Companies featured in the current edition of the newsletter: ACTC, BOKO, CHIP, CKGT, ETGF, GNBT, GSPG, HYTM, ICLK, ITUI, PLKH, RVEP, SEE, SWVC, VYTR
There was much evidence last week to support the contention that Wall Street seemed like a casino last week, as financial and energy stocks gyrated wildly, sometimes moving more than 25% in a single day. When the dust settled, it was a good week for the market that was governed by the drop in oil prices, the rally in the financial stocks, and better-than-feared earnings news. The Dow Jones Industrial Average gained 396 points or 3.6%, cutting its year to date loss to 13.3%. The Nasdaq rose by 44 points or 2%, reducing its year to date loss to 13.9%. The S&P 500 gained 21 points or 1.7%, bringing its year to date loss to 14.1%. The Russell 2000 finished the week up 18 points or 2.7%, giving it a year to date loss of 9.5%.
The week certainly began on an unsettling note, as the financial sector plummeted 6% Monday, marking its biggest loss in more than eight years. That decline was noteworthy for a couple of reasons. It occurred amid concerns that IndyMac’s failure was a harbinger of many more bank failures. Secondly, it came despite a plan announced by Treasury Secretary Paulson that essentially turned an implicit guarantee of the debt of government sponsored enterprises Fannie Mae and Freddie Mac into an explicit one. In the midst of all of this, crude prices were cracking. After touching $146.37 at their high Monday, crude prices ended Tuesday’s session at $138.74. The slide, though, didn’t end there. The selling persisted for the remainder of the week, with prices settling at $134.60 on Wednesday, $129.29 on Thursday and $128.96 on Friday. The latter price marked an 11% decline from the prior week’s close. Worries about demand destruction, an easing of geopolitical tensions, bearish oil and natural gas inventory reports, and an asset allocation trade all played a role in driving prices lower.
There was no mistaking where many accounts were shifting their oil profits. The financial sector surged 12.3% Wednesday alone, its largest single day percentage gain ever. Even more remarkable was that the sector logged a 21% gain over the final three sessions of the week. Wells Fargo provided the spark that fueled the surge. On Wednesday it delivered better-than-expected earnings results, which were accompanied by an announcement that the company’s board authorized a 10% increase in the annual dividend. That news, combined with the impending restrictions on naked short selling, unleashed a massive wave of buying interest in financials that was compounded by short-covering activity. That helped underpin Merrill Lynch Friday after it put up some dismal numbers for its second quarter. Despite posting a much bigger-than-expected loss of $4.7 billion, shares of Merrill actually eked out a gain on Friday. Ironically, it was Citigroup that helped save Merrill’s day. Citigroup for its part reported a second quarter loss of only $2.5 billion, which was considerably lower than analysts expected. This understanding kept a bid in the financial sector, which jumped 1.1% in Friday’s trade.
What should investors look for this week? It will be another busy week for earnings. Before the opening on Monday, Bank of America (NYSE: BAC), Merck (NYSE: MRK), and Schering-Plough (NYSE: SGP) will release numbers. Later that day, Apple (NASDAQ: AAPL), Boston Scientific (NYSE: BSX) and Texas Instruments (NYSE: TXN) will report after the market closes. Prior to the opening on Tuesday, Baker Hughes (NYSE: BHI), Caterpillar (NYSE: CAT), DuPont (NYSE: DD), Halliburton (NYSE: HAL), UAL Corp. (NASDAQ: UAUA), UnitedHealth (NYSE: UNH), UPS (NYSE: UPS), US Airways (NYSE: LCC), and Wachovia (NYSE: WB) announce results, with Yahoo! (NASDAQ: YHOO) and Washington Mutual (NYSE: WM) reporting earnings after the close. Wednesday morning, AT&T (NYSE: T), Boeing (NYSE: BA), General Dynamics (NYSE: GD), GlaxoSmithKline (NYSE: GSK), McDonald’s (NYSE: MCD), PepsiCo (NYSE: PEP), Pfizer (NYSE: PFE), Philip Morris International (NYSE: PM), Travelers (NYSE: TRV), WellPoint (NYSE: WLP), Whirlpool (NYSE: WHR), and Wyeth (NYSE: WYE) will report their earnings. Anheuser-Busch (NYSE: BUD) will release its financials during trading hours. Wednesday after the market closes Allstate (NYSE: ALL), Amazon.com (NASDAQ: AMZN), and McKesson (NYSE: MCK) will report their results. Thursday will be another busy day with reports from 3M (NYSE: MMM), AmerisourceBergen (NYSE: ABC), Bristol-Myers (NYSE: BMY), Bunge (NYSE: BG), Daimler AG (NYSE: DAI), Dow Chemical (NYSE: DOW), EnCana (NYSE: ECA), Ford Motor (NYSE: F), Medco Health Solutions (NYSE: MHS), Occidental Petro (NYSE: OXY), Petro-Canada (NYSE: PCZ), Raytheon (NYSE: RTN), Siemens AG (NYSE: SI) and Ingram Micro (NYSE: IM). Friday will feature releases from Black & Decker (NYSE: BDK) and Fortune Brands (NYSE: FO).
