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Hello Readers,
Since the last Newsletter, we closed three more positions; two for gains and one for a loss.
ASTEX PHARMACEUTICALS (12/5/10). Closed position 3/8/13 at $4.56 for a 72% GAIN.
MERU NETWORKS (8/20/12). Closed position 3/6/13 at $5.32 for a 62% GAIN.
CD INT’L (4/5/10). Closed position at 9 cents for a 94% LOSS.
It took long enough, but Astex Pharmaceuticals finally got that surge, probably fueled from a “buy” recommendation at TheStreet.com, which usually does not have this much sway on stock prices, but, hey, we’ll take it. Since picking Meru Networks, the stock had mostly been making a pretty steady upward move and we are happy to take the gain. And, sadly, we closed CD INT’L for a very bad loss.
Who would have thunk this a few weeks ago? Not us, that’s for sure. We overlooked one big factor, and it is not the Fed’s $85 billion monthly gift to the markets. For the last several years, we all have heard there is between $3 trillion to $5 trillion on the sidelines. Well, until a month ago, this money seemed to be invisible, but not anymore. Translation: this is a lot of firepower. Now, many of the media gurus are expecting some sort of major pull back, in the 5% to 7% range, and it will come. However, sans some sort of unforeseen world crisis, we doubt it will be tomorrow.
Here are the headlines since the last Newsletter; 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 very significant.
Peregrine Pharmaceuticals (PPHM)(3/5/13). Year-end numbers reflect decent revenue growth; balance sheet still looks healthy. Company provides product update.
Echelon (ELON)(3/5/13). Announces European wins: new grid modernization initiatives in two key cities, plus a 2013 European smart metering award.
AlphaTec Holdings (ATEC)(2/20/13). To present at the 2013 Canaccord/Genuity conference on March 19, the day after we post this Newsletter. Receives FDA market clearance for its spine stabilization device, which juiced the stock.
TranSwitch (TXCC)(2/5/13). TXC-44144 HDplay transceiver to enable Yudong’s high-definition video switch.
Apricus Biosciences (APRI)(2/5/13). Ceases financing French subsidiaries; records one-time impairment charge totaling $8.8 million. Sets FY2012 financial results conference call for March 18, the day we post this Newsletter; also, on that day the company will present at the annual Roth confab.
Gevo, Inc. (GEVO)(1/20/13). Releases pretty upbeat earnings report; balance sheet still looks pretty strong.
EnteroMedics (ETRM)(1/20/13). To present at the Roth Capital conference on March 19, the day after we post this Newsletter.
Codexis (CDXS)(1/5/13). Announces next generation CodeXyme cellulase enzymes.
Horizon Pharma (HZNP)(12/20/12). To present at the Roth confab on March 18, the day we post this Newsletter; also that day, company plans to release 2012 financial results. Receives UK marketing authorization for DUEXIS.
Palatin Technologies (PTN)(12/5/12). To present at the Roth conference on March 18, the day we post this Newsletter.
Limelight Networks (LLNW)(11/20/12). Aligns with Float Left Interactive to deliver high impact video to all connected devices.
TeleCommunication Systems (TSYS)(11/5/12). Wins $16.1 million contract with the Marine Corps. To feature its communications technology at Satellite 2013 Conference March 18-21.
Response Genetics (RGDX)(10/20/12). To present at the Roth Capital conference on March 19, the day after we post this Newsletter. Sets earnings call for March 21.
Delcath Systems (DCTH)(10/20/12). Raises $21 million and looks for additional $50 million. Recent balance sheet still looks pretty good. To present at the Roth confab on March 18.
Zynga, Inc. (ZNGA)(10/5/12). The usual several dozen stories, but, as we have stressed in the last several Newsletters, the play here is on the online gambling buzz.
ImmunoCellular Therapeutics (IMUC)(9/20/12). To present at the Roth confab on March 18, the day we post this Newsletter. Company sees rise in R&D revenue; balance sheet still looks healthy.
AXT, Inc. (AXTI)(9/5/12). To present at the Roth conference on March 19, the day after we post this Newsletter. Announces ISO/TS 16949 certification.
Overland Storage (OVRL)(7/20/12). To present at the Roth confab on March 19.
