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Hello Readers,
As we alluded in the last Newsletter, the markets did indeed go down during the first half of this month, but we never expected the kind of goring that occurred. Of course, the excuse used by the gurus was rising interest rates, however, we still suspect it was just time to take profits after the markets’ strong surge since March. After all, rates have been nudging upward for the last several months without even a yawn. It now appears that the markets have digested this condition and seem convinced that the economy is still rather healthy and may remain so for quite some time. And, no, we did not close any positions since the last Newsletter.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Xenonics (XNN) (6/5/07). Stock was making a nice move until the company said it was restating 2005 and 2006 results. This appears to be an honest accounting snafu and shouldn’t cause any long-term damage.
Oncolytics (ONCY) (6/5/07). Starts patient enrollment in UK combination REOLYSIN/Gemcitabine trial. Announces positive clinical data from U.S. Phase I REOLYSIN trial. Company is issued 21st U.S. patent.
Hana Biosciences (HNAB) (5/5/07). Cites positive results from early studies of Manadione and Marquibo.
ECTel (ECTX) (5/5/07). Leading Russian operator places a first time order for company’s FraudView Release 8.
DepoMed (DEPO) (4/5/07). Stock pierced our 50% threshold, so, consider the position closed. We will soon be posting it on the Track Record page. Immunicon (IMMC) (3/20/07). Bristol-Myers Squibb awards company new research services pact for oncology biomarker development.
Eon Communications (EONC) (2/5/07). Recent numbers so-so; balance sheet still looks good. Announces Business Connect telecommunication services.
UQM Technologies (UQM) (2/5/07). Receives $750,000 contract from U.S. Air Force to advance development of a silicon carbide electronic controller.
Neose Technologies (NTEC) (12/20/06). Coverage initiated by Rodman & Renshaw. Initiates Phase I trial of Factor VIIA with Nova Nordisk.
YM Biosciences (YMI) (11/5/06). Cleared to initiate clinical trial of Nimotuzumab in children with inoperable recurrent brain cancer. Cleared to initiate clinical trial of Nimotuzumab in colorectal cancer.
Terabeam (TRBM) (11/5/06). ShotSpotter deploys Proxim wireless WiMAX and W-Fi Mesh products. Major Taipei hotel and resorts in Vermont and Florida choose Proxim wireless products.
Hydrogenics (HYGS) (9/20/06). Gets $3 million in orders during the 2nd QT. Receives $3 million of orders for HySTAT electrolyzer products.
TVI Corp (TVIN) (9/5/06). Gets NASDAQ deficiency notice. This one is on the “Endangered List”.
02Diesel (OTD) (5/20/06). Dutton Associates give the stock a “speculative buy”.
Tri-S Security (TRIS) (5/5/07). Subsidiary awarded $20 million contract for federal facilities in state of Oregon.
Pharmos (PARS) (4/20/06). Settles class action suit.
Lipid Sciences (LIPD) (2/20/06). Announces validation of proprietary peptide that mimics key functions of natural human HDL.
Gateway (GTW) (2/5/06). The usual dozen or so news releases/articles on the company.
8×8 (EGHT) (1/20/06). Introduces Outlook integration, overhead paging and toll free fax numbers for Packet8 Virtual Office small business phone service. To restate some results because of warrants.
Digital Angel (DOC) (12/20/05). To supply Serbia with 200,000 pet ID chips. Receives SABRE orders from Dubai Air Wing and UK MOD Strike Command.
Westell (WSTL) (10/20/05). Subsidiary Conference Plus announces co-distribution accord with iLinc.
RAE Systems (RAE) (10/5/05). Introduces two 3rd generation photoionization detectors for volatile organic compounds.
EntreMed (ENMD) (9/5/05). Cites positive midstage study results with Panzem on patients with multiple myeloma. Also, cites positive early-stage data of Panzem, in combination with Taxol, on breast cancer.
Zi Corp (ZICA) (8/5/05). Hitachi selects Decuma Japanese handwriting recognition software. Licenses eZiText Chinese to BCM in Taiwan.
N.A. Scientific (NASI) (8/5/05). Quarterly results shows paring of losses, but revenues weaken; eyes options for its radiation oncology division. Stock takes another dip. We are placing this on the “Endangered List”.
VION Pharmaceuticals (VION) (5/20/05). Presents clinical data on lead drug candidate. This one is on the “Endangered List”.
Applied Micro Circuits (AMCC) (11/20/04). Partners with Senao to provide wireless LAN reference design kits for enterprise access points. Several new product intros.
Aviza (AVZA) (10/5/04). Coverage initiated by Needham & Co.
Network Engines (NENG) (6/5/04). NEWS 2.1 extends scope of NENG’s appliance management system.
OpenTV (OPTV) (3/20/04). Provides content validation platform for Japan’s TV portal “acTVila”. Selected by Astro to launch PlayJam channel.
WJ Communications (WJCI) (12/5/06). Introduces ultra low-power UHF RFID OEM reader module boosting medium/short range applications.
Our picks for this Newsletter are another biotech and a medical instruments maker, both trading on NASDAQ.
