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Hello Readers,
Since the last issue we closed one position for a pretty bad loss.
V.I. Technologies (11/20/03). Closed position 3/16/05 at $5.25 for a 78% LOSS.
If you are a recent subscriber, this is not what you care to see in the opening paragraph of this Newsletter. However, in our defense, it is rare when a stock implodes this badly on us. V.I. Technologies, or VITX, seemed to do everything that most shareholders abhor. The recent 1 for 10 reverse stock split was the final nail for us as we close VITX for a 78% loss, and, yes, we will soon be placing it on the Track Record page.
And, so, once again, we must hit the replay button and hear the same song. The markets are still marking time, particularly the NASDAQ and Russell 2000, which seem to have been idling at present levels for nearly two months, give or take 2% to 4%. Despite a season of relatively good earnings, stocks are stuck in oil and are spooked by rising interest rates. It would be nice if the markets had an idea as to how high each will go, but that we probably won’t know for a few more months.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.
Arotech (ARTX) (6/5/01). Electric Fuel subsidiary joins international zinc consortium with focus on electric vehicles for 2008 Beijing Olympics. Sees a threefold jump in 2004 revenue, and estimates 25% to 30% revenue growth for 2005.
ViroLogic (VLGC) (7/20/01). VLGC and AstraZeneca to conduct Iressa Biomarker study.
Generex (GNBT) (8/5/02). Oral-lyn matches fast-acting insulin in Phase 2b study. This is still on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Announces ATG On-Demand – application hosting and managed services combine advantages of licensed software and SAAS model.
Targeted Genetics (TGEN) (10/5/03). Year-end numbers not great; balance sheet improves year-over year.
Insmed (INSM) (11/5/03). Announces completion of $35 million financing. FDA accepts for review Insmed’s NDA for SomatoKine for treating growth hormone insensitivity syndrome. To release year-end numbers on March 16, or a few hours after this Newsletter is posted.
AVANT Immuno (AVAN) (12/5/03). Annual results probably what was expected; balance sheet still looks good.
Actuate (ACTU) (1/5/04). Named “Technology Vendor of the Year” by KeyCorp. Eclipse makes BIRT modules available.
Peerless Systems (PRLS) (1/20/04). ). Stock soared nearly a dollar since the last Newsletter on news that PRLS is to provide technologies for new Kyocera Mita printers. Earnings call slated for March 17.
Crossroads Systems (CRDS) (2/5/04). Stock drops to under a dollar on pretty lousy quarterly numbers, but the balance sheet still appears healthy.
Open TV (OPTV) (3/20/04). Stock gets a nice boost as company and Comcast ink a multi-year licensing deal. Also, signs multi-year pact with Playboy.
Socket Communications (SCKT) (3/20/04). gate5, SCKT, and Tele Atlas announce partnership to provide advanced mobile navigation solution in U.S. Extends bar code scanning functionality to Nokia Series 60 and Series 80 Smartphones.
NexMed (NEXM) (4/5/04). Provides update on NM100060 Phase 1 U.S. study. Yearly results to be released March 16, the same day we post this Newsletter.
Palatin (PTN) (4/5/04). PTN and King Pharmaceuticals to webcast PT-141 Symposium on March 21.
AVI BioPharma (AVII) (4/20/04). Year-end results typical of previous year; balance sheet still okay but weaker from a year earlier. Company still has a lot in the pipeline and this is a stem cell play.
Management Network (TMNG) (4/20/04). Expands Mobile Virtual Network Enablement practice.
Glenayre (GEMS) (5/5/04). Revenues drop year-over-year but balance sheet still looks unbelievably strong.
GoRemote (GRIC) (5/5/04). Wins new customer for Teleworker solution. First quarter numbers not bad and balance sheet appears to be in good shape.
EMCORE (EMKR) (5/20/04). Stock gets a lift as company announces breakthrough transmitter technology utilizes direct modulation at 1550nm for video transmission over HFC and triple-play FTTx networks. Announces 10-gigabit short Wavelength TOSA/ROSA.
