05/27/2007
VOLUME 301
Companies featured in the current edition of the newsletter: ARGA, AVGO, CHIP, CVM, CYTR, ENZ, GNBT, HSOA, HYTM, ISON, MBIF, PBIO, PCLI, SCLL, VOII
Stocks gave up a small amount of ground heading into the holiday weekend, but not without a fight as the Dow rose above 13,600 for the first time and the S&P 500 briefly surpassed its all-time high of 1,532 before giving back gains. For the week, the Dow declined 49 points, reducing annual gains to 8.3%. The Nasdaq fell 1 point with year-to-date gains remaining at 5.8%. The S&P lost 7 points but is still up 6.8% for the year. The Russell gained 6 points increasing annual gains to 5.3%.
Merger activity stole the headlines again. News of MGM Mirage being pursued by Kirk Kerkorian’s Tracinda Group captured the attention of investors, along with Alcan’s rebuttal of Alcoa’s $27.6 billion acquisition offer. Even beverage giant Coca-Cola leapt into the action by announcing the $4.1 billion purchase of Vitaminwater last Friday. The housing market still continues to release conflicting information as positive news of April new home sales rising by the largest amount in 14 years was offset by the disappointing decline in April existing home sales of 2.6%, representing the lowest level in roughly 4 years. But not all was bad on the economic front as durable goods increased 0.6 percent, indicating businesses are confident about making investments leading to future growth. As investors come back well-rested from an extended weekend, much attention will be focused on the busy economic calendar that lies ahead in the upcoming days.
In addition to a slew of economic data, followers of small-cap stocks will pay close attention to trading activity this week, as the Russell indexes, including the Russell 2000, rebalance at the end of the second quarter based upon the market capitalizations of publicly traded securities on May 31, 2007.Trading will begin on Tuesday after the Memorial Day holiday. with Verifone (NYSE: PAY) releasing results Wednesday morning, Williams-Sonoma (NYSE: WSM) andChico’s FAS (NYSE: CHS) report after the bell. Prior to the opening on Thursday, Tiffany & Co. (NYSE: TIF) reports figures with technology giant Dell Computer (NASDAQ: DELL) releasing numbers later that evening. H.J. Heinz Company (NYSE: HNZ) meets with analysts on Thursday with Weyerhaeuser Co. (NYSE: WY) hosting analysts on Friday.
Notable conferences being held include the two-day Merrill Lynch Small Cap Technology Health Care Conference starting Tuesday in Boston. Beginning Wednesday, the three-day Bank of America Health Care Conference in Las Vegas, the Cowen and Company 35th Annual Technology Conference 2007 Focus on SMidCap in New York, the Deutsche Bank Securities two-day Energy and Utilities Conference in Miami and the Lehman Brothers three-day Worldwide Wireless & Wireline Conference in New York, all begin.
The economic calendar will be very busy this week, starting with the release of May Consumer Confidence on Tuesday at 10:00 a.m. Weekly Crude Inventories will be reported on Wednesday at 10:30 a.m., followed by the release of the May FOMC minutes later that afternoon. Before the opening on Thursday, the Q1 Preliminary-GDP figures will be reported along with Q1 Preliminary Chain Deflator and Weekly Jobless Claims. Shortly after the bell on Thursday, May Chicago PMI will be reported along with April Construction Spending and April Help-Wanted Index. Friday will be very busy, as May Nonfarm Payrolls, May Unemployment Rate, May Hourly Earnings and Average Workweek are reported at 8:30 a.m., along with April Personal Income and Spending data and April Core PCE Inflation. At 10:00 a.m. on Friday, the May ISM Index will be reported as well as Revised May Michigan Sentiment and April Pending Home Sales. Later that day, May Auto and Truck Sales will be reported. Also on Friday, Fed Governor Kroszner talks on the economy from Greece.
