10/15/2006
VOLUME 259
Companies featured in the current edition of the newsletter: ADSX, ARGA, ARSC, ASPN, CPPT, CYTR, ENZ, GNBT, GSHF, HSOA, HYTM, IMMG, NTRN, OXMI, QTXB, SFP, SOG, USAT, VOIP
The Bulls continue to remain in firm charge of Wall Street, as the Dow posted another record high and the S&P 500 closed at its highest level in more than five years. The Dow closed up 97 points and increased its year to date gain to 11.5%. The Nasdaq finished up 46 points is now 6.4% higher on the year. The Russell 2000 surged 17 points and remains the best performing index with a gain of 12.5%. The S&P 500 gained 13 points increasing it year to date gain to 9.2%.
To be sure, a low level of negative earnings preannouncements combined with moderating interest rates and falling energy prices (crude oil closed at its lowest level since February last week at $58.57 per barrel) have helped support the recent surge in equities. Since July, crude oil prices have declined 25%. Investors in the Dow, which is on the verging of testing the 12,000 level, shrugged off a disappointing earnings report from Alcoa (NYSE: AA) last week and an in-line report from General Electric (NYSE: GE) on Friday. Third-quarter earnings estimates for Standard & Poor’s companies rose modestly this week, with Reuters Estimates projecting profit growth to increase 14.6% from a year earlier, compared with estimates of 14% a week ago.
Last week was another strong one for the stock market as earnings reports were good and the earnings outlook remains favorable. The market is convinced that the Fed will not raise rates further and despite more talk of production cuts by OPEC, oil prices continue to decrease. Earnings season got off to a disappointing start, but many of last week’s announcements suggest that the upcoming reports will be good. Quite a few technology and financial companies will be reporting next week and there is even the view that housing may have bottomed with the recent dip in mortgage rates. Oil closed the week at $58.57 a barrel, down from $59.76 the week before.
What should investors look for in the upcoming week? Earnings Season begins in full swing with many market-moving companies reporting results. Monday, before the open,Charles Schwab Inc. (Nasdaq: SCHW), diversified industrial manufacturer Eaton Corp. (NYSE: ETN), toy company Mattel (NYSE: MAT), Wachovia (NYSE: WB) and WW Grainger (NYSE:GWW) report results. Crown Holdings, Inc. (NYSE: CKK) reports earnings after the close. A busy Tuesday morning starts with announcements from American Standard (NYSE: ASD), Johnson & Johnson (NYSE: JNJ), Wells Fargo (NYSE: WFC) and Office Depot (ODP). Look for announcements from IBM (NYSE: IBM), Motorola (NYSE: MOT), Intel (Nasdaq: INTC), and Yahoo (Nasdaq: YHOO) after the close on Tuesday. JP Morgan Chase (NYSE: JPM), Illinois Tool (NYSE: ITW), Mellon Financial (NYSE: MEL), and NOVA Chemicals (NYSE: MEL) announce numbers before the open on Wednesday, while insurance provider Allstate (NYSE: ALL), Apple Computer (Nasdaq: AAPL), Capitol One (NYSE: COF), and eBay (Nasdaq: EBAY) post profits after the bell. Thursday morning announcements from Bank of America (NYSE: BAC), Citigroup (NYSE: C), Continental Airlines (NYSE: CAL), Coca-Cola (NYSE: SO), Hershey Foods (NYSE: HSY), Honeywell (NYSE: HON), McDonalds (NYSE: MCD), Nokia (NYSE: NOK), Pfizer (NYSE: PFE), United Health (NYSE: UNH), and UPS (NYSE: UPS) highlight the earnings calendar. After the bell, Google (Nasdaq: GOOG) and Freescale Semiconductor (NYSE: FSL) post profits. The activity slows down drastically Friday, but includes announcements from Caterpillar (NYSE: CAT) and Schering-Plough (NYSE: SGP).
Economic news for the week will likely take a back seat to earnings results, but still includes several market-moving reports. The NY Empire State index will be announced Monday morning. The September PPI will be announced before the bell Tuesday morning, with August Net Foreign Purchases, September Industrial Production and Capacity Utilization following later in the morning. The September Core CPI will be announced Wednesday morning along with September Housing Starts and Building Permits. Weekly Crude Inventories will be reported before the bell Wednesday. Thursday will include weekly unemployment claims announced before the bell. September Leading Indicators will be announced mid-morning and The Philadelphia Fed Index announcement will cross at noon.
