Georgetown has reported no revenues through December 31, 2011 and has negative equity as of that date. GTCP was not traded until May 9 and since then has traded around $0.50.

On May 8, 2012, the day before trading in GTCP began, controlling interest (74%) of Georgetown was sold to a new owner. This stock has received an unusual amount of interest for such a newbie.

As with our other momentum alerts, we bring this company to your attention because of the increase in investor awareness and we believe things could get interesting soon. However, GTCP does not seem to be a good prospect for long term value investors at this point and is likely only appropriate for risk seeking investors prepared to lose their entire investment, but might offer early investors a chance to make a large, exciting profit as a short-term play.

As we said, GTCP is only for those looking for a highly speculative play. All the attention paid to GTCP will likely drive a lot of volume at some point, but this does not mean prices will go up. Although we’re pretty confident that there will a lot of action with GTCP and probably the price will rise at some point, we don’t know if this will happen in the next 24 hours or in 2 – 3 months.

Investors interested in GTCP should be prepared to get in quickly when they feel the time is right, watch the stock closely and take their profits (if any) at a level they choose. On the buy side, we recommend that investors limit their bid price so they get in at a reasonable price. If the stock turns out to have a dramatic price rise and they miss out because of a low bid, there’s always next time. In our opinion this is much better than getting stuck buying near the peak price.

Investors in GTCP should be prepared to lose their entire investment. Always remember to do your own due diligence, checking up on company filings and consulting with an investment professional.

Additionally, remember our disclaimer.

Some market analysts claim that much skepticism surrounds ad campaigns on Facebook and their cost effectiveness. These ads may increase a company’s and/or product’s exposure, but evidence showing a direct relationship of Facebook ads to sales is lacking.

General Motors’ big decision may also contribute to the loss of other Facebook ad clients, who come from a variety of industries. Many of these clients may no longer feel that Facebook is the right place to allocate their ad budget. This could mean another hit to Facebook’s yearly $3.7 billion dollar ad revenues, which comprise over 80% of the total.

Because of Facebook’s reliance on ad revenues for their status as a financial goliath, this news could have a huge impact on Facebook’s IPO (initial public offering), which is set to take place in the next few days.

A comparison of click rate of ads on Google and Facebook was performed by WordStream and showed an eight-fold larger click rate on Google – giving little reassurance to Zuckerberg. WordStream also claims that Facebook’s lack of tools for ad targeting and the inability to choose an attractive ad format is the reason for these poor results – because it’s not just about interacting with people, but interacting with them at the right time. For example, clicking the ‘Like’ button might initiate a live conversation dialogue between a company rep and the potential client who just moments ago liked the product/company.

Marketing campaigns are successful when respective sales can be counted – but with Facebook, a straightforward system is missing. Facebook ads are still in the rudimentary stages of development – while their user-base has grown to 900 million since its conception.

Facebook will soon commence public trading, but is it mature enough to step up to the challenge.

acknowledgement: this post was based on an article by Ewa Lalik

GBWU

Our latest momentum play, Great Wall Builders Ltd. (OTCBB:GWBU) formerly provided homes with a solar integrated system in Texas until it ceased those operations. On March 19, 2012, the Company acquired the assets of dPOLUTION International, Inc. for stock. As part of the transaction, two officers of dPOLUTION purchased a controlling interest in Great Wall Builders.

dPOLUTION “holds certain intellectual property related to manufacturing and distributing an electro-cracking devise designed to reduce emissions, lower fuel consumption and improve engine performance.”

Great Wall Builders has reported no revenues in over a year and has negative equity as of that date. It has not yet filed a 10Q for the quarter ended March 31, 2012. GWBU began trading on April 4th and was very lightly traded until May 10th when volume exploded and the price doubled. It has attracted a huge amount of interest.

As with our other momentum alerts, we bring this company to your attention because of the increase in investor awareness and we believe things could get interesting very soon. However, GWBU does not seem to be a good prospect for long term value investors at this point and is likely only appropriate for risk seeking investors prepared to lose their entire investment, but might offer early investors a chance to make a large, exciting profit as a short-term play.