Shares of Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, closed at their highest level since June, 2006 last week after the NOAA , a prominent meteorological service forecast that the upcoming Hurricane Season was expected to be more active than previously anticipated. Specifically, they see 13-17 named storms and 7-10 hurricanes, of which 3-5 may be major. Investors may recall that shares of HSOA increased more than 400% two years ago after three major hurricanes made landfall in the U.S. Ironically, the company’s recent diversification efforts could help business more than hurricane activity, as contracts such as the one recently announced by its Fireline Restoration, Inc. subsidiary, in which it agreed to provide construction management services to help Blue Diamond Construction, Inc. develop and construct 339 residential condominiums and 160,000 square feet of mixed use retail space located in the boroughs of Brooklyn, Manhattan and Queens, New York provide a more predictable revenue base. Note that short interest increased last month to more than 33% of the float. Shares ended the week at $6.97, up 41 cents on approximately twice average volume.
Healthcare services company Hythiam, Inc. (NASDAQ: HYTM) said in an 8K filing late Friday that it had terminated the acquisition of a minority interest in behavioral services provider CompCare. HYTM acquired a controlling stake in CompCare in January, which is the eighth largest risk-based managed behavioral health organization servicing Medicaid, Medicare, and commercial third-party payers. CompCare is expected to generate approximately $36 million in revenue this year and be cash-flow positive. The acquisition is expected to provide the company with the infrastructure to support Blue Cross Blue Shield and other related programs involving PROMETA, its proprietary treatment for drug and alcohol dependence. Although not acquiring the balance of the company, Hythiam will continue to consolidate its financial results and maintain operational control. Shares ended the week at $7.73, up 24 cents.
Enzo Biochem, Inc. (NYSE:ENZ), a company engaged in the research, development and manufacture of innovative health care products, reported that Alequel, an individualized oral immune regulation preparation, may be an effective treatment for moderate-to-severe Crohn’s disease. Interim data from two ongoing double-blind, placebo controlled Phase II studies suggest that this investigational approach induced good clinical remissions and improved patients’ quality of life compared to placebo. Last week, results were presented at Digestive Disease Week 2007, the largest international gathering of academic researchers and practicing physicians in gastrointestinal specialties. Alequel is being developed by Enzo as an individualized oral treatment that harnesses the patient’s own immune system to alleviate symptoms which include diarrhea, abdominal pain, rectal bleeding and loss of appetite. Over 500,000 people in the United States alone are affected with Crohn’s disease. Such positive Phase II interim results have encouraged the company to further advance this product as it targets a lucrative market. Shares ended the week at $16.16, up 58 cents.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, last week announced plans to initiate a Phase II clinical trial on its stroke recovery drug candidate arimoclomal by the first half of 2008. The company is still on schedule and awaiting FDA approval to begin a Phase IIb clinical trial during the second half of 2007 on arimoclomal for the treatment of ALS, or Lou Gehrig’s disease. CytRx also said it will open a research and development facility in San Diego in the third quarter of 2007 to accelerate its molecular chaperone drug development programs. The company has named Dr. Shi Chung Ng, Ph.D., to the newly created position of Senior Vice President of Research and Development. Dr. Ng will be based in San Diego, and will report to CSO Jack Barber. Dr. Ng brings over 20 years experience in drug discovery research with companies such as Ligand Pharmaceuticals, Abbott Laboratories, Pfizer International, and Bristol-Meyers Squibb. Additionally, CytRx plans to transfer its research facilities in Worcester, Massachusetts to RXi Pharmaceuticals, as part of its stated plans to unlock the intrinsic value of its RNAi assets, and reduce CytRx’s ownership position in RXi to less than a majority, while providing stockholders with direct ownership. The company also said it will open a new research facility in Southern California which is expected to house approximately 20 employees. Shares ended the week at $3.89, down 14 cents.
Volume Alert: Shares of Isonics Corporation (NASDAQ: ISON), a provider of innovative solutions for the homeland security and semiconductor markets, traded over 6.3 times average volume after the company announced guidance for upcoming semiconductor revenue for the fourth quarter and year-ended April 30, 2007. Isonics said that revenue for its semiconductor business is expected to total $3.7 for the fourth quarter, a 94% increase compared to the same quarter a year earlier. As a result of the increased revenue and improved operating efficiencies, Isonics also expects to report its fourth consecutive quarter of positive EBITDA for its semiconductor segment. For the year ended April 30, 2007, semiconductor revenue should equal $13 million, EBITDA of $2 million and operating income of $375,000, compared to revenue of $5.7 million, a loss before depreciation of $3.7 million and an operating loss of $5.1 million for the same period last year. Improved results are due to enhanced operating efficiencies that consisted of improved manufacturing and the sale of higher quality 300 mm wafer products. Additionally, Isonics announced that its 90%-owned subsidiary, SenseIt Corp. has hired Fred L. Marion as its COO and Marshall J. Cohen Ph.D. as a Senior Technical Advisor and a member of SenseIt’s Advisory Board. They bring more than forty years of combined experience in the homeland security and defense industries, will play significant roles as SenseIt works to develop, produce and market its first night vision thermal sensor prototype units this fall. Shares ended the week at $1.55, up 28 cents.
