Companies featured in this edition of the newsletter: ACTC, CETG, CNLG, ENZ, GNBT, MWAV, RXAF
It was an historic week for the country with the inauguration of President Barack Obama on Tuesday, but another bewildering week on Wall St. as uncertainty surrounding the financial sector and questions about the timing of an economic recovery continued to plague the markets. All told, the Dow ended down 2.5%, losing 203 points to end the week at 8077 and bring its year to date losses to 7.9%. The Nasdaq finished down 3.4% on the week, closing at 1477 bringing its YTD loss to 6.3%. The S&P 500 and Russell 2000 finished the week down 2.1% and 4.7% bringing their YTD losses to 7.9% and 11% respectively.
Troubling developments from the financial sector continued to stoke fears this week-including a warning from Royal Bank of Scotland that its 2008 loss could be as much as $41 billion, as investors continued to search for signs of recovery on the horizon but were able to find nothing but disappointing earnings reports from some major companies including Microsoft, who indicated that due to market volatility it would be unable to accurately provide revenue guidance for the remainder of its fiscal year. Microsoft also announced its intention to reduce its workforce by some 5,000 employees in coming months.
Among the other dour headlines from the week was the announcement that China’s Q4 GDP had contracted to 6.8% from 9% in the preceding quarter, along with the UK, who reported a GDP decline of 1.5%, its largest since 1980. Rounding out the difficult economic news were announcements that housing starts have fallen to their lowest level on record and initial jobless claims returned to their pre-holiday levels, matching the 26-year high of 589,000 which was set back in December.
What should investors look for this week? Earnings season is in full force, as there are many industry leaders set to release earnings data. On the economic front, the Federal Open Market Committee (FOMC) will announce its interest rate decision Wednesday afternoon and Q4 GDP figures are set to be released Friday morning.
Before the bell on Monday, expect to hear from Caterpillar (NYSE: CAT), Halliburton (NYSE: HAL), McDonald’s (NYSE: MCD) and Tyson Foods (NYSE: TSN). After the close look for reports from American Express (NYSE: AXP), Amgen (NASDAQ: AMGN) and Texas Instruments (NYSE: TXN). Tuesday before the bell Bristol-Myers (NYSE: BMY), Delta Airlines (NYSE: DAL), DuPont (NYSE: DD), Energizer (NYSE: ENR), US Steel (NYSE: X), Valero Energy (NYSE: VLO) and Verizon (NYSE: VZ) will all be reporting. After the close look for reports from tech leaders Sun Microsystems (NASDAQ: JAVA) and Yahoo (NASDAQ: YHOO). Companies set to release on Wednesday morning include: AT&T (NYSE: T), Boeing (NYSE: BA), ConocoPhillips (NYSE: COP), General Dynamics (NYSE: GD), Hess (NYSE: HES), New York Times Co. (NYSE: NYT), Pfizer (NYSE: PFE), Phillip Morris Intl (NYSE: PM), and Wells Fargo (NYSE: WFC). Qualcomm (NASDAQ: QCOM) and Starbucks (NASDAQ: SBUX) will release after the close of trading Wednesday. On Thursday morning, look for results from 3M (NYSE: MMM), Anheuser-Busch (NYSE: BUD) AstraZeneca (NYSE: AZN), Black & Decker (NYSE: BDK), Colgate-Palmolive (NYSE: CL), Constellation Energy (NYSE: CEG), Continental Airlines (NYSE: CAL), Eastman Kodak (NYSE: EK), Eli Lilly (NYSE: LLY), Ford Motor Co. (NYSE: F), Jetblue Airways (NASDAQ: JBLU), PepsiAmericas (NYSE: PAS), Raytheon (NYSE: RTN), Royal Dutch Shell (NYSE: RDS-A), Sony (NYSE: SNE), T. Rowe Price (NASDAQ: TROW), US Airways (NYSE: LLC), and Wyeth (NYSE: WYE). Amazon.com (NASDAQ: AMZN) and Dolby Labs (NYSE: DLB) release after the bell Thursday afternoon. Chevron (NYSE: CVX), Exxon Mobil (NYSE: XOM), Honeywell (NYSE: HON), and Procter & Gamble (NYSE: PG) will all release before the market opens Friday morning.
