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Hello Readers,
Since the last Newsletter we have closed two positions; one for a very very nice gain and one for a loss.
CORIO, INC. (10/5/04). Closed position 1/25/05 at $2.78 for a 85% GAIN.
ARGONAUT (4/20/02). Closed position 1/25/05 at 81¢ for a 69% LOSS.
Periodically, one of our picks gets taken over, and with Corio it was none other than blue chip stalwart IBM that has offered $2.82/share in cash. The 85% gain was a nice lift in what had been a disappointing January. We also closed Argonaut, which had been on the “Endangered List” for several months.
As we just said, January was the pits for the markets. We need not go into all of the “whys”, you have already heard most of them. However, we are still extremely positive for the one simple reason that we have been harping on for some time – there is a mountain of cash sitting on the sidelines, and, at some point, it should come out from under the mattress.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Arotech (ARTX) (6/5/01). Names new president of subsidiary. Receives more orders from Air Force, Army and other governmental agency.
ViroLogic (VLGC) (7/20/01). Company’s eTAG system demonstrates potential ability to predict treatment outcomes for colorectal cancer patients.
Generex (GNBT) (8/5/02). Some patent/product news. This one’s on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Offers bundled marketing package. Delivers targeted, cross-channel e-marketing capabilities to business users. Earnings set for Tuesday, February 1, the day we post this Newsletter.
Targeted Genetics (TGEN) (10/5/03). Coverage initiated by Roth Capital.
Active Power (ACPW) (11/20/03). FY2004 numbers show improvement in revenue but losses widen; balance sheet still looks healthy.
Actuate (ACTU) (1/5/04). Selected for Defense Integrated Military Human Resources System (DIMHRS). Sets earnings call for February 10.
Somera Communications (SMRA) (2/20/04). Schedules earnings call for February 8. Stock downgraded by Raymond James.
Oplink (OPLK) (2/20/04). Quarterly numbers about the same as a year ago; balance sheet still appears to be very strong.
Socket Communications (SCKT) (3/20/04). Company’s USB adapter with Bluetooth wireless technology exends family of cordless products.
Palatin (PTN) (4/5/04). PTN’s small molecule Melanocortin Agonist demonstrates a reduction in body weight and positive effect on metabolic parameters in animal models of obesity. Announces issuance of a Medicare reimbursement code for NeutroSpec.
AVI BioPharma (AVII) (4/20/04). Updates progress on infectious disease program using NEUGENE Antisense drug for RNA viruses. Announces $24 million direct equity placement. Receives key U.S. patents covering preservation and expansion of stem cells using third-generation NUEGENE Antisense, and, yes, it appears that AVII has become a stemcells play.
Management Network (TMNG) (4/20/04). Sets earnings release for February 10.
GoRemote (GRIC) (5/5/04). Delivers secure managed connectivity to Mutual of Omaha. Provides remote access connectivity for top retailers.
GlowPoint (GLOW) (5/20/04). GLOW and TANDBERG win 14 location IP-video deal with Allied Office Products. Preliminary FY numbers look good but 4th QT falls short of expectations.
Network Engines (NENG) (6/5/04). Releases quarterly results; balance sheet still looks good.
BindView (BVEW) (6/5/04). Launches next-generation policy compliance solution. Unveils broad integration strategy across industry leading solutions.
Altair Nanotechnologies (ALTI) (6/20/04). Licenses RenaZorb to Spectrum Pharmaceuticals. Announces another new patent award notification.
Genus (GGNS) (7/5/04). Places first 300 mm CVD system in Taiwan.
Avanex (AVNX) (7/20/04). Releases quarterly numbers.
Tripath (TRPH) (8/5/04). To restate June quarter report.
Intraware (ITRA) (9/20/04). activePDF standardizes on ITRA’s software delivery and management service.
Chordiant (CHRD) (9/20/04). South Africa’s Cell C launches marketing program using CHRD’s Marketing Director suite.
Trikon (TRKN) (10/5/04). Sets earnings call for February 1, the day we post this Newsletter. Major Japanese chipmaker to evaluate for next-generation shallow trench isolation STI application.
Applied Micro Circuits (AMCC) (11/20/04). Stock takes a slight hit as 3rd QT loss widens. Settles lawsuit for $60 million.
Zhone Technologies (ZHNE) (12/5/04). Releases pretty upbeat year-end report; balance sheet looks good. Spring Net selects Zhones’s GigaMux Optical transport solution. Introduces new VoiceFLEX Gateway module for scalable circuit to packet voice migration. Consolidated Communications announces “Telco TV” service using Zhone’s multi-access line concentrator.
QuickLogic (QUIK) (12/20/04). Earnings call set for February 2. QUIK’s Eclipse II low-power FPGAs available for industrial temperature applications. To collaborate with Renesas on 902.11b/g wireless IP phone reference design.
Brillian (BRLC) (1/5/04). Expects to report yearly results by end of this month.
InsWeb (INSW) (1/20/05). Year-end numbers about as expected.
Our picks for this Newsletter are a NASDAQ-listed biotech and a NYSE-listed semiconductor.
