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Hello Readers,
Since the last Newsletter, we closed one position, for a nice gain.
INNODATA (7/5/05). Closed position 11/14/07 at $6.00 for a 104% GAIN
In this market it feels good to get an Innodata, which jumped over $2.00 in one day on blockbuster earnings news, and yes, it took awhile, but the 104% gain was worth the wait.
Undeniably, the last few weeks has been real scary, and small stocks have taken the biggest pounding, as our Current Portfolio can well attest. The thing to remember is that this, too, shall pass. We all know the culprits that have caused the recent chaos, so, there is no sense in rehashing. The main question we must ask ourselves, “Is the country as bad off as the markets would have us believe?”. The answer, right now, is simply “no”.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Linktone (LTON) (11/5/07). To announce 3rd QT results on November 28.
Sunesis Pharma (SNSS) (11/5/07). Recent balance sheet looks pretty healthy.
Orsus Xelent (ORS) (10/20/07). RedChip moves ORS to its Independent Index. Stock takes a hit as it announces higher than planned net income on lower than projected record revenues; sees strong 4th QT but revises full-year outlook; balance sheet still looks very strong.
Nucryst Pharma (NCST) (10/5/07). Quarterly results a little disappointing; balance sheet still looks healthy.
Boots & Coots (WEL) (9/20/07). Quarterly numbers so-so; balance sheet still looks okay.
XATA (XATA) (9/20/07). To enhance Austin Powders’s fleet safety and compliance.
Wave Systems (WAVX) (9/5/07). To demonstrate at Paris expo. Posts pretty good-looking revenue numbers driven by strength in PC OEM royalties; balance sheet still looks good.
Kodiak Oil & Gas (KOG) (9/5/07). Provides early results for Vermillion Basin unit. Brokerage downgrades stock from a “buy” to a “hold”. Recent balance sheet still looks good.
Iomai (IOMI) (8/20/07). Balance sheet still looks good.
Siga Technologies (SIGA) (8/20/07). Gets mentioned in an upbeat article at Motley Fool. Quarterly numbers show balance sheet still seems okay.
A.P. Pharma (APPA) (8/5/07). Confirms program development plans for 2008. Balance sheet still seems to be healthy.
Heska (HSKA) (7/5/07). Introduces the Dri-Chem 4000 chemistry analyzer; enters exclusive arrangement with FujiFilm. Records pretty decent quarterly numbers; balance sheet still looks okay.
Xenonics (XNN) (6/5/07). Announces $4 million in new purchase orders for its NightHunter illumination systems.
Oncolytics (ONCY) (6/5/07). To present at the Toronto CFA Society on November 20.
Encorium Group (ENCO) (5/20/07). Company issues upbeat quarterly report and some decent looking numbers; balance sheet still looks good.
Hana Biosciences (HNAB) (5/5/07). Balance sheet still looks okay. Feels that recent financial commitments will provide enough resources well into 2009.
VocalTec (VOCL) (4/20/07). Sets earnings release for November 20.
Immunicon (IMMC) (3/20/07). Balance sheet still looks okay as company increases revenue guidance from instrument revenue. Caris & Company downgrade the stock to “average”, whatever that means.
TTI Team Telecom (TTIL) (3/5/07). Company posts a nice quarterly profit; balance sheet looks good.
UQM Technologies (UQM) (2/5/07). Gets contract with the California Energy Commission and the National Renewable Energy Laboratory to develop an advanced grid-connect interface. Brokerage downgrades stock to “market perform”.
Neose Technologies (NTEC) (12/20/06). Recent balance sheet looks good. NTEC and BioGeneriX release positive data news from two Phase 1 studies of GlycoPEG-GCSF.
CardioTech (CTE) (12/20/06). Recent numbers not great; balance sheet still seems okay.
Lantronix (LTRX) (12/5/06). Quarterly report has some good aspects; balance sheet still looks viable.
WJ Communications(WJCI) (12/5/06). Recent numbers not great; balance sheet still seems okay. Unveils UHF RFID reader module for Europe.
YM Biosciences (YMI) (11/5/06). Recent balance sheet still appears to be healthy. Adopts renewed shareholders’ rights plan.
Proxim Wireless (PRXM) (11/5/06). Receives FCC certification for Tsunami MP.11 point-to-multipoint products supporting dynamic frequency selection. Rescales recent private placement. Recent quarterly numbers continue to show loss paring; balance sheet still looks good.
