02/04/2007
VOLUME 275
Companies featured in the current edition of the newsletter: ACCP, AVGO, CYTR, FSN, GNBT, GSHF, HSOA, HYTM, IRBO, ISON, JMAR, LANW, OXIS, PTCH, USAT, VOII
The bulls continued to remain firmly in charge of Wall Street last week, as earnings heated up with 25% of the S&P 500 companies reporting results. Key economic reports such as the January Employment data and the decision by the Federal Reserve on interest rates grabbed headlines, but when the dust settled the Dow and Russell 2000 established new all-time highs. The Dow jumped 166 points last week and increased its year to date gain to 1.5%, closing at 12,653. The Nasdaq posted a 40 point gain contributing to a 2.5% rise this year, while the S&P 500 increased its year to date gains to 2.1% with a 26 point increase. The Russell 2000 was up 21 points and has increased 2.8% this year.
While earnings results have generally been solid, suggesting an 11% year-over-year increase in EPS for S&P 500 companies, the increase versus expected results would be just 1.5%, among the lowest in years and less than half of the upside surprise that occurred in recent quarter. More significantly, earnings gains for the first quarter are expected to be just 5%.
Oil prices continued to rise last week, as the price per barrel jumped nearly $5 to $55.42 a barrel last week, thanks to colder temperatures in the East, helping the OIH (Oil Service Holders) Index jump 4.3%. While the sharp increase in energy costs may be a cause for concern, benign data on inflation helped to offset these concerns. The price deflator inflation measure in fourth quarter GDP was up at just a 1.5% annual rate. Another bullish inflation read came from the December core PCE, which was up just 0.1% after no change in November. This is one of the Fed’s favorite inflation indicators. Hourly wages were up just 0.2% in the January employment report, below recent trends.
While more than half of the S&P 500 companies have reported year-end results, the earnings calendar is still very heavy this week. Pre-market reports on Monday include health insurance provider Humana (NYSE: HUM), Temple-Inland (NYSE: TIN), and Royal Caribbean (NYSE: RCL). Monday after the close announcements include Anadarko Petroleum (NYSE: APC), Pitney Bowes (NYSE: PBI), and Principal Financial Group (NYSE:PFG). Tuesday before the opening, Automatic Data (NYSE: ADP), Celanese (NYSE: CE), Duke Energy (NYSE: DUK), Emerson (NYSE: EMR), InterActive (Nasdaq: IACI), Wrigley (NYSE: WWY) and Tyco (NYSE: TYC) announce results. After the close, Cisco Systems (Nasdaq: CSCO), Computer Sciences (NYSE: CSC), drilling company Nabors Industries (NYSE: NBR), and XL Capital (NYSE: XL) post profits. Investors can expect to see reports from CIGNA (NYSE: CI), Devon Energy (NYSE: DVN), DIRECTV (NYSE: DTV), News Corp (NYSE: NWS.A), Sara Lee (NYSE: SLE), and Whirlpool (NYSE: WHR) before the opening on Wednesday. Alcon (NYSE: ACL), EDS (NYSE: EDS), Prudential (NYSE: PRU), and Walt Disney will announce earnings after the market closes on Wednesday. Thursday morning will be fairly active with earnings announcements from Aetna (NYSE: AET), Borg Warner (NYSE: BWA), Bunge (NYSE: BG), Express Scripts (Nasdaq: ESRX), Marriot (NYSE: MAR), PepsiCo (NYSE: PEP), Qwest (NYSE: Q), Reynolds American (NYSE: RAI), Toll Brothers (NYSE: TOL), Tribune (NYSE: TRB), and Waste Management (NYSE: WMI). Look for announcements from Aon (NYSE: AOC), insurance provider Nationwide (NYSE: NFS), and W. R. Berkley (NYSE: BER) after the close Thursday. Friday mornings announcements include Alcatel-Lucent (NYSE: ALU), Coventry Health Care (NYSE: CVH), Hasbro (NYSE: HAS) and Weyehaeuser (NYSE: WY) before the market opens.
