02/11/2007
VOLUME 276
Companies featured in the current edition of the newsletter: ACCP, ADSX, ARGA, AXMP, CYTR, EMIS, ENZ, GNBT, HSOA, HYTM, IMMG, IRBO, ISON, LANW, LNXGF, RTK, SCLL, SFP, SWTS, USAT
Stocks consolidated some of their recent gains last week, with each of the indexes retreating modestly on below average volume. With fewer companies reporting results in the coming weeks, investors began to once again focus on interest rates and energy prices. Comments by Fed officials on Friday stoked fears that the Fed may not be done raising interest rates yet, contributing to most of the weekly decline in the indexes. The Dow finished the week down 72 points, paring its year to date gain to 0.9%. The Nasdaq dipped 16 points, reducing its year to date gain to 1.8%. The S&P 500 dropped 10 points, and is up 1.4% for the year, while the Russell 2000 finished the week down 2 points, reducing its yearly gain to 2.5%.
Last week’s economic news was relatively light with only a few high-profile companies reporting results. With Fed officials hinting that rate increases are more likely than reductions, this week’s upcoming CPI data takes on added importance. Likewise, the focus has shifted back to the energy sector, as crude oil prices continued to rise last week, briefly jumped above $60 per barrel. Oil finally settled at $59.89 per barrel, but the price increase could stoke inflationary concerns.
What should investors look for in the upcoming week? Next week will not see the same level of earnings activity as over the past few weeks, but there will be a few companies reporting results with the ability to impact trading. Monday before the bell Loews Corporation (NYSE: LTR) reports results. YUM! Brands (NYSE: YUM) will announce earnings after the market close on Monday. The activity picks up Tuesday with pre-market announcements from Coca-Cola Enterprises (NYSE: CCE), KB Home (NYSE: KBH) and Marsh McLennan (NYSE: MMC). Expect to see announcements from Applied Materials (Nasdaq: AMAT) and MetLife (NYSE: MET) after the bell Tuesday. United Auto (NYSE: UAG), Progress Energy (NYSE: PGN), Office Depot (NYSE: ODP), MGM Mirage (NYSE: MGM), Deere (NYSE: DE) and Coca-Cola (NYSE: KO) will announce earnings before the market opens on Wednesday. Thursday morning announcements include Baker Hughes (NYSE: BHI), EnCana (NYSE: ECA), Molson Coors Brewing (NYSE: TAP), and Reliance Steel (NYSE: RS). Allied Waste (NYSE: AW) and Community Health (NYSE: CYH), will announce earnings after the market close Thursday. Friday’s announcements will include earnings reports from Campbell Soup (NYSE: CPB) and Goodyear Tire (NYSE: GT).
Next week’s economic reports will take on added significance. The January Treasury Budget will be announced late in the afternoon Monday and the December Trade Balance will be announced before the bell Tuesday. January Retail Sales will be announced before the open on Wednesday followed by mid-morning announcements of December Business Inventories and the Weekly Crude Inventories. January Import and Export Prices will be announced before the bell Thursday, as well as the Weekly Initial Unemployment Claims and the February NY Empire State Index. December Net Foreign Purchases and January Industrial Production and Capacity Utilization will be announced later Thursday morning. The February Philadelphia Fed Index will be announced mid-day Thursday. January Housing Starts and January Building Permits, as well as the January Core PPI, which could dramatically move markets, will be announced before the open on Friday. The February Michigan Sentiment Index will be announced later that morning. Investors will likely pay close attention to Fed Chairman Bernanke on Wednesday as he testifies at the Senate on policy. Financial futures and options pits will close at 1p.m. on Friday.
