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Hello Readers,
Since the last Newsletter, we have closed four positions, two for gains and two for losses.
BRILLIAN (1/5/05). Closed position 10/20/05 at $5.89 for a 71% GAIN.
BINDVIEW (6/5/04). Closed position 10/20/05 at $3.90 for a 30% GAIN.
CENTRA SOFTWARE (2/20/05). Closed position 10/20/05 at $1.77 for a 23% LOSS.
TARGETED GENETICS (10/5/03). Closed position 10/20/05 at $1.77 for a 77% LOSS.
Ever since early September, when Brillian launched a new HDTV/media server video platform, the stock had been making very nice gains, probably also fueled by some momentum players; so, we’ll take the 71% gain even though this could go higher. Both Bindview and Centra are being acquired and probably are near their peaks. Targeted Genetics, which had been on the “Endangered List”, doesn’t appear like it’s going anywhere, soon, despite some recent upbeat news.
September and October are traditionally the two worst months for the markets, and this year was no exception. Of course, there were many negatives igniting the timbers of discontent, but no need to dwell on them any more. We still feel that the markets are due for a nice run over the next six months.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Cognitronics (CGN) (10/20/05). To acquire ThinkEngine Networks, a provider of VoIP solutions, for stock and cash totaling $4.7 million.
Westell (WSTL) (10/20/05). Announces enhanced UltraLine video router with improved ADSL2 interoperability. Stock upgraded to a “buy” by Needham & Co. as company’s quarterly statement shows improved revenue growth over previous year; balance sheet still looks very strong. Delivers new TR-069 CPE in conjunction with Fine Point Technologies.
RAE Systems (RAE) (10/5/05). Quarterly numbers reflect good growth over same time last year; balance sheet still looks very nice. Wins Isreali Air Force contract for Wingtank entry kits.
Discovery Partners (DPII) (10/5/05). To release quarterly report on November 1, the day this Newsletter is posted. Receives milestone payments from Allergan. Announces drug discovery collaborations with Mitsubishi Pharma and Ono Pharmaceutical.
EntreMed (ENMD) (9/5/05). Files $50 million shelf registration. Says two new patents strengthen position in antiangiogenic drugs.
Staktek (STAK (9/5/05). To present at several upcoming conferences. Names new CEO.
Ibis Technology (IBIS) (8/20/05). Third quarter numbers look bad as company reinvents itself, sort of, but balance sheet still looks decent. Wins its second implanter order valued at $7 million.
@ROAD (ARDI) (8/20/05). Posts 3rd QT profit; balance sheet still looks very strong. Announces major customer wins in land drilling operations and home improvement retail distribution. Stock upgraded by Wedbush. Named in Deloitte’s Fast 500 for North America.
Zi Corp (ZICA) (8/5/05). Licenses Decuma Handwriting Recognition software to Nintendo.
CDC Corp (CHINA) (7/20/05). Subsidiary announces share buy-back program. Presents at several conferences. Morgan Keegan selects Pivotal Financial Services for private client group and equity capital markets.
Innodata (INOD) (7/5/05). To report quarterly results on November 10.
Tele Systems (TSYS) (6/20/05). Partners with Thrane & Thrane on broadband solutions. Earnings call set for November 3. Gets patent for prepaid call management technology. Will integrate Wavesteam technology into SwiftLink DVM-90.
Dyadic (DIL) (9/20/05). To present at the Rodman & Renshaw conference on November 8.
Commerce Energy (EGR) (6/5/05). Reports FY and 4th QT results and restates results.
Sirenza Micro (SMDI) (6/5/05). Quarterly results okay; balance sheet still appears decent.
Vion Pharma (VION) (5/20/05). Provides updates at shareholders meeting. Gets fast track designation for Cloretazine in elderly poor-risk acute myelogenous leukemia.
EXACT Sciences (EXAS) (5/20/05). Releases 3rd QT numbers; balance sheet still looks good. Large company uses LabCorp test to screen workers for colon cancer.
Verticalnet (VERT) (4/5/05). Releases major upgrade of XE Supply Management Suite. Earnings call slated for November 3.
Loudeye (LOUD) (4/5/05). To release earnings on November 9. O2 Germany launches mobile music store powered by Nokia and Loudeye.
Mindspeed (MSPD) (2/20/05). Reports 4th QT loss narrows: balance sheet still looks viable.
B.O.S. (BOSC) (1/5/05). Qualmax aquires BOS’ communications division.
