TUESDAY - OCTOBER 2, 2007..... Correction? What correction? Indexes gained as Citi's earnings warning seemed to give investors a better handle on banks' credit-related losses. Wait -- was the market's August swoon just a bad dream? You would have thought so from the new highs major U.S. stock indexes were hitting Monday, as investors put a positive spin on gloomy earnings warnings from Citigroup (C) and UBS AG (UBS). On Monday, the Dow Jones industrial average swept through the previous 14,000 record threshold to trade 148.43 points, or 1.07%, higher at 14,044.06. The broader S&P 500 index rose 15.27 points, or 1.00%, to 1,541.97. The tech-heavy Nasdaq composite index gained 30.29 points, or 1.11%, to 2,731.54, a six-and-a-half-year high. The start of a new quarter after putting to bed the third-quarter's financial roller coaster seemed to be giving investors a fresh perspective on the markets. Optimism was stoked by Citigroup's saying that it sees continued growth in consumer loans and doesn't expect a consumer-led recession to result from the upheaval in the credit markets. Also, former Fed chief Alan Greenspan, in his capacity as a paid consultant by Pimco and Deutsche Bank, said the financial crisis may be nearly finished, noting positive signs such as lenders showing interest in longer term, lower quality assets in recent days, according to Action Economics.

Even Citigroup's projection of a 60% decline in third-quarter profits from a year ago, due to dislocations in the mortgage-backed securities and credit markets, and deterioration in the consumer credit environment, was greeted with a sense of relief by the markets that at least most of the bad news was being laid out on the table. The nation's largest investment bank said that, while it couldn't predict what market conditions would be, it expected earnings to return to more normalized levels in the fourth quarter, suggesting it now had a firm grasp on the extent of the asset write-offs that resulted from the credit crisis, said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati, Ohio. "The market may be extrapolating that to others [in the financial industry] as well," he said. "The credit problems are known, they're serious, but they're seen as a one-time event." Some observers on CNBC said that fresh money was being put to work in the new quarter and that much it was being channeled into equities because they're comparatively cheap relative to the high valuations of bonds at the moment. But Sparks said he suspected the news from Citigroup and UBS would have had a similar effect on Friday, before the new quarter had been ushered in.

Another important factor in Monday's rally, he said, was that after the Fed rate cut on Sept. 18, the stock market took a breather last week with some help from the Jewish holidays. It was very constructive that stock prices didn't pull back very much during last week's low-volume lull, he added. In economic data, the Institute for Supply Management reported a September index of 52, slightly below the 53 reading that was expected, and down from 52.9 in August. Although the index is down from the mid-fifties seen in June, any reading above 50 shows growth in the economy. New orders and production were down a bit, and prices paid were modestly lower. The big news this week will be the September nonfarm payrolls number that comes out Friday. People will be watching to see if it confirms August's sharp move lower, which helped convince the Federal Reserve to ease interest rates by a half-percentage point. Another negative report will boost investors' confidence that another rate cut from the Fed can be counted on, said Sparks. He predicted stocks would continue to move higher unless the jobs data was so disastrous as to suggest an all-out recession was imminent. Crude oil for November delivery in New York was down $1.61 to $80.05 a barrel, losing some momentum on a modest rally in the U.S. dollar, despite unwinding of long positions in the greenback that continued in early dealings, Action Economics said.

But after reaching a new high on Friday, the direction of crude prices continues to be mostly up, even after OPEC announced it would boost production by half a million barrels per day starting Nov. 1. Qatar's oil minister says more oil won't curb oil prices, as traders are focused on other things, such as the ongoing attraction of all commodities, CNBC said. Among the stocks in the news Monday, Citigroup shares were trading 2.4% higher despite its dark earnings forecast. UBS AG (UBS) shares wer up 3.5% after it warned about a larger-than-expected net loss of up to $690 million for the third quarter and plans to write down as much as $3.45 billion in fixed-income assets, including securities tied to subprime mortgages. The Swiss investment bank also said it would cut 1,500 jobs and announced some executive shake-up, including the demotion of the investment banking chief. Another M&A deal fell victim to the credit crisis. Acxiom Corp. (ACXM) shares plunged 22.8% after it said it had reached an agreement with private equity sponsors to cancel a $2.25 billion acquisition by Axio Holding LLC, which is controlled by Silver Lake and ValueAct Partners. The unique feature here is that the sponsors and banks will pay $65 million in breakup fees to terminate the deal.