Next week’s economic news and data will once again take a back seat to earnings announcements, but investors will likely be interested in some of the key reports and events. The January ISM Services Index will be released Monday mid-morning. Investors can expect to see the Q4 Preliminary Productivity and Unit Labor Costs reports before the market opens Wednesday. Weekly Crude Inventories will be announced mid-morning Wednesday and December Consumer Credit will be announced shortly before the market closes. Thursday brings the Weekly Initial Unemployment Claims announced before the bell and December Wholesale Inventories announced later that morning. Some key economic events scheduled for next week include Fed chief Bernanke speaking on currencies in Ohaha and San Francisco Fed president Yellen will be in Los Angeles on Tuesday discussing the Asian Financial Crisis. Chicago Fed president Michael Moskow will address a local planning summit on Tuesday as well. St. Louis Fed president Poole will speak in St. Louis on Wednesday.
The conference schedule will be active this week. America’s Growth Capital hosts its 3rd Annual Information Security Conference in San Francisco on Monday. Credit Suisse begins its week-long Group Energy Summit in Vail, Colorado on Monday, as does the three-day Thomas Weisel Partners 2007 Technology Conference in San Francisco, and the Leerink Swann &Company Diabetes Roundtable Conference in New York. Lehman Brothers kicks off a three-day Industrial Select Conference in Miami Beach on Tuesday, while Piper Jaffray hosts an Analog Summit in Boston. Merrill Lynch begins a three-day Global Pharmaceutical, Biotechnology and Medical Device Conference in New York on Tuesday, while Cowen holds a two-day Aerospace/Defense Conference in New York. William Blair starts a three day Winter Conference in Aspen, Colorado on Wednesday. Healthcare services company Hythiam (NASDAQ: HYTM) presents on Thursday at 9:30 a.m. local time. The three-day Credit Suisse 2007 Disruptive Technology Conference kicks off Wednesday in San Francisco, while the three-day Credit Suisse Financial Services Forum starts in Naples, Florida.
New 52-week high: Shares of biopharmaceutical company CytRx Corporation (NASDAQ: CYTR) remain red-hot, as investors continue to bid the stock higher after the company announced several weeks ago that it had formed a majority-owned subsidiary called RXi, leading to speculation that the company will spin the unit off to become a pure-play RNai company, with a stellar scientific advisory board including Nobel Prize winner Dr. Craig Mello, the co-discoverer of RNAi. Certainly, timing is ideal since Merck acquired peer company Sirna for more than $1 billion, leaving Alnylum at nearly a $700 million valuation as the only other “pure-play” publicly traded RNAi company. CYTR is valued at just approximately $205 million, including the value of its ALS drug, which is currently in Phase II studies. Shares rose last week to their highest level since May, 2003 on heavy volume, closing at $2.89, up 40 cents.
Will bird flu capture the attention of the investment community again? On Saturday, Britain scrambled to contain its first outbreak of the highly pathogenic H5N1 strain of bird flu in domestic poultry after the virus was found at a farm run by Europe’s biggest turkey producer. Some 2,500 turkeys have died since Thursday at the Bernard Matthews farm near Lowestoft in eastern England. Last year, shares of Generex Biotechnology Corporation (NASDAQ: GNBT) surged to a high of $5.02, from approximately currently levels, on record volume as investors bid shares of the company higher as a result of the promising solutions for avian flu being developed by its Antigen Express subsidiary. GNBT also announced last week that the company had entered into a Phase II clinical trial using its novel peptide vaccine in breast cancer patients in conjunction with the United States Military Cancer Institute’s Clinical Trials Group under a Clinical Trial Agreement. The study will be a randomized, multi-center trial for patients who have completed standard therapy for node-positive or high-risk node-negative breast cancer expressing at least low levels of the HER-2/neu oncogene. Because these patients are at an increased rate for recurrence, the endpoint for this study will be a 50% reduction rate of relapse in the disease at two years. The immunotherapeutic agent being developed is a peptide derived from a tumor-associated protein that has been modified to enhance stimulation of CD4+ T helper cells. Shares ended the week down 1 cent at $1.76.
