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Hello Readers,
Since the last Newsletter, we closed four more positions; three for gains and one for a loss.
TII NETWORK TECHNOLOGIES (3/20/06). Closed position 1/27/11 at $3.55 for a 51% GAIN.
I.D. SYSTEMS (12/5/10). Closed position 1/18/11 at $4.16 for a 60% GAIN.
CEREPLAST (12/20/10). Closed position 1/19/11 at $5.95 for a 51% GAIN.
A.P. PHARMA (8/5/07). Closed position 1/18/11 at 58 cents for a 75% LOSS.
Finally, after what seemed like an eternity, we closed TII Network Technologies for a nice gain; we do not like holding a position for that long, but if the fundamentals remain sound, it is difficult to abandon a profitable company. I.D. Systems got a nice push on news that it is to deploy its wireless vehicle management technology at three Caterpillar plants. Good news also helped to boost Cereplast over the 50%-plus threshold as it entered into a distribution pact with Euroink Romania. And, we closed A.P. Pharma for a loss.
As we write this, it is evident that events in the Middle East are about to dominant the markets, and, until the unrest started, our Current Portfolio was looking pretty good, overall; now, not so good. So, it is anyone’s guess as to the next direction for the averages. Let’s just hope and pray that more loss of life is averted and that the extremists are shut out of any future government in Egypt and elsewhere. We fear that this unrest may not stop at the Red Sea.
You have probably notice that we recently made some slight upgrades to the site, which include RSS Feed. To better understand the RSS Feed, click on the orange button that appears toward the lower left corner on the home page; this is a free service with a free download.
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 significant.
Great Basin Gold (GBG)(1/5/11). Slates earnings news for February 23.
Sprint Nextel (S)(1/5/11). The usual several dozen news items, among some of the notables are a new pricing plan and some new technology, plus it becomes the first wireless U.S. carrier to offer international 4G roaming.
Trident Microsystems (TRID)(12/20/10). To announce earnings news on February 3. Appoints interim CEO.
Pixelworks (PXLW)(11/20/10). Although 4thQT revenues down from a year ago, FY numbers were up over the previous year; balance sheet still looks good.
Inovio Pharmaceuticals (INO)(10/20/10). INO and University of Southampton initiate Phase 2 clinical study to evaluate leukemia DNA vaccine using electroporation delivery technology. Closes $24.3 million secondary offering, which put downward pressure on stock price.
Blue Phoenix (BPHX)(10/20/10). Wins $500,000 Natural/ADABAS modernization contract from a leading U.S. federal sector IT service provider.
Advanced Analogic (AATI)(9/20/10). Slates earnings report for February 3.
Banner Corp (BANR)(8/5/10). Releases pretty upbeat yearly report and declares a quarterly dividend.
Rexahn Pharmaceuticals (RNN)(7/20/10). Enrolls first patient in Serdaxin Phase IIb clinical trial. Teva Pharmaceutical increases investment in RNN by $3.95 million for continued R&D of pre-clinical anti-cancer compound.
Solta Medical (SLTM)(10/5/09). Sets earnings call for February 22.
BioSante Pharmaceuticals (BPAX)(9/20/09). FDA grants Orphan Drug Designation for company’s melanoma cancer vaccine.
Anadys Pharmaceuticals (ANDS)(8/20/09). Initiates dosing in Phase IIb study of ANA598.
BioClinica (BIOC)(8/5/09). Sets earnings call for February 16. To present at UBS Global Healthcare Services confab on February 7. Partners with Symbiance.
Oilsands Quest (BQI)(10/20/08). Establishes “At-the Market” equity financing program.
Identive Group (INVE)(10/5/08). Forms strategic cooperation with XIRING.
U.S. Geothermal (HTM)(8/5/08). May partner again with Enbridge.
GlobalScape (GSB)(5/20/08). Selects Intacct to help streamline operations.
Biolase Technology (BLTI)(4/5/08). Stock came roaring back from no-man’s land on a few pieces of good news. It was issued a patent for use of laser technologies for eye surgery; and announced that preliminary 4thQT results were in line with guidance.
Hollywood Media (HOLL)(1/5/08). Announces repurchase of up to 9 million of its common stock at $2 a share. We have always thought that stock repurchases were a poor use of corporate funds – money could be better spent elsewhere.
Move, Inc (MOVE)(1/5/08). Earnings call for set for February 10.
LRAD Corp (LRAD)(10//5/07). Sets earnings news for February 3.
YM BioSciences (YMI)(11/5/06). Announces data from Nimotuzumab Phase II gastric cancer trial.
Our picks for this Newsletter are a security software company and another one of those small biotechs, both NASDAQ-listed.
