By Michael Brush
March 30, 2006
If you produce video content that absolutely, positively has to get there on time, you turn to FedEx right?
No way. Instead, you are more likely call a tiny Burbank, Ca.-based company called Point.360 (PTSX). In a digital age when time goes by too fast for TV producers and advertisers just like the rest of us, Point.360 helps media moguls meet their deadlines.
Besides zapping high-definition (HD) versions of programs like ABC’s Desperate Housewives to Canadian broadcasters, Point.360 helps producers put the finishing touches on their product, convert it to new formats, and archive it safely.
The company also restores old video content so it is more presentable in high definition – making it harder to see telling details like suspension wires that would otherwise catch your attention in HD format.
Big insider bet
In late March Point.360’s chairman and chief executive Haig Bagerdjian plunked down $220,000 to buy another slug of his stock at $2.20. That brings his position – accumulated over the years through open market purchases, private transactions and options – to 2.9 million shares, or an impressive 29.7% of the company.
What’s going on here to explain this kind of conviction? “I believe in the future of the company. We are about to turn a corner,” says Bagerdjian.
Bagerdjian took over leadership of Point.360 two years ago when the company faced at least two big problems. It had been doing a lot of acquisitions of companies in its field, and they weren’t integrated. Next, the company had a huge debt load. “I thought with my management skills I could integrate the company and pay down the debt,” says Bagerdjian.
A work in progress
Bagerdjian inked a $10 million five-year term loan agreement with the General Electric Capital division of General Electric (GE) last January. Now the company is working on selling a building that came into the fold with one of its purchases. That should bring in another $10 million.
Reducing debt will improve profitability and make the stock more palatable to investors. Right now Point.360 has an enormous $19 million in debt, a burden that almost rivals its market cap of $23 million. At least the company brings in a lot of revenue – or about $64 million a year.
Besides shedding debt, Bagerdjian is working on getting out of lower margin businesses and taking on assignments that bring higher profits.
For example Point.360 used to distribute content for an ad agency serving BMW Group. But Point.360 moved up the food chain and began working for BMW itself, taking on additional responsibilities like “tagging” and archiving along the way. “Tagging” is when editors add the section on the end of a car ad that refers viewers in a national ad campaign to their local dealers. “We went upstream to work with the brand owner and expanded the service offering,” says Bagerdjian.
To deliver HD versions of Desperate Houswives on time for ABC, Point.360 developed a proprietary pipe that could handle the bigger HD content files without compromising quality.
And as more and more content converts to HD, and more players – like the phone companies – move into sending digital entertainment into the home, the need to quickly zap rich, digital content to distribution points will only increase. Another layer of complexity will arrive as consumers download more digital content to their hand-held devices like cell phones.
“When I look at what kind of requirements are put on studios and the content creators and the speed at which they have to get to market, I think we are sitting on a nice wave,” says Bagerdjian. “As time is compressed for our customers and the complexity increases, that forces them to look outside their four walls to specialists like us to meet their deadlines.”
In short, you can look at this company as an undiscovered play on the HD and digital content trend.
The bottom line: One problem is that Point.360 is so small and unknown – Thomson Financial lists no analysts following the stock -- it may take a while for the market to catch on that it is a turnaround. The good news is you can rest assured that you aren’t overpaying for the stock, in the meantime. Not only has management been buying near current levels, but the stock trades for around half of book value and a third of sales. That’s the kind of bargain you won’t often find in Hollywood, a culture better known for its extravagances. I’d buy shares right here and be prepared to wait, as usual with insider buying names, for the stock to advance.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
Thursday, March 30, 2006
Thursday, March 23, 2006
Keeping the Bad Guys at Bay in the Internet Jungle
It’s a jungle out there on the Internet where so many bad guys lurk -- trying to invade corporate networks, drop spyware onto your hard drive, or trick people into revealing personal secrets.
So anyone who runs a corporate computer system knows it’s a top priority to protect networks from the bandits and pirates. Many small companies turn to SonicWALL (SNWL) for the products and software to get the job done.
In what may be a sign of how aggressive the bad guys are becoming, SonicWALL had a great 2005. Its stock rose above $8 from below $5.