As we said, GWBU is only for those looking for a highly speculative play. All the attention paid to GWBU will likely drive a lot of volume, but this does not mean prices will go up.

Investors interested in GWBU should be prepared to get in quickly when they feel the time is right, watch the stock closely and take their profits (if any) at a level they choose. On the buy side, we recommend that investors limit their bid price so they get in at a reasonable price. If the stock turns out to have a dramatic price rise and they miss – Latest out because of a low bid, there’s always next time. In our opinion this is much better than getting stuck buying near the peak price.

Investors in GWBU should be prepared to lose their entire investment. Always remember to do your own due diligence, checking up on company filings and consulting with an investment professional.
Additionally, remember our disclaimer.

Zngle Logo

Our latest momentum play, Rarus Technologies Inc. (OTCQB: RARS), was classified as an exploration stage company in the business of exploring for minerals until May 8, 2012. But on May 8 the company acquired, under license, the rights to the software of an internet business concept called Zngle.

Per the company, “Zngle is a social media platform that allows members to make posts to specific zones including: family, friends, acquaintances, colleagues, custom, dating, and community. It allows members to communicate with traditional SMS chat along with video mail, voice chat and video messaging, it also has a mobile app that utilizes the API system for zngle.com with an enhanced geolocation feature coupled with augmented reality to create a interactive experience with local businesses.”

Rarus Technologies now calls itself “an emerging technology company focused on establishing an innovative business model intended to bridge cutting-edge social media and e-commerce into a marketplace that connects friends, family, consumers, and vendors in new and exciting ways.”

Rarus Technologies has reported no revenues through March 31, 2012 and has negative equity as of that date. RARS was very lightly traded until May 9 when volume exploded and the price doubled. Since the the price has trended down and closed yesterday at $0.097 after spending most of the day under $0.10. Could this be an opportunity to buy on a dip?

As with our other momentum alerts, we bring this company to your attention because of the increase in investor awareness and we believe things could get interesting very soon. However, RARS does not seem to be a good prospect for long term value investors at this point and is likely only appropriate for risk seeking investors prepared to lose their entire investment, but might offer early investors a chance to make a large, exciting profit as a short-term play.

As we said, RARS is only for those looking for a highly speculative play. All the attention paid to RARS will likely drive a lot of volume, but this does not mean prices will go up.

Investors interested in RARS should be prepared to get in quickly when they feel the time is right, watch the stock closely and take their profits (if any) at a level they choose. On the buy side, we recommend that investors limit their bid price so they get in at a reasonable price. If the stock turns out to have a dramatic price rise and they miss out because of a low bid, there’s always next time. In our opinion this is much better than getting stuck buying near the peak price.

Investors in RARS should be prepared to lose their entire investment. Always remember to do your own due diligence, checking up on company filings and consulting with an investment professional.

Additionally, remember our disclaimer.

Crowdfunding is the process of raising money for a project or venture from many people who each generally contribute in small amounts. This technique has been used to raise money for a wide variety of purposes including musicians and other artists seeking support from fans, political campaigns, disaster relief efforts, microcredits for entrepreneurs in poor countries, philanthropic projects and social change efforts. Crowdfunding has even been used to finance in vitro fertilization.

But until recently crowdfunding has been illegal for use in selling securities by small businesses. Then the “Jumpstart Our Business Startups Act” aka the JOBS Act became law in April. One part of this law created a new exemption under the Securities Act of 1933 which allows the sale of securities to a large number of unaccredited investors through crowdfunding.

The basic law, per http://majorityleader.gov/uploadedfiles/JOBSACTOnePager.pdf, “allows companies to pool up to $1 million (author addition – per year) from investors without registering with the SEC, or up to $2 million if the company provides investors with audited financial statements. Individual contributions are limited to $10,000 or 10 percent of the investor’s annual income, whichever is less.”

But the devil will be in the details. Most of the rules that will govern crowdfunding as a means to raise money for businesses, and the actual mechanics as to how this process will work under the new law will be determined by the SEC. These rules could help make crowdfunding an accessible, popular way for small businesses to raise capital, or mire crowdfunding in a morass of restrictive regulations and/or red tape that will make this technique impractical.

