Companies featured in this edition of the newsletter: ACTC, AEN, CBAI, CVM, ENZ, ESYM, FMTI, GERS, ICLK, ITUI, IWEB, PHC, TAGS
The rally that saw investors flooding back into equity markets with reckless abandon over the course of the last two months finally stalled last week, as profit-taking, coupled with some negative developments on the economic front, led to declines in all the major indices. All told, the Dow surrendered 306 points to close at 8268, down 3.6% on the week and 5.8% on the year. The Nasdaq finished marginally better, posting a 3.4% decline to finish at 1680 on the week, up 6.5% on the year, while the S&P 500 and Russell 2000 finished down 5.0% and 7.0% respectively on the week, bringing them to declines of 2.3% and 4.7% on the year.
With results of the bank stress tests and earnings season now all but distant memories and summer fast approaching, it was a considerably slower week on Wall Street as investors sorted through the developments of the past few weeks and began reaping profits from the spring rally that saw nine straight weeks of gains and left many investors feeling significantly better, considering the beating that many had taken before the beginning of this latest rally. The financial sector led the laggards, posting the largest decline at 12.1%, which stands to reason considering the 23% jump it saw following the stress test results the week prior, but it wasn’t the only sector to see sizable declines as Energy decreased 6.8% and Industrials lost 7.6%. While economic signals are still mixed, it appears that the trepidation characterizing markets prior to this spring rally have finally subsided and investors’ confidence has been restored in equities to a large degree.
Economic reports last week didn’t provide much room for positive interpretation, as retail sales data came in substantially lower than expected, suggesting that consumer spending gains in January and February were aberrations caused by rebounds from extremely weak fourth quarter numbers. Markets have been looking to a rebound in consumer spending as a signal of overall economic recovery, but the most recent decline in retail sales, coupled with last month’s less than encouraging numbers suggest that they may be waiting a bit longer. With unemployment continuing to rise and wage gains stagnating, the outlook for consumer spending remains poor.
What should investors look for this week? Earnings reports will be limited this week, but look for reports from Lowe’s (NYSE: LOW) Monday morning, followed on Tuesday morning by Home Depot (NYSE: HD) and Medtronic (NYSE: MDT), with Hewlett Packard (NYSE: HPQ) reporting after the close. On Wednesday, expect reports from Deere & Co. (NYSE: DE) and Target (NYSE: TGT) followed on Thursday afternoon by Foot Locker (NYSE: FL) and Gap, Inc. (NYSE: GPS).
Economic data for the week will be light, but look for building permits and housing starts for April to be released together at 8:30 am Tuesday morning. Weekly crude inventories are due out Wednesday at 10:30 am followed by minutes from the April 29th Federal Open Market Committee meeting. Weekly initial jobless claims will be released at 8:30am Thursday, followed by leading indicators for April and the Philadelphia Fed Index which will be released together at 10:00am.
Conferences for the week begin Monday with the three day JP Morgan Global Technology, Media and Telecom Conference which is being held in Boston along with the two day Deutsche Bank Healthcare Conference. The UBS Oil & Gas conference begins Tuesday in Austin, TX, as does the Biotechnology Industry Organization International Convention which is being held in Atlanta; JP Morgan will hold their annual shareholders’ meeting in New York the same day. The week rounds out with the Goldman Sachs Fourth Annual Alternative Energy Conference beginning on Thursday in New York.
Enzo Biochem (NYSE: ENZ), a biotechnology company specializing in gene identification and genetic and immune regulation technologies for diagnostic and therapeutic applications and laboratory services, announced that its subsidiary, Enzo Life Sciences has been granted a new patent by the U.S. Patent and Trademark Office that will complement existing proprietary technologies that have applications in the molecular diagnostics and life sciences marketplaces. The patent covers the use of labeled nucleotides that, when linked to other biological molecules such as proteins, provide enhanced signals and solubility, thus rendering them more readily detectable. The technology has wide ranging applications in the development of next generation diagnostic kits where the detection of a virus or bacteria, for example, can be more sensitively performed. Shares gained three cents on the week to close at $4.13.
