09/03/2007
VOLUME 315
Companies featured in the current edition of the newsletter: ACCP, ACTC, ARGA, AVGO, CBMC, CGXP, CHIP, CLXS, DOC, HSOA, HYTM, IWEB, PBIO, PLKH, USAT, VOIC
Investors need a rest over the holiday weekend as heavy volatility swung the market in multiple directions last week. Despite the wild volatility, the Dow ended the week down 21 points, equating to a yearly gain of 7.1%. The Nasdaq ended the week higher, gaining 19 points, and raising its yearly return to 7.5%. The S&P lost 5 points for the week, bringing its gains to 3.9% for the year. The Russell 2000 lost 6 points, trimming its annual gains to 0.6%.
The week started off on a mild note as stocks lost ground on Monday as news pertaining to the biggest drop in existing home sales in nearly twenty years grabbed headlines. Talks of M&A activity did help contain losses for the day. However, minutes from the most recent Fed meeting did little to calm uneasiness on interest rates, sending the Dow down 2.1%, amid somewhat lackluster volume on Tuesday. Both sides of this continual tug of war had reason to react. Slightly weaker GDP numbers released later during the week were offset by surprising news on Friday by President Bush announcing a federal program designed to allow homeowners with good credit refinance into mortgages insured by the Federal Housing Administration. The market reacted well as such a move helped allay some of the current sub-primes woes that are affecting the market. With Bernanke reaffirming the Fed’s willingness to act if needed, the bulls clawed their way back close to positive territory (except for the Nasdaq which posted a gain). Interest rates are likely to continue driving the markets until there is more clarity on the Fed’s direction.
What should investors look for next week? The corporate calendar for the holiday-shortened week is light. Apparel maker Guess Inc. (NYSE: GES) is expected to report sometime during the day on Tuesday. On Wednesday, J. Crew Group (NYSE: JCG) will report earnings, with technology company Altera CP (NASDAQ: ALTR) also reporting after the close of business. Campbell Soup (NYSE: CPB) reports before the opening on Thursday, with homebuilder Hovnanian Enterprises (NYSE: HOV), and semiconductor giant National Semiconduct (NYSE: NSM) due to announce earnings after the bell.
Alternately, the economic calendar is quite robust. On Tuesday at 10:00 AM, Construction Spending for July, and the ISM Index for August will be announced, with Auto and Truck Sales being reported at 5:00 PM. On Wednesday morning, look for Pending Home Sales for July at 10:00 AM, followed by weekly Crude Inventories at 10:30 AM. At 2:00 PM, the Fed’s Beige Book will be released. On Thursday morning, expect Initial Jobless Claims for the week, and the revised Productivity numbers for the second quarter being released at 8:30 AM, with the ISM Services Index for August being released at 10:00 AM. Friday morning’s schedule is full. Unemployment Rate, Non-farm Payrolls, Hourly Earnings, and Average Workweek numbers for the month of August are all expected at 8:30 AM. Rounding out the week is the Wholesale Inventories numbers for July, expected at 10:00 AM.
Hythiam Inc. (NASDAQ: HYTM) will present on September 5th at 2:30 at the Roth Capital Partners New York Conference, being held from Tuesday to Thursday in New York City. Auriga Laboratories, Inc. (OTCBB: ARGA) will present at 3:30 p.m. p.m. that day. VeriChip Corporation (NASDAQ: CHIP) presents to institutional investors at the Kaufman Bros. 10th Annual Investor Conference in New York City on Wednesday at 3:35 p.m., followed by Digital Angel Corporation’s (AMEX: DOC) at 4:10 p.m. Citigroup holds its three-day 14th Annual Technology Conference in New York starting Tuesday. Lehman holds a two-day Energy/Power Conference in New York starting Tuesday. Morgan Keegan holds an Equity Conference on Thursday in Memphis. Thomas Weisel Partners holds a two-day Healthcare Conference starting Wednesday in Boston. Sun Microsystems (NASDAQ: JAVA) and Cisco Systems hold analyst meetings on Wednesday. Motorola (NYSE: MOT) meets with analysts on Friday.
