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Dear Reader,
What’s this, no positions closed since the last Newsletter? After our May/June feast, a pause was expected. Actually, this marching-in-place scenario has been pervasive throughout the markets for the last several weeks, and it could continue for a few more, while all of the gum-flappers decide what is going on.
We still believe there is a lot more upside left, barring, of course, unforeseen events, like terrorism or war or heaven knows what. The tax cuts go into effect this month and The Fed added even more fuel with the latest rate cut, even though it was unnecessary. However, what really may launch what could be the greatest summer rally of all time are the June economic numbers and earnings reports, which may be much better than most are expecting. Also, short interest on the NYSE and NASDAQ has risen, so, if the economic/earnings numbers fall into place, the shorts will be clutching their shorts.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
New York Healthcare (BBAL) (3/20/97). Hospital study shows improvement for Crohn’s and IBS patients treated with Probactrix. However, stock keeps on falling. As we have said for the last few months, if BBAL cannot rally soon – during a good market – we’ll give up on it.
DOR BioPharma (DOR) (9/20/00). Will advance orBec to Phase 2 trials for irritable bowel syndrome. Although this one is still on the “Endangered List” the situation seems to be looking better.
Arotech (ARTX) (6/5/01). Arotech battery powers Dragon Eye unmanned drone in first UAV zinc-air flight test. Also, outperforms Lithium Ion Polymer in first-ever zinc-air powered MAV flight.
Saba Software (SABA) (11/20/01). Announces FY results. Remember, this one is on the “Endangered List” because of that reverse split they did a few months back.
Orthovita (VITA) (12/20/01). Announces $13.7 million private placement.
Superconductor Technologies (SCON) (1/5/02). Closes $11 million equity private placement.
VASCO Security (VDSI) (2/5/02). Launches “software” Digipass for Windows 4.0.
Magic Software (MGIC) (3/20/02). Rapattoni Corp. upgrades to Magic’s eDeveloper. Company to enhance State of Washington’s juvenile tracking system.
Argonaut (AGNT) (4/20/02). Introduces new kit for streamlining drug delivery. AGNT toolbox provides comprehensive method for ADMET sample preparation.
Immersion Technology (IMMR) (6/5/02). Introduces Mac Support for the MicroScribe G2 Digitizer.
Bruker AXS (BAXS) (6/20/02). Shareholders approve merger. Also, we’ll be closing this one in a day or two, since it has reached our 50% -plus threshold.
Hemispherx (HEB) (7/5/02). Says net assets rise by $2.8 million. Announces independent study showing Ampligen superior to other antivirals. Signs letter of intent with Guangdong Medicine. Enters pact with Business Asia Consultants to accelerate SARS program.
Rigel Pharma (RIGL) (7/20/02). Company does a 1 for 9 reverse stock split forcing us to place it on the “Endangered List”. Closes $46 million in financing. Starts shareholder rights offering.
Generex (GNBT) (8/5/02). Says studies show Oralin effective. 3rd QT shows balance sheet seemingly healthy.
Millennium Cell (MCEL) (9/20/02). Selected for Department of Energy funding. Morgan Keegan rates the stock an “outperform”.
Viewpoint (VWPT) (11/20/02). Selected by IBM for online portion of marketing campaign. Launches breakthrough video capability. This is still on the “Endangered List”, but we hope to remove it once we are almost certain that their accounting “problem” has been rectified.
Titan (TTP) (11/20/02). Begins Phase 2b study of Pivanex in lung cancer. Initiates clinical study of Probuphine for treatment of opiate addiction.
Interep (IREP) (2/5/03). Stock took off on 6/30 and we don’t have a clue as to why, right now. We will also be closing this one in a day or two.
Interwoven (IWOV) (3/20/03). Developer Network climbs above 5000 users. Extends IBM relationship.
Cyro-Cell (CCCEC) (5/5/03). A few more of those “well-intentioned” law firms pile on. Meanwhile, company announces conditional listing with NASDAQ, and revises results downward, which was to be half-expected.
MIPS Technologies (MIPS) (5/20/03). Introduces new microarchitecture for the next generation of embedded designs.
Magnetek (MAG) (6/5/03). MAG Sprectrum Power enclosures take indoor telecom equipment outdoors. Inks distribution agreement with Arrow Electronics.
Jacada (JCDA) (6/20/03). Certified ca smart with Computer Associates’ CleverPath Portal. BISYS selects Jacada to enhance banking operations.
Allos Therapeutics (ALLOS) (6/20/03). Announces favorable toxicity profile for lung cancer treatment. Publishes Phase 2 results of radiation sensitizer.
Our selections for this issue are an alternative energy play and another nanotech company.
SYNTROLEUM CORPORATION (NASDAQ: SYNM) – $2.65. Twelve-month hi-low has been $3.41 – $1.20. Based in Tulsa, OK, with about 90 employees, this alternative fuels company has 33.8 million shares outstanding, $20.26 million in total current assets, $48.5 million in total assets, and $65.8 million in total liabilities, of which $14.4 million is long-term debt. Institutional ownership is around 34%. One analyst rates the stock a “strong buy” and another as a “hold”. http://www.syntroleum.com/
There are times when the balance sheet isn’t overly pretty, but the story behind the company, and its recent developments, make it worth a very hard look. Such is the case with Syntroleum Corporation.
