Dow Jones 12027.42 -53.31 1:12 pm PST, November 1, 2006 NASDAQ 2334.19 -32.52 For info, visit access.smallcapnetwork.com S & P 500 1367.96 -9.98 Change your subscription status here Russell 2000 751.92 -14.92 VOLUME 06: ISSUE 87 Jonas Salk's Legacy - New Life for the Stock? When's the last time a 3 cent move for a stock meant more than a 100% gain for your position in it? Interested in the possibility? We've got one with that kind of potential today, and it's an idea that will simultaneously allow you to own a piece of the battle against two major illnesses. Immune Response (OTCBB: IMNR) is currently trading at only 2 cents. The price in itself is no big deal - there are plenty of stocks trading at 2 cents, some of which are on their way to even lower prices. However, Immune Response's legitimacy makes it a completely different kind of speculation...one with a considerably more compelling story than the penny stocks you usually hear about (you know, the ones with more hype than hope).  Yes, Immune Response is a real company, with real assets, and real potential. If this biotech company's two key drug projects perform well as they proceed through Phase II testing, we won't be surprised to see two effective vaccines as a result.....one for Multiple Sclerosis, and the other for HIV (two healthcare needs worth supporting, regardless of the price). They've got some other projects in their back pocket too, but we'll look at those in another newsletter.  The stunning part of our research - and frankly, where we think the sweet spot of its potential lies - is in Immune Response's capitalization. Comparable biotech companies can have ten times the capitalization Immune Response has, if not more. Priced at two cents each, the 850 million currently outstanding shares translates into a market cap of roughly $17 million. The 'average' biotech capitalization? About $250 million. While we don't want to downplay the risk factors involved with therapies only in Phase II testing, we also can't ignore the fact that an independent valuation study, factoring in the fact that their two lead drugs are in Phase II testing, estimated Immune's market cap should also be somewhere around $200 million...right up there with its peers. While there's the potential for some share dilution in the near-term, even a fully-diluted valuation at two cents per share would get the market cap up only to about $50 million.  Where's the rest of the market cap going to come from to close the gap between $50 million and $200 million? That's the point...price appreciation would fill the void. So the next question is, are the two lead drug therapies going to be able to inspire real interest in the stock? We think so, but we'll also let you decide for yourself.    Two Key Vaccines In The Works As stated above, Immune Response is presently focusing on two much-needed therapies. While we don't want to get bogged down by the science behind a company that's a potential investment, in Immune Response's case, we know you'll be interested in reading what it's all about.  NeuroVax is the company's answer to the root problem of Multiple Sclerosis, which is simply the patient's own immune system attacking the body's own nerve cells. In most cases, MS eventually wins the war. NeuroVax is promising, as it appears to regulate the immune system in a way that prevents it from damaging the nervous system. Note that the brain is actually part of the nervous system, which highlights the degree of need for a therapy of this nature.  NeuroVax is now entering Phase IIb trials, and will monitor results for about 200 patients in Eastern Europe (some will be part of a placebo control group). Of course, the real question is whether or not NeuroVax is any better than the current treatments. Well, think about this...NeuroVax is injected once per month, while the popular alternative, interferon, must be injected 2 or 3 times per week. There's another alternative that can be administered monthly, but it's delivered intravenously. As for effectiveness, 90% of NeuroVax patients show (so far) a strong yet specific response. There are no serious side effects either. So overall, it's very encouraging. The estimated size of the annual MS market is $5 billion....and of all the current players in the market, none of them seem to perform as well as NeuroVax without a heavy dose of downside included.  IR103, as it is named so far, is Immune Response's second generation product designed to fight the AIDS-causing human-immunodeficiency virus (or HIV). The patented treatment stimulates a patients own immune system to more effectively fight HIV on its own. Who designed the technology ultimately behind IR103? None other than Dr. Jonas Salk, who founded the company in 1986. And yes, it's the same Jonas Salk who developed the first polio vaccine.  