One important note – as the SEC has not yet issued its rules and regulations on crowdfunding, they have publicly warned us all that any offers or sales of securities claiming to be exempt from registration under the new JOBS Act are still illegal at this point.

Proponents of crowdfunding as a means of raising money for small businesses point out that in the current environment it is difficult for entrepreneurs and small businesspersons to raise equity funds from investors or get loans from banks or other lendors. Also, it’s often not cost-effective to raise only $1 to $2 million from accredited investors. They also note that current exemptions from registration are based on dollar amounts that haven’t changed in a generation or more. So they believe the new rules will be great for start-ups and small businesses.

Opponents point to the reduced accountability and almost certain increase in fraud. This will possibly increase the cost, and decrease availability, of capital for legitimate, honest businesses. Why would investors from around the world flock to US equity markets when the level of fraud is as high, or higher, than other markets around the world? In the future, shareholder litigation could become a major source of securities regulation for the financing of start-up and small businesses.

One other potential problem is how will facilitators, or “intermediaries”, make money in helping small businesses raise capital? Given the relatively small amounts involved, most wanna-be intermediaries are web-based. Up to now, crowdfunding has been mainly a labor of love for both contributors (actually donators rather than investors) and those who have organized the fundraising. Presumably, those now positioning themselves to raise money in this space will want to make money.

So, as noted at the outset of this article, whether crowdfunding becomes an important new source of funds for small business, a cesspool of fraud or a bureaucratic nightmare will depend largely on the rules put forth by the SEC.

At StockTips.com, the companies we profile generally fall into one of three categories:

1. 1. Highly speculative stocks that are currently the subject, or we believe within three months or so are likely to become the subject, of an investor awareness campaign. While these stocks may be good long-term investments, we do not evaluated them as such. We present them purely as a bet that at some time in the near future the price will rise dramatically at least for a short time. You can quickly learn about trading this type of stock here.
2. 2. Penny stocks that we believe offer the potential for long term growth, some with the potential for jumping to a whole other price level at some point. Here we strive to bring to our readers attention interesting companies that they would be unlikely to hear about without our profile. This is the category we’re recapping in this article.
3. 3. Growth and Income stocks of large corporations. We do this rarely, but we do.

As you read this article, remember that it’s really too early to judge the success or failure of these picks. But so far we continue to have confidence in these stocks.

Penny Stocks to Watch

On Jan 20th we profiled NUAN when it was trading around $29 a share.

While there were a few opportunities for attentive investors to make a small profit, the price has recently been in the high $23 to high $26 range. This company has made a lot of progress in its business since our profile, but unfortunately the price has not reflected this. A big reason is that their revenues and earnings for the quarter ended December 31st, released after our profile, were less than the guidance they had given.
View NUAN profile here.

On Jan 27th we profiled VTG when it was trading around $1.25 a share.

Before the recent market decline, this stock was trading solidly in the high $1.50s and $1.60s, although over the past week it has been trading in the mid $1.40s to the mid $1.50s. The most recent peak was $1.78, which ideally could have yielded a max profit of 42%. However, we still believe that the best is yet to come so keep an eye on this one.
View VTG profile here.

On Feb 12th we profiled GEOY when it was trading mostly in the lower $22s per share.

With the exception of a few days last week and a dip in early March, this stock has been trading solidly in the $23 to high $25 range. This stock’s future is highly dependent on government defense spending, which is currently in active debate.
View GEOY profile here.

On Mar 20th we profiled CPST when it was trading around $1.10 a share.

This stock has recently been trading in the mid $0.90s to mid $1.00s, where it will likely stay until annual revenues are released in June. If revenues are near or above analysts’ expectations, we should see a jump in price. For CPST, the street tends to expect extraordinary revenue increases year-to-year and quarter-to-quarter, and tend to punish this stock if increases are “only” 20 – 30 %. We believe the real key to this stock is the company’s steady progress to profitability, and when it approaches this milestone sometime in the next year to two, the price could jump to $4 or $5.
View CPST profile here.

On Mar 22nd we profiled END when it was trading at $12.09 a share.

