05/06/2007
VOLUME 298
Companies featured in the current edition of the newsletter: ADSX, ARGA, AVGOE, BSGC, CHIP, CVM, CYTR, EEEI, EMIS, ENZ, GNBT, GSHF, HSOA, HYTM, IRBO, LANW, LFBG, MBND, MLTC, NTRN, PBIO, PCLI, RTK, SFP, USAT, VOII, VQPH
It was yet another good week for the stock market. With the focus moving away from earnings and back towards the economy, data released last week did not disappoint investors. The Dow closed the week up 143 points, increasing annual gain to 6.4%. The Nasdaq rose 14 points and is now up 6.4% this year as well. The S&P increased 11 points, raising year-to-date gains to 6.1%. The Russell added 3 points lifting its annual gain to 5.7%.
With over 80% of the S&P companies reporting results already, the average Q1 profit growth has been 12%, far exceeding analysts’ estimates and supporting the much talked about soft-landing. Corporate results continue to be supported by economic trends. A solid report on U.S. factory orders showed a 3.1% gain in March. News of wages rising a mere 0.6% for the first quarter, combined with a report showing that hourly earnings in April rose a lower-than-expected 0.2% while unemployment at 4.5% remained in-line, suggests that inflationary pressures have moderated. The price of oil closed at $61.93a barrel, lower for the week, suggesting that supplies are sufficient for the summer driving season.
What should investors look for during the week? Cisco Systems (NASDAQ: CSCO) reports results Tuesday after the close. Before the opening on Wednesday, Toll Brothers (NYSE: TOL) announces earnings followed by Walt Disney (NYSE: DIS) later that evening. Alcatel-Lucent (NYSE: LU) releases results Friday morning before the opening. Texas Instruments (NYSE: TXN) meets with analysts on Tuesday and Wednesday.
Notable conferences happening this week include the Bank of America three-day BASic/Industrials Conference in New York beginning Tuesday. Bear, Stearns hosts its two-day Global Transportation Conference in New York starting Tuesday. Also beginning Tuesday is the two-day Goldman Sachs Consumer Products Symposium in New York and the three-day Robert W. Baird & Company Growth Stock Conference in Chicago. Piper Jaffray kicks off its two-day Semiconductor & Communications Conference in New York on Tuesday. The two-day UBS Global Generic and Specialty Pharmaceuticals Conference also begins on Tuesday in New York. CytRx Corporation (NASDAQ: CYTR) is scheduled to present on Tuesday at 1:30 p.m.
The economic calendar will once again be busy with all eyes being focused on the FOMC policy announcement on Wednesday afternoon. Prior to that release, March Consumer Credit will be reported Monday afternoon and March Wholesale Inventories will be released Tuesday morning after the bell. Weekly Crude Inventories will be reported on Wednesday morning. Thursday before the opening April Import/Export Prices will be released along with Weekly Jobless Claims and the March Trade Balance. The April Treasury Budget will be released later that day. Prior to the bell on Friday, the April Producer Price Index and April Retail Sales will be reported with March Business Inventories being reported shortly after the opening bell.
Earnings Preview: Home Solutions of America (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, will report first quarter results for the period ended March 31, 2007 on Wednesday after the market closes. Based upon the relatively easy comparisons (company earned 6 cents from continuing operations in Q1 2006), HSOA should be well positioned to report a solid report. According to the company’s Q1 outlook delivered in mid-March, it expects Q1 revenue of $35-40 million and net income of $0.09 to $0.11 per diluted share (the lone analyst covering the company has $38.6 million/$0.10). Of course, investors will also focus on what the company says about the future (Q2 analyst estimate is $56.5 million/$0.16) and its backlog for the balance of the year. Despite the company announcing backlog as of mid-March of $108 million and $28.7 million in additional work reported subsequently (exclusive of the Interior Products Manufacturing and Services Divisionwhich generated $39 million last year), the stock has remained range-bound since the company warned it would miss Q4 ’06 numbers in early March. In addition to revenue and EPS metrics, investors will also focus on the note the company has with Fireline (repayment would dramatically improve its balance sheet) and the company’s receivables, particularly those with FIGA totaling approximately $30 million. A resolution of that note could serve as a catalyst for the stock. With the stock trading for just 11 times trailing 12-month earnings, its lowest level in more than four years, sentiment weak, short interest close to its highest level (33% of the float) and hurricane season approaching, a positive report could send shares significantly higher. Key levels of interest include $4.93, the stock’s 50-day moving average and $5.58, its 200-day moving average, if shares were to rally significantly. Note that over the weekend, tornados were reported in Kansas, South Dakota and Oklahoma which could create incremental business for the company. Shares ended the week at $4.69, down 22 cents.