The conference schedule will be highly active again next week. The three-day Deutsche Bank Securities 2007 Small Cap Growth Conference begins Monday in Naples, Florida. The three-day Second Annual Stem Cell Summit begins Monday in San Diego, while the three-day UBS Annual Healthcare Services Conference in New York starts Monday as well. Hythiam, Inc. (NASDAQ: HYTM), will present there on Wednesday at 8:30 a.m. Eastern Time. Other conferences starting Monday include Citigroup hosting its three-day 2007 Retail Conference and Field trip in Orlando, the Goldman Sachs 2007 Housing Conference, and the three-day 9th Annual Bio CEO and Investor Conference in New York. CytRx Corporation (NASDAQ: CYTR) is scheduled to present at the 9th Annual Bio CEO and Investor Conference Wednesday at 3:00 p.m. Eastern Time. Emisphere Technologies, Inc. (NASDAQ: EMIS) will also present on Wednesday at 12:00 p.m. The CIBC Human Capital Management Software 1-on-1 Conference in New York and the First Albany Capital 2nd Annual Orthopedics Conference in San Diego will begin Tuesday. The three-day Merrill Lynch Insurance Investor Conference and the three-day Merrill Lynch Internet, Software & Services Conference begin Tuesday as well, and both conferences will be held in New York. Merriman Curhan Ford & Co. will hold a IP Video 2007 Conference in San Francisco on Tuesday. The three-day BB&T Capital Markets 22nd Annual Transportation Conference in Miami and the four-day Piper Jaffray 5th Annual Aircraft Summit in Vail, Colorado begin Wednesday. The two-day Credit Suisse Digital Media, Memory & Storage Conference in Boston also begins Wednesday. The two-day EnerCom Incorporated Oilservice Conference V in San Francisco begins Thursday.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, announced last week that the company has launched a new nationwide team of field personnel with a focus on increasing the awareness of the PROMETA® protocols among allied health professionals and physicians specializing in the treatment substance dependency. This national field organization is made up of 36 individuals, 18 of which are PROMETA Clinical Consultants (PCC). The remaining half of the team is comprised of Site Managers. The Site Managers will service the company’s licensed locations as liaisons between Hythiam and its licensees. In addition to working closely with the Site Managers to execute strategies for increasing the visibility of licensed sites, the PCC’s will also service Hythiam’s existing 60 PROMETA licensed sites by communicating the scientific features, advantages and benefits of the treatment protocols to key thought leaders and decision makers. The company also said that its flagship PROMETA center, based in Los Angeles, achieved its highest monthly revenue since its inception a year ago. HYTM recently said that two additional Centers were recently opened in San Francisco and New Jersey. The stock ended the week at $8.56, down 13 cents.
Enzo Biochem, Inc. (NYSE: ENZ), developer of innovative health care products based on molecular biology and genetic engineering techniques, announced last week that the company had agreed to sell one million shares of the company’s common stock at $15 per share in a registered direct offering. While the shareholder was not disclosed, it must have been somebody who wanted to own the stock pretty badly, as the company completed the sale of 3.3 million shares at $14 less than six weeks earlier. Net proceeds totaling $14.2 million from the sale increase the company’s cash position to approximately $125 million. Enzo also said that its subsidiary, Enzo Life Sciences, Inc., had been granted two new patents by the U.S. Patent and Trademark Office. These new patents add to the competitive position of the company’s intellectual property portfolio and serves to strengthen Enzo’s existing proprietary labeling products for the genomics and diagnostics markets. U.S. Patent No 7,166,478, covers a wide range of applications in DNA labeling broadly used in such areas as nucleic acid arrays for gene expression and analysis of gene copy number in chromosomes. U.S. Patent No. 7,163,796, relates to the use of novel processes developed at Enzo for use in chemiluminescent assays. The patents highlight the company’s broad portfolio of intellectual property, which has sometimes caused it to protect its IP estate through litigation. One lawsuit, filed by ENZ against Applied Biosystems (ABI), may have merit, if one were to read a 10-Q filing by ABI, in which it acknowledged that the lawsuit by Enzo was one of the risk factors investors faced. The suit alleges that ABI infringed six patents due to the sale of sequencing reagent kits, TaqMan ® genotyping and gene expression assays, and the gene expression microarrays used with the Applied Biosystems group’s Expression Array System. On November 8, 2006, a patent interference proceeding was declared by the United States Patent and Trademark Office between Enzo Diagnostics, Inc. and the California Institute of Technology, concerning a patent application owned by Enzo and U.S. Patent No. 5,821,058, owned by Caltech. The ’058 patent is exclusively licensed to Applied Biosystems and claims methods for DNA sequencing. The possibility of Enzo prevailing in the interference potentially provides it with the ability to assert claims against ABI and possibly others. Enzo shares closed the week up $0.57 at $15.65.
Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, finally completed the IPO of its Verichip Corporation subsidiary on Friday as the stock begin trading on the Nasdaq Global Market under the ticker symbol CHIP. VeriChip offered 3.1 shares of its common stock at $6.50 per share, before underwriting discounts and commissions. So where does that leave ADSX? Primarily as the majority owners of VeriChip and Digital Angel. While it will undoubtedly take some time for VeriChip to develop the market for the VeriMed Patient Identification System, the company is primarily being valued based upon revenue ($20.3 million for the first nine months of 2006) generated by RFID sales of infant protection and wander prevention systems. Essentially, it is trading at comparable multiples of revenue to other RFID publicly-traded companies, with investors attributing little value to VeriMed. Investors should focus on the number of new hospitals adopting the system, a key metric to value the company’s future progress in gaining traction. The stock ended the week down $0.12 at $1.90.
New 52-Week High: Shares of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company focused on developing products primarily in the area of small molecules and ribonucleic acid interference (RNAi), surged to yet another new high last week on heavy volume, as the company announced that it will proceed with its arimoclomol study. CYTR unveiled the company’s plans for completing its next step in the process of initiating the Phase IIb clinical trial for treatment of ALS, more commonly known as Lou Gherig’s disease, planned for commencement in the third quarter of 2007. The company plans to proceed with the maximum safe and well-tolerated dose during the Phase IIb efficacy trial of the orally-administered arimoclomol. At a European single-site, this double-blind, placebo-controlled multiple rising/ascending dose study is designed to test the safety, tolerability and pharmacokinetics of increasing dosages of arimoclomol in healthy volunteers over a seven-day period. Included in the plan will be 40 healthy volunteers in four groups consisting of ten individuals. CytRx believes that positive efficacy and safety results from the Phase IIb trial could be sufficient for arimoclomol product registration in the U.S. The stock ended the week up 36 cents at $3.25.
Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, announced that the company has selected and finalized the preparations of 50 volunteers set to participate in clinical trials for a synthetic avian influenza vaccine under development by GNBT’s wholly-owned subsidiary, Antigen Express. The company previously announced that it entered into an agreement with Lebanese-Canadian Hospital in Beirut, Lebanon to conduct the Phase I trial. The hospital is currently screening an additional 70 potential volunteers. The study is expected to accrue160 total patients. Antigen Express’s development of a novel peptide vaccine technology houses certain advantages for utilization against the potentially pandemic H5N1 avian influenza virus. The peptide vaccine has the potential for more inexpensive and rapid mass production, whereas the potential of the traditional egg-based vaccine would allow for vaccination of only a fraction of the world population. The technology under current development by Antigen Express is designed to more potently stimulate CD4+T helper cells by modifying a specific protein from the H5N1 virus in order to protect against the lethality of the virus. In other company news, Frost & Sullivan selected Generex as the recipient of the 2006 Frost & Sullivan Award for Technology Innovation in the field of diabetic therapies. The company’s Generex Oral-lyn™ oral insulin spray technology for the treatment of Type-1 and Type-2 diabetes provides an ideal and noninvasive path for insulin delivery. The technology is currently available in South America and Generex is preparing for a pivotal Phase III study in the USA and worldwide. The stock ended the week up 9 cents at $1.84.