Isonics Corporation (NASDAQ: ISON), a developer of innovative solutions for the homeland security and semiconductor markets, announced the results of the company’s Board of Directors meeting last week. As part of a plan to maintain the company’s listing status on the Nasdaq, the company said it would complete a 1 for 4 reverse stock split in order to meet the minimum bid requirements for continued listing. It will exit the life sciences business in order to focus management and resources on more rapidly-growing and higher potential opportunities in the semiconductor and homeland security product areas. The reverse split is expected to occur on or about February 13th. The stock ended the week down 7 cents at $0.55.
Fusion Telecommunications International, Inc. (AMEX: FSN), a provider of advanced VoIP services, announced that the company has teamed with the Daily News in New York to promote Fusion’s Efonica VoIP services through a Valentine’s Day sweepstakes. The nine-day promotion that began last Monday will give 1,000 randomly selected Daily News readers the opportunity to make a free Efonica call, from a home or mobile phone, to a family member or loved one anywhere in the world using Efonica’s recently launched Mobilink service. The international demographics represented by the nearly 800,000 readers of the Daily News closely mirror Fusion’s target market of consumers who communicate frequently with friends and family around the world. Efonica subscribers can use Mobilink to call other Efonica subscribers for free anywhere in the world and additionally, subscribers to call from their U.S.-based mobile or landline telephones and reach virtually any telephone in the world for up to 80% less than their traditional mobile carriers’ costs. The stock ended the week up a cent at $0.14.
Home Solutions of America, Inc. (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, said its subsidiary was awarded new and increased contracts totaling approximately $12 million. The majority of the new and additional work under existing contracts represents non-storm related projects which reflect the company’s goal of becoming more involved in infrastructure rebuilding and general construction. The company is one of seven contractors involved in the multi-year, $270 million rebuilding program for NASA’s Stennis Space Center. In addition, the company has added $2.2 million of mold remediation and roof repair to its existing contracts at Stennis obtained through the Associated Contractors acquisition. Other projects include $5.4 million of the new contracts related to infrastructure projects in the New Orleans area, the Armstrong International Airport in particular, and $3 million in additional work on existing contracts for public schools in the area. Investors may want to watch a key technical indicator, the 200-day moving average, in this heavily shorted stock (35% of the float), which is currently at $6.73 as the stock has failed to close above this indicator since July. Shares ended the week up $0.58 at $6.64.
OXIS International (OTCBB: OXIS), a biopharmaceutical company focused on commercializing biomarker research and clinical assays, announced last week that the company had retained the consulting services of internationally recognized expert on anti-oxidants and L-Ergothioneine (ERGO), Okezie Aruoma Ph.D., to aid in the acceleration development of the company’s biomarkers portfolio and promotion of OXIS’s launch and marketing of ERGO. ERGO is the company’s potent antioxidant neutraceutical. Dr. Aruoma has 18 years of experience in biomedical research focused on food biofactors, oxidative stress mechanisms and antioxidant pharmacology and their pharmaceutical indications as prophylactic agents. Dr. Aruoma has authored ten books and has been an Adjunct Research Professor at the University of Mauritius since May, 2005. The stock ended at $0.28, up $0.02 from last week.
Shares of VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, have been battered over the last couple of weeks as investors worried that the company was going to default on a $1.9 million loan. Well, relief may be on the way, as the company said last week the loan had been sold to a group of institutional investors and they have suspended VoIP’s cash payments under the Note until February 9, 2007. These investors have also signed a term sheet to redeem the Note in exchange for debentures convertible into the company’s restricted common stock at a market price. VoIP failed to make a payment due December 1, 2006 under the Note and since then shares have lost 46% of their value as investors worried about the company’s viability, despite a deal with Internet giant Google. Elimination of this Note will allow VoIP to use the $234,000 in monthly payments it would have been required to make to support the growth of the company’s products and solutions. The stock closed the week unchanged at $0.22.
