Quadramed (QDHC) - Microcap with Potential

I came across Quadramed Corporation (QDHC ,$6.52) by doing a database screen that focused on small cap companies with good valuation metrics little or no debt and significant insider buying. When I run this type of screen I will often come across a couple of dozen companies. Further fundamental research is required to filter thorough the list to come up with investment ideas that are worthy of my commitment. What piqued my interest about Quadramed, other than the screened criteria, was the sector it is in...software and systems for Electronic Health Records. The reason I find this industry very interesting is the great emphasis the Obama administration is putting into this area in the hope to reduce health care costs. In fact, the stimulus package passed earlier this year had approximately $19 billions set aside for health care technology. These are huge numbers that Quadramed is well positioned to take advantage of.

I will not provide a full blown research report on Quadramed but I will provide some of the numbers and reasons why I believe this company could be a double or triple within a year. No one should blindly listen to an anonymous blog (even a great one like Sirtuin Investor!) but should do there own homework (and I provide the links below to do so).

1. Market Cap: $56 million...Enterprise Value: $30 Million...yes this certainly is a micro cap. I like to keep a large portion of my assets in fixed income and make speculative but well thought out investments in under followed stocks. With a market cap so tiny, QDHC has no sell side Wall Street ANALyst coverage. I love this about a stock because if I Am correct and the company's earnings begin to accelerate, the ANALysts should take notice and provide a catalyst for stock appreciation
2. Tiny Float: 4.84 million shares outstanding. This can work both ways, making it hard to liquidate in a weak market and difficult to buy if the company starts to gain momentum on the upside. Since I believe QDHC is well positioned for growing EPS and, as a result, appreciating stock price...I love a small float. Small floats have been personally lucrative for me in the past.
3. Forward P/E = 6. According to Yahoo which I believe is coming from a single Reuters estimate.
4. New CEO: QDHC just snagged an executive from mega health care technology company McKesson to be its new CEO. His contacts should certainly help QDHC capture some of the stimulus money and his desire to move to QDHC gives me an independent opinion on QDHC prospects.
5. Insider Buying: 405,000 shares in just the last 6 months. I love insider buying in small cap stocks and, in this case, I suspect it is related to insiders' belief of how the recently passed stimulus package will stimulate new sales.
6. No Long Term Debt and Lots of Cash: $24,000,000 in cash or $2.89 per share. QDHC does have 4,000,000 share of convertible preferred stock outstanding with a conversion rate of $15 or so per share that was issued when the common stock was substantially higher in 2005. I look at this as a cheap source of financing that never has to be repaid and can possibly be bought back at a discount.
7. 1:5 Reverse Stock Split in June 2008: No one wants to own a stock that does a reverse split. A reverse split tends to drive down a stock further. However, if you are purchasing QDHC post the reverse split, you get the advantage of a lower valuation due to the the stigma of such. Remember, a reverse split, just like a regular stock split, has absolutely no effect on the finances or fundamentals of a company.
8. Recurring Revenues: I forgot the percentage but a significant portion of QDHC's revenues come from recurring maintenance and servicing contracts. Do your own DD here.

Well there you have it, an under-followed or should I say COMPLETELY IGNORED small cap stock (just look at the average daily volume) with, in my humble opinion, a compelling story. An investment in QDHC may help some of those resveratrol users that plan to live to 100 build up their nest egg (remember, Immortality is Expensive). You must, however, do your own due diligence.

Municipal Auction Investment Plan

Sorry, I haven't posted in a while as I've been focusing on making money in this volatile market. I've set up another blog with an investment idea that sophisticated Sirtuin Investor followers may want to examine. A Triple A rated debt security of a large utility with the potential to pay 18% if enough investors follow through on the plan. Click here to read about the idea.