Metabolix (MBLX)(7/5/12). Sets earnings call for March 26.
Athersys (ATHX)(7/5/12). Balance sheet still looks good.
Vermillion (VRML)(6/20/12). Names new CEO.
Rare Element Resources (REE)(6/20/12). Reports additional drilling results high in critical rare earth elements.
Avanir Pharmaceuticals (AVNR)(6/5/12). Announces research collaboration with the Department of Veterans Affairs for screening pseudobulbar affect.
Senomyx (SNMX)(5/20/12). To present at the Roth confab on March 19. Recent numbers not great; balance sheet still looks good.
Bacterin International (BONE)(5/5/12). Sets earnings call for March 26.
Air Media Group (AMCN)(4/20/12). Recent numbers show improvement quarter over quarter; balance sheet still looks good.
Axcelis Technologies (ACLS)(4/5/12). Purion M medium current implanter selected by leading chipmaker for memory and flash device manufacturing.
Echo Therapeutics (ECTE)(3/20/12). Granted US patent for Prelude SkinPrep System. Achieves ISO 13485 certification.
Ballard Power Systems (BLDP)(3/20/12). Signs about half-dozen contracts, which sends the stock back to almost our recommended levels; it had dropped to 70 cents.
Geron (GERN)(2/5/12). Recent balance sheet looks pretty healthy.
Revolution Lighting Technologies (RVLT)(12/5/11). Although this is on the “Endangered List” we may soon change that since the stock has been on a tear and just received a $5 million equity investment.
Anadigics (ANAD)(11/20/11). Sets secondary offering at $2.00 for 10 million shares, which puts pressure on stock price.
ECOtality (ECTY)(11/5/11). To present at the Roth confab on March 20. Teams with ChargePoint for hybrid auto charging stations.
Synthesis Energy Systems (SYMX)(8/20/11). To present at the Roth conference on March 20.
Cover-All Technologies (COVR)(7/20/11). To report earnings on March 20.
On Track Innovations (OTIV)(6/20/11). Names new CEO.
Idera Pharmaceuticals (IDRA)(6/5/11). We are placing this on the “Endangered List” on reports that the company is on the skids.
NeoStem (NBS)(5/20/11). Cash balance still looks viable. Announces intellectual property expansion in cardiovascular disease.
GSE Systems (GVP)(4/20/11). Quarterly numbers a little disappointing; balance sheet still looks good. To present at the Roth confab on March 20.
ThermoGenesis (KOOL)(4/5/11). To present at the Roth confab on March 20.
Jamba, Inc. (JMBA)(3/20/11). Ventures into the Mexican market.
Oculus Innovative Sciences (OCLS)(3/5/11). We are placing this on the “Endangered List” as the company scrambles to do another secondary.
Pixelworks (PXLW)(11/20/10). To present at the Roth confab on March 19.
RELM Wireless (RWC)(11/5/10). Recent numbers not bad; balance sheet still looks good.
Inovio Pharmaceuticals (INO)(10/20/10). Closes $15.1 million secondary offering. Aegis Capital gives the stock a “buy”.
Alpha Pro Tech (APT)(7/20/10). Posts pretty decent numbers; balance sheet still looks okay.
NovaBay Pharmaceuticals (NBY)(4/20/10). Recent balance sheet still looks good. To present at the Roth confab on March 19, and, yes, we are tired of seeing “Roth” all over the place.
Novavax (NVAX)(4/5/10). Recent numbers about as expected; balance sheet still looks good. To present at the Roth confab on March 19.
Qualstar (QBAK)(10/20/09). To present at, you guessed it, the Roth conference on March 20.
USA Technologies (USAT)(6/5/09). This is on the “Endangered List” and may be removed, soon, as the stock is near our old recommended price. Ameri-Source will promote USAT’s cashless and telemetry solutions to its 475 members.
GlobalScape (GSB)(5/20/08). Recent quarter showed a nice profit; balance sheet still looks okay.
Our picks for this Newsletter are a clothing retailer and another one of those small biotechs, both NASDAQ-listed.
