09/16/2007
VOLUME 317
Companies featured in the current edition of the newsletter: ACCP, ACTC, ARGA, CBMC, CHIP, CVM, CYTR, ENZ, GNBT, HJHO, HSOA, HYTM, IWEB, NTRN, PLKH, PBIO, TKO, VQPH
In a week marked by low volume, all of the major indices posted gains as investors anticipated an imminent rate-cut by the Federal Reserve. The Dow closed up 329 points for the week, bringing its annual gain to 7.8%. The Nasdaq closed up 36 points for the week, bringing its year-to-date return to 7.7%. The S&P ended the week 30 points higher, raising its yearly gain to 4.6%, and the Russell 2000 added 7 points for the week, trimming its annual loss to 0.5%.
Despite rising oil prices and the Bank of England infusing emergency funding into the U.K.’s third biggest bank, Northern Rock, investors drove stocks higher as the market priced in more than one rate cut by the Fed over the coming months. Overexposure to the U.S. subprime mortgage markets appeared to be the catalyst for Northern Rock’s woes as the bank announced on Friday that profits would fall by as much as much as 147 million pounds ($298 million) as a result. Economic news was muted for the week with weekly unemployment claims rising to 319,000 suggesting a continued weak payroll trend. August retail sales came in at a weaker than expected 0.3% compared to the 0.5% consensus, but did little to move the markets due to an upward revision to the July number. If interest rates are lowered next week by the Fed, investors will still have headline risk from potential further fallout from subprime issues, rising unemployment and soaring oil prices. With the hurricane season still ongoing and winter approaching, oil prices may continue to remain near the current levels of $79/bbl for the foreseeable future.
What should investors look for next week? On the corporate side, Adobe Systems (NASDAQ: ADBE) will report earnings on Monday. Results from Best Buy (NYSE: BBY), Lehman Bros. (NYSE: LEH), and Kroger Co. (NYSE: KR) are expected on Tuesday. On Wednesday, General Mills (NYSE: GIS) is due to report earnings before the opening bell, and Morgan Stanley (NYSE: MS) will announce numbers at some point during the day. Thursday morning, before the opening, look for earnings from A.G. Edwards (NYSE: AGE), Bear Stearns (NYSE: BSC), ConAgra Foods (NYSE: CAG), and Goldman Sachs (NYSE: GS). Circuit City (NYSE: CC) and FedEx Corp. (NYSE: FDX) will also report sometime during the day, with Nike (NYSE: NKE), and Oracle (NASDAQ: ORCL) releasing earning after the close of trading.
On the economic calendar, the NY Empire State Index for September will be released at 8:30 a.m. on Monday. The Producer Price Index, and the Core PPI for August will be announced at 8:30 a.m. on Tuesday, followed by the Net Foreign Purchases for July at 9:00 a.m., and the FOMC policy statement at 2:15 p.m. On Wednesday at 8:30 a.m., the Consumer Price Index and the Core CPI for August will be reported, along with Housing Starts and Building Permits for the month of August. Expect Crude Inventories for the week at 10:30 a.m. Initial Jobless Claims for the week will be released at 8:30 a.m. on Friday, Leading Indicators for August are announced at 10:00 a.m., and the Philadelphia Fed Index for September will be reported at noon. Former Fed Chairman Alan Greenspan will also be giving his thoughts in various interviews throughout the week, and his comments should not be overlooked.
