Companies featured in the current edition of the newsletter: ACCP, BOKO, CACN, CETG, CHIP, CKGT, CLXS, CVM, ENZ, GCEH, GMPM, GNBT, GSPG, IVOT, SRRY, SWVC, TKO
Last week the stock market gave back the prior week’s gains as it struggled to overcome renewed angst about the financial sector, a stunning spike in oil prices that culminated in new record highs and a weak Employment Report. The S&P 500 fell 40 points last week, bringing its year to date loss to 7.3%. The decline in the S&P 500 last week continues a very choppy trading pattern of late that has been marked by extreme volatility. Over the last six weeks, and beginning with last week, the S&P 500 has been: -2.8%, +1.8%, -3.5%, +2.7%, -1.8% and +1.2%. The Dow Jones Industrial Average had the biggest percentage drop last week as it lost 429 points or 3.4%, increasing its year to date loss to 8%. The Nasdaq Composite Index fell by 48 points, bringing its year to date loss to 6.7%. The Russell 200 fell 8 points or 1.1%, bringing its year to date loss to 3.3%.
In terms of the financial sector’s dealings last week, its fortunes often shifted at times on the latest headlines surrounding investment bank Lehman Brothers, which is said to be on the verge of a big capital raise to help offset what many think will be the first quarterly loss in its history. Shares of Lehman Brothers were down as much as 23% last week. Economic data throughout the week was generally better than expected, starting with the ISM manufacturing survey and construction spending reports on Monday, and carrying on with the factory orders, weekly initial claims, first quarter productivity, and wholesale inventories reports during the remainder of the week. Separately, the May same-store sales reports from the retailers Thursday morning were also better than expected, led by Wal-Mart, which reported a 3.9% increase, excluding fuel, and provided an upbeat forecast for June sales.
The one report, though, that failed to meet the market’s expectations happened to be the most influential economic report. This was the May employment report. According to the Bureau of Labor Statistics, nonfarm payrolls declined by 49,000 in May, hourly earnings rose 0.3% and the average workweek held steady at 33.7 hours. These numbers, however, weren’t the problem for the market. An unemployment rate that jumped to 5.5% from 5.0% was. However, it wasn’t long before the employment report took a backseat to oil prices. Crude futures surged 8.4% on Friday to $138.54, driven by a weakening dollar, geopolitical concerns, and a view from Morgan Stanley that prices could hit $150 by July 4th. The move in oil led to accelerated selling efforts in the stock market that wiped out the entirety of Thursday’s 2.0% gain and then some.
What should investors look for this week? The only major earnings release this week will be from Lehman Brothers (NYSE: LEH), coming Thursday before the bell. On the economic front, investors will be most focused this week on inflation and unemployment, as key economic reports are released. April Pending Home Sales and April Trade balance will be released Monday at 10:00 a.m. and Tuesday at 8:30 a.m., respectively. Weekly Crude Inventories will be released at 10:30 a.m. on Wednesday, followed by the Fed’s Beige Book later that afternoon. Before the opening on Thursday, May Import/Export Prices will be released along with May Retail Sales and Weekly Initial Claims. April Business Inventories will be released Thursday mid-morning. Friday morning, the widely followed Consumer Price Index for May will be released before the opening. Shortly after the opening bell, the June Michigan Sentiment will be reported.
The conference schedule will be busy for the week. Beginning Monday with the two day Credit Suisse Group Pan European Small & Mid Cap Conference in London, and the Deutsche Bank Securities Inc. Media and Telecom Conference in NYC. Tuesday will feature the four-day Credit Suisse Group Convergence Conference in California and the four-day Goldman Sachs Healthcare Conference in Dana Point, California. The two-day Credit Suisse Group Retail Round Up Conference in NYC and the two-day Piper Jaffray 28th Annual Consumer Conference in NYC will both begin Wednesday.
