10/21/2007
VOLUME 322
Companies featured in this edition of the newsletter: ACCP, ACTC, CYTR, ENZ, GNBT, HJHO, HYTM, ITUI, MLSC, MSHI, NTRN, PBIO, PLKH, PLRS, TKO, USAT, VOIC, VQPH
With Halloween fast approach, it was only appropriate that the ghosts of Black Monday would haunt investors on the 20th anniversary of Black Monday, as stocks plunged Friday as a series of disappointing earnings announcements stoked fears that a recession could be looming. The Dow lost 571 points for the week, with much of the decline coming Friday, or 4.0%, lowering its annual gains to 8.5%. The Nasdaq fell 80 points, or 2.8%, paring its year-to-date gain to 12.8%. The S&P lost 61 points, or 3.9%, trimming its yearly gain to 5.8%, and the Russell 2000 dropped 42 points, or 5.0%, leaving it with an annual return of just 1.4%.
Investors were busy sifting through earnings reports last week as over 80 members of the Standard & Poor’s 500 Index reported results. All in all, the numbers came in mixed with the likes of Google, Intel and Yahoo! topping forecasts while Citigroup, Caterpillar and 3M fell below estimates. With stocks logging significant advances this year, investors used the murky earnings picture to lock in profits. It did not help that crude oil crossed $90 a barrel for the first time. Worries over insufficient supplies for the winter, coupled with the concerns over the conflict in northern Iraq and buying activities by foreign funds that looked to take advantage of attractive dollar-denominated energy futures all contributed to the upward move in oil prices. As housing remains a “significant drag” on the economy according to Fed Chairman Bernanke, rising energy prices only “fuel” to the fire, creating an additional strain to the already weakened U.S. economic state.
From a technical perspective, there are a couple of areas worth watching. The Dow broke through its 50 day-average average on Friday, but it was barely held to remain above its September high and mid-September breakout level of 13494. The Nasdaq, reflecting the underlying outperformance of technology stocks, held above the 38% retracement of the September/October rally at 2724/2720. Note that there was a significant increase in the TRIN, which is a measure of selling pressure and a good indicator of investor “fear.” Friday’s close at 3.59 was its highest since February, 2007 and levels such as this in the past have suggested signs of at least stabilization or a corrective bounce over the short term.
What should investors look for this week? Earnings season continues in earnest. On Monday morning, expect announcements from Haliburton Co. (NYSE: HAL), Kimberly-Clark Co. (NYSE: KMB), Merck (NYSE: MRK), and Schering-Plough Corp. (NYSE: SGP), followed by American Express (NYSE: AXP), Apple Computer (NASDAQ: AAPL), and Texas Instruments (NYSE: TXN) after the close. Before the opening bell on Tuesday, AT&T Inc. (NYSE: T), DuPont (NYSE: DD), and United Parcel Service (NYSE: UPS) will report, with Amazon.com Inc. (NASDAQ: AMZN) releasing numbers after the close of business. Boeing (NYSE: BA), ConocoPhillips (NYSE: COP), DaimlerChrysler (NYSE: DAI), and Merrill Lynch (NYSE: MER) will release numbers Wednesday morning. Thursday morning, Aetna Inc. (NYSE: AET), Bristol-Myers Squibb (NYSE: BMY), Dow Chemical (NYSE: DOW), Honda Motors (NYSE: HMC), LM Ericsson (NASDAQ: ERIC), Motorola (NYSE: MOT), and Raytheon Co. (NYSE: RTN) will report earnings, followed by Amgen (NASDAQ: AMGN), and Microsoft Corp. (NASDAQ: MSFT) after the closing bell.
The economic calendar is quiet. Existing Home Sales for September will be announced at 10:00 a.m. on Wednesday, followed by weekly Crude Inventories at 10:30 a.m. Durable Goods for September, and weekly Initial Jobless Claims will be announced at 8:30 a.m. on Thursday, with New Home Sales for September being reported at 10:00 a.m. Lastly, the revised University of Michigan Sentiment data for October will be announced on Friday at 10:00 a.m. Expect commentary from Fed Gov. Kroszner on Monday.