OBAMA Budget Continues Push For Biofuels

President Obama revealed his proposed 2010 Budget that followed through on the American Recovery and Reinvestment Act of 2009 and set down a guantlet to attempt to propel the United States towards a future of cleaner energy and energy independence. The section of the budget related to the Department of Energy clearly indicates that the favoritism showed towards the oil industry at the expense of alternative energies is being reversed. Once again I point to Verenium Corpration, a pure play cutting edge cellulosic ethanol company with the backing of BP and old connections to Stephen Chu, Energy Secretary, as a company positioned to lead Mr. Obama's energy revolution. According to the Wall Street Journal, the oil industry is reeling from the new reality:

That has oil companies hopping mad. The American Petroleum Institute said
higher taxes would stifle oil-patch investment and job creation. “I don’t see
how this bolsters energy security,” API spokeswoman Cathy Landry said. BP
executive Lamar McKay told Congress Wednesday that taxing “core energy” while
subsidizing new energy would do nothing to help the nation’s energy
security.

It will be very interesting to see how this radical new direction in energy policy progresses over the next decade. Fortunes could be made by playing this policy shift correctly.

Excellent Article on State of Cellulosic Ethanol

If you are following the progress in cellulosic ethanol then you will want to read this excellent article in USA Today about cellulosic ethanol and Verenium.

WSJ: David Sinclair Screws Up

Hard to believe, even when you see it with your own eyes, that David Sinclair would become associated with a organization that sells wellness products through an Amway type sales structure. He has since ended his relationship with this organization but there he is...the star of the show, in front of the Shaklee sales force conference looking more like the combination of old style tonic salesman and a motivational speaker/preacher than a respected Harvard researcher. What could he be thinking? Hasn't he made enough money with the takeover of Sirtris Pharmacueticals by Glaxo? It makes me wonder to what extent the sale of Sirtris to Glaxo for $700,000,000 was a result of good marketing versus good science! Is this a sign of honest, unbridled enthusiasm from Sinclair or an indication of shameless greed? Take the poll at the right and express your views.

New Energy Secretary Steven Chu - a Dream Choice for Verenium

Who could be a better choice for energy secretary for Verenioum shareholders' than Steven Chu, a noble prize winner in physics? The answer is a resouding "nobody". Mr. Chu is now at the forefront of cellulosic ethanol technology, as much as Verenium is, and was the catalyst behind a $500,000,000 grant from BP to the University of California Berkely last year. With recent investment of $90,000,000 by BP into a joint venture with Verenium, the circle seems to have closed and the path is now wide open for VRNM. The only hurdle left is execution. Alternative Energy and specifically non food based bio fuels now have the political backing that the oil industry has enjoyed and abused over the last 8 years. Verenium's time will soon come.

New Sirtuin Hypothesis by David Sinclair Group

Seeking to unblock the mysteries of whether sirtuins (more specifically SIRT1) actually hold the secrets to aging, a group of scientist lead by David Sinclair of Sirtris Pharmacueticals (now part of GlaxoSmithKline ) has put forward the latest hypothesis on the mechanisms of SIRT1's role within a cell. For those not well versed in molecular biology, the hypothesis is rather complicated. Sirtuin Investor will attempt to simplify it into layman's terms:

1. Each cell has a double strand of DNA that, if stretched out, would extend over six feet long.
2. Each of these DNA strands has about 20,000 genes or so.
3. Under normal operations, each cell must provide instantaneous access to a very limited number of genes depending on the cell type (i.e. blood, pancreatic, renal, bone marrow, etc.)
4. The primary role of the SIRT1 is to help a cell SUPPRESS all the genes it shouldn't be accessing.
5. SIRT1 also has an important secondary role...to act as the cell's handyman, moving into action to repair any breaks in DNA strands within the cell.
6. Unfortunately, when the SIRT1 puts on its handyman hat and moves into action to make DNA repairs within the cell, it temporarily vacates its chief role as gene suppressor. Remember, only a handful of specialized genes are supposed to be active within any given cell type.
7. With SIRT1 distracted from it's primary role, normally dormant genes can wake up start partying, in the process, playing havoc and causing damage to the cell (think of a bunch of teenagers at house party when naive parents go on vacation). In the best case scenario, this cumulative damage is what we see in ourselves as normal aging.
8. Find a way to over express SIRT1 (analogous to finding surrogate parents while the real ones are on vacation) and there are less opportunities for cell damage....and the aging process is slowed down.

