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Dear Reader,

Since the last issue, we closed two more positions, both for some nice gains:

VASOGEN, INC. (12/5/02). Closed position 4/15/03 at $3.68 for a 60% GAIN.

EDEN BIOSCIENCE (3/5/03). Closed position 4/7/03 at $2.18 for a 74% GAIN.

There were not any real reasons or compelling news for either VSV and EDEN exploding as they did. And, who cares? We’re happy to take nice gains, even for no reason at all.

Our feelings about the market are still very bullish. We sense that the small investor is itching to get into the fray, once the White House and the media begin detoxing from the war. The stage is set for a heady climb, thanks to low interest rates and reasonably-priced crude. Once again, the only caveats are terrorist acts or further military ventures – someone better tell Dubya that threatening Syria could be a drag on the market. It’s time for Bush to start spending more time with his Treasury and Commerce Secretaries and Economic Advisors’ Chairman, if he can remember their names. We can’t.

Excluding the stocks on our “Endangered List” and some of the “golden oldies”, our Current Positions portfolio, as a whole, made good progress since the last issue. More of our picks are on the plus side, and those still in the negative look less scary.

Here are the headlines about companies in the Current Portfolio, since the last Newsletter. Dates in parentheses are when we first recommended them.

New York Health Care (BBAL) (3/20/97). Note the new ticker symbol is BBAL, which is an indication that the company plans to chart its future direction through its newly-purchased subsidiary, The Bio Balance Corp.

US Gold (USGL) (8/20/97). Posts annual report. Now that the war is over, the stock could taper off. We may be closing this, soon.

Mountain Province Diamonds (MPVI) (10/20/97). Reports modeled revenues per tonne for the Hearne and 5034 diamond pipes, but stock gets hammered. This is probably due to a lawsuit filed against MPVI partner DeBeers by workers of its African mines who are seeking billions in damages. This could throw the whole diamond industry out of whack for some time.

Draxis Health (DRAX) (3/20/00). Receives $6.5 million from Elan to return Cda rights of Elan Neurology products. Launches new radiotherapeutic product in U.S. Ends BrachySeed agreements with Cytogen.

RateXchange (RTX) (1/20/01). Successfully completes $2.75 million private placement.

Digital Power (DPW) (2/20/01). Receives additional investment from Telkoor Telecom.

Arotech (ARTX) (6/5/01). Awarded new $1.6 million U.S. Army Battery contract.

Access Pharmaceuticals (AKC) (11/5/01). Commences Phase I clinical trails for AP5346 Polymer Platinate. Announces year-end results.

Saba Software (SABA) (11/20/01). Abbey National and Banco Itau select SABA learning products. Hopefully, the stock’s slide has abated.

Superconductor Technologies (SCON) (1/5/02). Stock is up over a dollar since the last Newsletter on some good news. SCON won a court battle over a patent infringement suit. Also, gave an upbeat report on preliminary 1st QT revenues, which also announced that SCON had added another major U.S. based wireless carrier to customer list, and it now has a product backlog at $4.5 million.

Airspan Networks (AIRN) (1/20/02). AIRN, along with Intel, Nokia, and others form group to expand Wi-Fi.

VASCO Security (VDSI) (2/5/02). Says 1st Quarter should be positive for operating income.

Magic Software (MGIC) (3/20/02). Announces “Absolutely Open” standards-bridging release of eDeveloper.

Spectrum Pharmaceuticals (SPPI) (5/5/02). Reports year-end numbers. Receives NASDAQ notice that it could be delisted. This one’s on “Endangered List”.

Nanogen (NGEN) (5/20/02). Launches three new products for detecting genetic mutations. Announces cost reductions which include a 20% cut in work force.

Immersion (IMMR) (6/5/02). Kaiser Foundation to use IMMR simulators. Receives funding to advance simulation products for military and civilian health care.

Bruker AXS (BAXS) (6/20/02). Being acquired by its parent company in a deal that’s valued at $1.86 a share. Should be completed sometime this summer.

Hemispherx Biopharma (HEB) (7/5/02). Year-end report.

Generex (GNBT) (8/5/02). Will appeal NASDAQ delisting notification, however, company could instead end up on Nasdaq Small Caps.

SpeechWorks (SPWX) (9/5/02). Secures new patents for speaker verification software. Also, assisting Census Bureau with data collection.

Millennium Cell (MCEL) (9/20/02). Unveils MCEL’s entry into the early adopter markets.

Viewpoint Technology (VWPT) (11/20/02). Stock made a slight bounce shortly after we placed it on the “Endangered List”, thanks mostly on news that it had expanded its pact with Toyota. Also, partners with Eicoh Co. of Japan.

Titan Pharmaceutical (TTP) (11/20/02). New study shows efficacy of Parkinson’s drug, Spheramine. Will now begin Phase IIb study with Schering AG.

Interactive Intelligence (ININ) (12/5/02). Receives third U.S. patent for communications software.

Avaya (AV) (2/20/03). Several items about resellers and products.

E*TRADE (ET) (2/20/03). Revamps board; names four new directors. First QT results meets expectations.

Integrated Silicon (ISSI) (3/5/03). Partners with Goyatek on IP for the networking industry.

Interwoven (IWOV) (3/20/03). Warns on 1st QT and CEO resigns. Gets downgraded by RBC Capital Markets. The good news is that the stock could have been crushed on this news, but wasn’t. May have been helped by some upbeat product announcements.

