Are These Shiny Objects Really Attractive: FUQI, SGMO, DRRX

Trends, Observations, and Exclusive Opinion

Three SmallCaps Continue to Strengthen Their Core Business

FUQI: Co Makes Progress on its Restated Financial Statements

SGMO: Co’s SB-509 in 3 Phase II Trials for Diabetes

DRRX:  Azimuth to Buy $50 Million Worth of Shares over 24 Months

First up this morning we have Fuqi International Inc., (FUQI) http://www.fuqi.com.cn/ currently trading in the $7.87 range on a 3-Month average daily trading volume of 613,281 shares. FUQI has a 52-week high of $32.68 set on 09-15-09 with current trailing twelve month revenues of $466+ million and a positive, corresponding diluted EPS of $2.12. I really, really like those earnings. In China, FUQi sells precious metal jewelry and basics such as rings, bracelets, necklaces, earrings, and pendants made from platinum, gold, palladium, and karat gold. FUQI also manufactures jewelry with diamond and other precious stone inlays, as well as gold coins and gold bars. In an 8-k filing last week, FUQI announced it recently bought the intellectual property rights to the Shanghai Tian Mei Jewelry Co for 1,080,666 shares of common stock. In late June, FUQI announced an update on the status of its financial filings for the first three quarters of 2009, its 2009 Form 10-K and Form 10-Q for the first quarter 2010. Restated financial statements are a pain (been there; done that), but the Co is committed to filing the reports as soon as possible. It does take time. Considering the stock is currently priced at a quarter of its high and the given the rising middle class in China (and those earnings), FUQI is a short-term (6 Mo) ‘Buy’ consideration for me.

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Next up this morning we have Sangamo Biosciences Inc., (SGMO) http://www.sangamo.com/ currently trading in the $4.18 range on a 3-Month average daily trading volume of 271,352 shares. SGMO has a 52-week high of $9.39 set on 09-21-09. SGMO is a development Pharma Co targeting zinc finger DNA-binding proteins (ZFPs) for gene regulation and gene modification in the United States. Its ZFPs can be engineered to make ZFP transcription factors (ZFP TFs), proteins that can be used to turn genes on or off; and ZFP nucleases, proteins that enable to modify DNA sequences in various ways. SGMO’s SB-509 is in three ongoing Phase II clinical trials for the treatment of diabetic neuropathy and one Phase II trial for amyotrophic lateral sclerosis (Lou Gehrig’s disease). SGMO is also developing SB-728-T, which is in the Phase I clinical trial for the treatment of HIV/AIDS. SGMO has license agreements with companies, including Dow AgroSciences, Sigma-Aldrich Corporation; Pfizer, Genentech, Hoffmann La Roche, and Open Monoclonal Technology, Inc. At less than half its high, SGMO remains a short-term ‘Buy’ consideration for me.

Finally this morning we have Durect Corporation (DRRX) http://www.durect.com/ currently trading in the $2.23 range on a 3-Month average daily trading volume of 242,959 shares. DRRX has a 52-week high of $3.14 set on 04-15-10. In an 8-k posted on the first of this month, DRRX entered into an equity line of credit with Azimuth Opportunity Limited; Azimuth is committed to purchase up to $50 million worth of shares of DRRX common stock over the 24-month term of the Purchase Agreement. In my thinking small dilutions in the next two years are worth the capitalizing of ongoing operations and drug trial costs. DRRX pipeline candidates include: Remoxy, an oxycodone gelatin capsule for chronic pain, which is accepted as a new drug application; POSIDUR, a release formulation of bupivacaine that is under Phase III clinical trial for post operative pain; ELADUR, a transdermal bupivacaine patch, which is under Phase II clinical trial, provides continuous delivery of bupivacaine for up to three days from a single application, as well as for the treatment of pain associated with post-herpetic neuralgia; and TRANSDUR-Sufentanil, a proprietary transdermal sufentanil patch, which is under Phase II clinical trial, provides continuous delivery of sufentanil for a period of up to seven days from a single application. At its current price and with secure funding, DRRX is also a short-term ‘Buy’ consideration for me.  

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