METABOLIX, INC. & ATHERSYS, INC.

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Hello Readers,

Since the last Newsletter, we closed seven positions; four for gains and three for losses.

Nanosphere (1/20/12). Closed position 6/27/12 at $2.53 for a 58% GAIN.

CELSION (3/15/12). Closed position 6/26/12 at $3.24 for a 62% GAIN.

ANTHERA PHARMACEUTICALS (6/5/12). Closed position 6/26/12 at $3.16 for a 60% GAIN.

ANTARES PHRMA (8/5/11). Closed position 6/20/12 at $3.72 for a 60% GAIN.

NETWORK ENGINES (2/5/11). Closed position 6/20/12 at $1.45 for a 21% LOSS.

(acquired by Unicom Systems)

SATCON TECHNOLOGY (8/5/11). Closed position 6/25/12 at 25 cents for an 87% LOSS.

LRAD Corp. (10/5/07). Closed position 6/27/12 at $1.21 for a 68% LOSS.

Our long drought of closing positions in positive territory finally ended. Nanosphere spiked when it confirmed that the FDA has authorized the company to market its gram-positive blood culture test. Celsion made a nice run on no real apparent news as did Anthera Pharmaceuticals, which was in the Current Portfolio for less than a month. For the last month, Antares Pharma had been moving nicely upward and we closed it for a good gain. We closed Network Engines for a minor loss after it was announced that Unicom Systems was acquiring the company for $1.45/share; when the news broke the stock was under 80 cents. And, sadly, we closed Satcon Technology and LRAD Corporation for bad losses.

The markets are still about Europe most of the time. However, over the next few weeks, another earnings season begins and the market focus will be somewhat diverted. The expectations are that this earnings season will be a little gloomy; companies will probably blame Europe for some of their lower expectations. So, July may be a bumpy month.

Here are the headlines since the last Newsletter about companies in the Current Portfolio; 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 highly significant.

Rare Element Resources (REE)(6/20/12). Announces that 2012 drilling and exploration program has started in the Bear Lodge rare earth element project in Wyoming.

Capstone Turbine (CPST)(5/20/12). Lands another large U.S. oil and gas producer with initial 12-unit order. Downgraded by FBR Capital.

Mattson Technology (MTSN)(4/5/12). Company added to the Russell 3000 Index.

Echo Therapeutics (ECTE)(3/20/12). Obtains patents for Symphony tCGM System and Prelude SkinPrep System.

Ballard Power Systems (BLDP)(3/20/12). Revises 2012 revenue guidance downward from $100 million to $85 million.

Majesco Entertainment (COOL)(3/5/12). Confirms that Zynga will publish COOL’s golf course game.

Complete Genomics (GNOM)(2/20/12). Intends to vigorously defend against patent infringement suit.

Geron Corporation (GERN)(2/5/12). Needham initiates coverage as a “hold”.

A123 Systems (AONE)(1/20/12). This is still on the “Endangered List”, but company seems to be digging out of its hole, thanks Mid-Continent Instrument Company signing a deal with AONE to supply advanced nanophosphate lithium-ion battery technology for aviation applications. This is now a wait-and-see situation.

Navidea Biopharmaceuticals (NAVB)(1/5/12). Extends evaluation for option to license Parkinson’s imaging agent.

ECOtality (ECTY)(11/5/11). Taps China’s electric vehicle market with new joint venture.

Synthesis Energy Systems (SYMX)(8/20/11). Completes testing of Turkish lignite coals for small scale power generation projects. Gets $15.5 million in equity investments.

On Track Innovations (OTIV)(6/20/11). Company gets new U.S. patents pertaining to NFC and contactless payment.

Idera Pharmaceuticals (IDRA)(6/5/11). Reports on preclinical mechanism of action data on IMO-8400, a novel TLR inhibitor for autoimmune diseases.

Neostem (NBS)(5/20/11). Awarded NIAID research grant for the development of VSEL technology for radiation exposure. Sells 51% stake in Chinese generic drug maker for $12 million plus future equity payout.

Energy Recovery (ERII)(5/5/11). Sets earnings call for August 1.

Jamba, Inc. (JMBA)(3/20/11). Offers frozen yogurt to its summer menu.

Oculus Innovative Sciences (OCLS)(3/5/11). Company and AmDerma enter into a multi-country agreement to develop and commercialize Microcyn for which OCLS receive an undisclosed upfront payment.

Real Good Solar (RSOL)(1/20/11). Announces supply agreement with Canadian Solar.

Sprint Nextel (S)(1/5/11). The usual several dozen news stories. Sets earnings call for July 26.

Astex Pharmaceuticals (ASTX)(12/5/10). Initiates the Phase 2 expansion of the SGI-110 clinical trial in MDS and AML patients.

PixelWorks (PXLW)(11/20/10). Sets earnings call for July 19.

RELM Wireless (RWC)(11/5/10). Receives its first order with U.S. DHS Tactical Communications contract.

Novavax (NVAX)(4/5/10). To review RSV program at international confab on modern vaccines on July 4.