FreeMarkets (FMKT) (3/20/03). Releases ES 2.0. Aventis and SPX will use FMKT software.

Nanometrics (NANO) (4/5/03). Adams Harkness downgrades stock from “strong buy” to “buy”. Isn’t that like saying you’re a “little” pregnant.

Our picks for this issue are similar in that they are both biotechs with promising technologies and decent-looking balance sheets.

MEDAREX, INC. (NASDAQ: MEDX) – $3.20. Twelve-month hi-low has been $13.96 – $2.55. Based in Princeton, NJ, with about 400 employees, this biotech has 77.3 million shares outstanding, $360 million in total current assets, $549 million in total assets, $175 million in long-term debt (which are convertibles), and $20.7 million in total current liabilities. Institutional ownership is about 60%. Three analysts rate the stock a “strong buy”, one as a “hold”, and one as a “moderate sell”.

About a year ago, or more, we thought biotechs would be white hot right about now. Since then, there were several interruptions to our forecast, i.e. corporate scandals, talk of war, and war itself. It appears the sector is finally showing some signs of life, and, so, we add another one that seems to have nifty technology and a half-decent balance sheet. Welcome Medarex, Inc. to the Current Portfolio.

Founded in 1987, Medarex develops monoclonal antibody-based therapeutics to fight cancer and other diseases. Unlike many biotechs, the company boasts that it skips the use of transgenic mice to create fully human antibodies. MEDX does this through what it calls its UltiMAb technology, which may be more likely to have favorable safety profiles and be eliminated less rapidly from the human body, since this system is 100% human protein sequences. Also, Medarex’s fully monoclonal antibodies do not require any humanization, which can be time-consuming and can result with lowered affinities.

With numerous products and clinical trials in the pipeline, Medarex has established collaborations or partnerships with nearly 50 drug/biotech firms such as Eli Lilly, Abbott Labs, MedImmune, and Amgen. The company is developing or has licensed antibodies for ovarian and prostate cancer, psoriases, and a rare blood disorder. MEDX also owns more than 30% of Genmab, which has licensed antibody therapies for rheumatoid arthritis, psoriasis, and other conditions.

There seems to be a steady flow of news with this company. Last month, MEDX and Oncomab, of Australia, entered into a commercial alliance to develop cancer antibodies. Since the first of the year, Medarex has signed similar pacts with Ferris Technologies, diaDexus, and Ability Biomedical. Of significance is the multi-year collaboration that MEDX struck with Abbott Labs in January.

Like most of our other biotech picks, Medarex losses far outweigh the revenues. For FY2002, ending 12/31/02, revenue was $39.47 million with $102 million in losses, with much of the red ink attributable to R&D expenses.

Medarex must be doing something right or we doubt that it would have the partners/collaborators it now has.

Our 24-month target for the stock is $5.50 to $7.00.

For more information, call MEDX at 609-430-2880;

ARQULE, INC. (NASDAQ: ARQL) – $2.70. Twelve-month hi-low has been $11.79 – $1.92. Located in Woburn, MA, with nearly 400 employees, this drug maker/biotech, has 23.3 million shares outstanding, $88.29 million in total current assets, $145 million in total assets ($51.5 million is goodwill), and $51.36 million in total liabilities, of which over $14 million is short or long-term debt. Institutional ownership is around 58%. Three analysts rate the stock a “hold”.

Our thought process for picking ArQule, Inc. is much the same as Medarex above. The company apparently has a healthy balance sheet and a promising portfolio of new technologies. Public since 1996, ArQule bills itself as a leader in small-molecule chemistry that designs optimal chemical entities (OCEs). It integrates intelligent molecule design and high-throughput, automated chemistry, in parallel, with predictive modeling of ADMET parameters (absorption, distribution, metabolism, elimination, toxicity, hence ADMET). These OCEs are target-relevant small molecules whose drug-like characteristics have been optimized prior to their entry into preclinical trials. With this method of synthesizing molecular compounds and identifying characteristics, ArQule believes that drugs would have a greater likelihood of success through clinical trials.

Of course, ArQule’s purpose is to make drug discovery more efficient and it is now licensing compounds to such powerhouses as GlaxoSmithKline, Bayer, and Pfizer, its largest customer. They will pay royalties if any compounds from ArQule hit the market. ARQL presently focuses its drug development on ion channels and kinases for pain, inflammation, and incontinence. Last month, ArQule announced it had achieved its 2002 collaboration goals for its Pfizer agreement, triggering a $5 million additional equity investment from that company. This payment is the second of three planned investments as part of an expanded seven-year, collaboration signed in December, 2001. Pfizer could make an additional equity investment in 2004 if ARQL meets certain goals for this year.

For FY2002, ending 12/31/02, revenue was $62.8 million with $77.87 million in losses compared with $58.39 million in revenue and $41 million in losses for FY2001. ARQL expects FY2003 revenues to range between $56-$58 million with losses per share ranging between 45 cents and 48 cents; FY2002 losses were much greater.

ArQule is not a well-known biotech, but some of the major drug behemoths seem to think it has the right chemistry.

Our 24-month target for the stock is $4.50 to $5.50.

For more information, call ARQL’s Jean Devine at 781-994-0300;

Look for the May 5, 2003 issue to be posted on 5/1/03 or 5/2/03.

Have a Happy Holiday!

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