Advancis Pharma (AVNC) (12/20/04). Quarterly report reveals pretty healthy balance sheet. Anticipates Amoxicillin PULSYS Phase III trial enrollment will begin in November. CFO steps down.
Applied Micro Circuits (AMCC) (11/20/04). Several product news releases. Second quarter numbers pretty upbeat as losses narrow; balance sheet looks strong.
Net2Phone (NTOP) (11/5/04). Receives two Internet Telephony awards. Expands deal with Cable & Wireless.
Chordiant (CHRD) (9/20/04). Plans to announce 4th QT and year-end FY results on November 29.
Network Engines (NENG) (6/5/04). Rolls out major new NS Series product line enhancements. Slates November 3 for earnings call. NENG and Matrixforce deploy NS6400 in a Oklahoma school system. To present at financial confab November 8.
GlowPoint (GLOW.PK) (5/20/04). Launches private label IP-video service in Australia. This one is on the “Endangered List”.
Management Network Group (TMNG) (4/20/04). Schedules earnings call for November 8. Delivers solutions for the telecom industry. Chosen as mobile virtual network enabler by SmartServ. Names new president for Strategy Practice.
AVI BioPharma (AVII) (4/20/04). Earnings call set for November 4. Results from AVII’s antiviral program published in two virology journals. Thinks that its antisense drugs can beat the flu, which is what has probably boosted the stock.
Palatin Technologies (PTN) (4/5/04). Will present at two investor confabs in November. MDB Capital Group recommends a “buy” on the stock. Provid Pharmaceuticals to support drug discovery for PTN.
NexMed (NEXM) (4/5/04). Makes several presentations during conference on women’s health. To report 3rd quarter results on November 9.
Socket Communications (SCKT) (3/20/04). Reports 3rd QT profit; balance sheet still looks okay. Plans to tap new markets with wearable bar code scanning products. Delivers bar code scanning solution for RIM BlackBerry devices.
OpenTV (OPTV) (3/20/04). Slates earnings release for November 7.
Oplink (OPLK) (2/20/04). Posts pretty fair quarterly numbers; balance sheet still looks amazingly strong.
Somera Communications (SMRA) (2/20/04). Slates earnings call for November 2.
Crossroads Systems (CRDS) (2/5/04). Sets earnings news for November 22.
Actuate (ACTU) (1/5/04). Needham & Co. give the stock a “buy” as company posts a 3rd QT profit; balance sheet still looks good. Delivers the industry’s first spreadsheet application platform.
Avant Immuno (AVAN) (12/5/03). Reports 3rd QT results; balance sheet still seems fair.
Active Power (ACPW) (11/20/03). 3rd QT net loss narrows; balance sheet still looks pretty good.
Insmed (INSM) (11/5/03). FDA to review company’s complete response to approval letter for iPlex.
Art Technology (ARTG) (8/5/03). Reports profitable 3rd QT; balance sheet still looks decent.
Monogram Biosciences (MGRM) (7/20/01). Quarterly loss widens but company reports 52% revenue growth year-over-year; balance sheet still appears to be very healthy. Monogram and Merck to conduct Erbitux biomarker study. May partner with Maxygen, which has just been awarded $14.4 million DOD contract, to advance HIV vaccine research. Named to the 2005 Deloitte Technology Fast 500 list.
Our picks for this issue are a biotech and a software provider, both trading on NASDAQ.
MEMORY PHARMACEUTICALS CORP. (NASDAQ: MEMY) – $2.14. Twelve-month hi-low has been $7.08 – $1.75. Based in Montvale, NJ, with about 80 employees, this biotech has 21 million shares outstanding, $27.19 million in total current assets, $37.53 million in total assets, and $25.12 million in total liabilities, of which $1.46 million is long-term debt and $10.6 million is deferred long-term liabilities. Institutional ownership is around 38%. One analyst rates the stock as a “hold”. http://www.memorypharma.com
At the moment it seems that most biotechs are in a holding pattern, which could be seen as a positive as we put Memory Pharmaceuticals Corp. into the Current Portfolio. MEMY has a half-decent balance sheet and just entered into collaboration with Amgen.