Language Access Network (OTC: LANW), a leader in video language interpretation services, announced last week that the company had completed its first live video interpretation using its Martti™ service for Marion General Hospital, a division of Ohio Health, located in Marion, Ohio. Approximately 49,000 patients visit Marion’s Emergency Department every year. The Martti™ system allows the Marion General staff to provide quality care to individuals with limited English proficiency as well as the Deaf and hard of hearing patients. The company also announced the completion of its first live video interpretation for the Corona Regional Medical Center, located in Southern California. California has the nation’s largest limited English proficient population with 39% of the population speaking English poorly. The stock ended the week down 5 cents at $2.95.
Cashless vending technology was declared “the wave of the future” by CBS 11 Network in Dallas-Fort Worth, Texas. The reference was made in recognition of cashless vending machines deployed in the city by Cadbury Schweppes. Many of the vending machines, equipped with e-Port cashless transaction technology created by USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, rapidly sold out of stock after installation in the Dallas City Hall. It was reported that the retrofitted technology allows for quick and easy service and consumers are extremely impressed with the convenience of cashless transactions. Last December, MasterCard Worldwide and USAT said that Cadbury Schweppes would equip vending machines in several U.S. markets with the e-Port and begin accepting all major credit cards, including those enabled with MasterCard® PayPass™ contactless payment functionality. Cadbury Schweppes is converting as many as 1,000 Dr. Pepper and Snapple vending machines in Dallas, New York and Chicago to accept credit card transactions. These installations are part of the 5,000 self service point-of-sale terminals and vending machines Master Card and USA Technologies are currently deploying in 12 cities nationwide, including Las Vegas, San Francisco, Los Angeles, Boston, Denver, Seattle, Miami, Orlando and Washington, D.C. Shares ended the week down $0.10 at $6.84.
GreenShift Corporation (OTCBB: GSHF), announced last week that its portfolio company, Sustainable Systems, Inc., received a $700,000 grant award from the Montana Department of Labor’s Workforce Innovation in Regional Economic Development Program. GS AgriFuels holds a 14.3% stake in the Montana-based agriculture company that focuses on high value foods, biobased fuels and bioproducts. This funding will be utilized to expand the workforce to operate a larger oilseed extraction plant and biodiesel refining plant and will be directly used for training costs of employees in conjunction with Sustainable’s Montola oilseed crush biorefinery expansion project in Culbertson, Montana. Sustainable currently employs 22 at its Montola operations. Gs Carbon Corporation, another majority-owned subsidiary of Greenshift Corporation, announced that the company’s portfolio company, Sterling Planet, Inc. had joined together with the National Football League Environmental program and Florida Power and Light Sunshine Energy® program to make Super Bowl XLI and the NFL Experience Football Theme Park both 100% renewable energy events. Sterling Planet has agreed to supply Renewable Energy Certificates to indirectly offset greenhouse gas emissions associated with conventional electricity consumption at the events. Super Bowl LXI will be the first of its kind to use 100% renewable energy. Shares ended the week unchanged at $0.11.
Another company that could benefit from increased concerns about avian flu is ImmuneRegen BioSciences, a wholly owned subsidiary of IR BioSciences Holdings, Inc. (OTCBB: IRBO). Recently, the company said that test results conducted using Viprovex™, its proprietary compound, in a severe influenza treatment study using a cotton rat model system showing promising results. Company officials believe that the preliminary data suggests that Viprovex could have positive effects in the treatment of influenza infection perhaps through the modulation of cytokine activation and in the enhancement of innate immunity to influenza. Shares ended the week at $0.135, down 2 cents.