However, since the North Sea gas leak and market pull back, the stock has been trading mainly in the high $11s with a few jumps into the $12s. We continue to have confidence in the long-term prospects for this stock.
View END profile here.

On Mar 22nd we also profiled EGHT when it was trading mainly in the $3.80s a share.

For most of the time since our profile, EGHT has been trading solidly in the low $4 range in spite of the market pullback.
View EGHT profile here.

On Mar 26th we profiled POZN when it was trading around $5.50 a share.

Since our alert it has steadily gone up and is currently trading in the mid to high $7 range. As a biotech firm it is still subject to a lot of risks in the future so investors in this stock should regularly check in on its status.
View POZN profile here.

On Apr 2nd we profiled CDTI when it was trading around $3.90 a share.

A downward trend is visible on this stock and recent trades have been in the mid $3.20 to mid $3.80 range. However, this stocks long history and innovative products should lead to long term growth.
View CDTI profile here.

For investors interested in any of these stocks, always remember to do your own due diligence, checking up company filings and consulting with an investment professional.

Additionally, please read our disclaimer.

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Clean Diesel Technology

Clean Diesel Technologies, Inc. (NASDAQ:CDTI) bills itself as “a cleantech emissions reduction company that designs, develops and manufactures sustainable solutions to reduce emissions and lower the carbon intensity of on- and off-road engine applications.”

In other words it designs, develops and manufactures emissions control systems and products. In addition to the on- and off- road vehicle engines, Clean Diesel’s products are used for stationary and marine engines; and utility and manufacturing plants. And not only diesel engines: the company’s products are also used to reduce emissions from devices that burn gasoline, natural gas and propane. And its products use industry-leading, internally-developed, state-of-the-art technology.

Why We’re Profiling CDTI

We are introducing CDTI to our readers as a potentially good long term growth stock, with the added possibility of a big jump in price within the next year or so. As with most nano cap stocks offering such opportunities for profit, an investment in CDTI also carries a large risk of loss. CDTI is for investors with a larger than average risk appetite.

CDTI has been trading recently at around $4 per share and has a very small market cap of approximately $30 million. Prices jumped significantly a few weeks ago when the company released better than expected 4th quarter and full year 2011 earnings.

More on the Company and Industry

Clean Diesel Technology is a global leader in the business of manufacturing and distributing heavy duty diesel and light duty vehicle, along with stationary and marine engine, emissions control systems. They sell to both new equipment manufacturers (including Honda) and to retrofitters. Retrofitting trucks is an extremely important part of the company’s business as some US states (primarily California and New Jersey) and many areas in Europe are beginning to set standards that require older trucks to retrofit, stay off the road, or pay heavy fees to drive in the areas covered.

The industry’s growth is driven largely by increasingly tough emission standards for internal combustion engines around the world. Unfortunately, some government regulations and programs can lead to irregular ups and downs in sales. For example, London’s Low Emission Zone (LEZ) program concentrated a large number of retrofits (and huge sales for Clean Diesel Technology) in the 4th quarter of 2011 and the first part of 2012. So it may be difficult for Clean Diesel Technology to show increased 4th quarter sales in 2012 over 2011.

The company’s products are subject to regulatory tests and approvals in different markets around the world. The company has been very successful, and importantly become very experienced, in obtaining such approvals internationally. On the plus side, these regulatory hurdles form a barrier to entry for new competitors. And Clean Diesel’s recent, successful participation in London’s LEZ program gives it a lot of credibility all over Europe, especially when it comes to future LEZ programs on the continent.

Clean Diesel Technology also has nearly 300 issued or pending patents. They have a world class technology portfolio.

For example they have invented and patented material technology for their catalysts. This technology, complete with nanostructures, significantly improves performance and is highly durable, cost-effective, multi-functional and requires very small amounts of expensive platinum group metals.

Clean Diesel Technology’s headquarters are in California and it has operations in the United States, Canada, the United Kingdom, France, Japan and Sweden. They have nearly 200 distributors globally.

The company operates primarily through two divisions, called Heavy Duty Diesel Systems and Catalyst Clean Diesel. They are successfully increasing the proportion of Clean Diesel Technology catalysts used by the heavy duty diesel systems division. This is having the effect of increasing company revenues and increasing gross margins.

