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December 20, 2003
We did not close any positions during the last few weeks. Our Portfolio pretty much was on a treadmill, as was the rest of the market until about a week ago. However, now that Saddam has been captured it is anybody’s guess as to where the market averages are going between now and New Year’s Eve. So, it is possible that we may see several more of our picks make a nice run before we close the door on 2003. For the year, we have closed 75 positions, with 52 for gains and 23 for losses. Never before in a calendar year have we closed so many positions. It probably helped that 2003 turned out to be perhaps the best year for small stocks since the 1980s.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first picked them.
Draxis Health (DRAX) (3/20/00). Facility receives ISO 9001 certification.
Genetronics (GEB) (10/5/00). GEB and Chiron extend collaborative pact on technology for HIV vaccine delivery.
Arotech (ARTX) (6/5/01). Training subsidiary bags nearly $1 million in orders. Company increases size of shelf registration statement, which probably put downward pressure on stock.
ViroLogic (VLGC) (7/20/01). Brokerage firm issues “buy” on stock.
Airspan Networks (AIRN) (1/20/02). This one just keeps looking better as Narpio, Finland selects AIRN’s WipLL Technology.
VASCO Security (VDSI) (2/5/02). Launches VACMAN Middleware 2.1 for RADIUS, Windows and Web based environments. Reaches settlement deal with ActivCard, S.A..
Diomed (DIO) (7/5/02). Initiates lawsuit against Vascular Solutions. This is on the “Endangered List”.
Generex (GNBT) (8/5/02). Initiates feasibility study with Acertus for oral delivery of an E.coli recombinant human growth hormone.
Alios Therapeutics (ALTH) (6/20/03). Stock got a nice bounce as company completed NDA for novel treatment for patients with breast cancer and brain metastases.
Art Technology (ARTG) (8/5/03). Teams up with McFadyen Consulting to provide six new ATG publishing service offerings. Wins honor at 2003 Information Management awards. Announces general availability of web services in ATG 6.2.
Proton Energy (DESC) (9/20/03). Changes name to Distributed Energy Systems with new stock symbol DESC and announces completion of Northern Power acquisition.
Targeted Genetics (TGEN) (10/5/03). TGEN and collaborators begin human trial of vaccine candidate to prevent HIV/AIDs.
Insmed (INSM) (11/5/03). Presents positive data on anti-cancer drug candidate to San Antonio breast cancer symposium. Another candidate found to delay the onset of Type 1 diabetes in mice; this gets orphan drug status from FDA.
V.I. Technologies (VITX) (11/20/03). Right after our last Newsletter the stock mad a nice run and many of you played that dead-cat bounce pretty well. VITX hopes to stay afloat with a $3.4 million private placement by SG Cowen.
Active Power (ACPW) (11/20/03). Receives $3.5 million order, it’s largest to date.
AVANT (AVAN) (12/5/03). Roth Capital gives stock a “strong buy”.
SatCon (SATC) (12/5/03). Snares $1.1 million in new semiconduct contracts.
Our picks for this issue are a broadcaster that has carved a very good niche for itself and a medical equipment maker.
SIRIUS SATELLITE RADIO (NASDAQ: SIRI) – $2.20. Twelve-month hi-low has been $2.68 – 38 cents. Based in New York City, with about 300 employees, this broadcaster has 998.2 million shares outstanding, $505.3 million in total current assets, $1.56 billion in total assets, and $336.7 million in total liabilities, of which $260 million is long-term debt. Institutional ownership is around 37%. Five analysts have the stocks as a “hold”. http://www.siriusradio.com
Sometimes we see one with a low stock price and a balance sheet that causes shivers, but the company not only appears to have cornered its niche market but may be making a positive turn. Such is the case with Sirius Satellite Radio. However, a NOTE OF CAUTION: SIRI has almost a billion shares outstanding, and, at some point, it makes the stock a good candidate for a reverse split, which many times is not positive for current shareholders.