Walgreen (WAG) fell 14.6% after it posted a 4% drop in its fourth-quarter earnings to $396.5 million, or 40 cents a share, from $412.3 million, or 41 cents a share, a year ago, on lower reimbursements for some popular generic drugs, as well as higher store and staff costs. Revenue rose more than 10% to $13.4 billion from $12.2 billion. Analysts had expected a profit of 47 cents a share and revenue of $13.5 billion. Nokia Corp. (NOK) said it will buy U.S. navigation-software maker Navteq Corp. for around $8.1 billion, or $78 per share, including outstanding options. The acquisition will allow Nokia to, the world's largest mobile phone maker, to continues to expand services and content, going up against Apple (AAPL). World equity indexes were higher on Monday. In London, the FTSE 100 index rose 0.61% to 6,506.20. Germany's DAX index gained 0.77% to trade at 7,922.42. In Paris, the CAC 40 reversed from earlier losses to climb 1.01% to 5,773.26. In Japan, the Nikkei 225 index climbed 0.36% to 16,845.96. In Hong Kong, the Hang Seng index advanced 0.29% to 27,142.47. The Shanghai composite index gained 2.64% to 5,552.30.

VNDA Submits NDA After Successful
Ph III Trial of Iloperidone
Vanda Pharmaceuticals Inc. (VNDA) submitted a New Drug Application (NDA) to the FDA for iloperidone, an investigational atypical antipsychotic for the treatment of schizophrenia. A phase III clinical trial demonstrated that the drug is a potentially safe and effective treatment for schizophrenia in both the acute and the chronic setting. In addition, iloperidone demonstrated a potentially favorable side effect profile, with low potential for weight gain and induction of diabetes, low extrapyramidal symptoms including akathisia, and low incidence of sleepiness and effects on cognition. Akathisia is a debilitating sensation of restlessness that manifests as an inability to sit still. The NDA submission also contains pharmacogenetic data aimed to further improve the benefit/risk profile of iloperidone.

Iloperidone has demonstrated efficacy in treating the symptoms of schizophrenia both in the acute and the chronic setting. Iloperidone’s binding to a number of dopamine and serotonin receptors provides a favorable safety profile on adverse symptoms, such as weight gain, extrapyramidal symptoms, akathisia and prolactin elevation. The NDA submission also contains pharmacogenetic data aimed to further improve the benefit/risk profile of iloperidone in the treatment of patients with schizophrenia.

Mihael H. Polymeropoulos, M.D., President and CEO of Vanda Pharmaceuticals Inc., said, "For a serious brain disorder like schizophrenia, which affects about three million Americans in the prime of life, it is vital that new pharmacotherapeutic agents be developed in light of the fact that existing antipsychotic treatments work partially in some patients and not others, leaving many patients continuously disabled."

Iloperidone in the treatment of schizophrenia will compete with other atypical antipsychotics such as Janssen’s Risperdal(R) (risperidone); Invega(R) (paliperidone) by Johnson & Johnson (JNJ); Zyprexa(R) (olanzapine) by Eli Lilly and Company (LLY), Seroquel(R) (quetiapine) by AstraZeneca PLC (AZN); Abilify(R) (aripiprazole) by Bristol-Myers Squibb Company (BMY)/Otsuka Pharmaceutical Co., Ltd.; Geodon(R) (ziprasidone) by Pfizer Inc.(PFE) and generic clozapine, as well as the typical antipsychotics haloperidol, chlorpromazine, thioridazine, and sulpiride (all of which are generic). In addition to the approved products, compounds in Phase III trials (or for which an NDA has been recently filed) for the treatment of schizophrenia include bifeprunox (Wyeth/Solvay S.A./Lundbeck A/S), and asenapine (Schering-Plough Corporation). The antipsychotic market is worth an estimated $10.7 billion. After 2007, the market is expected to plateau due to the genericization of Risperdal(R) and Geodon(R).

Upon commercialization of iloperidone, Titan Pharmaceuticals, Inc. (TTP) will receive a royalty of between 8-10% on worldwide sales.

