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Hello Readers,
Since the last Newsletter, we have closed three more positions, two for gains and one for a loss.
OSTEOTECH (6/20/05). Closed position 8/29/05 at $5.82 for a 64% GAIN.
E-LOAN (3/5/05). Closed position 8/29/05 at $4.12 for a 29% GAIN.
GENEREX (8/5/02). Closed position 8/29/05 at 63¢ for a 71% LOSS.
A few days ago, a non-profit tissue bank made a $6.25 per share offer for Osteotech, which is bound to raise a few eyebrows. Will the board fight it? With a 64% gain why wait to find out? A while back, it was announced that E-LOAN would be acquired by Popular, Inc. at $4.25 a share, but we’ll close it at the $4.12, because one never knows what can happen. Sadly, we closed Generex, which had been on the “Endangered List”, after three long years.
Obviously, because of Katrina’s devastation to the Gulf Coast, it is next to impossible to get a good feel for the economy’s future and that of the markets’. Our guess is that short-term, the markets will be ugly. Long-term may be better inasmuch there is a lot of building to do, new appliances to be bought, etc. In the meantime, send some money to the Red Cross and/or other relief agencies.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
@ROAD (ARDI) (8/20/05). Selects Siemens module for use in new hub. Announces integrated MRM solution using Panasonic Toughbooks. Stock upgraded by Piper Jaffray.
N.A. Scientific (NASI) (8/5/05). Earnings call slated for September 6.
CDC Corp. (CHINA) (7/20/05). Announces restructuring that could save up to $5 million/year. Names new CEO and two additional independent auditors. Reports profit for second quarter; balance sheet still looks pretty good. Gets a mention at Motley Fool.
Tele Systems (TSYS) (6/20/05). To present at Roth Capital Conference in NYC on September 8.
Sirenza Microdevices (SMDI) (6/5/05). To present at SVB Forum on September 8. Awarded patent to improve linearity of broadband RF amplifiers. Vests certain “out of the money” options.
Optical Comm (OCPI) (4/20/05). To present at Roth Capital conference on September 8.
Verticalnet (VERT) (4/5/05). Concludes $6.6 million private placement.
Loudeye (LOUD) (4/5/05). Powers digital music store for major electronics retailer in Italy. Also, the same for a French supermarket chain. Extends MSN music service into Nordic countries.
AEHR Test Systems (AEHR) (3/20/05). Receives follow-on MTX orders from major memory manufacturer.
Tumbleweed (TMWD) (3/5/05). To present at Roth Capital confab on September 7. Will also present at Kaufman annual investor conference on September 8. Included as part of the Granite Ventures fund.
Mindspeed (MSPD) (2/20/05). MSPD and LynuxWorks announce LynxOS support for Comcerto VoIP processors. Huawei Technologies selects company’s Comcerto VoIP processors.
Brillian (BRLC) (1/5/05). Gets a mention at Forbes.com.
B.O.S. (BOSC) (1/5/05). Earnings report a mixed bag; balance sheet still appears okay.
Applied Micro (AMCC) (11/20/04). Coverage initiated by Susquehanna Financial.
Tripath (TRPH) (8/5/04). Shares will now trade on NASDAQ SmallCap Market. This one is on the “Endangered List”.
Avanex (AVNX) (7/20/04). We’re placing this one on the “Endangered List”. End of FY numbers were not stellar and balance sheet seems to have weakened.
Bindview (BVEW) (6/5/04). Upgraded by Avondale Partners. IDC says BVEW solutions reduce compliance costs by 50% to 90%. Unveils new IT security compliance capabilities with RAZOR research team. Delivers advanced new IT security compliance capabilities.
GlowPoint (GLOW) (5/20/04). Since company must restate certain financials, it receives a NASDAQ delisting threat. This is now a wait and see.
GoRemote (GRIC) (5/5/04). Stride Rite to use GRIC Small Office Solution. Achieves CMM Level 3 certification.
Palatin (PTN) (4/5/04). To present at Thomas Weisel confab on September 9. Sets earnings announcement for September 14.
NexMed (NEXM) (4/5/04). Announces positive results for U.S. anti-fungal trial.
Socket Communications (SCKT) (3/20/04). Launches entry-level wireless scanner for Bluetooth enabled devices. Tiva and SCKT deliver solutions to First Stop convenience stores.
OpenTV (OPTV) (3/20/04). Builds enhanced home portal application for DISH Network. Licenses home networking technology from Mediabolic.
Oplink (OPLK) (2/20/04). Post 4th QT profit; balance sheet still appears very strong.
Crossroads (CRDS) (2/5/04). To strengthen alliance with Quantum. Quarterly numbers not too bad; balance sheet still looks good.
Actuate (ACTU) (1/5/04). Will present at the Roth Capital conference on September 8.
Insmed (INSM) (11/5/04). Coverage initiated by Lazard Freres but stock takes a hit as FDA approves Tercica’s Increlex.
Targeted Genetics (TGEN) (10/5/03). Announces issuance of additional adeno-associated virus (AAV) vector technology patent. CFO steps down. This one is on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Here’s another one that is to present at the Roth Capital confab on September 8. Selected to participate in DEMOfall 2005 Conference.
