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A subscriber who extended her subscription at the special $245 rate last year asked if she could still extend for a second year at the $195 rate. So I set up a PayPal button to do that, and you don’t need a PayPal account to use it. To extend for two years, just go through the process twice.
If you didn’t extend last year, I’ve also reopened that offer for a limited time – CLICK HERE.
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Janet Yellen’s Fed raised the Fed funds rate another quarter-point yesterday, said they are on track for two more increases this year, and:
* * The S&P 500 moved up
* * Small-cap stocks, which have been weak recently, surged
* * 10-year notes rose
* * The dollar fell
* * Gold jumped
All pretty much the exact opposite of what the bears were expecting. Today marks the 107th consecutive day that the S&P 500 has not had a decline of at least 1%. Ryan Detrick, senior market strategist for LPL Financial, points out there have been 12 other 100+-day streaks since 1954, and: “History would say we can expect more volatility eventually, but this doesn’t mean to be on the lookout for a major correction, either. In fact, after a streak of 100 or more days without a 1% drop has ended, the S&P 500 has been up a very impressive median return of 14.4% a year later and higher 75% of the time. In other words, a lack of big down days or a lack of volatility by itself isn’t a warning sign.”
Yet I find it troubling that the 100-day rolling historical volatility in the S&P 500 just hit the lowest level in over a decade. It’s really quiet out there.
The problem is that bad news rarely gives much of a warning sign. It looks like the S&P 500 may complete its consolidation on the daily chart by double-topping around 2400. Normally, the trend would then resume in the same direction it was going before the consolidation – up.
But right now the weekly chart is only a couple of weeks into its consolidation, and the best way to do that is a drop back to the 38.2% retracement level at 2278.
So – first blow out the shorts who were waiting for a Fed funds increase to kill stocks, and then stage a sharp drop to panic the new bulls? Maybe based on a Republican food fight over increasing the debt limit? It could happen, starting as early as tomorrow.
The big monthly chart also is running out of fractal energy. That doesn’t mean a big drop is imminent, but it does make it harder to get a lot more upside this year.
All times below are ET, and most of the presentations and slides are archived on the companies’ websites so you can listen to them.
Friday, March 17
Happy St. Patrick’s Day! Don’t drink green beer and drive.
BDSI – BioDynamic Sciences – 8:00am – Earnings conference call
CSCO – Cisco – 12:00pm – UBS and Cisco tech talk on Cisco’s Internet of Things and Applications Strategy
Tuesday, March 21
PARNF – Parnell Pharmaceuticals – After the close – Earnings release; call tomorrow
Wednesday, March 22
PARNF – Parnell Pharmaceuticals – 8:00am – Earnings conference call
Friday, March 24
Short Interest – After the close
The Recovery Trade Sequence
The idea underlying the Recovery Trade Sequence is to put a small amount of money into a potentially very high-return investment, cash that in, and then do it again. Say you put $2,000 into a stock that goes from 25 cents a share to $10. The $2,000 turns into $80,000. Then you put the $80,000 into a stock that goes from 50 cents to $20. That turns the $80,000 into $3.2 million. You did it with two stocks, and never risked going negative more than $2,000. (Not that you won’t be mad at me if the first one works and then the second one doesn’t, taking your $80,000 to Money Heaven.)
Arch Therapeutics (ARTH – $0.59) presented at the Roth Conference (AUDIO HERE and SLIDES HERE). CEO Terry Norchi’s talk is getting tighter and more focused on coming events to drive the stock price. There were two new slides showing AC5’s faster time to stopping bleeding and better adhesion profile, at least one of which is from the forthcoming medical journal paper.
The next good news should be:
* * The medical journal article on the clinical trial
* * The midyear 510(k) filing with the FDA for the skin application
* * Filing for the CE Mark
* * Approval of the CE mark two or three months later
* * Approval of the 510(k) by the end of the year
* * Filing of the IND with the FDA by the end of the year to start clinical trials for the internal surgery application
Of course, a European or worldwide distribution agreement or acquisition could come anytime. I don’t know why the stock slipped under 60¢ after this presentation – it was a good one. ARTH is a Core Holding and Trading Buy up to $0.70 for a $3.50 target after AC5 is approved in the US.
Primary Risk:AC5 fails in clinical trials.