Whether this hypothesis gains wide support is open to debate. However, the hypothesis is tantalizingly seductive. Only time will tell whether the idea of a fountain of youth is a reachable goal or still a distant fantasy.

One final thought: you think the social security system (and our entire financial system) is in trouble now, just think about what will happen if we achieve the ability to extend our lifetimes by 20%? Oy Vey! Keep taking that resveratrol!

New Sirtris Study Results Reported

Sirtris Pharmacueticals recently released the results of a new study on mice that, it claims, further validates Sirt1 as a target for the treatment of metabolic disorders and endurance enhancement, an excerpt of which follows:

"The NAD+-dependent deacetylase SIRT1 controls metabolic processes in response to low nutrient availability. We report the metabolic phenotype of mice treated with SRT1720, a specific and potent synthetic activator of SIRT1 that is devoid of direct action on AMPK. SRT1720 administration robustly enhances endurance running performance and strongly protects from diet-induced obesity and insulin resistance by enhancing oxidative metabolism in skeletal muscle, liver, and brown adipose tissue. These metabolic effects of SRT1720 are mediated by the induction of a genetic network controlling fatty acid oxidation through a multifaceted mechanism that involves the direct deacetylation of PGC-1α, FOXO1, and p53 and the indirect stimulation of AMPK signaling through a global metabolic adaptation mimicking low energy levels. Combined with our previous work on resveratrol, the current study further validates SIRT1 as a target for the treatment of metabolic disorders and characterizes the mechanisms underlying the therapeutic potential of SIRT1 activation."

With evidence that SRT1720 "robustly enhances endurance running performance and protects from diet induced obesity" it would not be a leap of faith to hypothesize that the professional sports world is already ahead of the pack in trying resveratrol supplements to improve athletic performance. After all, resveratrol does not have the issues of being a banned substance.

The entire study is available for purchase here.

Obama Victory Bodes Well for Verenium

One of the stark policy differences between John McCain and Barak Obama was their respective differences on ethanol. Obama favors ethanol subsidies, McCain opposes them. McCain essentially gave up on Iowa, the largest corn producing state in the nation with this position. If the consideration is solely corn based ethanol, there is justification for McCain's position. Corn based ethanol provides very little net energy gain, if any, over the underlying fossil fuels that go into the process of making it and has had the unintended effect of raising food prices. However, the fallacy of McCain's policy is that it fails to consider the next generation of ethanol technology called cellulosic ethanol. President Obama understands that cellulosic ethanol is the end game due to clear advantages over corn based ethanol:

1. Use of non-food crops
2. Use of relatively low-cost feedstock
3. Use of marginal lands for feedstock growth
4. A very beneficial net energy balance
5. Use of less fertilizer and water.

With the victory of Barak Obama, Verenium is now firmly seated in driver's seat of this emerging revolution in biofuels. Verenium's landmark agreement with British Petroleum has positioned VRNM to be one of the top performers over the next 12-24 months in the opinion of the SI Blog.

To learn more about Verenium and its potential, visit these SI blog entries:

Focus on Verenium and Cellulosic Ethanol
Forbes Article Highlights Accelerating Race for Cellulosic Ethanol Production
Interview With Verenium's John Howe

Do your own due diligence.

Resveratrol and Weight Loss - Personal Experience

As many readers of this blog have learned, the benefits of resveratrol seem to be numerous. Just read down the entries of the SI blog and you will find many blog entries highlighting the numerous potential health benefits of resveratrol.

My own personal experience seems to confirm one benefit: weight loss. I've been using resveratrol for over a year and a half. During that time frame, my weight has slowly declined from 193lbs t0 183lbs. I'm 6 feet tall and my goal is 180lbs. I don't believe my calorie intake has lessened and I my activity levelhasn't changed. Research has shown resveratrol's effect on fat cells. My personal experience seems to confirm this. Additional comments from other personal experiences are encouraged.

