Stock Investing Guide

Pharmaceutical behemoth Pfizer currently sports a market cap of $102 billion and annual revenue of $48 billion. Merck, another mammoth drug maker, has a $65 billion market cap and annual revenue of $24 billion. Glaxo SmithKline, with a market cap of $95 billion, generated $22.7 billion in revenue over the past year…
Obviously, these industry leaders know how to make money. Pfizer's annual revenue works out to 47% of its total market cap. The annual revenues for Merck and GSK come out to 36.9% and 23.9% of their market caps, respectively…
This month, we've found a stock that can top the numbers of even the biggest drug giant. It's a penny stock pharma play with a market cap that doesn't even approach $100 million. We don't think it'll stay this way for long, considering the company just signed a commercialization agreement worth more than its entire market capitalization.
You simply won't come across a deeply discounted pharma stock such as this very often. The market has managed to overlook quite a gift…let's take advantage of it.
Grab Your Share of a $31 Billion Market
In 2007, the value of the global pharmaceutical pain relief market was approximately $31 billion. In the United States, two-thirds of the dollar volume of the prescription pain medication market is for drugs used to treat chronic pain, with the remainder going toward drugs used for acute pain.
Javelin Pharmacueticals Inc. (JAV:AMEX) designs products to fulfill unmet and underserved medical needs in the pain-management niche. The company is particularly focused on breakthrough cancer, post-operative, back, orthopedic injury and burn pains. Despite the advances in medicine, the company insists treatments for these types of pain continue to be an underserved medical need.
That's where Javelin's lucrative new contract comes into play…
The company penned an agreement in January worth up to $71 million that includes double-digit royalties on future sales of its new pain drug, Dyloject.
Javelin will receive roughly $12 million in upfront cash payments from European pharmaceutical developer Therabel for the commercialization rights for Dyloject, the flagship product in Javelin's current pipeline. Dyloject is an injectable form of diclofenac, which is a prescription anti-inflammatory drug often prescribed to treat post-operative pain.
Dyloject is undergoing Phase 3 clinical development in the United States - the drug is already available in the United Kingdom. During its pivotal U.K. registration trial, Dyloject's efficacy and safety were shown to be significantly superior to standard intravenous treatments currently marketed in the U.K.
A Faster, Better Treatment
The competition for Dyloject requires dilution and slow infusion into the patient. But Dyloject comes ready to use for immediate IV administration. The drug works faster than its main competitor, and according to a recent study has the potential to save the U.K.'s National Health Service up to $73 per post-operative patient.
Anti-inflammatory drugs such as Dyloject, along with opioids like morphine, are often used post-operatively. They help reduce opioid doses by as much as 50%, thereby decreasing morphine-related side effects on the patient. Some of the opioid side effects reduced by this dose-sparing approach include nausea, vomiting and trouble breathing. Additionally, the less morphine used, the less likely that the patient's body will become dependent upon the addictive drug during recovery.
Dyloject's most significant U.S. competitor in the injectable anti-inflammatory category is ketorolac tromethamine. In January 2006, Javelin announced the results of a Phase 2b U.S. study in which Dyloject showed superior onset of action compared with ketorolac five minutes after intravenous injection.
Bottom line: This drug does what it is supposed to do. And it does it better than all of the leading competitors. That's the ringing endorsement for Dyloject…especially since it's awaiting approval in the U.S.
U.K. Sales and European Agreement Are Signs of Things to Come
Dyloject is already on the market in the United Kingdom, and sales have been growing at an impressive pace. The drug is now on the formularies of 73 hospitals in the U.K., 58 of which were considered gold accounts and 15 silver accounts. In the first nine months of its availability, Dyloject was accepted at 40% of their targeted accounts.
In the most recent quarterly conference call, Javelin CEO Martin Driscoll said that he continues to be impressed with the acceptance of Dyloject in the U.K. This initial trend bodes very well for the pending approval of the drug in Europe and the United States.
The drug has been accepted at 95% of the institutions to which it's been presented. This, Driscoll believes, shows that Dyloject has value to clinicians. It will prove valuable to shareholders, too…
Since Dyloject was introduced to the market, sales of the drug have doubled each quarter. Although that may be a small sample size, it shows the growth potential of the product once it is introduced into a wider market.
Javelin is on schedule to complete its studies on Dyloject and submit applications in late 2009 for approval in the U.S. and European markets. The partnership with Therabel helps Javelin accelerate this process.
Javelin's a Bargain at Current Prices
Javelin has put itself in a fantastic position to succeed. The company currently has $34.6 million in cash and equivalents and no long-term debt whatsoever. Its burn rate during the first three quarters of 2008 was $8.6 million. With $12 million in upfront cash from Therabel, the company is well positioned to wait out approval in the U.S.