On the economic front, June Leading Indicators will be released Monday at 10:00 a.m. Weekly Crude Inventories will be reported on Wednesday at 10:35 a.m., with the Fed’s Beige Book being released later on in the afternoon. Prior to the opening on Thursday, Weekly Jobless Claims will be released, followed by June Existing Home Sales being announced at 10:00 a.m. Friday morning before the bell, June Durable Orders will be released. The Revised July Michigan Sentiment Index and June New Home Sales will be reported at 10:00 a.m.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) received a purchase order for $300,000 through its Generex MENA office from a distributor in Saudi Arabia. The Middle East represents a significant opportunity for the company in the over-the-counter product arena in addition to the company’s core diabetes and metabolic disease focus. In addition to serving the Middle East and North African countries with marketing and distribution of company owned and developed products, Generex MENA also is focused on acquiring other complimentary over-the-counter products that meet the needs of the local market. The stock finished the week unchanged at $0.79.
interCLICK, Inc. (OTCBB: ICLK), the fastest growing advertising network in the US during 2007, announced that it generated the tenth most unique visitors among all online advertising networks, according to comScore Media Metrix, for the month of June 2008. interCLICK, through its highly targeted behavioral ad network, reached nearly 119 million monthly unique visitors during the month, which represents 62.6% of all users online. interCLICK has continued its spectacular growth from calendar year 2007, through Q1 2008 and now through Q2 2008. The company currently ranks as the fastest growing advertising network from June 2007 to June 2008, showing 121% growth in that time period. Shares fell by $0.04, to finish the week at $2.96.
Advanced Cell Technology, Inc. (OTC: ACTC), a biotechnology company that engages in the development and commercialization of human embryonic and adult stem cell technology in the field of regenerative medicine, agreed to provide an exclusive license to use its “ACTCellerate” embryonic stem cell technology and a bank of over 140 diverse progenitor cell lines derived using that technology to a subsidiary of BioTime, Inc. ACTCellerate is a recently discovered technology that allows the rapid isolation of novel highly purified embryonic progenitor cells. Embryonic progenitors are cells intermediate between embryonic stem cells and fully differentiated cells. ACTC will receive a license fee and an 8% royalty on sales of products, services, and processes that utilize the licensed technology. Once a total of $1 million of royalties has been paid, no further royalties will be due. ACT has an option to reacquire rights to use the ACTCellerate technology for the development of certain types of stem cells for human therapeutic use in fields related to its core business. Shares ended the week down 2 cents, closing at $0.02.
Boo Koo Holdings, Inc. (OTCBB: BOKO) an innovative beverage company, which recently disclosed plans to changes its name to Performing Brands, Inc., announced that its revolutionary new beverage BooKoo Burner+ is currently being sold in more than 1,000 convenience stores throughout Nashville, Tennessee; Mobile, Alabama; Panama City, Florida and other surrounding markets, as well as in Dallas, Texas less than one month after its launch. BooKoo Burner+ is a major innovation in the energy drink category as it is among the first to add protein with the typical energy drink ingredients such as taurine, ginseng, caffeine, B vitamins. It is a non-carbonated energy drink with 20 grams of whey protein. This new drink contains no sugar and only two carbohydrates. It provides the desired energy with the necessary protein. The stock finished the week unchanged at $0.50.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality Voice-over-Internet Protocol products and services, announced that it has entered into a distribution agreement with Green Sky Solutions, Inc., a leading relationship management and retail product sales organization, under which Green Sky will distribute i2Telecom’s award-winning MyGlobalTalk offering. MyGlobalTalk, which recently won Internet Telephony Magazine’s “Product of the Year 2007” places Internet telephony in the hands of every cell phone user, independent of wireless carrier technology, handset manufacturer or the type of wireless carrier voice/data plan involved. The stock rose by a penny for the week, to close at $0.12.