Earnings Preview: Life sciences company Enzo Biochem (NYSE: ENZ) is scheduled to announce fiscal third quarter results for the period ended April 30, 2008 on Monday after the market closes and will host a conference call on Tuesday morning. Investors are likely to focus on the growth in the company’s Life Sciences business, as there will be another quarter to assess the impact of the acquisition of Axxora Life Sciences. For the six months ended January 31, 2008, the company reported revenue of $37.7 million, up 79% helped by the acquisition of Axxora and strength in the company’s Clinical Labs business. The company could also provide an update on Alequel, its immune regulation approach for treatment of Crohn’s disease, which is currently in a Phase IIb study. The company will also likely discuss Optiquel, its proprietary drug candidate for the treatment of uveitis, The company’s stock has increased 11% since it reported second quarter results. Shares ended the week at $9.80, down 3 cents.
Volume Alert: Shares of GoldSpring, Inc. (OTCBB: GSPG), the largest mineral rights land position in Nevada’s Comstock Lode Mining District, surged more than 21% on Friday on almost 10 times average volume after the company announced that it will hold a conference call on Tuesday, June 10th at 11 a.m. eastern time at which time it expects to discuss the preliminary findings of the 43-101 resource report that was conducted by an independent geology firm to determine the value of the mineral rights held by the company in Nevada’s Comstock Lode Mining District. While the reserve report had been expected to be released in June, a favorable result could serve as a catalyst for the stock. Perhaps even more significant was a paragraph buried at the bottom of the press release announcing the conference call, which many investors likely missed. It noted that “the company reports that drill hole #40, which is not included in the preliminary resource report being discussed on Tuesday, encountered 5 feet of ore containing 1.937 ounces of gold per ton. This is the highest grade of ore since the commencement of the drilling program in December 2007” and could be indicative of a potential Bonanza grade of gold, which is a vein of ore rich in gold. The Comstock was one of the most prolific areas for gold and silver, and GSPG believes that modern mining techniques will allow it to successfully mine in the area, that previously had been mined centuries ago with picks and shovels. Friday’s surge in price gives the company a market capitalization of approximately $65 million, based upon approximately 3 Billion shares outstanding. Shares ended the week at $0.021.
CEL-SCI CORPORATION (AMEX: CVM), a company that engages in the research and development of drugs and vaccines used in the treatment of cancer provided an update on the construction of its manufacturing facility near Baltimore, Maryland. The facility, when fully built out, will comprise 73,000 square feet and will be used to manufacture Multikine, the company’s lead cancer product. This dedicated facility will produce the Multikine that will be used for CEL-SCI’s pivotal Phase III clinical trial for first-line therapy of previously untreated head and neck cancer patients, and subsequently for sale following approval of the drug. Upon completion of the first phase of the build out in the 2008 third quarter, the facility will be capable of supporting approximately $600 million of annual commercial sales of Multikine. The facility build out is currently about 70% complete. The stock fell by $0.02, to finish the week at $0.68.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) announced that it has commenced dosing of patients in a Phase III clinical trial of the company’s flagship product, Generex Oral-lyn, an oral insulin spray. The clinical trial, which is expected to take six months to complete and include 750 participants, could pave the way for approval of Generex Oral-lyn in North America. The objective of the study is to compare the efficacy of Generex Oral-lyn and the Company’s RapidMist Diabetes Management System with prandial injections of regular human insulin as measured by HbA1c. The company also presented final results of the Phase I trial of the Company’s novel AE37 immunotherapeutic vaccine in breast cancer patients at the 44th annual meeting of the American Society of Clinical Oncology in Chicago, Illinois. The Phase I trial concluded the vaccine was safe and well tolerated in breast cancer patients. The completion of the Phase I breast cancer trial for AE37 is a significant milestone and accomplishment for Generex. The results of this trial offer proof of the company’s progress in successfully bringing AE37 through the clinical regulatory process. This trial also represents the first human experience with the Ii-Key modification. The stock rose by a penny for the week, to close at $1.04.