06/17/2007
VOLUME 304
Companies featured in the current edition of the newsletter: AVGO, AXMP, CGXP, CHIP, CVM, CYTR, ENZ, GNBT, HSOA, HYTM, ITUI, TAGS, USAT, VOII
Stocks rebounded sharply and erased most of the losses from the prior week as tame inflation data pushed the market higher. The Dow gained 215 points for the week and was near its all-time high of 13,692 on Friday before retracing slightly, raising its annual gain to 9.4%. The S&P is within 20 points of its record trading high after rising 25 points for the week, pushing its year-to-date gain to 8%. The Nasdaq closed at a six-year high of 2,627, rising 53 points for the week, equating its annual gain to 8.7%. The Russell rose 12 points with yearly gains totaling 7.6 %.
Last week’s key metric, the CPI, helped investors gain confidence as the core component, which excludes volatile food and energy prices, rose a less-than-expected 0.1% versus the 0.2% increase analysts were expecting. Such news reduces concerns of the Fed raising interest rates later this year. A similar trend was seen earlier in the week with the PPI, as the core component that also strips out food and energy costs showed an expected 0.2% rise, indicating that inflation is rising at a measured pace. Unemployment claims came in unchanged from the previous week also helping the market as analysts were expecting a small rise. Rising gas prices do not appear to be affecting consumers as much as some feared after reports showed that May Retail Sales rose 1.4%, twice the amount that analysts were expecting. Yields on the 10-year note should be watched going forward as the yield ended the week at 5.17%, near a five-year high.
What should investors look for this week? Consumer electronics company Best Buy (NYSE: BBY) will report quarterly results on Tuesday before the opening. Wednesday morning Circuit City (NYSE: CC) will announce earnings along with FedEx (NYSE: FDX) and Morgan Stanley (NYSE: MS). Tyco International (NYSE: TYC) will host analysts on Tuesday, with Alcatel-Lucent (NYSE: ALU) meeting with analysts on Wednesday and McKesson Corp. (NYSE: MCK) hosting an analyst meeting on Thursday. The conference schedule is light with the three-day Stifel Nicolaus Investor Conference at NXTcomm starting Monday in Chicago. Beginning Tuesday, William Blair & Company kicks off its three-day 27th Annual Growth Stock Conference in Chicago.
On the economic front, May Housing Starts and May Building Permits will be released on Tuesday prior to the opening. Weekly Crude Inventories will be announced on Wednesday at 10:30 a.m. Before the bell on Thursday, Weekly Jobless Claims will be reported followed by May Leading indicators at 10:00 a.m. and the June Philadelphia Fed Index being released at noon. Investors will also watch for comments this week from Boston Fed President Minehan who will be speaking on Monday and Tuesday. Former Fed head Volcker will also be speaking on Tuesday and San Francisco Fed President Yellen and New York Fed President Geithner will be speaking on Wednesday.
Healthcare services provider Hythiam, Inc. (NASDAQ: HYTM) held its Annual Shareholder’s Meeting on Friday, and at the event the company’s CEO suggested that the company’s private pay business was strong, which could bode well for the company’s second quarter results, as much of the early revenue for HYTM is expected to come from that area. The company also said for the first time that there were considerable opportunities to license PROMETA, its addiction protocols, to countries, suggesting that there was a “distinct possibility” for such an event to occur. Finally, he also said to anticipate initial reimbursement from managed care this year, and that very soon there could be a national alliance on a managed care basis, which could accelerate adoption in this area. Shares rose 34 cents last week to close at $7.80.
Enzo Biochem, Inc. (NYSE:ENZ), a company engaged in the research, development and manufacture of innovative health care products, reported solid results for its third fiscal quarter and nine months ended April 30, 2007. Revenue for the quarter rose an impressive 45% to $14 million compared to the same period last year, mainly attributable to the increase in the company’s Clinical Lab revenues. The revenue was the highest for the company in 18 quarters. Gross profit increased 39% for the quarter to $7.9 million. For the nine-month period, total sales for Enzo increased 17% to $35 million with gross profit totaling $20.5 million. The company continues to successfully implement its business plan for each of its business units. Enzo Clinical Labs is benefiting from expanded relationships with providers as the number of procedures performed continues to increase, as reflected in sales growth for the quarter of this division of 49% to $11.5 million. The company’s Life Sciences division also experienced top-line growth for the quarter of 28%. Although competitive pressures in this space offset the increase in royalty income received by Enzo Life Sciences, expenses are being effectively managed and remain comparable to the same period last year. The recent acquisition of Axxora Life Sciences will strengthen results from this division in the very near-term as Axxora is a well recognized, global manufacturer and marketer of life sciences research products. Going forward, further progress of the treatment of the first patient in the Phase I/II clinical trial for Enzo’s gene therapy for HIV-1 should be monitored, as well as updates regarding the enrollment of additional candidates in the trial. The performance of the company’s Alequel product for Crohn’s disease should also be watched as positive interim data have already been announced as Enzo moves this product into advanced studies. The financial health of the company is solid as the balance sheet is debt-free, with cash and cash equivalents totaling $120 million. Shares ended the week at $16.14, up 87 cents.
