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Hello Readers,
Since the last Newsletter, we closed four positions; three for gains and one for a loss.
ZOGENIX (4/20/12). Closed position 10/4/12 at $3.27 for a 70% GAIN.
FIVE STAR QUALITY CARE (5/5/12). Closed position 10/8/12 at $5.74 for a 60% GAIN.
VALUE VISION MEDIA (9/5/12). Closed position 10/10/12 at $2.78 for a 51% GAIN.
U.S. GEOTHERMAL (8/5/08). Closed position 10/8/12 at 32 cents for an 86% LOSS.
Zogenix had been moving nicely and then popped to a 70% gain on no real news. Ditto on no news for Five Star Quality Care, which may have received a nice boost as implementation for Obamacare starts kicking in. As for little news, add Value Vision Media to the parade, but we’ll take the gain. And, we finally gave up on U.S. Geothermal and took an ugly loss.
It is an understatement to say that the markets have been overly tentative, of late. We all know what the bugaboos are: the looming fiscal cliff, European debt problems (not to mention our own), the start of what appears to be a lousy earnings season, higher gas and commodity prices mostly due to more bone-headed quantitative easing by the Fed, and, of course, the elections. The outcome of the latter will probably have the greatest impact on the markets for most of November. Who will win? If the markets stay at current levels, expect an Obama victory. Should the markets have a major sell-off over the next several weeks, a distinct possibly, then, Romney may squeak in, which should begin to bring the small investor back into the markets.
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 highly significant.
Zynga, Inc. (ZNGA)(10/5/12). Ouch! Within days after picking this, the company lowered quarterly expectations and the shark feeding began as multiple downgrades were made on the stock. We are surprised that the stock hasn’t been pounded to shreds, so, let’s wait and see. Is a “bump in the road” or something else? Rumors are swirling that it could be a takeover.
AXT, INC. (AXTI)(9/5/12). Slates earnings call for November 1.
Meru Networks (MERU)(8/20/12). Sets earnings news for October 24. Confronts the crush of BYOD and sets new standard for WLAN capacity and performance with two new products.
Novatel Wireless (NVTL)(8/5/12). MiFi 2 builds on company’s wireless patent protected technology. Supplies Thrifty Car Rental with enhanced vehicle tracking solution.
pSivida (PSDV)(8/5/12). CEO to discuss sustained delivery and nanotechnology in ophthalmology at upcoming biotech meeting.
Overland Storage (OVRL)(7/20/12). SnapSAN 5000 wins best new IT hardware award at Golden Bridge Awards. Launches LTO6 offerings.
Athersys (ATHX)(7/5/12). Releases new data demonstrating potential benefits from MultiStem after spinal cord injury. Presents research progress in its Multiple Sclerosis program. Orbimed lowers stake in ATHX from 5.56% to 3.48%. Reports on progress in Phase 2 study of MultiStem for Ischemic Stroke.
Rare Element Resources (REE)(6/20/12). Reports on progress of metallurgical test work on Bear Lodge rare earth project.
Avanir Pharmaceuticals (AVNR)(6/5/12). Sues Impax over patent for Nuedexta nerve drug.
Capstone Turbine (CPST)(5/20/12). Secures 7.2MW order to power Mexican government facility. Announces significant follow-on order from large Australian coal seam company.
Senomyx (SNMX)(5/20/12). New flavors approved in the European Union.
Mattson Technology (MTSN)(4/5/12). Sets earnings call for October 24. Ships first follow-on Helios XP RTP System to major foundry for production through 2X NM technology nodes.
Ballard Power Systems (BLDP)(3/20/12). Slates earnings call for October 31. Receives NASDAQ non-compliance notice regarding minimum bid rule.
Anadigics (ANAD)(11/20/11). To exhibit at SCTE Cable-Tec Expo 2012 between October 17-19.
On Track Innovations (OTIV)(6/20/11). Receives $2 million in orders for NFC and contactless payment readers for use in the U.S. Proxy fights continue.
Idera Pharmaceuticals (IDRA)(6/5/11). Completes patient enrollment in Phase 2 trial of IMO-3100 in patients with psoriasis; first human trial in lupus program anticipated to begin in 2012.
NeoStem (NBS)(5/20/11). Says new publication supports positive results of AMR-001 for treating AMI. Announces very small embryonic-like cells (VSEL) publication in stem cells and development.
Energy Recovery (ERII)(5/5/11). Schedules earnings call for November 7.
Jamba, Inc. (JMBA)(3/20/11). Jamba and Systems Services of America announce new West Coast distribution alliance.
Oculus Innovative Sciences (OCLS)(3/5/11). Announces results from study of Microcyn technology-based Atrapro antipruritic hydrogel used in combination with Neosalus cream in treating Atopic Dermatitis.
Sprint Nextel (S)(1/5/11). The most important news here is Softbank’s move to take over Sprint by purchasing 70% of the company. The main question still appears to be at what price? Some think it could be up to $6.40 a share, or more. We may be closing this, soon, at a gain, although not the gain we had hoped for.
Astex Pharmaceuticals (ASTX)(12/5/10). The Street gives the stock an upgrade to “buy”. Earns $5 million for first commercial sale of DACOGEN in the European Union. Announces initiation of SGI-110 Phase 2 trial in platinum-resistant recurrent ovarian cancer patients. To publish the discovery of novel allosteric modulators for the key therapeutic targets HCV NS3 and PKM2 in nature journals.
