Companies featured in this edition of the newsletter: CBAI, ICLK, ITUI, IWEB, MBCI, OMCM, SIHI, SRCO
Markets continued their torrid pace this week on the strength of encouraging reports from two of the most beleaguered economic sectors, which led to gains in all of the major indices following the week’s activities. All told, the Dow ended the week up 2.2%, gaining 198 to close at 9370, bringing its YTD gains to 6.8%. The Nasdaq gained 1.1% on the week, bringing its yearly gains to 26.8% while the S&P 500 and Russell 2000 posted gains of 2.3% and 2.28 % respectively, bringing their yearly gains to 11.9% and 14.6%.
Economic news stole the spotlight this week as earnings season wound down, leaving investors with a more definitive picture of the overall state of recovery than in many weeks prior. The good news started early in the week, as the ISM Manufacturing Index posted its seventh straight gain, beating expectations in the process and suggesting that the manufacturing sector is rebounding more sharply than anticipated. Good news was also extrapolated from the housing sector, where construction spending for June surprised many by rising 0.3% versus expectations for a 0.5% decline. Pending home sales were also surprisingly more positive than anticipated, rising 3.6% in June and beating expectations for an increase of 0.7%.
The long awaited employment figures that were released on Friday served to add more fuel to the rally as the report was generally better than expected, although it indicated that employers are still shedding jobs. Employers cut 247,000 jobs in June which was better than expectations calling for 325,000. The amount of job losses fell to the lowest level in nearly a year as the unemployment rate receded to 9.4%, down from 9.5% in June. Corporate developments took a back seat to economic data, but there were still some notable developments as AIG (NYSE: AIG) managed to report its first quarterly profit since 2007 and Cisco (NADAQ: CSCO) reported an 18% drop in profitability year over year, which was in line with expectations and reflected the weakness remaining in consumer demand, which was further enforced by the tepid July same store sales reports from retailers.
What should investors look for this week? Earnings releases slow considerably, but look for reports from Sysco (NYSE: SYY), before the bell on Monday, followed on Wednesday morning by Macy’s (NYSE: M). Wal-Mart (NYSE: WMT) will report before the bell on Thursday, with Blockbuster (NYSE: BBI) reporting that afternoon along with Nordstrom (NYSE: JWN). The week wraps up on Friday morning with JC Penney (NYSE: JCP).
Economic releases for the week begin on Tuesday with Q2 Preliminary Productivity and Unit Labor Costs, due out at 8:30am, followed by Wholesale Inventories for June at 10:00am. On Wednesday, look for June Trade balance data at 8:30am, weekly crude inventories at 10:30am, Treasury Budget for July at 2:00pm, and the FOMC’s Interest Rate Decision, which is expected at 2:15pm. On Thursday, Import and Export Prices for July, weekly initial jobless claims, and Retail Sales for July will be released together at 8:30am followed by Business Inventories for June at 10:00am. The week finishes up on Friday with CPI and Core CPI for July at 8:30am, followed by Capacity Utilization and Industrial Production for July at 9:15am; Preliminary Michigan Sentiment finishes things up at 9:55am.
Conference schedules pick up this week with earnings season largely behind us; things kick off with the three-day CanaccordAdams Global Growth Conference in Boston on Tuesday, alongside the two day Oppenheimer & Co. Communications, Technology and Internet Conference which is also being held in Boston. Credit Suisse will host their E2M2 Investment Banking Conference in New York on Tuesday, while Jefferies & Co. will hold their Industrial CEO Summit in Chicago on Wednesday. UBS will hold their Engineering & Construction One-on-One Conference in Chicago that same day.
Earnings Preview: SinoHub (AMEX: SIHI) a provider of supply chain management services, is scheduled to report results for its 2009 second fiscal quarter on Friday before the market opens for the period ended June 30, 2009. Since the announcement of first quarter results, the stock has surged 58%. Highlights from the first quarter included a 56% increase in revenue, rising from $11.6 million to $18.1 million, and an increase in net income of 83% from $1.1 million in the corresponding year ago period to $2.0 million in Q1 of ’09. The company announced during its first quarter conference call that it expects top line organic revenue growth of as much as 50% in FY ’09. Investors are expected to focus on the company’s ability to continue to grow revenue and net income, especially as China emerges out of the global economic downturn. In other news last week, the company announced that it has been granted approval to begin trading on the NYSE Amex Exchange. The move from the OTC Bulletin Board to the AMEX should provide the company’s stock with expanded visibility and improved liquidity; it will trade under the symbol SIHI. Shares lost three cents on the week to close at $3.97.
