Companies featured in this edition of the newsletter: ACTC, CVM, CUR, DKAM, ENZ, IMUC, IWEB, PHC, SVUL, SRCO, SVUL, XSNX
Markets extended their winning streak yet again this week, as all ten sectors of the S&P 500 finished in positive territory and markets hit fresh highs for the year once again, despite the lack of any significant developments on either the corporate or economic fronts. All told, the Dow ended up 2.2% on the week, gaining 214 points to close at 9820 on the week, up 11.9% on the year. The Nasdaq performed slightly better, gaining 2.5% on the week, closing at 2132, up 35.2% on the year, while the S&P 500 and Russell 2000 gained 2.5% and 4.1% respectively, up 18.3% and 23.7% on the year.
While it was a relatively quiet week as far as headlines were concerned, there were some positive economic developments in the form of significantly better than expected Retail Sales (2.7% vs. expectations for 1.7%). Industrial Production managed to narrowly beat forecasts for 0.6% growth, coming in at 0.8%, while Empire manufacturing came in at 18.9 versus estimates for 15.0. Further empirical evidence of a recovery in the manufacturing sector was added by the Philadelphia Fed business outlook survey which showed an increase of 14.1 versus forecasts for 8.0.
Despite the encouraging economic news, which also included comments from Fed Chairman Ben Bernanke, who stated that the recession is, “very likely over,” there were some notable earnings misses from some big names that helped keep a damper on bullish enthusiasm, as Best Buy (NYSE: BBY), Oracle (NASDAQ: ORCL) and FedEx (NYSE: FDX) all failed to live up to expectations. All ten sectors of the S&P 500 finished the week in positive territory, led by Materials at 4.7% and Financials at 4.5%.
What should investors look for this week? Earnings releases will be light again, but look for results from Carnival Cruise Lines (NYSE: CCL) and ConAgra (NYSE: CAG) before the bell on Tuesday, followed on Wednesday morning by General Mills (NYSE: GIS). Thursday morning Rite Aid (NYSE: RAD) reports, followed after the bell by Research in Motion (NASDAQ: RIMM).
Economic releases for the week begin with August Leading Indicators, due out at 10:00am on Monday. On Tuesday, FHFA US Housing Price Index figures for July are expected out at 10:00am, with weekly crude inventories to be released at 10:30am Wednesday and the FOMC Rate Decision at 2:15pm that same day. Weekly initial jobless claims and continuing claims are due out at 8:30am Thursday, along with Existing Home Sales for August at 10:00am. The week wraps up on Friday with Durable Orders for August at 8:30am, followed by revised Michigan Sentiment for September at 9:55am and New Home Sales for August at 10:00am.
Conference schedules will be fairly busy again this week. Things kick off on Monday with the two day Bank of America Securities Mid Cap Conference in Boston. Enzo Biochem (NYSE: ENZ) will present at the three day UBS Global Life Sciences Conference in New York on Monday. On Tuesday, look for the two day Bank of America Securities Power & Gas Leaders Conference in New York, followed on Wednesday by the Canaccord Adams Healthy Living Conference in New York, and the RBC Capital Markets Financial Institutions Conference in Boston.
Volume Alert: Shares of stem cell company Neuralstem (AMEX: CUR) jumped 58% on almost five times average volume last week closing at their highest level since December. The company had previously said that it expected to hear from the FDA prior to the end of the summer on whether it would receive clearance to file an IND to commence Phase I trials for its stem cell platform studying the effect on Amyotrophic Lateral Sclerosis (ALS), often referred to as Lou Gehrig’s disease. If the company is correct on the timing, the FDA could notify it this week. Recently, the FDA placed a clinical hold on stem cell company Geron conducting a Phase I study of subjects with Spinal Cord Injuries. Shares gained sixty nine cents on the week to close at $1.87.
Volume Alert: Shares of Verichip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, which recently acquired identity security provider Steel Vault to form PositiveID Corp, a provider of identification technologies and tools for consumers and businesses, surged 58% on over 8 times average volume last week, following the announcement that the companies will now fund a partnership with Receptors LLC to continue the development of a triage detection system for detection of the H1N1 virus. The commitment marks a continued relationship between Verichip and Receptors, and it is expected that the companies will release more specific details of the functionality and the timing of the triage detection system next week. For those investors seeking an under-the-radar way to play a potential swine flu epidemic, CHIP could quickly begin to get on the screens of traders. VeriChip is expected to merge with Steel Vault Corporation (OTCBB: SVUL) later this year. Shares gained forty two cents on the week to close at $1.15.
