Subject: Market Pulled Down by Big Technology Issues Date: Published: 4/5/89 (123 lines) Source: Wall Street Journal. Copyright Dow Jones & Co. Inc. OTC Focus: Market Decreases in Active Trading, Pulled Down by Big Technology Issues ---- By Sonja Steptoe Staff Reporter of The Wall Street Journal NEW YORK -- The over-the-counter market slipped in active trading, dragged down by its giant technology issues. The Nasdaq Composite Index eased 0.47 to 407.18 on 139.6 million shares. The retreat by computer-related issues was in lock step with declines) by technology issues on the New York Stock Exchange. The Nasdaq 100 Index of large nonfinancial issues was off 0.59 to 371.07. The index of its biggest financial stocks gained 0.73 to 399.61. Among the technology stocks that finished lower were Intel, down 1/2 to 25 3/8, and Apple Computer, which eased 1/2 to 34 1/2. Sun Microsystems was down 1/4 to 15 7/8. But Seagate Technology gained 1/2 to 12 1/8, and MCI Communications jumped 1 1/4 to 29 7/8. Among other active issues was KinderCare Learning Centers, which added 3/4 to 8 7/8 on 2.5 million shares. The stock has moved on takeover talk in the past, but there was little of that yesterday, Dow Jones Professional Investor Report said. The company's president told the news wire that there was nothing newsworthy going on at the child-care, educational, specialty retailing, insurance and financial services concern. Vipont Pharmaceutical lost 1 1/2 to 9 1/2 on a million shares. The company is facing a challenge from the Food and Drug Administration over the status of its Viadent toothpaste and oral rinse. The agency says the products might have to be reclassified as drugs, which would make them subject to much tighter regulatory scrutiny. The company says they are cosmetics. Lately, some OTC market investors and brokers have focused on smaller stocks because they are expecting big gains from the group. But Scott Black, president of Delphi Management, a Boston money management company that invests in stocks with small market capitalizations, says he doubts that small issues are on the verge of such a strong showing. It's true, he says, that the Nasdaq composite and the Russell Index of 2000 small stocks have lagged behind larger issues, as measured by the Standard & Poor's 500-Stock Index, in almost every year since 1983. Cumulatively, the S&P 500 has leaped 148% over the past six years, while the Nasdaq composite is up only 64% and the Russell 2000 has added 88%, according to his calculations. But Mr. Black doesn't think much of the argument that small issues in general are bargains now just because they have been valued lower in the past. "There are a lot of junky companies that deserve to be selling (at low prices)," he says. "A lot of them are low-priced (because) they don't offer a decent return on equity." Currently, he says, the few undervalued OTC stocks he has found are regional bank issues, such as CCNB and First Tennessee National. Nowadays, Mr. Black says, truly undervalued small stocks don't stay ignored or undervalued for long. "Computers have made (stock) pricing more efficient," he says, and companies whose shares really are underpriced tend to be snapped up by other companies. Elsewhere, Imreg dropped 3/4 to 3 1/2 on 591,900 shares amid concern about the company's future if it doesn't get FDA approval of its compound for treating the condition known as AIDS-related complex. The New Orleans company, whose average daily trading volume is about 65,000 shares, is scheduled to meet Friday with an FDA advisory committee that is reviewing the compound, Imreg-1. A person with AIDS-related complex has a deteriorating immune system but isn't classified by federal health authorities as having acquired immune deficiency syndrome, according to James McCamant, editor of the Medical Technology Stock Letter. He said he hasn't recommended the stock because he believes the company's testing methods and results won't satisfy the FDA. David Garcia, an analyst at Howard Weil Financial, New Orleans, said Friday's meeting will be "a bet-the-company type of event." Mr. Garcia said he has believed since late last year that an outright denial of FDA approval for the compound would be "a crippling blow" to the company. He said this year that the company will use most of the $2 million in cash it had as of Dec. 31, 1988. "I don't know where you go without regulatory approval and no money," Mr. Garcia said. Clifford Kern, an Imreg spokesman, said the company has been trying to get special limited approval of its compound under rules that apply to drugs treating life-threatening diseases such as AIDS. The FDA deferred a decision on Imreg-1 when it considered the company's request last November. The special rules allow companies to make available to patients certain drugs that haven't been fully approved. The companies don't receive revenue from the users, but they can recover some development costs. Mr. Kern acknowledged that without the special approval, the company's development costs will "run up." But he said the company is prepared to do "whatever is necessary" to move the drug through the regular approval process. Timberjack jumped 4 1/8 to 24 after the company said it received a "conditional offer" from Rauma Repola, Helsinki, Finland, to purchase all its stock for $25 a share. Rauma Repola makes and distributes timber harvesting equipment and has had a joint-venture marketing arrangement with Timberjack since December 1986, the companies said. Paccar added 3/4 to 48 3/4 on 154,700 shares. Financier Harold Simmons said Paccar is one of three industrial concerns in which he plans to invest. He also said he might seek to acquire at least one of the companies. Mentor gained 1/4 to 12 3/4 on 369,000 shares. The maker of health-care products and medical devices said it will realize a gain on the sale of certain assets to Carter-Wallace. Jiffy Lube International fell 1/2 to 5 on about 1.2 million shares. [This article is made available here by Dow Jones Co. for the personal and non-commercial use of callers to this bbs, in the hope that it will be of some help to those who are suffering from the disease and others who are seeking to help them.]