The stock seems to be gaining momentum again after a few months of uncharacteristic volatility. Despite being a bit subdued during the last few months, the stock has appreciated by 38% over last one year. The company has been in the news for its deal with Inovio (INO), a smaller company in biotech space. An article on Motley fool mentioned Roche as a good stock for conservative growth for those looking to invest in this sector. The first half of 2013 was reasonably good with 5% increase in revenues and 12% increase in core EPS. The HER2 franchise showed 11% growth, and now accounts for 14% of the company's sales. Working with experimental companies like Inovio (INO) can help Roche prepare for the patent expirations which are starting next year. Hercepting ($6.3 billion in sales in fiscal 2012) is likely to face generic competition next year, but is expected to make up for the loss partly due to the new subcutaneous formulation recently approved in the EU. The Inovio deal is expected to be good for the company in the long term as it gives it exposure to the prostate cancer market. In addition, Inovio's Hepatitis B vaccine is also believed to have a lot of potential. It also gives it access to the electroporation technology for drug delivery. The technology is believed to have a lot of potential, though it has to go through a lot of trials etc. Another technology QuSomes from Biozone (BZNE), which is for liposomal delivery of drugs, is also believed to have a lot of potential for increasing the efficiency and efficacy of delivery of drugs. OPKO Health (OPK) is testing the Qusomes technology for various drugs based on a license agreement with Biozone. Ultimately, once these techniques go past the trial stage, they are likely to reduce the cost of production and the therapy. Roche is perhaps attempting to access these advantages by looking at the smaller players.
The CEO Ted Murphy recently purchased 100K shares of the company from the market for investment purposes. This week he purchased 30K shares at an average price of 33 cents per share (total purchase price of $9,890). Last week he had purchased 70K shares at 36 cents per share (total purchase price of $24,902). Though the quantity may not be much, insider purchase by top management indicates their confidence in the future prospects of the company. Hopes about the prospects were increased after the recent quarterly earnings when the company posted record numbers. In the first half also, the company booked $3.45 million in sales ($6.9 million on an annualized run-rate basis), and the net loss declined remarkably from $2.46 per share in H1'12 to 25 cents per share in H1'13. The company needs to show good performance in the next few quarters to indicate consistency. This will confirm the possibility of a turnaround over the next few quarters. Further, it recently obtained $1.49 million funding through private placements of shares and warrants. In the latest funding, the warrants are composed of warrants that are exercisable at $0.25 per share, and those which are exercisable at $0.50 per share at any time within 5 years of the issue. The funding will be used for working capital and other requirements. Funding is crucial at this stage as the company is expected to remain aggressive over the next few quarters. Obtaining funds on a regular basis will remain the key to success. It has high hopes from the launch of the Native Ad Exchange later this year. The launch is expected to help the company in increasing the revenues, and strengthening its presence in the social media sponsorship / native ads space. The company seems to be on course to leverage the growth in this segment. The experience gained by the company over the years will help it as the field evolves over time.
The company recently announced an asset purchase agreement with Lautus Pharmaceuticals whereby it sold its interests and inventory related to Glyderm brand of skin care products. The products are currently manufactured and sold by Biozone, and Lautus purchased the Glyderm trademark, patents, product formulations, the domain names and website, apart from the existing inventory. Lautus is expected to re-launch the product line soon through active promotion. The consideration is $1 million, out of which $600K is payable on closing of the agreement, $200K payable after 6 months and the balance $200K payable after 12 months from the closing date. Lautus will also pay the purchase price for the acquired inventory as and when it is sold to third parties. The two parties also entered into a 5 year supply agreement for manufacture of Glyderm products by Biozone for the Lautus. The price per unit payable by Lautus has also been agreed. The sum received will be used by Biozone to pay a portion of outstanding promissory notes, and for general working capital purposes. The company also settled a long standing dispute with its former Executive Vice President (Fisher). MusclePharm's (MSLP) investment of $2 million in the company is also a positive because it indicates the potential of its proprietary drug delivery QuSome technology. The technology is expected to help MusclePharm enhance the absorption and speed of delivery of MusclePharm's supplements. QuSomes have huge potential and are expected to be in demand from pharma manufacturers after the technology goes through the trials successfully. Dr. Frost's OPKO Health (OPK) is already working on the possibilities. Success of QuSomes will also help Biozone's contract manufacturing business which generates cash flow for the company. Deals with companies like MusclePharm can be a catalyst for interest from other parties if the technology is able to deliver the desired results.
