Companies featured in this edition of the newsletter: ACCP, ACTC, AIDO, CETG, CVM, ECOI, FMTI, GERS, GNBT, ICLK, ITUI, MNDL, MWAV
The tough start to the new year didn’t improve this week, as fresh concerns surrounding some prominent companies in the financial sector spurred selling which resulted in losses for all of the major indices. All told, the Dow ended the week down 317, closing down 3.7% to finish the week at 8281. The tech heavy NASDAQ fared slightly better, closing down 2.7% and ending the week at 1529. The S&P 500 and Russell 2000 both closed down as well, losing 4.5% and 3.1% respectively. Although January is just half over, the indexes already sport substantial losses, as the Dow is off 5.6%, S&P down 5.9%, Russell lower by 6.6% and the Nasdaq lower by 3%.
Concerns surrounding Bank of America and Citigroup, led to major sell offs of 16% on the week for the financial sector. Amidst insolvency concerns, Citigroup sold a controlling interest in its Smith Barney brokerage unit to Morgan Stanley, sparking fears that the bank was in dire need of capital to support continuing write downs. Citigroup later announced it would be splitting into two units as it attempts to downsize its operations and better manage some of the riskier assets on their balance sheet. The company also announced an $8.3 billion fourth quarter loss which fed continuing fears about the future of the international giant.
Bank of America’s problems were quite the opposite of those faced by Citigroup, as it was their attempts to increase the size of their operations that got them into trouble with the market. Their acquisition of mortgage giant Countrywide and former investment banking titan Merrill Lynch raised the bank’s credit risk profile which came back to haunt them as they reported their first loss in 17 years and announced that they required an additional $20 billion in TARP funds to deal with distressed assets resulting from their Merrill Lynch acquisition. The need for additional aid did not sit well with the market which seemed disappointed with the poor due diligence performed by Bank of America leading up to its purchase of Merrill.
The disappointing news wasn’t limited to corporate developments as there was also some negative reports on the economic front which were not well received by investors. December retail sales declined 2.7%, falling for the sixth straight month and industrial production in the fourth quarter declined at an annual rate of 11.5%. Unemployment data left no room for positive interpretation either, as weekly initial jobless claims jumped to 524,000 after two weeks below 500,000. Less than stellar earnings reports from Alcoa, which came up short of lowered estimates, and Intel, who reported a 90% drop in fourth quarter net income, stoked fears that Earnings Season would even disappoint lowered expectations.
What should investors look for this week? The markets will be closed Monday in observance of Martin Luther King Jr. Day. President-elect Obama will capture the attention of the global markets on Tuesday, when he takes office as the 44th President of the United States.
Earnings season picks up as there are a number of notable companies releasing results. On Tuesday look for reports from Johnson & Johnson (NYSE: JNJ) before the bell and IBM (NYSE: IBM) after the close. Things pick up Wednesday, with Abbott Labs (NYSE: ABT), Delta Airlines (NYSE: DAL), Phillip Morris (NYSE: PM), United Airlines (NASDAQ: UAUA) and United Technology (NYSE: UTX) all reporting before the open. Look for reports from Apple (NASDAQ: AAPL) eBay (NASDAQ: EBAY) and F5 Networks (NASDAQ: FFIV) after the close Wednesday. On Thursday morning, expect announcements from pharmaceutical company AmerisourceBergen (NYSE: ABC), Bank of New York (NYSE: BK) Ford Motor Company (NYSE: F), Lockheed Martin (NYSE: LMT), Nokia (NYSE: NOK), Northrop Grumman (NYSE: NOC), Southwest Airlines (NYSE: LUV) SunTrust Banks (NYSE: STI) UnitedHealth Group (NYSE: UNH) and US Airways (NYSE: LCC). Chip maker Advanced Micro Devices (NYSE: AMD), Capital One Bank (NYSE: COF), Con Edison (NYSE: ED), Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) will release after the bell Thursday afternoon. On Friday morning, General Electric (NYSE: GE), Harley Davidson (NYSE: HOG), and Xerox (NYSE: XRX) will announce their results.
The economic calendar for the week will be light, but look for December Building Permits and Housing Starts due out at 8:30 a.m. Thursday along with Weekly Initial Jobless Claims. Weekly Crude Inventories will be released later that morning at 11:00 a.m.