But in a sudden reversal, SonicWALL shares gapped down and crashed hard to $6.50 earlier this year. The weakness came on news that SonicWALL purchased a smaller company in its space and issued earnings guidance that didn’t exactly jib with Wall Street expectations.
That’s when insiders stepped up to the plate and bought shares – once again. Chief executive Matthew Medeiros purchased $100,000 worth at $6.75 in late February. That brought total insider buying since early December up to $515,000. Much of it was above current levels – meaning you can now get the stock cheaper than where insiders recently saw value. The buying was all in the $6.75 to $7.90 range.
What do insiders see in the stock?
Cash hoard
SonicWALL came public in 1999, and it was smart enough to do a secondary near the peak for tech stocks, in March of 2000. The company still has about $240 million in cash left over, or around $3.70 per share. It’s using the money to buy back stock – always a good thing for shareholders – and acquire smaller companies to build out its product line.
Acquisitions don’t always work out. That may be one reason investors sold SonicWALL after it announced yet another purchase in early February – this time buying MailFrontier, a company specializing in messaging security.
But acquisitions are how SonicWALL plans to grow faster than the small-business information technology market, already projected to grow 7% to 10% a year.
Before MailFrontier, SonicWALL recently bought a company specializing in data backup and protection called Lasso Logic, and enKoo, which offers a kind of virtual private network technology.
As an outsider, it’s impossible to know whether these acquisitions will work out. But the solid insider buying while investors worry about these takeovers suggests they will be profitable.
The razor blade model
Next, SonicWALL is the kind of company Warren Buffet would like if he purchased tech stocks. That’s because besides all the cash, SonicWALL follows the “razor blade model.” Instead of selling razors, SonicWALL sells the hardware behind intrusion protection systems. Then customers can buy more add-ons with new features, and they have to come back each year for the software upgrades. SonicWALL believes it can do a better job of selling more razor blades – the software and add-ons.
International growth
Right now SonicWALL only gets about 32% of its revenue from foreign sales, while peers get 50% or more. The company hopes to change that. “We believe Europe and Japan present the most immediate growth opportunities for the company,” believes Sterne, Agee & Leach analyst Andrey Glukhov, who has a buy rating and a $9 price target on the stock. SonicWALL recently formed a sales partnership with Cannon, which should help in Japan.
The bottom line: Small Internet security companies face a tough challenge going up against giants like Cisco (CSCO). But SonicWALL’s products are cheaper, and easy to use. And if the company does a good job of digesting all the recent acquisitions and making them work, this stock could get back on track. “A breakthrough quarter may occur towards the back half of 2006,” says WR Hambrecht analyst Ryan Hutchinson. If he’s right – and insiders seem to agree -- now’s the time to buy, along with the insiders.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
So anyone who runs a corporate computer system knows it’s a top priority to protect networks from the bandits and pirates. Many small companies turn to SonicWALL (SNWL) for the products and software to get the job done.
In what may be a sign of how aggressive the bad guys are becoming, SonicWALL had a great 2005. Its stock rose above $8 from below $5.
But in a sudden reversal, SonicWALL shares gapped down and crashed hard to $6.50 earlier this year. The weakness came on news that SonicWALL purchased a smaller company in its space and issued earnings guidance that didn’t exactly jib with Wall Street expectations.
That’s when insiders stepped up to the plate and bought shares – once again. Chief executive Matthew Medeiros purchased $100,000 worth at $6.75 in late February. That brought total insider buying since early December up to $515,000. Much of it was above current levels – meaning you can now get the stock cheaper than where insiders recently saw value. The buying was all in the $6.75 to $7.90 range.
What do insiders see in the stock?
Cash hoard
SonicWALL came public in 1999, and it was smart enough to do a secondary near the peak for tech stocks, in March of 2000. The company still has about $240 million in cash left over, or around $3.70 per share. It’s using the money to buy back stock – always a good thing for shareholders – and acquire smaller companies to build out its product line.
Acquisitions don’t always work out. That may be one reason investors sold SonicWALL after it announced yet another purchase in early February – this time buying MailFrontier, a company specializing in messaging security.
But acquisitions are how SonicWALL plans to grow faster than the small-business information technology market, already projected to grow 7% to 10% a year.