With that, I have started a new poll. Has resveratrol helped you lose weight?

OFF TOPIC: Two New Polls

Given the historic events over the last few weeks the Sirtuin Investor is conducting 2 new polls:

1) Should some form of the plan to approve the purchase of up to $700,000,000,000 (that's a lot of zeros) in mortgage backed securities be approved in order to help save the economy?

2)How will you vote for president?

Vote now.

Resceratrol: Now its Radiation Protection?

In a seemingly endless string of research into the potential health benefits of resveratrol, new research from researchers at the University of Pittsburgh shows that resveratrol, when altered with acetyl, protected cells from radiation in mouse models. The study was led by Joel Greenberger, M.D., professor and chairman of the Department of Radiation Oncology at the University of Pittsburgh School of Medicine.

This new research adds to resveratrol's reputation as a compond with an expanding universe of health benefits. In other unrelated research resveratrol has already been shown to have potential in many diseases of the aging.

Interview With Verenium's John Howe

Click here to watch a very relevant interview with John Howe of Verenium Corp.

Obama Versus McCain on Cellulosic Ethanol

Verenium investors should be aware of the materially different positions on cellulosic ethanol held by the two presidential candidates:



OBAMA's website..straight forward policy on ethanol:

• Develop the Next Generation of Biofuels: Barack Obama will work to ensure that advanced biofuels, including cellulosic ethanol, are developed and incorporated into our national supply as soon as possible. Obama will invest federal resources, including tax incentives, cash prizes and government contracts into developing the most promising technologies with the goal of getting the first two billion gallons of cellulosic ethanol into the system by 2013.

McCain's own word....against subsidies for ethanol

Verenium enters Landmark Agreement with BP

Like most small caps, the stock price of Verenium Corporation (profiled here on May 21, 2008) has languished with the stock market since the SI Blog expanded coverage to cover promising companies outside the sirtuin space with the elimination of Sirtris Pharmacueticals as a public company. Today however, Verenium Corporation, followed in the steps of Sirtris by announcing a landmark agreement with an industry leader. In this case it was British Petroleum. Unlike Sirtris, however, Verenium management, which owns an astounding 54.67% of the company, decided that the upside was too promising to sell the entire company to BP. The deal calls for the establishment of a joint venture to commercialize celluslosic ethanol and it includes $90,000,000 of financing from BP over the next 18 months

One major catalyst for this agreement is certainly recently passed legislation that mandates 21 billion gallons of advanced biofuel production by 2022, of which 16 billion gallons must come from cellulosic ethanol. That's one hell of a mandate considering that the cellulosic ethanol industry doesn't really exist right now. Any company that can take advantage of this legislation will have a very lucrative business. More importantly, that company will help us move forward towards true energy independence. Cellulosic ethanol has five principal advantages over much criticized, and rightfully so, corn based ethanol:

1. it uses non-food crops
2. it uses relatively low-cost feedstock
3. it uses marginal lands for feedstock growth
4. it has a beneficial net energy balance
5. it uses less fertilizer and water.


Verenium is a leader in this field and is currently optimizing the nation’s first true demonstration-scale plant capable of producing ethanol from non-food cellulosic biomass sources.

Do your own due diligence and remember, if you visit this blog primarily as a resveratrol user....immortality is expensive.

New Poll on Resveratrol Usage

Back in February 2008, the SI blog ran a poll on resveratrol usage. The results were as follows:

• I don't take any --- 19%
• Up to 100 mg ----- 11%
• Up to 200 mg ----- 20%
• Up to 1,000 mg --- 26%
• Over 1,000 mg ---- 22%

Given the volume of research that has become available in the last 6 months, a new poll is now being taken to examine how usage has evolved. To participate see box at the right.