Antares Pharma (ATRS – $2.82) reported December quarter revenues of $14.2 million, up 20.3% from last year and way above the $12.5 million consensus. Otrexup sales grew 25% from last year, and sumatriptan sales are accelerating – Teva already has a 22% market share.. Development revenue jumped to $3.8 million, primarily for the development of the Makena autoinjector.. They lost three cents a share, right on the consensus.
On the conference call (SLIDES HERE and TRANSCRIPT HERE), management said costs are under tight control. Total operating expenses decreased to $11.7 million in the quarter compared to $12.3 million last year, primarily due to an 8% reduction in sales, general and administrative expenses. That $11.7 million included a one-time $2 million New Drug Application filing fee for QuickShot Testosterone.
There are about six million prescriptions a year for testosterone in the US. Antares thinks QuickShot Testosterone can be the first-line therapy for treating testosterone deficiency, due to best in class pharmacokinetic data and patient compliance. They expect to capture market share from both the injectable and topical segments of the market based on the product profile as well as appropriate pricing relative to the market leaders. After approval they will hire a 60-person sales force to focus on high-prescribing urologists, endocrinologists and primary care physicians.
Otrexup continues to slowly and steadily grow. Management said: “It’s just a product that from a rheumatologist standpoint they take time to get comfortable with writing products. When you look at any other launch in that space, other than biologics, the growth curve is slow but steady and right now that’s what we’re seeing and we expect to continue to see that.”
Antares should benefit from Scott Gottlieb’s appointment as FDA Commissioner. He will streamline the FDA’s approach to “complex generics” like the EpiPen, which involve both a drug and a device. He wrote an article on that: EpiPen Shows A Path To Solve The Bigger Drug Pricing Challenge. The Antares/Teva EpiPen generic is back in the ball game!
The company finished the year with $27.7 million in cash and no debt. They currently burn about $4 million a quarter. ATRS is a Core Holding – buy up to $5 for a $10 target price in after Otrexup is widely adopted. My ultimate target price is still $50 in three to five years, as they and their partners introduce numerous new products.
Primary Risk: Otrexup prescriptions stop growing.
BioDelivery Sciences International (BDSI – $2.00) will announce December quarter results tomorrow morning. Analysts are looking for $3.88 million in revenues and a loss of 26¢ a share. The keys to the stock will be updated information on how Bunavail is doing through their sales force, and updated data on Belbuca. At the Roth Conference (AUDIO AND SLIDES HERE) management said Belbuca exited 2017 at a $21 million sales run rate, which should mean $5.5 million in the December quarter. Bunavail exited at a $10 million run rate, or $2.5 million for the quarter.
Belbuca for chronic pain can go through the same sales force as Bunavail for opioid dependence. But Belbuca prescriptions average 2.5x the number of films – 55 versus 21. The cost of goods sold for Belbuca is one-third of Bunavail. Belbuca should be approved in Canada by midyear.
Over 2.5 million people in the US are opioid-dependent. Drug overdose is the leading cause of accidental death in the US, with nearly 20,000 of them from prescription opioids.
The buprenorphine in Belbuca is a very different opioid:
Bunavail prescriptions are growing:
They will report December quarter results tomorrow. The consensus is for $3.89 million in sales and a 26 cents per share loss. That would make the consensus estimates way low versus the numbers from the Roth Conference. Guidance is expected to be for $5.91 million in sales and a 22-cent loss. The new state contracts should be kicking in. Buy BDSI under $9 for a $15 target now that Bunavail is launched.
Primary Risk: A slow launch of Bunavail.
ScyNexis (SCYX – $3.11) reported 2016 results. In the December quarter they did $64,000 in revenue and lost five cents a share, although they did not report quarterly results. The Street was expecting $50,000 in revenue and a loss of 32 cents a share. They also didn’t hold a conference call, although they did present at the Roth Conference (AUDIO AND SLIDES HERE).
In the earnings release, they said: “We are working closely with the FDA to review the pre-clinical and clinical data supporting the use of a suitable IV formulation and dose regimen of SCY-078 to test in subsequent studies. The upcoming meeting with the FDA is scheduled for the second quarter of 2017.” Over 300 patients have been exposed to intravenous SCY-078 in the Phase I trials. The FDA already granted both Fast Track and Qualified Infectious Disease Product designations for the IV formulation for the treatment of invasive candidiasis and invasive aspergillosis. I think the new FDA Commissioner will work to get the clinical hold on the IV version lifted.