.Junior oil and gas producer, Patch International Inc. (OTCBB: PTCH), announced that the company has entered into an agreement with Great Northern Oilsands, Inc. to sell various non-core assets located in the Province of Alberta for approximately $3 million via a combination of cash and stock. Patch has been paid a non-refundable deposit of $100,000, with the balance of the consideration to be paid at the closing scheduled for February 9, 2007. The closing is subject to customary conditions. Patch continues to pursue earning working interest in it newly acquired Dover Oil Sands Project and the Firebag Oil Sands Project near Ft. McMurray in northeast Alberta and plans to use the earnings from this sale to continue drilling at these recently acquired sites. The stock ended the week up a nickel at $1.47.
On the wires: GreenShift Corporation (OTCBB: GSHF) subsidiary, GS AgriFuels, announced that its NextGen Fuel division will showcase its proprietary biodiesel technology at the National Biodiesel Conference & Expo 2007. The four-day expo begins Sunday and will be held at the Henry B. Gonzalez Convention Center in San Antonio, Texas. Junior oil and gas producer Patch International Inc. (OTCBB: PTCH), will present at the 2007 Oil & Gas Investment Symposia Small Cap Conference on Thursday in Boca Raton, Florida.
SPECIAL SITUATIONS:
The Avicena Group, Inc. (OTCBB: AVGO) $5.95
It is not often that a company in late-stage clinical trials in large market indications sneaks up on Wall Street, but such may be the case with The Avicena Group, a company with a completed Phase IIb/III trial in Amyotrophic Lateral Sclerosis (ALS), or Lou Gehrig’s disease and plans to initiate Phase III trials in Huntington’s and Parkinson’s disease. The company, which went public in March, 2006 via a registration statement, has received more than $30 million through grants from government and non-profit organizations, and has lowered the cost of expensive clinical studies through partnering with these organizations. In total, more than $65 million has been spent on developing its science to date. As a result, the company has not tapped the capital markets the way most biotechnology companies have by this stage, making it relatively unknown on Wall Street.
Avicena develops products based on regulating cellular energy. The company’s most advanced program is in ALS, or amyotrophic lateral sclerosis, which is commonly known as Lou Gehrig’s disease, due to the death of the former New York Yankees great first baseman from this progressive neurodegenerative disease that affects nerve cells in the brain and spinal chord. As motor neurons degenerate, the ability of the brain to initiate and control muscle movement is lost. As the disease progresses, patients often become partially or totally paralyzed. It is estimated that approximately 30,000 Americans are affected by the illness today, representing a billion dollar plus opportunity. Riluzole is the only approved drug for the disease, and it has been proven to only extend respiratory-free life for months.
AVGO announced results from a Phase III study of its compound ALS-02 in May, 2006 in a study led by Carolina Neuromuscular Center, and although there was no statistical significance for various measures of muscle strength, muscle fatigue and functional scores, it demonstrated promising data on mortality when combined and analyzed with mortality data from a second study of ALS-02 previously conducted by the North East ALS Consortium. Avicena intends to discuss the findings, including the mortality trend, with the FDA in order to determine the appropriate next development steps for ALS-02. Riluzolehas not demonstrated benefit in regard to measures of muscle strength and neurological function, but merely in improved mortality, which was not what the Phase III study of ALS-02 was designed for.
The company is also currently pursuing a Phase II ALS trial for ALS-08, where investigators will assess the efficacy, safety and tolerability of the compound in separate combinations with minocycline and celecoxib (a COX-2 inhibitor). The company hopes that the neuron-protective potential of ALS-08 in combination with two separate agents that have shown to influence different mechanisms of neurodegeneration will result in a superior combination drug candidate. The one-year trial is divided into two six-month stages and is a multi-center, double-blind trial that will monitor 86 ALS patients. Following treatment, investigators will assess the mean difference in ALSFRS-R (revised ALS Functional Rating Scale) between the two treatment arms. If the mean difference between the two treatment groups achieves a pre-defined hurdle rate, the trial is judged to be complete. If results are positive, the superior combination therapy will be selected for further study in a Phase III clinical trial. This suggests that it is possible that the trial could be completed as early as July of this year, upon the conclusion of the first stage.
