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Hello Readers,
Since the last Newsletter, we closed four positions, three for gains and one for a loss.
THINKENGINE NETWORKS (10/20/05). Closed position 1/12/07 at $3.70 for a 57% GAIN. (formerly Cognitronics)
BSQUARE (6/20/06). Closed position 1/12/07 at $3.03 for a 53% GAIN.
MEMORY PHARMA (11/5/05). Closed position 1/8/07 at $3.88 for a 80% GAIN.
SCO Group (8/20/06). Closed position 1/8/07 at $1.13 for a 54% LOSS.
We haven’t a clue as to why ThinkEngine made a hefty move, but we will take the gain. Ditto with BSQUARE. Since the end of December, when Lazard Capital flashed a “buy” on its stock, Memory Pharma went on a nice tear. As for SCO Group, the recent court ruling may have damaged the stock for quite some time, so, we close it at a loss.
January is off to a good start and that should bode well for the year. What can dampen investor spirits? See our previous Newsletter.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we recommended them.
DeltaThree (DDDC) (1/5/07). It’s consumer VoIP solution to offer expanded DID coverage across five continents.
Critical Therapeutics (CRTX) (1/5/07). Preliminary results seem okay; earnings call slated for February 8.
Terabeam (TRBM) (11/5/06). U.S. Army, Denver Blizzards, and Lewis University select company’s technology.
Hydrogenics (HYGS) (9/20/06). Teams up with LiftOne in South Carolina pilot deployments of fuel cells in forklifts.
TVI Corp (TVIN) (9/5/06). Receives order for surge capacity systems from Bethesda Hospital’s emergency preparedness partnership.
Point Therapeutics (POTP) (7/5/06). Says results from Phase 2 metastatic pancreatic cancer study show promise.
Cytogen (CYTO) (3/20/06). Says expanded role for PROSTASCINT incorporated into NCCN clinical practice guidelines.
Gateway (GTW) (2/5/06). WR Hambrecht gives the stock a “buy” rating.
8×8 (EGHT) (1/20/06). About half dozen very positive releases, such as its partnering with World Telecom Group to offer Packet8 phone services.
Digital Angel (DOC) (12/20/05). Awarded $10 million contract with Army Corps of Engineers.
Westell (WSTL) (10/20/05). Names new CEO. Several releases about new technologies/partnerships. Acquires Noran Tel.
RAE Systems (RAE) (10/5/05). Partners with Implant Sciences to integrate advanced explosives detection with wireless AreaRAE sensor networks.
N.A. Scientific (NASI) (8/5/05). End of year results show revenue decline but a big decrease in the losses; balance sheet still looks good.
Innodata (INOD) (7/5/05). Sees $9 million in 2007 from new projects alone.
B.O.S. (BOSC) (1/5/05). Converts Qualmax debt into shares of New World.
Applied Micro Circuits (AMCC) (11/20/04). Files delayed financial statements and announces end of internal probe into stock option practices. Exhibits SATA II RAID storage solution for the Mac Pro and Power Mac G5 workstations.
Aviza (AVZA) (10/5/04). Plans to offer 4 million shares in a secondary offering.
Socket Communications (SCKT) (3/20/04). Regains Nasdaq compliance. This is on the “Endangered List”.
Open TV (OPTV) (3/20/04). OPTV and S3 showcase IPTV set-top box solutions.
Insmed (INSM) (11/5/03). Italian Health Ministry requests IPEX for treating ALS (Lou Gehrig’s Disease). This is on the “Endangered List”.
Dynacq Healthcare (DYII) (1/20/06). Announces reviewed results for the fiscal quarter ending November 30, 2006.
Our picks for this Newsletter are a medical supplier and a healthcare information provider, both trade on NASDAQ.
ENDOLOGIX, INC. (NASDAQ: ELGX) – $4.25. Twelve-month hi-low has been $7.35 – $3.17. Located in Irvine, CA, with about 130 employees, this medical supplier has 42.6 million shares outstanding, $34.21 million in total current assets, $55.03 million in total assets, little debt, and $4.3 million in total liabilities. Institutional ownership is around 54%. Two analysts rate the stock a “strong buy”. www.endologix.com
Sometimes, a $20 million secondary offering is what a company needs to help it transform from a developer to a manufacturer and marketer, which probably explains why Endologix, Inc. has a good looking balance sheet. The company also has been showing nice quarterly revenue growth, but it does need to pare the losses.