SCY-078 is effective against the deadly Candida auris fungal infection that has been diagnosed in nearly three dozen people in the US since last June. Antimicrobial Agents and Chemotherapy posted “The Emerging Candida auris: Characterization of Growth Phenotype, Virulence Factors, Antifungal 2 Activity, and Effect of SCY-078, a Novel Glucan Synthesis Inhibitor, on Growth Morphology and Biofilm 3 Formation “ in February. Candida auris causes serious bloodstream infections, spreads easily from person to person in healthcare settings, and survives for months on skin and for weeks on bed rails, chairs and other hospital equipment. Up to 60% of infected patients die.
It’s true that this was a lab study, and no one knows yet if the oral or IV versions will work in patients.
They finished the year with $69 million in cash that will last them until early 2019. Buy SCYX under $4 for a first target price of $9 after the invasive candidiasis Phase II trial results are reported.
Primary Risk: SCY-078 fails in clinical trials.
TG Therapeutics (TGTX – $13.90) reported $38,095 in licensing revenues in the December quarter, and lost 48 cents a share. The Street was expecting $30,000 in revenues and a 36-cent loss. Their goals for 2017 are:
* * Present updated clinical data including the full Phase III GENUINE data at a major medical meeting in the first half of 2017
* * Present clinical data from the Phase II Multiple Sclerosis (MS) trial
* * Initiate a global Phase III trial in MS
* * Complete the first interim analysis in the UNITY-CLL Phase III trial
* * Complete the first interim analysis in the UNITY-DLBCL trial
* * Meet with the FDA to review the GENUINE Phase III data and discuss suitability for filing for accelerated approval
* * Present new and updated data from ongoing trials at various scientific meetings throughout the year, including the ASH annual meeting in December
On the conference call (TRANSCRIPT HERE), management said that when they signed the Special Protocol Agreement the FDA was looking for a 20% improvement in the GENUINE trial. TGTX got 33%. The company always felt 20% was certainly good enough for accelerated approval, 25% would be great and anything above 30% would be quite amazing. So even though they had to give up the SPA when they reduced the size of the trial, they think the FDA will be open to accelerated approval.
Our old frenemy Adam Feuerstein is very negative on TGTX – or, rather, his short-selling hedge fund sources are negative – because: “What happens when a company seeks accelerated approval for a cancer drug in a patient population where there is no unmet medical need, and where older drugs might actually benefit patients more?…TG Therapeutics bears make the point these patients can be treated today with a combination of Rituxan, Roche’s long-approved anti-CD20 monoclonal antibody, and Imbruvica. Therefore, ublituximab is not filling an unmet medical need and accelerated approval should be off the table.”
That’s complete nonsense. Rituxan is not approved for use in previously treated, high-risk chronic lymphocytic leukemia patients. Doctors prescribe Rituxan with Imbruvica off-label. From an FDA perspective an unmet medical need still exists. And doctors do not like Rituxan’s powerful side effects. Ublituximab is much, much easier on patients.
In the Roth Conference presentation (AUDIO AND SLIDES HERE), they said the TG-1101 Phase II trial in multiple sclerosis has completed enrollment in Part 1 and is still enrolling Part 2. A Phase III trial for both the FDA and European Medicines Agency is under development.
The company had $45 million in cash at the end of December and just raised $84 million. They can fund themselves for the next two years. Buy TGTX under $6.50 for a target price in a buyout of $25.
Primary Risk: TG-1101 or TGR-1202 fails in clinical trials.
Biotech & Digital Dominators MegaShift
There are at least four ways to make money in the stocks of these large, growing, dominant companies. You can:
* * Buy a stock and hold it
* * Buy a stock and write a call option against it
* * With a Level IV options account, write an out-of-the-money put option
* * With a Level IV options account, write an out-of-the-money put option and use part of the premium to buy an out-of-the-money call option
Apple (AAPL – $140.69) hit another all-time high today. AAPL is a Long-Term Buy under $115 for a $135 first target.
Gilead Sciences (GILD – $68.54) presented at the Barclays Global Healthcare CoNference (AUDIO HERE). The company has started two Phase II trials of filgotinib in Crohn’s disease. I’m not sure why. Both Johnson & Johnson and AbbVie tried similar drugs in Crohn’s, and they failed.