The stock has done better over the last one month with 12% appreciation. It has recovered from the fall after the earnings, and there have been some high volume days recently. Over the last 3 months, it has done well as it has appreciated by 30%. Despite the recent positive moves, it is still down 22% over the last one year. The Q2 earnings came better than expected as the revenues were higher than the company guidance. The company seems to be doing well as far as the mobile revenues are concerned. Mobile revenues doubled on a yoy basis to reach an all-time high of $2.6 million. There was good growth sequentially as well. The net loss also reduced substantially. The management was pleased with progress being made in mobile advertising products especially after the launching of additional native mobile ads on iPhone recently. The company is focusing on this segment and hopes to do better in the near future. Native advertising / social media sponsorship is catching up with advertisers elsewhere also. As per a survey conducted by IZEA (IZEA), a company active in this space, advertisers are allocating an important portion of their budget to social media / paid social content. The performance of Meetme was good on several metrics, and even the mobile average revenue per daily active user increased by 48% on a yoy basis. However, the company still remains far away from being profitable, and revenue growth is not that great anymore. The upward momentum in the stock can be sustained if it continues to post good numbers over the next few quarters. Competition from other players will only increase with time, hence revenue growth will not be easy. Decline in revenues may be acceptable if it can show improvement in margins. Sustained movement will be difficult unless there is consistent improvement on this metric.
The last few days have seen the stock make a bit of a recovery. It seems relatively stable, though the volumes are not too high to indicate great upside momentum. Reaction to the good earnings was muted in view of the conservative forecast for the third quarter. Q2'13 saw the company beating analyst estimates with 6.5% growth in revenues and 53% rise in net income. The stock has corrected about 8% from the 52 week high made in May, but remains 34% up on a 52 week basis. It needs a boost in the form of some positive news flow to get the upward momentum going. Analyst targets are higher than the current level, with Zacks, having a price target of $46 for the stock. However, Zacks analysts remained cautious due to higher operating expenses and increasing competition. Further, the recent in-fill acquisitions are likely to add to the capital expenditure and related integration costs. The debt is already at high levels. Deutsche Bank & Citigroup have a target price of $53. Competition is direct and indirect as the market is highly fragmented. There are giants like Clear Channel Outdoors (CCO), and online advertising, specially the developments in social media cannot be ignored. Social media sponsorship / native advertising is being preferred by some advertisers for using the power of celebrity influence. IZEA (IZEA), a company operating in this space, reported results of a survey which indicate the changing dynamics in this space. The attempt of Lamar to convert into REIT may take some time, but will be more beneficial for investors if the fundamentals continue to improve. The valuations are a bit high now, but continued growth in the bottom-line can change that quickly. The trailing P/E is 122, the forward P/E is 47 and the PEG is 0.66. This points to the fact that market expects good growth in earnings in the next few years.
The stock seems to be a bit stable after the recent declines. However, the recovery has not been backed by volumes, which indicates that one should remain a bit cautious. This is more true because the sentiments for the stock have not changed at all. In fact, they may have worsened over the last few weeks. There is a lot of scope for profit booking because despite the 25% correction since July, the stock is still up by more than 90% on a 52 week basis. As mentioned in a recent SA article there are sell signals as the stock has broken below crucial supports. Any rise will meet with resistance. The author states that the company faces competition from Yelp (YELP) and InterActiveCorp's (IACI) Home adviser which do no charge customer any fees. Angie's List, on the other hand, charges for the services, and hence growth in subscriber base is low. It has around 2 million subscribers after several years in business. It spends about 80% of its revenue on sales and marketing, and needs to offer discounts to retain / increase subscribers. Yelp added almost 3.5 million reviews last quarter alone. Years of net loss have completely eroded the net worth of the company, and the high debt of $14.89 billion makes it financially risky. Future growth will be difficult if the same business model is pursued. The direct and indirect competition from other emerging segments is also increasing. Paid social content /celebrity influencers are also being preferred. IZEA (IZEA), which operates in this space reported results of a survey which indicated growing popularity of native ads. For Angie's list, it is more a matter of survival than growth. Growth without margins, is not likely to be sustained much longer. One cannot write off a brand like Angie's list, but something special needs to be done by the management soon. The level of shorts remains extremely high, which can lead to volatility.