Prolink Holdings Corp. (OTCBB: PLKH) will present on Monday at 8 a.m. pacific time at the Fourth Annual Merriman Curhan Ford & Co. Investor Summit in San Francisco. Hythiam Inc. (NASDAQ: HTYM), will present later that day at 3:00 p.m. pacific time. VeriChip Corporation (NASDAQ: CHIP) will present at the same forum on Tuesday at 8:00 a.m. pacific time, the second and final day of the event. Auriga Laboratories, Inc. (OTCBB: ARGA) will present at America’s Growth Capital’s 4th Annual Emerging Growth Conference in Boston on Thursday at 12:30 p.m. eastern time. CytRx Corporation (NASDAQ: CYTR) will present at the three-day G5: ThinkEquity Partners’ 5th Annual Growth Conference on Monday in San Francisco, and at the two-day A.G. Edwards 2nd Annual Emerging Growth Conference on Tuesday in New York. Other conferences of note include the three-day Bank of America 37th Annual Investor Conference, beginning Monday in San Francisco. The two-day Goldman Sachs Communacopia XVI Conference which begins Tuesday in San Francisco, and the two-day CL King 5th Annual Best Idea Conference in New York beginning Tuesday as well.
Lazard Capital Markets initiated coverage of Enzo Biochem, Inc. (NYSE: ENZ), a company engaged in the research, development and manufacture of innovative health care products, with a “Buy” rating, and a price target of $19 last week. Notably, Lazard says it expects Enzo to ultimately prevail in its ongoing patent disputes, including the dismissal of its lawsuit, which the company plans to appeal, against Applied Biosystems, a unit of Applera Corp. The report notes that Enzo has 211 issued patents and 186 pending, and that the company’s broad intellectual property estate could eventually draw $9 billion in life science partnerships. Shares ended the week at $11.83, down 73 cents.
Hythiam, Inc. (NASDAQ: HYTM), a provider of comprehensive behavioral health management services, last week reported that the city of Las Vegas will begin an assessment of the PROMETA Treatment Program for offenders referred by its municipal HOPE Court, a specialized court that focuses on habitual offenders, providing an alternative approach to sentencing that offers repeat offenders structured programs to try to help them rebuild their lives. It is estimated that approximately 180,000 Nevadans needed substance abuse treatment last year, and that less than 34,000 received any kind of assistance, highlighting the need for effective treatment programs in one of America’s fastest-growing cities. The court will use an ‘implement and assess’ approach, with the first 20 offenders being treated free of any licensing fees, with funding to commence upon the treatment of the 21st participant. Last week, Hythiam reported that the Denton County, Texas, Community Supervision and Corrections Department had approved the implementation and funding of the PROMETA Treatment Program for substance dependent criminal offenders under its supervision, and the company believes that soon-to-be-released data from ongoing studies will accelerate the acceptance and implementation of the program on a nationwide basis. Shares ended the week at $6.88, down three cents.
Trading in VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, was certainly volatile last week as investors continued to contemplate a dubious article written by the Associated Press which suggested that the VeriChip could cause cancer in rodents. CHIP issued a statement reiterating that the product is safe and has been cleared by the FDA as a Class II Medical Device, and the VeriMed Patient Identification System has been cleared by the FDA and the FDA stands by its approval. The company said there is no link whatsoever to malignant tumor formation from microchips in humans, and over the last 15 years, millions of cats and dogs have safely received an implantable microchip with limited or no reports of adverse health reactions. Although the article and the alleged research appears to have focused completely on laboratory mice/rats, VeriChip has offered data from two separate studies using laboratory rodents showing “No tissue masses or evidence of tumorigenicity was found at any microchip site at any time.” It should also be noted that lab mice/rats have a higher probability than any other lab animal of tumor formation, at any injection site, from injections of any sort, including vaccinations. While we do not have a crystal ball to determine whether the VeriChip will become widely adopted in humans as the company hopes it will, we believe that the reaction by investors to the Associated Press article was disproportionate and that ultimately the study highlighted in it will have little impact on the ultimate success or failure of the device. Shares ended the week at $4.67, down 95 cents.