RBC analyst Michael Yee says that based on discussions with Gilead’s management: “It will take a few quarters to get visibility on whether [hepatitis C] scripts are declining more, less, stabilizing, or flattening…when they do “flatten” we think the stock could start to stabilize since value investors will think there is a near-term bottom on downward earnings revisions (consensus been going down for 1-2 years now). We think it will take at least 2 quarters of hitting numbers for GILD stock to act better and they’ll need to do some “string of pearls” deals to improve pipeline visibility over next 1-2+ years. We’ve said KITE is an interesting angle at $4B cap, a $1B drug launching with US/EU rights, and a technology cellular therapy platform for cancer. But bottom line is GILD will require patience to build up a pipeline…meanwhile HCV needs to stabilize and Phase III bictegravir data this summer should (and needs to) look good.”
If Congress gets rid of the Obamacare taxes, as they’ve said they’ll do, that should include the branded prescription drug fee. In 2016, the industry paid $3 billion because of that fee, and of that, Gilead paid $270 million. The branded drug fee is supposed to climb to $4 billion in 2017 and $4.1 billion in 2018. It would be a significant addition to Gilead’s bottom line if the fee disappears.
Gilead is dirt-cheap and needs to do a meaningful acquisition to get Wall Street back on its side. GILD is a Long-Term Buy under $105 for a first target of $130.
Content on Demand MegaShift
And the markets are big and growing:
QuickLogic said that it has integrated the “Alexa” voice trigger into their sensor hub. This lets mobile and Internet of Things design engineers easily connect battery-powered devices to the Alexa ecosystem using the Alexa Voice Service (AVS) program offered by Amazon. The AVS program allows a developer to convert any product with a microphone and speaker into one with “intelligent voice control” through a connection to Amazon servers running artificial intelligence (AI) software.
QUIK is a Core Holding and a Trading Buy up to $4 for my $6 target as their sensor hub is widely adopted in smartphones, tablets and wearables.
Primary Risk: New sensor hub competitor emerges.
Gold ($1,225.90) was attracted back to the $1,225 level, but the move is just a consolidation. The real test will come when the fractal dimension gets back up to 55. That will take about seven more days, unless there is a sharp move up, maybe due to a fight over the national debt limit.
The demand for gold is coming from overseas buyers. Germans are piling in, with almost $1 billion flowing into the Xetra-Gold ETF in February alone. The UK is buying due to Brexit nervousness. The Russian central bank bought 37 metric tons of gold in January. Investment demand in China was strong in 2016, with gold bar demand up 28.2% and gold coin demand up 36.8%. India is importing again, after the restrictions on cash withdrawals recently were lifted.
Miners & Related
CDE is a Core Holding and a Trading Buy under $10 for a $20 target price when gold gets over $1,600 an ounce.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Paramount Gold Nevada (PZG – $1.72) also presented at Roth, with no audio available (SLIDES HERE). They are positioning Sleeper as a project that makes sense at higher gold prices, while Grassy Mountain can be built now. The last Preliminary Economic Analysis for Grassy Mountain showed:
For the first time they showed a gold price sensitivity analysis for Sleeper, which gets very interesting over $1,600 gold:
PZG is a Core Holding and a Trading Buy under $5 for a $10 first target when gold gets over $1,600 an ounce.
Primary Risk: Prices of precious metals fall due to US dollar strength.
Primero Mining (PPP; P.TO in Canada – $0.59) had $52.2 million in December quarter revenues. They reported a loss of $1.01 a share, but before a one-time mine impairment charge, they made a penny a share. The consensus was expecting $55.5 million with a loss of four cents. They produced 45,794 gold equivalent ounces during the quarter at total cash costs of $777 an ounce, and all-in sustaining costs of $1,159 an ounce.
On the conference call (SLIDES HERE and TRANSCRIPT HERE), Interim CEO Joe Conway acknowledged he has his work cut out for him. He said: “As we look back at ‘15 and ‘16, for ‘16 we had expected a modest improvement in production and cost. We also started to make a number of significant changes at the operations on behalf of improved safety and profitability. Unfortunately, both operations struggled to achieve the objectives and we reduced guidance a number of times. I would say the overriding theme with those changes and guidance was certainly geologic modeling, planning and execution at both operations…No doubt we’ve had our challenges, and I am confident that we can fix all of those challenges. But at this point, relative to our level of production, there is certainly a disconnect in terms of the valuation and we see that as an opportunity for potential investors going forward.”
