10/08/2006
VOLUME 258
Companies featured in the current edition of the newsletter: ADSX, ARSC, CDSS, CLRI, CYTR, ENZ, FMTI, FSN, GNBT, HYTM, IMMG, NTST, OXMI, PTCH, QTXB, RTK, USAT
The fourth quarter began where the third quarter ended, with many of the indexes making all-time or multi-month highs. The Dow pushed to record highs adding 171 points which increased its year to date gain to 10.6%. The other indices are well below record highs, but finished the week strong. The Nasdaq was up 41 points increasing its year to date gain to 4.3%, while the S&P 500 finished the week up 13 points rising 8.1% for the year. The Russell 2000 rose 14 points and is up 9.9%, year to date.
To date, most of the signs indicate that the Fed is accomplishing its objective of creating a “soft landing”. The “Goldilocks Economy”, which Wall Street seems to be rooting for, where the economic news suggest modest growth and moderating inflation appears to be occurring, as demonstrated by a tepid employment report on Friday. The decline in gas prices also may be giving investors comfort, as it is likely to boost consumer spending. Despite rhetoric from OPEC that it would reduce production, oil prices ended the week at $59.76 a barrel, down from $62.90 the previous Friday.
What should investors look for in the upcoming week? Earnings Season begin Tuesday after the close with announcements from aluminum producer Alcoa (NYSE: AA) and biotechnology company Genentech (NYSE: DNA). Gannett Company, Inc. (NYSE: GCI), Host Hotels & Resort (NYSE: HST), Monsanto Company (NYSE: MON), and insurance provider Progressive (NYSE: PGR) announce earnings before the market opens on Wednesday, with restaurant company Yum! Brands, Inc. (NYSE: YUM) reporting earnings following the market close. Costco (Nasdaq: COST), PepsiCo. (NYSE: PEP), Safeway (NYSE: SWY) and motorcycle manufacturer Harley Davidson (NYSE: HOG) announce earnings before the market opens Thursday. General Electric (NYSE: GE) closes out the week of earnings reports Friday morning with a before the bell announcement.
Even with the upcoming Columbus Day holiday, next week will have important economic news. The September Treasury Budget and September Wholesale Inventories will be announced Tuesday morning. Expect to see weekly Crude Oil inventories announced Wednesday morning before the bell. The release of the Fed FOMC minutes, after the market close, is likely to be carefully examined by investors for clues about the future direction of interest rates. Additionally, Fed Governor Bies will speak to UK bankers in London on Wednesday and Richmond’s Fed President Lacker will address the Chamber of Commerce. Thursday’s announcements include the weekly unemployment report and the August Trade Balance, before the bell. News from later in the day includes the release of the Fed’s Beige Book. Friday before the bell will be busy with the August Import and Export and September Retail Sales announcements, followed shortly by the Preliminary September Michigan Sentiment. The week comes to a close with a mid-morning August Business Inventories announcement. Chicago’s Fed President Michael Moskow will speak at the real estate gala Tuesday in Chicago and LM Ericcson Telephone Company (Nasdaq: ERIC) will hold a conference call to update the investment community on the company’s business outlook on Thursday. Bear Stearns holds its 9th Annual two-day Retail Investor Outing beginning Wednesday in New York.
Volume Alert: Shares of Enzo Biochem, Inc. (NYSE: ENZ), a developer of innovative health care products based on molecular biology and genetic engineering techniques, surged nearly 6% on Friday on more than twice average volume after it announced that its subsidiary, Enzo Clinical Labs, Inc., had been selected as a regional provider of medical laboratory services for UnitedHealthcare Insurance Company, an affiliate of healthcare giant UnitedHealthcare Group. Effective January 1, 2007, the new contract will cover UnitedHealthcare Insurance Company and its affiliates, including Oxford Health Plan. Enzo Clinical Labs is a leading regional laboratory serving the greater New York/New Jersey area, which covers more than 20 million individuals. The laboratory offers a full menu of state-of-the-art diagnostic procedures in areas such as chemistry, microbiology, hematology, blood banking as well as pathology and genetic testing. Enzo Clinical Labs is currently undergoing an expansion in the number and complexity of tests performed in-house. The stock ended the week up an impressive $1.60, finished the week at a solid $13.79.