Telkonet, Inc. (AMEX: TKO), the leader in providing in-building broadband access over existing electrical wiring and innovative energy management systems, last week reported that it has delivered its FIPS 140-2 validated, powerline networking solution to over 200 Department of Defense (DoD) sites nationwide. The Telkonet iWire System, using powerline communications (PLC) technology, taps into a building’s existing internal electrical wiring to establish secure Internet connectivity throughout an entire building, eliminating the need to install additional cable or wiring. Telkonet said that an additional 600 DoD locations have been scheduled for deployment between now and through 2008, and will positively impact revenues well into next year. The company also reported that EthoStream, LLC, a Telkonet company, continues to recognize accelerated sales growth through 2007, expecting year-end sales of approximately $5 million. Combined with Telkonet SmartEnergy’s revenue projection of $5 million for 2007, Telkonet’s recent acquisitions appear to be key factors in the company’s goal of becoming profitable by year end. Also of note, according to industrial giant General Electric’s newsletter, which TKO has said nothing publicly about, GE Energy recently signed an exclusive agreement with TKO to develop a high-speed broadband networking platform designed specifically for substations, power plants or other utility sites where traditional connectivity is not economically, environmentally or technically feasible. Although PLC technology has been used by Telkonet for years to deliver simple, cost-effective and secure broadband network access in hotels, resorts and other commercial buildings, this technology has not been widely considered for monitoring and data acquisition over the low-voltage power networks in substations. Currently, GE is helping Telkonet evaluate the product from the R&D side, and to understand the requirements for electric utilities. A successful collaboration with GE Energy could lead to many new opportunities for Telkonet. Shares ended the week at $1.63, down 4 cents.
Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, is scheduled to hold a conference call for the investment community on Thursday at a time that has yet to be specified, where it is expected to provide additional details on its two large construction projects in New York and Tampa, Florida, and perhaps more significantly, the status of its receivables and availability of credit. Shares of the company’s stock have lost more than half of their value since the company announced its second quarter results and filed its 10-Q, in which it said that an agreement it entered into to resolve a $21.5 million note could trigger a default with its lenders. Since then, the company has said that it is not in default with its lenders and that the company is able to borrow under these agreements. The stock appears to be pricing in a liquidity crunch for the company, so any news that its cash position is better than it was at the end of Q2 (approximately $4.5 million then), that it has collected the significant receivables from FIGA or that it has resolved/entered into a new credit facility could serve as a catalyst for the heavily-shorted stock. Investors will likely also press the company for an outlook on Q3. The company did not provide quarterly guidance on its second quarter call, but with the quarter nearly over, it may be in better position to comment on current business prospects. Shares ended the week at $2.72, down 29 cents.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), reported last week that Dutton Associates, one of the largest independent investment research firms in the U.S., has initiated coverage on the company with a Speculative Buy rating and a 12 month target price of $10. Dutton believes that Pressure BioSciences is in the early stages of commercialization of its product platform, and that as sales increase in the coming quarters, the shares will begin to reflect the substantial profits that we believe the company can generate beginning in 2010. Dutton is projecting revenues of $5.9 million and $16.4 million in 2008 and 2009 respectively. Pressure Bio also reported that Dr. Paul H. Pevsner, senior author of the research studies and a scientific investigator at the NYU School of Medicine, made three presentations last week at the 29th Annual Meeting of the British Mass Spectrometry Society, held at the Heriot-Watt University in Edinburgh, Scotland. The presentations highlight the advantages of PCT in understanding the events surrounding stroke, detecting biomarkers of colon cancer, and detecting proteins associated with embryo viability. Shares ended the week at $4.11, up one penny.