Regarding the Mexican tax situation, he said: “There has definitely been a recent change in the attitude towards, I would say, foreign investment in Mexico, particularly with the, I guess, the Trump factor, for lack of a better word. And so, we’re continuing to have a dialogue with them and see if we can move some positive resolution here.”
At the Prospectors and Developers Association of Canada conference, Silver Wheaton’s CEO Randy Smallwood said he would consider changing its financing deal with Primero on the San Dimas mine if that would improve the “health of the asset.” PPP remains a buy under $2 for a $6 target as Joe Conway gets them back on track and they increase drilling and mill capacity.
Primary Risk: Prices of precious metals fall due to US dollar strength.
International & Other Recommendations
It is important to hold some non-US assets, especially in China, and some diversifying assets like bitcoin and our periodic short against the long bond.
Bitcoin (BTCUSD=X on Yahoo – $1,158.20) took a dive today after the IRS asked a federal court to compel digital currency exchange Coinbase to provide it with records on users between the years 2013 and 2015, in response to a subpoena. Hey, that includes me! This fight has been going on for a while. It may give us a chance to buy bitcoin under my $1,100 limit.
Buy bitcoin under $1,100 for a next target of $1,400. My ultimate target price is much higher. Most subscribers should have no more than 5% of their net worth in this speculative investment.
Primary Risk: Bitcoin adoption and transaction rates stop growing.
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The total population in the blue area is the same as in the red area.
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Manu Cornet, a Google engineer who regularly maintains a comic called Bonkers World, is best known for this classic cartoon from 2011 on the organizational charts of famous companies, including Google:
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Michael Murphy, CFA
Founding Editor, New World Investor
These are the stocks everyone needs to own because transformative events are happening over the next year or two, and I expect to hold them long-term.
Arch Therapeutics (ARTH) – Buy under $0.70, first target $3.50
Antares Pharma (ATRS) – Buy under $5, first target $10
BioDelivery Sciences (BDSI) – Buy under $9, target $15
Keryx Biotherapeutics (KERX) – Buy under $14, first target $20s
Parnell Pharmaceuticals (PARNF) – Buy under $1.20, first target $4
ScyNexis (SCYX) – Buy under $4, target price $9
TG Therapeutics (TGTX) – Buy under $6.50, target price $25
Apple Computer (AAPL) – Buy under $115, target price $135
Cisco Systems (CSCO) – Buy under $32, target price $36
Gilead Sciences (GILD) – Buy under $105, target price $130
Content On Demand
QuickLogic (QUIK) – Buy under $4, target price $6
Sprott Gold Miners ETF (SGDM) – Buy under $25, target price $50
ALPS Sprott Junior Gold Miners ETF (SGDJ) – Buy under $39, target price $100
Global X Silver Miners ETF (SIL) – Buy under $25, target price $50
Central Fund of Canada (CEF) – Buy under 5% discount to NAV, target price 8% premium to NAV
Coeur Mining (CDE) – Buy under $10, target price $20
Energold (EGD.V) – Buy under $2, target price $5
Paramount Gold Nevada (PZG) – Buy under $5, first target price $10
Primero Mining (PPP) – Buy under $2, target price $6
Sandstorm Gold (SAND) – Buy under $10, target price $25
Sprott Inc. (SII.TO) – Buy under $3, target price $7
International & Other Recommendations
Bitcoin (BTCUSD=X) – Buy under $1,100, next target price $1,400
Morgan Stanley China A-Shares Fund (CAF) – Buy under $21 for a three- to five-year hold
KraneShares CSI China Internet ETF (KWEB) – Buy under $43 for a double over the next three years
SPDR Euro STOXX 50 Fund (FEZ) – Buy under $41, target price $65
Global X MSCI Greece ETF (GREK) – Buy under $8, target price $16
These are holds but not sells – yet. They could get moved back to one of the buy categories if their prices drop or outlook improves, or they could become sell recommendations in the future.
Towerstream (TWER) – hold for rights offering
A Short-Sale or REO House – hold for income
Bag of Junk Silver – hold through silver bull market
Publisher: GwynRose LLC, 5348 Vegas Drive, Suite 868, Las Vegas, NV 89108
New World Investor does not act as a personal investment adviser or advocate the purchase or sale of any security or investment for any specific individual. The recommendations and analysis presented to members is for the exclusive use of members. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. Recommendations are subject to change at any time. Nothing in this presentation should be considered personalized investment advice. No communication to you by Michael Murphy or any of our employees or contractors should be deemed as personalized investment advice.
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