10/07/2007
VOLUME 320
Companies featured in this edition of the newsletter: ACTC, AXMP, CHIP, CLXS, CYTR, DOC, GNBT, HYTM, ITUI, IWEB, NTRN, PBIO, PLKH, SFPI, USAT, VQPH
A strong jobs report gave bulls all the fodder they needed this week as stocks rose into record territory to start the fourth quarter. The Dow rose 170 points for the week, closing 21 points shy of a record close set on Monday, and advancing its yearly gains to 12.8%. The Nasdaq added 78 points for the week, closing at its highest level in over 6 years, and extending its gains for the year to 15.1%. The S&P closed at a new all-time high, adding 30 points for the week, for an annual return of 9.8%. The Russell 2000 gained 39 points for the week, increasing its year-to-date performance to 7.2%, and is now less than 12 points from a record high.
With the bulls stampeding across Wall Street, speculative fever has run wild, perhaps reflecting high levels of bullishness among investors. Small chinese stocks, in particular, have benefitted from this risk-taking environment, as the 170 Chinese stocks that have gone public via a reverse merger, are now worth an aggregate $20 billion, up 25% since the Federal Reserve cut interest rates 50 basis points less than three weeks ago. Bullish sentiment across the broader market reflects this enthusiasm, as 52%, of investors are bullish, according to the American Association of Individual Investors survey, the highest since February. The risk forecast as measured by the Chicago Board Options Exchange VIX volatility index has declined by 55% from its mid-August high to below 17. Similarly, option trades are buying 1.5 new calls for every new put, well above levels below 1.0 in August. Perhaps nothing reflects this sentiment more than financial stocks. Last week, Merrill Lynch (NYSE: MER) said it will write down $4.5 billion as it marks to market the value of its collateralized debt obligations and mortgages, and another $463 million for certain loans. Washington Mutual (NYSE: WM), Citigroup (NYSE: C) and UBS Securities (NYSE: UBS) also announced massive charges or write downs only to see their stocks surge.
Employment data released on Friday did not disappoint the market. The widely anticipated September employment report came in at a higher-than-expected 110,000 (versus 100,000 consensus). Equally as important, the report came with a nice upward revision of August payrolls to a gain of 89,000 versus the previously announced decline of 4,000. The unemployment rate came in at 4.7%, in line with the estimates. Such strong data may likely fuel speculation that the Fed may be done easing as a stable job market can be seen as offsetting the weak housing market. With August pending homes sales falling 6.5% from July and representing the lowest reading ever for the index, housing could remain a drag on economic growth. But the economy appears to be taking such housing woes in stride as the September ISM Index that gauges manufacturing came in at a reading of 52 and the September ISM Non Manufacturing number was reported at 54.8 (with any reading above 50 indicating growth).
What should investors look for this week? YUM Brands (NYSE: YUM) is expected to report earnings after the close of business on Monday, with aluminum giant Alcoa (NYSE: AA) announcing results on Tuesday. Monsanto (NYSE: MON) will report on Wednesday before the opening, with Costco (NASDAQ: COST) expected later in the day, followed by Infosys Tech (NASDAQ: INFY), and Computer Sciences (NYSE: CSC) after the closing bell. Pepsico (NYSE: PEP), and Safeway Stores (NYSE: SWY) are expected to announce earnings before the opening bell on Thursday.
The economic calendar for the week kicks off with the release of the FOMC’s minutes from its September 18th meeting at 2:00 p.m. on Tuesday. Wednesday morning at 10:00, Wholesale Inventories for August will be reported, followed by Crude Inventories for the week at 10:30 a.m. Import/Export Prices for September, Trade Balance for August, and Initial Jobless Claims for the week will all be announced on Thursday morning at 8:30 a.m., with the Treasury Budget for September expected at 2:00 p.m. Retail Sales, and the PPI for the month of September will be reported at 8:30 a.m. on Friday, and Business Inventories for August, and the preliminary Michigan Sentiment Index for October will be released at 10:00 a.m. SF Fed Pres. Yellen speaks on Tuesday, and Boston Fed Pres. will speak on Thursday. Friday, look for comments from Fed Chief Bernanke, Fed Gov. Kohn, and Dallas Fed Pres. Fisher.