Access Pharmaceuticals, Inc. (OTC Bulletin Board: ACCP) will be presenting clinical and preclinical data on its lead anticancer compound, ProLindac, at the “International Conference Molecular Targets and Cancer Therapeutics: Discovery, Biology, and Clinical Applications†taking place October 22-26, 2007 at the Moscone Convention Center West in San Francisco, CA. VioQuest Pharmaceuticals (OTC Bulletin Board: VQPH), will also present data pertaining to its two leading oncology candidates, VQD-002 and Lenocta, at the same forum, and will also present at the Paramount BioSciences Healthcare Conference on Tuesday, October 23, at the Waldorf Astoria Hotel in New York City.
Volume Alert: Shares of healthcare services company Hythiam, Inc. (NASDAQ: HYTM) surged to their highest level since July last week on more than three times average volume, before retreating on Friday, as investors anticipated the release of top-line data that clinical investigator Dr. Harold C. Urschel, III, M.D., M.M.A. will release later this month on the first double-blind study of PROMETA, HYTM’s protocols for treating drug and alcohol addiction. It is worth noting that earlier this month the same investigator published results of an open-label study he conducted using PROMETA to treat methamphetamine dependence. The study, published in The Mayo Clinic Proceedings journal, a publication of the prestigious Mayo Clinic in Rochester, Minnesota, was the first study on the protocols that was peer-reviewed. The primary endpoint of the study to be released later this month is cravings, which are thought to play a key role in relapse. The analyst community appears bullish on the prospects for a favorable outcome. The RBC analyst stated in a recent note that “we remain cautiously optimistic that the results will demonstrate a statistically significant reduction in cravings. Although this study is only 30 days long, we believe the timeframe is long enough to determine reduced cravings.” Likewise, the Brean Murray analyst noted that, “The recently peer-reviewed Mayo Clinic Proceedings Journal publication established the PROMETA arm in the Urschel study – 66% reduction in cravings. Based upon our analysis, it is highly unlikely that the placebo arm, despite the negative limitations of a 30-day study, can achieve a similar result. In addition, we have come to understand that all of the longer-term studies in progress have retention rates and negative urine test rates that are higher than the investigators in these placebo-controlled studies typically see with other anti-addiction approaches. We believe reduction in cravings translates to reduction in actual use, and that future trials will demonstrate this within 3-6 months.” Note that the stock closed above its 200-day moving average for the first time since July. Shares ended the week at $8.11, up 82 cents.
Volume Alert: What is bad news for one company can often be good news for a competitor. Last week, Pfizer finally gave up on Exubera, the first inhalable insulin product on the market, and in the process recorded a $2.8 Billion write-off, an acknowledgement of a giant failure, even for a company of Pfizer’s size. Not surprisingly, shares of drug delivery companies, one of this year’s poorest performing sectors, were punished, with one exception. Generex Biotechnology Corporation (NASDAQ: GNBT), traded nearly 5 times average volume last week after the Exubera news, as a note from the Rodman & Renshaw analyst titled, “Disappointment with Exubera enhances Oral-Lyn insulin’s opportunity” noted that “They believe disappointment with Exubera diminishes it as a competitor and enhances (GNBT) Oral-lyn’s opportunity as a safe, more tolerable, non-injectable insulin for the treatment of patients with diabetes. In light of the significant hurdles associated with the adoption of inhaled insulin, they believe that a significant opportunity exists for Oral-lyn.” Generex also reported that it has entered several service agreements related to the Phase III global multi-center clinical study for Oral-lyn, expected to include 750 patients with Type-1 diabetes mellitus. The company has selected PSI-CRO AG Clinical Research Services, Nextrials, Inc., and eResearchTechnology, Inc., to provide clinical services for the trials, in which enrollment is expected to begin in the near future. Generex believes a successful international trial will pave the way for the commercialization in the U.S. and Canada. Shares bucked the trends in the sector, ending the week at $1.59, up 2 cents.
