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Hello Readers,
Since the last Newsletter, we closed our first position of 2005.
VITRIA TECHNOLOGY (9/5/04). Closed position 1/4/05 at $4.33 for a 52% GAIN.
In the last issue, we said that Vitria was near our 50%-plus threshold and that we would probably be closing it, soon. The day after we posted the last Newsletter, the stock hit for a 52% gain, and, so, we closed it. We have not yet posted it on the Track Record page since there was no rush to do so; however, it will soon appear on the 2005 Track Record page, which should be up shortly. During the last few weeks, VITR has dropped along with the rest of the markets and we sense it could go higher.
Remember what we said a few weeks back? That our main worry for 2005 is that it looked TOO GOOD. Talk about self-fulfilled prophecies. For most of this new year, the markets have been drubbed, which began with massive profit taking during the first week of this month. Of course, the slide has continued because there is now the fear that as January goes, so goes the year. There may be more downside left, but we feel that the markets should come roaring back, quite soon, for the simple reason that there is a mountain of hot money sitting on the sidelines. Keep in mind that the recent carnage is a natural evolution of the markets, and that this, too, shall pass.
Our Current Portfolio hasn’t escaped the slump either. It has been somewhat in lockstep with the Russell 2000, which started the year at around 650, its all-time high, and is presently hovering near 615. And yes, we feel that now is a buying opportunity for most of our picks.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Generex (GNBT) (8/5/02). Announces publication of Oral-lyn research study. Achieves compliance with NASDAQ market place rule 4310 (c) (2) (B). This one is scaring us a little and we have placed it on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Earnings call scheduled for February 1.
Technology Genetics (TGEN) (10/5/03). TGEN and Sirna Therapeutics announce Huntington’s Disease collaboration. Also, announces collaboration with Celladon to develop AAV-based gene therapies for congestive heart failure. This is beginning to look interesting, again.
Insmed (INSM) (11/5/03). Submits new drug application (NDA) to seek regulatory approval of SomatoKine for treating Growth Hormone Insensitivity Syndrome.
V.I. Technologies (VITX) (11/20/03). We’re not prepared to remove this from the “Endangered List” just yet, but things may have become a little brighter. The FDA granted fast-track status for Panacos’ HIV drug, and this news has almost doubled the price of VITX.
AVANT Immuno (AVAN) (12/5/03). AVAN’s partner, GlaxoSmithKline, begins global launch of Rotarix in Mexico. Receives $2 million milestone payment from GSK, marking filing with European regulatory agencies of application for marketing approval of Rotarix.
Actuate (ACTU) (1/5/04). Contributes report object model to Eclipse BIRT project. Raises 4th QT earnings guidance. Strengthens sales management team.
Peerless Systems (PRLS) (1/20/04). Lenovo printers with Peerless’ imaging technology are shipped to China.
Socket Communications (SCKT) (3/20/04). Introduces OrganizeIT suite with barcode scanning for organizing music and video collections.
Palatin (PTN) (4/5/04). Completes enrollment in PT-141 clinical trials for female sexual dysfunction and male erectile dysfunction.
EMCORE (EMKR) (5/20/04). Coverage initiated by CE Unterberg Towbin as company ships 10,000th LX4 10 gigabit ethernet module.
Glowpoint (GLOW) (5/20/04). Major broadcast network selects GLOW to provide live interviews from Michael Jackson trial. Announces arbitration results.
Network Engines (NENG) (6/5/04). Claims its security appliance ensures integrity and confidentiality of law firm’s client data while reducing overhead.
Bindview (BVEW) (6/5/04). Stock was nearing a breakout before company reduced its 4th QT profit outlook. BVEW’s RAZOR team issues RapidFire updates for two new Microsoft vulnerabilities.
Altair Nanotech (ALTI) (6/20/04). Receives U.S. patent to protect manufacturing process for ceramic nanoparticles. Gets another U.S. patent to protect manufacturing process for lithium titanate spinel materials used in high power battery operations.
Avanex (AVNX) (7/20/04). Earnings call set for January 31.
Tripath (TRPH) (8/5/04). Despite all of the law suits, we have removed this from the “Endangered List”. The company’s digital amplifiers are to power Panasonic’s latest car stereo system.
Chordiant (CHRD) (9/20/04). Stock downgraded by JMP Securities.
Corio (CRIO) (9/20/04). CSAA extends its contract with Corio Applications on Demand 2005.
IGATE (IGTE) (10/20/04). Subsidiary announces 3rd QT 2005 results. IGTE earnings call set for February 17.
Applied Micro Circuits (AMCC) (11/20/04). To announce quarterly results on January 26. AMCC, ION Computer Systems enable high performance SATA RAID in new terastatION2 storage servers.
Zhone (ZHNE) (12/5/04). Supplying network equipment to Covad as it competes for the Bells’phone network. Announces FiberSLAM comprehensive passive optical network product supporting full-featured triple play solutions. Etisalat successfully deploys Zhone’s MALC and Raptor products to expand its ADSL Internet services. Slates earnings call for January 26. Says over one million subscriber interfaces have been shipped.
QuickLogic (QUIK) (12/20/04). Earnings call set for February 2.