Hythiam, Inc. (NASDAQ: HYTM), a provider of comprehensive behavioral health management services, announced last week the launch of Recovery Media Network (RMN), an online social network that supports the traditional recovery process, in advance of Recovery Month in September. The network of sites, including three online destinations anchored by 12StepSpace, will complement traditional behavioral approaches to addiction, on a 24/7 basis worldwide. RMN enables members to chat with other members, correspond via private message, create an online 12-step meeting, and generally communicate about topics related to addiction, as well as offering addiction resources, 24/7 access to support, information, and referrals. Based upon the current trend towards online social networking, Hythiam expects membership growth to be dramatic. RBC Capital Markets, an international corporate and investment bank, also initiated coverage of Hythiam, Inc. with an “Outperform” rating and $13 price target. RBC becomes the fifth brokerage firm to have the stock rated “Buy/Outperform”or better. Shares ended the week at $7.20, down 17 cents.
VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, along with Alzheimer’s Community Care, a local non-profit agency serving Alzheimer’s patients and caregivers, last week announced that the official launch of the VeriMed Patient Identification Project will take place at Alzheimer’s Community Care headquarters in West Palm Beach, Florida, on August 28, from 1:30 to 3:30 p.m. The two-year project calls for 200 Alzheimer’s patients and care-givers to receive a VeriMed microchip to evaluate the effectiveness of the VeriMed Patient Identification System in managing the medical records of Alzheimer’s patients and their caregivers. The VeriMed system is designed to give hospitals and physicians immediate access to a patient’s medical history, or other critical information that the patient, or care-giver, might be unable to provide, due to injury, unconsciousness, etc. All participation in the study is voluntary. Approximately 4-5 million people in the U.S. alone suffer from Alzheimer’s, and some 350,000 new cases are reported each year, showing a growing need for more efficient patient care. The story was covered by ABC’s Good Morning America show, which featured interviews from the official launch. Shares ended the week at $5.90, down 9 cents.
Digital Angel Corporation (AMEX: DOC), a technology company engaged in the development, manufacture, and marketing of visual and electronic identification tags and implantable RFID microchips, last week announced it had reached a settlement in its patent infringement litigation against Datamars, Inc., Datamars S.A., The Crystal Import Corporation and Medical Management International, Inc. Financial terms were not disclosed, but the company believes the settlement to significantly reduce its litigation expenses, which were approximately $1.5 million for the first six months of 2007. Digital Angel also announced that it has entered a distribution agreement with Data Lab S.A. of Paraguay for visual and electronic livestock identification tags, with purchase commitments through 2010. The company believes this agreement will help double South American sales to about 5 million tags in 2007. Digital Angel currently markets its products in Argentina, Brazil, Chile, Colombia, Paraguay, Peru, Uruguay and Venezuela. Shares ended the week at $1.52, up one penny.
Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, last week reported that its Home Solutions Restoration of Louisiana, Inc. subsidiary has been awarded new construction projects in New Orleans and the surrounding areas expected to generate revenue of approximately $12 million. Work to be done includes renovations, repairs and new construction at a variety of sites, including the New Orleans Public School System, the New Orleans Armstrong International Airport, the Veterans Administration Pharmacy, the Soulet Apartments, St. Paul the Apostle Elementary School, the Slidell Housing Authority Building, and the Salvador Liberto Jefferson Parish Office Building. These contracts are in addition to the company’s restoration and construction backlog announced August 9, 2007. Note that although it is not clear whether it will reach the United States, Hurricane Felix, as of press time, was upgraded to a Category 5 hurricane. Shares ended the week at $3.05, down five 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 it has been issued its first patent by the Canadian Intellectual Property Office entitled “Pressure-Mediated Binding of Biomolecular Complexes” (Number 2,259,318). This extends the coverage of the company’s PCT patents previously issued in the United States, Japan, Germany, Italy, France, Sweden, Switzerland, and