Rentech Inc. (AMEX: RTK), a developer of alternative energy sources, announced last week results for its 2007 first fiscal quarter ended December 31, 2006. RTK reported significantly increased revenue as a result of sales of nitrogen products from its manufacturing plant in East Dubuque, Illinois, which was acquired in April, 2006. RTK reported revenues of $35.4 million versus $41,000 for the equivalent period in fiscal year 2006. The company reported a net loss applicable to common shareholders of $(8.7) million or $(0.06) per share, compared to a net loss applicable to common shareholders of $(5.7) million or $(0.05) per share during the three months ended December 31, 2005. The company had cash and cash equivalents of $53.8 million at December 31, 2006. Perhaps most significantly, the company said in its conference call that it planned to finance a significant portion of the conversion costs for its East Dubuque facility through project financing, which would reduce the amount of stock the company would need to issue. Shares ended the week up 29 cents at $3.88.
Earnings Preview: Small-appliance maker Salton, Inc. (NYSE: SFP) will report second quarter results on Tuesday before the market opens for the period ended December, 2006 but the results are likely to be overshadowed by an announcement last week where the company said it had entered into a definitive agreement to merge with Applica, in a move that came as little surprise to investors. Immediately following the merger, Applica will become a subsidiary of Salton and the existing stockholders of Applica will control approximately 83% percent of Salton’s outstanding common stock. The combination of Applica and Salton will result in the creation of one of the largest U.S. public companies centered on the household small-appliance industry and should drive substantial cost savings, likely well in excess of $50 million. The combination of the two companies will create a broad product portfolio of highly recognizable consumer product names. The companies intend to complete this transaction by the end of the second calendar quarter of 2007. Harbinger Capital Partners, which acquired Applica after a bidding war with NACCO Industries, will be the largest shareholder of the combined companies. The stock ended the week down 8 cents at $2.91.
Isonics Corporation (NASDAQ: ISON), the developer of innovative solutions for the homeland security and semiconductor markets, announced that the company has made the final principal payment to the holders of its 8% Convertible Debentures, which were issued in February 2005. The repayment of the Debentures simplifies the company’s capital structure and eliminates the need for the company to issue more shares to repay the debt. Shares ended the week down 3 cents at $0.52.
Home Solutions of America, Inc. (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, said last week that its subsidiary, Fireline Restoration, Inc., was an emergency first responder to the tornados that hit central Florida in early February. In the wake of the twisters, the company was on the ground to assist with immediate remediation and recovery efforts once the area was confirmed safe and emergency services had finished attending victims of the natural disaster. HSOA anticipates revenue of approximately $8 million from the storm and additional reconstruction work in the area. Despite the news, this heavily shorted stock (30% short interest) continues to struggle with its 200-day moving average $6.67, rising briefly over that level earlier in the week only to fail to hold that level, as it has since July. Shares ended the week down 21 cents at $6.43.
New 52-week High: Is Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, close to inking a significant licensing agreement? While the company has said nothing about a deal for its MuGard™ product, used for the management of oral mucositis, a painful, inflammatory mouth condition affecting over 40% of cancer patients undergoing chemotherapy and radiation therapy, specialty pharmaceutical company BioProgress plc. said in a release disseminated in London but not picked up widely in the U.S. that it had entered into a term sheet to license the product for sale within the European, CIS and Middle East regions. As consideration for the exclusive rights, BioProgress will, upon signing the final licensing agreement, pay Access $1 million. Shares ended the week up $1.99 at $7.15.
Volume Alert: Shares of specialty pharmaceutical company Auriga Laboratories, Inc. (OTCBB: ARGA), jumped 55% last week on more than five times average volume, after the company announced preliminary results for the year ended December 31, 2006. For the twelve months ended December 31, 2006, ARGA had revenue of $7.4 million in its first full year of operations. Unaudited gross profit totaled nearly $4.1 million last year, up nearly 105% from the prior year. Auriga forecast $6.2 million in gross revenue for its first quarter ended March 31, 2006 and full-year revenue of $26 million. Auriga plans to launch Aquoral™, a prescription-only product designed to treat the widespread condition of Xerostomia, as well as its Zinx™ family of respiratory prescription and over-the-counter products during the first quarter 2007. Shares ended the week up 43 cents at $1.20.
