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Hello Readers,
You can sum up the market action of the last few weeks in one word: UGLY. What surprised us is that Fed Chairman Ben did not run to a microphone announcing that he was going to throw more money around. Actually, he sent a few of his top board members to do the work for him, sort of. When the markets appeared ready for a healthy correction, Fed Vice Chairman Yellon announced that the Fed was ready to act if there were signs of economic weakness. That seemed to calm things, for a few days. Hey, there’s nothing like market socialism, right? And, once again, we must remind you that when these sort of gut-wrenching selloffs occur, small stocks get pounded even worse than the big and mid-caps. So, it is no small surprise that our Current Portfolio was bruised pretty badly. And, for what is probably the first time this year, we did close any new positions since the last Newsletter, which can be mostly blamed on the recent market drop.
All of the gurus are calling for a 5% to 12% correction from the recent Dow high of 13,400. Where people pluck these numbers from has always baffled us. Putting aside what probably will be perceived as a good or modest earnings season, the key to the markets’ 2012 health is Europe, and that whole situation looks more perilous every day. Oh, and let’s not forget about Iran.
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 very significant.
Mattson Technology(MTSN)(4/5/12). Slates earnings news for April 25. ParadigmE Etch System moves into production at major CMOS image sensor manufacturer.
Echo Therapeutics(ECTE)(3/20/12). Announces key patents covering its Prelude SkinPrep System and Symphony tCGM System. Present positive clinical trial results at the 72nd Scientific Sessions of the American Diabetes Association.
Ballard Power Systems(BLDP)(3/20/12). Files base shelf prospectus. Company and Ida Tech extend fuel cell stack supply agreement for backup power through 2013.
Majesco Entertainment(COOL)(3/5/12). Announces Double Dragon: Neon, taking gamers back to the 1980s.
Geron Corp.(GERN)(2/5/12). Receives USPTO patent for CNC-tumor treatment method.
A123 Systems(AONE)(1/20/12). Sadly, we are placing this on the “Endangered List”. Ever since picking the stock, the company has been riddled with bad headlines. First it was the Fisker fiasco, and, recently, one of their batteries blew up at a GM plant.
Navidea Biopharmaceuticals(NAVB)(1/5/12). FDA extends PDUFA date for Lymphoseek by three months. Presents favorable comparison of Lymphoseek to sulfur colloid at Sentinel Node Oncology Foundation.
ECOtality(ECTY)(11/5/11). Will host shareholder update call on April 16, the day we post this Newsletter.
Synthesis Energy Systems(SYMX)(8/20/11). Announces cooperation framework agreement for coal to ammonia for fertilizer market in China. Is in continuing negotiations for strategic equity investment.
On Track Innovations(OTIV)(6/20/11). City of Austin, TX selects EasyPark System.
Gleacher & Co.(GLCH)(6/5/11). Announces leadership transition within MBS/ABS & Rates Group.
Neostem(NBS)(5/20/11). Orlando Health begins stem cell trial for heart patients sponsored by NBS subsidiary. Closes public offering for $6.8 million.
Energy Recovery(ERII)(5/5/11). To release earnings on May 2.
Biostar Pharmaceuticals(BSPM)(4/20/11). Company effects 1 for 3 stock split, which caught us by surprise.
GSE Systems(GVP)(4/20/11). Stock upgraded by The Street.com. Announces $7.5 million in nuclear engineering simulation contracts with Chinese companies.
ThermoGenesis(KOOL)(4/5/11). Gets registration approval for BioArchive in China.
Network Engines(NEI)(2/5/11). Says that its largest customer plans to transition certain product lines. Company is named Dell OEM Premier Partner.
Great Basin Gold(GBG)(1/5/11). Releases FY2011 results.
Sprint Nextel(S)(1/5/11). The usual several dozen news releases.
Astex Pharmaceuticals(ASTX)(12/5/10). To present at two conferences on April 18 and April 20. Announces positive clinical data for SGI-110.
Pixelworks(PXLW)(11/20/10). To release quarterly results on April 19.
Inovio Pharmaceuticals(INO)(10/20/10). Receives DOD funding for bioterrorism-related synthetic vaccine program.
CytRx Corporation(CYTR)(1/5/10). Announces key U.S. patent covering INNO-206 Linker technology.
Our picks for this Newsletter are another biotech and a media company, both trading on the NASDAQ.