In addition to iloperidone, Vanda is developing VEC-162, a compound for the treatment of sleep and mood disorders which is currently in Phase III for sleep disorders. Vanda’s third product candidate in clinical development, VSF-173, is currently in a Phase II trial for the treatment of excessive sleepiness.

At June 30, 2007, the Company had cash and cash equivalents and marketable securities of approximately $119.7 million and an accumulated deficit of $131.2 million.

Bank of America recently initiated a Buy rating for VNDA and set a price target of $23. Friedman, Billings and Ramsey reiterated and Outperform rating and said VNDA’s stock does not reflect the potential of iloperidone.

GeoEye Satellite Imagery and
Mapping Solutions Becoming Big Business
Monday’s market was met with extreme enthusiasm as the Dow soared to record highs gaining some 200 points during one point in the day. One of the more interesting announcements of the day was Nokia Corp’s bid to purchase digital map supplier Navteq Corp for $8.1 billion dollars. The deal solidifies Nokia’s move to employ and utilize more navigational tools into their phones. The acquisition also caused Garmin shares to take a hit as the company’s ability to negotiate pricing for maps will subside. Analysts also expected Garmin to bid for the company but would have had to pay in equity while Nokia could pay in cash. While the deal involves large cap companies, one company in the small cap space may receive attention following the deal. GeoEye, Inc. (GEOY) is a provider of geospatial information, imagery and solutions for the national security community, strategic partners, resellers and commercial customers to help them better map, measure and monitor the world. GeoEye operates a constellation of Earth imaging satellites, mapping aircraft and has an international network of ground stations, a robust imagery archive, and advanced geospatial imagery processing capabilities. GeoEye also owns and operates the IKONOS satellite and is nearing completion of the integration and testing of its next-generation commercial satellite, GeoEye-1. This space-based camera will provide imagery with a ground resolution of 0.41-meter panchromatic (black & white) and 1.65-meter multispectral (color). When operational, GeoEye-1 will be the world’s highest resolution and most accurate commercial imaging satellite. The launch of GeoEye-1 is slated for late first quarter or early second quarter 2008 from Vandenberg Air Force Base, California. GeoEye acquired MJ Harden Associates Inc. in March of 2007. MJ Harden offers a wide-range of high quality photogrammetry and geospatial technology services. Services based on 50+ years of experience include: image acquisition, photogrammetric mapping, GIS consulting and implementation, and mobile data solutions. Operating satellites in orbit is high risk but the Company has obtained insurance for GeoEye-1 worth approximately $270 million for launch and first-year on-orbit. In addition, the Company has received $40 million of insurance proceeds resulting from the loss of its OrbView-3 imaging satellite earlier this year. The payment represents the full amount of the insurance claim and will be recorded as a gain in GeoEye’s third quarter financial results. The Company also recently announced MJ Harden’s acceptance of Optech’s Airborne Laser Terrain Mapper (ALTM) Gemini 167 LiDAR imaging unit. MJ Harden is now able to merge imagery from their current digital mapping camera with LiDAR imagery to produce enhanced products ideally suited for large-scale mapping projects, such as mapping flood plains, coastal zones and public right of ways and corridors. This is especially important in the pipeline, oil and gas, mining, urban planning, disaster management, and utility and telecommunications industries. In any event, mapping and satellite imagery is becoming extremely important in the handset space. It will be interesting to follow the area over the coming months to see how it shakes out. With GeoEye’s newest satellite to take flight early next year, top line revenue could grow at large proportions. Over the short term, shares could get a boost on the Navteq acquisition. Investors would be wise to watch.