Clean Diesel Technology benefits from experienced, strong management and hopefully has strengthened it further by the recent addition of a new President and CEO after the retirement of its former President and CEO. The new CEO has a great background, both operationally and industry-wise, for this business and has a reputation for increasing revenues and bottom lines.

In short, Clean Diesel believes its competitive advantages include its broad portfolio of verified heavy duty diesel systems, its superior catalysts, its cost advantage in the catalyst market due to its lower platinum group metals requirements and the fact its products are compatible with existing automotive manufacturing processes (i.e., manufacturers don’t have to redesign their shop floors to accommodate Clean Diesel products).

Financial Highlights

On the financial side, Clean Diesel has announced 2011 sales of $61.6 million, which were 28% over the prior year. But part of that increase was due to the London LEZ program which pumped around $8 million in sales into the 4th quarter alone. On the plus side for 2012, 2011 catalyst sales were negatively impacted by the effects of the Japanese tsunami. Those problems are over. The company was slightly profitable in 2011, but there is no assurance that it will remain profitable for 2012.

The balance sheet looks fine, nothing really remarkable either positive or negative. The company did significantly improve its working capital position in 2011. Most importantly, the company now believes it has enough financial resources to operate and grow through 2012, which in prior years has been a concern.

Factors Specific to CDTI Which Could Depress its Price

The company’s results depend largely on, and may fluctuate from, a variety of government actions over which Clean Diesel has little or no control. Increased regulation of emissions generally contributes positively to the company’s business. On the other hand, reductions of funding for emissions control programs can have a negative impact. Budget crises around the world tend to reduce funds available for these programs. In the US, a takeover of the government by Republicans this fall might lead to a weakening of elimination of many environmental regulations and significant cuts in funding to emission control programs.

The company derives a significant portion of its revenues from a limited number of customers. In 2011, Honda alone accounted for 19% of sales. Any disruption in these relationships could have a negative impact.

The company’s three largest supplier accounted for over 30% of raw material purchases in 2011. Clean Diesel also utilizes rare earth metals in the production of some catalysts. Any failures by one of Clean Diesel’s suppliers, or restrictions on rare earth metals by China, could affect the company’s ability to produce and distribute their products.

Clean Diesel has suffered losses and negative cash flows from operating activities since inception. Although the company did post a small profit in 2011, there is no guarantee the company will remain profitable.

The dollar amount of a major financial resource now held in reserve is based on CDTI’s price. Any reduction in the price of CDTI reduces the cash available under the agreement governing this source of funds. An associated risk is that dilution, real or perceived, associated with this agreement may depress the price of CDTI.

While not necessarily depressive, the company’s very small market cap could also have an effect on the price of CDTI. It would not take too many dollars on the buy or sell side to affect CDTI’s price. This potential for fluctuation in share price could increase the chances for gains or losses.

So in spite of the downside risks, we believe CDTI offers the potential for long term growth with the added possibility of extraordinary gains within the next year or two.

This should be considered a speculative investment. Make sure it fits your risk appetite and other aspects of your trading strategy – and that you can afford to take a significant or total loss if things go wrong.

For investors interested in CDTI, always remember to do your own due diligence, checking up company filings and consulting with an investment professional.

More information about the company can be found at Clean Diesel Technology’s main website and its investor relations website.

Additionally, remember our disclaimer.

In short, you must turn off your emotions and execute a disciplined trading strategy. Which means you need to know when you’re going to buy and when you’re going to sell your stock before you call your broker. For some traders their strategy is simple – buy low, sell high. But unfortunately, it’s not always that easy.

One important aspect of a successful trading strategy is to make sure your investments fit well into your overall financial needs and goals. And as they establish investment goals, investors should consider their risk appetite. In general, penny stocks are more suitable for investors with a higher risk tolerance.

To successfully buy penny stocks, traders should first become aware of the risks associated with a particular penny stock investment. Overall, many penny stocks have low trading volumes which can result in extreme price volatility (which offers the potential for quick gains – or losses), and possibly makes it difficult to sell the stock exactly when you want. Also, information is hard to come by on many smaller, penny stock companies.

