Long-Term, Cyclacel Looks Better

Cyclacel Pharmaceuticals, Inc. (CYCC) is a clinical-stage company dedicated to the discovery, development and commercialization of small molecule cell cycle inhibitors for the treatment of cancers and other serious disorders. The company's lead pipeline candidate, CYC202, is being developed for the treatment of non-small cell lung cancer.

The recent acquisition of Align has bolstered the company's oncology/hematology programs and provided it with a revenue stream. However, CYC202, as well as other pipeline candidates, are still in early to mid-stage clinical development process and several years away from commercialization. As such, we maintain a Hold rating on the stock with a price target of $3.00.

Upcoming catalysts in the coming months include the announcement of clinical results from the phase II study of sapacitabine in CTCL and the phase IIb APPRAISE trial for seliciclib. Positive data from one or more of these trials could provide a boost to the company's shares and enable the company to strike an attractive development agreement with a major pharma company for one or more of its clinical candidates.

Pricing Weak for Wonder Auto

Wonder Auto Technology (WATG) is a beneficiary of a high market share in alternator and starter production in China, along with strategic positioning in the faster growing sub-segments in these markets. However, weak product pricing, high customer concentration, and an unusually low tax rate force us to rate the stock a Hold with a target of $9.50.

Wonder Auto, located in Liaoning, China, designs, develops, manufactures and sells automotive alternators, starters and suspension products through its Chinese subsidiaries. Wonder was founded in 1996 and has grown from sales of $15 million in 2001 to become China's second-largest manufacturer of alternators and starters, with a market share of 13%.

In the first quarter, earnings per share were $0.15 compared to $0.11 per share in the same quarter of the previous year. Net income was $4.0 million, reflecting an increase of 47% to $2.7 million. Net margin was 13%. Total revenues increased 44.3% to $31.1 million.

Sales revenue increase was primarily driven by the increased demand of our alternators and starters in China and increased export sales. Export sales increased 16.3% to $5.1 million on account of the acquisition of Jinzhou Wanyou.

Some NeurogesX Uncertainties

Although we remain optimistic on NeurogesX's (NGSX) eventual commercialization of NGX-4010, the recent failure of the C119 phase III program in HIV-DSP creates uncertainty in our financial model. We still believe NGX-4010 can be approved as early as next year for PHN. If so, there will most likely be significant off-label use in HIV-DSP regardless of the missed endpoints in the C119 trial.

However, investors will most likely take a wait-and-see approach with NeurogesX, and despite what we see as an attractive valuation and positive fundamentals, the stock will probably tread water for the next few months. But at this point, its lack of visibility is what keeps us at a Hold rating despite our belief that NGX-4010 is a $500 million product. If visibility improves throughout 2008, NeurogesX certainly looks like a potential Buy.

Right now, we see NeurogesX fairly valued at $6 per share. This is 20x our 2012 EPS forecast of $2.23 discounted back to present day at an aggressive rate of 40%. Getting answers to these questions above would lower our discount (risk) rate. This presents upside potential throughout 2008 and on into 2009.

Buy Kodiak Oil & Gas Up to $5

We are maintaining our Buy recommendation and raising our price objective for Kodiak Oil & Gas (KOG) shares following its mixed quarterly results. The increased price objective is primarily a result of our higher commodity-price deck.

Although the development has been slow, the potential for reserve adds in Vermillion offer significant upside potential that has been too heavily discounted. The recent agreement with Devon Energy (DVN) further improves the viability of the Vermillion play. Additionally, the company's growing Bakken exposure is valuable, particularly given the backdrop of continued oil strength.

Due to the complex nature of the Vermillion Basin and the unconventional extraction methods associated with it, we have created a modified sensitivity analysis to understand what the effect of delaying full scale production will have on valuation.