ZOGENIX, INC. (NASDAQ: ZGNX) – $1.92. Twelve-month hi-low has been $5.14 – $1.31. Based in San Diego, CA, with about 160 employees, this drug developer has 65.37 million shares outstanding, $79.89 million in total current assets, $100.64 million in total assets, and $91.33 million in total liabilities, of which $42.1 million is long-term debt. Institutional ownership is around 34%. Five analysts rate the stock a “strong buy”. www.zogenix.com
The sole reason for picking Zogenix, Inc. is that five analysts give the stock a strong buy, probably because their technology looks promising. Yes, the debt is sort of scary, but the company has over $55 million in cash. The stock recently got clocked because project revenue expectations did not live up to the estimates.
Founded in 2006, formerly known as SJ2 Therapeutics, and public for over a year, Zogenix is developing products for treating central nervous system disorders and pain. Its first commercial product is Sumavel DosePro (sumatriptan injection), a delivery system that offers needle-free subcutaneous administration of sumatriptan for the acute treatment of migraine and cluster headaches. The company’s lead product candidate, Zohydro, is a single-entity extended-release hydrocodone, which has completed Phase III clinical trials for treating moderate to severe chronic pain requiring around-the-clock opioid therapy. Zogenix is also developing Relday, an injectable formulation of respiridone to treat the symptoms of schizophrenia and bipolar disorder in adults and teenagers over 13 years old.
Zogenix markets its Sumavel DosePro through field sales mainly to neurologists and other prescribers of migraine medications. It has a licensing and distribution agreement with Desitin Arzneimittel to develop and commercialize DosePro in the European Union, Norway, Switzerland, and Turkey; a license agreement with Alkermes to import and sell tablet formulations of hydrocodone; and a co-promotion pact with Astellad Pharma US to market and sell Sumavel DosePro in the U.S.; as well as an asset purchase accord with Aradigm Corp.
At the end of March, Zogenix and Battelle, supposedly the world’s largest independent R&D organization, signed a marketing agreement that may open new avenues for DosePro to the bio-pharmaceutical community.
For FY2011, ending 12/31/11, revenue was $37.57 million with $84 million in losses compared to FY2010 revenue of $23.44 million and $73.56 million in losses. The company is expecting $45 million to $48 million in FY12 revenue, way short of the expect $65 million
Despite the losses and the debt, those five analysts making the strong buy may see something that we don’t.
Our 24-month target for the stock is $3.50 to $3.75.
For more information, contact ZGNX at 858-259-1165.
AIR MEDIA GROUP, INC. (NASDAQ: AMCN) – $3.08. Twelve-month hi-low has been $5.64 – $2.10. Based in Beijing, China, with unknown number of employees, this media company has 65.97 million shares outstanding, $247.66 million in total current assets, $361.46 million in total assets, little debt, and $91.41 million in total liabilities. Institutional ownership is around 28%. Four analysts rate the stock a “strong buy”, one as a “buy”, and another as a “hold”. www.airmedia.net.cn
Usually, we have shied from Chinese stocks, but Air Media Group, Inc. is hard to overlook. It has the analysts’ support, an eye-popping balance sheet, and unbelievable revenue growth. So, we have put our distrust of the “China Miracle” aside for the moment.
Founded in 2005, and public for over four years, Air Media Group, simply put, operates a digital media network for air travel advertising in China. It operates a network of digital frames and digital TV screens that display advertisements in airports and airplanes. For those of us who travel, we find these things annoying, but they can be effective. The company also displays ads on interior or exterior walls of gate bridges in airports, which include billboard and painted advertisements. In addition, Air Media displays non-advertising content, such as weather, sports, and comedy clips; and TV programs, including documentaries and hidden camera type reality shows from other third party providers. The company also holds the concession rights to operate various traditional advertising media comprising billboards, light boxes, and other media platforms in the air travel sector.
As of last year, Air Media operated about 3424 digital frames in 34 airports; 2144 digital TV screens in 37 airports, 588 light boxes and billboards in three airports, 240 billboard advertisements, and 46 painted advertisements on the gate bridges in seven airports. In mid-March, of this year, the company renewed its concession rights contract in Shanghai Airports.
For FY2012, ending 12/31/11, revenues were $277.82 million with $12.92 million in losses compared to 2010 revenues of $236.46 million and $7.58 million in losses.
This is a numbers/analysts’ play and, for now, both highly favor the company.
Our 24-month target for the stock is $5.00 to $5.50.
For more information, contact AMCN at 86 10 8438 6868
Look for the May 5, 2012 Newsletter to be posted on 4/30 or 5/1.
Thank you,
George