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Hello Readers,
Since the last Newsletter, we have closed five positions; four for gains and one for a loss.
RESPONSE GENETICS (10/20/12). Closed position 7/18/13 at $1.89 for a 51% GAIN.
TELECOMMUNICATIONS SYSTEMS (11/5/12). Closed position 7/25/13 at $3.20 for a 52% GAIN.
XOMA CORPORATION (4/5/13). Closed position 7/29/13 at $5.52 for a 58% GAIN.
INOVIO PHARMACEUTICALS (10/20/10). Closed position 7/31/13 at $2.14 for a 78% GAIN.
CYTOKINETICS (2/5/10). Closed position 7/29/13 at $12.94 for a 28% LOSS.
(price reflects reverse stock split)
Response Genetics had been creeping to the upside for the last few months and received a nice push on news that it had renewed its agreement with Taiho Pharmaceuticals. Going into earnings TeleCommunications Systems got a nice lift. Our second time around with XOMAworked out, and, though we sense the stock could go higher, we were happy to take the gain. It took a while, but Inovio Pharmaceuticalsfinally made it, helped by news that its cancer vaccine showed potential to reduce tumors and prevent recurrence. And, we closed Cytokineticsfor a loss.
The markets seemed to take a rest toward the end of July. Whether they continue on this unbelievable run is, of course, dependent upon whatever pearls of wisdom are spoken by the Fed Chairman. However, what should be of concern is that, at some point, the economy needs to begin looking more robust or else future corporate earnings could sag, and that would be very ugly.
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.
Discovery Labs (DSCO)(7/20/13). Slates earnings call for August 8.
MeetMe (MEET)(7/20/13). Expands native advertising capabilities on iPhone and launches same on Android.
Baxano Surgical (BAXS)(7/5/13). Sets earnings news for August 8.
Commtouch Software (CTCH)(7/5/13). To release earnings on August 6.
Vical, Inc. (VICL)(6/20/13). To release earnings report on August 1, the day we post this Newsletter.
Flow International (FLOW)(6/5/13). Quarterly numbers could have been better; balance sheet still looks good.
Antares Pharma (ATRS)(5/20/13). Sets earnings call for August 7.
InspireMD (NSPR)(5/20/13). Enrolls first patient in Master II IDE clinical trial.
Mela Sciences (MELA)(5/5/13). Sets earnings call for August 7.
Cytori Therapeutics (CYTX)(5/5/13). Enters into licensing agreement with Medistem. Divests Puregraft products, licenses Celution for Alopecia and options broader aesthetic market rights.
Synacor (SYNC)(4/20/13). Plans to release quarterly results on August 6. To present at the Oppenheimer technology conference on August 13.
Joe’s Jeans (JOEZ)(3/20/13). The stock got whacked for several reasons. First, the company’s wholesale numbers were not as expected and firms like B. Riley downgraded JOEZ. Then, more pressure was added to the stock price as the company announced purchase of Hudson Jeans, which could help long-term.
Oncotrhyreon (ONTY)(3/20/13). Sets earnings call for August 6, which is becoming a popular date for doing this.
Echelon (ELON)(3/5/13). Partners with Aditel to expand LonWorks dealer network throughout Latin America.
Alphatec Holdings (ATEC)(2/20/13). Plans earnings news for August 6.
GEVO, Inc. (GEVO)(1/20/13). Supplies U.S. Coast Guard with isobutanol-blended gasoline. Earnings call set for August 6.
EnteroMedics (ETRM)(1/20/13). Announces PMA application for VBLOC therapy in obesity accepted for review and filing by FDA. Recent balance sheet still looks healthy.
Codexis (CDXS)(1/5/13). Sets earnings news for August 7.
Horizon Pharma (HZNP)(12/20/12). Plans earnings call for August 7.
Limelight Networks (LLNW)(11/20/12). Names new CFO. Sets earnings call for August 7.
