11/04/2007
VOLUME 324
Companies featured in this edition of the newsletter: ACCP, ACTC, AVGO, CBMC, CGXP, CHIP, CLXS, CVM, DOC, ENZ, GNBT, HYTM, ISON, ITUI, MBND, MSHI, PBIO, PLKH, RVEP, SCLL, SMGY, XCPL
There was certainly no shortage of news for the financial community to digest last week, and the market’s volatility was an apparent indicator. The Dow lost 211 points for the week, lowering its annual gain to 9.0%. The Nasdaq bucked the trend, adding 6 points for the week, and raising its annual return to 16.3%. The S&P lost 25 points, trimming its yearly advance to 6.4%. The Russell 2000 dropped 23 points for the week, equating to a 1.2% year-to-date gain.
Record oil prices muted the market’s positive reaction to the FOMC cutting both the Fed funds rate and the discount rate by twenty-five basis points. The Federal Reserve also infused $41 billion into theU.S. financial system to help mitigate losses for companies during this credit crunch. With oil prices hitting record highs of $96 per barrel, pressure could increase on the Fed to fight inflation by maintaining current interest rate levels. Not helping matters was the release of weekly crude inventories showing an unexpected decrease of 3.9 million barrels versus consensus expectations for an increase of 600,000 barrels. If this environment were to continue, there are those that worry the Fed may have to start raising interest rates, a scenario that would not help the already weakened housing and credit markets. Consumer confidence in October fell to the lowest level in two years to 95.6 versus analysts’ estimates of 99.0. Furthermore, the October ISM manufacturing index came in at 50.9 versus consensus of 51.8, the weakest pace since March. That said, not all news was bad as the economic growth during the summer grew at a surprisingly brisk pace of 3.9 percent versus expectations of 3.1 percent. Job growth in October also surprised investors as 166,000 jobs were added, almost double the amount expected by analysts.
What should investors look for this week? Cardinal Health (NYSE: CAH) will report before the opening bell on Monday, with Anadarko Pete (NYSE: APC) and Sun Microsystems (NASDAQ: JAVA) reporting after the close. Tuesday morning, expect numbers from Archer-Daniels (NYSE: ADM), Emerson Electronics (NYSE: EMR) and Valero Energy (NYSE: VLO). Fluor Corp. (NYSE: FLR), and Time Warner (NYSE: TWX) are expected to provide commentary before the opening bell on Wednesday, with earnings from American International (NYSE: AIG) and Cisco Systems (NASDAQ: CSCO) expected after the closing bell. General Motors (NYSE: GM) will report before the opening on Thursday, and Qualcomm (NASDAQ: QCOM) and Disney (NYSE: DIS) are expected to announce earnings later that afternoon.
The economic reports for the week begins with the ISM Services Index for October being released Monday morning at 10:00 a.m. Preliminary Productivity for Q3 will be announced on Wednesday morning at 8:30 a.m., followed by Wholesale Inventories for September at 10:00, Weekly Crude Inventories at 10:30, and September’s Consumer Credit at 3:00 p.m. Initial Jobless Claims for the week will be announced on Thursday morning at 8:30 a.m. Trade Balance for September, and October’s Import Prices ex-oil, and Export Prices ex-ag. will be reported Friday at 8:30 a.m., with the Preliminary Michigan Consumer Sentiment Index for November being released at 10:00 a.m.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), Advanced Cell Technology, Inc. (OTCBB: ACTC), Avicena Group, Inc. (OTCBB: AVGO), Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), CEL-SCI Corporation (AMEX: CVM), Enzo Biochem, Inc. (NYSE: ENZ), Generex Biotechnology (NASDAQ: GNBT), Pressure BioSciences, Inc. (NASDAQ: PBIO), VioQuest Pharmaceuticals (OTCBB: VQPH) and XCorporeal (OTCBB: XCPL) are all expected to present at the three-day Acumen BioFin Rodman & Renshaw 9th Annual Healthcare Conference beginning Monday in New York. Additionally, Advanced Cell Technology, Inc. will also present its Myoblast Phase I(b) trial as a featured late breaking trial at the American Heart Association’s annual four-day Scientific Sessions Conference beginning Sunday in Orlando, FL. Enzo Biochem, Inc. will present data from its ongoing Phase II trial of EGS21, its candidate drug for the treatment of NASH, or non-alcoholic steatohepatitis, on Monday at the American Association for the Study of Liver Diseases meeting in Boston. The three-day CIBC World Markets 18th Annual Healthcare conference begins Monday in New York. The two-day Goldman Sachs Software Retreat commences Tuesday in New York, as does the two-day Keefe, Bruyette & Woods Securities Brokerage Conference. Wednesday begins the two-day Goldman Sachs Industrial Conference in New York, and the Merrill Lynch Global Energy Conference, also in New York.