The BIO InvestorForum 2006 Conference, a three-day event held at the Palace Hotel in San Francisco, begins Tuesday. CytRx Corporation (NASDAQ: CYTR) is scheduled to present at the conference on Thursday, October 19 The Deutsche Bank Securities Fall Energy Conference in Newport, Rhode Island begins Wednesday.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, announced that its PROMETA protocol for stimulant dependence will be evaluated for use and adoption in Fulton County, Georgia. Fulton County is the most heavily populated county within Georgia and is also where the state capitol, Atlanta, is located. According to the Office of National Drug Control Policy, almost half of Atlanta’s adult male arrestees test positive for cocaine at time of arrest while the Atlanta Police Department estimates that 75% of all area drug-related arrests involve crack cocaine. In Georgia, there are 13 diversion centers and 19 probation detention centers with an cumulative capacity of approximately 3,350 beds to service the estimated 140,000 drug related offenders out of approximately 419,000 that are on probation in Georgia. Fulton County Superior Court’s Drug Court, which is the Superior Court’s sole treatment provider in Fulton County servicing parole, probation, drug court and diversion clients, will conduct the pilot. Hythiam also announced that it had expanded in the south Florida region, and has licensed PROMETA to Fort Lauderdale-based Challenges treatment center. Treating over 2,000 patients per year, Challenges is a high end residential treatment facility that also offers patients the option of outpatient treatment. Challenges specializes in relapse prevention treatment and is the first and only treatment center which has been awarded national certification as a Center of Excellence in relapse treatment and prevention. The stock ended the week at $6.46, up $0.14 from last week.
Enzo Biochem, Inc. (NYSE: ENZ), a developer of innovative health care products based on molecular biology and genetic engineering techniques, said last week that a a Federal court has issued a favorable ruling in a Markman Ruling, which determined the claim terms in six patents asserted against defendants Applera and Tropix. The court ruled that the plain language and structure of the patents indicate they cover both direct and indirect use. Markman Rulings often play critical roles in patent litigation, as a favorable decision for one party or another often determines the outcome of ligitagation. For example, in ENZ’s litigation against Digene, a ruling in Enzo’s favor helped the company enter into a licensing agreement, worth at least $31 million to Enzo. The stakes are much higher here, as the alleged infringing products include, among others, Applied Biosystems’ DNA sequencing products and systems as well as services. The company also announced that it received a license to a device that allows researchers to increase the amplification of small RNA samples. The device, a comprehensive non-PCR based system made by LBS Technologies Inc., assists researchers in gene expression studies. The technology involves a series of reactions that boost the amplification of RNA samples taken from biopsies and other tissue sources when the sample size is limited. Late Friday, Enzo reported operating results for the three and twelve months ended July 31, 2006. Revenue for the fourth quarter was $9.9 million, compared with $10.9 million in the corresponding year-ago period. For the full year, revenue totaled $39.8 million, compared with $43.4 million in the prior year. The fourth quarter loss before tax benefit totaled $5.0 million as compared to a loss of $3.5 million in the year-ago period. For the full year, the loss before tax benefit was $17.0 million, compared with income before taxes of $5.2 million (including the $14 million pre-tax gain from the Digene settlement) a year ago. The fourth quarter net loss was $4.5 million, or $(0.14) per share, compared with a net loss of $2.0 million or $(0.06) per share a year ago. For the full year, the net loss totaled $15.7 million, or $(0.49) per share compared with net income of $3.0 million, or $.09 per share a year ago. The after-tax gain of the Digene settlement contributed $8.1 million or $0.25 per share towards net income a year ago. In addition, both the fourth quarter and the full year 2006 were negatively affected by the inability to record a full tax benefit on the pre-tax losses incurred. During the fiscal year, the company’s results were impacted by significant investments across its business units, which have helped the company begin fiscal 2007 strongly. Recently, the company said its Clinical Labs division had entered into agreements with Aetna and UnitedHealthcare Group to provide laboratory services. The company was also granted three patents and settled litigation with Sigma-Aldrich, which should boost fiscal 2007 first quarter results. The stock ended the week up $0.67 at $14.46.
