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Hello Readers,
Since the last Newsletter, we closed one position for a gain.
BIODELIVERY SCIENCES (11/5/11). Closed position 1/6/12 at $1.93 for a 105% GAIN.
It was a great way to begin 2012 when BioDelivery Sciences inked a licensing deal with Endo Pharmaceuticals for BDSI’s BEMA Buprenophrine, which sent the stock into a nosebleed. Now, here’s something that happens to us about once a decade. Last April, 2011, we closed previous pick Inhibitex at $4.78 for a 103% gain and thought that was pretty nifty, which it was. This past January 10, the company was acquired by BristolMyersSquibb for over $24 a share, which would have been a 925% gain. It’s fun to dream about the “if only”.
The first half of this month we have seen the markets post grudging gains on what has been considered to be light volume. The markets seem to want to move higher, but Europe remains an overhang. Presently, the markets are close to a six-month high. Is there a violent sell-off in the offing, or are we at the start of a huge upturn? The answer probably depends upon if investors and traders can turn a blind eye to Europe over the next few months.
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 providing updates about companies on the “Endangered List” unless we feel the news to be highly significant.
Neoprobe (NEOP)(1/5/12). Secures $10 million in debt financing from Hercules bio fund. Changes name to Navidea Biopharmaceuticals. New ticker symbol will be NAVB.
Trans1 (TSON)(1/5/12). Law firm launches probe into stock purchases.
DryShips (DRYS)(12/20/11). Imperial Capital initiates coverage.
Vermillion (VRML)(12/5/11). Sharpens focus and streamlines operations.
Anadigics (ANAD)(11/20/11). Ships production volume of HELP3E power amplifiers for New Galaxy Nexus from Samsung Electronics.
BioCryst Pharmaceuticals (BCRX)(10/20/11). Announces positive results from its ongoing BCX4208 Phase 2b study in patients with gout.
Corcept Therapeutics (CORT)(10/5/11). BioLogic Equity Research initiates coverage.
BioMimetic Therapeutics (BMTI)(9/20/11). Announces approval to market GEM21S in the European Union. However, stock took a hit when FDA asked for more information about the company’s Augment Bone Graft.
Celldex Therapeutics (CLDX)(9/20/11). Initiates a Phase 2 study of Rindopepimut in patients with recurrent gliobastoma including Avastin nave and refractory populations.
Satcon (SATC)(8/5/11). Plans to cut 140 jobs and Raymond James downgrades the company. We have placed this on the “Endangered List”.
Cover-All Technologies (COVR)(7/20/11). Enters insurance claims solutions marketplace by acquiring BlueWave Technology.
Galena Biopharma (GALE)(7/5/11). Announces FDA IND approval for Phase 2 trial for NeuVax combined with Herceptin.
On Track Innovations (OTIV)(6/20/11). Sidoti initiates coverage.
Idera Pharmaceuticals (IDRA)(6/5/11). Announces selection of toll-like receptor agonist candidates for evaluation as vaccine adjuvants by Merck.
Neostem (NBS)(5/20/11). Islet Sciences selects NBS manufacturing subsidiary Progenitor cell therapy for product manufacturing. Subsidiary Amorcyte expands its intellectual property coverage. Plans to present at several conferences over the next few weeks.
Thermogenesis (KOOL)(4/5/11). Inks agreement with sports medicine company Arthrex for sports medicine applications. Gets approval to sell cord blood product in India.
Jamba, Inc. (JMBA)(3/20/11). Reiterates FY2011 guidance.
Network Engines (NEI)(2/5/11). Sets 1stQT earnings call for January 26.
Sprint Nextel (S)(1/5/11). The usual several dozen articles and news releases.
Relm Wireless (RWC)(11/5/10). To present at the Noble equity conference on January 17, the day we post this Newsletter.
Inovio Pharmaceuticals (INO)(10/20/10). Will present at the Noble confab on January 17, the day we post this Newsletter.
NovaBay Pharmaceuticals (NBY)(4/20/10). Announces strategic marketing agreement for NeutroPhase in China.
Novavax (NVAX)(4/5/10). Reports progress under joint venture in India with Cadila Pharmaceuticals.
U.S. Geothermal (HTM)(8/5/08). Gets Nevada PUC approval of 19.9 megawatt PPA for San Emidio.
GlobalScape (GSB)(5/20/08). Software products recognized by information security industry.
LRAD Corporation (LRAD)(10/5/07). To report $3.5 million in 1stQT FY2012
XATA Corporation (XATA)(9/20/07). Motorola Xyboard now certified by Xata Turnpike. Lands on Food Logistics’ FL100 List. COO steps down.
Our picks for this Newsletter are a diagnostic developer and a battery systems maker.