Hydrogenics (HYGS) (9/20/06). New numbers show revenue growth and loss reduction; balance sheet still looks good. Plans to windup test equipment business.
TVI Corp (TVIN) (9/5/06). Releases 3rd QT report. This is on the “Endangered List”.
Advanced Life Sciences (ADLS) (7/20/06). Announces Cethromycin achieves all endpoints in second pivotal Phase 3 trial for treating pneumonia. This news comes perhaps just in time as recent balance sheet doesn’t look all that good.
NTN Buzztime (NTN) (7/5/06). Quarterly report pretty upbeat; balance sheet looks pretty good.
02Diesel (OTD) (5/20/06). Announces 3rd QT results. This is on the “Endangered List”.
Tri-S Security (TRIS) (5/5/06). Quarterly report shows revenue growth and profits; balance sheet still looks good.
ThermoGenesis (KOOL) (4/5/06). Recent balance sheet looks healthy as company reports progress on key initiatives.
Cytogen (CYTO) (3/20/06). Recent numbers aren’t bad and balance sheet still looks reasonably good, but stock continues to get clocked. CYTO hires ThinkEquity to explore strategic options, which usually means things like a reverse split. Names new CEO as brokerage downgrades stock.
TII Network (TIII) (3/20/06). Quarterly numbers show growth and profits; balance sheet looks good.
Lipid Science (LIPD) (2/20/06). Latest balance sheet only so-so.
Adherex (ADH) (2/20/06). We’ve placed this on the “Endangered List” even though latest balance sheet seems healthy. However, this was done at the expense of much stock dilution.
MIND C.T.I. (MNDO) (2/5/06). Recent numbers show increase in profits; balance sheet still looks good.
8X8 (EGHT) (1/20/06). Quarterly numbers look pretty fair, as does balance sheet. So, why did the stock go down? Same reason that many of our picks with good news have suffered. This has been Satan’s Stock Market.
Digital Angel (DOC) (12/20/05). To present at NYC confab on December 4 and 5. To hold virtual investor roadshow on November 19. Wins electronic car deal in Slovakia. Recent numbers show good growth; balance sheet so-so since half is “goodwill”. As we have said, this one has been a major disappointment. It always has a steady flow of good news but the stock goes down, continually. Maybe the merger will change things? We’re not too hopeful.
Westell (WSTL) (10/20/05). UltraLine Series3 wins CES Innovation Award.
RAE Systems (RAE) (10/5/05). Quarterly numbers look good, as does balance sheet.
EntreMed (ENMD) (9/5/05). Recent balance sheet shows new significant long-term debt, but company claims it is funded into 2009.
Zi Corporation (ZICA) (8/5/05). Releases some pretty upbeat numbers; balance sheet still seems okay.
Vion Pharma (VION) (5/20/05). Releases quarterly numbers. This one is on the “Endangered List”.
Applied Micro Circuits (AMCC) (11/20/04). There’s about half dozen releases, but the most noteworthy is that AMCC will effect a 1 for 4 reverse stock split December 10. Usually, these seldom benefit current shareholders, so, let’s see what happens.
Nova Measuring (NVMI) (11/5/04). Opens new metrology application development center in Taiwan. Quarterly numbers show a pretty ugly loss; balance sheet still looks good.
Aviza Technology (AVZA) (10/5/04). FY earnings call set for November 29.
Network Engines (NENG) (6/5/04). Year-end results and 4th QT show revenue growth and profits; balance sheet still looks very strong.
TMNG Global (TMNG) (4/20/04). Recent numbers show return to profitability; balance sheet still looks good.
Palatin Technologies (PTN) (4/5/04). Releases quarterly numbers. This is on the “Endangered List”.
OpenTV (OPTV) (12/5/03). We held on long enough and we are placing this one on the “Endangered List” as company reports a quarterly loss of over $8 million. Maybe, someday we’ll change our minds, if OPTV ever gets its act together.
Our picks for this Newsletter are another small drug developer trading on the NASDAQ and a health services provider trading on the AMEX.
SANTARUS, INC. (NASDAQ: SNTS) – $2.38. Twelve-month hi-low has been $9.70 – $1.93. Based in San Diego, CA, with about 335 employees, this drug manufacturer has 51.3 million shares outstanding, $70.31 million in total current assets, $72.92 million in total assets, little debt, and $56.35 million in total liabilities. Institutional ownership is around 44%. Three analysts give the stock a “strong buy”, two have it as a “hold”, and one gives it a “moderate sell”. www.santarus.com
Sometimes we find a company that has been growing revenues and lowering its losses, but the stock is still trading near its 52-week low. Unless, we missed something, Santarus, Inc. seems like a good bet.