Founded in 1992 as Cardiovascular Dynamics, and public for over a dozen years, Endologix makes and sells minimally invasive therapies for treating cardiovascular disease, basically stents. It offers what it calls the Powerlink System, a catheter and endoluminal graft (ELG), which is used for treating abdominal aortic aneurysms, a weakening of the wall of the aorta, the largest artery in the body. The Powerlink System consists of a self-expanding cobalt chromium alloy stent cage covered with a ePTFE graft. Powerlink ELG is implanted in the abdominal aorta, which is accessed through the femoral artery. The implantation causes the blood flow to be shunted away from the weakened or aneurysmal section of the aorta, resulting in the reduction of pressure and potential for the aorta to rupture. In addition, the company offers infrarenal bifurcated systems, suprarenal bifurcated systems, and aortic cuffs and limb extensions.
Powerlink has been commercially available in Europe since 1999. FDA approval for the Powerlink AAA stent graft was received in October, 2004. The Powerlink design is covered by 17 U.S. patents with 361 allowed claims. Endologix believes it has designed the technology to overcome shortcomings of first-generation ELGs.
At the end of December, Endologix was asked for more information on its Powerlink System as part of a Japanese Regulatory Review. Earlier that month, the company announced that LaMaitre Vascular will distribute Powerlink in select European markets.
For FY2005, ending 12/31/05, revenue was $7.13 million with $15.52 million in losses. During the first nine months of FY2006, ending 9/30/06, revenue was $10.02 million with $12.69 million in losses.
We like the balance sheet, the revenue growth, and the product, which looks to have an ever-expanding market. As mentioned, the company needs to shave the losses.
Our 24-month target for the stock is $7.00 to $7.50.
For more information, contact ELGX at 949-595-7211; investorrelations@endologix.com
ETRIALS WORLDWIDE, INC. (NASDAQ: ETWC) – $3.55. Twelve-month hi-low has been $6.29 – $2.70. Based in Morrisville, NC, this healthcare information provider has 12.4 million shares outstanding, $21.37 million in total current assets, $21.81 million in total assets, little debt, and $4.65 million in total liabilities. Institutional ownership is around 4%. One analyst rates the stock a “moderate buy”. www.etrials.com
During the California Gold Rush of the 1850s, most of the miners did not make a lot of money, however, their pan and pickaxe suppliers did. That is how we think when it comes to Etrials Worldwide, Inc. and its relationship with the biotech industry. Also, the company has a pretty healthy looking balance sheet.
Founded in 1996, and basically public for less than a year, Etrials offers a range of technical solutions to help biotechs hasten their clinical trials. It bills itself as the first eClinical company to offer fully integrated electronic data capture (EDC), interactive voice response (IVR), electronic patient diaries (eDiaries), and a clinical trial management system (CTMS). The company is able to offer these products together in a fully-integrated platform or as individual technologies that collect, manage, and analyze clinical data, while providing an automated mechanism to collect data directly from patients. Etrials also provides a range of professional services in support of its eClinical software solutions, which are delivered during the three stages of the clinical trial process.
To date, Etrials has facilitated over 900 trials involving more than 400,000 patients in 60 countries; and has participated in 33 studies used for new drug applications. It has partnered with over 100 clients, including 16 of the top 20 global pharmaceutical companies. The company had 32 active customers as of September 30, 2006, up 33% from 24 active customers in the year ago period.
In November, ETWC announced that two top ten pharmaceuticals successfully deployed its integrated eClinical suite for clinical studies. Last summer, Etrials deployed the largest global wireless eDiary study in the company’s history with a top ten global pharma. Also, during that period, Etrials implemented one of the largest global studies of over 95,000 subjects utilizing several of its platforms.
During the first nine months of FY2006, ending 9/30/06, revenue was $13.63 million with $1.72 million in losses compared to the same period in FY2005 with revenues of $10.8 million and $1.02 million in losses.
Etrials appears to have established itself within the biotech industry as a provider of the “pans and pickaxes”.
Our 24-month target for the stock is $5.50 to $6.25.
For more information, contact ETWC at 919-653-3400.
Look for the February 5, 2006 Newsletter to be posted on 2/1 or 2/2.
Thank you,
George