Volume Alert: Shares of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company engaged in the development and commercialization of human therapeutics, soared 26% Friday on more than 10 times average volume after CNBC stock picking champ Thomas Ko suggested that the company was “the next Acrorda Therapeutics”, a stock that has surged nearly eight fold after the company released a Phase III study showing its experimental drug, Fampridine-SR, improved mobility in some patients with Multiple Sclerosis. Recently, CYTR announced promising results in a Phase IIa study of its lead drug arimoclomal, for the treatment of Lou Gehrig’s disease. Shares ended the week at $1.55, up 22 cents.
Shares of Home Solutions of America (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, could be volatile this week as the company provides investors with details on the acquisition of Fireline Restoration, Inc., a provider of recovery and restoration services throughout Florida, Louisiana and Mississippi. The company has said little about its recently completed third quarter for the period ended September 30, 2006, where the analyst estimates are that the company had $50 million in revenue and EPS of $0.20. Fireline had unaudited revenue for the first six months of 2006 of approximately $21 million and EBITDA of $5 million. The acquisition of Fireline is expected to provide HSOA with an important source of skilled labor that will allow it to pursue larger projects, a significant competitive advantage in regions where the labor markets remain tight. Shares rose 91 cents last week on twice average volume closing at $6.11, its highest level since mid-August.
Volume Alert: Shares of Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, soared 28% on more than five times average volume, as the company said that it had filled several purchase orders from additional retail pharmacies for Glucose RapidSpray, the company’s new over-the-counter glucose oral spray product. Generex has filled orders for Meijer, Inc., Kerr Drug, Inc., Hy-Vee, Inc., and Fruth Pharmacy, Inc. The company’s proprietary liquid formulations allow drugs typically administered by injection to be absorbed into the body by the lining of the inner mouth using its proprietary RapidMist™ device. Shares ended the week up $0.51 closing at $2.34, the highest level since mid-May.
Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, announced the initial installation of the company’s Hugs® infant protection system in the Middle East. The installation represents an additional milestone in VeriChip’s efforts to pioneer its infant protection systems outside of North America. The Middle East Regional Office of Austco Communication Systems, VeriChip’s international infant protection dealer outside North America, is currently installing Hugs® systems at the Royal Hayat Hospital in Jabriya, Kuwait, the International Medical Centre in Jeddah, Saudi Arabia and the Security Forces Hospital in Jeddah, Saudi Arabia. The Hugs® system provides hospitals with systems of protection against infant abduction and mother/infant mismatches. Shares ended the week up $0.05 at $1.66.
Earnings Preview: Small appliance maker Salton, Inc. (NYSE: SFP) will announce fourth quarter and year-end results for the period ended July, 2006 before the market opens on Monday. There are few surprises expected as the fourth quarter represents a seasonally slower period for the company. However, investors will likely be focused on what the company says about its ability to pass through pricing increases to offset the costs of higher commodity prices (which have been declining recently) as well as prospects for the holiday season. Last week, SFP announced an agreement with internationally renowned actor Jackie Chan to endorse a line of George Foreman branded electric grills in the Asian market. Jackie Chan will team up with George Foreman on a line of grills that will bear Chan’s likeness and endorsement and that will be promoted and sold in various countries throughout Asia. The two celebrities will join talents in a marketing and direct advertising campaign that Salton will execute in the region in the second quarter of 2007. Salton expects that the association with Jackie Chan will bring the Foreman grill to millions of people in Asia and anticipates a similar success to their launches in Europe, Australia and So. Africa. The stock ended up $0.07 at $2.14.
Volume Alert: Last week, Google launched its click-to-call model using VoIP as the phone service. Click-to-call ads are a new kind of advertising from Google AdWords. Click-to-call ads help advertisers connect with potential customers by arranging a telephone call between the advertiser’s business and a web user. Google said it was using a third party telecommunications carrier to connect these calls between Internet users and advertisers. Last week, investors speculated that the third party service provider was VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, helping shares surge 37% on more than five times average volume. Earlier this year, the company said it signed a master service agreement with Google. VoIP receives a fee each time one of Google’s advertisers is connected to a customer via its service. The stock ended the week up 10 cents closing at $0.42.
IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, announced last week that E&M Advertising, the direct response unit of Impart Media Advertising, Inc., and International Media Partners have been selected by Community Health Plan for the launch of their new member acquisition campaign. The company commented on the experiences of working with various health care organizations and the important roll that this experience plays in understanding how to plan, buy and analyze the media component of campaigns. The promotion will air during the 4th quarter in Washington State. Shares ended up $0.06 at $0.54.