Economic reports for the week begin with December Existing Home Sales and Leading Indicators due out at 10:00 a.m. Monday morning. On Tuesday, look for January Consumer Confidence figures, being released at 9:00 a.m., along with the S&P/Case Shiller Composite Index for November. Weekly Crude inventories will be released Wednesday at 10:35 a.m. The FOMC’s interest rate decision is expected to be announced at 2:15 p.m. Wednesday afternoon. On Thursday, Durable Orders for December and Weekly initial Jobless Claims are due to be released at 8:30 a.m. followed by New Home Sales for December at 10:00 a.m. Q4 GDP and Chain Deflator data are expected out at 8:30 a.m. Friday, followed by Chicago PMI and Michigan Sentiment Index for January at 9:45 a.m. Q4 Employment Cost Index will end the week at 10:00 a.m.
The conference schedule for the week will be light, with The Citi Financial Services Conference scheduled for Tuesday, which will feature an address by Citigroup CEO Vikram Pandit. Brazilian exploration company Petrobras will meet with analysts in New York the same day to provide updates on its business plan through 2013.
Life sciences company Enzo Biotechnology (NYSE: ENZ), stated last week at its annual shareholders’ meeting that it anticipates increased revenue for 2009 despite the global economic slowdown. These expectations are driven by the rapid growth in sales of its Life Sciences products, sales of which have increased in the past three years from $7.9 million to $35.7 million in fiscal 2008. The company also cited growing strength in its clinical laboratory services and therapeutics divisions, which it expects will aid in generating increased revenue in the coming year. Despite the difficult economic environment in which it is currently operating, Enzo is well positioned to take advantage of weaknesses in capital markets, which could adversely affect companies seeking to raise funding, due to the fact that the company has upwards of $77 million in cash on hand and no debt. This excess cash will undoubtedly aid in expanding ENZ’s already growing Life Sciences business through the funding of strategic acquisitions and partnership arrangements. The stock closed at $4.50, losing 32 cents on the week.
Volume Alert: Shares of stem cell therapy developer Advanced Cell Technology (OTC: ACTC) continued their recent surge last week, soaring more than 54% on more than three times average volume, as the stem cell industry received encouraging news and the company said it was close to getting funding to file an IND which could allow it to commence clinical trials in humans. First, Geron announced that it had been cleared by the FDA to begin the first ever human trials involving embryonic stem cells. The study will begin this summer and will focus on therapies for regenerating nerve cells of paraplegics who have suffered spinal cord injuries. The news could have profound implications for Advanced Cell, which is currently developing a portfolio of stem cell based therapies and has recently taken great strides towards synthesizing functional red blood cells that may one day make blood shortages a thing of the past. In light of the Geron announcement, ACTC plans to accelerate their IND filing, a requisite for commencing clinical trials in humans, for retinal pigment epithelial (RPE) cell therapies which are designed to treat diseases of the eye, including Age Related Macular Degeneration (AMD). AMD is a condition which results in progressively deteriorating vision as people age and is the leading cause of severe vision loss in people over the age of 60, representing a potential market of $28 billion. The announcement of approved human trials suggests a change on the part of the FDA towards stem cell-based therapies, and could begin to drive federal funding under the new administration. Shares gained 6 cents on weekly volume of 93.4 million shares to close at $0.17.
Conolog Corporation (NASDAQ: CNLG), an engineering and design company that provides digital signal processing solutions to global electric utilities, said last week it received record orders for the month of December. The company received orders totaling $338,000 for December, representing a 65% increase from the comparable period in the previous year. The steadily increasing orders which the company have been receiving, despite the realities of the current marketplace, demonstrate systems preferences amongst customers and high reliability in field operations which have been rewarded with reorders. The company expects that additional significant revenue will be generated from the introduction of their new CM 100 product line later this quarter. Shares lost 7 cents on the week to close at $0.34.
Drug delivery company Generex Biotechnology (NASDAQ: GNBT) announced an innovative new distribution agreement for its oral insulin spray. The deal, announced last week, will target an animal segment of the diabetes population, pets. Under the terms of the deal, Butler Animal Health Supply, the nation’s leading distributor of companion animal health supplies to veterinarians, has agreed to a minimum purchase of 20,000 units of GNBT’s Glucose RapidSpray in the first year, with increases of 20,000 units every year until the 100,000 unit mark at year five, which it will distribute to the animal health industry in the US. There are more than 72 million dogs and 82 million cats in the US, and approximately one in 500 suffer from diabetes that would be treatable with GNBT’s spray, creating a significant opportunity to expand the sales base of their proprietary insulin spray. The stock surrendered 2 cents on the week to close at $0.32.