Last year, the company announced important progress in developing its platform in Parkinson’s Disease, an indication that is estimated to be $8 billion globally. It is estimated that roughly 1.5 million Americans are affected by the disease, making it the second most common neurodegenerative disorder after Alzheimer’s disease. Approximately 60,000 new cases are diagnosed each year in the United States. There presently is no known cure. In December, the company said that it had signed an agreement with the National Institute of Neurological Disorders and Stroke to supply PD-02, the Company’s lead Parkinson’s disease drug candidate, for a Phase III trial that is being planned by the Institute. The trial is designed to evaluate PD-02’s potential to slow the progression of Parkinson’s disease. In a randomized, Phase II, multi-center, double-blind trial which enrolled 200 early, untreated Parkinson’s disease patients into three different treatment arms, investigators found that the rate of disease progression for both PD-02 and minocycline was lower than the threshold for futility, as measured by the Unified Parkinson’s Disease Rating Scale. Futility trials are unique Phase II studies designed to assess whether it is worthwhile to consider evaluating drug candidates in Phase III efficacy trials. In measuring outcomes of specific compounds against predetermined thresholds, investigators are able to discard those treatments deemed unlikely to be effective in Phase III trials. Additionally, PD-02 was found to be safe and generally well-tolerated by the subjects during this study.
The third advanced clinical program is in the area of Huntington’s disease, another large market opportunity. Huntington’s disease is a progressive neurodegenerative disease that is caused by a defective gene. This genetic defect, which is often inherited, causes the deterioration of neurons in those parts of the brain that are responsible for controlling cognitive, emotional and motor functions. Approximately 35,000 people are afflicted with the disease, for which there is no known cure. The company is preparing to commence a Phase III trial using HD-02, its primary compound, which was granted orphan drug designation by the FDA. Results from a previous Phase I/II clinical study of HD-02, published in the January 24, 2006, issue of Neurology, demonstrated that the drug was safe and well-tolerated and reported that patients also showed reduced levels of an oxidative marker, serum 8-hydroxy-2′-deoxyguanosine, which some researchers have linked to reduced oxidative injury in patients with Huntington’s disease. Earlier preclinical trials examining the effects of HD-02 in a model of Huntington’s disease showed significantly improved survival and slowed the rate of brain atrophy.
In addition to a robust clinical platform, the company generates a small amount of revenue from the sale of its proprietary cellular energy-based skin care ingredients. Revenue for the nine months ended September 30, 2006 was $313,000, with Estee Lauder the company’s primary customer. Revenue could increase as a result of a recent favorable clinical trial for Nurigene™, the company’s therapeutic skin care regimen, which demonstrated significant improvements in skin cell turnover rate, skin firmness and elasticity. Additional results showed a significant improvement in the skin’s ability to retain moisture. Subjects also reported a reduction in fine lines and wrinkles as well as an increase in skin softness and smoothness.
Although largely unknown on Wall Street, the stock has performed well. Since going public in March, the stock is up nearly 70%, although the company’s market capitalization of approximately $300 million is more appropriate for a company with one or perhaps two late-stage clinical programs. AVGO has three. With a move to a national exchange probable, and publicity likely to increase surrounding late-stage clinical activities in large-market CNS indications, Wall Street may soon begin to recognize the potential for the company’s drug pipeline in the same way that the scientific community has for years.
Access Pharmaceuticals, Inc. (OTCBB: ACCP $5.16)
What happens when a company that is all but forgotten by investors gets rediscovered? Big profits, as demonstrated by Friday’s explosive move in shares of Access Pharmaceuticals, an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients. The stock soared 77% on more than 40 times average volume after a favorable mention in BusinessWeek.