Sometimes reactions from investors can make you scratch your head, recognizing that Wall Street can be a tough place to predict. Hythiam, Inc. (NASDAQ: HYTM), a provider of comprehensive behavioral health management services, last week reported solid results from a 30-day, randomized, double-blind placebo-controlled study conducted by addiction expert and Board Certified Psychiatrist Harold C. Urschel, III, M.D., M.M.A. The data met its primary endpoint, as it showed a statistically significant reduction in methamphetamine cravings with the PROMETA Treatment Program in treatment-seeking, methamphetamine-dependent subjects. The study also reported a dramatic 60.8% decline in self-reported methamphetamine use following treatment. This study on cravings and neurocognition was designed as a follow-up to Dr. Urschel’s 90-day open-label study on the effects of the PROMETA Treatment Program in treatment-seeking, methamphetamine-dependent subjects. So why are we so puzzled? The stock sold off on a significant increase in volume, despite the positive data and analyst commentary. The analyst at Brean Murray raised his rating on the stock to a Strong Buy, while most of the other analysts covering the company reiterated their Buy/Outperform or Strong Buy ratings. We believe that the data could allow the company to finally begin to make marketing claims, which should drive its business. A second, ongoing, 120-day, randomized, double-blind placebo-controlled study is being conducted to evaluate the effects of this therapy on cravings and post-treatment reduction of use for 90 days beyond the 30 day treatment period. Hythiam believes that these, and other results expected shortly will increase adoption of the PROMETA Treatment Program throughout the U.S. Shares ended the week at $5.97, down 98 cents.
Volume Alert: Shares of drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), traded over 16.5 times average daily volume last week after the company reported that Generex Oral-lyn, its proprietary oral insulin spray product, has been approved for importation and commercial marketing and sale in India for the treatment of diabetes by the Central Drugs Standard Control Organization (CDSCO), Directorate General of Health Services, Government of India. Oral-lyn becomes the first non-injectable buccal insulin approved in India. There are approximately 40.8 million people in India diagnosed with diabetes, and another 35.9 million who have pre-diabetic conditions. In preparation for the commercial launch of the product, Generex has entered a product licensing and distribution agreement with Shreya Life Sciences Pvt. Ltd., a leading Indian-based pharmaceutical company. Shreya is currently the fourth largest distributor of insulin in India, and is experiencing sales growth of approximately 38% annually. Due to Oral-lyn’s acceptance into one of the world’s largest markets for diabetic products, both companies are actively making arrangements to meet demand following the launch of the product, expected in early 2008. Shares ended the week at $1.71, up 19 cents.