GlowPoint (GLOW) (5/20/04). Gets $10 million in financing, which puts pressure on stock. To receive $3 million from settlement. To announce yearly results on March 16, a few hours after we post this Newsletter.
Genus (GGNS) (7/5/04). Shareholders approve merger acquisition with AIXTRON. Shareholders will receive 0.51 AIXTRON ADS in exchange for each Genus share.
Avanex (AVNX) (7/20/04). Stock drops on wider 3rd QT loss forecast. Company adds to industry-leading optical amplifiers with new platform for L-Band transmissions. Announces optoelectronics foundry services and also newest PowerReach amplified transponder.
Tripath (TRPH) (8/5/04). Several product releases. Raises $4.4 million through private placement and stock takes a hit. Maybe we should have kept this one on the “Endangered List”.
Itraware (ITRA) (9/20/04). NASDAQ gives company six months, extendable to one year, to regain compliance with minimum bid rule and stock price suffers a little. Inks pact with Sygate Technologies. Also, announces agreements with Pre-Se Technologies and Epiphany. Will release FY2005 results on March 31.
Chordiant (CHRD) (9/20/04). Will restate quarterly results for three quarters in 2004 and files notice that it is no longer in NASDAQ compliance. However, stock price doesn’t seem to be affected, yet. Several product releases.
Trikon (TRKN) (10/5/04). Announces merger/acquisition pact with Aviza Technology and a new holding company will be formed that will trade on NASDAQ under the Aviza name. There may be a lot more of this sort of consolidation throughout the tech industry over the next several years.
iGate (IGTE) (10/20/04). Postpones year-end results.
Nova Measuring (NVMI) (11/5/04). Files patent infringement complaint to protect its intellectual properly.
Net2Phone (NTOP) (11/5/04). Second quarter loss narrows on nearly flat sales and IRG Research downgrades stock. Launches enhanced Wi-Fi offer that allows handset to automatically scan and connect to available access points.
Applied Micro (AMCC) (11/20/04). Names new CEO. Demonstrates PCI-X SATA 3Gb/s RAID technology. Unveils high-speed, low cost PowerPC processor for networking applications.
Zhone Technologies (ZHNE) (12/5/04). Introduces 10-Port fibre channel card.
Brillian (BRLC) (1/5/04). Stock takes a hit on poor 4th QT results; balance sheet still seems okay.
InsWeb (NSW) (1/20/05). Announces online marketing partnerships.
Saviant (SVNT) (2/5/04). ). Earnings call set for March 16 – again, the same day we post this Newsletter. Had to stop Phase 2 trial for pain drug but stock doesn’t tank, which is usually the norm.
Tumbleweed (TMWD) (3/5/05). Company and Edvance announce partnership in Hong Kong. SkillSoft selects Tumbleween email firewall.
Our picks for this issue are another biotech and a maker of semiconductor equipment, both trade on the NASDAQ.
REPLIGEN CORPORATION. (NASDAQ: RGEN) – $1.70. Twelve-month hi-low has been $3.52 – $1.22. Located in Waltham, MA, with about 40 employees, this biotech has 30.1 million shares outstanding, $19.78 million in total current assets, $27.4 million in total assets, little debt, and $2.72 million in total liabilities. Institutional ownership is around 9%. One analyst has the stock on “hold”. http://www.repligen.com
Time for another small biotech like Repligen Corporation that has a decent-looking balance sheet and the possibility of increasing revenues this year, despite a recent setback.