Idenix Pharmaceuticals Decline Continues
in Monday’s Session on Restructuring Plan
Shares of Idenix Pharmaceuticals, Inc. (IDIX), a component of the Nasdaq Biotechnology Index, continued their decline in Monday’s session following a trade halt on Friday. The Company announced a restructuring plan and discontinuation of all development, manufacturing and commercial activities for hepatitis B drug, Tyzeka(R) (Sebivo(R) in Europe), with Novartis (NVS). Novartis will continue development, and Idenix will receive a royalties on worldwide product sales. Currently, Novartis owns 56% of Idenix and has first right of refusal to Idenix’s pipeline. As a result of these changes, Idenix is reducing its workforce by approximately 100 positions (approximately 33%), the majority of which support the development and commercialization of Tyzeka/Sebivo in the United States and Europe. The Company will now focus on its hepatitis C and HIV/AIDS programs. A non-nucleoside reverse transcriptase inhibitor (NNRTI), IDX899, for the treatment of HIV-1 is being evaluated in phase I/II clinical testing. Preclinical evaluation of compounds from a hepatitis C discovery program is in progress. This program is focused on the three primary classes of drugs for the treatment of hepatitis C, which include nucleoside polymerase inhibitors, protease inhibitors and nonnucleoside polymerase inhibitors. Currently, there is no vaccine that can prevent hepatitis C. Infections are expected to increase 180% over the next 20 years. Current approved treatments in the United States for hepatitis C include interferon and pegylated interferon administered by injection alone or in combination with ribavirin. The FDA recently placed the Company’s development program of valopicitabine (NM283) for the treatment of hepatitis C on clinical hold in the United States based on the overall risk/benefit profile observed in clinical testing. The Company does not plan to continue the development of valopicitabine. As a result of the restructuring, Idenix will incur between $5 million and $10 million in charges. It estimates that this restructuring will result in savings of $40 million to $45 million on an annual basis. The Company continues to expect to end 2007 with between $100 million and $110 million of cash, cash equivalents and marketable securities. As of June 30, 2007, its accumulated deficit was approximately $391 million. "We have taken the steps necessary to streamline our organization and significantly reduce our expenses, while continuing to maintain the strength of our balance sheet," said Ronald Renaud, Jr., chief financial officer of Idenix. "We believe that we are now well-positioned to fund the advancement of our HIV and HCV discovery and development programs through 2009." Morgan Stanley analyst Steven Harr has reaffirmed an Equal Weight rating on IDIX. He said that the restructuring initiatives were expected, given Tyzeka’s slow launch and clinical trial halt of hepatitis C compound over safety concerns. He noted, "This move could open the doorway for interesting returns over the next several years for investors interested in high-risk, low market cap biotech." Friedman, Billings, Ramsey analyst Jim Reddoch reaffirmed a Market Perform rating with a $5 price target. He estimated the Company will get a 15 percent worldwide royalty rate on Tyzeka, though the Company has not disclosed a figure.

Nanogen Awarded Two US Patents
re Nucleic Acid Detection and Genotyping
Nanogen, Inc. (NGEN) has been granted a U.S. patent, titled "Abasic site endonuclease assay." The technology described in the patent extends the underlying proprietary real-time PCR technology used in the Company’s MGB Alert(R) products to a new product offering that has been commercialized as research reagents for use in replication validation following genome wide scanning in pharmaceutical and biotechnology industry labs. This technology can also be used for genetic analysis in multiplex formats of complex genetic diseases. Nanogen has also been awarded U.S. patent, "Real-time linear detection probes: sensitive 5’-minor groove binder-containing probes for PCR analysis," related to the probes employed in its MGB Alert(R) line of reagents. These probes are an important part of the Company’s proprietary product offering designed to assist clinical laboratories in developing molecular diagnostic tests that will detect genetic sequences associated with pathogens including those often tested in immunocompromised patients such as cytomegalovirus, Epstein-Barr virus, and enterovirus.