Founded in 1996, and public for less than four years, Santarus bills itself as a specialty pharmaceutical company that develops and markets proprietary products and therapies that treat gastrointestinal diseases and disorders, including gastroesophageal reflux disease (GERD) in the U.S. It offers what are called the Zegerid family of products, which are proprietary immediate-release formulations that combine omeprazole, a proton pump inhibitor (PPI), and one or more antacids. The company’s products are prescribed for treating upper gastrointestinal diseases and disorders, including heartburn and other symptoms associated with GERD, erosive esophagitis, upper gastrointestinal bleeding, and gastric and duodenal ulcers. The products are offered in capsule, powder for oral suspension, and chewable tablet dosage forms.
Santarus sells its products to pharmaceutical wholesalers, who in turn distribute to retail pharmacies, mail order pharmacies, hospitals, and other institutional customers. The company has a strategic alliance with Schering-Plough Healthcare Products to develop and sell over-the-counter products with the lower dosage strength of 20mg of omeprazole in the U.S. and Canada. Santarus also has a license agreement with the University of Missouri for its patents and pending patent applications relating to specific formulations of PPIs with antacids and other buffering agents.
As we said above, this company has had some pretty good revenue growth over the years, while paring its losses. For FY2006, ending 12/31/06, revenue was $49.24 million with $56.46 million in losses compared to FY 2005 revenue of $26.52 million and $64.99 million in losses. During the first nine months of the current FY, ending 9/30/07, total revenue has been $55.35 million with $36.27 million in losses. This FY isn’t even over and the company has already topped 2006.
One must think that Santarus has some product good products. What else would account for this sort of revenue growth?
Our 24-month target for the stock is $4.00 to $4.50.
For more information, contact SNTS’ Martha Hough at 858-314-5824; contact@santarus.com
CONTINUCARE CORPORATION (AMEX: CNU) – $2.55. Twelve-month hi-low has been $3.69 – $2.37. Based in Miami, Fl, with about 560 employees, this health services provider has 70.1 million shares outstanding, $23.1 million in total current assets, $116.93 million in total assets ($73.6 million is “Goodwill”), little debt, and $12.88 million in total liabilities. Institutional ownership is around 4%. One analyst rates the stock a “strong buy”. www.continucare.com
We don’t normally like companies that have limited themselves to a specific geographic location, but the revenue growth and profits at Continucare Corporation are pretty hard to ignore, as is the balance sheet. Also, difficult to overlook is the company’s industry, which is probably recession proof, and, with an aging population, should keep on growing.
Founded in 1996, and public for over ten years, Continucare provides primary care physician services on an outpatient basis in Florida, namely in Miami-Dade, Broward, and Hillsborough counties. It provides medical services to patients through physicians, nurse practitioners, and physician’s assistants. The company also provides practice management services, including assistance with medical utilization management, pharmacy management, and specialist network development to independent physician affiliates (IPAs). Continucare operates a network of 18 medical centers, and provides management services to 15 IPAs, which provides services to over 40,000 patients. The company has managed care agreements with Humana Medical Plans, Vista HealthPlan of South Florida and its affiliated companies, including Summit Health Plan, and Wellcare Health Plans and its affiliates.
Quite soon, the company will be opening Continucare ValuClinic, a new line of consumer-oriented, retail-based health centers which will offer treatment for common illnesses such as the flu, pink eye, bronchitis, and seasonal allergies in a quick patient-friendly health care setting. Also offered will be common vaccinations, physical exams, and diagnostic screenings. The clinics will be staffed mostly with nurse practitioners and physician assistants and will be open seven days a week. No appointment will be necessary and fees will be less than those charged at more traditional health care settings.
For the FY ending 6/30/07, revenue was $217.14 million with net income of $6.3 million compared to last FY’s revenue of $132.9 million and net income of $5.33 million. Looks like serious money to us.
Can the company exceed the year-over-year growth it just had? That’s probably iffy, but if it keeps on expanding and staying profitable, the stock price, at some point, should reflect this. Also, we can’t keep but wonder if Continucare will try it success in other areas of the country?
Our 20-month target for the stock is $4.00 to $4.50.
For more information, contact CNU’s Fernando Fernandez at 305-500-2105.
Look for the December 5, 2007 Newsletter to be posted on 12/3 or 12/4.
Happy Thanksgiving,
George