Then there are different types of penny stock investments. Some penny stocks are shares in a growing company that could be a great long term investment.

Other penny stocks are shares in companies that are in an early development stage – or even essentially shell corporations with little intrinsic value. These penny stocks are sometimes subjects of investor awareness programs which can greatly increase trading volumes and prices. These promoted stocks offer the chance for extreme profits in a short period of time, but they also tend to crash suddenly. So in this environment of high risk, high potential reward, investors must take steps to protect themselves and maximize their chances to make money.

Please see our article “Navigating Promotional Stocks – Cashing In” for some tips on trading in these stocks.

Some traders may shoot for small gains of 5, 10, even 20% and they might even buy and sell the same penny stock multiple times in an effort to cash in profits as often as possible as well as to decrease their chances of getting caught in a dip with no way out. Others, however, may not have the luxury of continuously monitoring the market or quite simply they might not be satisfied with meager gains that barely break 20%. So they set bigger goals and hopefully set up stop-losses to minimize losses if the stock plummets. These traders want to double, others triple, and yet others are on a mission to the peak and want to rake in as much as 30 or more times their investment.

As you can see all over the Internet, there are dozens, even hundreds of examples of over-the-counter securities that have increased 10, 20, even 30 times the latest dip price. But you can also see from historical data that these explosive gains are most often short lived. Their price almost always falls back to one of the lowest support levels, a phenomenon likely influenced by the laws of supply and demand.

It’s no wonder that when a stock price jumps 30 times a dip price that investors who got in at the dip want to sell, sell, sell. When there is too much selling and not enough buying, the law of supply and demand takes over and in turn the stock commences a nosedive back to baseline.

Trading penny stocks can be profitable, but investors must know the risks and how to minimize their chances of loss. Find out more on this topic by reading about Volatile Markets and Understanding Stocks.

There are many reasons that a stock may be hawking itself this way:

• The company is interested in attracting capital or developing new business relationships in order to expand their company, and are promoting it to attract attention from customers, vendors, distributors and investors.
• The CEO may see it as a way to raise his status and it tickles his ego.
• The company or a third party is trying to raise the stock’s value and/or trading volume in order to increase liquidity.

In the case of smaller companies this new investor attention often results in rapid price increases, but may be followed by a crash when too many shareholders try to cash out and find few buyers. Some investors can lose significant percentages of their investment in these situations.

Regardless of the reason for increased investor awareness, there are ways to cash in on such promotions – not every one, but enough to profit over a series of trades.

First of all, we send a stock tip to our members on select stocks we find a stock that are undervalued and gathering interest, with information on that stock and the company. Read our reports carefully and do your own due diligence to make sure that you understand the possibilities for a profit and the risk of a loss.

You should also consider limiting your bid price for the stock. Getting caught up in the excitement may cause you to buy stocks near the peak, which may leave you stuck in the crash. Remember that these stocks tend to bounce around in price for days or weeks before the price really goes up, which gives early investors a chance to buy the stock at a reasonable price. You may also miss out on the opportunity, but missing out on what could have been a profitable trade (viewed in hindsight) is better than running after the stock on the way up and losing a lot of money in the crash.

For selling, you may set an exit price at the time of buying or consider taking small profits (30-70%) on the way up. It has been said that Warren Buffett made his portfolio by little win after little win. Rather than think “buy low, sell high”, think “buy low, sell higher”. As is the case, especially for speculative stocks, nobody really knows what the “high” point is until after the fact – they can only make predictions. In other words, if the stock price rises well over your sell point, don’t let greed guide you towards a stupid mistake. It’s always better to get out while the goings good.

Another tool at your disposal is your broker’s stop-loss option. This gives a safeguard to make sure that your stock sells as soon as possible when it drops below a certain price. Your stock might still take a hit depending on the decreasing gradient of the stock being sold as investors jump ship, but that’s more preferable to taking a completely devastating loss.

Once again, make sure that the money you’re investing is surplus funds – don’t use your retirement fund, your children’s college money, or any other money that’s going to undermine your current way of life. Remember, some penny stocks carry higher risk then others and you should always be prepared to loose your entire investment.