Pioneer Behavioral Health (AMEX: PHC), a leading provider of inpatient and outpatient behavioral health services, reported results for its third quarter ended March 31, 2009 last week. Total net revenue from continuing operations increased 5.9% to $12.0 million for the three months ended March 31, 2009 compared to $11.3 million for the three months ended March 31, 2008. The increase is primarily attributed to a significant increase in patient care revenue from rate increases on PHC’s capitated contracts and the opening of Seven Hills Behavioral Institute, which led revenue to increase 8.2% sequentially. Pioneer reported income from continuing operations of $7,388, although it posted a net loss from operations of $151,643, or $0.01 per share, including the results of a subsidiary which was sold during the quarter, and which includes $1.1 million in losses from startup costs associated with the Seven Hills Behavioral Institute and Capstone Academy. While these new facilities have led the company to incur losses resulting from startup costs, PHC expects to realize significant revenue in the second half of the year as the facilities increase treatment of patients. One catalyst that could come soon, according to the company, would be CMS Medicare certification for its Henderson, Nevada facility, which could serve as a significant catalyst for the stock as it would likely significantly increase census at the Nevada facility. Shares ended the week unchanged at $1.20.
interCLICK (OTCBB: ICLK) the fastest growing advertising network in the US according to comScore, reported record results for its first quarter ended March 31, 2009 last week. First quarter 2009 revenue of $8.4 million rose 136% from pro forma 2008 first quarter revenue of $3.6 million, exceeding the company’s previously announced guidance of at least $7.0 million. EBITDA for the period was $0.9 million, versus 2008 fourth quarter EBITDA of $0.2 million,and pro forma 2008 first quarter EBITDA loss of $1.7 million. interCLICK managed to post a net gain of $0.03 million for the period, compared to a loss of $3 million in the first quarter of ’08. The company also posted its first quarter of GAAP profitability, despite Q1 generally being a slower period for the advertising industry. The company’s strong results are a result of advertisers seeking out more cost effective targeted solutions in the face of the global economic slowdown which has led to significant decreases in advertising budgets across the board. interCLICK’s strong performance despite the slowdown suggests that advertisers have recognized the significant value proposition that the company’s highly targeted advertising services offer and have shifted their budgets accordingly. Shares gained eight cents on the week to close at $0.83.
IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, announced results for its second quarter ended March 31, 2009 last week. Revenue for the 2009 second quarter was $1.4 million compared to $3.9 million for the same period in fiscal 2008. The decrease in revenues was due to the company’s divestiture of its IceWEB Solutions Group, Inc. subsidiary, a reseller of low-margin hardware and software products in order to focus assets on their higher margin proprietary storage products. Despite the drop in revenue resulting from the divestiture, the focus on higher margin enterprises helped gross margin increase to 41.1% compared to 16.4% in the 2008 fiscal second quarter and 27.2% from the 2009 fiscal first quarter. The increased gross margin, along with a one-time gain of $3.5 million resulting from the divestiture, helped contribute to net income of $2.7 million, or $0.08 per diluted share, compared to a loss of $1.6 million, or $0.10 per diluted share in the year-earlier period. Shares remained unchanged on the week at $0.08.
Stem cell developer Advanced Cell Technology (OTC: ACTC), announced last week that it has entered into a licensing agreement with CHA Bio & Diostech Co, a leading Korean based stem cell developer. Under the terms of the agreement, Advanced Cell will license its proprietary “single blastomere technology,” which has the potential to generate stable cell lines, including retinal pigment epithelium (RPE) cells for the treatment of diseases of the eye, to CHA Bio for development and commercialization exclusively in Korea for an undisclosed sum. Shares gained four cents on the week to close at $0.14.
CEL-SCI Corporation (AMEX: CVM), a company engaged in research and development of drugs and vaccines used in the treatment of cancer, announced results for its second quarter ended March 31, 2009. Among the highlights was a significant reduction in net loss from the corresponding period a year ago. For the second quarter of ’09, CVM managed to reduce net loss by 41%, reporting a loss of $1.9 million, compared to $3.2 million in the second quarter of ’08. The reduction in net loss was primarily a result of a significant reduction in the company’s cash used in operations, which declined from $10.7 million for the first two quarters in ’08 to $57,092 during the first two quarters of ’09. CVM’s ability to significantly reduce cash used in operations during periods characterized by constricted capital markets could position the company ably to take advantage of continued economic recovery as they continue to develop their diverse portfolio of vaccines. Shares gained two cents on the week to close at $0.31.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company focused on evidence-based nutritional solutions, reported results for its first quarter ended March 31, 2009. During the period, Forbes managed to post revenues generated from sales of its nutraceutical product marketed under the name Reducol of $725,000 Canadian, versus $2 million Canadian in the comparable period a year ago. The company completed divestiture of assets associated with a subsidiary, renamed Deans Knight Income Corp., which resulted in a onetime gain of $4.1 million Canadian, helping Forbes post a net gain for the period of $2.98 million Canadian or $0.60 per share. The gain is a significant improvement over the corresponding year ago period in which the company posted a net loss of $1.6 million Canadian, or $0.34 per share. In other news last week, the company received a notice from the Nasdaq stating that Forbes once again meets the shareholders’ equity requirements necessary to retain its listing on the exchange. Shares lost ten cents on the week to close at $0.29.