Earnings Preview: Hythiam, Inc. (NASDAQ: HYTM), a provider of healthcare services, will release financial results for the first quarter ended March 31, 2007 on Wednesday after the market closes. Investors will be looking for signs that the company will meet its 2007 full-year revenue forecast of $14 million for PROMETA, although estimates for Q1 revenue are modest ($1.2 million). Note that the company will report consolidated results, including its acquisition of CompCare, for the first time (one analyst estimates revenue including CompCare will be $6.7 million). Investors will look for commentary pertaining to adoption rates stemming from the multiple pilot programs happening in various states as well as a status report pertaining to scientific data on the PROMETA protocols for alcoholism from a study at Cedars-Sinai should be monitored. Last week, the company announced that Hawaii’s largest provider of health care coverage, Hawaii Medical Service Association (HMSA), will evaluate the PROMETA protocols for use among its membership. HMSA is an independent licensee of Blue Cross Blue Shield that cares for over 700,000 patients. Treatments using PROMETA protocols for alcoholism, stimulants, and alcoholism and stimulants are expected to begin this quarter for up to 50 patients. Results will be measured after 90 days after which initial reimbursement may begin. Hythiam said it is currently in discussion with 18 other commercial third-party payers that represent a substantial market opportunity. From just HMSA alone, Hythiam could generate revenue of up to $14 million if the company is successful on achieving a penetration rate of just 0.2%, representing the most severe cases. Furthermore, the company reported that the Australian Intellectual Property government agency – IP Australia, issued Hythiam patent no. 2002226427 for the use of a composition of matter for the treatment of alcoholism. The company has already been issued an Australian patent for its cocaine dependence treatment. This patent further strengthens Hythiam’s intellectual portfolio, with its PROMETA protocols receiving notifications of allowance or grants of patents from over 25 countries including the U.S. and 19 European nations, and having already received patents in Europe, Russia, Ukraine, Singapore, New Zealand, and South Africa. Shares ended the week at $7.20, up 29 cents.
Enzo Biochem, Inc. (NYSE:ENZ), a company engaged in the research, development and manufacture of innovative health care products, reported that its Enzo Life Sciences subsidiary, and Abbott Molecular have entered into a cross-licensing agreement covering the supply of certain of Enzo’s products to Abbott Molecular for use in their FISH product line. The FISH technology is used to help diagnose and/or select therapy for certain cancers, as well as to help diagnose genetic disorders. Notably, the agreement does not cover any of the IP surrounding patents granted to Enzo after January 1, 2006, suggesting that this deal could possibly represent some form of settlement surrounding contested intellectual property benefitting Enzo. The cross-licensing agreement includes Enzo patents directed towards its proprietary labeling and detection systems as they relate to Abbott’s FISH platform. The license also provides Enzo with limited access to Abbott’s FISH technology patents, CGH patents and various patents which relate to particular chromosome targets. Enzo now becomes the only distributor of Abbott’s FISH technology and should help ENZ expand its portfolio of products, one of the ways it believes it will increase diagnostic sales. Shares ended the week at $17.31, down 12 cents.