VeriChip Corporation (NASDAQ: CHIP) will attend the four-day American College of Emergency Physicians Conference beginning Monday in Seattle. CytRx Corporation (NASDAQ: CYTR), and its wholly-owned subsidiary RXi Pharmaceuticals will present at the two-day Natixis Bleichroeder Hidden Gems Conference starting Monday in New York, and will also present at the three-day BIO InvestorForum 2007 beginning Tuesday in San Francisco, along with VioQuest Pharmaceuticals, Inc. (OTCBB: VQPH). Oppenheimer & Co. hosts its Hidden Gems Investor Conference on Tuesday in Boston.
Hythiam, Inc. (NASDAQ: HYTM), a provider of comprehensive behavioral health management services, last week reported that researchers at the Mayo Clinic, led by Dr. Harold C. Urschel, III, M.D., M.M.A., have found that the pharmacological component of the PROMETA Treatment Program consistently reduced methamphetamine cravings and use. The findings were reported in the October installment of the Mayo Clinic Proceedings medical journal, and were based on the results from a 12-week open-label study of 50 patients. The data showed the effectiveness of the pharmacological component, with 97% of the patients completing the program reporting a reduction in cravings, with an average reduction in frequency of 66%. The report also cited adherence to the treatment that was much higher than generally expected for this patient population. The Mayo publication represents the first peer-reviewed study of PROMETA and sets the stage for Dr. Urschel’s double-blind placebo study results, which are expected in late October. If these results show a similar reduction in cravings, a key component of relapse in addiction treatment, it could lead to broader adoption of the PROMETA protocols by substance-treatment professionals throughout the U.S. as HYTM will be able to make marketing claims. Additionally, Hythiam announced implementation of the Healthy Mothers Substance Abuse Disease Management Program (HMSADM), developed in collaboration with The Assist Group, a leader in integrated claims resolution and disease management solutions. Access to services for recovery for substance-abusing pregnant and parenting women is limited, and it is estimated that less than 25% of programs address this demographic. The new program will combine Hythiam’s PROMETA protocols with Assist Care’s comprehensive care management to improve quality of life for both mother and child. Shares ended the week at $7.62, up 22 cents.
Volume Alert: Shares of Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), rose over 35% on approximately 12.4 times average volume last week, as it appears that the company’s recent corporate update and listing on the Frankfurt Stock Exchange have attracted positive attention. Technically, shares of PBIO have broken out of a downward trend and look poised to take out the 52-week high of $5.80, set back in May. Shares ended the week at $5.40, up $1.41.
Digital Angel Corporation (AMEX: DOC), a technology company engaged in the development, manufacture, and marketing of visual and electronic identification tags and implantable radio frequency identification (RFID) microchips, last week reported it has received an order for 630,000 compliant RFID ear tags valued at more than $600,000 from the United States Department of Agriculture (USDA) for the National Animal Identification System (NAIS). The NAIS is a voluntary program designed to trace animals back to farms and ranches in the case of a disease outbreak or other animal emergencies, and is operated by states, industry producers and the USDA. The order is for tags that will be used to control and trace brucellosis among cattle. Under the NAIS, electronic ID devices must be approved by the USDA. Digital Angel has approval on its EID and transponder devices for livestock, and will be submitting its new sheep and goat EID device for approval shortly. Shares ended the week at $1.44, up 15 cents.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), last week reported that the company has been awarded a new patent by the United States Patent and Trademark Office, titled Metered Dose Spray Device for Use with Macromolecular Pharmaceutical Agents such as Insulin. The patent generally relates to the company’s oral insulin product, Generex Oral-lyn, and adds to the company’s robust IP portfolio, which now stands at an aggregate of 111 patents worldwide (21 in the U.S.) and another 92 patent applications pending in various jurisdictions. Shares ended the week at $1.49, down two cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, last week announced that the City of Houston, TX, is installing VendingMisers in beverage vending machines in city buildings as part of a concerted program to reduce energy consumption and C02 emissions. The city has purchased 300 VendingMisers, an energy control product from USA Tech’s EnergyMiser line, and expects to reduce electrical consumption by approximately 40-50%. Recently, the Texas Legislature passed legislation requiring vending machines in public buildings to be equipped with energy saving devices as part of a program to improve energy efficiency in the state. Houston joins the city of Austin in already having begun installation of VendingMisers. Similar projects have taken root elsewhere, with the cities of Phoenix and Tucson, AZ also having deployed VendingMisers as part of cost and energy-saving initiatives. The city of Houston purchased its products through the General Services Administration (GSA), which allows federal, state and local governments and agencies to purchase the EnergyMiser product line directly from USA Technologies. Shares ended the week at $8.28, down 10 cents.