Before MailFrontier, SonicWALL recently bought a company specializing in data backup and protection called Lasso Logic, and enKoo, which offers a kind of virtual private network technology.
As an outsider, it’s impossible to know whether these acquisitions will work out. But the solid insider buying while investors worry about these takeovers suggests they will be profitable.
The razor blade model
Next, SonicWALL is the kind of company Warren Buffet would like if he purchased tech stocks. That’s because besides all the cash, SonicWALL follows the “razor blade model.” Instead of selling razors, SonicWALL sells the hardware behind intrusion protection systems. Then customers can buy more add-ons with new features, and they have to come back each year for the software upgrades. SonicWALL believes it can do a better job of selling more razor blades – the software and add-ons.
International growth
Right now SonicWALL only gets about 32% of its revenue from foreign sales, while peers get 50% or more. The company hopes to change that. “We believe Europe and Japan present the most immediate growth opportunities for the company,” believes Sterne, Agee & Leach analyst Andrey Glukhov, who has a buy rating and a $9 price target on the stock. SonicWALL recently formed a sales partnership with Cannon, which should help in Japan.
The bottom line: Small Internet security companies face a tough challenge going up against giants like Cisco (CSCO). But SonicWALL’s products are cheaper, and easy to use. And if the company does a good job of digesting all the recent acquisitions and making them work, this stock could get back on track. “A breakthrough quarter may occur towards the back half of 2006,” says WR Hambrecht analyst Ryan Hutchinson. If he’s right – and insiders seem to agree -- now’s the time to buy, along with the insiders.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
Thursday, March 09, 2006
Chasing the Blues from Your Portfolio
The next time you hear people moan about a tough day, you might remind them they should at least be happy they don’t have a problem that doctors call psychotic major depression (PMD).
As the name suggests, this is a nasty mixture of depression and the delusional thinking or hallucinations that come from psychosis. It affects about 3 million people in the U.S.
Victims of this terrible ailment often have to be hospitalized. But there are no treatments approved by the Food and Drug Administration (FDA). The two that doctors use – a kind of electro-shock therapy or a one-two punch of antidepressant and antipsychotic medications – either have serious side effects or they don’t work well.
So psychiatrists and victims of the disease should be tuned in closely this year as a tiny and lightly-covered biotech company called Corcept Therapeutics (CORT) releases updates on studies on a drug that could offer a fix.
The company – whose researchers have links to Stanford University – believes that the compound mifepristone may help combat the disorder. Mifepristone, also used to terminate pregnancies, may work by blocking receptors for cortisol, a stress hormone that may spark PMD.
Corcept calls the drug Corlux. Early studies completed several years ago found that Corlux helps reduce psychosis in people who have PMD.
The current studies
Now, Corcept has two Phase III studies on Corlux in the U.S. and one in Europe. It also has several studies on safety and tolerability, re-treatment, and the use of Corlux against Alzheimer’s disease.
On the side, the company is working with Eli Lilly (LLY) to determine if Corlux can fight weight gain in people on olanzapine, a drug used to treat schizophrenia, bipolar disorder and dementia related to Alzheimer's disease.
The FDA has granted “fast track” status for Corlux in use against PMD. It has also offered a “special protocol assessment,” which basically means the FDA and Corcept have agreed in advance on how studies should be done so they are good enough for the FDA, at least procedurally.
Near-term catalysts
The key thing for investors right now is that Corcept may be releasing partial results from some of its Phase III studies throughout 2006. If they are positive, that will juice the stock.
The risk is that even though Corcept has other possible uses for Corlux – like treating psychosis associated with cocaine addiction – the company is in essence a one trick pony.
So by owning shares, you are essentially placing a bet that Corlux gets approved for use against PMD. This is what analysts call a “binary event,” which is sort of like betting on a coin toss – either you win or lose.
Many investors shy away from this proposition as too risky. Edward Nash, who follows the stock at Stifel, Nicolaus & Company, for example, has a hold on the stock, using the rationale against “binary events.”
Insider buys
But the significant dose of insider buying in this stock of late tilts the odds in your favor and suggests success is a better than a 50-50 proposition, I believe.