Volume Alert: Shares of CEL-SCI Corporation (AMEX: CVM), a developer of new immune system based treatments for cancer and infectious diseases, traded roughly 5.4 times average daily volume, after it announced last week that CEL-1000 alone increased the immune response against hepatitis B antigen, and that the combination of CEL-1000 with MAS-1, a proprietary water-in-oil adjuvant delivery system owned by Mercia Pharma, induced highly significant increases in specific anti-HBV (hepatitis B virus) antibodies. CEL-1000, a modified version of a human immune-based protein known to bind to both human and mouse immune cells, is derived from the beta chain of human MHC-II, and has previously been shown to be protective against viruses and unrelated diseases, specifically herpes simplex virus, viral encephalitis and malaria. These findings show that CEL-1000 may be very useful in enhancing immune responses by individuals who have a poor immune response to vaccinations. Hepatitis B infections result in 500,000-1.2 million deaths annually worldwide, thus emphasizing the need for more effective therapies and treatments. Shares ended the week at $0.90, up 1 penny.
Earnings Preview: Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, will issue its 2007 first quarter financial results for the period ended March 31, 2007, on Tuesday, May 8, 2007, and will hold a conference call to discuss the results at 9:00 a.m. EDT. The company’s majority owned subsidiary, VeriChip Corporation (NASDAQ: CHIP), reported financial results for its first quarter ended March 31, 2007 last week. Revenue grew 12.1% from last year with a net losses of ($3.7) million, as a result of increased marketing expenses surrounding the VeriMed network. As a result of these activities, the number of hospitals enrolled in the VeriMed network grew 31.4% to 515 and CHIP posted a 14% increase in the number of infant protection systems sold by the company. VeriChip also partnered with Alzheimer’s Community Care during the quarter to conduct a two-year, 200 patient study of the effectiveness of the VeriMed Patient Identification System in safeguarding Alzheimer’s patients and their caregivers. Shares of ADSX ended the week at $1.38, down 2 cents, while CHIP rose 4 cents.
Avicena Group, Inc. (OTCBB: AVGOE), a biotechnology company focused on diseases of the central nervous system, said last week that it had filed a patent application to cover potential treatments for Huntington’s disease, a fatal neurodegenerative disease. This composition of matter patent aims to extend Avicena’s intellectual property portfolio for its current and future drug candidates for the treatment of Huntington’s disease by broadly covering pharmaceutical formulations based on creatine derivatives alone or in combination with an anti-inflammatory compound. The strengthening of Avicena’s IP portfolio is crucial, especially as HD-02, the company’s lead drug candidate approaches late stage development and continues to demonstrate significant potential for slowing the rate of progression in Huntington’s disease. Shares ended the week at $5.60, up 9 cents.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, reported last week that it had contributed $15.0 million, net of expenses reimbursed to CytRx, to its majority-owned subsidiary RXi Pharmaceuticals Corporation (RXi), and increased its ownership in RXi to 89.4%. RXi is obliged under its license and other agreements with the University of Massachusetts Medical School (UMMS), to pay UMMS $275,000 and issue shares to UMMS of RXi common stock having a value of $2.4 million. CytRx has also agreed with UMMS and RXi’s other stockholders to reduce its ownership of RXi to less than a majority stake as soon as possible, and intends to issue a dividend of a sufficient number of its shares of RXi to CytRx stockholders so that, after the dividend, CytRx no longer owns a majority of RXi. RXi intends to use the remaining proceeds of the contribution for its working capital and general corporate purposes. Additionally, CytRx announced it will present at the Deutsche Bank 32nd Annual Health Care Conference on Wednesday, May 2, at The Mayflower Hotel in Washington, D.C. Shares ended the week at $4.28, up 5 cents in volatile trading.