Lionbridge Technologies (LIOX)(11/5/12). Sets earnings call for August 6.
Zynga, Inc. (ZNGA)(10/5/12). Several dozen news stories and releases; most notable perhaps is that the company probably won’t be pursuing online gambling, which put some pressure on the stock.
ImmunoCellular Therapeutics (IMUC)(9/20/12). Initiates Phase 1 trial of cancer vaccine ICT-121 in recurrent glioblastoma.
AXT, Inc. (AXTI)(9/5/12). Quarterly earnings could have looked better; balance sheet still looks very strong.
SemiLEDS (LEDS)(8/20/12). Lawsuits keep piling up. This is making us nervous.
pSivida (PSDV)(8/5/12). Announces positive opinion for reimbursement of ILUVIEN in France. Raises about $10 million in secondary offering.
Aviat Networks (AVNW)(7/20/12). Sets earnings call for August 14.
Metabolix (MBLX)(7/5/12). Recent balance sheet looks strong.
Athersys (ATHX)(7/5/12). Slates earnings call for August 13.
Capstone Turbine (CPST)(5/20/12). Earnings news planned for August 8.
Senomyx (SNMX)(5/20/12). Sets earnings call for August 1, the day we post this Newsletter.
Axcelis Technologies (ACLS)(4/5/12). Sets earnings call for August 1, the day we post this Newsletter. Receives follow-on orders for Optima HDx Current Implanters.
Mattson Technology (MTSN)(4/5/12). Quarterly numbers better than a year ago; balance sheet still looks good.
Geron Corporation (GERN)(2/5/12). To announce earnings August 8.
Anadigics (ANAD)(11/20/11). Releases pretty good revenue numbers while paring losses; balance sheet still looks strong.
Synthesis Energy Systems (SYMX)(8/20/11). Agrees to expand and restart its ZZ Joint Venture Plant in China.
Cover-All Technologies (COVR)(7/20/11). Adds three carriers to list of policy customers.
Idera Pharmaceuticals (IDRA)(6/5/11). This one is on the “Endangered List” but the stock recently squirted up probably due to some corporate changes and a news U.S. patent being issued to the company.
ThermoGenesis (KOOL)(4/5/11). Agrees to merge with privately-held TotiRx and new company will be called Cesca Therapeutics and will trade under the symbol KOOL. This will all happen sometime in the 4th quarter.
Pixelworks (PXLW)(11/20/10). Sets earnings call for August 6.
NovaBay Pharmaceuticals (NBY)(4/20/10). To present at investor conference on August 8.
Novavax (NVAX)(4/5/10). Publishes positive preclinical efficacy data against influenza A (H7N9).
GlobalScape (GSB)(5/20/08). Sets earnings call for August 7.
Our picks for this Newsletter are a semiconductor and a medical device maker, both trade on NASDAQ.
TOWERSTREAM CORPORATION (NASDAQ: TWER) – $2.85. Twelve-month hi-low has been $4.70 – $2.05. Based in Middletown, RI, with about 170 employees, this broadband services provider has $42.29 million in total current assets, $92.47 million in total assets, and $8.1 million in total liabilities, of which $2.34 million is long-term debt. Institutional ownership is around 38%. Two analysts rate the stock a “strong buy” and one as a “buy”. www.towerstream.com
Recently, Towerstream Corporation raised a nice pile of money through a secondary offering because some investors sense that the company is in a pretty unique position thanks to its infrastructure network and the growing demand for mobile data consumption. The company also has been showing some steady quarterly revenues, though we like to see the losses pare a little; but, in all the company seems like a pretty good bet.
Founded in 1999, and public for nearly six years, Towerstream provides wireless high-speed Internet access to businesses. The company also delivers access over a wireless network transmitting over regulated and unregulated radio spectrums. Its services support bandwidth on demand, wireless redundancy, virtual private networks, disaster recovery, bundled data, and video services. Towerstream provides services to almost 3600 businesses in thirteen markets including New York City, Boston, Chicago, Los Angeles, San Francisco, Seattle, Miami, Dallas metro, Houston, Philadelphia, Nashville, Las Vegas-Reno, and Providence, RI.