Like most of the market, shares of Javelin were slammed over the past year. Even after the partnership with Therabel was announced, the stock didn't bounce much. With drug applications expected in late 2009 and shares are low levels, investors have a great opportunity to get in at a bargain level.
Recently, costs have been higher than expected. Javelin expects these costs will continue to be high in the short term, but will decrease as production increases and the company streamlines supply chain issues. Regulatory approval in the U.S. would be a major step toward scaling this business and reducing operational costs.
A Pipeline Filled to Capacity
Javelin feels that self-medication segment is an area of possible growth. It generally takes 15-20 minutes and sometimes as long as 40 minutes for commercially available oral pain medications to provide any meaningful relief. Javelin says that all three of its product candidates appear to work faster than the oral formulations of currently available prescription pain products. Dyloject has shown to relieve pain in as little as five minutes, a mark that has not been achieved by current injectable anti-inflammatory drugs.
Other shortcomings of presently available pain drugs include poor side effect profiles and requirements for invasive routes of administration, such as intravenous infusion. Due to the current delivery methods, undertreatment and overtreatment often result. Javelin currently has two late-stage drugs aimed at helping resolve these issues.
Rylomine (intranasal morphine) and PMI-150 (intranasal Ketamine) are both in Phase 3 trials in the United States. These candidates are less-invasive routes of administration for self-medications. Both of the drugs have IV-like effects without the invasive nature of IV administration or the need for patient-controlled infusion pumps.
These two product candidates present an opportunity for improved drug therapy both in the hospital setting and other medically supervised settings. The company feels that the economic benefit of nasal administration is very compelling. These products would eliminate the need for the staff and equipment needed to set up an IV. Additionally, by eliminating the IV, the incidences of needle injuries and the potential for transmission of blood-borne viruses are reduced.
The ability of the patient to self-regulate the medicine would provide greater control to the patient and thereby help avoid doses that are higher than necessary.

A Vested Interest in Javelin's Success
CEO Driscoll has shown his confidence in Javelin with his money. In May and June of 2008, Driscoll purchased 50,746 shares of Javelin common stock at a value of $169,598.
He wasn't the only one. In total, Javelin's directors and officers purchased 667,776 shares in 2008. That's more than $1.6 million in company stock.
In 2008, Javelin's leadership made their confidence known with large bets on the company's stock. (Refer to insider table on previous page.)
We like the fact that Javelin's leadership has a significant stake in the company's future. And with shares at their current levels, you have the chance to join them in investing in the potential of these pain-management drugs. 2009 will be a huge year for Javelin. Get in on this bargain now.
Action to take: Buy shares of Javelin Pharmaceuticals Inc. (JAV:AMEX) for $1.75 per share or less.

STAYING IN THE LOOP

Believe it or not, the stock market isn't perfect. It's not the omniscient force so many people think. It's not infallible.
Indeed, the market is driven by people. Buy and sell orders dictate where the market's going at any given time. And more importantly, misapprehensions lead to misaligned prices…that's where money's to be made for investors who are willing to think beyond the confines of Wall Street.
Just look at LoopNet (LOOP:NASDAQ), a victim of the free-falling market that's seen a 51% drop in value over the course of the last year.
LoopNet is the leading commercial real estate marketplace. When a company wants to buy a new office building or an entrepreneur is in need of retail space, they turn to LoopNet because it provides more commercial listings than any other real estate Web site. It also gets more traffic. At more than 910,000 unique visitors monthly, the site has five times more traffic than its closest competitor.
The company has been a Wall Street darling since its initial public offering in 2006, but it's not hard to see why LoopNet's price has fallen so sharply.
Commercial real estate took a massive hit in 2008. In New York City - one of the strongest commercial real estate markets in the country - transactions plunged 61% through October, according to Bloomberg.
Prospects don't look great for 2009 either. Even the most optimistic industry analysts see residential and commercial real estate struggling for the entire year. So why then are we writing to you about a company that helps businesses buy and sell property?
The reason is simple: LoopNet is one of those misunderstood companies.
The Company Wall Street Just Doesn't Understand
Believe it or not, the deteriorating real estate market hasn't taken a huge bite out of the company's ability to make money - LoopNet makes its revenues from the premium subscriptions it sells to companies looking for real estate. The company's more than 88,000 premium subscribers pay less than $100 per month for unfettered access to all of LoopNet's listings.
What's unique about LoopNet is the fact that its subscription rates are relatively resistant to a bad real estate market - after all, is a commercial developer likely to cancel its $100 per month subscription just because the economy's in the gutter? Probably not - it's a tool it needs to conduct its business, even when business is bad.
That idea has translated over to LoopNet's income statement in 2008. In its latest earnings release, on Feb. 11, it reported revenues of $86.1 million, a 22% growth from one year ago.
The notion that LoopNet would be hit hard by a slowdown in commercial real estate has been a misapprehension on the part of Wall Street. The analysts and investment firms miscalculated just how resilient this company is, and now's your chance to profit from their error.
Positioned to Ride out 2009
Right now, LoopNet's financial position puts it in a nice spot to ride out any difficulties it could face in 2009…The company's bank accounts are flush with $66 million in cash, and it's debt free. That means it's got enough money to operate for the next five or six years without any cash coming in the door.
But cash is certainly coming in right now anyway.
In the fourth quarter of 2008, LoopNet reported profits of $18.3 million.