Drug delivery company Generex Biotechnology (NASDAQ: GNBT) announced the publication of a report reviewing the studies performed to date with their novel immunotherapeutic agent AE37, which is being developed by their subsidiary Antigen Express, Inc. The compound is currently the subject of a Phase II clinical trial in patients with breast cancer, a Phase I clinical trial in prostate cancer patients, and another Phase I clinical trial wherein the compound will be combined with another vaccine peptide in patients with either ovarian or breast cancer. The report appears in the January 2009 edition of Expert Opinion on Biological Therapy (Vol. 9, No. 1, Pages 71-78), and reviews both the clinical and pre-clinical data on AE37, comparing the compound to other vaccines that have been clinically reviewed. The report concludes that AE37 has superior immunogenicity to other peptide vaccines investigated to date. Shares gained a penny on the week to close at $0.34
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company focused on evidence-based nutritional solutions, received a notice from the Toronto Stock Exchange (TSX) indicating that they are reviewing Forbes’ eligibility for listing on the exchange following a deficiency in the company’s market cap, which has fallen below the designated TSX threshold. The company will have until August 12, 2009 to regain compliance. The stock gained a half a cent to close at $0.21.
CEL-SCI Corporation (AMEX: CVM), a company engaged in research and development of drugs and vaccines used in the treatment of cancer announced operating results for fiscal year ended September 30, 2008 last week. The company managed to reduce its net loss from $9.6 million ($.10 per share) in ’07 to $7.7 million ($.07 per share) in ’08. Included in the loss in 2008 were non-cash expenditures that added up to approximately $3.3 million, including $1.3 million for employee-stock compensation charges and $1.4 million for various consulting and other related expenses. As expected, research and development costs associated with the upcoming Phase III trial of Multikine, the company’s candidate for treatment of head and neck cancer, accounted for the bulk of expenditures for the year, totaling $4.1 million, up from $2.5 million in 2007. Expenditures are expected to be reduced significantly in the coming year because their new manufacturing facility has been largely completed. The company’s focus is now on securing a strategic partner to incur some of the costs associated with the upcoming Phase III clinical trials of Multikine. Shares surrendered six cents to close at $0.24 on the week.
Volume Alert: Investors continue to bid up the price of shares of Advanced Cell Technology (OTC: ACTC), in anticipation of the incoming Obama administration. The stock has almost tripled in value since the New Year on more than 3 times average volume. Shares surged Friday on twice average volume to their highest level since April. It is expected that the policies of the new administration will be especially friendly to companies engaged in stem cell research potentially providing the funding to support the company filing its IND. Shares ended the week up 4 cents, closing at $0.105 on 75 million shares traded.
Advanced ID Corp (OTCBB: AIDO), a complete solutions provider in the RFID market with a focus on the tire management industry, announced last week that it has received orders through its China-based subsidiary DDCT that are expected to generate revenue in the neighborhood of $1.3 million. The company has secured more than 25 new orders for readers, tags and labels in China for applications including personnel management, military asset management, mining, warehousing, fleet management, food safety and pharmaceuticals. AIDO expects to complete its acquisition of DDCT sometime near the end of January and expects to see more significant orders generated as China continues to adopt RFID technologies at a rapid pace. Shares remained unchanged at $0.065
ecoSolutions Intl (OTCBB: ECOI), a developer of environmentally friendly consumer materials, has announced that the company has acquired a five year license to a technology that dramatically reduces oil consumption and landfill impact associated with the manufacture of plastic bags. The technology has the potential to reduce the consumption of oil used in the production of plastic bags by up to 50%, or 600 million barrels a year based on historical production figures which suggest that the plastic bag industry produces some 380 billion bags a year, using 1.3 billion barrels of oil. The acquisition of this license should significantly improve ECOI’s position as a leader in the production of environmentally friendly consumer materials. Shares remained unchanged at $0.16.