Volume Alert: Shares of vaccine developer CEL-SCI (AMEX: CVM) surged 103% on almost seven times average volume last week, highlighted by a 13% increase on Friday on the third highest trading volume in the company’s history (first two were earlier in the week) after the company said that the U.S. Food and Drug Administration (FDA) indicated that the company can proceed with its first clinical trial to evaluate the effect of its investigational LEAPS-H1N1 treatment on the white blood cells of hospitalized H1N1 patients. The company also further strengthened its balance sheet by raising $20 million. Net proceeds from the offering will be used to commence a pivotal Phase III clinical trial with its cancer drug Multikine and to conduct human studies for the treatment of hospitalized H1N1 patients. Shares gained 82 cents on the week to close at $1.61.
Volume Alert: Shares of Enzo Biochem (NYSE: ENZ), a leading vertically integrated biotechnology company engaged in the research, development, manufacture, licensing and marketing of innovative health care products, technologies and services based on molecular and cellular techniques, surged 13% on Friday more than 4 times average volume, with the stock closing above $7 for the first time since October. This week, company executives will be presenting at both industry and investor events. Barry Weiner, President, and David Goldberg, Vice President, Corporate Development, will be presenting at the UBS Tenth Annual Global Life Sciences Conference on Monday, September 21, at 8:30 AM ET at the Grand Hyatt in New York City. Kevin Krenitsky, MD, President of Enzo Clinical Labs, will present at the 27th Annual Lab Institute ’09 in Arlington, VA on Wednesday, September 23. Dr. Krenitsky will present at a panel discussion entitled “Going Inside the Boardroom: What’s the Bottom Line for Labs During a Time of Economic, Policy and Market Flux?” Among the meeting’s keynote speakers will be the Hon. Newt Gingrich, former Speaker of the U.S. House of Representatives, and Rep. Pete Stark (D-CA), Chairman, House Ways and Means Health Subcommittee. Shares gained $1.56 on the week to close at $7.08.
Healthcare services company Pioneer Behavioral Health (AMEX: PHC) announced results for its fourth fiscal quarter and year ended June 30, 2009 last week. During the period, the company managed to increase net revenue from continuing operations to $11.7 million for the three months ended June 30, 2009 from $11.5 million for the three months ended June 30, 2008. Income from operations was $381,661 for the 2009 fiscal fourth quarter compared to $97,540 for the 2009 fiscal third quarter, and $394,571 for the fiscal 2008 fourth quarter. Net income before taxes for the 2009 fiscal fourth quarter improved approximately $305,000 sequentially to $317,086. PHC attributes the improved results to strong demand at its Capstone and Seven Hills Behavioral Facilities, which it expects to continue. Demand could be further boosted by Seven Hills receiving CMS Medicare certification, which could increase census. The company also said on its conference call that it expected sequential quarterly revenue and profitability to continue to improve. Shares gained four cents on the week to close at $1.53.
Volume Alert: Shares of ImmunoCellular Therapeutics, Ltd. (OTCBB: IMUC), a clinical-stage biotechnology company that is developing immune based therapies for the treatment of brain and other cancers, surged 22% on almost eight times average volume following the announcement last week that it has been featured in an in-depth report by Griffin Securities highlighting the importance of the role that cancer stem cell (CSCs) targeting technology such as that employed by its lead product candidate, ICT-121, may play in developing future cancer treatments. The report summarizes how understanding these cells may be a crucial component of preventing, diagnosing and treating the diseases, highlighting two of the company’s therapeutic programs ICT-121 and ICT-109, which was recently licensed to Roche in a deal that could generate as much as $32 million in milestone payments, as potential approaches to harnessing the immune system in the fight against cancer. Shares gained twenty two cents on the week to close at $1.22.
iceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, announced last week that the company has been awarded a key contract by a Federal Agency to provide its Iplicity Unified Storage Platform to support a VMware Virtual Desktop Infrastructure deployment. The initial award is for a 16 terabyte platform and will enable the agency to commence testing within their research and development laboratory prior to full deployment. If the testing phase is successful, the contract may be expanded to procure Iplicity systems to support in excess of 8000 VDI images and home directories. In other news last week, the company announced that it has launched the Iplicity Cloud Storage Appliance product line. Iplicity Cloud Storage Appliance is the first commercially available Cloud Storage device geared toward allowing its users, businesses of any size, to simply attach a pre-configured appliance to their network and immediately begin serving vast amounts of file and data storage space to local, remote, internet or VPN connected users and applications. This appliance allows corporations to gain all of the benefits of Cloud Storage without assuming the risks of putting priceless company data in the hands of third party providers. Shares lost two cents on the week to close just above $0.07.
Drinks Americas Holdings (OTCBB: DKAM), a company that develops, owns, markets, and nationally distributes alcoholic and non-alcoholic premium beverages associated with renowned iconic celebrities, announced last week that it will host a conference call on Monday, September 21 at 10:00am to discuss results for its 2010 first fiscal quarter which are scheduled to be released before the bell that day. Shares remained unchanged at $0.08 on the week.
Sparta Commercial Services (OTCBB: SRCO), a nationwide financial services company dedicated to the powersports industry, announced last week that it has formed a strategic alliance with Dairyland Cycle Insurance, a recognized leader in the motorcycle insurance industry. The newly formed alliance will enable Sparta’s nationwide network of powersports dealerships to provide an expedited means of securing personal vehicle insurance covering new and pre-owned powersports vehicles for their customers, adding further value to customers seeking to acquire powersports vehicles through the company. Customers who are financing their new or used powersports vehicle purchases through Sparta have the option to receive a free, no-obligation insurance quote from Dairyland Cycle while submitting their credit application online using Sparta’s proprietary credit decisioning and underwriting software. In other news last week, Sparta announced the appointment of Bill Kenney as Vice-President, Client Development; Mr. Kenney has over sixteen years of experience in the financial services sector of the powersports industry, most recently with GE Money, where he served as National Program Manager since 2001. Sparta believes that the relationships which he has developed over his tenure will be very valuable to the organization, as they include some of the largest powersports manufacturers and their dealer networks. Shares remained unchanged at $0.07 on the week.
Advanced Cell Technologies (OTC: ACTC), a company engaged in the development of regenerative therapies utilizing stem cells, announced last week that shareholders have approved each proposal in the company’s proxy statement dated August 5, 2009. As a result, the 2005 Stock Incentive Plan has been amended to increase the total number of shares available for issuance and the certificate of incorporation has been amended to increase the authorized shares eligible for issuance by the company. The company also indicated that it remains on schedule to submit an IND for its retinal pigment epithelial (RPE) program to the FDA for approval to commence a Phase I Clinical Trial prior to the end of the year. Shares remained unchanged at $0.13 on the week.
SPECIAL SITUATIONS:
XSUNX (OTCBB: XSNX) $0.14
Last summer’s staggering run up of energy prices led to worldwide acknowledgement of the need to find more efficient, sustainable sources that insulate global economies from speculative energy markets. As consumers were crippled in the wake of unthinkably high prices resulting from soaring energy costs, the importance of finding these alternative sources led many to look towards solar power as a solution, despite the lingering problems with the technology as a whole. XSUNX is a company seeking to make solar power a viable substitute by solving its technological limitations through focusing on efficiencies that will lower the cost per watt of electricity produced through two distinctive changes to photovoltaic cell production and design that the company expects will enable it to more cost effectively harness the power of the sun.
As a prospective comparison, traditionally the main problem with solar power versus fossil energy sources has been the higher per watt of electrical production capacity costs associated with installing a solar system versus building a coal fired power plant. However, the use of solar systems to produce power is rapidly becoming an economically viable alternative to traditional coal power plants. As electrical demand has continued to climb the costs to build a new power plant today has risen from $1.40 per watt of production capacity in 2000 to $3.50 per watt today with costs anticipated to continue to increase. These costs also do not include operating and fuel costs, and the costs to the environment through green house gas emissions which are yet to be fully realized or accounted for. Conversely since 1970 the solar industry has seen a 100 fold decrease in the cost per watt for a solar system. Today residential costs vary from $6 to $10 per watt (unsubsidized costs), and large multi-megawatt utility size solar installations are approaching $4 per watt installed in the Southwest Untied States. What’s needed to drive solar costs even further down is more efficient solar cell manufacturing processes and mass production systems that can be easily and inexpensively deployed.
