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Hello Readers,
Since the last Newsletter, we were able to close another position for a gain:
AVIGEN (6/20/08). Closed position 9/8/08 at $4.58 for a 55% GAIN.
Avigen started a good run in early August when Credit Suisse upgraded the stock from “neutral” to “outperform”. What these terms mean is Mandarin to most of us. Why not just have “buy” and “sell”. Actually, we are happy to close any position for a gain for whatever reason given the state of this market…
…and that state is pretty grim or just plain plug ugly. Yes, we have become a broken record and to sum up our feelings about the last six months: the markets are the worst we have seen since the 1970s, and, if things continue, the 70s will seem like boom times. We keep hoping for the major cataclysmic sell off to occur so as to cleanse the situation and the wait has been a slow death by a thousand knives. Our Current Portfolio keeps getting whacked and is still at its all-time worst while closing positions for gains has become cause for a national holiday. Most frustrating is that most of our picks have come out with good to great news about their companies only to see their stock prices fall even more. When does the carnage end? Probably once confidence is restored in the financial system. So, get a Snickers bar, this could take a while.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Endeavour Silver (EXK) (9/5/08). Discovers four new zones of high grade silver-gold mineralization at Guanajuato mines project in Mexico. Stock price has slumped badly since we picked it two weeks ago, probably due to slumping commodity prices.
Insure.com (NSUR) (9/5/08). Launches updated car crash safety ratings tool that allows car shoppers to instantly identify the safest cars of 1990 through 2009.
Uranium Energy (UEC) (8/20/08). Completes successful hydrologic tests and files production area authorization application at the Goliad ISR project. This, too, has seen its stock plummet, probably also due to slumping commodity prices.
Digirad (DRAD) (8/20/08). Developing new cardiac imaging system with distortion correction.
U.S. Geothermal (HTM) (8/5/08). Company posts second quarter of revenues; balance sheet still looks good.
E*TRADE (ETFC) (7/20/08). A number of news articles and releases. Names new finance chief.
Applied Energetics (AERG) (7/5/08). Gets a bad mention at Motley Fool.
Neurobiological Technologies (NTII) (7/5/08). Earnings call set for September 16, the day we post this Newsletter.
Bridgeline Software (BLSW) (6/5/08). Selected by Hooked On Phonics to power new eCommerce initiatives.
Microvision (MVIS) (5/20/08). Approved to list warrants on NASDAQ Global Market.
Ziopharm Oncology (ZIOP) (5/5/08). Commences randomized Phase II study of Palifosfamide in soft tissue sarcoma.
Biolase Technology (BLTI) (4/5/08). Counter sues reseller of modified lasers.
Rodman & Renshaw (RODM) (3/20/08). Strengthens its energy research team. To hold its annual Global Investment Conference November 10 – 12 in NYC. Hires senior healthcare banker.
ActivIdentity (ACTI) (3/5/08). Software is embedded in select HP multifunction printers.
Amicas (AMCS) (1/20/08). Gets 21st contract for new Vision Series Financials Platform.
Catalyst Pharmaceutical (CPRX) (12/20/07). Does a $4.5 million secondary offering which puts downward pressure on the stock.
Hollis-Eden Pharmaceuticals (HEPH) (12/20/07). Reports update on autoimmunity program with TRIOLEX (HE3286).
Continuecare (CNU) (11/20/07). Reports pretty good numbers for last quarter; balance sheet still looks healthy.
Linktone (LTON) (11/5/07). Reports higher revenue and bigger losses in second quarter; cash position looks strong.
Sunesis Pharmaceuticals (SNSS) (11/5/07). Company and SARcode start Phase 1 clinical trial in ocular inflammatory diseases.
American Technology (ATCO) (10/5/07). Reaffirms FY and 4thQT revenue guidance.
Wave Systems (WAVX) (9/5/07). To complete $756,800 Series I convertible preferred stock financing.
SIGA Technologies (SIGA) (8/20/07). NIH funds SIGA Lassa antiviral program. NIH funds SIGA Dengue antiviral program with grant totaling $963,000 over a two-year period. Awarded $55 million by Federal government to develop broader applications for its lead drug candidate ST-246.