Greenshift (OTCBB: GERS) a company engaged in the development of clean technologies, took an important step towards positioning their NextDiesel branded biodiesel as a leader in the rapidly growing biofuels market, as they announced results from testing that suggests that their corn oil derived biofuel has significant advantages over other biofuels when operating in cold temperatures. NextDiesel demonstrated cloud points ranging between minus 3 and 5 degrees, consistently achieving superior cold flow properties when compared to biodiesel produced from soybean oil derived biodiesel, a fuel well known for its benchmark high quality and good cold flow properties in U.S. markets. These results suggest that not only is the company’s corn oil derived biodiesel economically viable, but is of a superior quality to many of the alternatives currently being considered as substitutes for traditional fossil fuels. The stock lost a half a cent to close at $0.015.
interCLICK, Inc. (OTCBB: ICLK) the fastest growing ad network in the US, could benefit from favorable secular trends, as investment bank FBR indicated that it expects the internet advertising space to be among the most resilient in the coming year. The announcement comes on the heels of the release of comScore internet search query figures for December, which demonstrated growth of 38% year over year, suggesting that there is still significant growth ahead of the industry despite the difficult economic conditions under which companies are currently operating. Shares gained a penny to close at $0.79, up 9 cents.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality Voice-over-Internet Protocol products and services, announced that they have submitted their highly touted mobile phone application, MyGlobalTalk for inclusion in several next generation cell phone platforms. The company has submitted the application to Apple’s iPhone App Store and Google’s G1 Google Phone Android Marketplace, in addition to providing a Symbian S60 operating system compatible version for use on phones from several leading cell phone manufacturers including Nokia and Samsung. MyGlobalTalk is a free downloadable application that will allow cell phone users to place inexpensive phone calls to destinations anywhere in the world for as little as two to three cents per minute via their carriers’ cellular voice networks, creating a significant value proposition for customers who would be paying upwards of $1 per minute making the same call directly through their carrier without ITUI’s application. The company is including 20 free minutes of calls through MyGlobalTalk as part of its offering, which is expected to be made available to users in coming weeks. The stock gained a penny and a half to close at $0.06.
On the Wires: Capital City Energy Group (OTCBB: CETG) appointed Joseph Sites to its Board of Directors to fill a vacancy. Mr. Sites will fill this position until the next regularly scheduled shareholder meeting at which time he may stand for reelection by the shareholders who are permitted to vote in that election. Mandalay Media (OTCBB: MNDL) announced that Bruce Stein, Chief Executive Officer resigned to pursue other opportunities.
SPECIAL SITUATIONS:
Access Pharmaceuticals, Inc. (OTCBB: ACCP) $1.00
With small biotechnology companies out of favor, investors these days often fail to differentiate between late and development stage biotechnology companies. In fact, sometimes even companies with FDA-approved products can be ignored. Such is seemingly the case with Access Pharmaceuticals a company with a late stage oncology focused pipeline.
One of the biggest challenges facing small biotechnology companies today is the need for capital to support R&D activities, without a product that is likely to achieve near-term commercialization. Access differs from these typical small pharmaceutical companies in two respects. First , the company already has a product, MuGard, which has gained FDA approval and has been partnered globally, with launches expected in Europe this quarter and in North America and the Far East by mid-year. MuGard is designed to ease the suffering of patients afflicted with oral mucositis, a painful condition in which oral ulcers form in the inner lining of the mouth and throat, resulting as a side effect of radiation therapies designed to eradicate cancers and is so painful that many patients discontinue their radiation treatments to rid themselves of the ulcers. Access has partnered with several large pharmaceutical companies worldwide which could generate revenue from sale of this drug in the neighborhood of $350-400 million globally, with Acess receiving royalties of between 20 and 25% from sales. In addition to having a product capable of generating a portion of the capital needed to fund ongoing clinical research, the company currently has enough cash on hand to operate without needing to raise additional funding until well into 2010. Through partnerships it has been able to form globally, it has the ability to help defray some of the costs of developing its portfolio of oncology products.
In addition to its existing FDA approved portfolio, the company is on the verge of closing a deal involving one of their MacroChem Dermatological candidates that has recently generated positive results in two Phase III clinical trials. The company has indicated that it expects to close a deal involving Pexiganan, a novel topical antibiotic for diabetic foot ulcer infections, sometime in early 2009. Pexiganan targets a U.S. market of approximately $400 million and fills a void in treatment for diabetic foot ulcers created by the current lack of effective topical treatments for the condition. In Phase III testing, it has been demonstrated to be well tolerated and has a comparable efficacy to the traditional oral antibiotic treatments currently employed to treat the condition, without the potential cross resistance to other medications affecting current oral antibiotic therapies.