Electro Energy, Inc. (NASDAQ: EEEI), a developer and manufacturer of high-powered, rechargeable bipolar nickel-metal hydride batteries, was initiated as a “Buy” with a twelve-month price target of $1.50 – $2.00 by Torc Investments and Research LLC, a NYSE and NASD member firm. The growth prospects presented by the company’s transitioning to commercialization from research and development represents a significant opportunity as the company’s patented bipolar battery chemistries target a number of large markets including the U.S. military, automobile and power-tools markets. As a result of its strong industry contacts with various departments of the U.S. military, Electro Energy has the opportunity to become the only domestic supplier of the roughly 10 million lithium-ion batteries that are purchased each year by the Army for use in communications equipment. Initial production is anticipated to begin by the fourth quarter of this year where if successful, the market opportunity is significant for the company and could generate in excess of $30 million in sales each year if the entire order is awarded to the company. Shares ended the week at $1.20, up 2 cents.
Emisphere Technologies, Inc. (NASDAQ: EMIS), a biopharmaceutical company pioneering the oral delivery of otherwise injectable drugs, reported financial results for the first quarter ended March 31, 2007 last week. Sales rose 64.7% to $2.8 million from last year as a result of the commencement of the Phase III testing on Oral Salmon Calcitonin by Novartis. Net loss decreased to $3.9 million for the quarter, compared to a net loss of $26.8 million, mainly attributable a one-time cash charge last year and a change in the fair value of the derivatives that resulted in a $3.5 million gain. Highlights from last quarter include results from studies conducted on oral formulations of GLP-1 and PYY that were proven statistically significant showing Emisphere’s eligen technology having the ability to orally deliver those hormones. With regard to oral heparin, Emisphere met with the FDA to determine a registration pathway for oral heparin including the design for a phase 3 study. In addition to strengthening its product portfolio, the company has strengthened its management team with the recent addition of Michael Novinski as the Company’s President and CEO. Shares ended the week at $3.42, up 4 cents.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), reported last week that the first patients have been treated in a Phase II clinical trial of its novel immunotherapeutic vaccine AE37 being developed by Generex’s wholly owned Antigen Express subsidiary. The United States Military Cancer Institute’s Clinical Trials Group is conducting this trial with the goal of attaining at least a 50% reduction in the rate of relapse in patients treated with AE37. The study is randomized and will compare patients treated with AE37 plus the adjuvant GM-CSF versus GM-CSF alone. Management is upbeat about the potential of this product as Phase I trials demonstrated strong immunotherapeutic results. Shares ended the week at $1.54, down 8 cents.
Volume Alert: Shares of Pressure BioSciences Inc. (NASDAQ: PBIO), a life sciences company engaged in the development and commercialization of pressure cycling technology, traded over 7.2 times average daily volume last week, after the company announced that it will unveil a patent-pending, lightweight, compressed air driven pressure cycling instrument (Barocycler NEP2320) at the 2007 BIO International Convention, being held May 6-9 in Boston. Originally designed to be a demonstration unit for the larger NEP3229, the company’s existing Barocycler instrument, the NEP2320 system weighs approximately 75 pounds, compared to the NEP3229’s 350 pounds. It also processes one sample at a time, verses three for the NEP3229. With over 200,000 scientists in the world that could benefit from the PCT Sample Preparation System, there should be room in genomics and proteomics research laboratories for a Barocycler instrument with a lower sample throughput and a lower price, but with many of the technical capabilities of the higher models, and this new system should provide another revenue stream within Pressure BioSciences’ product line. Shares ended the week at $5.20, up 20 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, reported last week that it had prepaid all of the outstanding $3.65 million principal amount of Convertible Senior Notes, further strengthening its balance sheet. In the last several months, the company has prepaid over $9.5 million in convertible debt. As of May 1, 2007 the company had no Convertible Senior Notes outstanding, approximately $10 million cash on hand, and 11.5 million shares outstanding. The company also announced a one-year agreement to sell The Kroger Co.10,000 VM2IQ VendingMisers for use in cold drink vending machines located at Kroger stores, for approximately $710,000. Shares ended the week at $11.00, down 80 cents.