SAVIENT PHARMACEUTICALS, INC. (NASDAQ: SVNT) – $3.00. Twelve-month hi-low has been $5.25 – $1.77. Based in East Brunswick NJ, with about 460 employees, this biotech has 60.4 million shares outstanding, $63.39 million in total current assets, $250.4 million in total assets ($40 million is goodwill), and $97.05 million in total liabilities, of which $7.66 million is debt. Institutional ownership is around 38%. http://www.savientpharma.com
Time for another biotech that has a half decent-looking balance sheet, and Savient Pharmaceuticals, Inc. also has had some pretty nice product news, of late. Currently hanging over the stock price is that SVNT will soon be restating 2004 and 2003 results.
Trading on NASDAQ for nearly 15 years, Savient develops and markets a number of pharmaceutical products that address unmet medical needs. The company presently has over a dozen products that are either in some state of development or are now on the market. It distributes these products worldwide through a sales force in the U.S., the U.K., and Israel, and through third-party license and distribution relationships. Pre-clinical studies, R&D, and manufacturing of its biotechnology-derived products are primarily carried out through its wholly-owned subsidiary in Israel, Bio-Technology General; SVNT is exploring the sale of this subsidiary. Development and sales of its oral liquid products are carried out through UK-based Rosemont Pharmaceuticals, which SVNT acquired in 2002; Rosemont sells more than 80 products.
Some of Savient’s products that are on the market are Oxandrin, an oral anabolic agent to promote weight gain following weight loss due to medical reasons; Bio-Tropin, for treating pituitary growth hormone deficiency in children; BioLon, used as a surgical aid during cataract extraction procedures; Delatestryl, an injectable testosterone replacement therapy; Bio-Hep B, a hepatitis B vaccine; Mircette, an oral contraceptive; and Silkis, a vitamin D derivative for the topical treatment of psoriasis.
Last month, Savient had a spate of news. It completed patient dosing in a Phase 2 clinical trial of Puricose for severe gout. The company submitted a new drug application for Soltamox to the FDA, while announcing an exclusive marketing collaboration in Germany for that drug for the treatment of hormonally sensitive breast cancer.
For FY2003, ending 12/31/03, revenue was $132.5 million with $13.9 million in net income. During the first nine months of FY2004, ending 9/30/04, revenue was $77.6 million with net losses of $35.1 million. Much of the loss is due to a decline in Oxandrin sales, largely driven by the effects of returns of expired product.
Over the last year, Savient has hit a few bumps in the road and still must contend with restating 2003 and 2004 numbers. However, the company appears eager to change its focus and just may succeed.
Our 24-month target for the stock is $5.25 to $6.00.
For more information, contact SVNT’s Jenene Thomas at 732-565-4716; information@savientpharma.com
THREE-FIVE SYSTEMS, INC. (NYSE: TFS) – $1.70. Twelve-month hi-low has been $8.27 – $1.63. Headquartered in Tempe AZ, with about 1500 employees, this semiconductor has 21.8 million shares outstanding, $68.44 million in total current assets, $121.7 million in total assets, and $45.1 million in total liabilities, of which $16.35 million is debt. Institutional ownership is around 47%. One analyst gives the stock a “strong buy”, one a “moderate buy”, one a “hold”, and one a “strong sell”.
http://www.threefive.com
Like Savient above, Three-Five Systems, Inc. had a pretty rough 2004, but the company is restructuring, and, with its stock near an all-time low, it may be worth a flyer. During the Net Stock Craze of 2000, the stock went over $60, which, today, means very little. Founded in 1990, and trading on the NYSE for over a dozen years, Three-Five Systems is a global provider of EMS (electronics manufacturing services). The company designs and manufactures printed circuit board assemblies, radio frequency (RF) modules, display modules and systems, and complete systems for customers in the automotive, computing, consumer, industrial, medical, and telecom industries. TFS provides advanced engineering and design, new product introduction and prototyping, global supply chain management, printed circuit board assembly, display module assembly, RF module assembly, box build, testing, logistics and distribution, and aftermarket services. TFS also provides aftermarket support, such as repairs, refurbishment, systems upgrades and spare part manufacturing. Three-Five Systems has manufacturing facilities in Redmond, WA, Beijing, Manila, and Malaysia. Its sales offices are located in the UK, China, Singapore, and regionally throughout the US.
A few weeks ago, the company announced it had secured design wins for its color thin-film transistor Platform Product line from two makers of personal media players. Both programs are now in the prototype production phase with initial volume production expected to start sometime this quarter. Also, in mid-January, TFS was awarded a contract with the U.S. GSA Federal Supply Service for flat panel display systems.
For FY2003, ending 12/31/03, revenue was $159 million with $20.39 million in losses. During the first nine months of FY2004, ending 9/30/04, revenue was $118.43 million with $41.23 million in losses; much of the loss was attributed to several non-cash charges. TFS has warned that the last quarter outlook will be below analysts’ expectations.
Our thinking here is that most of the carnage may be over, and that the restructuring should place more emphasis on sales, as witnessed from the recent contracts that TFS has snared.
Our 24-month target for the stock is $3.25 to $3.75.
For more information, contract TFS’ Pamela Shaw at 602-389-8600; pamela.shaw@tfsc.com
Look for the February 20, 2005 Newsletter to be posted on 2/16 or 2/17.
GO EAGLES!!!!
Thank you,
George