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, announced that it has entered into definitive agreements with YA Global Investments, L.P. pursuant to which the company agreed to issue and sell up to $3.5 million of 13% three-year secured convertible debentures under three closings. Proceeds from the financing will be used for working capital and general corporate purposes. The stock fell by $0.08, to finish the week at $0.55.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, and Jiangsu Aosaikang Pharmaceutical Co., LTD. (ASK), a premier pharmaceutical company focused on bringing oncology medicines to the China market, announced the signing of a definitive licensing agreement under which ASK will manufacture, develop and commercialize Access’ proprietary product ProLindac for the Greater China Region which includes the People’s Republic of China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan. ProLindac is Access’ novel DACH platinum pro-drug currently in Phase 2 clinical studies which has been shown to be active in a wide variety of solid tumors in both preclinical models and in human trials. Under the terms of the agreement ASK will pay Access an upfront fee and subsequent milestone payments along with a double digit royalty upon commercialization of ProLindac. In addition, in co-operation with Access, ASK has committed to fund and execute two Phase 2 studies for ProLindac in colorectal cancer and one other indication to be determined by the parties. These major Phase 2 studies would cost up to $20 million if conducted in the US or Europe. ASK has also committed to become a second source for the manufacturing of ProLindac. ASK will be responsible for obtaining the necessary regulatory approvals for ProLindac and commercializing the product in the Greater China Region. Shares fell by $0.13 for the week, to close at $3.12.
Boo Koo Holdings, Inc. (OTCBB: BOKO), an innovative beverage company, announced that its new beverage BooKoo Burner+ will launch with Coca-Cola Bottling Co. Consolidated, the nation’s second largest Coca-Cola bottler. Coke Consolidated will distribute BooKoo Burner+ to over 2,000 of its current convenience store customers throughout Nashville, Tennessee; Mobile, Alabama; Panama City, Florida and other surrounding markets. The launch of BooKoo Burner through one of the largest bottlers represents a significant opportunity for the company to rapidly penetrate the energy beverage market. The stock rose by $0.15 for the week, to close at $0.64.
Alternative energy developer Global Clean Energy Holdings, Inc. (OTCBB: GCEH)’s business model received powerful validation last week after Air New Zealand said it hoped, by the fourth quarter of this year, to conduct the world’s first flight test on a large passenger aircraft using fuel sourced from the plant jatropha. The Air New Zealand Boeing 747-400 Rolls Royce powered test flight is expected to take place in Auckland in the last quarter of this year subject to final regulatory approvals and fuel testing by the engine manufacturer. Jatropha is a plant that grows to approximately three meters high and produces seed that contain inedible lipid oil that is used to produce fuel. Each seed produces between 30 and 40% of its mass in oil and jatropha can be grown in a range of difficult conditions, including arid and non-arable areas. The jatropha oil Air New Zealand is sourcing for refining for its test flight comes from South Eastern Africa and India. It was sourced from seeds grown on environmentally sustainable plantations. GCEH recently announced that it had acquired approximately 5,000 acres of land in the State of Yucatan in Mexico. The property will be used for the cultivation of Jatropha curcas. When fully planted, the land is expected to have over 4 million Jatropha trees that will produce a high quality seed oil and biomass, for more than 30 years. GCEH also recently formed a 50-50 joint venture with Los Angeles Businessmen Stewart A. Resnick and Selim K. Zilkha, both highly accomplished entrepreneurs who have developed successful agricultural & alternative energy companies. The joint venture’s mission is to acquire and develop non-food based land in Mexico to grow Jatropha and commercialize oil and biomass derived from its fruit and seeds. Shares ended the week at $0.08, up 1 cent.
Eastern Well Services, a wholly owned subsidiary of Capital City Energy Group (OTCBB: CETG), a company that offers energy services through its subsidiaries, announced that it has signed a definitive agreement to acquire Osage Wireline, Inc., a leading provider of geophysical well logging services in Northeastern Oklahoma and Southeastern Kansas, for cash and stock. The acquisition, which is expected to be immediately accretive, is expected to increase Capital City’s gross revenues by approximately 40%. Shares rose by $0.05 for the week, to close at $2.40.
