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To
OTC Journal Members:
Quote of the Week:
"A lot of buying is in low-price,
beaten up technology stocks - the $1 and $2 are going to $3 and $4. That's
the vitality. You needed new leadership and you're getting it in the form
of technology and financials services," Said Larry Wachtel, market analyst
at Prudential Securities.
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Market Comment-
This Time It Looks Like It's For Real |
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The action on the NASDAQ was impressive
on Thursday, pushing the index solidly through the 1430 resistance level
on it's fourth attempt to break out since the August low. For the first
time since March of 2000, the NASDAQ has made a consecutive lower high
and higher high. This action provides strong evidence that the elusive
Bull has returned after a 2 1/2 year sabbatical.
As depicted by the blue line in the
chart, the NASDAQ broke through it's 2002 resistance line in the third
week of October, providing the first evidence of a trend reversal. Thursday's
surge above the critical 1430 level (shown by the yellow line) pushed the
NASDAQ through a level it had tried to pierce three previous times. The
next critical level is the 200 day moving average, currently at 1502. Nearly
all technicians consider Indexes trading above their 200 day moving averages
in a long term uptrend. The NASDAQ has not been above the 200 day moving
average since February of 2001.
While detractors are calling this
a technical rally only, Thursday's action was spurred by an impressive
earnings report from Hewlett Packard and a big surprise in the weekly unemployment
numbers. Coupled with the recent third quarter GDP report, which showed
business investment in equipment and software increased at an annualized
6.5 percent, this rally appears to be driven by the market's perception
that corporate performance will improve in 2003, not simply a technical
bounce.
On the negative side, the charts
of the DOW and the S&P 500 don't look nearly as good. Neither has broken
above their August highs, and we can't be in a true Bull Market without
these indexes participating. However, both indexes remain well above their
50 day moving averages, suggesting they are both in shorter term uptrends.
Take-Two Interactive (NASDAQ:
TTWO), the subject of a Trading Alert we issued in our October
30th edition, made a new all time high and appears to be destined for
higher levels. The stock traded to $31.50 on Friday, up 20% in three weeks.
The December $22.5 and $25 call options we suggested at $5 and $4 are now
trading at $7.90 and $6.20, for much higher percentage gains. We still
believe this stock will easily find our target price of $38, and pullbacks
should be viewed as opportunities to accumulate. Vice City, their
recently introduced video game for the Sony Play Station 2, still cannot
be found on the shelves in stores. This could be the best selling video
game of all time.
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Calypte
Biomed (OTC BB: CALY): Misconceptions Offer Opportunity |
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On November 7th, Orasure Technologies
(NASDAQ: OSUR), announced it had received the first FDA Approval for
a "OraQuick® - the first FDA-approved rapid, point-of-care test designed
to detect antibodies to HIV-1 within approximately 20 minutes."
Orasure, well known as the premier
developer of test kits using saliva, got a tremendous amount of high profile
publicity in national media. Their stock went on a tear, trading from $5.78
to a high of $8.15 on twenty times its normal volume.
As you can readily see in the overlaid
chart, shares of Calypte (OTC BB: CALY), gave up 30% of their value,
selling off on the perception that Orasure's newly approved "Rapid Test"
represented significant competition. The chart clearly shows stocks of
each moving rapidly in different directions.
A close look at the two technologies
reveals the knee jerk reaction of investors was, in fact, unwarranted,
and investors should take a look at Calypte at these levels.
Calypte boasts the only FDA
Approved HIV test using urine as opposed to blood. Based on inquiries received
by the company and emails we have received on this issue, investors made
the mistake of believing Orasure's new test represented significant potential
competition for Calypte.
The new Orasure test is called the
"OraQuick® Rapid HIV-1 Antibody Test". The name is very misleading.
There is really nothing oral or rapid about this new test.
The Orasure test requires a blood
technician to draw a small amount of blood from the subject which can be
accomplished with a simple prick in the end of the finger. The blood must
then be transported to a lab just like every other FDA Approved AIDS test.
Once the sample has arrived at the lab, results can be garnered in 20 minutes.
This new test does not have any competitive
advantage over the Calypte urine based test. Calypte's test
still offers the same benefits:
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Lower cost: the test runs about
the same price, but the cost of collection and transportation to the lab
for urine is considerably lower. Urine does not need to be refrigerated
and does not require a licensed lab technician to collect.
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Safer: HIV can be spread through
contact with blood, but cannot be spread through contact with urine. Therefore,
the disease cannot be transmitted when testing with urine.
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More accepted in other cultures:
In many third world countries there are taboos and fears about having blood
drawn. Urine collection does not have those challenges. Also, in many third
world countries samples can take a long time to get to the labs, and refrigeration
for blood is not always an option.
Orasure has a competitive advantage
in the US market as Abbott Labs distributes their test kits. While this
may seem like a negative for Calypte at first glance, it may in
fact end up being a positive.
As mentioned in the September quarterly
earnings conference call, Calypte is currently in discussions with
several household names for US distribution of the AIDS test. Abbott Labs
will no doubt be trying to take market share from existing tests with this
new technology. This new test may be the catalyst required to get one of
the large pharmaceutical companies to engage in a distribution agreement
with Calypte sooner rather than later.
In either case, the US market pales
in comparison with the size of other markets world wide. Calypte
has made significant progress in China with the recent announcement of
a major distribution partner, and is shipping orders now. The first order
flow has started coming out of West Africa, probably the largest market
for AIDS test kits.
Calypte has already developed
a true rapid AIDS test kit, and will be starting the FDA Approval process
early next year. This test works just like a home pregnancy test. A few
drops of urine are applied to a test strip and a color change indicates
whether or not the subject is infected with the HIV virus. The eventual
commercialization of this type of test would be far more significant in
the world wide market than another blood test which has to go to a lab.
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Conclusion |
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Orasure has annual sales of
$31 million, and a market capitalization of $237 million. Their sales have
been declining slightly over the past year. Another testing company, Psychemedics
(AMEX:PMD), a company which develops tests using hair, trades at a $56
million market capitalization on $15 million in sales.
Since restarting production Calypte
has now returned to an annual run rate of about $4 million, and sales are
ramping up rapidly. At current levels, the stock can only boast a $10 million
market capitalization, with enormous growth potential. Many experts in
the biotech field would argue the lab certification alone is worth more
than $10 million.
However, Calypte's market
capitalization is a moving target as the company continues raising capital
to finance the development of the a new truly rapid AIDS test kit. Therefore,
we believe investors should view the company as already having 200 million
share issued and outstanding, even though there are about half that number
at this time.
We believe the market will eventually
place a $50 million value on this company, suggesting your upside potential
on 200 million shares is $.40, 400% higher than today's levels over the
next year, but there will be ups and downs along the way, and there are
no guarantees.
We considered publishing this information
shortly after the Orasure announcement, but we decided to wait for
the stock to bottom out. It seems to have found support at $.09, higher
than the support level at the last pullback. This would indicate that the
stock is positioned to rebound, and therefore today's entry level could
be favorable for both traders and investors.
If the right sequence of events falls
in place, Calypte will find itself in the national media spotlight,
and if and when it happens you will wish you were a shareholder.
Charts Provided Courtesy
Of TradePortal.com
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