The Pierce County Alliance (PCA) reported at the 2006 Pacific Rim Meth Summit results from its 6 month follow up on a pilot to evaluate Hythiam, Inc.’s (NASDAQ: HYTM) PROMETA® protocol for the treatment of methamphetamine and cocaine dependence within the felony and family drug court system. According to PCA, 98% of aggregate urine screens tested negative for all substances, including methamphetamine and cocaine use, and 92% of the 40 patients who participated in the pilot remain drug free 6 months after treatment initiation. PROMETA represents an innovative approach to managing dependence on alcohol, cocaine or methamphetamines, as well as combinations of these drugs, that is designed to address the physiological, nutritional and psychosocial aspects of these multi-factorial diseases, and is thereby intended to offer patients an opportunity to achieve sustained recovery. The PROMETA protocol for the treatment of methamphetamine and cocaine dependence was adopted as a treatment by the PCA earlier this year when it was concluded that PCA’s success in using PROMETA with offenders had far surpassed that of any other treatment model previously used. The PROMETA protocol for stimulant dependence integrates nutritional, medical, and psychosocial care within PCA’s existing infrastructure and treatment framework. The strong results could help drive adoption in the State of Washington where it is based. Shares ended the week down 90 cents at $6.32.
Fusion Telecommunications International, Inc. (AMEX: FSN), a provider of advanced VoIP services, announced that it has entered into a retail marketing alliance with MasterCard Worldwide to offer its suite of premium paid Efonica services to MasterCard cardholders. As part of the agreement, Fusion will market its premium paid Efonica VoIP services via mastercard.com. Efonica offers consumers the ability to call each other using their existing landline or mobile telephone numbers. Calls can be made to and from any combination of PCs, Internet phones and regular telephones (with an SIP adapter), connected to either a wireless, broadband or dial-up Internet connection. The service was introduced incorporating Fusion’s patent-pending Worldwide Internet Area Code™, which coupled with a subscriber’s existing telephone number, further simplifies the process of making a call. As one of the largest card issuers in the world, MasterCard should provide an excellent platform for the company to market Efonica. Shares ended the week $1.90, up 20 cents from last week.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company focused on developing products primarily in the area of small molecules and ribonucleic acid interference (RNAi), said last that its Scientific Advisory Board member Craig C. Mello, Ph.D., together with Andrew Fire, Ph.D., was awarded the Nobel Prize in medicine for discovery of the use of double-stranded RNA for gene silencing, a technology that has come to be known as RNA interference (RNAi). Doctors Mello and Fire acted as key inventors on the first approved RNAi patent, which is licensed to CytRx on a non-exclusive basis. As a member of the CytRx Scientific Advisory Board, Dr. Mello acts in an advisory capacity to assist the company to develop RNAi therapeutics for specific diseases. CytRx uses RNAi to aid in screening and identifying classical, orally-available small molecule drugs. In its obesity and type 2 diabetes programs, CytRx is using the company’s proprietary high throughput RNAi-based screening technology to screen the more than 2,000 candidate genes that may be involved in diabetes and obesity in order to rapidly validate numerous drug targets in the most critical pathways which regulate metabolism. During the past year, CytRx-sponsored research programs have discovered and validated approximately 30 new type 2 diabetes and obesity drug targets. CytRx also is exploring the utility of RNAi for direct therapeutic applications when technically feasible. Shares ended the week up 6 cents at $1.33.
Life sciences company Forbes-Medi-Tech Inc. (NASDAQ: FMTI) said last weej that it had completed its US Phase II trial for the cholesterol-lowering drug, FM-VP4. The primary endpoint of this trial is to determine the effect of two doses of FM-VP4, 450mg and 900mg, given over 12 weeks, compared to placebo, on low density lipoprotein-cholesterol (LDL-C). Demonstrating a minimum of 15% reduction from baseline in LDL-C at Week 12, is the goal of this trial. The results are anticipated to be released in mid-to-late fourth quarter 2006. The multi-center Phase II trial of approximately 150 male and female mild to moderate hypercholesterolemic subjects was randomized, double-blind and placebo-controlled. Subjects were eligible if they had a LDL-C of 130-210 mg/dL and a triglyceride level of less than 300 mg/dL. Randomization was equal across three groups with approximately 50 subjects in each group (450mg group, 900mg group and placebo group). The continuous growth of cholesterol absorption inhibitors confirms the strength of the alternative therapy market for cholesterol lowering. FM-VP4 is one of few other inhibitors in development and, as such, has the potential to achieve a significant market share. The company also announced that Champion, based in France (a Groupe Carrefour banner), will be creating five new dairy products containing Forbes Medi-Tech’s cholesterol-lowering ingredient, Reducol™. The following products will be launched on the market through Champion stores: original and strawberry flavored yogurt drinks, a mixed strawberry and apricot flavored yogurt, and an all natural (fruit base) set yogurt. The Carrefour superstores will sell these products under their brand name Agir Nutrition. A wide variety of cholesterol lowering dairy products containing Reducol™ can now be found in a number of European countries including France, the United Kingdom, Finland and the Netherlands, at major retailers including Champion, Tesco, U.K. Wal-Mart/ASDA, Kesko, and Albert Heijn. The stock ended the week up 28 cents, closing the week $2.28.
