Stock Market Chumps..........9-26-06

Merix Corp. (MERX)

Last Trade:	10.29
Trade Time:	4:00PM ET
Change:	3.76 (26.76%)

Shares of Merix Corp. tumbled Tuesday, after the maker of printed circuit boards lowered its earnings outlook for the fiscal first quarter.

In making the revision, the Forest Grove, Ore.-based company cited higher raw material costs and outsourcing and pension costs in Asia.

Shares of Merix fell $3.51, or 25 percent, to $10.54 in late trading on the Nasdaq Stock Market. Tuesday's weakest level, on heavy volume, was $10.34. On a 52-week basis, there was a low of $5.10 last Sept. 28 and a high of $14.39 on Monday.

After market close Monday, Merix said it expects first quarter, per-share earnings of 15 cents to 17 cents, compared with an earlier forecast of 25 cents to 30 cents.

Excluding items, Merix expects per-share earnings for the quarter ended Aug. 26 of 19 cents to 21 cents. That's down from an earlier forecast of 31 cents to 35 cents.

Analysts surveyed by Thomson Financial had forecast, on average, first-quarter earnings of 31 cents a share. Such estimates typically exclude items.

"We do owe our investors bottom-line profitability enhancement with the revenue growth," said Merix Treasurer Lynda Ramsey, who called the market's reaction to the news disappointing. "We have some work to do to get our margins back in line. Overall, it's still a very healthy environment."

But analyst Kevin Kessel of Bear Stearns said in a research report that he expects printed circuit board makers to struggle with passing through higher costs.

The company has said its supplier of copper laminate, which increased prices in July, plans to raise them again in October.

Kessel cut his rating on the stock to "underperform" from "peer perform" on Tuesday. He doesn't have a position in the stock. Bear Stearns doesn't have an investment-banking relationship with Merix.

While Merix and competitor TTM Technologies Inc. are facing higher costs, "the issues with Merix are more company-specific," analyst Shawn Harrison of Longbow Research said. Harrison doesn't own shares of Merix. Longbow doesn't have an investment-banking relationship with the company.

"TTMI has no Asian operations," Harrison said. "Merix generates approximately half their revenue from Asia, where raw materials are a significant portion of their cost of goods sold."

Merix is talking with customers about raising prices for the first time, Harrison said. The company's current contracts in the automotive sector, which account for 16 percent of revenue, don't include escalator clauses for raw material costs, he added.

"Once these issues work out, things will begin to normalize," Harrison said. "That will take at least two quarters for Merix."

Ramsey said that, while the current automotive contracts don't include escalators, the company will be including those in this fall's negotiations.

Bear Stearns analyst Kessel cited "moderating demand" in cutting his rating on the stock.

Ramsey said Merix hadn't seen any slowdown in orders, but wouldn't speculate on whether one might develop.

"The only thing we can refer to is what we see in our own factories," she said. "We have seen very slight softening in Asia, but our North American demand is still extremely strong."

CytRx Corp. (CYTR)

Last Trade:	1.3500
Trade Time:	4:00PM ET
Change:	0.4800 (26.23%)

Biopharmaceutical company CytRx Corp. said Monday a mid-stage study of its Lou Gehrig's disease treatment candidate showed the drug was well tolerated, and it plans to continue development.

However, shares of the company tumbled because the drug had no statistical significance on disease progression.

The goal of the Phase IIa clinical trial was to study the safety of arimoclomol in treating the disease, also called amyotrophic lateral sclerosis. The 10-center, double-blind and placebo-controlled study dealt with three dose levels given three times daily for 12 weeks and involved 84 patients. But the study showed there was no statistical significance in treating the disease.

The company said it expected that result, based on the study design's scale and scope, which was focused on safety and tolerability, not efficacy.

Shares of CytRX fell 48 cents, or 26.2 percent, to close at $1.35 as trading volume surged to nearly seven times its three-month average. The stock has traded between 85 cents and $2.30 over the last 52 weeks.

No statistically significant increases in adverse events were reported as compared with placebo. CytRx said it will continue on with a Phase IIb clinical trial, which will focus on the drug's effectiveness in treating the disease. It hopes to start that study in the first half of 2007.

"The results of the Phase IIa trial are encouraging for the future development of arimoclomol in that even the highest dose was shown to be safe and well tolerated in a patient population that has virtually no treatment options," said Jack Barber, senior vice president of drug development, in a statement.

Secondary endpoints, or measurements, of the study, also showed the drug was well absorbed by the body, specifically, by passing the blood-brain barrier. Preliminary analyses shows the drug entered the cerebral spinal fluid effectively, marking the breaking of an important barrier for drugs intended to treat neurodegenerative diseases.

The Phase IIb clinical trial, which is still in a planning stage, will likely involve about 390 patients at between 30 and 35 clinical sites.

Advanced Medical Optics Inc. (EYE)

Last Trade:	38.75
Trade Time:	4:00PM ET
Change:	7.55 (16.31%)

Advanced Medical Optics Inc. plunged Tuesday, a day after the maker of eye care and eye surgery products slashed its 2006 outlook, prompting analysts to offer contradictory investment advice.

The company's products include Complete brand lens solutions and cataract, glaucoma and laser eye surgery devices and services.

Shares of the Santa Ana, Calif.-based company lost $5.72, or 12 percent, to $40.58 in midday trading with 12 times its average daily trading volume. The stock has traded in a 52-week range of $32.04 to $52.90 and is up about 11 percent from the beginning of the year.

Prudential Equity Group analyst Larry Biegelsen downgraded the company to "Neutral Weight" from "Overweight," and said he expects demand for artificial lens implants and laser correction volume to continue to slow. The implant products enjoy very high margins of about 95 percent, the analyst wrote.

But Merrill Lynch analyst Lee E. Brown took an opposite view, and advised investors to buy in while shares are down. He reiterated a "Buy" rating but reduced his target price to $54 from $57.

The company is repositioning itself for future growth that could boost returns in the long-term, the analyst said.

"Thus, despite some unexpected disappointments along the way, we continue to believe Advanced Medical will reward investors who are willing to stay the course," wrote Brown.

The company on Monday said it now expects adjusted profit for 2006 at $1.90 to $1.95 per share on revenue between $1.01 billion to $1.02 billion, while analysts polled by Thomson Financial expect profit of $2.10 per share on revenue of $1.03 billion.

Advanced Medical forecast 2007 earnings per share of about $2.60 on an anticipated $1.1 billion in revenue, while analysts predict profit of $2.69 per share on revenue of $1.11 billion.

The company blamed a sluggish shift in its sales mix to premium-priced products, softer-than-expected domestic laser vision correction volumes, government reimbursement pressures overseas and recent strikes by European surgeons who use Advanced Medical's cataract products.