IR103 is also in Phase II trials in select European countries as well as in Canada. What's interesting about Immune's Phase II trial of IR103 compared to Phase II trials of other companies is the depth with which Immune Response is conducting this level of testing. Basically, they want the Phase II sample size to be big enough to ensure there are no surprises in Phase III....a wise move in our opinion, since the scrutiny bar is raised during Phase III. Smooth sailing in Phase III is likely to get IR103 to the market much sooner, which depends on a relatively conclusive Phase II.  Current methods of treating HIV and/or AIDS do indeed exist, but most - if not all - have a drawback. For starters, using many of the drugs demands a very strict dosage schedule. Of course, the more difficult a regimen is to follow, the more likely it is to not be followed. Other limitations of current treatments include anything from nausea and fatigue to liver damage and pain. Obviously if the treatment creates more problems than it solves, it's really tough to call it a treatment. Finally, in the end, HIV is never really 'beat'. The virus can replicate very quickly, and mutates very easily. So, treatments can lose effectiveness over time. Immune's IR103 is a novel vaccine approach that can potentially avoid some of the inherent problems of antiviral therapies presently being used.  While the global AIDS market is tough to size due to the multiple types of therapies available, we do know that more than $7 billion is spent on HIV anti-retrovirals each year, and the number is projected to keep growing. IR103 is not actually an anti-retroviral, but would compete within the same market if approved.  Final results for Phase II trials of both drug therapies are expected in early 2008. At that point, if things go as hoped in Immune's thorough Phase II testing, the trials will proceed into Phase III testing - the final stage of the FDA approval process.    The Opportunity Although as an investor we'd rather be through the tunnel rather than just see the light at the end of it, it's worth noting the market has a tendency to reward biotech 'milestones' via price appreciation. As a drug progress from Phase I all the way to a final FDA approval, the risk/reward scenario changes; at each stage of development, a more promising picture makes a stock a little more attractive. So, don't assume the stock isn't going anywhere until the drugs actually hit the market. And for that matter, we're not even saying NeuroVax and IR103 are definitely going to proceed into Phase III. The fact is, they might not. All we're saying is what we've seen so far is very promising, and the potential of both therapies - if they do get to the market - is enormous...far greater then the risk. Between the two markets, Immune Response is looking at more than $10 billion up for grabs on an annual basis. But yes, there is still risk involved. However, that's where the rewards are.  To detail a point we made earlier, the attractive part of the opportunity with Immune Response is in its currently-small market capitalization...the path to a commensurate capitalization of, say the $200 million we discussed, will mostly come in the form of price appreciation. So what's the deal with potential dilution?  In simplest terms, the 850 million currently-issued shares could potentially become about 2.5 billion shares, through a combination of outstanding warrants and convertible debt. Before you raise your eyebrows, understand two key points. First, the exercise price on the warrants and convertible notes is 2 cents, as is the current open-market price. So, any new stock issued from the warrants now - or the notes later - isn't necessarily going to negatively impact today's buyers (although the deal's announcement back in June was what sent shares from 8 cents to 2 cents). And second, while the number of shares will increase, if they do so, it results in a major cash infusion for the company. How much? Of the remaining 600 million warrants that expire at the end of November, if all are exercised, it would put $12 million in cash into the company's fund pool. Is that a lot? Plenty. The company spends about $1 million per month, so the November warrants alone could fund an entire year. (And on a side note, we also have to wonder of the November warrant expiration will be a load taken off the stock's back. The company has the right to extend the expiration, but if they don't, we won't be shocked to see shares start to appreciate again, once that threat is wiped away. We'll look at that closely when the time comes.) As for the notes, the time frames on those are well into next year, and beyond.  