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Hello Readers,
As we have been saying for the last several months that, with few exceptions, the markets are all about Europe all of the time. Yes, the markets had somewhat of a reprieve over the last few weeks, which may have been a dead-cat bounce. The day we publish this Newsletter, June 18, Greece’s election results will be known, and two days later the June Fed meeting will be over. We haven’t a clue as to how the markets will respond to either of these events, short-term. However, we do know one thing and that is current global monetary policies are not really helping the man or the woman on the street, be they in the U.S., Greece, Spain, or Italy.
And U.S. monetary policy sure has not been helping our Current Portfolio, which is still marking time. We have only closed one position over the last three months and that is unheard of during our 16-plus years of publishing.
Here are the headlines since the last Newsletter about companies in our Current Portfolio; dates in parenthesis are when we first recommended them. We are not including updates about companies on the “Endangered List” unless we feel the news to be highly significant.
Anthera Pharmaceuticals(ANTH)(6/5/12). Coverage initiated by JMP Securities.
Avanir Pharmaceuticals(AVNR)(6/5/12). FDA accepts IND for AVP-923 for treating agitation in patients with Alzheimer ‘s disease.
Capstone Turbine(CPST)(5/20/12). Posts record FY revenue numbers; balance sheet still looks good.
Zogenix(ZGNX)(4/20/12). Company and Mallinckrodt enter into an exclusive co-promotion agreement for SUMAVEL DosePro.
Echo Therapeutics(ECTE)(3/20/12). ECTE set to join the Russell Microcap Index. Presents positive clinical trial results of the Symphony tCGM System.
Ballard Power Systems(BLDP)(3/20/12). Announces operational trial plan for its fuel cell backup power systems in the China Mobile network.
Celsion Corporation(CLSN)(3/5/12). To collaborate with the University of Oxford to design and execute a clinical trial using ultrasound-guided high intensity focused ultrasound and ThermoDox for metastatic liver cancer.
Majesco Entertainment(COOL)(3/5/12). COOL and FremantleMedia announce partnership to bring American Idol games to market. Northland Securities downgrades stock and The Street downgrades it from a “buy” to a “hold”. Releases several new games. Revenue numbers fall slightly compared to a year ago but earnings look good; balance sheet still appears strong.
Complete Genomics(GNOM)(2/20/12). Announces restructuring and review of strategic alternatives – not something we like to hear.
Navidea Biopharmaceuticals(NAVB)(1/5/12). Presents data about AZD4694 at the Society of Nuclear Medicine annual meeting.
Anadigics(ANAD)(11/20/11). Expands family of small-cell wireless infrastructure power amplifiers. To showcase new 4G solutions at the International Microwave Symposium.
BioMimetic Therapeutics(BMTI)(9/20/11). Gives highlights of the 2012 shareholders meeting.
Antares Pharma(AIS)(8/5/11). Company name has changed to Altiris, Inc. with a new stock symbol ATRS, which reflects its move to NASDAQ.
Idera Pharmaceuticals(IDRA)(6/5/11). To present at the 2012 BIO confab on June 20. Receives NASDAQ listing notice over market cap requirement; company basically has until December to rectify the situation.
Energy Recovery(ERII)(5/5/11). To help plant in the United Arab Emirates increase water supply.
Oculus Innovative Sciences(OCLS)(3/5/11). Latest numbers still show revenue growth; balance sheet could use more cash.
Biodel(BIOD)(2/20/11). Sadly, we must add this one to the “Endangered List” as it declares a 1 for 4 reverse stock split, which boggles our mind. We don’t see the rationale for it.
Sprint Nextel(S)(1/5/11). The usual several dozen releases and articles.
Astex Pharmaceuticals(ASTX)(12/5/10). Earns $5 million milestone from J&J on Phase I trial initiation of a FGFR kinase inhibitor.
Pixelworks(PXLW)(11/20/10). Introduces next generation reference design platform for 3D display systems and projectors. Roth Capital gives the stock a “buy”.
RELM Wireless(RWC)(11/5/10). Receives $2 million in orders from the USDA Forest Service and National Interagency Fire Center.
Inovio Pharmaceuticals(INO)(10/20/10). To present at the Marcum Investor Conference on June 19, the day after we post this Newsletter.
NovaBay Pharmaceuticals(NBY)(4/20/10). Announces successful end-of-Phase 2a FDA meeting for dermatology platform.
Cytokinetics(CYTK)(2/5/10). Announces publication of Phase II evidence of effect study of CK-2017357.
Qualstar(QBAK)(10/20/09). Several stories about the battle with BFK Capital.
