More BS from Obama; Monday Morning Chartology; Update on Polymedix (10 bagger)
Steve Cook on Disciplined Investing

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Have You Seen This?


The Market
    
    Technical

    The January barometer (short):
    http://www.investmentpostcards.com/2010/01/09/year-endnew-year-indicators-progress-report-2/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+wordpress%2FVYxj+%28Investment+Postcards+from+Cape+Town%29&utm_content=Yahoo!+Mail

    Market performance in the second year of the Presidential cycle (chart):
    http://www.ritholtz.com/blog/2010/01/year-2-of-the-presidential-cycle-the-historical-record/

    The latest from TraderFeed:
    http://traderfeed.blogspot.com/2010/01/two-views-of-market-sentiment.html

       Monday Morning Chartology

    Note: I have redrawn the trend lines for the S&P.  The gold chart is simply an update but is self explanatory.  The VIX shows a continuing sizeable decline--which my own pessimism notwithstanding--is a very positive sign of investor confidence and an indication of more positive stock price performance.











   Fundamental
        
     Bob Doll, vice chairman of Blackrock, predictions for 2010 (short):
    http://www.investmentpostcards.com/2010/01/09/bob-dolls-crystal-ball-into-2010-and-the-next-decade/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+wordpress%2FVYxj+%28Investment+Postcards+from+Cape+Town%29&utm_content=Yahoo!+Mail

    Headlines

    Friday afternoon, the American people got yet another dose of smoke and mirrors from Obama.  He announced that the way out of the jobs crisis is increase spending on clean energy.  Sound familiar? Sort of like ‘the way to solve deficit problem is to increase healthcare spending’ or how about ‘the $700 billion stimulus bill will produce 5.5 million jobs in the next two years’.  How’s that working out? 

    Making matters worse, America has an alternative clean energy with reserves larger than Saudi Arabia--natural gas--that can be accessed right now, would create jobs and with no expenditure of tax dollars.

    Ralm Immanuel: ‘never let a crisis go to waste’.

    http://mjperry.blogspot.com/2010/01/us-natural-gas-energy-saudi-arabias-oil.html
    (short)

    And from my buddy, Larry Kudlow (medium):
    http://kudlowsmoneypolitics.blogspot.com/2010/01/de-stimulate.html

    Here is a report of Spain’s experience with ‘green jobs’ (short):
    http://michellemalkin.com/2009/04/13/spains-green-jobs-boondoggle/
       
    News on Stocks in Our Portfolios

    A positive write up on Fastenal (Aggressive Growth Portfolio):
    http://seekingalpha.com/article/181860-fastenal-investing-in-the-nuts-and-bolts-of-the-economy

    A summary of a report on PolyMedix (10 Bagger) from Roth Capital:

A Strong Platform Technology Begins To
Change The Biotech Playing Field

n The PolyMedix Proprietary Platform Technology is the core piece of
the company's value. Both of the Phase Ib clinical programs in
development came from this platform, which we believe differentiates
PolyMedix from the competition. This technology enable PolyMedix to more
accurately develop safer more efficacious drugs by selectively choosing
optimal molecular groups for the drug's backbone.

n PolyMedix currently has two ongoing Phase Ib clinical programs. One
of the programs is a heptagonist which is used to reverse the effects of
heparin in surgery and low molecular weight heparin. Both of these
markets combined are billion dollar opportunities with the currently used
drug on the market, protamine, being less than optimal and no competition
on the horizon. The second program is a potent, broad spectrum antibiotic
targeting both gram positive and gram negative bacteria. Both programs
lend themselves to partnership possibilities.

n PolyMedix targets therapeutic markets which have defined clinical
endpoints and quick development time. This is exemplified in both of the
current ongoing clinical programs, which have moved through Phase I
dose-escalating trials rapidly and successfully.

n PMX-60056, the heptagonist, will enter Phase II clinical trials in 1H10,
in our opinion. Trials for this indication enroll rapidly with quick results
given the simple lab measurement needed to attain the clotting time of
blood. Additionally, we expect the antibiotic to enter Phase II testing in
mid-2010, once additional GMP-manufactured drug is obtained from the
manufacturer.

n Multiple milestones through 2010 should drive shares of PolyMedix.
With trial results moving swiftly investors have many catalysts to invest and
make money on shares of PYMX in the near-term, in our view. We use a
35x multiple to our FY14 EPS estimate, which we believe is warranted due
to the significant market opportunity of PolyMedix's programs. We
additionally apply the high risk discount rate of 35% based on the early
stage nature of the programs to arrive at our price target.