Founded in 1982, and public for nearly 15 years, Repligen focuses on developing novel therapeutics for diseases that affect the central nervous system. These product candidates are secretin for schizophrenia and anxiety disorders, uridine for bipolar disorder, and CTLA4-lg and Protein A for autoimmune diseases. The products are synthetic forms of naturally occurring substances, which may correct improperly regulated biological processes with minimal toxicity or side effects. The company claims these have the potential to produce clinical benefits not attainable with any existing drug in diseases for which there are few alternative therapies or treatments. It should be noted that, last month, initial results for a Phase 2 clinical trial of secretin in refractory schizophrenia indicated that secretin did not produce a statistically significant improvement in patient symptoms. This news caused the stock to drop over a dollar to its present levels. However, RGEN plans a follow-on study to target cognitive deficit of schizophrenia. Repligen also manufactures and markets several products based on recombinant rProtein A. Their primary customers incorporate rProtein A products into their antibody purification systems, which they sell directly to the biotech and pharmaceutical industry. In addition, the company markets SecreFlo to aid in the diagnosis of pancreatic exocrine dysfunction or chronic pancreatitis and diagnosis of gastrinoma.
In February, RGEN and GE Healthcare expanded an existing Protein A supply agreement. A new amendment to the pact extends the term of the agreement through 2010, and expands the manufacturing to include an additional GE Healthcare protein and anticipates a mechanism for making future proteins.
For FY2004, ending 3/31/04, revenue was $6.9 million with $9.94 million in losses. During the first nine month of FY2005, ending 12/31/04, revenue was $6.36 million with $2.56 million in losses. Although some analysts had hoped for higher revenues during 2005, it is encouraging that the losses seem to be abating, somewhat.
The company had a setback with the Phase 2 trial, but it looks as if RGEN has enough irons in other fires to help make up for the slack.
Our 24-month target for the stock is $3.25 to $4.00.
For more information, contact RGEN at 781-250-0111.
AEHR TEST SYSTEMS (NASDAQ: AEHR) – $3.00. Twelve-month hi-low has been $5.15 – $2.18. Based in Fremont, CA, with about 85 employees, this maker of semiconductor equipment has 7.4 million shares outstanding, $23.2 million in total current assets, $26.8 million in total assets, little debt, and $4.61 million in total liabilities. Institutional ownership is around 54%. One analyst rates the stock a “strong buy”. http://www.aehr.com
We keep thinking that it is not too much longer before the semiconductor industry will see a major revival, thanks to a draw-down in inventories. When that day comes, and we hope it’s soon, Aehr Test Systems, with its good looking balance sheet and retooling efforts, should catch a nice wave of investor interest.
Founded in 1997, and public since then, Aehr bills itself as a leading worldwide provider of systems for burning-in and testing DRAM and logic integrated circuits and has an installed base of more than 2000 systems worldwide. Aehr has developed and introduced such products as the FOX, MTX, MAX3 and MAX4 systems, and the DiePak carrier. The FOX is a full wafer contact test and burn-in system. MTX is a massively parallel test system designed to reduce cost of memory testing by performing both test and burn-in on thousands of devices simultaneously. The MAX system can effectively burn-in and functionally test complex devices, such as digital signal processors, microprocessors, microcontrollers, and systems-on-a-chip. The DiePak carrier is a reusable, temporary package that enables IC manufacturers to perform final test and burn-in of bare die. Last July, the company introduced a new lower cost 54/66 pin DiePak solution. Lastly, is the ATX system, which is designed for dynamic and monitored burn-in of high-pin-count logic devices, including microprocessors and microcontrollers. The ATX uses much of the same software as the MAX system. During FY2004, ending 5/31/04, the ATX product category accounted for nearly 45% of Aehr’s net sales.
In February, Aehr announced it had received its first order for the new generation of its MAX test system from a major semiconductor manufacturer and that shipping is slated for the second half of this year. In January, the company announced that it had shipped one of its new MTX models to Viking InterWorks.
For FY2004, ending 5/31/04, revenue was $15.8 million with $3.96 million in losses, which were about the same numbers for FY2003. During the first six months of this FY, ending 11/20/04, net sales were $10.7 million with $1.93 million in net losses. Looks as if Aehr is on pace to rack up some good revenue growth during this FY.
We like the balance sheet and the revenue growth, so far, for this fiscal year. Also, we like how the company is maintaining its technology.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact AEHR at 510-623-9400; info42@aehr.com
Look for the April 5, 2005 Newsletter to be posted on 4/1 or 4/4.
Have a happy holiday,
George