the U.K. Pressure BioSciences currently holds 13 U.S. and 6 foreign patents covering multiple applications of PCT in the life sciences field. Shares ended the week at $3.95, up 22 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, announced last week that Canteen Vending Services is installing e-Port terminals that accept MasterCard PayPass on vending machines in its Jacksonville, Florida marketplace. Canteen is installing and testing the e-Port system at a variety of locations, including colleges, healthcare and retail facilities, lodging, and other businesses and workplaces. MasterCard reported, as an example, that with machines that were deployed in Philadelphia last year, consumers purchased an average of 32% more when using a card to make a vending purchase, due mainly to not being limited to spending cash on hand. USA Technology has announced the installation of over 13,500 e-Port/PayPass terminals recently. As of the second quarter of 2007, there are over 16 million PayPass cards and devices in the market, and PayPass is currently accepted globally at 55,000 merchant locations globally. Shares ended the week at $9.85, up 62 cents.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, last week signed a definitive licensing agreement with SpePharm Holding, B.V., an emerging pan-European specialty pharmaceutical company, to market Access’s product, MuGard, in Europe. As many as 40% of all patients receiving chemotherapy and/or radiotherapy develop moderate to severe mucositis, with the treatment market estimated at over $1.0 billion annually. SpePharm expects to launch MuGard during 2008 with a dedicated sales force of 50-60 representatives across Europe promoting both MuGard and its existing product Loramyc. SpePharm will be responsible for marketing, manufacturing, and obtaining the necessary regulatory approvals for MuGard throughout the EU plus Switzerland, Norway and Iceland, and will pay Access an upfront fee and substantial royalties on net sales. MuGard has received marketing allowance in the United States from the Food and Drug Administration under a 510(k) procedure. Shares ended the week at $3.45, down five cents.
Discovery Research at Thomas Weisel Partners initiated coverage last week on Auriga Laboratories, Inc. (OTCBB: ARGA), a specialty pharmaceutical company with products for the treatment of acute respiratory diseases and dermatological conditions, with an “Overweight” rating and a twelve-month price target of $2.00. The TWP report highlighted cost savings as a result of Auriga’s innovative commission-based sales strategy, as well as its comprehensive product portfolio as catalysts for the company’s continued growth. The price target represents a gain of over 150% from current levels. This comes on the heels of a “Buy” recommendation for the company by Torc Investments and Research issued on August 20. Torc has a price target of $2.00-2.50. Auriga also announced last week that Philip S. Pesin, Auriga’s CEO, had terminated his pre-arranged stock trading plan on August 30, 2007, and will no longer be selling any stock after the planned third quarter sales. Insider sales have represented a significant overhang in the stock for the past year. Additionally, Auriga last week announced the appointment of Frank R. Greico as its Chief Financial Officer, effective September 1st. Mr. Greico has 28 years of finance and operations experience, and will bring needed expertise in assisting with Auriga’s expansion initiatives, as well as its plans to list on a national exchange. Shares ended the week at $0.77, down one penny.
Shares of Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, could receive a boost if the company is able to close a $10 million financing announced in mid-August. The proceeds of the financing are expected to be used to fund working capital, including costs associated with advancing the technology it expects to acquire in its pending acquisition of Mytogen to Phase II clinical trials. If the company is able to complete the Mytogen acquisition, it has the potential to significantly change investors’ perceptions, as Mytogen is one of the few stem cell companies currently in the clinic. ACTC currently has a market capitalization of less than $30 million, far less than other stem cell companies that are still in early stages of clinical development. Note that the proceeds would also likely be used to advance several promising preclinical programs in the areas of Retinal Pigment Epithelial cells for diseases of the eye, Hemangioblast cells for the treatment of blood disorders and cardiac disease, and Dermal cells for skin damage such as burns, wound repair, etc. All represent significant market opportunities. Shares ended the week at $0.35, up 2 cents.