Tarrant Apparel (NASDAQ: TAGS) a design and sourcing company for private label and private brand casual apparel, reported first quarter results for the three months ended March 31, 2009 last week. Tarrant reported total net sales of $37.3 million in the first quarter of 2009, a 26.1% decrease compared to total net sales of $50.5 million in the same period of 2008. Gross profit decreased by $2.1 million, or 20.5%, to $8.0 million in the first quarter of 2009 from $10.0 million in the first quarter of 2008. The decrease in gross profit was primarily due to a decrease in total sales resulting from the worldwide economic downturn. The net loss for the 2009 first quarter was $171,000 or $(0.01) per share compared to a net loss of $253,000 or $(0.01) per share in the year earlier period. Shares gained eight cents on the week to close at $0.80.
Adeona Pharmaceuticals (AMEX: AEN), a specialty pharmaceutical company developing innovative late-stage drug candidates for the treatment of autoimmune and central nervous system diseases, announced results for its first quarter ended March 31, 2009. Among the highlights was a significant reduction in net loss from $3.1 million, or $0.15 per share during the first quarter in 2008, to $1.1 million, or $0.05 per share in the comparable period this year. The reduction in net loss was most readily attributed to downsizing and cost saving measures initiated at the end of the first quarter of 2008 which have significantly reduced Adeona’s burn rate. The company has received encouraging clinical results recently and expects to use the $5.3 million cash on hand at the end of the period to continue to push its portfolio of treatments designed to slow debilitating diseases such as Alzheimer’s through the FDA approval process. Shares lost seven cents on the week to close at $0.43.
Cord Blood America, Inc. (OTCBB: CBAI), an umbilical cord blood stem cell preservation company focused on bringing the life saving potential of stem cells to families nationwide and internationally, announced last week that it had received a commitment from a private institutional investor for up to $2.3 million to acquire or build its own state-of-the-art laboratory for the storage of multiple stem cell products including umbilical cord blood stem cells. $300,000 of the proposed $2.3 million has already been received by the company with the remainder scheduled to be dispersed in future installments. Cord Blood feels that operating its own laboratory space presents significant opportunities to expand their capabilities beyond focusing on umbilical cord stem cells to include adipose tissue and peripheral blood stem cells and that this acquisition will be an important strategic step towards growing to the size and position which they hope to achieve in the future. Shares remained unchanged at under a penny on the week.
Greenshift (OTCBB: GERS), a company that develops and commercializes clean technologies that facilitate the efficient use of natural resources, announced last week that it has recently executed term sheets with several corn ethanol producers that correspond to more than 15 million gallons per year of extracted corn oil. Greenshift customarily enters into non-binding term sheets as a precursor to executing agreements for the construction of facilities based on GreenShift’s proprietary corn oil extraction technologies. Assuming that these term sheets are converted into new contracts, it would put the company’s current backlog at 55 million gallons per year. The recent allowance of two key corn oil extraction patents has served to significantly improve Greenshift’s marketing position which should enhance the strategic options available to the company as they continue to develop their portfolio of carbon reducing ethanol production technology. Shares remained unchanged on the week at under a penny.
On the Wires: EcoSystem Corp. (OTCBB: ESYM), a company innovating industrial-scale applications of bioreactor technology that are designed to resolve compelling ecological challenges while producing value added carbon neutral products, announced last week that it has appointed Trevor Bourne, the founder and chief executive officer of Global Ethanol, LLC (, to EcoSystem’s board of directors. In other personnel news last week, i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality mobile applications and services, appointed Bruce Friedman to its Board of Directors as Chairman of the Audit Committee. Mr. Friedman has been involved in structuring complex financial transactions and designing marketing campaigns to introduce new, innovative products to the general public. He has extensive experience in the areas of structured partner relationships, consumer marketing and accounting.
