Tuesday, December 29, 1998
DJIA 9244.25 +17.50 (+0.19%) S&P 500 1229.01 +3.52 (+0.29%) Nasdaq 2172.67 -7.63 (-0.35%) Value Line ndx 898.56 +0.80 (+0.09%) 30-Year Bond 101 12/32 -4/32 5.16% Yield

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An Investment Opinion
by Alex Schay

Replicating Higher

Geron Corp. (Nasdaq: GERN), a developer of therapeutic and diagnostic products based on the biological mechanisms underlying cancer and other age-related diseases, replicated $2 9/16 higher to $12 5/16 this morning. After the bell yesterday, the firm announced the upcoming publication of two papers -- for the January 1, 1999 issue of Nature Genetics -- displaying evidence that "telomerase expression in normal cells confers an infinite replicative capacity, but does not result in cellular changes associated with cancer."

Under normal circumstances, human cells divide roughly 75 times over a lifetime (depending on the type of cell). However, each time a cell divides, the "telomere" -- or the protective end of a chromosome -- erodes a little bit. In conjunction with old age and eventual death, the telomere becomes too short to protect the chromosome and the cell can no longer divide. By adulthood, most healthy cells no longer contain any telomerase. It has also been found that 90% of cancer cells have telomerase, raising suspicions that telomerase is somehow linked to cancer as well.

Back in January, Geron's biologists announced a ground-breaking finding. While all cells possess the telomerase gene, which can restore the telomeres to their youthful length, in most cells the gene is inactive. Geron's discovery was that by inserting a copy of the telomerase gene in active form into cells, it could make them grow and divide indefinitely. The problem posed by the discovery was the possibility that the enzyme could cause cancer by allowing cell division to go crazy.

Yesterday's announcement by Geron will undoubtedly lead to closer scrutiny of the findings, but it has given Geron a proverbial shot in the arm. Yes, Geron lost $5.7 million in cash from operations over the first nine months of the year. No, the discussion to date has yet to veer into the realm of applications for "immortalizing" cells. However, this finding and the recent cash infusion from the sale of $15 million in convertible zero debentures to investment funds should help meet Geron's working capital needs. The visibility of the announcement will also help Geron shift the discussion toward finding solutions for the more immediate problem of the two dozen degenerative diseases that currently have no treatment.


Direct marketer ValueVision International (Nasdaq: VVTV) added $6 to $12 1/4 after the company said its television home shopping division saw pre-Christmas December sales 70% above last year's levels while pre-Christmas Q4 sales were up more than 50%. "Electronic commerce sales continue to increase at a far greater percentage than television sales," the company added in a statement.

Online brokerage National Discount Brokers Group (NYSE: NDB) shot up $10 1/4 to $24 1/4 after it announced fiscal Q2 EPS of $0.42, well above last year's $0.16 figure. Meanwhile, E*Trade Group (Nasdaq: EGRP) earned $3 5/8 to $60 3/8 following an $11 3/4 gain yesterday on news that half a million people have signed up for its Destination E*Trade website since its official launch in September. Head back to yesterday's Lunchtime News for a closer look at the announcement.

Petroleum refiner and marketer Sunoco (NYSE: SUN) rose $15/16 to $34 1/2 after it said it finished a $150 million stock buyback plan authorized in November 1997 and announced plans for another $150 million repurchase.

Unmentionables retailer Intimate Brands (NYSE: IBI) strapped on a gain of $1 11/16 to $29 13/16 following reports in The Wall Street Journal saying the company's Victoria's Secret catalog division expects a record Q4 because of strong online business. Victoria's Secret part-owner Limited (NYSE: LTD) added $1 3/8 to $28 5/8.

Barnes & Noble (NYSE: BKS), the nation's largest retail bookseller, advanced $3 11/16 to $43 3/4 after a Morgan Stanley Dean Witter analyst raised his target price on the company to $45 from $35 per share based on increased recognition of the company's Internet division. The analyst reiterated an "outperform" rating on the company.

Premium meats producer IBP (NYSE: IBP) packed on $15/32 to $28 23/32 after it said it expects Q4 net earnings to be four times last year's $0.23 per share level, about $0.92 per share. Eight analysts surveyed by First Call projected EPS of $0.80. Strong business at the company's fresh meats and food service operations were credited for the windfall.

Public information kiosk company ObjectSoft Corp. (Nasdaq: OSFT) won $2 5/8 to $5 3/4 following its appointment of former Plaza Entertainment executive Ray Schwartzman as its marketing VP.