Avicena Group, Inc. (OTCBB: AVGO), a biotechnology company focused on diseases of the central nervous system as well as dermaceutical products, last week announced an exclusive worldwide distribution agreement with RITA Corporation, covering global rights to certain Avicena compounds for use in the personal care industry. Avicena’s proprietary dermaceutical compounds incorporate the company’s patented cell-nourishing technology, promoting optimal cellular regeneration and cellular protection, as well as anti-aging skin benefits. RITA Corporation, a leading supplier of specialty chemicals to the personal care industry, operates five wholly owned distribution centers across the United States and is represented by international agents on six continents. The revenue generated will be more than welcome as Avicena continues moving forward in its ongoing ALS, Parkinson’s, and Huntington’s Phase IIb/III trials. Avicena also reported results from the second quarter ended June 30, 2007. The company reported a net loss of $(0.05) compared to a loss of $(0.03) in the previous year. The increase in the net loss was primarily due to increased research and development expenses associated with clinical development. Revenues in the second quarter rose to $108,850, up 22% from a year earlier. Shares ended the week at $3.76, down four cents.
Calypte Biomedical Corporation (OTCBB: CBMC),medical diagnostic tests manufacturer for the rapid detection of antibodies to the human immunodeficiency virus (HIV), last week announced its support for the guidance policy unveiled last week by the National AIDS Control Council of Kenya, giving Kenyans personal control over their HIV testing and encourages them to use non-invasive tests such as HIV-1/2 OMT (oral fluid) rapid tests. Calypte has provided Kenya, through the National AIDS and STD Control Program of the Ministry of Health, 10,000 Aware HIV-1/2 OMT rapid tests which will be available to the public. HIV cases and deaths have decreased significantly in Kenya, primarily due to HIV/AIDS prevention and treatment programs. The government provides access to antiretroviral drugs to people living with HIV/AIDS at no-cost, so effective and widespread testing is crucial in maintaining this momentum. Adoption of similar guidance policies by other developing or “third-world” nations could provide Calypte a substantial pipeline for its products for years to come, as well as provide a much needed weapon in the global battle against HIV/AIDS. Shares ended the week at $0.13, unchanged.
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, last week reported that it is the recipient of Frost & Sullivan’s 2007 North American Technology Innovation Award for the field of Anti-Infective Coatings. Frost & Sullivan, a global growth consulting company, has used a unique global perspective and combined ongoing analysis of markets, technologies, and econometrics, to support the development of innovative strategies for more than 40 years. Each year, this award is presented to a company that has demonstrated excellence in new products and technologies within its industry. “Ceragenix’s Cerashield antimicrobial medical device coating has shown in preclinical testing to provide an unsurpassed level of protection against bacterial colonization and biofilm growth when applied to catheters and endotracheal tubes,” said Frost & Sullivan Research Analyst, Srimathy Raghuraman. Approximately one million people a year develop an infection from an indwelling medical device, with over 50,000 deaths attributed to these infections, as well as resulting in billions of dollars of additional treatment costs. Ceragenix has obtained a favorable ruling from the FDA’s Office of Combination products that a medical device containing a Cerashield coating would be regulated as a medical device requiring a Pre Market Approval Application (PMA), and the company believes that certain of its applications may be eligible for Expedited Review which may shorten the time to approval and commercialization. Ceragenix has not yet filed a PMA for Cerashield. Shares ended the week at $1.25, down five cents.
IceWEB Inc. (OTCBB: IWEB), a software services provider, last week announced an agreement with Echoworx, a provider of security solutions for enhancing privacy and trust in digital communications, to deliver subscription based Software as a Service (SaaS) solutions, primarily focused on exposure to threats which may originate from within their trusted internal networks. Such threats include confidential customer data being stolen or transmitted outside of the trusted company network, inappropriate communications, content, or activities being transmitted from, within, or conducted within or from behind the company firewalls, theft or loss of extremely sensitive information such as business plans, proprietary trade secrets, or senior management plans, as well as violations of SEC or other regulatory disclosure or data confidentiality rules. IceWEB’s new IceSECURE product suite, available September 30th, will be powered by Echoworx technology and will provide subscription-based security products, allowing clients of any size to easily deploy on-demand solutions to meet requirements that their business may face. IceWEB and Echoworx also announced that the entire Echoworx product offering will be available to Federal Government customers. Shares ended the week at $0.64, down five cents.