Pozen Inc.

Pozen Inc. – (NASDAQ:POZN) bills itself as “a progressive pharmaceutical company committed to transforming how the healthcare industry addresses unmet medical needs.” Over the years it has successfully created novel and affordable drug therapies by combining existing drugs in new ways to create superior patient outcomes. Pozen’s products are aimed primarily at relieving pain and pain related conditions with a minimum of side effects.

We introduce POZN as a potential long term growth stock with the possibility of an extraordinary pop in price over the next year or so. We also believe that POZN offers this upside potential with an asymmetrically much lower downside risk.

POZN has a market cap of approximately $150 million and until a recent positive announcement it had been trading in the mid to high $4 range. Since announcing positive results of two clinical drug trials, it has been trading mainly in the low to mid $5 range.

Please view our technical analysis & chart for more information on POZN stock price.

We will post a link later today.

Pozen currently offers two products and last week announced positive top-line results from two Phase 3 clinical trials of a third. Of the two products now being sold, one is used to treat migraines; and the other to treat the signs and symptoms of osteoarthritis, rheumatoid arthritis and ankylosing spondylitis, and to decrease the risk of developing gastric ulcers in patients at risk of developing NSAID-associated gastric ulcers. The new product now in trials is designed for the secondary prevention of cardiovascular disease in patients at risk for gastric ulcers.

The company has established strong collaborations with GlaxoSmithKline and AstraZeneca, which appears to be both a blessing and a curse. On one hand, Pozen benefits from the resources and credibility of these leading companies, but at the same time perhaps their products have not been marketed as aggressively as possible.

Besides the potential of its new product, Pozen has more immediate opportunities to increase revenues by marketing its products outside the US. For example, last year Pozen entered into a licensing agreement with a division of Johnson & Johnson for the development and commercialization of part of its product line in Brazil, Colombia, Ecuador, and Peru. For this, Pozen received an upfront payment and will also receive royalties. The licensee will take care of manufacturing and marketing. Outside the U.S., the company has patents in Australia, Canada, Europe, Mexico, and Eurasia.

Pozen’s balance sheet and operating methods are what limit the downside risks for investors in POZN. As of December 31, the company had almost $120 million in cash and short term investments (about $4 per share), with total liabilities of only around $16 million. Even though the company forecasts a loss for 2012, it still projects having over $85 million in cash and short term investments (almost $3 per share) at the end of 2012. And this assumes that no partner (and related milestone payments) is found for its new product, which seems highly unlikely due to this product’s value.

Also Pozen has outsourced most of its research and development and all production. This means there are no expensive facilities and related costs to bleed off the company’s cash. So while a small drug developer like Pozen may pose a risk of significant loss for investors, the odds of a catastrophic loss within the next year or two seem remote.

As to downside risks, POZN presents all the normal risks of pharmaceutical companies including competition, government regulation, patent protection, and litigation. Risks more specifically relevant to POZN include:

1. a) Pozen must successfully commercialize its products in the US and abroad to achieve consistent profitability.
2. b) Pozen’s business could suffer significant damage if one or more of its collaborators decide to develop its own competing products or other products.
3. c) Pozen seems to have attracted an unusual number of competitors seeking to introduce generic versions of its products. While Pozen has so far been successful in defeating these attempts, there is no assurance they will be successful in the future. In fact in 2011 the company sold the US royalty rights to one of its products to an investor, who will assume the risk of loss and pay for all legal costs to defend these rights.
4. d) Pozen has enacted certain protective provisions in its corporate make-up that may discourage, delay or prevent a merger or acquisition, or may also discourage or prevent any attempt by stockholders to change the direction or management of the company, which could potentially hurt investors of POZN in the future.

As stated above, we believe POZN offers investors the potential for long term growth with the added possibility of extraordinary gains within the next year or two, with an asymmetrically lower downside risk.

For investors interested in POZN, always remember to do your own due diligence, checking up company filings and consulting with an investment professional.

More information about the company can be found at Pozen’s main website and on its investor relations page.

Please remember our disclaimer.