Since the end of January, insiders have purchased around $364,000 worth of the stock. True, chief executive Joseph Belanoff has been selling small amounts. But this is not too troubling to me because he owns 2.9 million shares.
Meanwhile, the company has around $30 million in cash – or about an 18-month supply if the recent burn rate is any guide. The company believes that’s enough to see Corlux through clinical development for the treatment of PMD.
How much is the market worth?
Nash, the analyst at Stifel, Nicolaus, doesn’t publish his model. But a report from him last autumn while he worked at Legg Mason Wood Walker – which was bought by Stifel, Nicolaus – shows he thought the company could earn $1.67 per share in 2008, if all went as planned. Put a conservative 15 time earnings multiple on that, and you’d have a $25 price on a stock that trades now for $4.90. A five bagger like that is usually enough to chase the blues out of your stock portfolio.
The bottom line: I can’t predict with any certainty that this scenario will play out. But earlier tests suggested Corlux works, and the insiders are lining up like that might be the outcome. As tempting as the potential upside is, however, remember to put just a small portion of your stock portfolio in a risky play like this – or less than 4%. In fact, Corcept is best suited as part of a collection of biotech companies you own with the hopes that the few big winners offset all the duds. Because I can predict this: There will always be many big losers in the biotech space.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
As the name suggests, this is a nasty mixture of depression and the delusional thinking or hallucinations that come from psychosis. It affects about 3 million people in the U.S.
Victims of this terrible ailment often have to be hospitalized. But there are no treatments approved by the Food and Drug Administration (FDA). The two that doctors use – a kind of electro-shock therapy or a one-two punch of antidepressant and antipsychotic medications – either have serious side effects or they don’t work well.
So psychiatrists and victims of the disease should be tuned in closely this year as a tiny and lightly-covered biotech company called Corcept Therapeutics (CORT) releases updates on studies on a drug that could offer a fix.
The company – whose researchers have links to Stanford University – believes that the compound mifepristone may help combat the disorder. Mifepristone, also used to terminate pregnancies, may work by blocking receptors for cortisol, a stress hormone that may spark PMD.
Corcept calls the drug Corlux. Early studies completed several years ago found that Corlux helps reduce psychosis in people who have PMD.
The current studies
Now, Corcept has two Phase III studies on Corlux in the U.S. and one in Europe. It also has several studies on safety and tolerability, re-treatment, and the use of Corlux against Alzheimer’s disease.
On the side, the company is working with Eli Lilly (LLY) to determine if Corlux can fight weight gain in people on olanzapine, a drug used to treat schizophrenia, bipolar disorder and dementia related to Alzheimer's disease.
The FDA has granted “fast track” status for Corlux in use against PMD. It has also offered a “special protocol assessment,” which basically means the FDA and Corcept have agreed in advance on how studies should be done so they are good enough for the FDA, at least procedurally.
Near-term catalysts
The key thing for investors right now is that Corcept may be releasing partial results from some of its Phase III studies throughout 2006. If they are positive, that will juice the stock.
The risk is that even though Corcept has other possible uses for Corlux – like treating psychosis associated with cocaine addiction – the company is in essence a one trick pony.
So by owning shares, you are essentially placing a bet that Corlux gets approved for use against PMD. This is what analysts call a “binary event,” which is sort of like betting on a coin toss – either you win or lose.
Many investors shy away from this proposition as too risky. Edward Nash, who follows the stock at Stifel, Nicolaus & Company, for example, has a hold on the stock, using the rationale against “binary events.”
Insider buys
But the significant dose of insider buying in this stock of late tilts the odds in your favor and suggests success is a better than a 50-50 proposition, I believe.
Since the end of January, insiders have purchased around $364,000 worth of the stock. True, chief executive Joseph Belanoff has been selling small amounts. But this is not too troubling to me because he owns 2.9 million shares.
Meanwhile, the company has around $30 million in cash – or about an 18-month supply if the recent burn rate is any guide. The company believes that’s enough to see Corlux through clinical development for the treatment of PMD.
How much is the market worth?
Nash, the analyst at Stifel, Nicolaus, doesn’t publish his model. But a report from him last autumn while he worked at Legg Mason Wood Walker – which was bought by Stifel, Nicolaus – shows he thought the company could earn $1.67 per share in 2008, if all went as planned. Put a conservative 15 time earnings multiple on that, and you’d have a $25 price on a stock that trades now for $4.90. A five bagger like that is usually enough to chase the blues out of your stock portfolio.