Junior energy company Aspen Exploration Corporation (OTCBB: ASPN) announced impressive fourth quarter and year-end results for the period ended June 30, 2006 last week. For the fiscal year, Aspen reported revenues of approximately $6 million, an increase of 45%, as compared to the year-earlier period and net after tax profit of $$3 million, or $0.40 per diluted share, nearly double the previous year’s results. The company reported higher revenues as a result of an increase in production volumes from recent gas discoveries and higher prevailing prices for natural gas. Gas production for the fiscal year ended June 30, 2006 averaged 1,843 MCF per day, an increase of 8% versus the same period in fiscal 2005. Net income before interest, depletion, depreciation and taxes increased 55% to $5.6 million, or $0.75 per diluted share, compared to $3.6 million, or $0.53 per diluted share, for the prior twelve month period. Aspen had pre-tax income of $4 million or $0.54 per diluted share, compared to pre-tax income of $2.2 million, or $0.33 per diluted share, for the prior twelve month period. ASPN also said that it had drilled a new gas well and performed a successful flow test on a recently drilled gas well in the Sacramento Valley gas province of northern California. The Johnson Unit #12 well, located in the Malton Black Butte Field, Tehama County, California, was drilled to a depth of 4,700 feet and encountered 100 feet of potential gas pay in several intervals in the Forbes formation. Production casing was run based on favorable mud log and electric log responses. This was the ninth successful gas well out of ten attempts by Aspen in this field. Aspen has a 36% operated working interest in this well. The September 4, 2006 issue of the Oil & Gas Journal named Aspen among the Top 20 Fastest Growing companies for 2005 based on percentage growth in stockholder equity. Shares ended the week up $0.43 closing at $3.78.
Junior oil and gas producer Strategic Oil & Gas, Ltd. (TSX VENTURE: SOG), recently provided an update of its Canadian and Wyoming exploration projects. The company has been advised by its joint venture partner, Jed Oil Inc. which who operates its Pinedale/Jonah gas wells, that they are currently working to correct excess water flow in the first 2 gas wells and are currently re-evaluating the timing of the follow up wells, given current gas prices. Formation water production was encountered during initial flowback of the first well drilled in Pinedale. A spinner survey was completed and determined that two of the eleven fracture stimulation states within the well accounted for the majority of the water production. An assembly has been placed in the well that will enable isolated testing to be conducted at the various stages of the well. Drilling and fracture stimulation of the second well in the Pinedale area has been completed. Following the fracture stimulation, the well was flowing at rates as high as 1.5 mmcf/d through the frac plugs while recovering the frac fluid. When the frac plugs were removed, formation water production was encountered similar to the first well. A spinner survey will be performed as soon as possible to determine what stages the water production is coming from. It is anticipated that an isolation assembly will be run in this well similar to the first well. As previously mentioned SOG and Jed obtained approval from the Wyoming Oil and Gas Conservation Commission to increase the well density from one well per 40 acres to one well per 20 acres on the Company’s lands. This approval will allow for the drilling of up to 32 wells on the Company’s current land holdings. The company said it was pleased with its progress on its six well program on six separate prospects in the liquid-rich deep basin region of the Western Canadian sedimentary basin near the large scale, multi-zone oil and gas fields of Caroline, Pembina and Sylvan Lake, Alberta. Shares ended the week at $0.95.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions,announced that the company has entered the lucrative web-based interactive marketplace by beginning the development of an Internet portal that features a stock market competition in which participants will be able to measure their ability to select and trade stocks with the goal of maximizing overall portfolio return. The tournament portal is being developed as a skill based, multiplayer online fantasy stock market trading competition for active players to compete within an online community for significant prizes. Neutron expects to generate revenue from both entry fees as well as advertising. The company also plans to provide stock market training simulations for both the high growth and high margin educational and corporate segments. The stock ended the week up $0.05 at $2.40.
GS CleanTech Corporation (OTCBB: GSCT), one of the portfolio companies of GreenShift Corporation (OTCBB: GSHF) said last week that it had the first stage of its Corn Oil Extraction System™ at Little Sioux Corn Processors, LLC, a Marcus, Iowa based ethanol producer. GS CleanTech’s patent-pending corn oil extraction technology has been engineered to help ethanol producers enhance production and increase revenues out of their existing crop in cost-effective and rapid ways. GS CleanTech’s COES can extract about 3 million gallons of crude corn oil from a typical 50 million gallon ethanol production facility in two 1.5 million gallon per year stages. Little Sioux is an innovative farmer-owned ethanol production facility that was commissioned in April 2003 and was designed to produce 40 million gallons of ethanol per year. Facility operators have been able to eliminate processing bottlenecks to allow it to consistently produce in excess of 50 million gallons of ethanol annually, and Little Sioux continues to implement new processing technologies. Shares of GSHF rose 1 cent, closing at $0.12.
