Our Newest Insights on Delcath, Graphene and the Linn/Berry Deal

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Delcath Systems Inc. (Nasdaq: DCTH), a micro-cap oncology stock that we believe has a big upside, yesterday announced that its new drug application (NDA) will be reviewed by a U.S. Food & Drug Administration advisory panel starting on May 2.
The FDA's Oncologic Drugs Advisory Committee (ODAC) will convene to review Delcath's trademarked "Melblez Kit," an intriguing innovation that allows cancer patients to receive chemo treatments that are 100 times stronger than normal – without the usual side effects because a proprietary filter system removes the medicine before it circulates through the rest of the body.
ODAC panels advise the FDA on the safety and efficacy of proposed new oncology treatments, although the agency is not bound to follow the recommendations of the advisory committees.
Delcath's NDA was accepted by the FDA for substantive review on Oct. 15, 2012, and was assigned a Prescription Drug User Fee Act (PDUFA) goal date of June 15.
Delcath CEO Eamonn P. Hobbs said the company's team is "actively preparing for the ODAC meeting and we look forward to presenting our data for the safety and efficacy of Delcath's system for the treatment of patients with unresectable ocular melanoma metastatic to the liver to the ODAC panel."
The reason I wanted to make a point of this today is that we just updated our report on Delcath.
That report, "Buy With the Smart Money" can be accessed via the Private Briefing "Dashboard," or by just clicking on the report title in this column.
We just posted the update on the Private Briefing site, and wanted to make sure the folks who are interested in Delcath's potential have access to our latest insights.
In addition to the daily recommendations and analyses of market trends and global events that are part and parcel of your Private Briefing subscription, one of the "extras" that we like to periodically deliver are in-depth research reports on special recommendations.
At the start of each New Year, for instance, we deliver a special report detailing our experts' favorite picks for the 12 months to come – the most recent report of this type being the "Seven Investments You Have to Make in 2013," which we delivered a month ago.
Our "Biotech Buyout Binge" report has been one of our biggest winners, with Pharmacyclics Inc. (Nasdaq: PCYC) notching gains of as much as 222% – becoming our second "triple" since launching Private Briefing in August 2011.
Once you've logged in, these reports are available in the "Dashboard" area of Private Briefing, under the "pull-down" tab labeled "Your Promised Reports."
We obviously work very hard to track these recommendations, just as we do the recommendations that we make in the daily Private Briefing column.
Graphene Update: When we recommended GrafTech International Ltd. (NYSE: GTI) in our "investing in graphene" column back on Feb. 12, we warned that investors hold back until the company released its earnings report on Feb. 26 … which was yesterday.
Indeed, we even suggested that you take the near-term uncertainty that faces the company and make it work to your advantage by "averaging into" the shares if the price declined.
Talk about a perfect call.
For the quarter ended Dec. 31 (Q4), GrafTech International beat expectations on both the top line (revenue) and bottom line (earnings per share). Indeed, revenue came in at $371 million, a 6.6% increase from the prior year's $348 million, and well above the $317 million that analysts expected, says S&P Capital IQ.
But GrafTech's shares have been thrashed, dropping 6% on Tuesday and another 8.8% yesterday (as of mid-afternoon). The reason: The company expects to tread water – endure zero growth – at least in the current quarter.
Remember, graphene is pretty much a new technology, meaning researchers and companies are just now figuring out how to best put its strength and lightness to use. So we view this as an investment with a longer-term payoff. And that's why we recommended that you break your GrafTech buy into three or four transactions – averaging in to lower your average cost per share, while also avoiding being "stopped out" of a stock with some promise.
Remember, too, that GrafTech has one of the most robust graphene patent portfolios around.
An Update on the Linn/Berry Deal: On Tuesday, we told you that Berry Petroleum Co. (NYSE: BRY) became the fifth Private Briefing recommendation to become a takeover play when Linn Energy LLC (NYSE: LINE) last week agreed to buy the midstream producer for $4.3 billion.
Because of the structure of this deal, if you own Berry, you have two choices: You can sell out, and cash in on your profit. Or you can hold on through the deal's conclusion, after which you'll become a Linn shareholder.
Berry was recommended to Private Briefing subscribers by Dr. Kent Moors back on Oct. 11, 2011. Since it was Kent's recommendation – and since there are questions about Linn's accounting strategies (they're aggressive, but not unlawful in any way) – I promised I'd ask the globally known energy consultant for his assessment of the suitor firm.
Subscribers may want to factor this insight into their decision about whether to cash out now, or hold on and become a Linn stockholder.
Kent is a terrific colleague and is always super responsive – all the more remarkable given his frenetic schedule. And this time was no exception.
Here's what he told me in a message that he sent during a break from one of his many meetings.
"Bill, I am not a fan of LINE," Kent told me. "It has been on my tracking listsfor over two years and is 3.5% in the red for that period. It's up for the week (3.6%, despitethe market downturn Monday) but down for the month (-4.2%). The Barron's piece that you referenced in your note and in your column is [right] on the money. Linn has been able to offset some suspect management decisions via a very energetic hedging strategy, but that never augurs well for a company that is supposed to be acquiring production reserves to increase market share. This is an MLPwhose return is founded moreon derivatives than drilling. The stock price is near a 52-week high and I think isoverpriced."
That's an eloquent bit of insight – and is typical of what I always receive from one of the smartest energy guys I've ever met. Kent is the editor of the Energy Advantageand Energy Inner Circle advisory services.
See you all tomorrow.
[Editor's Note: Unless otherwise specified, we recommend investors employ a 25% "trailing stop" on all holdings. To access the updated Delcath report, you can also click here.]

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