VeriChip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, announced it has completed the sale of its wholly-owned Canadian subsidiary, Xmark Corporation, to Stanley Canada Corporation, a wholly-owned subsidiary of The Stanley Works for $47.9 million in cash, which consists of the $45 million purchase price plus a balance sheet adjustment of $2.9 million. Under the terms of the Stock Purchase Agreement the company will use the proceeds of the sale of Xmark to retire all of the company’s outstanding debt. The company expects to realize net proceeds, after retiring its outstanding debt, paying transaction related costs, and other contractual commitments, of approximately $24.8 million. The company also announced that it has completed its previously announced purchase of Sonitrol Corporation from an ownership group comprised of Carlyle Venture Partners, Wachovia Capital Partners and Spire Capital Partners as well as selected members of Sonitrol management for $276 million cash. The stock rose by $0.18 for the week, to finish at $1.68.
China Kangtai Cactus Biotech Inc. (OTCBB: CKGT), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based consumer products in China, announced that it has launched two innovative products, Cactus Cattle Feed and Cactus Fish Feed. It is expected that the company will generate approximately $2.1 million in annual sales from the two products, commencing during the current quarter. The products provide cattle with the nutrition from cactus and have characteristics designed to prevent against sepsis, inflammatory illnesses and to boost immunity. The products, which the company has been developing since 2003, have been included in the National Spark Program of China in May 2004 and obtained the certification of the Chinese Scientific and Technological Achievements. The stock rose by $0.03 for the week, to close at $0.69.
Element 21 Golf Company (OTCBB: ETGF), the leading manufacturer of advanced Scandium Alloy golf and fishing equipment, announced the launch of innovative new fishing products at The International Convention of Allied Sportfishing Trades, the world’s largest sportfishing trade show. The company launched new freshwater and saltwater fishing rods, tackle management products and apparel. The company also announced that it has won best product award at the convention. This is the second year that Element 21 has won best product awards at the iCAST. The convention is the cornerstone of the sportfishing industry, helping to drive sportfishing companies’ product sales year round. From buyers to media to exhibitors, ICAST annually attracts 7,000 members of the international sportfishing community. Shares fell by $0.11, to finish the week at $1.07.
ProLink Holdings Corp. (OTCBB: PLKH) and the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced that it has partnered with GPS Strategies of Alberta, Canada to install ProLink Solutions GPS at three of Calgary’s leading golf courses. The company also announced that Swope Memorial Golf Course in Kansas City, Mo. now features the ProLink Solutions GPS system. The stock fell by a penny for the week, to close at $0.43.
SeaMiles Limited (TSX Venture: SEE), North America’s premier cruise loyalty provider, announced that SeaMiles, LLC, its Florida subsidiary has joined forces with the merchants of Ketchikan to offer cruisers a chance to Earn Faster and Redeem Easier than ever before on Any Cruise Line by offering the SeaMiles Visa Rewards Card as the preferred card of the merchants of Ketchikan. The partnership between SeaMiles and the Ketchikan merchants is an ideal pairing with over 900,000 cruise enthusiasts visiting Ketchikan, Alaska annually. These cruisers will be given the unique opportunity of applying for the SeaMiles Visa Rewards Card and being entered to win a Caribbean Cruise for two. Shares rose by $0.25, to finish the week at $2.85.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital, announced that Sackets Harbor Brewing Company’s award winning 1812 Amber Ale was one of the top draughts poured at the sixth annual Empire State Brewing and Music Festival. The Empire State Brewing and Music Festival saw a record turnout for the beer festivities and continued to enjoy strong turnout throughout the music portion of the three-day festival. In addition to 1812 Amber Ale, Sackets Harbor Brewing Company featured three other of its hand-crafted ales for sampling at the Festival, including Thousand Island Pale Ale, Harbor Wheat, and Railroad Red beer. The stock traded below $0.01 for the week.
On the Wires: GoldSpring, Inc. (OTCBB: GSPG) reported that it has recommended to its Board of Directors the election of Jonathan D. Jaffrey to serve as an independent director. Jaffrey is the President and a founding partner of Springbanc Philanthropy Advisors, a nationally focused philanthropy consultancy. Mr. Jaffrey most recently served as chief operating officer, chief financial officer, and member of the investment committee for the W.M. Keck Foundation, a $1.4 billion private foundation focusing on science and engineering research, medical research, liberal arts, and community programs in Southern California. Hythiam, Inc. (NASDAQ: HYTM) announced that Richard A. Anderson was appointed as President and Chief Operating Officer, and Christopher S. Hassan was appointed as Chief Strategy Officer.
SPECIAL SITUATIONS:
Vyteris Inc. (OTCBB: VYTR) $0.51
A strong priority for pharmaceutical companies is the development of more efficient, less expensive and more patient friendly methods for drug delivery. Traditionally, many drugs have been available only in injectable or oral format, each of which system has drawbacks. Transdermal delivery of products, that have previously been delivered in an injectable or oral format, opens up new possibilities in terms of lowering costs while increasing efficacy, which could be very significant in improving patient compliance and increased demand, leading to vast market expansion for the products yielding stronger profit potential for drug companies.