NANOSPHERE, INC. (NASDAQ: NSPH) – $1.60. Twelve-month hi-low has been $5.54 – 89 cents. Based in Northbrook, IL, with about 110 employees, this diagnostics developer has 44.12 million shares outstanding, $50.03 million in total current assets, $58.1 million in total assets, little debt, and $4.93 million in total liabilities. Institutional ownership is around 37%. One analyst rates the stock a “strong buy” and three have it as a “hold”. www.nanosphere.us
Yes, Nanosphere, Inc. is bouncing around the low end of its trading range and, at times, that is cause for alarm. However, the company had several pieces of good news at the end of December, and its balance sheet is pretty nice-looking.
Founded in 1998, and public for over four years, Nanosphere is developing and marketing an advanced molecular diagnostics platform known as the Verigene System, which enables sensitive genomic and protein testing on a single platform. The company nanoparticle technology allows multiple tests to run simultaneously on the same sample. The Verigene System includes a molecular diagnostics workstation that is a universal platform for gnomic and protein testing. The system provides for multiple tests to be performed on a single platform, including both gnomic and protein assays, from a single sample. The company has developed and launched a second generation Verigene System process (the Processor SP) that handles the same processing steps as the original processor and incorporates sample preparation. Their customers include hospital-based laboratories and academic research institutions.
At the end of December, Nanosphere announced that it had received FDA 510(k) clearance for the Verigene Staphylococcus blood culture nucleic acid test (BC-S). The BC-S test expands the company’s infectious disease test capabilities to include the rapid detection of bacteria that cause deadly bloodstream infections. This was the first phase of a stepwise process to obtain clearance for a larger test panel which will be marketed as the Verigene BC-GP test. A few days prior to this news, the company announced that it obtained a CE mark in Europe for its gram-positive blood culture test.
And, yes, this is another one of those small bio-companies with little income and mega losses, i.e. for the period ending 9/30/11, revenue was $556,000 with $9.5 million in losses.
Our thinking here is that the company got some pretty good news just as it is at the low end of its 52-week trading range, so, the future momentum should be upward.
Our 24-month target for the stock is $2.75 to $3.00.
For more information, contact NSPH’s Zack Crowther at 847-400-9047; IDtesting@nanosphere.us
A123 SYSTEMS, INC. (NASDAQ: AONE) – $2.34. Twelve-month hi-low has been $11 – $2.10. Based in Waltham, MA, with about 2000 employees, this battery systems maker has 126.08 million shares outstanding, $408 million in total current assets, $711 million in total assets, and $358.36 million in total liabilities, of which $160.24 million is long-term debt. Institutional ownership is around 44%. Five analysts rate the stock a “strong buy”, one as a “moderate buy”, six as a “hold”, and one as a “sell”. www.a123systems.com
With A123 Systems, Inc. it may be easy to forget about the $160 million in debt, for now, since the company has a pile of cash/cash equivalents. It also has nearly a dozen analysts following the company and it has started showing revenue growth. And, yes, as much as many of us hate the idea, battery-powered vehicles and other forms of battery generation are here to stay.
Founded in 2001, and public for just over two years, A123 Systems, simply stated, manufactures and sells rechargeable lithium-ion batteries and battery systems, and provides R&D services to government agencies and commercial customers. In the transportation industry market, the company works with global auto makers and tier 1 suppliers to develop batteries and battery systems for hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs) and electric vehicles (EVs). This business is divided into two categories: heavy-duty and passenger, such as buses. A123 Systems products include batteries in various shapes and forms, as well as packaged modules and fully-tested battery systems. Its platform for battery and battery system development is its Nanophosphate material.
In early January, A123 Systems announced it will supply complete lithium ion battery packs to VIA Motors, an EV company, for extended range electric trucks, which, when combined with an onboard generator, is expected to deliver a driving range of up to 40 miles. At the end of December, 2011, the company said it will supply an 11MW grid battery system to Sempra Generation for the Auwahi Wind Project in Hawaii. Also, at that time, the company announced that it will supply a Grid Battery System to Maui Electric Company to support the Maui smart grid project.
For FY2010, ending 12/31/10, revenue was $97.3 million with $152.56 million in losses. For the first nine month of FY2011, ending 9/30/11, revenue was $118.76 million with $172.75 million in losses. Yes, the company is showing some good revenue growth, and it would be nice to see paring of the losses over the next year.
This is far from a “sexy” stock play and we suspect the stock price has been battered due to recent negative headlines about other alternative energy companies. However, A123 has a nice pile of money on the balance sheet, is showing decent revenue growth, and the recent news from the company shows a promising future. And, a dozen analysts are following the company.
Our 24-month target for the stock is $3.75 to $4.00.
For more information, contact AONE’s Garo Toomajanian at 617-956-6725; ir@a123systems.com
Look for the February 5, 2012 Newsletter to be posted on 2/1 or 2/2.
Thank you,
George