VeriChip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, announced the results of an independent study presented at the Society of Academic Emergency Medicine’s Annual Meeting. The study concluded that use of the VeriChip for access to patient medical history verification significantly decreased the emergency care charges among critically injured patients in a randomized, blinded, prospective mass casualty scenario. This study adds to the body of evidence further validating that the VeriChip technology can lead to more efficient and effective patient care in a triage or emergency room setting. Shares fell by $0.17, to finish the week at $1.89.
Sancon Resources Recovery, Inc., (OTCBB: SRRY), a rapidly growing industrial and commercial waste management and waste recycling company, with operations in both China and Australia, announced that recycling silage wrap into a strong, durable coating for pine posts with local government councils by its Australian division has been very successful. This recycling project has seen farmers from some of Australia’s local councils such as Baw Baw Shire Council and South Gippsland Shire Council recycle hundreds of tons of silage wrap this year that would have otherwise been burnt or taken to landfill. Sancon expects it to contribute positively to the company’s bottom line and that its Australian division will be profitable in 2008. The stock rose by $0.02, to finish the week at $0.49.
China Kangtai Cactus Biotech Inc. (OTCBB: CKGT), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based consumer products in China, announced test results from studies conducted of cows that received the company’s Cactus Cattle Feed. The studies, which included 30 cows, were conducted in conjunction with the company’s application for a Certificate of National Invention Patent and showed cows that received the company’s Cactus Cattle Feed increased milk production by approximately 15.2% during the twenty-day trial period. The company also conducted a second test, evaluating the ability of cattle to produce milk under adverse environmental conditions, including cold temperatures and strong wind conditions. The study selected 100 milk cows between the ages of 2.5 to 3 years, and divided them into two groups. The cows in the control group were fed with the normal feed which was made by the ranch. The cows in the experimental group received the same feed, but also added 1kg cactus cattle feed to each ton of the normal feed. The milk production of the experimental group increased to 1,372kg from 1,350kg despite the adverse conditions. The milk production of the control group decreased to 1,286kg from 1,380kg. The results suggest that the use of cactus cattle feed additives could increase milk production by 8.44%. The stock rose by 2 cents for the week, to close at $0.70.
Collexis Holdings Inc. (OTCBB: CLXS), a leading developer of high definition search and knowledge discovery software, announced that Johns Hopkins University has become the next institution to sign onto Collexis Expertise Profiling System for their entire medical community. The Collexis system creates updated profiles of University researchers based on their publications, grants and other associated work. The Collexis Platform was previously adopted across the National Institute of Health and is expected to be fully integrated with BiomedExperts.com, the first pre-populated, scientific social network for life science researchers. The company also announced that its wholly owned subsidiary Lawriter, Inc., a leading developer of high definition search and knowledge discovery software, has signed five year renewal agreements with the State Bar Associations of Idaho, Indiana, New Hampshire, Rhode Island and Vermont. These five year agreements offer Casemaker online legal research tools to attorneys, who are members of their state bar association. Shares fell by $0.03, to finish the week at $0.57.
iVoice Technology, Inc. (OTCBB: IVOT), a company that engages in the design, development, manufacture, marketing, and licensing of the interactive voice response line of computerized telephony software, announced that its wholly owned subsidiary B Green Innovations, Inc. has a new patent application filed on paver blocks and patio blocks made from recycled tire crumb rubber. These blocks represent another product of B Green Innovations’ green product development program. Other environmentally beneficial products that are in the R & D stage will be announced as the patent applications are filed. The stock remained under $0.01 for the week.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital, reported that its War of 1812 Amber Ale, which is produced by wholly owned subsidiary Sackets Harbor Brewing Company, has been recognized as one of the most popular beers poured by The Blue Tusk Pub & Wine Bar in the heart of Syracuse’s Armory Square. The Blue Tusk is one of Syracuse’s most popular ale houses and specializes in an ever-changing, eclectic selection of the highest quality international specialty beers, fine wine and gourmet food. The company also announced that its wholly owned subsidiary, Patrick Hackett Hardware Company, is in discussions with representatives for two new possible Hackett’s stores “both outside the seaway valley corridor. If either lease is consummated, the stores would represent Hackett’s initial push outside the region. Both potential locations, which remain confidential during discussions, would represent large store formats of between 20,000 and 40,000 square foot venues. In other news, the company announced that its wholly owned subsidiary, North Country Hospitality, Inc., owner of Good Fello’s Brick Oven Pizza and Wine Bar, Sackets Harbor Brew Pub, The Cantina, and Sackets Harbor Brewing Company, has begun preliminary discussions with the owners and management of a restaurant in a metro area in New York State. The stock remained below $0.01 for the week.