Volume Alert: Shares of Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, traded over 3.2 times average volume last week, and appeared to get a boost from the announcement that three of Europe’s top drugmakers, GlaxoSmithKline, AstraZeneca and Roche, have combined to fund Stem Cells for Safer Medicines Ltd., a non-profit venture focused on developing more efficient ways of testing for liver toxicity, the biggest single cause of drug failures and withdrawals. Although the project will not focus on the use of stem cells as therapy, Advanced Cell’s single cell blastomere technology could lead to the company being a front line supplier of stem cells for use in worldwide research. Perkin Elmer’s acquisition of Viacell also demonstrates growing interest in stem cell companies by larger companies. Shares ended the week at $0.30, unchanged.
New 52-week high: Shares of Calypte Biomedical Corporation (OTCBB: CMBC), a manufacturer of medical diagnostic tests for the rapid detection of antibodies to the human immunodeficiency virus (HIV), surged to a new high last week on strong volume. For investors looking for below-the-radar China plays, the company is in the process of seeking approval from the Chinese SFDA (the equivalent of the United States’ FDA) to sell its diagnostic tests in the country. With more than 1.3 billion people, China represents a significant opportunity for the company’s rapid tests. Shares ended the week at $0.225, up 3.5 cents.
Collexis Holdings, Inc. (OTCBB: CLXS), a global knowledge discovery company, last week announced an agreement with the University of South Carolina, and SC Launch!, an organization created by the S.C. Research Authority to help commercialize research ventures, to develop a hydrogen fuel dashboard, a virtual library for hydrogen fuel research. The research will be available for free to the S. Carolina research community, and will be available online, for a fee, to other researchers. This partnership was born from several successful collaborations between Collexis and South Carolina University in the health sciences, computer sciences and engineering, and the university library. The dashboard will be the basis for an additional seven other alternative energy topics, which will be used to create a co-branded USC / Collexis alternative energy suite, and will use data from the U.S. Department of Defense and the U.S. Department of Energy, as well as resources from the university’s library. The company also announced that the Wageningen Universiteit Library in the Netherlands has just upgraded its Collexis Search software to Collexis High Definition Search 6.0, citing extended features and usability. The upgrade enables the user to search the 120,000 publications in the WUR Library via full text, abstract and title, and will be accessible on a publicly available website. Wageningen Universiteit joins other well-known university libraries using Collexis’ High Definition software, such as Erasmus University Library, Mayo Clinic Libraries and Johns Hopkins. Shares ended the week at $1.70, down 30 cents.
Volume Alert: Shares of i2Telecom International, Inc. (OTCBB: ITUI), a developer of ultra-portable high quality Voice-over-Internet Protocol products and services, traded over 5.6 times average volume last week as investors weighed the significance of the recent Notice of Allowance from the U.S. Patent and Trademark Office regarding pending patents involving its Portable VoIP Service Access Module (VoiceStick) technology. The company believes its IP rights may have been violated by many companies in the VoIP and USB industries, and the company has stated its intentions to maximize and monetize the value of its intellectual property assets, possibly pursuing further legal action to protect these technologies. Shares ended the week at $0.18, up 4 cents.