Volume Alert: Shares of VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, reached a new high of $7.00 and traded over 16.1 times average volume after the company announced last week that 78 new hospitals agreed to participate in the VeriMed Patient Identification System network, bringing the total of hospitals participating to more than 600 nationwide. The announcement follows the company’s appearance at the Emergency Department Practice Management Association’s (EDPMA) tenth annual conference in Las Vegas on May 16-18. The company’s stated goal is to have 800 hospitals enrolled by year-end. Verichip also announced that it has established a joint committee with Digital Angel Corp. to design and develop a working, implantable glucose microchip negating the need for diabetics to draw blood in order to monitor their individual blood glucose levels. This could help the hundreds of millions of diabetes sufferers worldwide maintain compliance with their care regimen without the discomfort and inconvenience of pricking their fingers numerous times per day. VeriChip is expected to have sales of $30.2 million in 2007. Shares ended the week at $6.24, up 48 cents.
CEL-SCI Corporation (AMEX: CVM), a developer of new immune system based treatments for cancer and infectious diseases, last week reported results from its final Phase II clinical trial of Multikine that was conducted in patients with head and neck cancer. Multikine was given prior to standard care to recently diagnosed and not yet treated cancer patients, and resulted in a 33% improvement in the median overall survival at 3-1/2 years post-surgery, when compared to the survival results reported in 55 head and neck cancer clinical trials published between 1987 and 2007. CEL-SCI received clearance from the FDA to proceed to a Phase III clinical trial with Multikine earlier this year. Having shown a 33% increase in overall survival with no safety concerns in the final Phase II study, CEL-SCI has decided to over-enroll its Phase III study, hopeful of demonstrating a 10% increase in overall survival of patients treated with Multikine, the primary endpoint of the trial. Head & neck cancer affects over 500,000 – 600,000 people annually worldwide, and it is clinically recognized that recurrence of disease in head and neck cancer is usually associated with a very poor prognosis. The company also announced that CEL-1000, a modified version of a human immune-based protein known to bind to both human and mouse immune cells, increased the immune response against H5 avian influenza antigen in combination with MAS-1, a water-in-oil adjuvant delivery system owned by Mercia Pharma. CEL-1000 has previously been shown to increase the antigenicity of hepatitis B virus, and has also previously been shown to protect animals against infection against viruses and unrelated diseases, specifically herpes simplex virus, viral encephalitis and malaria. This finding may have broad applications for individuals who have a poor immune response to vaccinations, as well reducing the amount/dose of antigen required for protective immunity, and in bio-defense and pandemic settings for anti-infectious vaccines. Shares ended the week at $0.84, down 5 cents.
Auriga Laboratories, Inc. (OTCBB: ARGA), a specialty pharmaceutical company with products for the treatment of acute respiratory diseases and dermatological conditions, last week reported it had acquired the exclusive license to market Ellevan gel, a new OTC intranasal lubricant developed by Dr. Donald Carter, MD, PC, a Colorado-based otolaryngologist. Ellevan is a unique formulation consisting of microencapsulated saline, which produces longer-lasting nasal hydration, unlike current saline solutions often recommended by physicians. Since it does not have a seasonal element to sales, such as cold/flu products and remedies, Ellevan should provide a consistent revenue stream for Auriga’s Consumer Brands Division. Auriga began marketing its Zinx line of OTC cold/cough products earlier this year. Shares ended the week at $1.30, up 13 cents.