By the way, as we mentioned earlier, shares priced at only two cents translates into a fully-diluted $50 million market cap for IMNR. The manufacturing facility alone - located in Carlsbad, CA - is worth $75 million. Do the math here....the worst-case-scenario, despite being very unlikely in our opinion, is still financially advantageous to anybody who was able to scoop up some shares at 2 cents. Even making an adjustment for real estate's illiquidity still puts the minimum book value of this stock right where it is now. But like we said, we think the momentum is pointed in the other direction.    Already Endorsed?  The nice part of possibly issuing all those shares is, they don't immediately need the money. Between the March convertible note deal and the warrants that expired in August, Immune Response raised $18 million. And honestly, that's the one compelling point we really want you to digest - this company just raised $18 million from the 'smart money' players....the ones who can get involved in private placement deals, and the ones who see the potential of Immune Response. Heard the phrase 'money talks'? That may apply here; some big money just endorsed Immune Response, so maybe the smaller retail investor should listen. And at 2 cents per share, what's the worst that could happen? (You could lose two cents per share.) Obviously betting the farm would be foolish, but we think a lot of speculators are going to be willing to take a calculated chance with this stock, now that $18 million has already been put on the table.  While we try to avoid the price target game, more than one valuation (even based on full dilution) has established a target of 5 cents or more, with a high end target of 9 cents. We don't necessarily disagree; those prices are certainly in line with market cap valuations in the $200 million range we discussed above.  In any case, that's the story on Immune Response. If you were impressed, you weren't alone. It seems like for a lot of smaller companies, there's one illness or another that could potentially infect, then kill, the whole organization. For Immune Response though, we really didn't see any chinks in the armor. The only potential headache - the dilution associated with issuing shares via the November warrants - is a 'known' issue. And, it's not even necessarily a problem; there will be more outstanding shares with each exercised warrant, but there will also be more cash (up to a year's worth of cash, in fact). While all stocks include some kind of risk, we think IMNR shares pose a smart kind of risk that savvy investors tend to seek out....the kind with a limited downside relative to a very generous upside.    The Last Word  Whew! OK, we know it was a long one today, but definitely worth it...when the opportunity is strong, the words just keep flowing. The thing is, we've only scratched the surface. Over the next several weeks we'll be detailing the incredible qualifications of Immune Response's CEO, the role of the scientific legacy of Jonas Salk, the likely time frames for both of the lead drugs, and the progress of the company's financing decisions. We're looking forward to telling the rest of this incredible story.      We Value Your Feedback   Got comments, questions or suggestions? Send 'em on over: Editor@smallcapnetwork.com If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 4653 Carmel Mtn Rd Suite 308 #402 San Diego, CA 92130 On The Go Reports Full Year Results Would you be impressed by a 439% increase in sales? Yeah, we were too when On The Go Technologies (OTCBB: ONGO) reported that improvement in their full-year results. Last fiscal year (ending in July) the company posted $5.5 million in revenue, but thanks to some key acquisitions, On The Go was able to rake in $30.0 million in sales this year. Not bad, huh?  Of course, there's more to life than just the top line. All the other lines, for better or worse, were proportional to the 'then' from a year ago. The per-share loss this year was 65 cents, versus a per-share loss of 59 cents a year ago. On a bottom line basis, the company lost $6.3 million, compared to a $1.0 million loss last year. The cost of sales as a percentage of revenue went from 18% to 16%. Like we said, the accounting statements were basically proportional.  What's our take? Click here to read more, and get the complete copy of the fiscal results.    Biocurex & RECAF To Be Featured On Television Earlier this week we learned Biocurex's (OTCBB: BOCX) RECAF cancer test is going to be the topic on an upcoming episode of television's 'Your Cancer Today'. This highly-focused show has the potential to introduce the cancer-detection tool to a very interested audience, perhaps continuing to expand knowledge of RECAF, and therefore, expand the market for RECAF.  We encourage you to watch the show, which will be airing this weekend. For local airing times, be sure to visit the program's website www.YourCancerToday.com.  For the full press release, click here.    