Earnings Preview: Alternative energy company Rentech, Inc. (AMEX: RTK), will report financial results for the first quarter ended March 31, 2007 on Thursday May 10, 2007. As a result of the company’s acquisition of its east Dubuque Plant that was purchased in April 2006, sales from nitrogen products manufacturing totaled $35.3 million for the fiscal 2007 first quarter, equating to a 104% increase in sales tonnage by the plant versus the fourth quarter in 2005. Investors will likely also focus on the company’s balance sheet, which was significantly strengthened as a result of the recent completion of a $55 million registered direct offering of common stock. Most importantly, the company will provide an update on key developments at its Product Development Unit in Commerce City, Colorado as well as the conversion of the REMC facility in East Dubuque. Shares ended the week at $2.42, down 2 cents.
TitleMatch Entertainment Group, a subsidiary of Protocall Technologies Incorporated (OTCBB: PCLI), a leading provider of DVD on-demand systems for retailers and etailers, last week announced a distribution agreement for animation content from Tokyo-based TMS Entertainment Ltd., a subsidiary of SEGA SAMMY Holdings, Inc. TitleMatch will receive exclusive U.S. DVD distribution rights to a series called “TMS Presents: Anime Classics”. Estimates of box-office receipts and DVD sales from anime films are expected to be over $5 billion next year, and this agreement could provide substantial revenue to TitleMatch. TMS recently disclosed plans to promote the “TMS Presents” volumes beginning in June 2007 through TV broadcasts of the episodes by ImaginAsian Entertainment, owner and operator of iaTV, and are expected to include promotions for consumers who wish to purchase the DVD volumes from TitleMatch. Shares ended the week at $0.12, up 2 cents.
VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, traded over 3 times average volume after the company updated investors with its 2007 outlook last week. The company expects to generate 2007 full-year revenue in excess of $30 million, gross profit in excess of $10 million and EBITDA exceeding $1 million. New customer additions combined with increased usage of the company’s VoiceOne network by existing users are contributing factors for such rapid growth. Management further commented that second quarter revenue will be in excess of $4 million with significant increases in revenue during the second half of the year. VOII expects to reach operating profitability during the third quarter. Shares ended unchanged for the week to close at $0.16.
BigString Corporation (OTCBB: BSGC), a provider of user-controllable email services, last week announced it has entered into a $1.6 million financing agreement with several parties, with the proceeds to be used to fund ongoing operations, as well as advancement of the company’s technology and corporate developments. The initial installment, in the amount of $800,000 closed on April 30, 2007. Shares ended the week at $0.35, down 2 cents.
GreenShift Corporation (OTCBB: GSHF), a company devoted to facilitating the efficient use of natural resources, announced last week that its portfolio company, U.S.-based Sterling Planet, Inc., had entered into an agreement with PepsiCo to purchase renewable energy certificates to offset 100% of the purchased electricity used by all PepsiCo US Facilities. This purchase is the largest-ever of Sterling Planet RECs and puts PepsiCo at the top of the EPA’s quarterly list of the 25 greenest energy users. Sterling Planet will source the RECs to model PepsiCo’s purchased electricity use geographically. PepsiCo used over 1.1 billion kilowatt-hours last year. Additionally, Sterling Planet said it teamed with Germany-based 3C Group to offer multinational businesses solutions to both mandatory and voluntary corporate-wide greenhouse gas reduction goals and make their business operations, products and services climate neutral. Sterling Planet is the leading U.S. retail provider of solar, wind and other clean, renewable energy through direct sales and electric utility partnerships, with sales creating environmental benefits comparable taking more than 1 billion cars off U.S. roads for a year. GSHF also said last week the company is continuing the re-evaluation of the structure of the GreenShift – GS CleanTech – GS Carbon reorganization, and has determined that the GS Carbon component of the previously planned merger will be cancelled. Options for GS Carbon include the transfer of GS Carbon’s current investments, intellectual properties and R&D operating subsidiaries to GS CleanTech followed by the reverse acquisition by GS Carbon of a qualified mature business from outside of GreenShift, a simpler and more cost-effective structure compared with merging GS Carbon into GreenShift. Initially, shareholders of GS Carbon common stock were to receive 1 share of GreenShift common stock for each 3 shares owned in GS Carbon. Shares ended the week at $0.04, down 1 penny.