IceWEB Inc. (OTCBB: IWEB), a software services provider, last week reported the launch of its newest product offering, IceSECURE Mail. IceSECURE Mail is available to both Government and Commercial customers, and provides the customer with the capability to ensure the privacy of their privileged or sensitive email communications. The service is available immediately, and can be purchased and implemented in the same day, requires no hardware, requires little or no training, and is compatible with Microsoft Exchange, Outlook, Outlook Express, and other mail servers, as well as for BlackBerry smart devices from RIM. IceWEB also reported last week that the company has more than doubled its footprint of recurring users in the last 30 days, and now expects that the company will exceed the predicted 10,000 user mark before year-end. The company also announced plans to expand significantly in the coming months, with entries into the European, South American, and Chinese markets. Shares ended the week at $0.60, unchanged.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, last week announced some very impressive results from its third fantasy stock market contest, wallstreetsurvivor.com, which ended September 28, 2007. The total number of page views more than doubled, to 3.8 million. The number of unique visitors grew 52%. The contest drew over 22,000 participants, up approximately 68% from the previous contest, and trades completed grew by over 135%. Continued growth in contest participation will most certainly lead to more interest among advertisers and financial sponsors alike. The company recently reported an advertising agreement with The Motley Fool, Inc., a leading financial services portal. Neutron expects its fourth competition, running from October 1-December 14, to be even more successful, due to increased features and functionality. Shares ended the week at $0.47, up two cents.
ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, last week announced that Access Golf Management now features the ProLink GPS system at all four of its courses in the Seattle and Olympia, WA region. Access Golf also plans to participate in ProLink’s exclusive national advertising program. Recently, the company announced a four-year agreement with ABC National Television Sales, Inc. (ABC), in which ABC will provide exclusive advertising sales representation for the video display monitors on golf carts using ProLink’s golf management systems. ProLink believes this agreement will provide the company greater access to advertisers seeking to target a highly attentive audience of golfers with significant buying power. ABC’s sales force generates roughly $9 billion annually in revenue. Shares ended the week at $0.87, down 3 cents.
Volume Alert: Shares of Salton, Inc. (OTC: SFPI), a leading designer, marketer and distributor of branded, high-quality small appliances, home decor and personal care products, traded over 5.2 times average volume last week, as it appears the on-again, off-again merger between Salton, Applica Inc., and APN Holding Company, Inc., Applica’s parent company, will finally come to fruition. Under terms of the agreement, Applica will become a wholly owned subsidiary of Salton, Inc., and Harbinger Capital Partners, the parent company of APN Holding, will receive approximately 92% of the common stock in Salton, pursuant to various transactions relating to the conversion of preferred stock. This merger will create one of the largest U.S. public companies focused on the household small appliance industry, with a broad portfolio of well-recognized brand names. Management of the new entity is expected to consist of a combination of existing management teams, as well as new personnel. Salton said the merger is expected to be completed in the next three to four months. Shares ended the week at $0.31, up 9 cents.
AXM Pharma, Inc. (OTC: AXMP), a manufacturer of proprietary and generic pharmaceutical and nutraceutical products for the Chinese and other Asian markets, last week reported it has entered into an exclusive representation agreement with Xian Jiahui Pharma Co., Ltd., a leading Chinese pharmaceutical manufacturer, to represent Xian Jiahui in the sale of new medicines. Xian Jiahui’s lead product is its patent-pending Shen Kang injection/suppository for the treatment of chronic allograft nephropathy, and with AXM Pharma selling approximately $375,000 worth of product in the first day of sales, this exclusivity agreement could provide a substantial revenue stream for the company in the future. Shares ended the week at $0.11, down 4 cents.