So what are investors so excited about? The company already has an FDA-approved product called MuGard™, a rinse to treat oral mucositis, a side effect that afflicts 40% of patients undergoing radiation and chemotherapy, a market estimated to be over $1 billion worldwide. There is currently no well-accepted treatment for mucositis, and the company believes that MuGard™ should be a valuable supportive care option for cancer patients. After receiving FDA allowance to market the product in December, the company is actively seeking marketing partners in the U.S. and internationally.
In previously reported clinical studies, MuGard™ prevented mucositis in over 40% of patients in a population where the incidence of mucositis normally exceeds 90%. In addition to the management of mucositis, the approved indication for MuGard™ includes all types of oral wounds, including aphthous ulcers (canker sores) and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces. This broad-based approval provides the company with the opportunity to promote the use of the product for several related oral ulcerative conditions.
Perhaps even more promising than the opportunities for MuGard™ is the potential for its drug candidate, ProLindac, now in Phase 2 clinical trials. It utilizes a safe, water-soluble nanoparticulate system to deliver DACH platinum (the active moiety of oxaliplatin) to tumors. Platinum-based drugs are among the largest classes of chemotherapeutics and oxaliplatin (Eloxatin; Sanofi-Aventis) is a DACH platinum drug that is projected to have had worldwide sales of over $2 billion in 2006.
The objective of the ProLindac nanoparticulate formulation of DACH platinum is to deliver more drug to the tumor while reducing delivery to normal tissue, thus increasing the drug’s effectiveness and decreasing the toxic side-effects. A major drawback of the existing blockbuster therapy, oxaliplatin, is acute neurotoxicity. ProLindac™ has been shown to be much more effective than oxaliplatin in a large number of murine tumor models. In a Phase 1 clinical study, at least five times more DACH platinum could be administered to patients with ProLindac™ than oxaliplatin. Moreover there was no indication in ProLindac™ of the acute neurotoxicity associated with oxaliplatin.
While new cancer drugs often display minimal activity in Phase 1 trials, ProLindac™ produced two partial responses based on MRI analysis, one partial response based on biomarker analysis (CA-125) and four cases of stable disease in an evaluable patient population of 16. A phase 2 study to determine the efficacy and safety of ProLindac™ in patients with recurrent ovarian cancer has commenced in Europe. A second phase 2 trial of ProLindac™ in patients with head and neck cancer has been initiated in the U.S. to provide data on the comparative ability of ProLindac™ and oxaliplatin to deliver platinum to the tumor and tumor DNA.
An interesting third-leg to the Access asset portfolio is an innovative drug delivery system that uses Cobalamin (an analog of vitamin B12). While this is still in the preclinical, or animal-testing stage, Access has shown data on the use of their patented Cobalamin delivery system to allow large molecule drugs that can otherwise not be given orally to cross the gut wall. Some important drug cannot to be given orally, and must be given by injection or intravenously — examples include insulin, human growth hormone, and blockbusters like Amgen’s Epogen (EPO) and Neupogen. Access has shown data from animal studies that by enveloping insulin in a nanosphere coated by its patented Cobalamin delivery system, the resulting drug-complex is able to trick the stomach into grabbling orally ingested insulin, moving it across the wall of the stomach, and getting it into the blood stream. An orally available insulin product has long been viewed by the pharmaceutical industry as the “holy grail” of drug opportunities, and while it’s still very early in development, Access believes it may have found the mechanism to make orally deliverable insulin a reality.
The stock was delisted from the AMEX one year ago and fell to as low as $0.10 in June of last year after the company completed a 1-for-5 reverse stock split. Despite Friday’s outsized gains, and the stock’s stellar performance since receiving FDA-allowance to market MuGard™ (shares up 212%), the company still has a nominal valuation, with a market capitalization of about $50 million on a fully-converted basis. Shares are still far below the $70 that the stock was trading for in 2000. Oracle Investment Management, a top-ranked health-care hedge fund, owns a major stake, while the company’s largest shareholder is SCO Capital Partners, an other specialized healthcare player. With an FDA-approved product, the next catalyst for the stock could be a marketing partner for MuGard, or data from the clinical trials of ProLindac™. Acorda Therapeutics went from $2 to $18 in just one month. Could Access Pharmaceuticals be next?