Green St. Energy (OTCBB: MWAV), a company developing a portfolio of renewable wind energy assets, announced the results of an appraisal conducted by a leading global energy assessment firm, 3TIER, that have significant implications for the value of the company’s newly acquired acreage in Tehachapi, California, a desert area known for its prolific production of wind energy. The independent report estimated the average wind speed at the Green St. Energy location to be 7.8 meters per second, or 17.5 mph. This means that the firm is 68% confident that the true wind speed at the location is between 14.5 and 20.4 mph. The report also estimated that the power capacity factor at the location, a common assessment tool for wind farm viability, is 40%, which is considered excellent by industry standards. Existing wind farms have been financed and successfully operated with capacity factors in the 28% to 30% range, suggesting that Green St. has acquired a property with significant potential for wind power generation. The report could help in attracting developmental partners and financing. The highly desirable characteristics of the acquired land, taken in conjunction with the high number of preexisting wind farms and infrastructure in the area could greatly enhance Green St.’s ability to generate significant revenues from the project. Shares closed up 29 cents on the week, finishing at $0.51.
On the Wires: Capital City Energy Group (OTCBB: CETG) announced that it has appointed Joseph Sites to its Board of Directors and to the position of Executive Vice President and has promoted Charles Kendall from the position of Director of Business Development and Land Management to president of Avanti Energy Partners, the company’s oil & gas operating company which is a wholly owned subsidiary.
SPECIAL SIUTATION:
Rx For Africa, Inc. (OTC: RXAF) $0.10
Africa’s growth is one of the best-kept secrets in today’s global economy. According to the World Bank, GDP in Africa has been higher than the world average for the last five years. Recently, The Economist highlighted its outlook for Ethiopia in 2009-2010 and forecasted that GDP should continue to grow robustly in the 7% to 7.5% range. Meanwhile, populations are still extremely underserved in healthcare with most of the pharmaceuticals available either highly expensive imports or dangerous counterfeits. Rx for Africa, Inc., through its wholly owned operating company Rx Africa (Ethiopia) P.L.C., is involved in a better solution, bringing local high-quality generic pharmaceutical manufacture to Ethiopia. This is an example of capitalism at its best, bringing jobs as well as much-needed pharmaceuticals to a nascent growing economy.
Rx for Africa was formed in 2007 to invest in companies manufacturing generic pharmaceuticals in Sub-Saharan Africa. Rx Africa (Ethiopia) P.L.C. is its first acquisition, and is a successful model for the development of future potential acquisitions. The company has hired scientists from India and Germany to augment the staff of its recently completed R&D Center (the largest in Sub-Saharan Africa), to complete the formulation of a minimum of 36 additional products in 2009, including additional malaria medications and drugs against HIV/AIDS. Current drugs in production treat a variety of indications, including malaria, lower respiratory tract infections (such as pneumonia and acute bronchitis), gastrointestinal disorders associated with dysentery, urinary tract infections, several STDs including syphilis and chlamydia, peptic ulcers, skin and soft tissue infections, septicemia, legionellosis, anthrax, sinusitis, pelvic inflammatory disease, acne and an anti-parasitic drug that combats a host of protozoan infections which is especially useful in rural areas where water supplies are contaminated.
The company sells 100% of its current production at attractive gross margins. The availability of these drugs is making a real difference in the lives of many, and also serves to generate healthy operating profits. The company expects to have 42 drugs in production by the end of 2009, distributed in a growing and underserved market. While many potential end users of their products cannot yet afford to buy these medications directly, entities such as the World Health Organization (WHO) spend billions in medical aid to Africa each year. By finding a way to produce effective, low cost generic medications that do not have to be imported, Rx for Africa has seemingly discovered a way to benefit everyone involved.
Investors seem to be noticing, as shares, which fell to as low as 2 cents in December, have increased to 10 cents, including rising 11% last week on strong volume. With an extremely socially responsible business model targeting an enormous, virtually untapped market, Rx for Africa presents investors with an opportunity to invest in a company with appealing prospects for growth and potential to make a tangible difference in the lives of millions of people across Africa.