Research and development biotechnology company ImmuneRegen BioSciences, Inc., a wholly owned subsidiary of IR BioSciences Holdings, Inc. (OTCBB: IRBO), announced that Viprovex™ has demonstrated the potential for treating potentially resurgent Spanish Flu, Avian Flu and other infectious diseases. The results were based upon studies the company conducted in animal models showing protection from infection by Bacillis anthracis and influenza A viruses. Studies aimed at potential mechanisms have examined cellular components of the host immune system and have found that in both animals and in cultured cells, Viprovex causes differential activation of components of the innate immune system. These results support the whole animal findings and suggest that Viprovex may be capable of preventing immune system over-stimulation that might motivate the severe lethality of both Spanish flu and avian influenza. Current studies are planned to confirm both anti-viral effectiveness as well as these specific mechanistic findings in animal models for avian and Spanish Flu. In addition, these studies will expand efficacy observations against Anthrax to viral diseases such as Hepatitis C and Dengue Fever. The stock ended the week up a penny at $0.14.
Joe Granville, a noted mining newsletter published who writes The Granville Letter, said last week in his publication that he thought the stock of junior mining company Linux Gold Corp. (OTCBB: LNXGF) could easily reach a $1 or more. While certainly a bold prediction, Granville has been uncannily accurate before, winning the top gold model for the second consecutive year in a competition to forecast the price of gold. Previously, he recommended Linux as a top stock, just weeks before the stock surged to a new 52-week high in May. Linux shares ended the week unchanged at $0.27.
Cell biology company Stem Cell Innovations (OTCBB: SCLL), said last week that the company had submitted its ACTIVTox® in vitro toxicology suite to ECVAM to seek validation as an alternative to animal testing in the European Union. The company’s proprietary, highly characterized human liver cell system is currently being used to accurately predict the response of the liver to a new drug compound and chemists can then eliminate potential toxicity before entering clinical trials. The use of ACTIVTox has the potential to reduce the need for animals in clinical testing, in turn saving pharmaceutical companies time and money. ACTIVTox also has broad application and can be used to examine toxicity in chemicals, nutraceuticals and cosmetics. Shares ended the week at $0.05, down $0.02.
Sweet Success Enterprises, Inc. (OTCBB: SWTS), which has re-launched a product line made popular by Nestlé’s to tap into the rapidly growing demand for convenient and nutritious beverages, announced the finalization of an agreement with Kerry Sainte-Claire for the production of the unique ChocKoala Immunity Jr.(TM) This agreement significantly broadens the company’s production potential to include the smaller “kid-friendly” products. The company will mass-produce the one of a kind ChocKoala Immunity Jr. in the 250mL Tetra Prisma packaging at KSC’s 122,000SF state-of-the-art facility. Kerry Sainte-Claire, is a unit of the multinational conglomerate Kerry Group. Kerry Group is a leader in global food ingredients and flavors markets, and a leading branded consumer foods processing and marketing organization. The stock ended the week unchanged at $0.63.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, announced last week that all energy utilities offering EnergyMiser rebates had renewed their incentive programs for 2007. USAT also signed two additional utilities, increasing the total number of energy utilities offering EnergyMiser rebates to 26. The two new utilities joining the program are The United Illuminating Company, of Connecticut and the Western Massachusetts Electric Company. Shares ended the week down 8 cents at $6.72.
Language Access Network (OTC: LANW), a leader in video language interpretation services, announced last week that the company will provide services to Cypress Fairbanks Medical Center, in Houston, Texas. Cypress is part of the massive Tenet Healthcare System. Language access will provide interpretation service in over 150 languages, including American Sign Language, to the medical center’s Emergency Department. The company’s Martti™ system will be available free to Cypress Fairbanks Medical Center patients 24 hours a day, year round. Texas ranks second in the nation, behind California, with 13% of its population speaking English less than very well. If the launch is successful, it could lead to widescale adoption among other hospitals in the Tenet chain. The stock ended the week down $0.15 at $2.80.