JMAR Technologies, Inc. (OTCBB: JMAR) $0.26
In President Bush’s recent State of the Union speech, he continued to shine the spotlight on terrorism, and the continued battle the United States faces to not only attack the terrorists abroad, but to protect our country’s borders. One area that has attracted increased scrutiny is our water supply, as water supplies and water distribution systems represent potential targets for terrorist activity in the United States because of the critical need for water in every sector of our industrialized society. Even short-term disruption of water service can significantly impact a community, and intentional contamination of a municipal water system as part of a terrorist attack could lead to serious medical, public health, and economic consequences.
That is where JMAR Technologies, Inc., a diverse company that specializes in applications of advanced photonics and x-ray technologies in order to create valuable products for markets such as defense, research, and industrial markets, comes in. Based in San Diego, the company’s lead commercialized product is BioSentry™, a contamination system for waterborne microorganisms which uses laser-based, multi-angle light scattering technology to provide continuous, on-line and real-time monitoring for harmful contaminants. The BioSentry system targets a variety of applications across multiple markets encompassing homeland security, pharmaceutical companies, municipal water and utility providers, and the beverage industry.
JMAR has shipped five operational systems and the company anticipates additional orders this year. Recently, the National Homeland Security Research Center of the EPA began testing the product. Reflecting growing recognition of the threat of bioterrorism, the company recently received a purchase order from the University of Arizona Water Quality Center for a BioSentry™ System to be used in ongoing research for real-time detection, tracking and remediation of bioterror and accidental contamination events within water distribution systems. It also received a purchase order from Yorkshire Water Services Ltd. to install and test the System in a major water utility facility in the U.K. This test program marks the first water utility application for BioSentry in Europe.
JMAR, founded in 1987, traded as recently as December on the Nasdaq, before being delisted due to its stock price and failure to meet the Nasdaq’s minimum equity requirements. The company, which had previously received a significant amount of revenue from a subcontract with General Dynamics Advanced Information Systems, was informed nearly one year ago that it would not receive additional subcontract funding from that company, and as a result closed its Microelectronics Division to focus on the BioSentry and X-ray product lines. Excluding revenue from the discontinued operations of JMAR’s Microelectronics Division, for the nine months ended September 30, 2006, JMAR reported revenues of $3.5 million, including approximately $2.5M from the company’s multi-year mask contract with Naval Air Systems Command valued at approximately $17.5 million.
In addition to BioSentry, the company’s products consist of laser-based equipment for imaging, analysis, and fabrication at the nano-scale. The Company applies its laser and photonics expertise to create high value equipment for growing markets including semiconductors, nanotechnology, bioscience, and homeland security. The company is completing its first working prototype of a commercially viable and compact X-ray microscope (XRM) for 3D visualization of single cells and polymers at sub-50 nanometer resolution. The XRM enables research facilities worldwide to rapidly carry out X-ray tomography in their own facilities for the first time, which has garnered active interest from several companies in partnering on the final development and commercialization of the instrument. The total microscope market is currently estimated at $800 million per year and JMAR expects that the X-ray microscope market may exceed $100 million in 5 years. Recently, the company said that it successfully hit the 50 nm resolution milestone as it seeks to bridge the sizeable gap between optical microscopes, which are typically greater than 200 nm resolution, and transmission electron microscopes that resolve feature sizes as small as 0.1 nm.
The stock, which traded as high as $19 in 2000, today trades for a fraction of that amount, giving the company a market capitalization of just $10 million, or slightly more than two times trailing 12-month revenue. While the stock is up 50% this year, the company’s valuation appears to reflect little of the potential for its technology, especially with its focus on nanotechnology, which has started to gain momentum with government entities and the private sector. For those investors looking to speculate on a company with exciting new products and a stock price just a few pennies above its all-time low, JMAR Technologies represents an intriguing opportunity.