Britain (BRLC) (1/5/05). Unveils true six-megapixel 1080p HDTV.
Our picks for this Newsletter is a one-time Internet high flier and another one of those small biotechs.
INSWEB CORPORATION (NASDAQ: INSW) – $2.88. Twelve-month hi-low has been $6.49 – $2.09. Based in Gold River, CA, with about 110 employees, this insurance services provider has 4.8 million shares outstanding, $21.57 million in total current assets, $23.04 million in total assets, little debt, and $5.2 million in total liabilities. Institutional ownership is around 13%.http://www.insweb.com
Sometimes we like to glance at those former nose-bleed Net stocks and see if they are now worth a shot. About five years ago, InsWeb Corporation was hovering at between $80 to $90/share before joining the Great Collapse of 2000. Now, with the stock at near its all-time lows, the company has reappointed its founder as CEO and is changing certain business tactics, which may make this worth a flyer.
Founded in 1995, InsWeb claims to operate the largest online insurance marketplace in the U.S. Their site allows consumers to comparison shop online, and obtain insurance company sponsored quotes for a variety of insurance products such as automobile, term life, health, homeowners, renters, condos, motorcycle/ATV and RVs. These quotes are free to consumers, while participating insurance companies pay a transaction fee to InsWeb. Fees are earned either from the delivery of a lead to a participating insurance company; from a fee paid by an insurance company for each closed policy; or from a commission earned by InsWeb’s wholly-owned insurance agencies InsWeb Insurance Services and Goldrush Insurance Services. At the end of 2003, auto insurance accounted for nearly 80% of transaction revenues.
The latest information shows INSW having relationships with 38 insurance companies with the company’s site offering quotes or Web sponsored links to consumers in 49 states plus D.C., and its online marketplace offered comparative quotes for term life insurance from 11 companies in all 50 states and D.C.
During the last year, INSW has seen a revenue drop, so, a few months back, it replaced its CEO with the former CEO and company founder in hopes he can work his magic, again. Since then, he has put in place changes to enhance revenues per auto insurance customer. In addition, the company is transitioning term life insurance companies from a lead referral model to a commission-based model. All of this will take time to work, if it does work, so, don’t expect the 4thQT numbers to be stellar.
For FY2003, ending 12/31/03, revenue was $24.13 million with $1.04 million in net income. During the first nine months of this FY, ending 9/30/04, revenue was $10.79 million with $6.72 million in losses.
The balance sheet looks good, the founder’s back in charge, and just maybe the new changes may work.
Our 24-month target for the stock is $5.50 to $6.50.
For more information, contact INSW at 916-853-3300; investor@insweb.com
XCYTE THERAPIES, INC. (NASDAQ: XCYT) – $2.44. Twelve-month hi-low has been $4.89 – $2.00. Located in Seattle, WA, with about 70 employees, this biotech has 16.7 million shares outstanding, $28.24 million in total current assets, $35 million in total assets, and $8.12 million in total liabilities, of which $2.16 million is long-term debt. Institutional ownership is around 24%. One analyst rates the stock a “strong buy” and two have it as a “moderate buy”. http://www.xcytetherapies.com
The first thing you should know about Xcyte Therapies, Inc. is that it was one of the worst performing medical IPOs of 2004; the IPO price was $8.00. However, since the stock is trading around its lows, and coupled with its appealing balance sheet, plus its promising T-cell technology, Xcyte could see better days.
Founded in 1996, Xcyte is developing a class of therapeutic products designed to enhance the body’s natural immune response to treat cancer, infectious diseases, and other conditions associated with weakened immune systems. The company garners its therapeutic products from a patient’s own T cells, which are the cells of the immune system that orchestrate immune responses and can detect and eliminate cancer cells and other infected cells in the body. Xcyte uses its Xcellerate Technology to generate activated T cells, which the company calls Xcellerated T Cells, from blood that is collected from the patient. Activated T cells have been stimulated so as to carry out immune functions. The Xcellerate Technology is designed to rapidly activate and expand T cells outside of the body and then are administered to the patient.
The company is presently conducting several clinical trials: Phase 1 and 2 study of Xcellerated T cells in patients with chronic lymphocytic leukemia. Phase 2 study of the same in patients with relapsed or refractory indolent Non-Hodgkin’s Lymphoma (NHL). Phase 2 study of Xcellerated T Cells with or without prior Fludarabine therapy in patients with Multiple Myeloma.
In December, at the American Society of Hematology meeting, Xcyte presented the results of two clinical trials of Xcellerated T Cells in Multiple Myeloma, and the results of the Chronic Lymphocytic Leukemia trials. All of the results appeared to be encouraging and Xcyte is now considering its next moves.
Xcyte, of course, is typical of many small R&D biotechs insomuch as it has almost zero revenues and lots of red ink. For example, in the quarter ending 9/30/04, revenue was $13,000 and losses were $6.83 million.
Our sense is that if Xcyte continues to see some positive results in future trials, the stock could have a nice run.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact XCYT at 206-262-6200; ir@xcytetherapies.com
Look for the February 5, 2005 Newsletter to be posted on 2/1 or 2/2.
Thank you,
George