Language Access Network (OTC: LANW), a leader in video interpretation services, said last week that Children’s Medical Center Dallas, has installed and begun usage of the company’s MARTTI units. The Medical Center is one of the largest and most well respected pediatric healthcare providers in the nation, having assisted more than 340,000 patients, and had 110,000 patient encounters for interpretation. Children’s is also the primary pediatric teaching facility for The University of Texas Southwestern Medical Center. The MARTTI system will be available to Children’s Medical Center 24 hours a day, 365 days a year, and will be billed on a per minute usage fee. The company estimates revenues of approximately $12-$35 per usage. Shares soared 100% for the week to close at $1.80, up 90 cents.
Multiband Corporation (NASDAQ: MBND), a leading provider of video, data, and voice systems and services to multiple dwelling units, last week entered an agreement with Ad Systems Inc., a wholly-owned subsidiary of Synergetic Technologies Inc., to begin installation of Ad Systems’ proprietary digital ad insertion system into the systems for the 106,000 U.S. subscribers that Multiband currently provides cable programming to, allowing the company to develop advertising revenue from new sources. Installation is expected to begin early this month. Shares ended the week at $0.43, down 4 cents.
Melt, Inc. (OTCBB: MLTC), owner, operator and franchisor of quick service restaurants operating under the name “Melt Gelato & Crepe Cafe”, announced last week the opening of a franchised owned and operated store in the Connecticut Post Mall in Milford, CT. This is the first “Melt Gelato & Crepe Cafe” to open in the Northeastern United States. Melt Inc. expects to be operating over 25 units in nine states by the end of 2007, including units in New York, Massachusetts, Illinois and Ohio. After having served over one million customers in 2006, shareholders of Melt, Inc. can expect to see substantial revenue growth as the company continues its aggressive 2007 store roll-out schedule. Shares ended the week at $0.50, down 1 cent.
Salton, Inc. (NYSE: SFP), a leading designer, marketer and distributor of branded, high-quality small appliances, home decor and personal care products, said last week that CEO Leonhard Dreimann had resigned and that William Lutz will become interim CEO while continuing to serve as chief financial officer. Dreimann will continue to serve as a director and will also help with the company’s previously announced merger agreement with Applica Inc., which is expected to close in June or July. Dreimann’s resignation represents the third senior executive to depart Salton in the last 18 months. Shares ended the week at $2.01, down 23 cents.
On the Wires: IR BioSciences Holdings, Inc. (OTC Bulletin Board: IRBO) appointed Frederick “Skip” M. Burkle, Jr. to its Bioterrorism/Pandemic Influenza Advisory Board. Dr. Burkle is a significant addition to the company as he is internationally recognized as an expert in infectious diseases in developing countries, management of humanitarian emergencies and disaster medicine, and for his work as a physician, professor and author. VioQuest Pharmaceuticals Inc. (OTCBB: VQPH) will present at the BIO 2007 Business Forum at the Boston Convention and Exhibition Center in Boston, MA on Tuesday, May 8th, and also at the Acumen BioFin 4th Annual Global Healthcare Conference on Monday, May 14th at the Le Meridien Beach Plaza Hotel in Monte Carlo. Applied Digital (NASDAQ: ADSX) will present at the AeA Micro Cap Financial Conference in Monterey, CA on Tuesday, May 8th at 1:15 p.m. PT. Auriga Laboratories, Inc. (OTCBB: ARGA) announced that it has appointed Steven D. Gallopo as its Vice President of Business Development. Gallopo brings to Auriga Laboratories18 years of experience in the pharmaceutical industry, and his focus on dermatology will complement Auriga’s expected launch of its newly-branded prescription products that target the lucrative $5 billion dermatology market by year end. Neutron Enterprises, Inc. (OTCBB: NTRN) said that Ciaran Griffin has stepped down as Chief Financial Officer, effective April 30, 2007. Mitchell Rosen has been appointed CFO in addition to his current duties as Executive Vice President.