Enzo Biochem, Inc. (NYSE: ENZ), a company engaged in the research, development and manufacture of innovative health care products, last week reported impressive results for its fourth quarter and fiscal year ended July 31, 2007. Revenue for the quarter rose 81% to $17.9 million from $9.9 million, reflecting a 46% increase in Clinical Lab revenues, an increase of $1.2 million in royalty and license fee income and $3.1 million in product revenues attributed to the acquisition of Axxora Life Sciences Inc. Full year revenues totaled $52.9 million, up 33% from a year earlier. Gross profit totaled $29.7 million, up 26% from 2006. Net loss for the quarter was ($0.09) compared to a ($0.14) loss a year earlier, and handily beat the lone analyst’s estimates of a ($0.12) loss. For the year the net loss totaled ($0.38) versus a loss of ($0.49) in 2006, an improvement of over 22%. Enzo ended the year in stout financial shape, with working capital of $113.9 million, cash and cash equivalents of $105.1 million, equity of $141.9 million and no debt. With the life sciences division demonstrating growth for the first time in years, helped by the acquisition of Axxora, value-oriented investors may be attracted to the stock, as the sum of the parts appears to exceed the current valuation. Shares ended the week at $12.44, down one penny.
Telkonet, Inc. (AMEX: TKO), the leader in providing in-building broadband access over existing electrical wiring and innovative energy management systems, last week announced that Motel 6 has signed a four year energy maintenance agreement for Telkonet SmartEnergy at thirty-nine Motel 6 properties in North America. The agreement will involve over 10,000 rooms when fully implemented. The installation of Telkonet SmartEnergy typically reduces heating and cooling related energy consumption by approximately 30%. The system automatically tracks room occupancy to optimize temperature settings by relaxing the temperature when a room is empty and then recovering to guests’ temperature set-points within a pre-defined number of minutes upon their return. Telkonet SmartEnergy thermostats include programmable parameters that allow guests to adjust room temperatures within a range dictated by hotel management. Motel 6 is known as a leader in green energy management practices, receiving Energy Star Leader status from the U.S. Environmental Protection Agency in 2006 for improving energy efficiency. Telkonet reported last week that Vantage Hospitality Group, Inc., the 12th largest hotel company worldwide, and the parent company of Americas Best Value Inn, had given Telkonet’s SmartEnergy system “Preferred Provider Status.” The company also announced that it has acquired a 30% stake in 1-800-905-GEEK,the nation’s premier provider of on-site computer services, from several stockholders of 1-800-905-GEEK in exchange for 2,940,200 shares of Telkonet common stock valued at approximately $4.5 million. This strategic investment is designed to bring Telkonet’s family of broadband networking and energy management products to the small business and residential markets. The GEEK LINK SYSTEM, which is based on Telkonet’s in-building powerline communications (PLC) technology, is now fully developed, and shipments have already begun to fulfill initial orders. Shares ended the week at $1.50, up 4 cents.
Shares of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, got a boost last week as Oppenheimer & Co. initiated coverage of CytRx Corp. with a “Buy” rating, and a target price of $6.00. Oppenheimer cited the commercial potential of CytRx’s lead molecular chaperone drug candidate Arimoclomol, which has been given Fast Track designation by the FDA for the treatment of ALS, and has also been given Orphan Drug status by the FDA, and by the European Commission. Opco also sees RXi Pharmaceuticals (86% owned by CytRx) as one of the few “pure play” companies in the RNAi technology field. CtyRx currently has plans to spin off RXi Pharmaceuticals as a dividend to its shareholders. Shares ended the week at $3.62, up 5 cents.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), last week reported that a study focused on the discovery and identification of potential biomarkers of colon cancer using PCT for the extraction of proteins from colon cancer tissues was presented on Sunday, October 14, 2007 at the Annual Scientific Meeting of the American College of Gastroenterology. The data presented indicate that an apparent tumor signature protein (hCG1787564) extracted from colon tumor tissue by PCT might be a biomarker that could be of benefit to surgeons treating colon cancer patients. Colon cancer is the second leading cause of cancer death in the United States. The company believes that this study might signal the beginning of PCT becoming a significant tool used by independent scientists in the preparation of their samples for other important scientific studies. Shares ended the week at $5.72, up 9 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, last week announced that it has completed a private placement of 2.1 shares of common stock at a price of $7 per share resulting in gross proceeds of $15 million, to be used towards the purchase of e-Port devices for the Quick Start program. As reported last week, the Quick Start purchasing program is a limited time offer giving vending machine operators and bottlers a “no money down” opportunity to bring their customers the convenience of using credit and debit cards. A vendor or bottler would pay only $24.95 per month for the e-Port device and full e-Port Connect services for a pre-determined time period, allowing them to compete and benefit immediately in the cashless marketplace. By eliminating the up-front cost of acquisition, the company expects to drive adoption of cashless vending, in a similar manner to the razor, razor blade concept. Note that 10% holder SAC purchased 284,000 shares in the offering. Shares ended the week at $7.48, down 26 cents.
Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, last week announced that the American Heart Association (AHA) has selected the company’s Myoblast Phase I(b) trial as a featured late breaking trial for its annual Scientific Sessions Conference in Orlando Florida on November 4, 2007 through November 7, 2007. ACT’s myoblast therapy involves the transplantation of expanded adult progenitor stem cells (myoblasts) derived from a small biopsy of skeletal muscle from a patient’s leg. The technology allows for the expansion of myoblasts into hundreds of millions of cells over a short period, with the resulting myoblasts transplanted back into the patient’s scarred heart tissue. The myoblast program has successfully completed Phase I human clinical trials utilizing the therapy safely in over forty patients, in four independent studies, all conducted under FDA oversight. The FDA has reviewed the Phase I data and will allow the company to proceed with a Phase II human clinical trial of approximately 160 patients. While shares of other stem cell companies sold off last week, ACTC closed at its highest level in six weeks, perhaps indicating that investors have begun to recognize the value that was created by the recent acquisition of Mytogen, Inc. Investors may want to watch the upcoming IPO of Bioheart, another stem cell play for its impact on the sector. Shares of ACTC ended the week at $0.31, up two cents.
Halcyon Jets Holdings, Inc. (OTCBB: HJHO), a luxury charter aircraft broker, last week reported that it has created a new division called “Halcyon O.P.L.”, with NBA superstar Shaquille O’Neal, with an eye on marketing the company’s luxury travel services to the sports and entertainment communities. Mr. O’Neal has also agreed to make personal appearances on behalf of the company. The company believes Mr. O’Neal will help accelerate its penetration into the sports and entertainment sectors, similar to the contacts made by company director Spike Lee in the entertainment industry. Mr. O’Neal, who travels extensively on chartered aircraft, is a regular customer of Halcyon. The company also announced that it has joined Virgin Charter’s Charter Member Program, giving it access to Virgin Charter’s online marketplace, designed to sell, purchase and book charter flights on private aircraft. This significantly increases the number and type of private aircraft available, and will allow Halcyon to offer customers greater flexibility in booking flights, and increases the company’s ability to offer transportation to customers in remote locations. Shares ended the week at $1.30, unchanged.
Medical Discoveries, Inc./Global Clean Energy Holdings LLC (OTC: MLSC),a biofuel feedstock development and operations company, last week reported it has signed a development agreement with Corporativo LODEMO S.A DE CV, a well known Mexican corporation, to develop and operate a number of large commercial-scale Jatropha farms throughout Mexico. The first farm is in development and is expected to generate revenue for MDI/Global from commercial off-take sales during 2008. LODEMO will be responsible for the overall day-to-day operations of the Jatropha project in Mexico, including the planting of the fields, the hiring of the required employees, the cultivation and harvesting, and the transportation of the seeds, Jatropha oil and biomass. The agreement also indicates plans for the construction and operation of a seed oil extraction facility, as well as construction of jointly owned biodiesel refining facility in Mexico. Goldman Sachs recently lauded Jatropha as one of the best candidates for future biodiesel production, with cost estimates of Jatropha-based biodiesel in the range of $45 per barrel, compared to $132 per barrel for rapeseed (canola) based biodiesel, and roughly $128 per barrel for soy based biodiesel. With current oil prices hovering near $90 per barrel, MDI/Global Clean Energy’s Jatropha solution appears to have come at precisely the right time. Shares ended the week at $0.07, down one cent.