Vyteris, Inc., is the maker of the first active drug delivery patch to receive marketing clearance from the U.S. Food and Drug Administration. Vyteris’ proprietary active transdermal drug delivery technology delivers drugs comfortably through skin, non-invasively, and using low-level electrical energy. The active patch technology provides precise control of the rate, dosage and pattern of drug delivery. This combination of precise dose control in a convenient transdermal patch offers many advantages over existing methods of drug administration.
With Vyteris’ active patch system, many of the shortcomings of conventional dosage forms and alternative drug delivery methods can be avoided or minimized. The Vyteris active patch system can deliver drugs directly to the blood stream, avoiding first pass liver metabolism, and reducing stomach and gastrointestinal side effects associated with oral drug administration. For drugs that cannot be taken orally, such as peptides (which traditionally involve painful injections or intravenous infusions), Vyteris’ active patch system provides a very convenient alternative, which may minimize concerns about patient compliance.
Vyteris has already proven the concept of marketability of its Smart Patch through its limited commercialization of its LidoSite patch, which is the first FDA approved active patch. More significantly, Vyteris is working with Ferring Pharmaceuticals, Inc., a billion dollars sales company and a leader in female infertility products based on naturally occurring human peptide hormones, through a licensing and development arrangement, on a product that uses an FDA-approved hormone for ovulation induction based on Vyteris’ active patch technology. This therapy, if successful, may have the potential to revolutionize the standard of care for ovulation induction for the estimated 25 million women worldwide living with fertility problems. Furthermore, the use of an active transdermal patch to deliver peptides with this level of control would constitute a major scientific breakthrough in the biotech and biopharma sectors. Within the next few quarters, Vyteris may be poised to deliver a significant breakthrough in drug delivery — non-injected peptide-based medications, if the Vyteris/Ferring project continues to demonstrate success.
Developments with Ferring are steadily progressing. Ferring has indicated support by its recent loan to Vyteris, which is an advance of a $2.5 million milestone payment which would be earned if Ferring elects to undertake Phase II of the joint project. Phase I clinical testing successfully demonstrated safety and evaluated dosage levels for the fertility project, and Vyteris is progressing well in manufacturing planning for Phase II clinical supplies and poised to meet needs if and when Ferring is ready to initiate Phase II. Under the licensing and development agreement, Vyteris could receive up to another $6.0 million upon the achievement of different milestones, $3.5 million of which would be achieved if Ferring elects to proceed with Phase III. In addition upon FDA approval, Vyteris would receive a transfer price for the manufacturing of the infertility product along with a revenue share percentage based on net sales. Ferring, which reported 2007 sales that exceeded $1 billion, is considered a pioneer in infertility research, and thus represents a strong partner for Vyteris. The early promising results from Phase I indicate potential for future positive developments in the project.
Vyteris reported revenue of $2.8 million in fiscal year 2007 compared to $2.5 million for the comparable period in 2006. Its revenue in 2007 and 2006 was principally comprised of $2.6 million and $2.2 million from the development and marketing agreement with Ferring.
Based on Vyteris’ prior experience with peptide feasibility work and progress-to-date with the Ferring peptide, Vyteris’ new management team launched a program to identify and secure another joint product development program in 2008, to manage a biotech outreach initiative to secure an additional partnership program for 2009, and to franchise LidoSite to a fully integrated pharmaceutical company. Vyteris is targeting pharmaceutical companies with proprietary product candidates and seeks to engage them in a collaboration aimed at extending patent life, improving therapeutic outcomes and/or creating a generic specialty.
Vyteris represents a promising opportunity as its stock, which is at a 52 week low, does not appear to reflect the potential value if the company has further developmental or commercial success. Additionally, the drug delivery sector has been one of the poorest performers this year, so there is ample room for turnaround. However, Vyteris has the distinct advantage of being the first company in the industry to have its transdermal drug delivery technology receive marketing clearance from the U.S. Food and Drug Administration in addition to its strong patent portfolio of 61 US patents and 120 international patents issued and an additional 51 patents filed. This gives it a market free from immediate competition, allowing the company to develop a strong market presence, increase its revenue and collaborations with pharmaceutical companies.
Despite this potential and collaboration with Ferring, the company has a market capitalization of less than $10 million. The company’s valuation is a fraction of other companies in the drug delivery space, many of which lack partners or some of the opportunities on Vyteris’ horizon. If Ferring, which will fund clinical expenses, elects to apply Vyteris’ transdermal drug delivery technology in its clinical activities, or the company demonstrates success in one of its other developmental activities, Vyteris’ stock value could increase significantly from its current level.