Avicena Group, Inc. (OTCBB: AVGO), a biotechnology company focused on diseases of the central nervous system, reported financial results for the first quarter ended March 31, 2007. Net revenue for first quarter of 2007 grew 58.1% to $144,619 compared to the same period last year, based on stronger sales to Estee Lauder. Net loss improved to $565,518, or $0.01 per share, compared to a net loss of $785,081, or $0.02 per basic and diluted share last year. A portion of expenses and cash burn was offset by revenue generated from Avicena’s dermaceutical business. The company continues working closely with the National Institutes of Health (NIH) for further development of its PD-02 drug to treat Parkinson’s disease. Last quarter, a significant milestone was met as the NIH initiated enrollment in its Phase III clinical trial to evaluate the potential of PD-02, which is expected to last for five years and enroll over 1,700 patients at over 50 sites in the United States and Canada. Additionally, the company reported that the Phase I study of AL-02 in subjects with ALS, or Lou Gehrig’s disease announced last week will be led by Dr. Allitia DiBernardo, M.D., at the Neurology Clinical Trials Unit at Massachusetts General Hospital (MGH), with additional funding donated by the Harvard Center for Neurodegeneration and Repair, and the ALS Therapy Alliance. Shares ended the week at $5.45, down 3 cents.
Volume Alert: Shares of MBI Financial, Inc. (OTCBB: MBIF), a rapidly expanding national financial services company, traded over 14.8 times average volume last week as investors took note of the company’s recently announced line of credit from four different institutions, allowing the company to fund over $32 million in new mortgage loans. MBI Financial is expected to have operations in 28 states by the end of the 2Q 2007. Shares ended the week at $0.60, up 25 cents.
Protocall Technologies Incorporated (OTCBB: PCLI), a leading provider of DVD on-demand systems for retailers and etailers, last week reported first quarter revenue for the period ended March 31, 2007 of $257,356, a 32% increase from a year earlier. The increased revenue came primarily from the company’s TitleMatch Internet fulfillment services business, where consumers browse and select available titles from an etailer’s website, store locations or from multi-media touch-screen display terminals located on the sales floor. Store personnel then produce orders behind the counter at an order fulfillment station in minutes, creating a value-added experience for the customer. Top-line growth is expected to continue as the company continues to build brand awareness for its TitleMatch service. Near-term results should also benefit from the commencement of Protocall’s distribution agreement with Overstock.com, Inc. where the company will provide a full range of on-demand digital media products that starts this month. TitleMatch Entertainment Group also announced an agreement with The Right Stuf International, a leading online retailer of quality Japanese animation. RightStuf.com will become the first online retailer to carry the “TMS Presents: Anime Classics” DVD series, to which TitleMatch recently gained exclusive rights. Estimates of worldwide box-office receipts and DVD sales from anime films are expected to be over $5 billion in 2007, a huge market from which Protocall Technologies stands to benefit significantly. Shares remained unchanged for the week to close at $0.10.
Stem Cell Innovations, Inc. (OTCBB: SCLL), a provider of toxicology testing and discovery systems, continues to make great strides in advancing its stem cell drug discovery work despite the U.S. ban on federally funded stem cell research. The company is able to do so as a result of using fetal germ cells, which is considered a less controversial stem cell source than using cells from viable embryos. By combining its stem cell technology called PluriCells to the process, the company is able to generate unlimited amounts of cells that can be manipulated into any cell type and more easily cloned and frozen without the use of feeder layers, a significant benefit for the company. Investors have a lot to look forward to as the company continues to develop this exciting product-line and work with multiple academic and research institutions, including the ALS Association, to create a portfolio of models that can be used as research tools for drug discovery. Shares ended the week at $0.03, down 1 penny.
VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, said it has significantly improved its financial health through the reduction of liabilities by approximately $11.5 million since March 31, 2007. Such progress was achieved through a few key initiatives that included that included a settlement with MCI Corporation reducing VoIP Inc.’s accounts payable by approximately $4 million, the conversion of $3.4 million worth of previously existing debt primarily into restricted common stock and the reduction of other liabilities of approximately $4.1 million through restricted stock related issuances. These efforts enable management to invest in future expansion of its network and capitalize on the exciting growth opportunities that lie ahead. Shares remained unchanged for the week to close at $0.14.
On the Wires: Antigen Express, a wholly owned subsidiary of drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), presented its vaccine development strategy at the “Developing New Anti-Infective Agents – Challenges and Opportunities” international conference in London last week, and focused primarily on Antigen’s development of its proprietary peptide vaccines, some of which are currently in clinical Phase I and Phase II trials.