Volume Alert: Shares of IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, surged 71% on over three times average volume last week, following the announcement late last week that its Chairman and CEO had acquired the remaining 626,667 shares of Series B Convertible Preferred Stock for $75,000, or approximately $0.12 per share. Following that acquisition, there was more insider buying this week, as the company’s CFO made multiple open-market purchases. IWEB also announced last week that its storage subsidiary has begun commercial shipment of its new MLP ManPac III portable Geospatial Information Server. The device, along with new optional expansion storage accessories is available to commercial and federal clients and Channel Partners immediately. The Shares gained five cents on the week to close at $0.12, their highest level since Septmber.
Earnings Preview: interCLICK (OTCBB: ICLK), a leading behavioral targeting company, is scheduled to report second quarter results for the period ended June 30, 2009, after the bell on Tuesday. For the first quarter of ‘09, ICLK reported record results, with revenue of $8.4 million, up 136% from pro forma 2008 first quarter revenue of $3.6 million. The company also managed to post its first quarter of profitability, reporting net income of $0.03 million. Gross profit of $4.0 million grew 366% from pro forma 2008 first quarter gross profit of $0.9 million while expanding 24% from 2008 fourth quarter gross profit of $3.2 million. The company also managed to report gross margin of 47.3%, its highest margin ever, thanks in large part to improvements in its supply chain management. ICLK previously released a preliminary second quarter outlook in which it said that it expects record revenue to exceed $10.5 million, an increase of at least 124% compared to the year-earlier period and 25% sequentially, raising guidance from its previous forecast for quarterly revenue to exceed $9.5 million. Investors will likely focus on the company’s ability to retain profitability and continue to grow revenues, as this is traditionally a busier period seasonally. Shares gained three cents on the week to close at $1.93.
I2 Telecom (OTCBB: ITUI), a leading developer of award-winning patented and innovative high-quality mobile applications and services announced last week that the company has converted approximately $5.5 million in Promissory Notes into preferred stock of its wholly-owned subsidiary i2Telecom IP Holdings, Inc. The exchange was required as part of a financing of ITUI’s Series F Convertible Preferred Stock, which required the exchange of a minimum of eighty-five percent of the company’s $6.3 million in total debt related securities. In connection with creation of the new subsidiary, substantially all of the company’s intellectual property has been transferred to the subsidiary, with ITUI owning all common stock in the newly formed entity. The Preferred Stock provides for an accruing dividend of 12 percent per annum, and a special dividend for up to two years in the event that the IP Subsidiary Preferred Stock has not been redeemed. Shares remained unchanged at just over $0.05 on the week.
OmniComm (OTCBB: OMCM), a leader in integrated electronic data capture (EDC) solutions for clinical trials, announced last week that it has acquired the EDC assets of UK based, clinical software provider, Logos Technologies, Ltd. The software is used to collect data gathered while conducting Phase I clinical trials, aiding in all aspects of the Phase I process from subject recruitment and clinical workflow management to laboratory sample management. This latest acquisition serves as a complement to OMCM’s TrialMaster software which is primarily used to collect data for later stage trials, and now allows the company to provide a complete range of EDC software solutions for clinical trials from Phase I through Phase IV, making it an extremely valuable service to all types and sizes of organizations conducting clinical research. In other news last week, OMCM announced that it has signed a licensing deal with a west coast based Clinical Research Organization (CRO) expected to generate more than $1.1 million from licensing, maintenance, hosting, and consulting fees over the next three years. The company expects that its latest acquisition will aid in signing more deals with companies seeking to streamline and more efficiently manage their clinical data collection efforts. Shares gained four cents on the week, surging 25% to close at $0.20.