Along with their existing FDA approved product and imminent deal involving Pexiganan, Access has a number of cutting edge oncology candidates in its pipeline focusing on several of the more commercially successful classes of oncology drugs that have already been proven winners by big pharma, and even one experimental candidate that has sparked enough interest to generate several sizable deals from notable pharmaceutical companies in preclinical stages. This new research garnering aggressive investments from big pharma focuses on a group of drugs called Monoclonal Antibodies (mAb’s), a class of drugs that directly targets a tumor’s ability to grow itself by inhibiting the body from supplying blood to the cancerous growth. There have been several significant deals based upon this novel class of drugs, all done in preclinical stages, emphasizing the importance which big pharma has placed on the prospects for this new class in the fight against cancer. Access’ mAb candidate, Angiolix, has been shown to be as effective, both in combination with chemotherapy and as a standalone treatment as Avastin, a drug that received one of the aforementioned preclinical deals from a major pharmaceutical company. In addition to their comparable efficacies, Access’ candidate attacks tumors through a second mechanism, which other drugs do not, by directly attacking a protein target found only in solid tumors, leading to a more highly targeted treatment that seeks to eradicate tumors, not healthy proteins, enabling a less toxic treatment with significantly decreased side effects-such as bleeding-that patients treated with Avastin are subjected to. With a candidate that is as effective as a drug which has already received a sizable deal from a major pharmaceutical company that offers an additional highly targeted mechanism of attacking tumors resulting in less toxicity, Access appears to have another candidate in their portfolio well positioned to attract significant interest from big pharma.
In addition to this highly experimental class of anti-cancer drugs currently in development, the company is also working on a portfolio of more traditional candidates which have also been proven to be as or more effective than their big pharma counterparts. Perhaps the most clinically and commercially successful class of drugs used in the fight against cancer are the platinums, a class of drug that works by inhibiting DNA replication in tumorous cells. Access is currently in late Phase II clinical testing of Prolindac, the company’s drug candidate that if approved could compete with Sanofi’s immensely successful platinum, Oxaliplatin, marketed under the name Eloxatin, which generated approximately $2.5 billion in sales last year. In clinical trials, Access’s Prolindac was demonstrated to deliver significantly more platinums (up to 12x more) with fewer side effects than Sanofi’s compound.
Aside from their oncology candidates with opportunities for deals with major pharmaceutical companies, the company is currently in preclinical development of an oral delivery system for diabetics requiring insulin treatments which has also generated interest from major pharma companies. Access has focused its efforts on mimicking the body’s own transport of insulin and other similar compounds by attaching these molecules to B vitamins which are naturally transported across cells. By piggybacking insulin with B vitamins for transport, Access has been able to deliver significantly higher doses of insulin through oral delivery than many of their competitors. Typical bioavailability of molecules delivered orally is somewhere in the neighborhood of 5-10%, with 15% being generally accepted as the commercially viable threshold; Access has demonstrated bioavailabilities of an unprecedented 90%, positioning them at the forefront of companies vying to make insulin injections obsolete.
With a business capable of sustaining its clinical activities through the current downturn and several promising candidates in late clinical stages awaiting FDA approval, Access appears to be well positioned for the future. As recently as September, shares traded for $3, giving investors an opportunity to take advantage of the weakness in the stock market to purchase an intriguing biotechnology company at a discount.
M-Wave, Inc./GreenSt Energy, Inc. (OTCBB: MWAV) $0.22
Last summer’s record run up of crude prices made many Americans realize just how dependant we have become on finite reserves of fossil fuels and led to a deep shift in global consumer sentiment, the effects of which has still yet to be fully realized. As gas prices rose to unthinkable levels and prices of most consumer goods rose in accordance, many began to shed their wasteful mindsets in favor of a newer, more sustainability friendly outlook. As consumers’ preferences shifted towards renewability, many companies began to entertain the idea of adapting their business models to capitalize on both these shifting sentiments and the need to reduce the dependence on non-renewable fossil fuels. One such business is GreenSt Energy, a company that has adapted its business plan to focus on production of renewable wind energy. Currently trading under the name M-Wave, the company sold all of its technology assets to the previous management team to focus exclusively on renewable energy.