Netsmart Technologies, Inc. (NASDAQ: NTST), a leading provider of enterprise-wide software for health and human services organizations, announced the availability of Avatar Mobile, a software solution that enables Netsmart Avatar users to view and update information in the field. Avatar Mobile is designed to help clinicians and caseworkers reduce paperwork and maximize consumer contact time by allowing them to enter progress notes and other information into a notebook computer, tablet PC or other device while in the field and disconnected from their organization’s network. The data can then be quickly and securely synchronized with the electronic medical record data in a base Avatar system back at their agency. Designed with a Services-Oriented Architecture (SOA), Avatar Mobile is designed to support the elements of a multi-disciplinary electronic medical record. Shares ended the week up 63 cents to finish at $13.75.
Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, announced last week the publication of studies demonstrating specific anti-tumor activity of its novel Ii-Key/HER-2/neu immunotherapeutic vaccine. The studies were performed in the laboratory of Dr. Costas Baxevanis in collaboration with scientists at Antigen Express, the immunotherapeutic division of Generex Biotechnology. The outcome of these recent efforts appear in the journal Cancer Immunology and Immunotherapy under the title “Ii-Key/HER-2/neu(776-790) hybrid peptides induce more effective immunological responses over the native peptide in lymphocyte cultures from patients with HER-2/neu+ tumors.” In addition to demonstrating increased activity in human lymphyocyte cultures of peptides designed with the proprietary Ii-Key modification, the studies also exhibit the anti-tumor effectiveness of these activated lymphocytes in suppressing the growth of human ovarian cancer cells (expressing HER-2/neu) in an animal model. Furthermore, mechanistic studies demonstrated that the specifically stimulated lymphocytes worked by enhancing the activity of cytotoxic T lymphocytes, which is consistent with the proposed mechanism of action of lymphocytes stimulated by Ii-Key/Her-2/neu hybrid peptides. In addition to developing an immunotherapeutic vaccine for HER-2/neu expressing cancers, Antigen Express is also developing vaccines for other types of cancer and infectious diseases, including the potentially pandemic H5N1 influenza virus. The fact that Antigen Express vaccines are manufactured by an entirely synthetic process, enabling rapid production of large amounts, makes them uniquely suited for an H5N1 vaccine given the possible demand for such a vaccine and the supply limitations of more traditional vaccines. The company also recently announced that its new Glucose RapidSpray™ product will be available in Shoppers Drug Mart® stores across Canada (Pharmaprix® in Québec) in late October, 2006. Shoppers Drug Mart is Canada’s largest retail drug store group with more than 960 retail drug stores. Glucose RapidSpray is an innovative alternative for people who require or want additional glucose in their diet. Glucose RapidSpray delivers a fat-free, low-calorie glucose formulation that was developed using the company’s proprietary buccal drug delivery technologies. Glucose RapidSpray delivers glucose directly into the mouth. Glucose RapidSpray is simple to carry and use, with no large tablets to chew or messy gels to swallow. The stock ended the week up 11 cents and finished at $1.83, above a key level of resistance.
Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, announced that more than 300 physicians registered in the VeriMed Physician Network during the annual meeting of the American Academy of Family Physicians, held in Washington, D.C. on September 28-30, 2006. The VeriMed system, which consists of a hand-held radio frequency identification (RFID) scanner, an implantable RFID microchip, and a secure patient database, is being used to help rapidly identify and provide access to important health information on participating patients who arrive at the emergency department unconscious, delirious, or unable to communicate. The stock ended the week down a penny at $1.61.