MSTI Holdings, Inc. (OTCBB: MSHI), a carrier class communications technology company, last week announced that its wholly-owned subsidiary, MST (NuVisions), been selected by Urban West Development to provide genuine Quad-Play and eConcierge solutions to residents of One Rincon Hill, a luxury high-rise residential development that will become one of San Francisco’s tallest landmarks, offering 695 condominiums in 55- and 45- story towers, as well as 14 townhomes. When completed in 2008, One Rincon Hill will be the tallest residential building in the U.S. west of the Mississippi River. This agreement is another milestone in the company’s stated growth strategy of expanding into strategic U.S. regional markets. NuVisions services are currently offered in a number of high-profile buildings in New York metropolitan area, including Fifteen Central Park West, Trump Tower, Trump Palace, Trump Parc, and Trump Parc East. Shares ended the week at $1.05, down 26 cents.
Shares of Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, traded actively last week as the company announced that Zions Bank, a subsidiary Zions Bancorp, one of the nation’s premier financial services companies, has renewed its license for its high school stock market simulation with Neutron’s Stock-Trak Inc. subsidiary. In addition Stock-Trak will develop another trading simulation web site to compliment Zions’ primary investment site, Zions Direct, providing individual investors an opportunity to simulate trading different products offered by the bank. Zions Bancorp operates its banking businesses through more than 500 offices and approximately 600 ATMs in 10 western and southwestern states, and is a national leader in Small Business Administration lending and public finance advisory services. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Neutron reported last week that eFinancialCareers.com, a leading provider of financial career opportunities, job market news and analysis, had also renewed its contract with its Stock-Trak to host various financial trading games with European university students. Shares ended the week at $0.59, up 9 cents.
ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, reported last week that Falcon Ridge Golf Club in Mesquite, NV, now features the ProLink Solutions GPS system. Other notable Nevada courses offering the ProLink system include Tuscany Golf Club, Las Vegas Paiute Resort and DragonRidge Country Club. Falcon Ridge also plans to participate in the company’s exclusive national advertising opportunity, in collaboration with ABC National Television Sales, Inc. Shares ended the week at $0.83, down two cents.
Pluristem Life Systems, Inc. (OTCBB: PLRS), a bio-therapeutics company dedicated to the commercialization of products for a variety of malignant, degenerative and auto-immune indications, last week announced that results from Fraunhofer Institute’s ongoing in vivo study, utilizing Pluristem’s proprietary PLacenta eXpanded (PLX) cells in treating ischemic stroke, showed initial promise as a potential therapy to treat stroke victims. PLX cells are stem cells obtained from the placenta and expanded using Pluristem’s proprietary 3D PluriX technology. PLX cells were systemically injected into spontaneously hypertensive rats that had undergone middle cerebral artery occlusion, a commonly accepted ischemic stroke model, and showed a significant advantage in functional recovery over a control group that did not receive PLX cells. Pluristem believes these results, combined with favorable results of pre-clinical studies of its proprietary PLX cells for additional clinical indications being released next week at the 3rd World Congress on Regenerative Medicine in Leipzig, Germany, show great promise in treating millions of ischemic stroke patients, an estimated $4 billion market. Shares ended the week at $0.04, up one cent.
VoIP, Inc. (OTCBB: VOIC), a provider of turnkey Voice over Internet Protocol (VOIP) communications solutions for service providers, last week reported preliminary Caerus results for its third quarter ended September, 30, 2007. The company reported third quarter revenue of approximately $2.6 million, an increase of 39% over the second quarter of 2007. The company also reported gross profit of $669,866, the first quarter of positive gross profit in the company’s history. VoIP, Inc. also reduced its net loss from approximately $2.2 million in the fiscal 2007 second quarter to $1.2 million in the third quarter, an improvement of 44%. The company believes sequential monthly revenue will continue to increase, and said it expects to be cash-flow positive in November 2007. As partial confirmation of these expectations, VoIP, Inc. reported an increase in usage from existing customers resulting in a 40% increase in overall network minutes per day over the company’s network during the period from September 15, 2007 to October 15, 2007. Shares ended the week at $0.45, down 20 cents.
On the Wires: i2Telecom International, Inc. (OTCBB: ITUI), a developer of ultra-portable high quality Voice-over-Internet Protocol products and services, announced the appointment of Mark Hewitt to the position of Chief Strategic Officer. Hewitt brings over 26 years of experience and in-depth technological guidance in communications and broadband technologies.