A.P. Pharma (APPA) (8/5/07). Ladenburg Thalmann gives the stocks a “buy” rating.
Pharmacyclics (PCYC) (6/20/07). CEO and four directors resigns, CFO to depart. RBC Capital Markets upgrades the stock to “outperform”.
Oncolytics Biotech (ONCY) (6/5/07). Starts patient enrolment in U.S. Phase II clinical trial investigating REOLYSIN in combination with Paclitaxel and Carboplatin. Announces U.S. Phase II combination clinical trial for non-small cell lung cancer patients with K-RAS or EGFR-activated tumors.
Encorium Group (ENCO) (5/20/07). Stocks plunges as company provides update on acquisition and its termination of Linkcon business combination. Appoints new CEO and announces board changes. This one is wait and see until the dust settles.
Hana Biosciences (HNAB) (5/5/07). HNAB’s rALLy clinical trial of Marqibo meets response criteria to advance to full enrollment.
Endologix (ELGX) (1/20/07). To present at UBS Global Life Sciences conference on September 23. Presents six-year follow-up data on Powerlink.
Lantronix (LTRX) (12/5/06). Recent quarterly numbers not bad; balance sheet still looks okay. NASDAQ gives company until December 22 to regain minimum bid rule. Secures revolving credit facility and term loan.
Proxim Wireless (PRXM) (11/5/06). Sells its Harmonix division for $5.3 million. This is on the “Endangered List”.
TVI Corporation (TVIN) (9/5/06). Receives orders for decontamination systems totaling more than $500,000 from U.S. military. Receives $750,000 in disaster relief orders. On “Endangered List”.
Hydrogenics (HYGS) (9/20/06). To present at Merriman Curhan Ford’s investor summit on September 16, the day we post this Newsletter.
ThermoGenesis (KOOL) (4/5/06). Reports record quarterly revenues of $7.2 million as full year revenues increase 31%; balance sheet still looks good. Announces distribution agreement for bone marrow stem cell device.
MIND C.T.I. (MNDO) (2/5/06). Approves plan to repurchase up to $2.8 million in stock.
Digital Angel (DIGA) (12/20/05). A couple of news items. On “Endangered List”.
Westell (WSTL) (10/20/05). Slates annual shareholders meeting for September 18.
Zi Corp (ZICA) (8/5/05). Sony Ericsson and ZICA agree on multi-million dollar expansion to Sony Ericsson’s license agreement for predictive text and handwriting recognition products. Provides update on strategic alternatives. On “Endangered List”.
N.A. Scientific (NASM) (8/5/05). A number of items, including 3rdQT earnings release. On “Endangered List”.
B.O.S. (BOSC) (1/5/05). Receives over $600,000 in orders for electronic components from a strategic customer.
Our picks for this Newsletter are another biotech and a maker of computer peripherals, both listed on NASDAQ.
LEXICON PHARMACEUTICALS, INC. (NASDAQ: LXRX) – $1.85. Twelve-month hi-low has been $4.03 – $1.27. Based in The Woodlands, TX, with about 550 employees, this biotech has 136.8 million shares outstanding, $152.95 million in total current assets, $310.3 million in total assets, and $91.85 million in total liabilities, of which $30.1 million is long-term debt. Institutional ownership is around 35%. Two analysts rate the stock a “strong buy” and two as a “hold”. www.lexpharma.com
At first glance, one asks, “what about all that long-term debt?”. We’re not that worried, for now, since Lexicon Pharmaceuticals, Inc. has a big pile of cash/equivalents. It also seems to have a pretty exciting drug development program, which, in the biotech wars, can go a long way.
Founded in 1995 and public for over eight years, Lexicon focuses on drug discovery using its proprietary gene knockout technology on what can be considered an unprecedented scale to systematically discover the physiological and behavioral functions of 5000 genes. Through this initiative, known as the Genome5000 program, the company has identified and validated more than 100 drug targets and has created a growing clinical pipeline. Lexicon is currently targeting diseases in cardiology, gastroenterology, immunology and oncology, metabolism, neurology, and ophthalmology.
