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Hello Readers,
Since the last Newsletter, we closed another position for a pretty nice gain.
COMMERCE ENERGY GROUP (6/5/06). Closed position 3/26/07 at $2.71 for a 67% GAIN.
To be candid, we have not a clue as to why Commerce Energy Group gained over a dollar in the last few weeks. Actually, most of the gains came over three trading days, from 3/21 to 3/26; however, judging by the volume, we suspect it may have become a favorite of the momentum players.
It looked for a while that the markets were making a nice recovery from the late February/early March drubbing, only to be stymied with new inflation fears brought about by the Fed chairman, and soaring oil prices thanks to the Iran/Britain face-off. Once again, the key here is have some patience and don’t panic. This market mood won’t last forever.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
CommTouch (CTCH) (3/5/07). Partners with Message Systems to combat spam and viruses for ISPs.
UQM Technologies (UQM) (2/5/07). Several product releases. Gets $1 million contract supplement from U.S. Air Force. Brokerage Merriman Curhan Ford gives the stock a “buy”.
Etrial (ETWC) (1/20/07). Selected by two European-based pharmaceuticals for multi-year trials.
Zix Corporation (ZIXI) (3/20/07). Adds eight more financial organizations to its email encryption client list.
Neose Technologies (NTEC) (12/20/06). NTEC and BioGeneriX initiate second Phase I clinical trial of GlycoPEG-GCSF; interim results from first trial show dose-dependent response. Announces restructuring with year-end report and will cut work force by 40%; balance sheet still looks okay.
CardioTech (CTE) (12/20/06). Reports first surgical implant of CardioPass; patient has been discharged from hospital.
Lantronix (LTRX) (12/5/06). Announces first distributed KVM over IP solution offering zero footprint, USB, and PS/2 design. Dutton Associates rates the stock a “strong speculative buy”.
Alfacell (ACEL) (11/20/06). ONCONASE results published in Anticancer Research, a medical trade pub. Studies show mild hyperthermia enhances antitumor effects of ONCONASE, which is also highlighted in latest edition of Handbook of Therapeutic antibodies.
Target Logistics TLG) (11/20/06). Secures $20 million credit line from Wells Fargo.
Terabeam (TRBM) (11/5/06). Proxim Wireless provides broadband along London’s River Thames. Expands public safety and homeland security product portfolio. Nexen Petroleum chooses Proxim wireless WiMAX network for Yemen oilfields.
HealthStream (HSTM) (10/20/06). Partners with Laerdel to offer hospitals an American Heart Association blended learning solution for basic life support and advanced cardiovascular life support training.
Autobytel (ABTL) (10/5/06). Inks agreement with Luther Automotive to drive more customers to dealers.
Hydrogencis (HYGS) (9/20/06). Year-end results show revenue drop and wider loss; balance sheet still seems okay. Plans job cuts in hopes of saving $4 million annually.
Advanced Life Sciences (ADLS) (7/20/06). Year-end loss widens; balance sheet still looks healthy. Enrollment completed in first of two pivotal Phase II trials for Cethromycin.
Point Therapeutics (POTP) (7/5/06). Releases FY2006 results. This one is on the “Endangered List”.
Spherix (SPEX) (6/20/06). Files form for unregistered sale of equity securities. Year-end numbers look good as company swings to a profit.
02Diesel (OTD) (5/20/06). Company’s blend to power school bus fleet in Lead and Deadwood, SD. Reports “Going Concern” note. Releases year-end results.
Kintera (KNTA) (5/5/06). TMA Resources signs partnership with KNTA as platinum solutions provider. Numbers improve year-to-year; balance sheet still looks very good. Cutting work force by 16%.
TRIS-S Security (TRIS) (5/5/06). Subsidiary awarded $6.4 million contracts with FAA. Releases pretty good revenue results; balance sheet could look better. Gets $2.5 million loan and expects new financing to meet 2007 working capital needs.
Pharmos (PARS) (4/20/06). Gets $1.5 million grant from Israeli government.