Despite energy prices moderating following their historical rally this summer, the global economy’s insatiable demand for energy is expected to drive prices steadily higher as developing nations such as China and India continue to industrialize, leading analysts to predict that there will be a 100% increase in energy demand over the next 20 years worldwide. Due to this expected increase in energy demand and our dependence on diminishing fossil fuel resources to fill this need, it is imperative that another economically viable method of energy production be commercialized on a global scale. Wind energy is the cost leader amongst renewable energy options currently available and is poised for explosive growth. Over 30% of all new electricity generated in the US last year was wind powered, with the US wind energy industry currently serving a $15 billion market with projected annual growth of 25%. The European wind industry is far better developed than our own currently, supplying $30 billion worth of renewable energy which is expected to grow at a rate of 35% annually. These worldwide growth rates have the potential to outperform forecasts as well, as there are many initiatives currently being employed by governments at all levels to encourage production of renewable energy, and specifically wind power due to its position as a cost effective option. The inauguration of President Obama this week is expected to provide a boost to the industry as well, as he has announced his intention to pass initiatives designed to make 25% of all energy generated in the US wind energy by 2025. In addition, he has pledged $150 billion in renewable energy support, with 90% of those expenditures expected to be directed towards the expansion of our wind power generation capabilities in hopes of catching up to our European counterparts and reducing the $700 billion a year that we spend importing foreign oil.
The technology allowing the conversion of electrical energy to wind has been significantly refined over the course of the past 30 years, and has been the subject of many breakthroughs and technological improvements which now allow for more efficient operations, highlighted by the dramatic decreases in costs of wind energy over the years- from 40 cents per kilowatt hour to around 8 cents presently. Wind turbines are now able to operate 98% of the time, through technological breakthroughs that allow turbine blades to turn in the slightest of winds. Along with being economically viable, the technology has substantial environmental benefits including no carbon footprint, zero emissions, no fuel requirements whatsoever, and none of the water usage problems that plague coal plants. The technology also requires minimal usage of land and can be placed on plots that are not suitable for agriculture or development, making it an ideal candidate for green energy revenue generation.
GreenSt has recently announced the acquisition of a 160 acre parcel of land in Tehachapi, California, a prolific area for wind energy production located between Bakersfield and the Mohavi Desert. Tehachapi is recognized as the wind producing capital of California, a state which is considered to be one of the most progressive in the nation concerning initiatives regarding renewable energy and has pledged to produce 33% of its total energy from renewable sources by 2020. The area is already home to several major companies seeking to harness wind energy, including GE Wind, Mitsubishi, Florida Power & Light, Horizon Wind Energy and Vestus, and is ideally situated due to its close proximity to transmission lines which will transport the energy from wind farms into the power grid. GreenStis in negotiations to acquire an additional 4,840 acres through the same landowner from which they have purchased their current 160 acre stake and expect to be able to produce between 20 and 40 megaWatts of power once the acquisition is completed; a coal plant will typically produce around 50 megaWatts as a basis for comparison. The company’s current parcel is located at the highest point of the ridge line in the area, which provides maximum wind shear and will serve to maximize energy production.
Due to the infinite and renewable nature of wind power, GreenSt expects to produce energy that is cheap and environmentally friendly which can be marketed to government agencies and wholesale energy buyers. In addition to selling the power generated from operations, there are several other revenue streams available which the company plans to capitalize on. Project development and management fees provide opportunities to generate substantial revenues both in development phases and over the duration of operations, while Renewable Energy Credits (REC’s) and carbon credits -allocated to businesses based on how well they actively support emissions reduction initiatives- provide tangible assets for the company to sell to other businesses seeking to improve their sustainability profiles. Additional revenues are expected to be generated through traditional asset acquisitions such as land and turbine investments, and stock price appreciation, including tax incentives which will be granted to companies focusing on production of renewable energy. While these additional revenue streams will undoubtedly help to bolster GreenSt’s balance sheet, the biggest revenue generator will be the ability to turn an initial investment in land and turbine technologies into a clean, renewable, profitable, source of energy for decades with minimal management or maintenance required.
There are approximately 316 companies that provide non-nuclear and non-fossil fuel power generation to the general public. Each year, these businesses aggregately provide more than $18 billion of energy to the open market. Despite the existence of a thriving market, wind energy currently accounts for only around 1% of total energy production, leaving tremendous room for growth; especially in light of the expected explosion in demand for energy and requisite shortage of fossil fuels to meet those rising demands. Companies such as GreenSt that have recognized, and acted in response to these developments, should benefit significantly from first mover advantages as the wind energy market expands to account for a larger share of the other 99% of the world’s energy production. The forecasted growth, taken into account with the high probability of initiatives aimed at encouraging development of renewable energy projects suggest that GreenSt. is entering a fledgling market well positioned for explosive long term growth at an extremely fortuitous time, presenting investors with the opportunity to invest in a company with promising prospects.