PHARMACYCLICS, INC. (NASDAQ: PCYC) – $3.07. Twelve-month hi-low has been $6.29 – $2.50. Located in Sunnyvale, CA, with about 90 employees, this biopharma has 26 million shares outstanding, $45.64 million in total current assets, $47.03 in total assets, little debt, and $2.46 million in total liabilities. Institutional ownership is around 60%. One analyst rates the stock a “strong buy”, one as a “hold”, and one as a “strong sell”. www.pharmacyclics.com
Yes, Pharmacyclics, Inc. is another one of those small biotech that we load up on, periodically. This one, like most of the others, has a decent-looking balance sheet and a number of promising drug candidates in the hopper.
Founded in 1991, and public for over ten years, Pharmacyclics develops drugs to treat cancers and other diseases. The company’s pharmaceutical agents are synthetic small molecules designed to target key biochemical pathways in diseased cells. In April, 2006, PCYC bought certain drug candidates from Celera Genomics Group, which comprise much of their present portfolio. Of note, the company has a collaboration and license agreement with the National Cancer Institute.
The company’s principal development products are: Xcytrin Injection, Pharmacyclic’s most advanced drug candidate, is an anti-cancer agent that is in Phase II clinical trials. It has the potential to selectively target and kill cancer cells by apoptosis. HDAC Inhibitors is a Phase I clinical trial product that targets histone deacetylase enzymes and inhibits their function. HDAC-8 Selective Inhibitor, a preclinical stage drug for treating cancer. Factor VIIa Inhibitors, a small molecule inhibitors of Factor VIIa that are designed to treat cancer by inhibiting iogenesis and tumor growth. Burton’s Tyrosine Kinase Inhibitors, which are potential treatments for autoimmune diseases and lymphomas based on their ability to stop the proliferation and differentiation of B-cells.
In June, Pharmacyclics announced a mid-stage clinical trial found that Xcytrin showed promise in helping improve the effectiveness of radiosurgery treatment and in detecting hard-to-find cancerous brain lesions. Also, at that time, the company reported “promising” preliminary results from a Phase II clinical trial of Xcytrin injection as a second-line treatment for patients with recurrent, metastatic non-small cell lung cancer who failed at least one platinum-based chemotherapy regimen.
Once again, PCYC is another one of those small biotechs that has almost zero revenues and lots of red ink. For the quarter ending 3/31/07, losses were $6.8 million.
This hinges upon the drug candidates continually showing “promise”.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact PCYC’s Leiv Lea at 408-774-0330.
ALPHATEC HOLDINGS, INC. (NASDAQ: ATEC) – $3.60. Twelve-month hi-low has been $9.00 – $2.67. Based in Carlsbad, CA, with about 290 employees, this medical instruments maker has 35 million shares outstanding, $40.61 million in total assets, $124 million in total assets ($59.5 million is Goodwill), and $27.8 million in total liabilities, of which $2.63 million is long-term debt. Institutional ownership is around 21%. One analyst gives the stock a “strong buy”, one a “moderate buy”, and another has it on “hold”. www.alphatecspine.com
It is sometimes said that if you can’t buy an IPO at its offering, wait until it falls out of bed. Usually, this is not good strategy, but Alphatec Holdings, Inc. has a small arsenal of nifty products and has been pulling in some decent revenues, although we would like to see the losses pared a lot more.
Founded in 1990, and public for about a year, and better known as Alphatec Spine, the company focuses on making and marketing products for the surgical treatment of spine disorders. It offers spine screws, spinal spacers, and plates, about a dozen and a half products in all. The company collaborates and contracts with surgeons to design and develop spine fusion products in the U.S. and Japan. Its spinal implant products and systems are made of titanium, titanium alloy, stainless steel, and polyetheretherketone (PEEK).
Alphatec’s products include fusion systems that are used to facilitate the growth of a boney connection; lumbar fixation system, a spinal system, which offers fixed angle pedicle screws, polyaxial pedicle screws, and advanced instrument design; spinal fixation system designed to allow the rod to be placed closer to the center of the patient’s body; ROC lumbar plating system, a posterior lumbar plating system that provides an alternative to traditional screw and rod constructs; and deformity system. Its product portfolio also comprise tamarack anterior thoracolumbar plating system; trauma/tumor fixation system for use in anterior thoracolumbar fixation for treating tumor, trauma, and anterior deformity; anterior cervical plate system; and reveal anterior cervical plate system that allows a surgeon to visualize the graft site during surgery.
In early May, Alphatec announced the launch of the new CONNECT II cervical structure allograft product which is integrated with the company’s cervical fusion instrumentation.
For FY2006, ending 12/31/06, revenue was $74 million with $29.3 million in losses. During the 1stQT of the current FY, ending 3/31/07, revenue was $19.55 million (its best as a public company) with $2.67 million in losses. The company is projecting revenues of $83 million to $85 million for FY2007. We hope they can at least halve last year’s losses.
We don’t expect the stock to grow by leaps and bounds, but if Alphatec can maintain the good revenue growth and keep paring the losses, the stock price should take care of itself.
Our 24-month target for the stock is $6.00 to $7.00.
For more information, contact ATEC’s Gordon Bigler at 760-431-9286, ext. 402; gbigler@alphatecspine.com
Look for the July 5, 2007 Newsletter to be posted on 7/2 or 7/3.
Thank you,