Founded in 1998, and relatively new to NASDAQ, Memory develops drugs for treating central nervous system (CNS) disorders, such as Alzheimer’s, schizophrenia, depression, vascular dementia, mild cognitive impairment, and memory impairments associated with aging. The company has five clinical and preclinical stage drugs. Its products include MEM 1003, MEM 1414, MEM 1917, and MEM 63908 for treating Alzheimer’s, vascular dementia, and mild cognitive impairment; and MEM 3454 for treating schizophrenia. MEM 63908 and MEM 1917 are in pre-clinical studies, while the other three candidates are in Phase 1 development. Memory also has numerous additional compounds undergoing lead optimization and identification testing, and these may have potential application to other CNS disorders, such as Parkinson’s and age associated cognitive decline.
Memory’s strategy is to leverage its pipeline of drug candidates through alliances with leading pharmas and biotechs. MEMY has two separate collaborations with Roche for the clinical development of its PDE4 inhibitors including MEM 1414 and MEM 1917, and for their nicotinic alpha-7 partial agonists, including MEM 3454.
In mid-October, Memory announced it will receive $5 million in collaboration with Amgen to develop PDE10 inhibitors; PDE10 is an enzyme present in neurological disorders. During mid-September, MEMY said it completed the dosing portion of the safety and tolerability tests for MEM 1003, which means the drug can move into Phase 2a clinical trials. Also, around that time, the company announced a $31 million private placement.
MEMY is pretty typical of a small R&D biotech, inasmuch as it bleeds red ink. For FY2004, ending 12/31/04, revenue was $9.78 million with $26.12 million in losses. During the first six months of this FY, ending 6/30/05, revenue was $4.92 million with $16.86 million in losses.
With the likes of Roche and Amgen collaborating with MEMY one must suppose that the company has some viable drug candidates. It recently also raised a nice pile of money.
Our 24-month target for the stock is $3.75 to $4.00.
For more information, contact MEMY at 201-802-7100; info@memorypharma.com
IONA TECHNOLOGIES PLC (NASDAQ: IONA) – $3.10. Twelve-month hi-low has been $5.95 – $2.52. Headquartered in Dublin, Ireland and with offices in Waltham, MA, with about 340 employees, this Internet software and services provider has 35.3 million shares outstanding, $59.85 million in total current assets, $64.19 million in total assets, and $30.4 million in total liabilities. Institutional ownership is around 27%. http://www.iona.com
In the current market climate, it’s nice to stumble across a small software company that recently showed a profit and also has a good-looking balance sheet. Hopefully, some Irish luck will rub off as we add Iona Technologies Plc to the Current Portfolio.
Founded in 1991, and public since 1997, the stock hit $85 during the Internet heyday in January, 2000, IONA delivers integration solutions for the Global 2000 IT environments. Their software products allow its customers to build, maintain, and scale the computing environments, while preserving and extending existing IT investments. Boasting that it routinely tames the toughest integration projects on the planet, the company offers two primary product families Artix and Orbix, which is the oldest of the two. Artix is an enterprise service bus product that provides infrastructure for enterprise integration based on a service-oriented architecture. It allows organizations to reuse existing middleware and application functionality to create Web services integration projects. The Orbix platform extends or integrates component-based systems and supports the integration of CORBA with other technologies, especially J2EE and web services.
In addition, IONA also offers Mobile Orchestrator, a Web services-based process integration broker that enables mobile workers to work with enterprise applications and data.
Over the last dozen years, IONA has served over 4500 customers in such industries as finance, government, healthcare, software, telecom, transportation, and manufacturing. Customers have included Boeing, HP, AT&T, Deutsch Post, Independence Blue Cross, Ford, Southwest Airlines, Nokia, and Mitsubishi. In FY2004, over 48% of the company’s revenue came from companies outside the U.S.
About a month ago, IONA entered into a strategic partnership with Satyam Computer Services. At the end of September, the company and LogicBlaze announced a collaboration on Open Source ESB projects. In August, IONA and MetaSecure partnered to deliver highly secure service oriented architecture (SOA). Also, during that month, Cantor Fitzgerald Europe reported that it held over 5% of the outstanding shares.
For FY2004, ending 12/31/04, revenue was $68 million with $192,000 in net income. During the first nine months of FY2005, ending 9/30/05, revenues were $47.7 million with $1.8 million in losses; the company posted a 3rdQT profit of $438,000. IONA has forecast 4thQT revenues to be $17 million to $18 million.
This is one of those small techs that seems to have a way of surviving, and one that should be around for a while.
Our 24-month target for the stock is $5.50 to $5.75.
For more information, contact IONA’s David Roy at 781-902-8033; ir@iona.com
Look for the November 20, 2005 Newsletter to be posted on 11/16 or 11/17.
Thank you,
George