Volume Alert: Shares of Multiband Corporation (NASDAQ: MBND), a leading provider of video, data, and voice systems and services to multiple dwelling units (MDUs), traded over 9.0 times average daily volume last week after reporting the signing of a definitive agreement relating to the company’s previously announced merger with DirecTECH Holding Company, Inc., one of the nation’s largest DirecTV Home Satellite providers. Under terms of the agreement, a Multiband subsidiary and DirecTECH will merge into a combined entity (New Multiband) whereby DirecTECH will be a wholly owned subsidiary of Multiband Corporation. DirecTECH, based in Maysville, Kentucky, provisions home satellite television for DIRECTV for approximately 1.5 million customers in 32 cities covering nearly 20% of the country. After the closing of the transaction, which is expected to be completed during Q1 2008, current Multiband shareholders will own approximately 21-24% of the new combined company. The two companies combined generated nearly $200 million in unaudited pro forma revenue in 2006. Additionally, Multiband announced it has entered a Joint Marketing and Master Supply Agreement with ADT Security Services. Under the agreement, Multiband will market ADT’s suite of security services, which include access control, intrusion detection and control, and video management systems, as well as fire and safety solutions, to MDU and apartment owners and renters, and will utilize ADT’s name and trademark in its marketing materials. ADT is the country’s largest provider of electronic security services, with over six million commercial, government and residential customers throughout the U.S. Shares ended the week at $2.80, up 30 cents.
Earnings Preview: Digital Angel Corporation (AMEX: DOC), a technology company engaged in the development, manufacture, and marketing of visual and electronic identification tags and implantable RFID microchips, is scheduled to report third quarter results for the period ended September 30, 2007 on Wednesday, after the close of business. Investors should look for the continuation of the company’s strong revenue growth, after second quarter revenue increased 57% compared to a year earlier. For six months, revenue had increased 20% from the previous period. Also of interest will be the integration of McMurdo Ltd. into the company’s balance sheet, the first full quarter since its acquisition by Digital Angel. Of special interest will be sales of its identification and Bio-Thermo temperature-sensing microchips, being marketed by Milburn Equine, the leading equine veterinary distributor in the United States, and current developments in its SARBE (Search and Rescue Beacon Equipment) division. However, what investors are likely to pay most attention to is what the company says about its merger with Applied Digital (NASDAQ: ADSX), which is expected to be completed prior to year end. The merger will simplify the company’s capital structure and is expected to reduce costs. Shares ended the week at $1.32, down one penny.
Rio Vista Energy Partners LP (NASDAQ: RVEP), a master limited partnership focusing on the acquisition of oil and gas exploration and production assets, last week announced that its wholly-owned subsidiaries, Rio Vista Penny LLC and Rio Vista GO LLC, have entered into three separate agreements to acquire assets and/or equity including certain leasehold interests of oil and gas producing properties and associated pipeline gathering systems in East Central Oklahoma from three privately held companies for an aggregate purchase price of approximately $29.0 million. The leases comprise approximately 22,000 gross HBP (held by production) acres, a 25-mile natural gas pipeline located in Haskell and Pittsburg Counties and a 40-mile natural gas pipeline in the Texanna area north of Lake Eufaula. Collectively, the companies control a majority interest in a total of 93 operated wells and 16 non-operated wells primarily from Booch sand, Hartshorne Coal Bed Methane, George’s Fork and Spiro wells, with an additional 114 identified drilling locations in the upper formations with upside potential. The properties have estimated natural gas reserves of 60.5 million MCF. The transactions are expected to be completed by mid-November, and results from the properties operations are expected to be included in Rio Vista’s consolidated fourth quarter results. Shares ended the week at $14.36, up 67 cents.
VeriChip Corporation (NASDAQ: CHIP), a provider of RFID systems for healthcare and patient-related needs, last week reported results from its third quarter and nine months ended September 30, 2007. The company reported revenue growth of 16.1% for the quarter, and 15.4% for nine months. Gross profit margin for the quarter increased to 57.3% from 55.3% a year earlier. Net loss for the quarter was $(0.35) versus a loss of $(0.23) in 2006, and net loss for nine months was $(1.09) compared to a loss of $(0.62) in the previous period. Much of the net loss can be attributed to higher sales and marketing expenses in connection with the build out of its VeriMed business. VeriChip ended the quarter with cash and cash equivalents of $9.7 million, and reiterated that the company is on track to achieve full-year revenues at the upper range of its guidance of $30-32 million. Shares ended the week at $3.86, down 14 cents.