Cytogen (CYTO) (3/20/06). To report preclinical data at the AACR annual meeting April 14-18. Data on other studies to be presented at Oncology confab on June 1-5.; at a myeloma workshop June 25-30 in Greece; and at an AUA meeting May 19-24.
TII Network (TIII) (3/20/06). Announces four management appointments. Expands its VoIP product offerings to small businesses and multiple dwelling units.
Adherex (ADH) (2/20/06). Balance sheet weakens further and for some inane reason we are still reluctant to give up on this. Initiates combination trial of ADH-1 and Melphalan for treating melanoma.
Gateway (GTW) (2/5/06). Introduces the E-2610 desktop. Catholic Health Systems to use Gateway desktops. Company denies takeover talks, which has probably stalled the stock at current prices.
8X8 (EGHT) (1/20/06). President resigns and current CEO/chairman will assume duties. Wins Army contract. Announces availability of international virtual numbers for Packet8 subscribers. Now shipping Packet8 Tango Video adapter.
Digital Angel (DOC) (12/20/05). Awarded $1.5 million contract by Swedish Air Force. Wins $400,000 contract with U.S. Air Force.
Fusion Telecom (FSN) (12/5/05). To release FY results April 2, the day we post this Newsletter, and if they’re not great, we will most likely put this on the “Endangered List”.
Westell (WSTL) (10/20/05). Conference Plus named as conferencing services partner for the West Chamber serving Jefferson County, CO.
RAE Systems (RAE) (10/5/05). AreaRAE chosen by Total Safety for industrial deployments. Offers new chemical sensors and stainless steel enclosures for AreaRAE.
Zi Corporation (ZICA) (8/5/05). Year-end results show some revenue increase, but larger losses; balance sheet not looking good, but company closes $6 million in private placements. Enters alliance with Digit Wireless for intelligent text interfaces. Sells minority stake in Archer Education Group for $629,300.
N.A. Scientific (NASI) (8/5/05). Names new CEO.
Vion Pharma (VION) (5/20/05). Extends manufacturing deal with Sigma-Aldrich.
B.O.S. (BOSC) (1/5/05). Year-over-year revenue dips but company gets into the black; balance sheet still looks okay. Subsidiary enters into a new pact with Positronic Industries. Applied Micro Circuits (AMCC) (11/20/04). About half dozen news releases on new products.
Aviza (10/5/04). Receives new order for thermal processing system from semiconductor in China. Receives order for Sigma fxP PVD system from SMIC.
OpenTV (OPTV) (3/20/04). Article at Motley Fool negative on company. Stock downgraded by Ferris Baker Watts to “neutral”.
NTN Buzztime (NTN) (7/5/06). Sells wireless division. Innodata (INOD) (7/5/05). Named to IAOP’s 2007 Global outsourcing list.
Our picks for this Newsletter are an Internet service provider and another small pharmaceutical, both trade on the NASDAQ.
QUOVADX, INC. (NASDAQ: QVDX) – $2.55. Twelve-month hi-low has been $3.64 – $2.13. Located in Englewood, CO, with about 480 employees, this Internet service provider has 42.3 million shares outstanding, $48.62 million in total current assets, $121.9 million in total assets ($47 million is goodwill), little debt, and $43.4 million in total liabilities. Institutional ownership is around 53%. One analyst gives the stock a “strong buy” and another has it as a “moderate buy”. www.quovadx.com
For the better part of two years, the stock chart of Quovadx, Inc. has looked like an ER flatline; it hasn’t traded much above its low nor much below its high. However, besides a nice-looking balance sheet, the company recently has resolved some major issues, namely some hefty shareholder lawsuits and a SEC probe. It also hired an investment house, last year, to help explore strategic alternatives so as to enhance shareholder value, which could mean selling non-productive operations, a buy-out, a merger, etc.
