Navidea Biopharmaceuticals Inc (NAVB) has launched its lymphatic mapping agent Lymphoseek for use in breast cancer and melanoma with partner Cardinal Health Inc (CAH), and is looking at potential to expand the label for use in other areas after promising results shown in head and neck cancer, says Dr. Mark J. Pykett, CEO of Navidea Biopharmaceuticals Inc.
“Lymphoseek was approved for use in lymphatic mapping procedures in breast cancer and melanoma by the FDA in mid-March, and we launched the agent commercially in early May with our partner Cardinal Health in the United States. Cardinal Health is the leading distributor of radiopharmaceuticals in the U.S., and they are really the best-suited partner to make Lymphoseek a commercial success,” Dr. Pykett said.
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Upon approval, Lymphoseek had been through a number of rigorous clinical studies that demonstrated its ability to pinpoint and accurately identify key lymph nodes, Dr. Pykett said. Those lymph nodes are then biopsied to determine if the cancer has spread. NAVB is now looking forward into the possibility of expanding the label into other types of cancer after strong data from a third Phase III study in patients with head and neck cancer.
“The results in this study, called the NEO3-06 study, are very compelling. In this study…we showed that Lymphoseek had a very high sensitivity of about 97.5% with a very low false negative rate of about 2.5% in identifying lymph nodes that contain cancer in patients where the disease has begun to spread from the primary tumor site into the lymphatic system. That’s an astonishingly low false negative rate that really shows the ability of Lymphoseek to identify the right lymph nodes and be able to help determine if the cancer has spread into the lymphatic system,” Dr. Pykett said. “We are now assessing those data with the possibility of submitting an sNDA, or supplemental NDA, to the FDA later this year, which would potentially allow us to expand the label for Lymphoseek into other kinds of cancers such as head and neck cancer.”
Chart Industries (GTLS) offers investors exposure to the growth of natural gas fuel stations in China, currently with a contract to fulfill orders for PetroChina (PTR) and expecting more business to come from international markets, says Pavel Molchanov, Analyst at Raymond James & Associates, Inc.
“Chart as a whole has a wide range of products for a wide range of different gas-related end markets, not all of which are specifically focused on energy. But there is no question that the natural gas fuels arena is one of the principal growth drivers for Chart. In China alone this year, they have received $85 million of contracts from PetroChina, one of China’s top energy companies, and I think there is plenty more where that came from,” Molchanov said.
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Molchanov says China plans to build more natural gas fuel stations in one year than the United States has built in its entire history, and PTR is building most of them.
“Even though the price of natural gas is more expensive in China, in India and certainly in Europe than it is in North America, governments have been much more supportive of developing the natural gas fuels market, and industry adoption has generally been more rapid,” Molchanov said.
Cardinal Health Inc (CAH), a health care services company providing products and services to health care providers, is coming through a challenging couple of years with opportunities for cash flow deployment, the re-establishment of their medical side of business as well as a positive bias toward dividends, says Ross Muken, Senior Managing Director at ISI.
“We…like Cardinal Health (CAH) in the service complex — great pharma distributor, pharma wholesaler. They had a challenging 2012, 2013 through the loss of Express Scripts and Walgreens. They’re now compounding against that,” Muken said.
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Muken expects CAH to deploy a significant amount of cash flow as they re-establish their medical side of the business, and sees other positive characteristics of the company that enhance its value.
“We think stocks are quite inexpensive. You’ve got a great positive bias toward dividends, and there is a lot more, we think, that can come on the M&A side that continues to enhance the overall mix,” Muken said.
EnerNOC (ENOC) is the lead demand-response provider, a technology that has now been accepted by utilities and grid operators as a resource, and the company trades inexpensively when compared to independent power producers while having better growth, margins and a healthier balance sheet, says Ben Kallo, Senior Analyst at Robert W. Baird & Co.