Ticker Changed for Siena Technologies (a.k.a. Network Installation) We first mentioned Network Installation (OTCBB: SIEN) was changing their name to Siena Technologies in a blog entry from last Thursday. At the time we didn't know of any new ticker in the works, but we've now learned the ticker has indeed been changed....to SIEN. You may find that both (or neither) tickers work for your particular quote service for the time being. Be sure to give it a couple of days for all the data to propagate.  As for trading this company's stock, nothing has changed - the company is still doing well, but the stock is still struggling. However, it's also worth noting the downturn that plagued shares last year has at least turned into a flattened consolidation ....perhaps this is a base that SIEN shares could build a rally on.  Subscribe Information is power and timely information is profitable. Become informed and profit from SmallCapDigest Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. Add your email address below and make sure to check your email inbox and confirm your opt-in request to start receiving the SmallCapDigest Email Newsletter on a regular basis. To ensure newsletter delivery, you can add any additional email addresses you may have to the SmallCapDigest Member List. Receiving the SmallCapDigest Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! For web based email addresses, the SmallCapDigest recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. Subscribe Here Note: Your email address will be kept strictly confidential, and will not be shared with any other entity for any purpose at any time. If you no longer wish to receive the SmallCapDigest, simply follow the instructions located at the bottom of every SmallCapDigest Newsletter Edition. Unsubscribe Here D I S C L A I M E R: The Small Cap Digest, the Small Cap Network, its website and email newsletter (hereafter, cumulatively referred to as "SCD") , is an independent electronic publication committed to providing its readers with factual information on select publicly traded companies. SCD is owned and operated by TGR Group, LLC ("TGR"). TGR is not a registered investment advisor or broker-dealer. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible.  Moreover, as detailed below, TGR accepts compensation from third party consultants and/or companies, which it features in the publication and circulation of SCD. To the degrees enumerated herein, SCD should not be regarded as an independent publication.  Click Here or go to http://access.smallcapnetwork.com/compensation_disclosure.html to view our compensation on every company we have ever covered, or visit the following web address: http://www.smallnetwork.net/profile_disclosure.html for our full profiles and http://access.smallcapnetwork.com/short_term_alerts.html for Trading Alerts.  TGR Group, LLC has been paid a fee of $30,000 cash and 10 Million shares of newly issued restricted stock by Immune Response Corp. for coverage of the Company. TGR Group, LLC has been paid a fee of $30,000 cash and 20,000 shares (reverse split adjusted 08/09/06) of newly issued, restricted stock by On the Go Technologies Group for coverage of the Company. TGR Group LLC has been paid a fee of $30,000 and 200,000 newly issued restricted shares of Network Installation for coverage of the company. In addition, one of the principles of TGR Group LLC is also a principle of MarketByte LLC. In a separate contractual relationship in 2003, MarketByte LLC was paid a fee of $25,000 in cash and 500,00 newly issued, restricted shares by Network Installation for coverage of the company. The term of MarketByte's obligation to Network Installation has expired. The aforementioned 500,000 shares issued to MarketByte LLC have become free trading, and whatever number remains could be sold at anytime. This should be viewed as a potential conflict of interest. In October of 2003, TGR Group LLC was paid a fee of $25,000 and one million newly issued restricted shares by Biocurex for coverage of the Company. Under SEC Rule 144, all one million issued restricted shares have been eligible for sale into the public market since October of 2004. In addition, on March 22, 2005, TGR entered into an extended agreement with Biocurex for a fee of 25,000 newly issued restricted shares and on July 1, 2006 TGR entered into another extended agreement with Biocurex for an additional 100,000 shares of newly issued, restricted stock. From time to time TGR sells shares received as compensation for coverage of client companies. Shares received are sold in the open market. Since the shares are received as compensation for services as previously disclosed, and not for investment purposes, TGR does not view the sale of the shares as contradictory to any opinions delivered in the content. 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