Started about a dozen years ago, and public since 1998, Syntroleum develops and licenses a proprietary process for converting natural gas to synthetic liquid hydrocarbons, which is known as gas-to-liquids or GTL technology. The company sells licenses to use its GTL technology, calling it the Syntroleum Process, for producing fuels. SYNM plans to develop and own GTL plants, which will produce fuels and refined specialty products. Of course, there is a big environmental angle to the Syntroleum Process, also known as synthetic crude oil, insomuch that the process is substantially free of contaminants normally found in conventional products made from crude oil.
SYNM has more than several irons in the fire, but three are worth watching. First is the 100-barrel per day fuels demo plant, a joint project with Marathon Oil under contract with the U.S. Dept. of Energy, is expected to be completed and producing fuel by year-end. The plant’s synthetic diesel fuel will be tested in Washington, D.C. buses and vehicle fleets in other locations. Next is a project for the U.S. DOD to develop a GTL barge-mounted plant that will be tested by the military for possible adoption as a single battlefield fuel. Syntroleum is hopeful that a phase two contract for up to $12 million will be authorized.
Lastly, a few weeks ago, the company and Ivanhoe Energy inked a deal to cooperate in developing GTL opportunities in China and other locations worldwide. Keep in mind that China is probably light years ahead of the rest of us in the alternative energy arena and there is strong demand for liquid hydrocarbons in that country.
Syntroleum is pretty typical of most companies still in the R&D stage – little revenues and major losses. For example, during the 1stQT of FY2003, ending 3/31/03, revenue was $1.49 million with $16.3 million in losses. However, the company did state that it had reduced negative cash flow by 41% during this quarter.
There appears to be some heavy hitters that are tapped into Syntroleum’s GTL technology. At some point, some of this stuff should become newsworthy.
Our 20-month target for the stock is $5.00 to $5.50.
For more information, call SYNM’s Ron Stinebaugh at 918-592-7900.
CALIPER TECHNOLOGIES, CORP. (NASDAQ: CALP) – $4.55. Twelve-month hi-low has been $8.35 – $2.71. Located in Mountain View, CA, with about 250 employees, this nanotech has 24.7 million shares outstanding, $153.7 million in total current assets, $168.1 million in total assets, and $10.4 million in total liabilities, of which $3.72 million is debt. Institutional ownership is around 49%. http://www.calipertech.com
Over the years, we have had this love affair with nanotechnology firms, and, in particular, companies like Caliper Technologies Corp., which appears to have overcome some rough patches, looks to have a very healthy balance sheet, and owns some exciting proprietary technology. Okay, it is close to our $5 penny stock threshold, but that shouldn’t be a deterrent, should it?
Founded in 1995, and public since December, 1999, the stock roared to $180 during the crazy days of February, 2000. Caliper bills itself as a leader in what is known as lab-on-a-chip technologies, or as the company calls it “LabChip” systems. The LabChip systems miniaturize, integrate, and automate many laboratory processes and put them on a chip, which, of course, shrinks the size of labs that are full of people and equipment. Marketed primarily to the pharmaceutical industry, each chip contains a network of microscopic channels through which fluids and chemicals are moved, using electricity or pressure, in order to perform experiments. The chips are the key components of the LabChip systems, which also include reagents, as well as instruments and software, that together control and read the chips.
Also marketing to the genomics, chemical, and diagnostic industries, CALP, as of 12/31/03, owned or licensed 158 issued U.S. patents, 22 allowed and 161 pending U.S. applications. Their patent estate covers areas such as fluid movement, chip design and manufacturing, system architecture, chip/instrument interface, and assay chemistries. To date, over 1800 instruments deploying LabChip technology have been shipped to customers, the newest being Avantis, which, a few weeks ago, purchased the Caliper 250 Drug Discovery System.
Perhaps the most significant development for the company over the last few years occurred in early June when Caliper announced it plans to by privately-held Zymark for $71 million; $57 million in cash and 3.15 million shares of CALP stock. Zymark is a leader in laboratory automation and robotics, and has designed over 2700 robotic systems and thousands of workstation-based automation products. Sounds like the two firms should be a good match. For FY2002, ending 12/31/02, revenue was $25.8 million with $40.9 million in losses versus FY2001 revenue of $29.58 million and $2.8 million in net income. During the 1stQT of FY2003, ending 3/31/03, revenue was $5.6 million with $9.7 million in net losses. Caliper anticipates that the Zymark acquisition could bring it an additional $65 million in annual revenues and feels the company could be profitable by the end of 2005.
Call us eternal optimists, but it appears there is too much going on here for this not to work.
Our 24-month target for the stock is $8.50 to $10.
For more information, call CALP’s Soleil Harrison at 650-623-0700; investor.relations@calipertech.com
Look for the July 20, 2003 issue to be posted on 7/16 or 7/17.
Have a Safe Fourth,
George