“On EnerNOC, you have a company that’s cheap; it’s a leader in its industry, the demand response industry. We have good visibility into the rest of the year. The third quarter, there is some seasonality where the third quarter is the biggest quarter, so I’d like to get ahead of that. We have good visibility in 2014, 2015,” Kallo said.
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Kallo says ENOC is currently developing new applications on energy efficiency and currently has opportunities to expand its services internationally, especially as the world becomes more accepting of newer technologies for energy management.
“There’s room for it to grow internationally. EnerNOC is doing a good job bringing their service, their software, their technology to places like Australia, New Zealand and the U.K., and they’ll enter new markets, too, as these different countries become more comfortable,” Kallo said.
WGL Holdings (WGL) trades at a premium to natural gas utilities group despite a lack of earnings growth and a trend from its customer base to reduce spending, leading Christopher B. Muir, Equity Analyst at S&P Capital IQ, to rate the stock a “sell” with a price target of $43.
“If you look just at pure-play natural gas utilities, the average p/e ratio is 16.7, and so they are trading at a slight premium to that. And I don’t think — I think that they should trade at somewhat of a discount to the pure-play side; it is just a fact that I don’t think they are growing quite as quickly,” Muir said.
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Muir says WGL is exposed to government budget cuts through its Washington customers, and the sequester is expected to result in reduced spending in its services. Muir says that, although the company does have investments in nonregulated businesses, they currently are not big enough to offset the negatives.
“The Washington area economy is right now suffering from the sequester cuts, so there are a lot of general contractors that were in the defense industry who have been furloughed, and so I think they are cutting back on spending. They are just looking for ways to save money. As a result, I see households spending less on gas as they try to conserve,” Muir said.
ITC Holdings Corp. (ITC) has been making investments into its systems while also completing projects, adding to its EPS growth, which is expected to grow triple the rate of other pure-play utilities, and the company is also looking to increase their dividend in double-digit rates, says Christopher B. Muir, Equity Analyst at S&P Capital IQ.
“The company has really been investing a lot in its transmission system and both in maintenance, investments and in growth projects. They have recently completed a number of projects, which have added to their EPS growth. We see them growing EPS at roughly a 17% three-year compound annual growth rate, and that is triple what other typical pure-play utilities have, but at the same time ITC’s current 2014 p/e ratio is just 15.2 times, so it’s even with electric utilities, and its 2013 p/e ratio is 17.8 times earnings,” Muir said.
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Since ITC is trading at a small premium to the electricity utility space and is also seeing triple EPS growth to other utilities, Muir sees the stock as a strong value play and growth play at the same time. He is also expecting the company to increase its dividend in double-digit rates.
“The company, in addition to growing its EPS, is growing its dividend very quickly. It does have a fairly low dividend yield of just 1.7%. But again, as they increase their dividend in double-digit rates as my expectation, that yield will go up over time for purchased shares. I have a $109 price target on ITC and a five star or ‘strong buy’ opinion,” Muir said.
AcelRx Pharmaceuticals Inc (ACRX) is preparing for the U.S. launch of its novel lead product candidate Zalviso, which through late stage clinical tests has shown the ability to manage postoperative pain nonintravenously, says Richard King, Director, President and CEO of AcelRx Pharmaceuticals Inc.
“AcelRx fundamentally set out to come up with a different opioid to manage postoperative pain than morphine or hydromorphone, delivered nonintravenously through a preprogrammed delivery device. We’ve now come to the end of our Phase III studies, had great success with our technology that we’ve developed to meet that challenge, and we’re now getting ready to file our NDA to approve the drug in the United States,” King said.
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Zalviso is a new technology that uses an opioid called sufentanil, which is delivered under the tongue, King says. The sufentanil then leaches into the plasma to get delivered to the effector site in the brain where the opioid receptor is located. With the technology’s success in the company’s late stage studies, King expects ACRX to begin to commercialize Zalviso in the last quarter of 2014 upon FDA approval.