Last week, Montana Gov. Brian Schweitzer announced an agreement with a team of companies to build one of the nation’s first coal-to-liquid fuel facilities. The Montana plant would use what is called integrated gas combined cycle technology to gasify, rather than ignite the coal. The project calls for converting a portion of the synthetic gas into 22,000 barrels per day of diesel fuel, using the rest of the gas to generate about 300 megawatts of electricity. After the process of converting the coal into synthetic gas form, Rentech Inc. (AMEX: RTK), a developer of alternative energy sources, will be used to convert the synthetic gas into a liquid. Shares ended the week down 16 cents at $4.47.
Several months ago, we speculated that Citadel Security Software Inc. (OTCBB: CDSS), a leader in enterprise vulnerability management and policy compliance solutions, could be a takeover candidate, based upon a flurry of deals that had previously been announcing among software companies that specialize in security. Last week, CDSS announced that the company had signed a definitive agreement with McAfee, Inc. for the acquisition of substantially all of Citadel’s assets for approximately $56 million in cash plus an estimated $4 million in working capital reimbursement. The proposed transaction is expected to close in the fourth quarter of 2006, subject to closing conditions including Citadel stockholder approval, expiration of the Hart-Scott-Rodino waiting period and other conditions in the definitive agreement. Following payment of estimated transaction costs, liabilities, preferred stock and other cash payments, Citadel expects to distribute to its common stockholders an aggregate amount in the range of approximately $0.52 to $0.54 per share of common stock in the form of liquidating dividends. Citadel anticipates that this distribution will be made in one or more cash dividends with a substantial portion of the payment to be made as soon as feasible following expiration of the 30-day indemnification period under the definitive agreement. The balance will be paid at a later date after payment of any remaining obligations. Citadel will provide an update in its proxy statement with respect to the timing and amounts of estimated distributions. The company has not set a record or payment date for such distributions, and the final amount and timing of the distributions is dependent upon a variety of factors, including the timing and amount of costs and expenses, tax payments and the amounts of liabilities and potential indemnification claims under the definitive agreement. The company also recently announced that it had received an order from a major government systems integrator for an agency of the United States Department of Defense. This order includes security content subscription for Citadel’s flagship product, Hercules®, customer support and consulting services valued at approximately $3.2 million. As organizations are becoming more vigilant in minimizing security risks and ensuring an efficient method to audit policies and track compliance, Citadel’s Hercules is designed to protect an organization’s network against all five classes of vulnerabilities — unsecured accounts, unnecessary services, mis-configurations, backdoors and software defects — across a multi-platform, multi-device environment. Shares ended the week up 6 cents and finished at $0.49.
Clearant, Inc. (OTCBB: CLRI), the developer of the patent-protected CLEARANT PROCESS® for pathogen inactivation, announced that a record 52 Clearant Sterile Implant® cervical spinal and soft tissue allografts were distributed during the third quarter of 2006, the first full quarter since the company began making Clearant Sterile Implants available directly to surgeons and clinics. The demand for Clearant Sterile Implants continues to develop as is evident by the recent groundswell of interest from spinal surgeons that visited Clearant’s exhibit booth at a national meeting of spinal surgeons held last week in Seattle, WA. Numerous spinal surgeons at the program expressed a high degree of interest in potentially converting their practices to the use of Clearant Sterile Implants. The stock ended down 5 cents at $0.35.
IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, announced that E&M Advertising, the direct response unit of Impart Media Advertising, a wholly owned subsidiary of Impart Media Group, landed a media contract with CARSTAR. The project, which launched this week, is an extensive direct response campaign that will run for the next three months. CARSTAR selected E&M Advertising and International Media Partners to oversee the new campaign in Washington State. Terms of the contract were not disclosed. Founded in 1989 and headquartered in Overland Park, Kansas, CARSTAR is the largest group of auto body repair shops in North America. The privately held company currently has 270 locations in 25 U.S. states and the District of Columbia, and 110 Canadian locations. The stock ended the week at $0.48, down 9 cents.