Cytokinetics (CYTK)(2/5/10). This one is now on the “Endangered List”. Company announced it is trying a $60 million secondary offering, which depressed the stock price even more.

Qualstar (QBAK)(10/20/09). Announces a new high density XLS tape library and expandable rack mount tape libraries.

GlobalSCAPE (GSB)(5/20/08). Subsidiary QNAP partners with Tappln to offer customers unique file access and sharing solution.

Our picks for this Newsletter are two more biotechs, both NASDAQ listed.

METABOLIX, INC. (NASDAQ: MBLX) – $1.85. Twelve-month hi-low has been $7.74 – $1.82. Located in Cambridge, MA, with about 115 employees, this bioscience company has 34.19 million shares outstanding, $70.35 million in total current assets, $73.11 million in total assets, little debt, and $3.61 million in total liabilities. Institutional ownership is around 49%. Five analysts have the stock as a “hold”. www.metabolix.com

The first thing to tell you is that Metabolix, Inc. saw its stock tumble about six months ago because the CEO was accused of making false product claims. There are some suits still pending, but in the meantime the company was granted two key patents for its technology. The fact that five analysts are still holding the stock means they still believe in the company, which may be easy to do considering its rather strong balance sheet.

Founded in 1992 and public for over six years, Metabolix focuses on bringing environmentally friendly solutions to the plastics, chemicals, and energy industries. The company has core capabilities in microbial genetics, fermentation process engineering, chemical engineering, polymer science, plant genetics, and botanical science. It produces a family of biopolymers known as polyhydroxyalkanoates (PHAs), which occur naturally in living organisms and are chemically similar to polyesters. Metabolix offers these biopolymers under the Mirel and Mvera brand names, and are used in agriculture/horticulture, compost and organic waste diversion, marine/aquatic, sustainable packaging, and consumer goods applications. It also develops four carbon chemicals for high-performance engineering plastics and spandex applications; and three carbon chemicals that have applications in paints, coatings, diapers, and adhesives.

In addition, Metabolix is developing a crops platform, a biorefinery system that uses plant crops to co-produce PHAs. This platform focuses on developing camelina for co-production of bioplastics along with vegetable oil, biodiesel fuel, and oleochemicals; and to maximize bio plastic production in the leaf tissue of sugar cane and to engineer switch grass to produce bioplastics in the leaf and stem of the plant.

Metabolix is pretty typical of many small R&D companies in that it usually has little revenue and major losses. An exception was the quarter ending 3/31/12 when the company showed $39.32 million in revenue and net income of $28.84 million. This was mostly attributable to deferred revenue which was recognized as a result of terminating a joint venture.

Putting aside the company’s recent problems, the technology looks pretty viable, about half-dozen analysts are still hanging in there, and Metabolix has a boatload of money.

Our 24-month target for the stock is $3.50 to $3.75.

For more information, contact MBLX’s Lynne Brum at 617-682-4693; LBrum@metabolix.com

ATHERSYS, INC. (NASDAQ: ATHX) – $1.60. Twelve-month hi-low has been $2.90 – $1.00. Located in Cleveland, OH, with nearly 50 employees this biotech has 29.4 million shares outstanding, $16.96 million in total current assets, $18.39 million in total assets, little debt, and $10.37 million in total liabilities. Institutional ownership is around 13%. Two analysts rate the stock a “strong buy”. www.athersys.com

The first thing that caught our attention about Athersys, Inc. was the number of collaborations it has with some name biotechs, and, also the fact that the stock is trading at very close to its yearly low helped to place it in the Current Portfolio. Please note that it is our understanding that the company only deals with adult stem cells, and not fetal.

Founded in 1995, and public for over five years, Athersys’ clinical development programs focus on treating cardiovascular disease, neurological conditions, inflammatory and immune disorders, and other conditions. Its product pipeline includes MultiStem, a novel allogeneic approach to stem cell therapy and regenerative medicine for treating a range of diseases. The company is also developing novel small molecule compounds for applications in indications, such as obesity and other areas, including treatment of neurological conditions and for the modulation of stem cells or related applications in the area of regenerative medicine.

Athersys has a product co-development collaboration with Pfizer to commercialize and develop MultiStem to treat inflammatory bowel disease; AngioTech Pharmaceuticals to develop and commercialize MultiStem to treat certain cardiovascular disease, such as acute myocardial infarction; and RTI Biologics to develop and commercialize biologic implants for certain orthopedic applications in the bone graft substitutes market.

The company has been generating some revenue over the last few years thanks to its above collaborations. For FY2011, ending 12/31/11, revenue was $10.34 million with $13.7 million in losses. During the quarter ending 3/31/12, revenue was $2.74 million with $4.34 million in losses.

As we said, the stock appears to be cheap and we like the alliances with the name pharmaceutical companies.

Our 24-month target for the stock is $2.75 to $3.00.

For more information, contact ATHX’ William Lehmann at 216-431-9900; bjlehmann@athersys.com

Look for the July 20, 2012 Newsletter to be posted on 7/16 or 7/17.

Have a great 4th!

George