Whether or not commercial real estate markets will rebound in 2009 remains to be seen. There's no question that a better environment for commercial real estate will bring huge benefits for a company like LoopNet. That said, there's also little doubt that LoopNet can continue to thrive in the interim.
Our analysis puts LOOP's value around $15.09 per share - the only question is how long it will take to get there, given Wall Street's inability to realize this company's enormous potential. Even so, we see the stock above $10 in the next year.
Action to take: Buy LoopNet (LOOP:NASDAQ) up to $7.10 per share.

Understanding a company's potential is one of the most important aspects of investing… especially for penny stocks. Without knowing what a company is capable of, you have no chance of ever striking it rich.
Today, we must take a step backwards. It's not something we enjoy, but it's fundamental to smart penny stock investing.
Arrowhead Research Corp (ARWR:NASDAQ) is one of the dream companies you tell your friends about. The firm is the majority shareholder in certain businesses that own major intellectual properties over sciences and breakthrough such as carbon nanotubes, RNAi development, and even stem cell technologies.
The company has exclusive deals with major players in all fields - the most important is Samsung in the LCD field. It also has rights, and ambitions, to technologies that have proven themselves in rehabilitating severed spinal cords.
Unfortunately, the investors were just not there to back Arrowhead up. There's nothing we can do about it. We swung for the fences at a fastball right down the middle of the plate and we missed. These patents and intellectual properties alone are worth our investment. The market just doesn't see it that way.
Lucky insiders of Arrowhead, we have no doubt, will someday be rewarded for their scientific progress. Unfortunately, we are not insiders. NASDAQ has sent a letter announcing that if Arrowhead doesn't bring their shareholder equity above $10 million, then it will be delisted. That's our cue to leave the stage.
While this one hasn't panned out for us the way it should have, we have to acknowledge the potential was right and the risk was justified. It's now time to sell and put our money into opportunities equal in potential and risk. Penny Stock Fortunes aren't made on mediocre gains. They are made by swinging for the fences, even if the rest of the market calls you out from time to time.
We'll keep our eyes peeling to see where these breakthrough intellectual properties go. For now…
Action to take: Sell shares of Arrowhead Research Corp (ARWR:NASDAQ) at market.
Sell Share of Terex Corp.

Terex Corp. (TEX:NYSE) reported a net loss of $421.5 million for the fourth quarter due to a one-time charge of impairment to goodwill. This quarter sank the company's entire fiscal year 2008, leaving it with a net gain of only $71.9 million.
With the shock of the impairment, shareholders are selling like wildfire. Shares fell 31% on the day of the announcement.
It's time for us to get out too - but not because of the one-time write-down…
Terex is, and will stay, an industry leader. But after hearing the CEO spout about increased competition, lowered margins and long-term recession problems, it's clear we are on a different page.
There will be plenty of money to be made in the heavy machinery needed to build infrastructure. Unfortunately, Terex isn't going to benefit as much as it should. It's clear the company is cutting back…
The best businesses will look at an opportunity such as this stimulus bill and take advantage of it. Terex's older brother Caterpillar is doing just that. President Obama said, "The CEO of Caterpillar said that if this American Recovery and Reinvestment Plan is passed, his company would be able to rehire some of the employees they've been forced to lay off."
That's a good sign. But Caterpillar is too big for us - and not exactly cheap at the moment. While we are selling one of our favorites, Terex, we will be looking for other ways to get into this coming infrastructure boom.
Action to take: Sell shares of Terex Corp. (TEX:NYSE) at market.
Sell Shares of AudioCodes
Last week, AudioCodes Ltd. (AUDC: NASDAQ) became one of the newest victims of the recession, missing its already-lowered estimates for the fourth quarter last week. Guidance isn't looking any better, either…
The $38.8 million AudioCodes posted in the fourth quarter was almost 10% less than the company brought in a year earlier.
What's even more distressing is how the bankruptcy situation with Nortel - the company's largest customer - is affecting AudioCodes' top line.
As of right now, our timeframe for recovery for this stock has increased dramatically. We feel that it's not worth holding on to this position any longer, instead using our capital for more promising picks.
Action to take: Sell shares of AudioCodes (AUDC: NASDAQ) at current prices.
Sell SOAP for Double-Digit Gains
Close out your position in Soapstone Networks (SOAP:NASDAQ). In light of another quarter of waiting for the company's PNC technology to be deployed on a wide scale - and translated into earnings - we've decided to book the double-digit gains we've made since recommending the stock on Nov. 20, to avoid the volatility we're seeing in the small-cap market right now.
Gains have been hard earned in 2009, but we've been able to capitalize so far over the last several months. Congratulations on your well-deserved gains on this position.

Action to Take: Sell shares of Soapstone Networks (SOAP:NASDAQ) for 20% gains.