“We’ve completed all of our late stage clinical tests, including two placebo-controlled studies and one active comparative study against intravenous patient-controlled analgesia with morphine; all very successful studies, clearly demonstrating that our new technology, Zalviso, has an ability to manage postoperative pain well while also giving both patients and health care professionals a good experience in that management process,” King said. “Assuming that the FDA approves Zalviso, we would then look to begin to commercialize in the last quarter of 2014 and into 2015.”
ADA-ES (ADES) is expected to benefit from regulation that gives the company a large tax subsidy for its coal technology, and there is growth expected on the company’s emissions control, says Sanjay Shrestha, Managing Director and Senior Analyst at Lazard Capital Markets.
“Under the current administration, it will clearly be difficult to build a new coal-fired power plant. Specifically for ADES, the company remains a beneficiary of Section 45 tax credit. This allows a refined coal facility using clean coal technology to receive large tax subsidy, and the ADES’s JV will generate substantial cash flow,” Shrestha said.
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Shrestha remains a buyer of the stock despite current levels and despite current moves. He says the company’s joint ventures should increase free cash flow, and the emissions control is expected to expand into different chemicals.
“The company has formed a clean-coal JV with two other partners and has a 42.5% stake in the JV, which should provide FCF in excess of $130 million through 2021. Now in terms of the other emission regulations, obviously controlling mercury, SOx and NOx will remain an area of growth for the company. Over time there may be some opportunity surrounding CO2 capture,” Shrestha said.
Microsoft Corporation (MSFT) is generating a great amount of cash flow and has changed aspects of the company that aren’t reflected in its valuation, and is looking at potential benefits of new chips coming from Intel Corporation (INTC), which may drive consumer activity, says Nathan Snyder, Portfolio Manager at Snow Capital Management.
“We believe [MSFT] has changed in ways that don’t seem to be reflected in the valuation — 75% of their business is not Windows-related. The percentage that is Windows obviously has some issues, but the company has been able to, in some ways, transform itself into a different company than the way people have traditionally viewed it. They are no longer a true growth company but they generate a great amount of cash flow,” Snyder said.
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Snyder expects new chips coming out of Intel to drive a product refresh across the technology market, driving some consumer activity and potentially benefiting companies like Microsoft.
“From a timing standpoint, we believe that the new chips coming out of Intel should drive a product refresh across the technology market. There is no guarantee that this will be the case and we remain open-minded, but we should see relatively quickly whether this holds true or not. It’s been a while since anything outside of an Apple (AAPL) product has created a product refresh cycle. So the extended battery life of the new chips from Intel should drive some consumer activity,” Snyder said.
Greencore Group plc (LON:GNC) is expected to continue its dominant position in the U.K.’s convenience foods market and has made way into the U.S. through acquisitions that gave them an entry into Starbucks Corporation (SBUX) and 7-Eleven, says Bernard R. Horn Jr., President and Portfolio Manager of Polaris Capital Management, LLC.
“Greencore makes chilled foods, ready-to-eat meals and sandwich products that are primarily sold to large retail grocery stores in the U.K., like Tesco (LON:TSCO), Marks & Spencer’s (LON:MKS) and Asda,” Horn said. “In the U.K., store brand goods comprise a high percentage of grocery store sales; in the U.S., such sales are still much less. Retailers who operate in Europe and the U.S. have sought to convince Greencore to enter the U.S. market to increase the percentage of sales dedicated to store brands.”
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Greencore is one of Horn’s top holdings, as it has relatively lower volatility. The company has made acquisitions over the last couple of years that have given them entry into the U.S. market, and Horn expects continued growth there.
“Greencore made a couple of acquisitions over the last year or two that gave them an entry into Starbucks and 7-Eleven accounts. This is a company that may expect to continue its dominance on the U.K., while growing its business in the U.S.,” Horn said.