QuantRx Biomedical Corporation (OTCBB: QTXB), a medical technology company with leading edge products targeting worldwide health needs, announced that the United States Patent and Trademark Office has issued U.S. Patent 6,998,273 relating to an innovative QuantRx device that enables collection of oral fluids in a lateral flow device. The QuantRx device, an industry first, integrates a removable barrier that prevents test chemicals from washing into the oral cavity during the collection process, and allows the controlled start of the test, or tests, within the device. The patent covers the QuantRx oral fluid collection device specifically designed for rapid lateral flow tests and was developed by QuantRx for use with the company’s patented RapidSense® technology. The innovative lateral flow collection device is designed for either a single test or multiple tests using the same sample, making it ideal for emerging drugs of abuse testing and HIV testing. Additionally, the patented technology has a feature that provides a more secure “chain of custody” system, helping to ensure the identity and integrity of a specimen from collection through the reporting of test results. Shares ended at $1.38, up $0.03.
Volume Alert:Shares of USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, surged 26.2% last week on more than four times average volume after the company announced record revenue for the three months ended September 30, 2006. The company’s revenue for the period, slightly above $2 million, was driven by the growing sales of the company’s e-Port® cashless transaction products and strong sales of its EnergyMiser™ energy management solutions. Last year, USA Technologies reported revenue of approximately $1.35 million for the same period. In addition, the company experienced a significant increase in gross profit compared to the three months ended September 30, 2005. The company expects to announce its full first quarter results in mid-November. Shares ended the week up $1.34 closing at $6.45.
CompuPrint, Inc. (OTCBB:CPPT), an energy technology company that combines satellite-based technology with traditional exploration services, which does business through Terra Insight Corporation, its wholly owned subsidiary, has received the first payment of $750,000 from a major oil and gas exploration and production company in connection with a $2.5 million service contract the company received in August 2006. The company has completed its preliminary analysis of the contracted off-shore African oil and gas drilling prospect and delivered its first stage STeP analysis report. Under the agreement, CompuPrint has now earned an additional progress payment of $375,000. Under the contact, the remaining two payments are to be paid over the next sixty days, with the last payment being made on delivery of the final report. In preparing its analysis, the company utilizes a proprietary technology STeP which is based on interpretation of satellite data to effectively identify oil and gas as well as other minerals subsurface. Shares ended the week unchanged at $0.20.
American Security Resources Corporation (OTCBB: ARSC), a holding company that acquires and develops technologies that advance the development of alternative energies, announced that its Hydra Fuel Cell subsidiary had submitted a proposal in response to Columbia, South Carolina’s Fuel Cell Challenge. The Greater Columbia Fuel Cell Challenge seeks firms and service providers to partner with the City of Columbia and the University of South Carolina to assist in the design and implementation of a groundbreaking plan involving unparalleled integration of hydrogen fuel cell technology into multiple aspects of the city and the University of South Carolina. The Challenge is managed by a coalition consisting of the City of Columbia, The University of South Carolina, and the South Carolina Research Authority and EngenuitySC. The HydraStax™ fuel cell is a proprietary technology developed by American Securities’ wholly-owned subsidiary, Hydra Fuel Cell Corp. that increases both the efficiency and useful life of electric generating hydrogen fuel cells. The HydraStax(TM) units are designed to be commercially mass produced. Hydra proposes fuel cell applications for police, fire and public safety; local government communications; utilities; and academic sporting and entertainment facilities among others. The stock ended the week unchanged at $0.09.
SPECIAL SITUATION:
Auriga Laboratories, Inc. (OTCBB: ARGA) $1.51
With many of the largest pharmaceutical companies focusing exclusively on billion dollar markets, opportunities for specialty pharmaceutical companies to control niche markets for drugs are significant. One company that has positioned itself to capitalize on this trend is Auriga Laboratories, Inc., a specialty pharmaceutical company driving high-growth revenues through acquisition of valuable brand portfolios and innovative drug development programs. The company has boldly forecast dramatic revenue growth, forecasting it will generate an estimated $26.4 million of total revenue for calendar year 2007, compared to total estimated revenue of $7.6 million for the current year.