The momentum has taken the stock even higher. The stock has appreciated by 50% after the earnings, and the last month saw it rise by 25%. The earnings surprised the street, and the company is getting really close to making a turnaround over the next few quarters. The analysts had increased their target after the earnings, but all those targets have been exceeded by a huge margin. There are voices advising caution due to stretched valuations. An insidermonkey article has called the valuations insane. The price to sales and price to book is around 23/24 which indicates that a lot of future positives may already be factored in the stock price. So movement from here on is likely to take it beyond reasonable levels. However, an article on seekingalpha is positive on the stock, and the author says that that a large portion of the up move in the stock has come due to positive opinions about Yelp’s ability to continue growing at a high rate, and its ability to monetize its content. The author believes that the stock still has a lot of upside potential, but needs to address relevancy issues about the content it continuously acquires. It needs to use data science to increase relevancy and trust about its content. In fact, not many doubt the potential of the company, but are wary of investing after such a huge run up. Despite the specialization and brand strength of Yelp, competition from players like Google (GOOG) and Yahoo (YHOO) cannot be ignored, and there are other players like IZEA (IZEA) (native advertising, social media sponsorship) which may provide direct and indirect competition in the near future. The momentum can take it higher, but the risk reward ratio may not be so favorable anymore. The next earnings will be a risky event.
The stock has done well over the last few days, and the volumes have been better. The ten day volume average is higher than the three month average. So it may be recovering from the post earnings crash, and may enter a period of range bound movement. Many more days of stability are required to confirm this. A recent article on seekingalpha had given a target of $33 for the stock. Interestingly, the 52 week high of the stock is also around $32. The author was bullish on the stock and had summarized by saying that 'ValueClick is a quality business, which is generating a lot of shareholder value for both short and long term. The company is being managed, as probably any private equity investor would have managed, using cash to make strategic acquisitions and share buybacks. Stock correction due to a temporary weakness is giving a good opportunity to invest'. For the short term, however, the company needs to beat its guidance for the third quarter and the guidance for the full year. This is because the last two earnings have dented the sentiments, and it may be difficult for the stock to cross $25 even if the current recovery lasts a bit longer. It needs to remain dynamic, and alive to opportunities in other segments. Social media sponsorship is an emerging field, with players like IZEA (IZEA) doing well. Looking in isolation, the stock is reasonably valued with a trailing P/E of 17.45 and forward P/E of 11.52. The price to sales and price to book are 2.4 and 2.8 respectively, which is reasonable considering the other metrics. The PEG is 0.99, which indicates good prospects for earnings growth over the next few years. The debt is around $102 million and the cash is more than $127 million. So it is not that bad, but needs a dose of good news to get a bit of positivity going.
The stock has declined over the last few months, but seems to be making a recovery over the past couple of weeks. Jefferies have reduced the PT from $45 to $41 recently. The consensus target for the stock is around $45, with an average rating of hold. A recent article on SA has recommended to buy the stock. The author considers the recent decline as an opportunity to buy the stock for the long term. He mentions that despite the expected loss of patents over the next few years, the company is likely to maintain or improve upon its position in cardiology, Cancer and Hepatitis C. International revenues have increased in proportion over the years, and in 2012 they comprised 42% of the sales. Expected continuation of the buyback program is also expected to reduce the share count by 10% over next 3 years. The author is banking upon the expected growth in revenues due to new products in the cancer field. Bristol is likely to become a dominant player in cancer due to its multiple revolutionary product line in immunotherapy. This industry has huge potential in view of its expected size of $35 billion by 2023. The author gives a PT of $59.50 for the stock by 2016, implying 50% returns if one considers the dividend payments. He expects the price to touch $80 by end of the decade. Despite what is mentioned in the article, growth may not be easy if one considers the expected loss of patents and increasing competition. Importantly, the bottom-line needs to grow, which requires efforts on cost control. Biozone (BZNE) has recently been in news for its proprietary drug delivery technology (QuSomes) which can help reduce cost of production. Dr. Frost (TEVA, OPKO fame), has a stake in this company. Bristol already has a collaboration with OPKO in diagnostics. Bristol remains a good stock for the long term, but the company needs to show improvements in the fundamentals so that the uptrend resumes.