AXM Pharma Inc. (OTC: AXMP), a manufacturer of proprietary and generic pharmaceutical and nutraceutical products for the Chinese and other Asian markets, announced last week the acquisition of a leading Chinese research institute. The company’s wholly-owned subsidiary, AXM Shengyang entered into an Acquisition Restructure and Technology Transfer Agreement with Beijing Yuhuatang Biological Sci-Tech Development Co., Ltd. AXM will issue approximately 4.5 million shares of the company’s common stock and RMB 1 million to Yuhuatang in exchange for all of Yuhuatang’s common stock and technology. Yuhuatang’s technology was granted innovative funds for Small and Medium Enterprises from State Science and Technology Ministry. Under the agreement, AXM will acquire a broad portfolio of products including products in the areas of testosterone and testosterone undecanoate, both of which contain Androstenedione. The demand for these products far exceeds the supply. The company expects that it can produce these products in a GMP-certified 60,000 square meter facility and expects to produce and launch these products during the fourth quarter of 2007. The products will be exported and will also be sold domestically. Construction funding will come from Chinese investors under financial terms currently under negotiation. AXM also announced that Brazil Wahsun Import & Export Ltd. has signed a ten-year agreement, under which AXM Pharma has been designated exclusive distributor for Sygen. Sygen, a product produced by TRB Pharma of Brazil, measures pathological changes in the central nervous system and Parkinson’s disease. Shares ended the week up $0.05 at $0.30.
In an operational update released to company shareholders, IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, provided information regarding the company’s business strategies. The company said its E&M business produced its best quarter in 20 years and surpassed 1,000 sold units for the Impart IQ™ platform by the year-end of 2006. The company also said the market acceptance of the Impart IQ mini™ increased. The company anticipates becoming cash flow positive in the second quarter of 2007. IMPART also announced its preliminary unaudited revenues for the fourth quarter 2006 was $2.34 million. The revenues total represents an increase of 42% over third quarter revenues. In additional company news, IMPART announced its expansion into Europe as a supplier to the Interpublic Group’s Momentum Worldwide subsidiary. The company is providing an integrated, interactive merchandising shelf signage solution with 8.4″ LCD touch screen, custom enclosure, Impart IQ mini™ player, dual solid state flash memory storage for both the media and Windows embedded operating system, plus USB future upgrade accommodations for Wi-Fi connectivity. The stock ended the week up $0.21 at $0.72.
On the Wires: Access Pharmaceuticals, Inc. appointed Esteban Cvitkovic, M.D. to its Board of Directors. Dr. Cvitkovic has also assumed the title of Vice Chairman (Europe). Dr. Cvitkovic is widely respected physician who played a crucial role in the registration of leading cancer drugs and with over thirty years of international experience in oncology therapeutics he will assist Access with the development of its existing portfolio. Dr. Cvitkovic is currently a Senior Medical Consultant to AAIOncology and maintains a part-time academic practice including teaching at the hospitals Beaujon and St. Louis in Paris. Language Access Network, a leader in video language interpretation services, recently announced the addition of Erika Shell Castro as Director of Interpreter Services. Castro was previously employed as the Manager of Interpretive Services at OhioHealth, where she was responsible for designing and implementing a full service Language Access Services program. She is a trained facilitator for the 40 hour spoken language medical interpreter training program, Bridging the Gap, and under an agreement with the Cross Cultural Health Care Program, Castro will provide this training to all of LANW’s spoken language interpreters. Sweet Success Enterprises, Inc. said last week that the company has appointed Robert D. Straus, Senior Vice President and Senior Analyst at Merriman Curhan, Ford & Co., to its Board of Directors. He joined the firm to cover specialty consumer and retail sectors. AXM Pharma Inc. appointed Elliot M. Maza to serve as a director on the Board and as Chairman of the Audit Committee. Maza is currently the Executive Vice President and Chief Financial Officer of Intellect Neurosciences, Inc.