Auriga Laboratories Inc., is a specialty pharmaceutical company making headway in developing new ways to deliver existing drugs. The company currently focuses on already-approved drugs with market presence and established reputations in the medical community without patent protection. Using these drugs in combination with patented reformulations and drug delivery technologies, Auriga can create unique products with distinct market and clinical advantages. The company has a highly focused development team that has produced a pipeline of medically needed new drug formulations utilizing novel drug delivery technologies. The team utilizes an intricate process for selecting drugs based on market size, drug characteristics, and possible medical improvements the company’s reformulation can add.
Auriga is divided into two successful divisions with experienced and highly dedicated personell. Auriga Pharmaceuticals is the company’s sales and marketing division and is led by experienced industry executives who oversee the construction and growth of Auriga’s highly committed direct sales team. The current sales strategy of the company reflects the recent implementation of an innovative plan to significantly expand its sales force through a commission-only structure (versus the industry-standard salary + commission) designed to maximize revenues while minimizing costs. Auriga is among the first pharmaceutical companies to apply such an aggressive sales strategy. The company currently has 31 sales representatives and plans to add an additional 20 members this October, rounding the total to 100+ within the next 18 months. The company’s management estimates that this strategy will attract the prime performers in the business and that fielding the same number of representatives under the old compensation structure would have cost close to $20 million annually. The second division of the company, Auriga Development, is made up of a team of professionals with profound expertise in the use of new, patented drug delivery technologies to produce improved formulations of already-approved drugs. These drugs can then be used for new clinical indications, which is a key element of Auriga’s unique strategy and will continue to be a focus of the company.
Auriga’s product strategy is dynamic and evolving with a focus on three primary areas: cough and cold medications (respiratory); gastrointestinal disorders; and central nervous system disorders, including pain control. At the end of last month the company currently featured a product line that incorporated treatments designed to provide symptomatic relief for coughs and colds that included Extendryl® and the recently acquired Levall™ product line. Auriga also recently acquired an exclusive license to market the prescription only, FDA-cleared, Aquoral™ product designed to treat patients with chronic dry mouth, also known as Xerostomia. The ailment is a common side-effect of many prescription drugs and represents a growing market. In addition, Auriga entered into a strategic agreement with Degussa to develop a proprietary formulation targeting serious chronic gastrointestinal diseases utilizing Degussa’s proprietary EUDRACOL™ technology. Auriga is developing an oral, controlled-release corticosteroid formulation that targets inflammatory bowel disease lesions at different sites within the GI tract. This is a primary example of the company’s development pipeline. The company also recently announced the filing of a new provisional patent application for a key drug delivery platform technology that will provide market exclusivity for its proprietary product pipeline and proven pharmaceutical brands. The company also recently executed a term sheet for an agreement authorizing River’s Edge Pharmaceuticals, LLC to be the exclusive generic drug distributor of the company’s Extendryl® and Levall® prescription product lines.
Auriga recently released revenue guidance for the remainder of calendar year 2006 and for 2007, projecting significant revenue increases through sales growth of its FDA-authorized prescription drug products, including Extendryl® and other brands. According to guidance released by Philip S. Pesin, Auriga’s Chief Executive Officer, Auriga currently projects that it will generate an estimated $26.4 million of total revenue for the calendar year ending December 31, 2007, compared to total revenues of an estimated $7.6 million currently projected for the calendar year ending December 31, 2006. Auriga generated approximately $507,000 of revenues during the three months ended June 30, 2006 and generated $3.7 million of net losses over the three month period and anticipates that it will continue to generate losses until sometime in 2007.
Pharmaceutical and biotechnology companies look to drug delivery enhancements as a way of gaining a competitive advantage and the company has a strong future focus that includes plans of an aggressive series of acquisitions of established but underexposed drug brands that have been overlooked by other pharmaceutical companies. Auriga plans to reformulate these brands and improve them with its proprietary delivery technologies, thereby creating new medicinal therapies while building its intellectual property portfolio. Developing safer and more efficient ways of delivering existing drugs is generally far less risky than attempting to discover new drugs, because of lower development costs and the time it takes to gain FDA approval. This strategy is one that the company believes will give them an industry leading gain and will to push Auriga to a new level of success. With a market capitalization of approximately $55 million, the stock is well below its mid-July high of $3.50. However, with significant revenue growth opportunities, the stock could be positioned to return to those levels, delivering healthy returns for investors.