The bottom line: I can’t predict with any certainty that this scenario will play out. But earlier tests suggested Corlux works, and the insiders are lining up like that might be the outcome. As tempting as the potential upside is, however, remember to put just a small portion of your stock portfolio in a risky play like this – or less than 4%. In fact, Corcept is best suited as part of a collection of biotech companies you own with the hopes that the few big winners offset all the duds. Because I can predict this: There will always be many big losers in the biotech space.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
Thursday, March 02, 2006
Custom Cancer Care With a Little Help from Giant Sea Snails
One of the reasons we succumb to cancer so easily is that our immune systems are reluctant to attack it. Since tumors are a part of us, killing them is tantamount to self destruction, at least from the point of view of an immune system.
Wouldn’t it be great if you could trick the immune system into ignoring its natural reluctance to attack tumors? That’s the strategy used by a cancer therapy being developed by the biotech company Genitope (GTOP).
The process starts by identifying unique proteins on tumors and taking out a small sample. Those proteins are mixed with other proteins from giant sea snails living off the coast of California – of all things. They are grown into a brew that’s able to entice the immune system into attacking proteins like the ones on tumors.
The mixture is injected back into your body where it arouses the immune system to kill the cancerous tumors which have the protein targets. The giant sea snail comes into play because the protein it contributes is highly “immunogenic.” That means the immune system reacts strongly to it -- and anything attached to it.
“If you make enough of that target and activate the immune system against that target, you can apparently eliminate or at minimum control any of the residual tumors,” says Genitope chairman and chief executive Dan Denney.
Low cost manufacturing
This ingenious approach, which Genitope calls “MyVax,” has actually been known to work for a long time. Cancer patients were treated at Stanford University as long ago as the late 1980s. “About half of the patients immunized starting in 1988 have gone out very far in time and have never relapsed. It is looking like these patients may never relapse,” says Denney.
So why isn’t everyone using MyVax? The techniques originally used to produce the tumor protein brew were not commercially viable. That’s where Genitope comes in. The company has developed a system of “gene amplification” for growing the anti-cancer brew. The technology is called Hi-GET.
The target cancers
Genitope is in late stage, phase III, testing of MyVAx for use against follicular non-Hodgkin’s lymphoma (NHL), a cancer that begins in cells in the immune system. “Follicular” means the lymphoma cells are grouped in clusters or follicles in the lymph node. This cancer strikes about 55,000 people a year in the U.S. It is the second most prevalent NHL worldwide.
If tests prove beyond a doubt that MyVax works, Denney predicts it could be on the market in two years. WR Hambrecht analyst Patrick Flanigan estimates annual sales could reach to $500 million. But you won’t have to wait for two years for the stock to move.
As early as this summer, Genitope may present convincing data that MyVax works against lymphoma. It’s hard for anyone to know how these studies will turn out. But a Genitope director’s recent purchase of $212,000 worth of the stock at $8.50 suggests Genitope may be on the right track.
Other potential therapies
Genitope is also doing early phase testing of MyVax testing against chronic lymphocytic leukemia, another market that could be worth $500 million in annual sales. MyVax will also likely also be tested for use against other kinds of lymphoma and NHL.
The company is also developing monoclonal antibodies – a class of therapy made famous by Rituxan, Avastin and Herceptin from Genentech (DNA). Success of drugs like these has helped Genentech stock more than double in the last year.
Monoclonal antibodies work by attacking tumors directly and convincing them to commit suicide, or helping other defense mechanisms in the body kill them off.
Cash levels
Genitope just raised $58 million in February -- bringing cash levels to around $148 million. That should be enough to last well into 2007, says chief financial officer John Vuko. The company is spending tens of millions of dollars right now to build a new manufacturing facility and headquarters.
No sure bet
As we know by now, biotech companies are always a crap shoot. Cancer “vaccine” companies like Genitope in particular are viewed with suspicion because of the difficulty in proving that cancer vaccines work. Keep in mind, however, that these aren’t really “vaccines” in the traditional sense because they are used to combat an ailment that has already set in – instead of neutralizing one ahead of time.