Trading on NASDAQ for nearly ten years – the stock hit $60 during the wacko days of early 2000 – Sirius broadcasts digital-quality audio from three orbiting satellites throughout the continental U.S. It holds one of only two licenses issued by the FCC to operate a national satellite radio system. Operating from its HQ in Rockefeller Center, Sirius is the only such service bringing listeners more than 100 streams of music and entertainment coast to coast. The company offers 60 commercial-free music streams covering nearly every genre, including heavy metal, hip-hop, country, dance, jazz, Latin, and classical. The other 40 streams cover sports, news, talk, and entertainment; sources are derived from the likes of ABC, NPR, BBC, ESPN, and CNBC.
At the end of 2002, the company had nearly 30,000 subscribers; subscription fees are $12.95 monthly. Sirius is available through home, office, or auto with the latter apparently offering the company the most revenue potential. SIRI has agreements to install AM/FM/SAT radios in Ford, Chrysler, BMW, Mercedes-Benz, Jaguar, Volvo, Mazda, and numerous other trucks and vehicles. They are even available in some RVs, powerboats, and on John Deere agricultural equipment.
Earlier this month, Hertz rental cars began offering Sirius service in 29 models at 53 major airport locations. Last month, SIRI did a secondary offering of over 73.1 million shares at $2.10 a share, which, for now, has probably weighed on the stock price.
For FY 2002, ending 12/31/02, SIRI had $805,000 in revenue and $422.5 million in net losses (sort of hard to swallow, huh?). During the first nine months if this FY, ending 9/30/03, revenue was $7.9 million with $78.5 million in losses, which appears to be a big improvement.
SIRI finally may be on the “revenue stream”, and with a virtual monopoly in its niche, the company could see very rapid growth over the next few years.
Our 24-month target for the stock is $3.75 to $4.00.
For more information, contact SIRI at 212-584-5100; investor_relations@sirius-radio.com
CURON MEDICAL, INC. (NASDAQ: CURN) – $3.20. Twelve-month hi-low has been $3.90 – 52 cents. Located in Fremont, CA, with about 65 employees, this maker of medical equipment has 20.2 million shares outstanding, $16.14 million in total current assets, $17.1 million in total assets, little debt, and $1.62 million in total liabilities. Institutional ownership is around 31%. http://www.curonmedical.com
Proprietary technology with FDA clearance coupled with a good-looking balance sheet makes Curon Medical, Inc. a good candidate for the Current Portfolio.
Founded in 1997, Curon develops and makes products for treating gastrointestinal l diseases. The company’s technology is based upon delivery of radiofrequency (RF), a highly controllable, scalable energy source that has been widely used in medicine for over 70 years. Presently, Curon has two main products. Its first product, the Stretta System, received FDA clearance in April 2000 and treats gastroesophageal reflux disease, referred to as GERD. By the end of 2002, about 3500 patients had been treated with this procedure. The second product is the Secca System, which treats fecal incontinence and this received FDA clearance in March 2002.
The Stretta System has also received European, Australian, and Canadian regulatory approval, while Secca has attained the regulatory nod in Europe. The company has also developed a suite of products for use in both procedures. These consist of a disposable catheter, a disposable handpiece for delivery of controlled RF energy to issue, and a RF generator.
If there is one key development to hone in on, it came during the last quarter. In short, it will soon be easier for physicians to be reimbursed from medical insurance for using the Stretta procedure. This could be a huge break for the company, since this was not the case until now.
Should this add revenues and enhance the bottom line? One would think so.
For FY2002, ending 12/31/03, revenue was $3.4 million with $15.44 million in losses. During the first nine months of this FY, ending 9/30/03, revenue was $2.36 million with $10.7 million in net losses.
The big key for Curon may develop over the next few quarters when the new medical coverage rules could begin to impact the company’s P&L statements.
Our 24-month target for the stock is $5.25 to $6.00.
For more information, contact CURN’s Alistair McLaren at 510-661-1802; amclaren@curonmedical.com
The January 5, 2004 issue should be posted on 1/5 or 1/6.
Happy New Year,
George