Apparel marketer Active Apparel Group (Nasdaq: AAGP) grabbed $7 1/4 to $18 3/4 this morning after jumping $10 1/4 yesterday following its announcement of the launch of its e-commerce website at www.everlastusa.com. Meanwhile, in-flight catalog and online retailer SkyMall Inc. (Nasdaq:SKYM) added $3 7/8 to $39 7/16 after loading up $23 in yesterday's session.

Teen accessories retailer Claire's Stores (NYSE: CLE) rose $1 9/16 to $20 1/16 after Scott & Stringfellow upgraded its rating on the company to "strong buy" from "buy."

High-stakes bingo network company Multimedia Games (Nasdaq: MGAM) snagged $2 7/8 to $8 3/4 after it said last night it will offer its games to offshore bingo players on the Internet beginning in February.

Sterling Commerce (NYSE: SE) added $1 13/16 to $43 1/4 after J.P. Morgan listed the electronic commerce software developer among its "Best of Sector" picks for 1999.


Medical imaging systems maker Adac Laboratories (Nasdaq: ADAC) was zapped $7 11/16 to $19 7/16 after announcing it will restate its fiscal 1996, 1997, and 1998 financial results to adjust the accounting treatment of certain one-time charges, revenues, and expenses. The revision is expected to have a "material adverse impact" on the company's 1996 and 1897 results, but a minimal effect on previously reported 1998 figures.

Oilfield services company Halliburton (NYSE: HAL) slid $2 11/16 to $30 1/4 after warning that it expects to earn $0.19 to $0.21 per share before charges in the fourth quarter, far short of the First Call mean estimate of $0.36 per share. The company late yesterday announced plans to cut 2,750 more jobs and record a $24 million ($0.05 per share) after-tax charge in the period. The cuts come with oil prices near a 12-year low and amid upstream budget cutbacks at various oil and gas exploration and production companies. Fellow services and supply firm Schlumberger (NYSE: SLB) lost $1 5/8 to $45 3/4.

Ship and offshore oil and gas drilling rig builder Halter Marine Group (AMEX: HLX) slipped $15/16 to $4 11/16 after saying its fiscal Q3 will only be "marginally profitable" due to higher-than-expected costs for the construction of six drill barges. The company said the Street had been expecting earnings of $0.27 per share for the period. Halter added that it probably won't meet its goal of $1 billion in revenues in fiscal 2000 and now expects revenues to come in below fiscal 1999's results.

Asynchronous transfer mode (ATM) switches supplier Network Equipment Technologies (NYSE: NWK) dropped $1 7/8 to $11 3/8 after saying weakness in Asian markets and in its leasing business will result in fiscal Q3 EPS "significantly below" the $0.20 expected by analysts surveyed by First Call.

Modular and broadloom carpet supplier Interface Inc. (Nasdaq: IFSIA) was burned for a $1 15/16 loss to $9 after Salomon Smith Barney lowered its rating on the firm to "outperform" from "buy."

Chip maker Intel (Nasdaq: INTC) has filed papers with the SEC disclosing it may sell about $18.3 million in shares of Internet search software developer Inktomi Corp. (Nasdaq: INKT) and around $4 million in shares of online "Computer Network" CNET (Nasdaq: CNWK). While the filings indicate an intent to sell, they don't obligate Intel to go through with the sale. This morning, Inktomi dropped $9 1/4 to $128 1/8 and CNET slid $3 9/16 to $55.

Professional audio systems maker Mackie Designs (Nasdaq: MKIE) slumped $5/8 to $6 1/4 after saying economic conditions in the U.S. and overseas will result in fiscal Q4 revenues and earnings below previous expectations. However, the company said it remains "confident" that its results will still beat last year's revenues of $17.8 million and earnings of $0.09 per share.

Premisys Communications (Nasdaq: PRMS) lost another $1/4 to $8 1/8 after BT Alex. Brown lowered its rating to "market perform" from "buy." Yesterday, the telecommunications access products designer slid 15% after warning that its fiscal Q2 earnings will come in below analysts' expectations.

Garden City, N.Y.-based thrift holding company T R Financial (Nasdaq: ROSE) wilted $2 7/16 to $36 3/16 after saying it will terminate its planned merger with Roslyn Bancorp (Nasdaq: RSLN) unless Roslyn boosts the exchange ratio for the stock swap to 2.1137 shares for each T R share from the current 2.05 shares. T R is allowed to end the deal under the two companies' merger agreement since Roslyn's share price fell below the $20.72 per share level on Dec. 24. Roslyn rose $1/4 to $20 3/4.


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