SUMMARY

We are initiating coverage of PolyMedix, Inc. with a Buy rating. PolyMedix is currently in Phase Ib clinical development with a heptagonist for the reversal of heparin and low-molecular weight heparin (LMWH) as well as with an antibiotic, which has broad activity against multiple strains of highly resistant bacteria, including the endemic Methicillin Resistant Staphylococcus aureas (MRSA). PolyMedix is uniquely positioned in that both of its clinical programs were generated through the company's de novo drug design technology. The technology that is generated from computational models are novel, small-molecule biomimetics. Biomimetics are small polymers that mimic the behavior of naturally occurring proteins within the body. This technology allows PolyMedix to approach multiple therapeutic areas, but the company is focused on therapeutic areas with high unmet medical need and fast pathways to approval.  

VALUATION

We are initiating coverage with a Buy rating and a price target of $5 on shares on PolyMedix. Our target is derived by applying a 35x multiple on our FY14 EPS estimate of $0.47 and discounting back four years by 35%. We believe the continued development of both the heptagonist as well as the antibiotic will create a nice upward movement in the shares of PYMX. When compared to other biotech companies, either on a technology value basis or pure market cap basis, shares of PolyMedix are still significantly underappreciated, in our opinion.

We have the heptagonist and antibiotic entering commercialization in 2013 with partial sales and 2014, which is the year we base our full price target from, the drugs have penetrated the market with a conservatively modeled full year of sales.

If access to capital becomes constrained, we would see a slow down in clinical development, which would delay our current projections. Additionally, if PolyMedix, partners any of their programs, our model changes dramatically, as we currently have PolyMedix keeping all rights to the products.
Finally, if there were a hiccup in the development of either lead program, investors could become leery of the platform technology and garnering new investors could be difficult.

RISKS

The risks involved with an investment with PolyMedix are the same types of general risks shares by all small-cap biotech investors. Shares of PolyMedix can be very volatile and in as is the case with biotech, each news event is a binary event that no one knows the answer to ahead of time. PolyMedix could run out of cash and not be able to raise cash except under very dilutive terms. Cash requirements are high for pivotal testing of drugs and additional financing or partner funding would be needed to complete these trials and reach commercialization.

Many additional clinical trials must be completed before either potential therapeutic can reach the market. In the course of running additional trials, clinical trials could fail, safety issues arise, competition may enter with a better molecule.
 
Economics

   This Week’s Data

   Other

    No job growth in the last tem years (chart):
    http://www.investmentpostcards.com/2010/01/09/chart-du-jour-a-decade-of-no-new-jobs/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+wordpress%2FVYxj+%28Investment+Postcards+from+Cape+Town%29&utm_content=Yahoo!+Mail

    Some positives in last Friday’s jobs report (short):
    http://mjperry.blogspot.com/2010/01/temp-jobs-rise-5th-month-first-time.html

    This is a 30 minute video by economist Steven Keen.  It gets a bit technical but it is well worth your time to view it.  The essence of his message is that debt and credit levels drive economic activity and given the current huge debt levels and the accompanying de-leveraging, the economy has a very limited ability to grow:
    http://www.investmentpostcards.com/2010/01/08/steve-keen-how-do-we-pay-for-all-this-debt/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+wordpress%2FVYxj+%28Investment+Postcards+from+Cape+Town%29&utm_content=Yahoo!+Mail
       
Politics

  Domestic

  International War Against Radical Islam

    Israeli general denies Iran will be a nuclear threat anytime soon (short)
    http://www.nakedcapitalism.com/2010/01/isreali-general-formerly-head-of-nuclear-weapons-denies-iran-as-a-nuclear-threat.html









Posted 01-11-2010 8:34 AM by Steve Cook