Investors and traders may want to pay close attention to shares of Home Solutions of America, Inc. (NASDAQ: HSOA) Monday morning, as the company will webcast its Annual Stockholder’s Meeting at 10 a.m. eastern, and then take questions from investors. There are certainly no shortage of topics the company could address, including providing additional details on the two contracts it recently announced, each worth approximately $100 million, the FIGA receivable and whether it will collect it during Q2 and repay a $21.5 million note issued in connection with the acquisition of its Fireline Restoration subsidiary and its outlook for the second quarter and balance of the year. Shares have retraced all of their gains since May 17th, the day prior to when the company announced its first $100 million contract, suggesting that investors have discounted the value of both contracts. The stock currently trades for less than 13 times trailing 12-month earnings. Volatility and trading volume in the stock declined significantly last week from previous levels, but with approximately 33% of the float short as of the most recently published report, volatility could return quickly. Shares ended the week at $5.97, down 24 cents.
VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, announced last week that 25 patients and caregivers received the VeriMed RFID implantable microchip at the Alzheimer’s Community Care 2007 Alzheimer’s Educational Conference in West Palm Beach, Florida on June 7-8. As well as the obvious benefits to Alzheimer’s patients by providing medical personnel quick access to identification and medical records information in an emergency situation, in the event that a caregiver is immobilized or otherwise unable to communicate, a chip implanted in that caregiver can inform medical personnel that he or she is responsible for someone unable to care for themselves. VeriChip, in collaboration with the ACC, is also scheduled to begin enrollment this month of a voluntary, two-year, 200 patient project to study the effectiveness of the VeriMed Patient Identification System in managing the records of Alzheimer’s patients and their caregivers. The company also announced that Xmark Corporation, its wholly owned subsidiary, will present at the Association for the Advancement of Medical Instrumentation Conference and Expo in Boston, MA, on June 16-18. The presentation will showcase its Assetrac system, featuring the smallest RFID asset tag on the market, and is designed exclusively for use in healthcare environments. Attendance by over 1,500 healthcare technology management professionals is expected. VeriChip also announced the results of its first annual meeting, held in Boca Raton, Florida. In addition to the election of board members, the shareholders also ratified the appointment of Eisner LLP as the company’s independent registered public accountant, and adopted a stock incentive plan. Shares ended the week at $7.49, down 73 cents.
CEL-SCI Corporation (AMEX: CVM), a developer of new immune system based treatments for cancer and infectious diseases, reported last week that its cancer drug Multikine has been granted orphan-drug status as a neoadjuvant therapy for head and neck cancer patients by the U.S. Food and Drug Administration. Orphan drug status is given to drugs that have the potential to treat rare diseases, and provides an accelerated path to approval and seven years of market exclusivity, as well as other funding and tax advantages. The revenue of the world’s leading orphan drug was approximately $2.4 billion in 2003. Multikine was shown to increase overall survival by 33% in its Phase II trial, and has been cleared by the FDA for a Phase III trial with an expected enrollment of 800 advanced primary head and neck cancer patients. Head and neck cancer accounts for approximately 600,000 new annual cases of cancer worldwide. Shares remained unchanged for the week to close at $0.81.
Cytrx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, announced last week its inclusion in the Russell 3000 index, with the final membership being announced on June 22, 2007. Membership is determined by the Russell Investment Group primarily by objective, market-capitalization rankings and style attributes, and reflects growing recognition from the investment community. As a result of being included in the Russell 3000, Cytrx Corp. is automatically included in the Russell 2000, as well as other appropriate growth and value style indexes. Currently, over $4 trillion in assets are benchmarked to Russell indices by institutional investors and investment managers. Shares ended the week at $3.93, up 11 cents.