Inovio Pharmaceuticals (INO)(10/20/10). Receives approval to market Life Tide SW 5.0 in New Zealand. Says its cancer vaccine demonstrates for first time that a DNA-based therapeutic vaccine can produce immune responses to kill target cells.
ProPhase Labs (PRPH)(10/5/10). Matrixx up its bid to buy company for $1.60 a share; PRPH has already rejected a $1.40 offer.
Novavax (NVAX)(4/5/10). Begins Phase 1 clinical trial of RSV vaccine candidate in elderly adults. Initiates Phase 2 clinical trial of RSV vaccine.
GlobalSCAPE (GSB)(5/20/08). Rolls out business edition of Tappln.
YM Biosciences (YMI)(11/5/06). After six years, we are throwing in the towel and placing this on then “Endangered List”. Usually, we are patient people, but no more with YMI.
Our picks for this Newsletter are a diagnostics developer and a medical device maker, both NASDAQ-listed.
RESPONSE GENETICS, INC. (NASDAQ: RGDX) – $1.25. Twelve-month hi-low has been $2.40 – 70 cents. Based in Los Angeles with about 100 employees, this diagnostics developer has 24.8 million shares outstanding, $6.73 million in total current assets, $7.85 million in total assets, little debt, and $6.13 million in total liabilities. Institutional ownership is around 61%. One analyst has the stock as a “hold”. www.responsegenetics.com
At first glance, one would ask, “what’s the big whoop on Response Genetics, Inc.”? After all, the balance sheet seems a little light and no analysts are flashing a “buy” on the stock. Well, earlier in September, pharmaceutical giant GlaxoSmithKline (GSK) bought a 15% passive stake in the company for over $8 million. So, what’s there not to notice here?
Founded in 1999 under the name Bio Type, Inc., and public for over five years, Response Genetics develops and markets what they call pharmacogenomics test for treating cancer. They develop genetics tests that measure predictive factors for tumor response in tumor tissue samples. The company offers tests for non-small cell lung cancer, colorectal cancer, gastric and gastroesophageal, and melanoma cancer patient’s tumor tissue specimens. These are done through its ResponseDX: Lung, ResponseDX: Colon, and ResponseDX: Gastric test suites, as well as under the ResponseDX: Melanoma name. The tests are based on its proprietary and patented technologies which enable extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin embedded specimens.
Response Genetics also develops diagnostic tests for other types of cancer that identify genetic profiles of tumors, which recur after surgery; and engages in identifying genetic profiles of tumors, which are responsive to a particular chemotherapy. The company serves community-based oncologists, pathologists, physician office, and hospitals, as well as pharmaceutical companies and research organizations.
For FY2011, ending 12/31/11, revenue was $22.64 million with $5.7 million in losses. During the first six months of the current FY, ending 6/30/12, revenue was $7.8 million with losses totaling $5.9 million.
Revenues for the current year seem to be on the downturn with losses on the path upward. Usually, this would really concern us, but we need to ask why GSK would shell out nearly $9 million to take a 15% stake in the company?
Our 24-month target for the stock is $2.25 to $2.50.
For more information, contact RGDX’s Thomas Bologna at 323-276-6060.
DELCATH SYSTEMS, INC. (NASDAQ: DCTH) – $1.70. Twelve-month hi-low has been $4.74 – $1.40. Located in New York City, with about 90 employees, this medical device company has 66.9 million shares outstanding, $31.32 million in total current assets, $35.13 million in total assets, little debt, and $13.63 million in total liabilities. Institutional ownership is around 14%. Three analysts rate the stock a “strong buy” and one as a “buy”. www.delcath.com
This is one of those “what’s there not to like?” Maybe something, but, on the surface, Delcath Systems, Inc. has a nice balance sheet, pretty good analysts backing, and what appears to be nifty technology. The stock is also trading at near its 52-week low.
Founded in 1988, and public for over ten years, Delcath Systems is a specialty pharmaceutical and medical device company focused on oncology, primarily cancers in the liver. Delcath focuses on the development and clinical study of the Delcath Chemosaturation System, allows the administration of concentrated regional chemotherapy by isolating the circulatory system of the targeted organ. It delivers high doses of chemotherapeutic agents directly to the liver while limiting systemic exposure and the related side effects by filtering the blood prior to returning it to the patient. The system involves a series of three catheter insertions, each of which is placed percutaneeously through interventional radiology techniques. The procedure is minimally invasive and repeatable allowing for multiple courses of treatment with chemotherapeutic drugs. Back in August, the company sought FDA approval for the device and expectations are high that they okay could come in early 2013.
Early in 2011, Delcath received the Conformite Europeenne (CE) mark of approval for the Hepatic CHEMOSAT delivery system. The Chemosaturation System is currently being tested in various liver cancers. The company is conducting a separate Phase II clinical trial of the system with melphalan in patients with primary and metastatic liver cancer. Delcath has a research and development agreement with Chi-Fu Trading Co. to conduct clinical studies, as well as distributing the system in Taiwan and Singapore.
Like most small R&D companies, Delcath garners zilch revenue and incurs some hefty losses. For example, during the quarter ending 6/29/12, revenue was $106,000 and losses were $14.5 million.
Besides the reasons we gave above, this stock seems to be in traders’ and momentum players’ crosshairs.
Our 24-target for the stock is $3.25 to $3.75.
For more information, contact DCTH at 212-489-2100; info@delcath.com
Look for the November 5, 2012 Newsletter to be posted on 11/1 or 11/2.
Thank you,
George