Oxford Media, Inc. (OTCBB: OXMI), a leading developer of scalable, turnkey hybrid digital VOD and PPV entertainment systems, announced that the company expects to report revenue for its third quarter for the three months ended September 30, 2006 of approximately $5.5 million – $5.7 million, representing an increase of approximately 178% compared to the same period for Oxford in fiscal 2005. The third quarter represents the first three months of operations since the company completed the acquisition of SVI Hotel Corporation, a leading provider of Video-On-Demand (VOD) movie systems, Free-to-Guest satellite systems, and high-speed Internet and information solutions to the hospitality industry. The strong revenue increase was driven by the recent acquisition of SVI Hotel’s hospitality business. In the coming quarters Oxford expects to continue benefiting from the synergies of the acquisition of SVI Hotel Corporation and the upgrading of the SVI analogue tape based customers to Oxford’s next generation VOD platform. This has provided opportunities for Oxford to reach customers in more than 1,500 of the 1,900 hotels currently serviced by SVI. In September, Oxford Media announced that it had completed the previously announced acquisition of SVI’s hospitality business for a combination of cash, debt and securities approximating $10.0 million. The company expects to announce third quarter results in early November. The stock ended the week up a nickel at $0.45.
Junior oil and gas producer, Patch International Inc. (OTCBB: PTCH), announced that the company will proceed immediately to shoot a 3D Seismic program at the oil and gas prospect at the Rich/Rumsey area in Alberta. This project was previously referred to in a press release dated July 7, 2006. The purpose of the program is to determine a higher point within the section in the Leduc formation and/or a better location for possible Banff potential. Patch recently reported it had received a reserve report prepared by independent petroleum engineers of Calgary, Alberta. The report showed a contingent resource potential of 59 million barrels (high) to 23 million barrels (low) across all the lease sections in which Patch has an ownership interest. The report was prepared by the independent petroleum engineers based on public well log information and with respect to the Alberta oil sands property, Leismer Section 19 (“Leismer 19”) some limited seismic data. Moving forward, Patch’s strategy is to undertake a work program to prove up the contingent resource reserves indicated in the reserve report. This will consist of both a 2D and 3 D seismic program as well as a test well program on the Lesimer 19 lease. It is scheduled to commence in the fall 2006 and program details will be forthcoming in the near future. Patch International is also the new featured company spotlight stock at StreetInsider.com. Shares ended the week down at $0.82.
QuantRx Biomedical Corporation (OTCBB: QTXB), a medical technology company with leading edge products targeting worldwide health needs, announced that its affiliate company FluoroPharma, Inc. has begun Phase I clinical trials for CardioPET™ a new cardiac viability imaging agent. The product has been developed to allow acute and chronic coronary artery disease to be assessed while patients are at rest. The recently announced move to Phase I trials follows the Boston-based FluoroPharma’s filing with the Food and Drug Administration of an investigational new drug application for CardioPET, the company’s first such application. The institutional review board approved Phase I trial is a single-center, open-label study designed to evaluate safety, distribution and dosimetry of CardioPET as a positron emission tomography (PET) tracer for myocardial imaging in healthy subjects. The study is to be led by Dr. Alan J. Fischman, Director of the Nuclear Medicine Division of Massachusetts General Hospital and a highly respected leader in PET uses and techniques. The stock ended the week up 23 cents and finished at $1.35.
USA Technologies, Inc.(OTCBB: USAT), a developer of cashless vending and energy management products, reported last week that the Coast Guard in San Francisco and Oakland has installed VendingMiser® technology on vending machines across both bases to help lower energy consumption and costs. USA Technologies also announced that the Arizona Department of Administration was installing VendingMiser, technology from the EnergyMiser product line, on vending machines in General Services Department buildings at the State Capitol in Phoenix and that the city of Tucson was installing the EnergyMiser technology on vending machines city-wide. The decision by the city of Tucson came just weeks after USA Technologies announced that 15 cities in the Los Angeles South Bay area were installing EnergyMiser in vending machines across the region. In recent months USA Technologies’ EnergyMiser products have been sold to Fort Hood Army Garrison, the biggest military base in the Nation, to the Texas National Guard, and to Burnsville Air Force Base. Much of the EnergyMiser technology is being purchased through the General Services Administration Advantage shopping system, which enables Federal and State government agencies to purchase EnergyMisers directly from USA Technologies at pre approved prices. Shares ended down nearly a dollar and finished the week at $5.11.
On the Wires: American Security Resources Corporation (OTCBB: ARSC), a holding company that acquires and develops technologies that will advance the development of alternative energies, announced that James Twedt, President and CEO of its Hydra Fuel Cell Corp. subsidiary, has become Chairman of Hydra and joined the Board of American Security Resources Corporation.