According to a research note last week from the Rodman & Renshaw analyst who covers drug delivery company Generex Biotechnology (NASDAQ: GNBT), the company’s lead product candidate, Oral-lyn, a proprietary insulin formulation that is delivered directly into the mouth, is in late-stage preparations for a global, 750-patient, multi-center, open-label Phase III trial in patients with Type 1 diabetes mellitus (T1DM) in the U.S., Canada and the E.U. The analyst anticipate the initiation of a Phase III trial by 3Q/4Q07, which combined with strong clinical data and Oral-lyn’s product profile, could lead to Oral-lyn’s potential approval and launch in the 2009-2010 time frame. He also noted that he anticipates a two-pronged strategy of seeking approval in Eastern Europe and South East Asia while conducting pivotal studies in North America to promote global accelerated adoption of Oral-Lyn upon approval. The high quality dossier includes the evaluation of Oral-lyn in 59 clinical trials including the dosing of 1,500 patients so far. Thus, the Ecuador dossier, where the product has been approved, has potential for use in the registration of Oral-lyn in several international markets without conducting additional clinical trial work. GNBT is using a two-pronged approach for commercialization of Oral-lyn in large markets, such as Southeast Asia and Eastern Europe. The analyst believes GNBT could have Oral-lyn approved in 2-3 jurisdictions in these regions by 2010. The firm reiterated its Market Outperform rating and $6 price target. Shares ended the week at $1.62, up 12 cents, closing at their highest level since July 23rd.
CEL-SCI Corporation (AMEX: CVM), developer of new immune system based treatments for cancer and infectious diseases, last week released a letter to shareholders detailing the past twelve months advances and achievements, and highlighting the continuing developments of its cancer drug Multikine. The company received clearance from the FDA in January to begin Phase III trials, and recent financial agreements have the company in sound financial shape as it moves forward with what could be the development of a blockbuster drug. The FDA has also recently granted Multikine Orphan Drug status, which should further facilitate implementation of the study. Shares ended the week at $0.63, up two cents.
Cytrx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, announced last week that its subsidiary, RXi Pharmaceuticals Corp., has entered an agreement with TriLink Biotechnologies Inc. to exclusively license three RNA interference (RNAi), or RNAi technologies. RNAi has been shown to effectively interfere with the expression of targeted disease-associated genes, and this agreement will allow RXi Pharmaceuticals to expand its research and development of RNAi-based therapeutics for the treatment of human disease. Under terms of the agreement, TriLink will receive upfront and annual licensing payments, as well as royalties of 1 percent or less based on clinical milestones. Cytrx also announced last week the appointment of Mitchell K. Fogelman as Chief Financial Officer, effective immediately, replacing Matthew Natalizio, who plans to pursue other opportunities. Fogelman has more than 30 years of financial and accounting experience, most recently as Senior Vice President-Finance and Administration, Chief Financial Officer and Corporate Secretary of International Aluminum Corporation. Shares ended the week at $3.42, up one penny.
Volume Alert: Shares of Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, traded over 8.4 times average volume last week after the company received another bullish endorsement less that one week after being favorably profiled in Business Week. Kevin Raidy, portfolio manager for hedge fund H4 Capital Management, said last week that the fund has taken a sizable position in the shares of Access Pharmaceuticals, primarily on the potential of ProLindac, Access’ lead platinum-based drug that is currently in Phase II clinical trials for ovarian and colorectal cancer. Mr. Raidy notes that ProLindac appears to be safer and more effective than Sanofi-Aventis’ Elotaxin, a current platinum drug that produces revenues in excess of $2 billion and is close to patent expiration in the U.S., and believes that ProLindac could potentially be included in the blockbuster drug category. Shares ended the week at $4.47, up 12 cents.
Volume Alert & New 52-week High: Shares of Calypte Biomedical Corporation (OTCBB: CBMC), medical diagnostic tests manufacturer for the rapid detection of antibodies to the human immunodeficiency virus (HIV), traded over 8 times average daily volume, and traded at a new 52-week high of $0.20 last week after the company said Thursday that it would host a conference call on Tuesday morning to discuss a significant corporate development. Shares rose to their highest level since July, 2006. Shares ended the week at $0.18, up 5 cents.
Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, reported that Dr. Robert Lanza, the company’s Vice President of Research and Scientific Development, participated in the Luncheon Panel regarding current issues in stem cell therapy, tissue engineering, and bone regeneration, at the First Albany Capital Regenerative Technologies Conference in New York City on Tuesday, September 11, 2007. Interest in Advanced Cell seems to be gaining momentum, with the company recently completing a private placement resulting in gross proceeds of $10 million, no small feat in today’s current economic environment, which will allow the company to accelerate its development programs and fund the planned acquisition of autologous adult stem cell company Mytogen, Inc., and its Myoblast program for the treatment of heart failure. Note that interest could increase in stem cell companies as the presidential election approaches, especially if the Democrats continued to maintain their advantage. Shares ended the week at $0.28, down 2 cents.
IceWEB Inc. (OTCBB: IWEB), a software services provider, last week reported the company has completed enhancements that will now allow clients who have BlackBerry or other smart devices to automatically provision those devices for synchronization on the IceMAIL network. Customers can instantly enable or disable PDA devices at will with no obligation or minimum term of service. It also provides administrators with the security capability of performing a “remote wipe” on any lost or stolen device, ensuring that valuable and/or proprietary business data contained on the lost or stolen PDA does not fall into the wrong hands. Upon receiving a replacement, customers can re-enable their new device and begin synchronizing email, calendars, contacts, and tasks immediately. Shares ended the week at $0.59, down one penny.
Reports on a medical web site last week said that nine patients have been diagnosed with leishmaniasis in north Texas, way out of the parasite’s normal range, according to Kent Aftergut, M.D., a clinical instructor of dermatology at the University of Texas Southwestern Medical Center and in private practice at Methodist Charlton Medical Center here. Leishmaniasis is common in South America, Mexico and in the Middle East and many cases have been seen in troops returning from Iraq and Afghanistan. It has also been reported in south Texas. But none of the nine patients here had traveled to areas where the parasite is endemic, leading Dr. Aftergut and colleagues to conclude they had acquired the disease locally. If leishmaniasis comes to the United States in a significant way, it could increase interest in VioQuest Pharmaceuticals, Inc. (OTCBB: VQPH), a New Jersey-based biopharmaceutical company, which in partnership with the U.S. Army, has been granted orphan drug designation from the FDA for the active moiety of VQD-001, sodium stibogluconate, a treatment for the cutaneous form of leishmaniasis. VioQuest has executed a Cooperative Research and Development Agreement (CRADA) with the U.S. Army relating to VQD-001’s development and regulatory filing process for a New Drug Application (NDA) for the treatment of cutaneous leishmaniasis. VioQuest plans to submit an NDA to the FDA for VQD-001 this year based on trial data from clinical studies conducted by the U.S. Army at the Walter Reed Army Medical Center. Subject to FDA approval, VioQuest will market and commercialize VQD-001 for the treatment of cutaneous leishmaniasis in the U.S. Leishmaniasis currently threatens 350 million people in 88 countries around the world. Shares ended the week at $0.25, unchanged.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, last week announced results of the $25,000 beta version of its contest site. The company reported that a 69-year old grandmother from Bay City, TX beat approximately 12,500 registered users and active players to walk away with the $5,000 top prize for Best Overall Portfolios, by turning $100,000 into $164,073 during the June tournament. Recently Neutron reported significant participation and site-visitor numbers, and said that overall performance and integrity of its trade execution platform has not suffered the irregularities experienced by other simulation environments. Registrations for its current contest, which began August 1, were expected to significantly exceed the number of registrations for the June/July contest. Shares ended the week at $0.50, down 13 cents.
Volume Alert: Shares of ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, traded over 20 times average volume last week, as the stock bounced back from recent declines that had shaved more than 40% off of the company’s valuation. Shares gained 20.5% last week to close at $0.82, up 22 cents.
On the Wires: Halcyon Jets Holdings, Inc. (OTCBB: HJHO), a luxury charter aircraft broker, last week introduced its board of directors, including award-nominated actor/writer/director/producer Spike Lee, and Mitchell Blatt, the president and chief operating officer of Coinmach Service Corp.