While the solar industry has achieved substantial cost reduction gains the two most widely employed methods of converting the sun’s power each have their own set of unique limitations which leave significant room for improvement. Silicon based cells are the most common form of solar conversion technology currently being employed, accounting for approximately 90% of all solar cells currently in use. They utilize banks of small silicon based photovoltaic cells, and although they convert energy efficiently, they are expensive to produce due to the large amounts of precious silicon used in production and are subject to drastic swings in price due to the volatility of silicon feedstock on the open market. In response to the high cost of producing silicon based solar cells, many companies have begun to focus on a lower cost production method which, although less expensive to produce, has its own set of limitations. Thin-film photovoltaic cells, while significantly less costly to produce, do not harness the power of the sun nearly as efficiently as their more expensive silicon counterparts. This creates a whole new set of inefficiencies relating to the vast amounts of these cells required to produce the same amount of energy as silicon cells. These more inefficient cells are typically large sheets of glass that are coated with multiple layers of reactive materials in order to convert sunlight into energy. The ungainly, large cell sizes required to produce as much energy as a small bank of the more efficient, but more costly silicon based panel’s leads to a technology that requires vast amounts of space, making it largely inapplicable in any instance other than solar farms. Additionally, there is a loss of the cost affectivity which makes them an attractive alternative due to the need for larger numbers of cells to obtain the same amount of energy as would be produced with silicon based cells.
XSUNX is currently developing a technology that bridges the gap between high efficiency and low cost, which, although still in its early paces, has shown significant improvements on the limitations posed by its predecessors. The company has taken a two pronged approach to improving solar technology, choosing to focus on improving efficiencies in both the production of the cells, and the mass manufacturing system behind them as well. Their plan is to improve production efficiencies through a rather ingenious method; using idle space in existing factories that produce hard disk drives to produce photovoltaic cells, since the technologies have significant similarities that allow them to be manufactured in the same space with minimal process adaption. This allows for a significant reduction in production cost due to the elimination of the need to build separate facilities to produce the cells. In addition to their plans to streamline the production process in order to obtain lower costs per unit, XSUNX is also planning to increase the energy conversion efficiency per unit through a combination of technological advancement and common sense. One of the most efficient thin film solar technologies currently available is Copper Indium Gallium Selenide (CIGS), which has gained popularity among companies operating in the solar energy space. The problem with these types of cells is that they display much higher efficiency levels in laboratory testing than they do in commercial applications. This is primarily due to the loss of efficiency associated with taking a small area proven laboratory processes and attempting to scale the manufacturing process on to large sheets of glass needed to generate meaningful amounts of solar product. XSUNX has chosen to focus its production on what allows for the high conversion efficiencies obtained in laboratory CIGS testing; small cell sizes rather than large sheets which are typical of the arrays produced by the majority of the competition in the space. By building smaller, more efficient cells which can be assembled together to form larger arrays, similar to how silicon cells are used, they have come up with a technology that is closer to the efficiencies generated by the costly silicon arrays, and as cheap to produce as the less effective thin-film cells. Thanks to these improved efficiencies in production and design, the company expects that it will be able to reduce the cost of energy produced to much less than $1 per watt for the solar module. Providing low cost and high power production per unit area which in turn can reduce other installation costs this solar technology may allow utility scale installations to effectively reduce per watt solar system costs to below that of new coal power plants.
With an extremely promising technology operating in a robust multibillion dollar market that epitomizes the green movement, XSUNX appears extremely well positioned to capitalize on the shift in consumer preference away from fossil fuels and towards alternative energy sources. While the company is still in preproduction, its technology has garnered enough attention to generate almost $42 million in preorders, despite the fact that they are still in development phases. Add to that a management team comprised of industry veterans with significant connections within governmental agencies such as the National Renewable Energy Laboratories (NREL), which the company is establishing a relationship with as a third party validator of their technology, and you begin to see the type of potential that XSUNX has. The stock is currently trading at its 52 week low making now an interesting time to consider investing, as the company’s technology and the popularity of the movement towards alternative energy make this an intriguing prospective investment, especially at current levels.