trial to evaluate the drug as a treatment for methamphetamine addiction.
How does this work? The release of dopamine in the brain causes the “high” or exaggerated sense of pleasure associated with drug abuse. CPP-109 works by indirectly lowering the level of dopamine in the brain. Specifically, GABA – gamma aminobutyric acid – is a neurotransmitter in the brain that inhibits the release of dopamine. GABA, however, is broken down by GABA transaminase (GABA-T). CPP-109 works by inhibiting GABA-T and consequently increasing the level of GABA, which then lowers the level of dopamine and turns off the “high”. CPP-109 works without the apparent side effects typically associated with GABA agonists, according to the company.
Catalyst also intends to develop CPP-109 to treat other addictions, such as nicotine, prescription pain medications, alcohol, and marijuana, as well as treatments for obsessive-compulsive disorders, including obesity and compulsive gambling.
Catalyst is typical of small biopharmas in that it has little revenue and a lot of expenses. For example, during the 3rdQT of FY2007, ending 9/30/07, revenue was zilch with $734,000 in losses.
Yes, there are several widely-used drugs for treating addictions, but there may be room for one more.
Our 24-month target for the stock is $5.00 to $6.00.
For more information, contact CPRX at 305-529-2522.
HOLLIS-EDEN PHARMACEUTICALS, INC. (NASDAQ: HEPH) – $1.84. Located in San Diego, CA, with about 65 employees, this biotech has 29 million shares outstanding, $48.5 million in total current assets, $49.54 million in total assets, little debt, and $2.99 million in total liabilities. Institutional ownership is around 18%. One analyst rates the stock a “strong buy” and one as a “hold”. www.holliseden.com
Lately, biotechs have not been in favor; in fact many of them have been pounded, as witnessed in the Current Portfolio. However, this, too, shall pass and now may be the time to pick up some small biotechs with good balance sheets and promising technologies, like Hollis-Eden Pharmaceuticals, Inc., which is trading at near its all-time low.
Founded in 1994, and public since 1997, Hollis-Eden bills itself as the world leader in developing a proprietary class of adrenal steroid hormones. Through its Hormonal Signaling Technology Platform, the company is developing a new series of small molecule compounds that are metabolites or synthetic analogs of endogenous hormones derived by the adrenal glands from the body’s most abundant circulating adrenal steroid – dehydroepiandrosterone (DHEA). These steroid hormones, designed to restore the biological activity of cellular signaling pathways disrupted by disease and aging, have been demonstrated in humans to possess several properties with potential therapeutic benefit – they regulate innate and adaptive immunity, reduce nonproductive inflammation and stimulate cell proliferation.
The company’s clinical drug development candidates include TRIOLEX – HE3286 – in a clinical trial for treating Type 2 diabetes and being prepared for a clinical trial in rheumatoid arthritis; and APOPTONE – HE3235 – selected for clinical development in cancer. Basically, in laymen’s language, Hollis-Eden’s therapeutic approach is to restore healthy body functions by providing the chemical messengers or signals that enable intercellular communications necessary for homeostasis and a return to health.
In mid-November, the company provided data demonstrating that TRIOLEX provided benefit in an animal model of collagen antibody induced arthritis.
Once again, this is another of those small biotechs with virtually no income and a fair share of red ink. For the quarter ending 9/30/07, revenue was nil with $5.65 million in losses.
At some point in time, biotechs will come back and promising companies with battered stock prices like Hollis-Eden could see some nice dead-cat bounces.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact HEPH’s Scott Rieger at 858-587-9333; info@holliseden.com
Look for the January 5, 2008 Newsletter to be posted on 1/2 or 1/3.
Have a Great Holiday!
George