The last one year has been good for the stock with around 25% appreciation. Over the longer term, it has remained volatile, with negative returns. The topline has grown well, but the bottom-line has remained negative. That is one of the main reasons for the pressure on the price. The accumulated deficit is around $162 million. Importantly, the ttm net margins are around -2%, which is a significant improvement if one considers the margins in prior years. The revenues have grown from $150 million in 2009 to $650 million in 2012, which is pretty remarkable. It is trading at 0.46 times sales which is low if one factors a possibility of a turnaround over the next few quarters. Cash position is not bad. The long term debt is around $86 million as on June 30, which is a significant reduction from the $197 million at the end of Q1. So it looks reasonably good on paper, and is not far away from being profitable either. It has the backing of Dr. Phillip Frost, which another fact to consider. Frost is more known for his investments in pharmaceuticals / medical devices companies like OPKO Health (OPK) and Biozone (BZNE), and has interest in other sectors also. He picks companies with potential, and Ladenburg is a company with good history of operations. It could be a matter of time before this stock comes in more focus and delivers better returns like many of Frost's stocks have done recently. It needs to report a couple of good quarters in succession to indicate that the company is moving towards profitability. In H1'13, the revenue increased to $381 million from $318 million in H1'12. Interestingly, the net loss declined from nearly $8 million to $6.4 million during the same period. The net loss in H1'13 contained a $3.8 million one time charge on extinguishment of debt. Of course, the company may need to pay preference dividends ($1.028 million in Q2'13). So it is very close, but still not there. Risky, but there are good possibilities.
The acquisition by OPKO is expected to be mutually beneficial. The huge appreciation in OPKO share price over the last few months has surely increased the value of the deal for PROLOR shareholders. OPKO is up 90% over the last one year, and has done well even over the longer term. It has appreciated by 380% over the last 5 years. The exact benefits of the merger will be known only over time, but it is expected to broaden OPKO's portfolio of therapies in selected specialty markets. PROLOR's product pipeline strengthens OPKO's pipeline. PROLOR's technology platforms and R&D infrastructure are expected support OPKO's growth strategy. A recent article on SA has recommended to buy OPKO mainly based on future prospects related to its innovation pipeline and backing of Dr. Phillip Frost. However, the author also mentioned that the stock is trading at very high valuations. Though the revenues have grown exponentially over the years, the company has a huge accumulated deficit. The level of debt is also high. As per the author, OPKO's 4KScore diagnostic test is one of the main hopes of the company with annual revenues estimated at $1.8 billion in due course. Dr. Frost's investment and active involvement in the company is reassuring considering his track record. OPKO has an agreement with Biozone (BZNE), another company where he has a stake, to explore the possibilities related to Biozone's proprietary drug delivery technology (QuSomes). The delivery technology can help in reducing cost of manufacture of formulations. QuSomes are likely to be in great demand from pharmaceuticals companies who are looking for more cost effective methods of manufacturing drugs. So the potential is surely there, but the stock is already factoring a lot of future positives. After such a huge rise, it is good to remain a bit cautious.
The merger has improved the sentiments for SafeStitch dramatically, but it is important to keep in mind that the stock has already run up quite a bit. The merger may have great prospects, but translation of that into real dollars may take some time. The stock has already delivered exponential returns to the investors over the last few months. It has doubled in one month, and it has appreciated by nearly 500% on a ytd basis. Recent movement in the stock is linked to the announcement of the merger with TransEnterix. Billionaire investor Dr. Phillip Frost, who has a significant stake in SafeStitch, will be on the board of the combined entity. SafeStitch raised more than $30 million in a private placement, with TransEnterix investors contributing 65% and SafeStitch investors (including Dr. Frost) putting in 35%. With the funding, TransEnterix will be able to build upon its ability to bring flexible minimally invasive surgical technologies to market and develop its robotic system SurgiBot(TM). As mentioned in an article on SA, the merger will give Safestitch the necessary resources to continue developing devices and to begin marketing them. The most reassuring part of the deal is the active interest of Dr. Frost, who is known as an astute investor in the pharma / medical devices sector. He actively explores synergies between the companies where he has stake. For example, his company OPKO Health (OPK) is working with Biozone (BZNE), another of his companies, to use Biozone's proprietary drug delivery technology (QuSomes) which can help reduce cost of manufacture of formulations. So the potential is surely there, but after such a huge rise in the stock price over the last few months, it is good to be a bit cautious.