NY Times Article - More on Sirtirs, Sirtuins and Resveratrol

You'd think that Sinclair, Westphal and Sirtris Pharmacueticals would be less inclined to push the media/press envelope now that Sirtris is part of GlaxoSmithKline. Not true. See the latest feature article in the NY Times. One interesting excerpt: Glaxo is considering the marketing of SRT501 as ad over the counter resveratrol supplement. If you are looking to try resveratrol today be sure to vist SI Blog sponsors on this page.

New Study: Resveratrol Helps Prevent Breast Cancer

New research into the health benefits of resveratrol continue. The latest comes out of the Eppley Institute for Research in Cancer and Allied Diseases at the University of Nebraska Medical Center. This new research published in the July 2008 edition of Cancer Prevention Research shows that resveratrol inhibits can cancer formation in Breast tissue. An excerpt from the study follows:

Resveratrol decreased estrogen metabolism and blocked formation of DNA adducts in cells treated with TCDD and/or estradiol. Resveratrol also suppressed TCDD and/or estradiol-induced cell transformation. Thus, resveratrol can prevent
breast cancer initiation by blocking multiple sites in the estrogen genotoxicity
pathway

The entire study can be read here.

The body of evidence continues and expands as to the positive effects of resveratrol on the human body. As with other recent research, this latest study shows that megadoses of resveratrol were not required to gain the anti-cancer benefits.

New Resveratrol Research Thows a Curveball

Just as many have become confident that the fountain of youth can be found in a daily dose of resveratrol, new research is clouding the issue. The latest research on mice comes from the National Institute of Aging and was the result of a collaborative effort between the laboratories of Rafael de Cabo, Ph.D., of the Laboratory of Experimental Gerontology at the NIA; David A. Sinclair, Ph.D., of the Glenn Laboratories for Molecular Biology of Aging at Harvard Medical School; and an international group of researchers. This research showed:

The Good:

• Improved heart health.
• Improved bone density.
• Improved motor skills and coordination.
• Significantly reduced incidence of cataracts.
• Improved quality of life.
• Increased lifespan for mice fed a high calorie diet.

However, resveratrol DID NOT extend the lifespans of mice fed a normal diet. For now at least, this research debunks the belief that high doses of resveratrol mimic the life extending benefits of a calorie restriction diet.

Meanwhile another study performed by a group lead by Valter Longo, a molecular geneticist at USC, found in laboratory tests that reducing the level of SirT1 activation in neurons decreased the cells sensitivity to oxidation when compared to normal SirT1 activation (for those unfamiliar with SirT1 and other sirtuins, they are the genes believed to be activated by both a calorie restriction diet and resveratrol). However eliminating the SirT1 gene completely, caused the mice to die young.

What this all means is certainly still open to debate, interpretation and motivation. Sirtuin Investor has pointed out previously seemingly conflicting results on whether activation or deactivation of sirtuins is preventative to various types of cancer (see blog entry dated April 30, 2008.) It is advisable to read through all the research and and to look behind the catch phrases put out by the often superficial media. As the sirtuin research picture becomes less focused, shareholders of Sirtris Pharamcueticals who were dismayed by the cash tender offer by Glaxo may now be feeling a little more placated with the $22.50 per share in their pockets! Stay tuned.

Elixir Licenses Boston University SIRT1 Modulators

Trying to stay in the game of Sirtuin based drug development, Elixir Pharmaceuticals has signed an exclusive licensing agreement with Boston University to key intellectual property covering discoveries regarding the use of modulators of SIRT1.

Expert from Elixir press release:

"Modulation of SIRT enzymes has attracted considerable attention because of
their potential to address a broad range of diseases," stated Dr. Peter
DiStefano, Elixir's Chief Scientific Officer. "Based on nearly a decade’s-worth
of research, Elixir has amassed a broad intellectual property estate, which
includes compounds that activate SIRT1 and compounds that inhibit SIRT1. It is
an exciting time to be working in SIRT development and we are pleased to have
added this intellectual property from Dr. Stephen Farmer’s lab at Boston
University to our portfolio."

In January 2008, Elixir was forced to postpone its IPO due to unfavorable market conditions.