CEL-SCI Corporation (AMEX: CVM), developer of new immune system based treatments for cancer and infectious diseases, last week announced it has published a comprehensive review of cancer immunotherapies on its new website: www.cel-sci.com. The company’s lead cancer compound, Multikine, recently completed Phase II trials, was well-tolerated, and improved the patients’ overall survival by 33% at a median of three and a half years following surgery. The FDA has granted Multikine orphan drug status, and earlier this year cleared CEL-SCI for a Phase III clinical trial, which the company plans to over-enroll. Shares ended the week at $0.61, up one penny.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, last week reported results from studies in two poster presentations made at the joint symposium of the American Association for Cancer Research, National Cancer Institute, and European Organization for Research and Treatment of Cancer last week in France. One study showed that the cytotoxicity of ProLindac, the company’s lead platinum-based drug, in a panel of cancer cell lines is greater than that found for either oxaliplatin or cisplatin, and the second demonstrated that combinations of ProLindac with certain other anticancer compounds produces greater cytotoxic effects than is produced by use of the drugs individually. The authors recommended that further investigation of ProLindac’s use with other cancer drugs in clinical trials is warranted, which is in line with the company’s plans to begin ProLindac combination clinical studies beginning in 2008. ProLindac is currently in Phase II clinical testing of patients with ovarian cancer. Shares ended the week at $3.10, down 70 cents.
Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, is beginning to attract attention. Last week, a CNNMoney.com article named Advanced Cell as one of the first companies preparing to submit applications to the FDA to begin human testing of experimental treatments that are based on embryonic stem cells. To date, the FDA has only approved human tests of products based on stem cells taken from adult tissue, although many researchers prefer the use of human embryonic stem cells because they can rapidly reproduce themselves for years at a time in a lab environment. Advanced Cell has demonstrated a technique that produced a human embryonic stem cell line without destroying an embryo, a technique that could ultimately prove satisfactory to all sides in the on-going stem cell dispute. If approved, testing could begin as early as next year. The company is currently developing potential treatments for vision loss diseases, including macular degeneration, as well as blood and cardiovascular diseases. Advanced Cell Technology also reported that Dr. Robert Lanza, M.D., the company’s chief scientific officer, delivered the keynote address at the 7th International Stem Cell Conference, a leading international stem cell conference held last week in Pittsburgh. Shares ended the week at $0.29, down one penny.
Calypte Biomedical Corporation (OTCBB: CBMC), medical diagnostic tests manufacturer for the rapid detection of antibodies to the human immunodeficiency virus (HIV), last week announced the opening of its Geneva, Switzerland branch office. Because many of the organizations involved in global healthcare, such as the Global Fund, UNAIDS and the World Health Organization (WHO) are based in Geneva, Calypte plans to expand its relationships with these organizations, as well as market its products in Europe, Central Asia and French-speaking Africa. The company named executives Khatuna Janjalia and Kartlos Edilashvili, who have both served with the Permanent Mission of Georgia to the UN, and numerous other international organizations, to the positions of President and Vice President of the Geneva branch, respectively. Shares ended the week at $0.17, down two cents.
Volume Alert: Shares of Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, traded over 3.8 times average daily volume last week as investors responded to recently announced data on CSA-13, one of the company’s lead compounds. As well as showing an ability to suppress septic shock, CSA-13 has also recently shown to be effective against a large collection of bacterial strains in cystic fibrosis patients. Shares ended the week at $1.70, up 20 cents.