For what it’s worth, Brean Murray, Carret analyst Jonathan Aschoff has a medium-term price target of $21 on Genitope. He bases that on projections that Genitope could make $2.11 per share in 2009. But we also know biotech companies can easily flop.
The bottom line: This one looks promising. But you should only own it as part of a basket of biotech companies you hold with the hope that a few big winners will offset all the losers.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
Wouldn’t it be great if you could trick the immune system into ignoring its natural reluctance to attack tumors? That’s the strategy used by a cancer therapy being developed by the biotech company Genitope (GTOP).
The process starts by identifying unique proteins on tumors and taking out a small sample. Those proteins are mixed with other proteins from giant sea snails living off the coast of California – of all things. They are grown into a brew that’s able to entice the immune system into attacking proteins like the ones on tumors.
The mixture is injected back into your body where it arouses the immune system to kill the cancerous tumors which have the protein targets. The giant sea snail comes into play because the protein it contributes is highly “immunogenic.” That means the immune system reacts strongly to it -- and anything attached to it.
“If you make enough of that target and activate the immune system against that target, you can apparently eliminate or at minimum control any of the residual tumors,” says Genitope chairman and chief executive Dan Denney.
Low cost manufacturing
This ingenious approach, which Genitope calls “MyVax,” has actually been known to work for a long time. Cancer patients were treated at Stanford University as long ago as the late 1980s. “About half of the patients immunized starting in 1988 have gone out very far in time and have never relapsed. It is looking like these patients may never relapse,” says Denney.
So why isn’t everyone using MyVax? The techniques originally used to produce the tumor protein brew were not commercially viable. That’s where Genitope comes in. The company has developed a system of “gene amplification” for growing the anti-cancer brew. The technology is called Hi-GET.
The target cancers
Genitope is in late stage, phase III, testing of MyVAx for use against follicular non-Hodgkin’s lymphoma (NHL), a cancer that begins in cells in the immune system. “Follicular” means the lymphoma cells are grouped in clusters or follicles in the lymph node. This cancer strikes about 55,000 people a year in the U.S. It is the second most prevalent NHL worldwide.
If tests prove beyond a doubt that MyVax works, Denney predicts it could be on the market in two years. WR Hambrecht analyst Patrick Flanigan estimates annual sales could reach to $500 million. But you won’t have to wait for two years for the stock to move.
As early as this summer, Genitope may present convincing data that MyVax works against lymphoma. It’s hard for anyone to know how these studies will turn out. But a Genitope director’s recent purchase of $212,000 worth of the stock at $8.50 suggests Genitope may be on the right track.
Other potential therapies
Genitope is also doing early phase testing of MyVax testing against chronic lymphocytic leukemia, another market that could be worth $500 million in annual sales. MyVax will also likely also be tested for use against other kinds of lymphoma and NHL.
The company is also developing monoclonal antibodies – a class of therapy made famous by Rituxan, Avastin and Herceptin from Genentech (DNA). Success of drugs like these has helped Genentech stock more than double in the last year.
Monoclonal antibodies work by attacking tumors directly and convincing them to commit suicide, or helping other defense mechanisms in the body kill them off.
Cash levels
Genitope just raised $58 million in February -- bringing cash levels to around $148 million. That should be enough to last well into 2007, says chief financial officer John Vuko. The company is spending tens of millions of dollars right now to build a new manufacturing facility and headquarters.
No sure bet
As we know by now, biotech companies are always a crap shoot. Cancer “vaccine” companies like Genitope in particular are viewed with suspicion because of the difficulty in proving that cancer vaccines work. Keep in mind, however, that these aren’t really “vaccines” in the traditional sense because they are used to combat an ailment that has already set in – instead of neutralizing one ahead of time.
For what it’s worth, Brean Murray, Carret analyst Jonathan Aschoff has a medium-term price target of $21 on Genitope. He bases that on projections that Genitope could make $2.11 per share in 2009. But we also know biotech companies can easily flop.
The bottom line: This one looks promising. But you should only own it as part of a basket of biotech companies you hold with the hope that a few big winners will offset all the losers.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
Subscribe to:
Posts (Atom)