Volume Alert: Shares of drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), traded over 27 times average volume after Rodman & Renshaw initiated coverage with a Market Outperform rating last week and an 18-month price target of $6. The price target relative to the current share price is one of the highest we have seen. The Rodman analyst is one of the top-rated stockpickers according to published data. Analysis indicated that the company’s core product Generex Oral-lyn could be a significant player in the non-injectable insulin market and that Oral-lyn’s product profile, combined with strong clinical data and expected rapid growth in the global diabetic population, could result in over $600 million in revenues by 2013. Separately, Generex filed last week its quarterly report for the period ended April 30, 2007. Initial revenue from sales of Generex Oral-lyn in Ecuador should be recognized later this year as the company finalizes its licensing and distribution agreement with PharmaBrand, its joint venture partner in South America. The company continues to exhibit a strong balance sheet with over $40 million in cash and short-term investments. Lastly, the company announced that Antigen Express, Inc., its wholly owned subsidiary, has been awarded two new U.S. patents, further strengthening its core vaccine technology platform. The patents give Antigen increased protection for its novel vaccine technology platform, currently being used in a Phase II trial for breast cancer, a Phase I trial for prostate cancer, and a Phase I trial for the potentially pandemic H5N1 avian influenza virus. Shares were up 39.6% for the week to close at $1.83, up 52 cents.
Volume Alert: Shares of Tarrant Apparel Group (NASDAQ: TAGS), an innovative design and sourcing company for private label and private brand casual apparel, traded 3.6 times average volume as investors take notice of the company’s optimism for near-term results as Tarrant continues to improve operating efficiencies while growing sales in its Private Label and American Rag CIE businesses. With 2007 sales guidance totaling $230 – $240 million, such estimates signal yet another year of solid growth for the company. Shares ended the week at $1.17, up 8 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, reported last week that the Humboldt Vending Machine Efficiency Initiative, a joint project between Rendezvous Music & Vending, a canteen franchise and Humboldt County’s largest vending machine distributor, and the Redwood Coast Energy Authority (RCEA), have agreed to use USA Tech’s EnergyMiser technology in an effort to lower energy consumption and CO2 emissions. The plan calls for the installation of over 400 VendorMisers in refrigerated vending machines, saving local businesses and public agencies approximately $100,000 annually. The project is also considering installing USA Tech’s EnergyMiser in another 400 candy and snack vending machines. The Los Angeles South Bay Cities Council announced a similar plan late last year in 15 cities south of Los Angeles. Shareholders of USA Technology stand to benefit significantly as similar “green” initiatives gain momentum nationwide, aimed at reducing the threat of global warming. Shares ended the week at $11.50, up $1.60.
Volume Alert: Shares of i2Telecom International, Inc. (OTCBB: ITUI), a developer of ultra-portable high quality Voice-over-Internet Protocol products and services, traded 7.2 times average volume last week as excitement surrounding the company’s recent formation of a Joint Marketing and Licensing Agreement with Axcess Online builds. This collaboration creates a lucrative opportunity for the company as it provides a world-class converged solution for delivering data and voice communications to large enterprise customers, where i2 would receive 75% of the gross profits. Shares ended the week at $0.13, up 1 cent.
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, announced that the FDA has approved the company’s request to review its antimicrobial wound dressing as a device. The antimicrobial wound dressing is a combination product that combines EpiCeram Skin Barrier Emulsion, which has been cleared by the FDA as a medical device, with Ceragenix’s proprietary Ceragenin antimicrobial compound CSA-13. The antimicrobial wound dressing is intended to be used to help prevent bacterial colonization and infection. This decision by the FDA to review the device to confirm reasonable assurance of safety and effectiveness is significant, as it provides a clear regulatory path for the company to follow in bringing this device to market. Shares ended the week at $1.81, up 1 cent.
Volume Alert: Shares of VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, traded 5.8 times average volume after the stock broke above the downward trend-line it has followed for the past three months. Shares ended the week at $0.11, up 2 pennies.
Volume Alert: Shares of AXM Pharma, Inc. (OTC: AXMP), a manufacturer of proprietary and generic pharmaceutical and nutraceutical products for the Chinese and other Asian markets, traded 4 times average volume last week, as investors speculate on the progress of the company’s sales activities. Last quarter the company hired four experienced Chinese pharmaceutical sales and marketing employees. Shares ended the week at $0.17, up 2 cents.
On the Wires: Avicena Group, Inc. (OTCBB: AVGO), a biotechnology company focused on diseases of the central nervous system, continues to create brand awareness for its HD-02 product for the treatment of Huntington’s disease by participating at the Huntington’s Disease of America Society’s 22nd Annual Convention, which took place on June 15 – 17, 2007 in Oklahoma City. Such conventions are leading forums for the advancement of the science for the treatment of Huntington’s disease, a disease for which there are no treatment options.