Collexis Holdings, Inc. (OTCBB: CLXS), a global knowledge discovery company, last week reported that it is working with the California Institute for Quantitative Biosciences (QB3) to create a profiling system designed to promote research efficiency by facilitating cross-campus and cross-discipline collaborations. QB3 is a cooperative effort among three campuses of the University of California (Berkeley, San Francisco and Santa Cruz) and private industry, combining over 170 research laboratories in disciplines ranging from mathematics to human magnetic resonance imaging. The new system is being designed to foster innovation and communication by helping researchers make rapid identification of scientific research and potential collaborators at the edge of many diverse disciplines. QB3 joins the growing list of Collexis clients in the public, private and academic sectors, such as the Mayo Clinic, Johns Hopkins University, Bristol-Myers Squibb, and the National Institutes of Health. Shares ended the week at $1.45, down 5 cents.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of ultra-portable high quality Voice-over-Internet Protocol products and services, last week announced it has retained Vinson & Elkins LLP, one of the world’s leading intellectual property law firms, to investigate possible patent infringements regarding its recently allowed patent application on portable access VoIP technology. The company recently announced that it had received a Notice of Allowance from the U.S. patent and Trademark Office regarding pending patents involving its Portable VoIP Service Access Module (VoiceStick) technology. The VoiceStick is a USB device that turns any computer into your own personal telephone, allowing the user to make calls anywhere in the world where you have access to a broadband Internet connection. The patent application was filed in October 2004, and the company believes that its intellectual property rights have been violated by dozens of companies in the VoIP and Universal Serial Bus (USB) industries. Shares ended the week at $0.12, down one penny.
MSTI Holdings, Inc. (OTCBB: MSHI), a carrier class communications technology company, last week reported that it believes a new rule proposed by the Federal Communications Commission (FCC) could create new opportunities for the company’s MST NuVisions subsidiary. The new rule would ban new exclusive cable television service deals between cable companies such as Comcast Corp., and Time Warner Cable Inc., and multiple-dwelling units (MDUs), and abolish all existing exclusive arrangements. The rule change would invalidate these long-term agreements, opening up the market to increased competition from smaller competitors, such as MST. MST NuVisions believes consumers will be drawn to the superior quality and price of its services offered, rather than having to rely on only one supplier. Shares ended the week at $1.05, up 4 cents.
ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, last week announced it has added Las Barrancas Golf Course in Yuma, AZ and River Hall Country Club in Alva, FL to the growing list of courses worldwide featuring the ProLink Solutions GPS system. Both courses also plan to participate in the company’s exclusive national advertising program, a collaboration with ABC National Television Sales, designed to provide customers with expanded revenue potential. Additionally, last week ProLink filed a patent infringement suit in the United States District Court for the District of Arizona against GPS Industries, Inc., Uplink Corp., and other parties for patent infringement. The patents involve the ability to place advertising on a GPS System on a golf course, and related monitor design and location. ProLink plans to seek injunctive relief, as well as monetary damages. Shares ended the week at $0.85, unchanged.
Volume Alert: Shares of cell biology company Stem Cell Innovations, Inc., (OTCBB: SCLL) traded over 3.9 times average daily volume last week as investors repositioned themselves following last weeks report that two government panels advocated the use of human stem cell-based assays for toxicity testing over animal models, citing speed and ease of standardization. Shares ended the week at $0.02, up one penny.
On the Wires: Advanced Cell Technology, Inc. (OTCBB: ACTC) announced that Jonathan H. Dinsmore, Ph.D. has been appointed Senior Vice President – Regulatory and Clinical, and Ivan has been named Senior Vice President – Finance, Administration & Chief Accounting Officer. Dr. Dinsmore has been serving as the company’s Vice President and General Manager, and Mr. Wolkind as the company’s Vice President of Finance and Chief Accounting Officer. Isonics Corporation (NASDAQ: ISON), a provider of innovative solutions for the homeland security and semiconductor markets, reported last week that it has appealed a Nasdaq staff determination that would have resulted in a delisting of its common stock from the Nasdaq Capital Market. As a result, the delisting has been stayed pending a hearing scheduled to be held on November 29, 2007.