Volume Alert: Shares of VoIP, Inc. (OTCBB: VOIC), a provider of turnkey Voice over Internet Protocol communications solutions for service providers, traded over 3.5 times average volume last week after the company issued a letter to shareholders highlighting the company’s corporate and capital restructuring efforts, improved operating margins and expenses, and increasing revenue growth. VoiP expects to be cash-flow positive by the fourth quarter of this year, and said that revenue by the end of August 2007 should be greater than that of the entire 2006 fiscal year. Shares ended the week at $1.16, up 56 cents.
On the Wires: ProLink Holdings Corp. (OTCBB: PLKH), the world’s leading provider of GPS golf-course management systems and on-course advertising, last week announced the appointment of Chris Kager to the position of Executive Vice President of its ProLink Media division. As President of The Media Group, Mr. Kager implemented sales and marketing strategies for the EchoStar/DISH Network platform, and was directly responsible for $200 million in sales revenue. Mr. Kager will work directly with Andy Batkin, CEO of ProLink Media (the advertising sales division of ProLink Solutions).
SPECIAL SITUATIONS:
Collexis Holdings, Inc. (OTCBB: CLXS) $3.50
Many remember well the IPO of Google. Everybody had an opinion on what a fair valuation for the company was, but few could say at the time that they had never heard of it. Well, another search engine provider recently went public, with considerably less fanfare. Collexis Holdings Inc. went public approximately two months ago to allow it to accelerate the sale of software for its scientific search engine that provides the necessary tools to search and mine large sets of information to help professionals and scientists base their research, decisions and conclusions on the information available to them. Already, the company has collaborations with elite, well-respected institutions including the National Institutes of Health, Johns Hopkins University, Harvard University, Bristol-Myers Squibb, Merck & Company, Lockheed Corporation and the World Health Organization, to name a few.
As the amount of archived information continues to grow, answers to questions can no longer be found from a single source. Information from multiple sources brought together will construct answers. As a result, the importance of providing researchers with high performance technologies to unlock large amounts of electronic data is crucial. Collexis Holdings recognizes the importance of this concept and has developed a unique approach, called knowledge retrieval, which finds the correct information in a single search action. The company’s technology is based on the usage of “Fingerprints”. A Fingerprint is a list of concepts with an assigned weight derived from a text using a thesaurus. The higher the weight, the more important the concept is to describe the text. This method, with its strong matching component, broadens the scope of the search as many words and concepts are used interchangeably. For example, concepts like “Alzheimer Disease” and “Dementia” can be used frequently in text items for the same subject, where the Collexis technology can recognize such relationships and provide the best meaning of such concepts to researchers to maximize their searches.
Finding information using the company’s Fingerprint technology is very powerful. This approach is not just limited to document searches, but can be used to look for experts and organizations. An impressive component of this software is called Collexis Texpert that is an application that automatically identifies experts through detailed textual analysis of documents they have authored. Such benefits can be used to quickly locate the best employees for crisis management, build optimal teams for projects and proposals, perform knowledge audits and gap analysis, track concepts over time and benchmark an organization’s strengths to those of competitors. In a nutshell, such technology optimizes human capital, one of any company’s most valuable assets.
In mid-July, the company achieved a significant milestone as it was selected as the knowledge platform for the National Institutes of Health (NIH). Collexis’ technology will be used for categorization, search, expertise identification, discovery and analysis of text-based content. As the NIH had their pick of the best technology, such an agreement signals the validity of the Collexis product. Recently, the company was selected by KMWorld as a Trend-Setting Product of 2007. Each year the editors of KMWorld select Trend-Setting Products from among the thousands in the knowledge management marketplace. KMWorld covers the latest in Content, Document and Knowledge Management and informs more than 50,000 subscribers about the components and processes and subsequent success stories that together offer solutions for improving business performance. For the nine months ended June 30, 2007, CLXS had revenue of approximately $1.6 million, up from $1 million in the same period in fiscal 2006. As the company’s blue-chip customer base increases utilization, revenue should grow.
Shares of the stock have been volatile in the two months since going public, reaching a high of more than $10 in early trading, before settling in to the current range, giving the company a market capitalization of approximately $200 million. With search becoming an increasingly important part of the business landscape, Collexis appears well-positioned to capture a meaningful portion of the increasingly larger portion of the scientific dollars seeking efficient ways to source information.