USA Technologies(USAT)(6/5/09). Company is entering a fight with a dissident group. We once had this on the “Endangered List”, then removed it when things seemed as if USAT had gotten act together. We are again placing it on the “Endangered List”.
Our picks for this Newsletter are a NASDAQ-listed diagnostics developer and a NYSE-listed rare earth miner.
VERMILLION, INC. (NASDAQ: VRML) – $2.35. Twelve-month hi-low has been $5.67 – 97 cents. Based in Austin, TX, with nearly 30 employees, this diagnostic tests maker has 14.94 million shares outstanding, $20.33 million in total current assets, $20.54 million in total assets, little long-term debt, and $11.82 million in total liabilities. Institutional ownership is around 8%. Three analysts rate the stock a “strong buy”. www.vermillion.com
And, once again, we decide to walk down the same road twice. A few years back, Vermillion, Inc. did well for us, and since the stock price has come back down, let’s put it back in the Current Portfolio and take another roller coaster ride.
Founded in 1993, and public for nearly a dozen years, Vermillion develops diagnostic tests in the fields of oncology, hematology, cardiology, and women’s health with the initial focus on ovarian cancer. The company’s lead product is OVA1, an ovarian tumor triage test that enables pre-surgical identification of women who are at high risk of having a malignant ovarian tumor. OVA1 is the first blood test cleared by the FDA for evaluating an ovarian adnexal mass prior to a planned surgery. The test uses a panel of five biomarkers that may help identify women with cancer so they can be referred directly to a gynecologic oncologist for their initial surgery.
Vermillion is also developing various programs in other clinical aspects of ovarian cancer, as well as in peripheral arterial disease. The company has a strategic alliance agreement with Quest Diagnostics, and collaborations with various academic and research foundations to develop and commercialize diagnostic tests. It services clinical reference labs, hospital labs, and physician offices.
Vermillion is pretty typical of a small R&D company that is just getting a new product off the ground floor in that it has scant revenues and some hefty losses. For example, during the quarter ending 3/31/12, revenue was $312,000 with $1.78 million in losses.
We liked this stock once and it worked for us, and it looks as if it could do so once again.
Our 24-month target for the stock is $3.75 to $4.00.
For more information, contact VRML at 512-519-0400.
RARE ELEMENT RESOURCES LTD. (AMEX: REE) – $4.35. Twelve-month hi-low has been $11.80 – $3.08. Based in Lakewood, CO, with about 25 employees, this rare earth mining company has 44.22 million shares outstanding, $56.42 million in total current assets, $58.22 million in total assets, little debt, and $1.49 million in total liabilities. Institutional ownership is around 13%. Two analysts give the stock a “strong buy” and one rates it a “buy”. www.rareelementresources.com
Rarely do we pick a stock simply for the reason that this could be a future momentum play, but, quite recently, Rare Element Resources, Ltd. was just that, and nothing else. Oh sure, it has a great balance sheet and some interesting properties, but the real future driver for this stock will probably be the momentum players.
Publicly trading for over six years, Rare Element Resources is acquiring and exploring mineral properties. Its principal property is the Bear Lodge Property located in northeastern Wyoming and it contains the Bear Lodge REE Project, a disseminated rare-earth elements (REE) deposit, as well as the Sundance Gold Project. Over the last year, or so, the company acquired the Eden Lake property in Manitoba, Canada and the Nuiklavik Property in Labrador, Canada, and both are said to contain REE deposits. In August, 2011, Rare Element Resources announced the discovery of heavy rare-earth elements (HREE) in the Whitetail Ridge resource area, and in the East Taylor and Carbon target areas, and the discovery of high-grade REE mineralization at the East Taylor target at the Bear Lodge REE Project. According to U.S. Geological Survey Professional Paper 1049D, the Bear Lodge Project contains one of the largest disseminated rare earth deposits in North America.
Like many small miners, this one is pretty typical in that it has little or scant revenue and mega-losses. For the quarter ending 3/31/12, revenue was zilch and losses totaled $5.32 million.
So, what will drive rare earth stocks, again? Back in September, REE’s stock price was hovering around $16 for one simple reason. The Chinese announced they were on a rare earth spending spree and people, probably rightly, thought they were cornering the rare earth markets. We don’t think the Chinese have slowed their spending. The reason REE’s stock has dropped, along with others in the group, is fear of a global slowdown. Any news to the contrary could swing the momentum players back into this group.
Our 24-month target for the stock is $7.00 to $7.50.
For more information, contact REE’s Anne Hite at 720-278-2460; ahite@rareelementresource.com
Look for the July 5, 2012 Newsletter to be posted on 7/2 or 7/3.
Thank you,
George