Our picks for this Newsletter are another biotech and an electronics maker, both trading on the NASDAQ.
ENTREMED, INC. (NASDAQ: ENMD) – $2.53. Twelve-month hi-low has been $4.80 – $1.35. Based in Rockville, MD, with about 35 employees, this biotech has 50 million shares outstanding, $37.98 million in total current assets, $39 million in total assets, little debt, and $3.18 million in total liabilities. Institutional ownership is around 12%. http://www.entremed.com
Even though many small R&D biotechs are currently marking time, including those in our own Current Portfolio, our love affair with them never seems to end, particularly if they have healthy looking balance sheets and some promising technologies, as appears to be the case with EntreMed, Inc.
Founded in 1991, and public since 1996, EntreMed has developed its initial drug pipeline based on research into the relationship between malignancy and angiogenesis, which is the growth of new blood cells. Their research has led the company to focus on drug candidates that act on the cellular pathways that affect biological processes important in multiple diseases, specifically angiogenesis, inflammation, and cell cycle regulation. Panzem (2-methoxyestradiol or 2ME2), EntreMed’s lead drug candidate, is in clinical trials for cancer, as well as in preclinical development for non-oncology indications. It is a naturally occurring estrogen metabolite; has multiple mechanisms of action; inhibits angiogenesis, microtubule formation, HIF-1a and osteoclastic activity; and induces apoptosis (cell death).
EntreMed also designs new chemical compounds to inhibit tumor growth and antigenesis activities; it modifies the chemical structure of 2ME2 at various positions, as well as synthesizes molecules with combinations of these modifications. ENMD’s other therapeutic targets include the proteinase-activated receptor-2, which is a cell surface receptor that activates inflammatory processes; and a peptide fragment of tissue factor pathway inhibitors, a naturally occurring anti-coagulant protein that blocks tumor growth and angiogenesis in in-vivo models.
In mid-August, EntreMed was granted two new cancer drug patents covering derivatives of the drug Panzem. Back in March, the company entered into a exclusive worldwide license agreement with Celgene for developing and commercializing Celgene’s small molecule tubulin inhibitor compounds for treating cancer. In October, 2004, ENMD entered into a research pact with Affymax.
The company is pretty typical of a small biotech in that there isn’t much revenue but there is a pile of losses. For example, during the quarter ending 6/30/05, revenue was $579,461 with $4.3 million in losses.
We like the collaborations with Celgene and Affymax, which leads us to think there may be some viability to ENMD’s technologies.
Our 24-month target for the stock is $4.00 to $4.50.
For more information, call ENMD’s Ginny Dunn at 240-864-2643; ginnyd@entremed.com
STAKTEK HOLDING, INC. (NASDAQ: STAK) – $3.25. Twelve-month hi-low has been $6.46 – $2.39. Headquartered in Austin, TX, with about 370 employees, this electronics maker has 50.3 million shares outstanding, $84.99 million in total current assets, $148.53 in total assets, little debt, and $10.79 million in total liabilities. Institutional ownership is around 7%. Three analysts have the stock as a “hold”. http://www.staktek.com
Yes, there still are a few more small techs with good-looking balance sheets that seem poised for a turnaround, and that is why we have placed Staktek Holdings, Inc. into the Current Portfolio. Founded in 1990, and recently public, Staktek provides stacked memory solutions for OEM, silicon, memory module, and contract manufacturers. It also offers licenses of its technologies to its customers to enable them to manufacture stacked memory products. The company offers customer services including design of custom-stacked memory assemblies, electrical modeling assistance, and component inventory management. STAK solutions are designed to make stacked memory solutions accepted by OEMs by utilizing parts to provide memory capacity with better size characteristics and superior thermal management design features. It claims that these solutions provide increased performance by doubling, tripling, or quadrupling the capacity of memory modules compared to current-generation monolithic chips, at higher process speeds, in less physical space and with superior thermal management.
Besides its Austin facility, Staktek also has a manufacturing plant in Reynosa, Mexico, and it also has more than 140 patents and pending patent applications. It has been ISO-certified to the ISO9001:2000 standard since 2001. STAK markets products to large OEMs like Cisco Systems, Dell, HP, Intel, and Sun, which qualify, and in most cases, specify, the use of their stacked memory products in their systems.
In mid-July, Staktek and Samsung Electronics renewed and expanded its five-year-old license agreement for stacking packaged DRAMs using STAK’s stacking technology. Also, around that time, the company realigned its executive and technical infrastructure with the focus on market growth.
For FY2004, ending 12/31/04, revenue was $73.62 million with $7.8 million in net income. During the first six months of the current FY, ending 6/30/05, revenue was $26.78 million with $14.39 million in losses.
Whatever recent problems STAK has had appear to be marketing-related, but the company has a nice stack of money and has just beefed up its marketing force.
For more information, contact STAK’s Kirk Patterson at 972-385-0286; investors@staktek.com
Our twenty-four month target for the stock is $5.50 – $6.00.
The September 20, 2005 Newsletter should be posted on 9/16 or 9/19.
Have a safe holiday,
George