BEGINS SHIPMENTS: The first shipments of DUSA Pharmaceuticals, Inc.’s (DUSA) Levulan(R) Kerastick(R) have been released to Argentina and Mexico where it will be officially launched through its marketing partner for Latin America, Stiefel Laboratories, Inc. In Latin America, Levulan has regulatory approval in Argentina, Mexico, Chile, and Brazil (where launch is pending receipt of acceptable pricing approval), with approvals and subsequent product launches in additional markets scheduled to follow shortly. Levulan Photodynamic Therapy (PDT) is a 2-step treatment for Grade 1 or Grade 2 actinic keratoses of the face or scalp. Actinic keratoses (AKs) are rough textured, dry, scaly patches on the skin, caused by excessive exposure to ultraviolet (UV) light. The treatment uses a light activated drug therapy to selectively destroy actinic keratoses. The therapy consists of treatment with Levulan(R) Kerastick(R) Topical Solution, 20% followed by illumination with a blue light source, BLU-U(R). Kerastick is the proprietary applicator that delivers Levulan. Most major private insurers have approved coverage for this therapy. The BLU-U(R) light alone is FDA cleared for light alone treatment of moderate inflammatory acne. The BLU-U is not a laser. Lasers deliver light as coherent beams, while the BLU-U delivers incoherent light scattered over a larger area. Treatments are simple, short (15 minutes), and painless. The Company is also conducting a Phase II study examining the use of Levulan(R) PDT for the treatment of moderate to severe acne. Results from this study are expected by the end of the third quarter of 2008. Other dermatology products of the Company include Nicomide(R), an oral prescription vitamin supplement, and Nicomide-T(R), a topical cosmetic product. Both products target the acne and acne rosacea markets. The AVAR(R) line of products includes a number of leave-on and cleanser formulations of sodium sulfacetamide and sulphur, a drug combination with anti-acne and anti-inflammatory properties. ClindaReach(TM) is a medicated pad with a proprietary wand applicator for use in the treatment of acne of the back. As of June 30,2007, the Company had an accumulated deficit of approximately $126.7 and $3.0 of cash and cash equivalents. DUSA is also seeking to expand its distribution in Asia. It has entered into a marketing and distribution agreement with Daewoong Pharmaceutical Co., granting Daewoong exclusive rights to distribute the Levulan(R) Kerastick(R) in certain Asian countries. Regulatory submissions for Korea have been filed, and the regulatory approval and launch are expected during the first quarter of 2008.

ANNOUNCES THREE CONTRACT WINS: Yucheng Technologies Limited (YTEC) announced three contract wins to provide call center solution and implementation services to China Construction Bank, one of top four commercial banks in China. Yucheng will be assisting China Construction Bank with its call center integration of five provinces, as well as the upgrade and capacity expansion of its national credit card call center. These three contracts amount to RMB 67 million (approximately US$8.9 million) and the projects are expected to be completed by the end of this year.

REINSTATES FANNIE MAE LOANS: Tarragon Corp. (TARR) announced that it has entered into an agreement with the Federal National Mortgage Association, or Fannie Mae, to reinstate a combined $79.6 million in loans it made to Tarragon and/or its affiliates. In addition, Tarragon has restored loans from five other lenders totaling $56.6 million to good standing, and has reached an agreement in principal with another lender to reinstate an additional $73.2 million in loans in connection with the proposed sale of a property anticipated to close by October 15, 2007.

ANNOUNCES REORGANIZATION AND WORKFORCE REDUCTION: SXC Health Solutions, Inc. (SXCI) unveiled a re-alignment plan to optimize its cost structure and enhance its growth prospects. This program is expected to generate annual cost savings of approximately $3.0 million, a portion of which will be re-deployed to support the fastest growing segments of the Company’s business. To generate cost savings, the Company has reduced its workforce by approximately 7%. These reductions were focused on the provider and administrative segments of the business. SXC will incur one-time severance costs of approximately $0.8 million, which will be reflected in the Company’s third quarter fiscal 2007 financial results. Starting in the fourth quarter and into fiscal 2008, SXC intends to hire new personnel in sales and to support the areas of the business with the most promising growth opportunities. SXC is lowering its 2007 guidance for fiscal 2007 to $92-$93 million and EPS of $0.51-$0.55.

TO CONSTRUCT SOLAR SYSTEM: WorldWater & Solar Technologies (WWAT) announced it will engineer and construct a 2 Megawatt solar system at Denver International Airport (DIA). MMA Renewable Ventures LLC, a subsidiary of Municipal Mortgage & Equity (MMA) will finance the installation through a Power Purchase Agreement. WorldWater will begin construction of the project immediately for completion in 2008. MMA Renewable Ventures will own and operate the system under a long-term PPA contract.

COMPLETES FIRST BIPV GLASS ROOF SYSTEM: Canadian Solar Inc. (CSIQ) announced that it has completed the first BIPV solar glass roof system, with glass-on-glass solar modules, in Henan Province in collaboration with China’s Luoyang Polysilicon Company. CSI was the sole supplier of the solar glass technology, the specialty BIPV modules, and acted as the integrator of the complete solar power system.