JOE’S JEANS, INC. (NASDAQ: JOEZ) – $1.80. Twelve-month hi-low has been $1.88 – 63 cents. Based in Commerce, CA, with about 180 employees, this clothing wholesaler and retailer has 67 million shares outstanding, $49.24 million in total current assets, $86 million in total assets, little debt, and $14.29 million in total liabilities. Institutional ownership is around 8%. One analyst rates the stock a “strong buy”, one as a “buy”, and one as a “hold”. www.joesjeans.com
Periodically, we like to wander off the usual biotech/hi-tech reservation and take a stab at retail and Joe’s Jeans, Inc. with its pretty good looking balance sheet and P&L statement just could work out. Who knows? It may be the next “big thing”.
Founded as the Innovo Group in 1987 and known as Joe’s Jeans since 2007, simply stated, Joe’s Jeans designs and distributes apparel products to over 1200 retail stores in the U.S. and abroad, both wholesale and retail. The company provides women’s and men’s denim jeans, pants, shirts, sweaters, jackets, and other apparel products. It also offers women’s handbags and clutches, shoes, belts, and leather products; and children’s products including denim bottoms, tops, T-shirts, and jackets for infants, toddlers, girls, and boys.
Joe’s Jeans sells to retailers, specialty stores, and distributors; and to consumers through its full-price retail and outlet stores, as well as through its web site. Besides selling in the over 1200 retail stores, the company operates about eleven full-price retail stores and nineteen outlet stores, mostly on the West Coast. Recently the company expanded into the Middle East.
For the FY ending 11/30/12, revenue was $118.64 million with net income of $5.56 million compared to the previous FY revenue of $95.42 million and $1.37 million in losses. The 4th quarter was particularly strong and the company attributes this to “revamping core basics” that brought back customers.
There is absolutely nothing sexy about this company other than its web site photos, except that it has been showing some good revenue and income growth.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact JOEZ’s Hamish Sandhu at 323-837-3700.
ONCOTHYREON, INC. (NASDAQ: ONTY) – $2.20. Twelve-month hi-low has been $8.74 – $1.71. Located in Seattle, WA, with about 30 employees, this biotech has 57.2 million shares outstanding, $79.36 million in total current assets, $95.53 million in total assets, little debt, and $19.28 million in total liabilities. Institutional ownership is around 52%. Two analysts rate the stock as a “strong buy”, one as a “buy”, two as a “hold”, and one as an “underperform”. www.oncothyreon.com
Occasionally, we stumble across a beaten-down biotech that was crushed because a trial failure was way overblown, and this appears to be the case with Oncothyreon, Inc. The company seems to have a promising pipeline and a mountain of cash, and is trading near a 52-week low.
Founded in 1985, and public for nearly twenty years, Oncothyreon is developing therapeutic products to treat cancer. The company’s cancer vaccines are designed to stimulate the immune system to attack cancer cells, while its small molecule compounds are designed to inhibit the activity of specific cancer-related proteins. Its lead product candidate, Stimuvax, is a cancer vaccine being evaluated in two Phase III clinical trials for treating non-small cell lung cancer (NSCLC). It has granted a worldwide license to Merck for developing and commercializing the product, and that is where the stumble comes in. In December, Merck said that the START trial of Stimuvax failed to meet its primary endpoint, and that sent the stock tanking. However, further on in Merck’s report it also stated “notable treatment effects were seen in certain subgroups of patients and warrant further investigation”. Also, there were no major safety concerns.
Oncothyreon is also developing PX-866, a small molecule that is in Phase II trials for various cancer indications, such as head, neck, NSCLC, colorectal, prostate, and glioblastoma. In addition, it is in the preclinical development of ONT-10, a cancer vaccine; and ONT-701, a pan-inhibitor of the B-cell lymphoma-2 family of anti-apoptotic proteins.
The company is pretty typical of many small biotechs in that it earns little money and racks up major losses. During FY2012, ending 12/31/12, revenue was $143,000 with losses totaling over $42 million.
As we alluded above, the stock was creamed by what we believe was an over-reaction by certain investors. Let’s see how the Merck episode finally plays out. The company appears to have the cash to do just that.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact ONTY at 206-801-2100; ir@oncothyreon.com
Look for the April 5, 2013 Newsletter to be posted on 4/1 or 4/2.
Happy holidays,
George