Lexicon’s drug candidates include LX6171, a Phase II clinical trial product for treating cognitive impairment associated with disorders such as Alzheimer’s, schizophrenia, and vascular dementia; LX1031, which is in Phase lb clinical trials for treating irritable bowel syndrome and other gastrointestinal disorders; LX1032, Phase 1 clinical trial products for treating symptoms associated with carcinoid syndrome; LX2931, a phase 1 clinical trial product for treating autoimmune diseases, such as rheumatoid arthritis; and LX4211, a preclinical development stage product for treating Type 2 diabetes. The company has drug discovery alliances with Bristol-Myers Squibb to discover and commercialize small molecule drugs in the neuroscience field; Genetech to discover therapeutic proteins and antibody targets; N.V. Organon to discover biotherapeutic drugs; Takeda Pharmaceutical to discover new drugs for blood pressure; and Taconic Farms to market and license various lines of the company’s knockout mice. It also has a strategic alliance with Nuevolution to discover small molecule lead components for drug targets.
In mid-August, Lexicon announced that it had initiated the formal preclinical development of LX7101, a new drug candidate for glaucoma.
Lexicon is a typical small biotech with fluctuating revenues which can range from zero to whatever, depending upon when certain licensing fees come due. For the six months ending 6/30/08, revenue was $18.45 million with $38 million in net losses compared to the same period in FY2007 with revenues at $26.14 million and net losses of $32.5 million.
This is one those “what’s not to like?”.
Our 24-month target for the stock is $3.50 to $3.75.
For more information, contact LXRX’s Bobbie Faulkner at 281-863-3503; bfaulkner@lexpharma.com
PLANAR SYSTEMS, INC. (NASDAQ: PLNR) – $2.45. Twelve-month hi-low has been $7.42 – $2.01. Located in Beaverton, OR, with around 690 employees, this maker of computer peripherals has 18.6 million shares outstanding, $122.8 million in total current assets, $183.27 million in total assets, and $92.5 million in total liabilities, of which $12.6 million is “other liabilities”. Institutional ownership is about 53%. One analyst rates the stock a “hold”. www.planar.com
Planar Systems, Inc. has taken some lumps over the last fiscal year, but maybe, just maybe the company is beginning to turn things around. The company is bolstering its balance sheet and cleaning up its income statement for starters.
Founded in 1983 and public for almost 15 years, Planar makes and markets electronic display products and systems. Its industrial segment provides embedded, rugged customized displays to OEMs to include in their systems. It offers electroluminescent displays, active-matrix liquid crystal displays (LCDs), and passive LCDs for use in various applications, including instrumentation, medical equipment, vehicle dashboards, and military uses. This segment’s activities also include the sales related to Atomic Layer Deposition (ALD) technology; ALD based services and expertise, such as customer specific coating and material solutions, and foundry based coating services; and the manufacture and sale of ALD reactors for customer in-house R&D and production. Planar’s Control Room and Signage segment provides high resolution video walls for security, governmental, telecom, energy, industrial, broadcast, and transportation sectors, as well as digital signage solutions for retail, banking, indoor advertising, and the casino/hospitality industry. The Home Theater segment offers various products, including high-performance home theater projection systems, large-format thin displays, and unique front-projection screens. These are sold directly to custom home installation dealers. Planar’s Commercial segment offers LCD desktop monitors, other touch displays, and projectors.
In August, the company announced the 1000-unit shipping milestone of its Planar LX1200 in-vehicle touchscreen displays. Also, at that time, Planar sold its medical display division for $34.25 million, which should add strength to next few balance sheets. And also during August, the company won a contract with Thomson Premier Retail Networks to deploy digital displays over the next two years.
For FY2007, ending 9/28/07, revenue was $272.2 million with $23.18 million in losses. During the first nine months of the current FY, ending 6/27/08, sales were $225.36 million with $70.75 million in net losses (Note: $58.4 million of this was a non-cash impairment charge for goodwill and other intangible assets).
There isn’t too much sexy about Planar. This is all about the numbers and what the company has done to hopefully better its future.
Our 24-month target for the stock is $4.25 to $4.50
For more information, contact PLNR’s Ryan Gray at 503-748-8911; ryan.gray@planar.com
Look for the October 5, 2008 Newsletter to be posted on 10/1 or 10/2.
Thank you,
George