Founded in 1989, and public for seven years, Quovadx offers software and services for application and system development, extension, integration and analysis to enterprise customers worldwide, and is comprised of three divisions: The Integration Solutions Division offers private and public healthcare organizations software infrastructure to ease system interoperability and leverage existing technology. Its offers Cloverleaf Integration Suite, which includes integration services, business process management, and Screen Rejuvenation; the Intelligent Health Broker Suite; the Cash Accelerator Suite, which includes INSURENET Hub; and Identity Services. Cloverleaf has installations in more than 2000 sites worldwide, and in 40% of all large IDNs (integrated delivery networks) in the U.S.
Quovadx’ CareScience Division provides care management and analytical solutions to hospitals and health systems, to access and analyze information about patient care practices, physician and family performance, care processes, and resources and outcomes. Its Rouge Wave Software Division provides reusable software components and information software tools to professional developers.
Some of the company’s customers include the Mayo Clinic, Univ. of Pennsylvania, Johns Hopkins, Oracle, Microsoft, HCA, Capital Health, Ohio Health, Sun, HP, Putnam Investments, and Intel.
In mid-March, Provider Advantage selected the QVDX financial interoperability solution to increase efficiency for its insurance verification system.
For FY2006, ending 12/31/06, revenue was $84.12 million with $13.12 million in net losses; much of the loss can be attributable to settlement costs of those lawsuits mentioned above. This compares to 2005 revenue of $83.1 million and $2.9 million in losses.
We have to think that most of the worst is behind Quovadx and that the flatlining should start turning into an uptrend.
Our 24-month target for the stock is $4.25 to $4.75.
For more information, contact QVDX’ Rebecca Winning at 720-554-1346; rebecca.winning@quovadx.com
DEPOMED, INC. (NASDAQ: DEPO) – $3.50. Twelve-month hi-low has been $6.99 – $2.74. Based in Menlo Park, CA, with about 90 employees, this pharmaceutical has 42 million shares outstanding, $47.87 million in total current assets, $52.61 million in total assets, and nearly $80 million in total liabilities, of which $57.5 million is deferred license revenue (non-current portion). Institutional ownership is around 51%. Three analysts rate the stock a “strong buy”. www.depomedinc.com
Normally, we like to see less liabilities on balance sheets, but DepoMed, Inc. does appear to have a good cash position and it has three analysts giving the stock a “strong buy”, which is rare among small stocks. Also, a few weeks ago, an analyst at CIBC World Markets put a $7.50 target price on the stock.
Founded in 1995, and public for about nine years, DepoMed is a specialty pharmaceutical that uses what it calls AcuForm drug delivery technology to develop novel oral products and improved, extended release formations of existing oral drugs. AcuForm is based on polymer technology that embraces diffusional, erosional, bilayer, and multi-drug systems that DEPO claims can optimize oral drug delivery for both soluble and insoluble drugs. The AcuForm delivery system has the potential to provide controlled and prolonged release of a drug, which reduces frequency of closing and potentially reduces the risk of adverse side effects.
DepoMed has two FDA-approved products: ProQuinn XR (ciprofloxacin hydrochloride) extended release tablets for the once-daily treatment of uncomplicated urinary tract infections and currently being marketed in the U.S. Also, Glumetza (metformin hydrochloride) extended release tablets for adults with type 2 diabetes and marketed in the U.S. and Canada. The company is presently evaluating Gabapentin for adjunctive therapy for epileptic seizures and post therpetic pain, and for menopausal hot flashes.
DEPO has collaborations with New River Pharmaceuticals, Boehringer Ingelheim, and AVI BioPharma. It also has a commercial partnership for Glumetza with King Pharmaceutical.
Around mid-March, DepoMed submitted an Investigational New Drug (IND) application with the FDA for Gabapentin for treating postmenopausal hot flashes, and expects to initiate a Phase 2 clinical trial by the end of June.
DepoMed is another one of those small pharmas with little revenues and large losses. During FY2006, ending 12/31/06, revenue was $9.55 million with $40.32 million in losses.
This is one time when we are following the crowd – the analysts.
Our 24-month target for the stock is $5.75 to $6.25.
For more information, contact DEPO at 650-462-5900; investor@depomedinc.com
Look for the April 20, 2007 Newsletter to be posted on 4/16 or 4/17.
Happy Holidays,
George