On the Wires: Seaway Valley Capital Corporation (OTCBB: SWVC) announced that it elected Christopher Swartz to serve as an additional member of the Board of Directors.
SPECIAL SITUATIONS
Gamma Pharmaceuticals Inc. (OTCBB: GMPM) $1.35
These days, Baby Boomers are more active and health conscious than any previous generation, and want to ensure their health and longevity into their golden years. They have money to spend, and are willing to spend it on high quality nutritional products, anti-aging formulas, and products that will help to keep their aches and pains at bay. In China, consumers are traditionally health conscious with respect to herbal medicine and nutrition for different reasons, relying on age-old remedies to solve modern health challenges. With an increase in disposable income, the Chinese market is now growing in demand for vitamins and other nutritional supplements. Combined, the U.S. and China markets have had the largest growth in the health and wellness industry and offer incredible earnings potential to companies that are able to market and produce quality products.
Gamma Pharmaceuticals Inc, is a marketing, brand management and product formulation company. Gamma has created, registered and branded innovative product lines of nutritional supplements, personal care products and Over-the-Counter pharmaceuticals. The company manufactures in North America and distributes in the United States and Greater China. Gamma’s initial success is based on adapting its proprietary “Gel Delivery Technology” for selected wellness products in market categories growing at more than 60% per year. The GEL base is all natural and has been found to provide a faster and more effective dosing format with more favorable forms, textures, flavors & fragrances. It is an effective replacement for traditional capsules and tablets that offers better absorption and less dosage fatigue. The company offers a suite of gel product forms, including gummy gels, liquid gels, crystal gels and gel strips. Gamma markets its vitamins and nutritional supplements under the brand names of Brilliant Choice, Savvy Choice, and AirDefense; instant hand sanitizers under the brand name of iceDROP; and youth targeted products under the brand name of Jugular Energy. It also offers diabetes type II/ pre-diabetes, stress reduction, cognition, well being, and menopause symptoms products.
Gamma has product, resources, and experienced management in place in both the US and China to capitalize on these high growth and high margin opportunities. China’s consumer healthcare marketplace has grown at more than 30% annually. Though growth in the US consumer healthcare market is slower, the margins are high and remain very attractive. Gamma’s targeted product categories are growing at more than 50% per year in both China and the US, and the target consumer base has been growing 14% annually to reach more than 60 million consumers, who spent over $90 billion on wellness products in 2005.
If the company is able to meet its audacious targets, the stock could be a bargain. The company forecasts revenue for 2008, 2009, and 2010 to be $31.6 million, $90.6 million and $163 million. Earnings per share are also expected to increase from an estimated $0.09 per share in 2008 to $1.91 per share in 2010. Gamma plans to achieve the explosive growth in earnings through its ability to distinguish itself by products made with Gamma’s proprietary “Gel Delivery Technology.” Competition is based primarily on product forms, price, quality and range of products, customer support, marketing support, and availability of new products. Also the unit volume and margins achievable in the combined US and China markets give the company a significant advantage in scale-up and long term costs. The company also plans to ink deals with leading athletes, which are expected to bolster sales in its targeted markets.
With a market cap of less than $25 million today, the stock trades at less than one times the company’s revenue target for this year. If the company even comes close to meeting its forecast, there could be a lot of upside potential in its hares from current levels.