NETWORK ENGINES, INC. (NASDAQ: NEI) – $1.82. Twelve-month hi-low has been $3.61 – $1.30. Based in Canton, MA, with around 225 employees, this security software/services company has 43.87 million shares outstanding, $87.9 million in total current assets, $96 million in total assets, little debt, and $39.26 million in total liabilities. Institutional ownership is about 31%. Two analysts rate the stock a “moderate buy”. www.nei.com
This is our second go-around with Network Engines, Inc., having pick it sometime in the previous decade, and, yes, it worked out well, as we recall. Not only does the company have a pretty good balance sheet, but it has now been profitable for five straight quarters.
Founded in 1997, and public for over ten years, Network Solutions designs and manufactures server-based platform and appliance solutions, on which software applications are applied to enterprise and telephony IT networks. The company’s application platforms are pre-configured server-based network infrastructure devices designed to deliver specific software functionality, and enhance the integrations, manageability, and security of that software application in an end-user’s network. It sells its application platform solutions to customers operating in the data storage, network security, carrier communications, and enterprise communications markets. And, of course, it offers support services.
Network Solutions business operations are governed by its compliance to ISO 9001 and TL 9000 standards. With more than 30 standard products from which to choose, NEI boasts that it has the largest selection of purpose-built, turnkey platforms and appliances in the industry. Customers are able to select the best-fit platform and right-size it for their application, be it a robust enterprise security appliance or a highly integrated carrier-grade rack mount system.
For the FY ending 9/30/10, revenue was $221.6 million with $1.52 million in net income; NEI has been showing a profit now for four consecutive quarters. This compares to the previous FY revenues of $148.72 million and $3.2 million in losses.
This is a company that does not issue a lot of press releases. They seem to let the numbers speak for themselves
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact NEI at 781-332-1000.
TRANSITION THERAPEUTICS, INC. (NASDAQ: TTHI) – $2.06. Twelve-month hi-low has been $4.44 – $1.81. Based in Toronto, Ontario, Canada, with about 25 employees, this biotech has 23.2 million shares outstanding, $24.91 million in total current assets, $45.95 million in total assets, and $23.07 million in total liabilities. Institutitional ownership is around 26%. One analyst rates the stock a “strong buy” and three have it as a “hold”. www.transitiontherapeutics.com
Besides having a pretty decent balance sheet, Transition Therapeutics, Inc. has collaborations with two of the biggest names in the pharmaceutical industry.
Founded in 1987, and public for nine years, Transition Therapeutics, simply put, develops novel therapeutics for various disease applications. Its lead products include ELND-005/AZD-103, a Phase II clinical trial product for treating Alzheimer’s; and TT-223 gastrin analogue, a Phase II clinical trial product for treating diabetes, of which the company has a licensing and collaboration agreement with Eli Lilly. The company’s TT-223 gastrin analogue, includes TT-223 in combination with a GLP-1 analogue as a therapy for treating type 1 and type 2 diabetes, which is under Phase 1b clinical study in type 2 diabetes patients; and TT-223 in combination with EGF analogues that has completed two Phase 1 clinical trials for the drug candidate in type 1 and type 2 diabetes. In addition, it has an emerging pipeline of preclinical drug candidates developed using it proprietary drug discovery engine.
Transition Therapeutics has a strategic collaboration with Elan Pharmaceuticals to develop and commercialize ELND-005/AZD-103, as well as a licensing and collaboration agreement with Eli Lilly to develop and commercialize gastrin based therapies, including the lead compound TT-223. At the end of December, 2010, the company and Elan modified the deal under which they are developing the Alzheimer’s drug candidate. Under the new arrangement, Transition will turn over its 30% ownership of the drug to Elan and won’t fund its development, and Elan won’t make a Phase III milestone payment. In return, Transition will receive $9 million at signing of the pact and will be eligible for an $11 million payment when the next clinical trial starts. Transition will be eligible for a much as $93 million of payments as the drug reaches regulatory and commercial sales milestones. The FDA fast-tracked the drug in 2007.
Other than milestone payments, Transition Therapeutics is another one of those small biotechs that earns little revenue and chalks up some hefty losses. For example, during the quarter ending 9/30/10, revenue was zilch and losses totaled $4.33 million.
With partners like Elan and Eli Lilly, we suspect that the company may be doing something right.
Our 24-month target for the stock is $3.50 to $3.75.
For more information contact TTHI’s Elie Farah at 416-260-7770, ext. 203; efarah@transitiontherapeutics.com
Look for the February 20, 2011 Newsletter to be posted on 2/16 or 2/17.
Thank you,
George