SPECIAL SITUATION:
Smart Energy Solutions, Inc. (OTCBB: SMGY) $0.42
For an investor searching for a company with an emphasis on focus, Smart Energy Solutions, Inc. certainly appears to have all its ducks in a row. By concentrating its efforts on a dynamic, innovative product in a huge, worldwide market, success is no longer a matter of “how?” but a matter of “when?”
Smart Energy Solutions’ lead product is the Battery Brain, an electronic auto accessory designed with a unique technology, which ensures a car’s battery always has enough of a charge to start the engine. While it looks like a gadget, it offers a potential solution to one of the automotive industry’s biggest challenges. In a society where some vehicles now come standard with up to 6 power outlets, televisions, video games and players, GPS devices, etc., draining a car’s battery is no longer just a question of leaving the lights on, although that particular phenomenon might never be eliminated. Anyone who has ever been stranded in a parking lot or roadside with a dead battery can surely attest to the fact that they never want it to happen again. The Battery Brain’s patented technology enables it to monitor the voltage in the battery and isolate it from any possible energy drainage. By monitoring temperature, current, voltage and voltage direction and using mathematical logarithms, the Battery Brain first determines if a voltage drop is temporary, and will recover quickly. If not, Battery Brain disconnects the battery from the vehicle’s electrical system to preserve the charge. The battery will then typically recover, but it will at very least retain enough charge to start the engine. The driver merely needs to reset the Battery Brain to reconnect the battery and start the engine. Not only does this prevent drivers and passengers from becoming stranded, it also prevents unnecessary towing and/or repair costs. In some versions, the Battery Brain can be used as an anti-theft device by disconnecting power from the battery. At a cost of under $100, and an installation time of approximately 15 minutes, the Battery Brain is a device that could address a large market. It also acts as an anti-theft device.
There are approximately 760 million cars and trucks worldwide, with about 220 million in the U.S. alone. This is not even counting tractors, boats, recreational vehicles, motorcycles and other motor vehicles in use in the U.S. or internationally. There is a Battery Brain application for every one. This can be defined as a huge market. Not only is the Battery Brain being marketed to the public, it is also being sold to commercial and government customers. Virtually every owner of a motor vehicle worldwide is a potential customer.
Smart Energy has been busy developing relationships and signing distribution agreements internationally, most recently entering a pact with a major Mexican distributor. The company has agreements in place with distributors in the U.S., Canada, China, Australia, the Philippines, the U.K. and Europe, and has stated that it is actively pursuing other revenue growth in Asia, Central and South America, and Africa. The Battery Brain is currently being sold in over 2000 retail outlets in North America alone. With manufacturing and development facilities in Italy, and China, and a new agreement with a Tier II automotive supplier in Canada to provide manufacturing facilities in North America, Smart Energy has the resources in place to provide products to a growing customer base. The company also has warehouse and shipping facilities in New Jersey, as well as Italy and China, geographically positioned to further serve customer needs.
Recently, Smart Energy was granted the federal government’s GSA schedule contract, giving federal agencies a simplified means of procurement of the companies products. The company has also been invited to participate in the U.S. Army’s Expedited Modernization Initiative Procedure to demonstrate the Battery Brain technology for evaluation on future military vehicles. The company is also currently involved in testing to support the Army’s Humvee and Stryker vehicles. Smart Energy has also developed relationships with respected auto names like GM, Fiat, Autolite, and Bosch, and has recently had the Battery Brain placed in tests with major potential customers. Other opportunities for the company could be created in the environmental area, as the device actually helps batteries last longer, creating a “green” element which could be attractive to environmentally conscious companies.
Given the size of the potential market, the clearly defined business strategy, and the product, Smart Energy Solutions is not a company trying to find its niche. The pieces are all in place, and the company’s proven management team is dedicated to bringing the company to the next level. Gross margins improved to 64% in the latest quarter, versus 34% compared to the same period a year ago. The company currently has a market capitalization of approximately $35.0 million, and little or no debt. For an investor looking for a company with a singular focus, and a determination to make it succeed, Smart Energy Solutions represents an intriguing opportunity.