Simply stated, Towerstream is a backhaul provider. Backhaul, sometimes known as the “last mile” in Internet connections, is a critical part of such networks and its demand is soaring. It is estimated by some analysts that spending for backhaul development has increased by 40% in the last four or five years, as mobile demand soars. Usually backhaul is very costly but leasing Towerstream’s network allows mobile operators, Internet companies, and cable outfits to increase capacity and quality without the need to spend big dollars building their own network infrastructure.
For FY2012, ending 12/30/12, revenue was $32.27 million with $20.1 million in losses compared to 2011 revenue of $18.3 million and $7.1 million in losses. For the first three months of the current FY, ending 3/30/13, revenue was $8.29 million with $5.63 million in losses.
In sum, there is nothing sexy about Towerstream, except that it appears to have positioned itself to possibly make a ton of money over the next few years.
Our 24-month target for the stock is $5.00 to $5.50.
For more information, contact TWER at 401-848-5848.
SOLTA MEDICAL, INC. (NASDAQ: SLTM) – $2.70. Twelve-month hi-low has been $3.53 – $1.44. Based in Hayward, CA, with about 360 employees, this medical device maker has 79.4 million shares outstanding, $75.8 million in current assets, $249.54 million in total assets ($165.3 million are intangible), and $120.34 million in total liabilities, of which $15.4 million is long-term debt. Institutional ownership is around 59%. Two analysts rate the stock a “strong buy” and five as a “buy”. www.solta.com
Put aside that Solta Medical, Inc. has been chatted up as an acquisition target and that the company has more debt than we usually care to see. It has over a half dozen analysts flashing some sort of ‘buy’ on the stock, the company is a play on the aging baby boomers, and it has been tallying up some decent sales numbers over the last year.
Founded in 1996, and public for nearly seven years, Solta Medical designs and markets devices for aesthetic applications. The company offers six aesthetic energy devices to address such issues as skin rejuvenation and skin resurfacing. It offers Fraxel repair system for dermatological procedures requiring ablation, coagulation, and resurfacing of soft tissue, as well as rhytides, pigmentation, dyschromia, fine lines, acne, surgical scars, deeper lines, wrinkles, and actinic keratosis; Clear + Brilliant system, a treatment to improve skin texture and help prevent the signs of aging skin; Liposonix system to destroy unwanted fat cells resulting in waist reduction; a collection of surgical and non-surgical body shaping products; Isolaz system for treating inflammatory acne, comedonal acnre, and mild to moderate inflammatory acne; and the CLARO device, a consumer handheld device for treating mild to moderate inflammatory acne, including pustular acne. The company’s customers include dermatologists, plastic surgeons, GPs, gynecologist, ophthalmologists, among others.
At the end of June, Solta Medical received FDA clearance of its Fraxel DUAL 1550/1927 laser system for treating pigmented lesions, such as age spots, sun spots, and freckles. For the last few months the company has been under pressure from Voce Capital Management demanding that it evaluate a strategic sale or merger of the company; something that Solta Medical seems to be resisting, for now.
For FY2012, ending 12/30/12, revenue was $144.54 million with $38.01 million in losses compared to FY2011 revenue of $115.98 million and $1.33 million in losses. During the first quarter of the current FY, ending 3/30/13, revenue was $34.52 million with $2.6 million in losses.
It is unusual for seven analysts to be issuing “buys” on a company whose stock trades at these levels. Maybe they see more and more demand from all of those vain baby boomers; we do.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact SLTM at 510-782-2286.
Look for the August 20, 2013 Newsletter to be posted on 8/16 or 8/19.
Thank you,
George