Sparta Commercial Services (OTCBB: SRCO), a nationwide financial services company dedicated exclusively to the powersports industry, announced last week that it has completed a transaction to provide financing in the amount of $172,000 for the leasing of eight 2009 BMW police motorcycles for the City of Charlotte, North Carolina. The company believes that the difficult economic climate which has tightened municipality budgets will enable the company’s Fleet Leasing operations to continue to grow, even as it continues to focus its efforts mainly on its consumer financing and leasing operations. Shares lost $0.004 on heavy volume on the week to close at $0.076.
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 retired $2.53 million of long term debt. The debt was related to the company’s acquisition of CorCell, the first licensed family cord blood banking company in the United States which allowed the company to establish itself as one of the largest domestic stem cell storage companies. The notes were scheduled to mature on February 28, 2010 and were paid off ahead of schedule as part of the company’s plan to increase shareholder value by strengthening its balance sheet through retiring debt. Shares remained unchanged at less than a penny on the week.
SPECIAL SITUATIONS:
MabCure, Inc. (OTCBB: MBCI) $0.87
Much of the focus of the biotech and pharmaceutical industries over the past several decades [or 50 years] has been on trying to develop cures for cancer. As billions of dollars have been pumped into potential treatments and preventative measures, one aspect of the fight has been largely overlooked; providing early, definitive diagnoses that enable treatments to achieve 5-year survival of more than 90% in most cancers. MabCure is a company devoted to using its proprietary technologies to create highly specific monoclonal antibodies (MAbs) for the early detection of cancer. These MAbs have shown extremely encouraging results in early studies. MBCI’s business model centers on serving the vast and growing cancer markets that have been the focus of so much attention and funding, but does so by concentrating on the much less competitive niche of diagnosing these deadly diseases rather than mixing it up in the highly competitive business of attempting to treat them. This allows them to offer a product which potentially has just as much importance to the multibillion dollar market, but without the significant risks associated with going toe to toe with the major pharmaceutical and biotech companies vying for supremacy in the treatment space, making them an intriguing early stage play on an enormously robust market.
MabCure’s current focus is on early cancer detection, which it feels should lead to significant reductions in overall mortality and morbidity. Its portfolio currently includes highly specific MAbs targeted to diagnose three lethal human malignancies: melanoma, ovarian cancer and prostate cancer. The company’s ultimate goal is to remedy the glaring lack of diagnostic tests that can reliably detect many types of cancers in the blood or urine, when they are at their earliest and most curable stages. This could change the reality of cancers as largely incurable diseases by diagnosing them before they spread to other tissues, when the rate of curing the diseases is often greater than 90%. By detecting these diseases in their most curable stages, the company hopes to allow patients to be treated effectively with conventional therapies and significantly prolong their disease free survival.
In preclinical studies, a single anti-melanoma MAb was able to correctly identify 100% of different melanoma tissue specimens, while cross reacting with both early and metastatic tissue specimens, demonstrating its potential to detect early cancerous growths. Similarly positive data were observed in a pilot clinical trial using an anti-ovarian cancer MAb which detected active disease in the blood of thirteen out of thirteen patients; it also diagnosed six patients judged to be in remission to still have the disease, suggesting that the MabCure antibody is more sensitive than the standard diagnostic marker or test, CA-125, in detecting patients with residual disease. Plans are underway to begin the first full scale clinical study of patients at high risk for ovarian cancer and an additional clinical study for diagnosing prostate cancer in high risk patients. In addition to melanoma, prostate and ovarian cancers, which all serve multi-billion dollar markets, the company has also begun work on diagnostic antibodies for colon cancer, with plans for other types of cancer with similarly large markets to follow.
As money continues to be poured into researching more effective treatments for cancer, it appears that perhaps a shift in strategy such as the one which MabCure is currently focusing on may be the more prudent course of action in combating these terrible diseases. By focusing on improving our ability to detect these maladies before they advance beyond the point of no return, patients are given a much greater chance at survival which is essentially what the majority of companies working towards more efficient treatments are attempting to do. By choosing to work away from the pack and focusing on early diagnosis, MBCI provides investors with an opportunity to invest in a company engaged in crucially important research that should be able to command significant market share in the extremely lucrative cancer space once they have gained approval to market their portfolio of highly targeted, advanced diagnostic tools designed to provide physicians with a window of opportunity to effectively treat cancer patients through early detection of these terrible and deadly diseases.