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STOCK WATCH : Viratek Soars on Drug Test Results : AIDS Treatment Speculation Fuels Leap to All-Time High

May 25, 1986|Robert Hanley

Buoyed by speculation concerning test results of the drug Virazole among AIDS patients, Viratek Inc. continued its dramatic climb last week to hit a new all-time high of $37.75 a share in extremely heavy volume.

Closing Friday at $37.50 a share, up $7.75 for the week, more than 571,500 shares of Viratek, or 16.4% of its outstanding shares, changed hands. Friday's close was up an even $1 from Thursday.

Officials of ICN Pharmaceuticals Inc., which owns a majority stake in the Costa Mesa drug maker, say there is no news coming out of the company to explain Viratek's strong performance.

At the opposite end of the spectrum, Comprehensive Care Corp. hit a new 12-month low Friday amid news that the company expects to post its first yearly earnings decline and has laid off workers for the first time in its 13-year history.

In volume of 884,800 shares traded, CompCare slid to a low of $13.50 on Friday before rebounding slightly to finish the week at $13.75 a share, off $1.75 for the week. Traded over the counter, more than 5% of CompCare's outstanding shares changed hands last week.

The Irvine-based provider of drug- and alcohol-abuse treatment programs said this week that net earnings for fiscal 1986, which ends May 31, will be off 10% from last year's net earnings of $17.2 million.

Meanwhile, earnings and investment prospects may be looking up for semiconductor makers. As the industry begins to emerge from a long-running slump, one company likely to post a strong rebound is Silicon Systems Inc., suggests technology analyst Jay Vleeschhouwer of the Los Angeles investment firm of Cantor, Fitzgerald & Co.

In a research report released this month, Vleeschhouwer upgraded his "hold" recommendation to one that suggests that investors "buy on weakness," essentially at under $16.375 a share. Now selling in the mid-$16-a-share range, off slightly from $17 a share a week ago, Silicon Systems currently is an "attractive buy" now, he told The Times.

Although the Tustin chip-maker reported lower net earnings of $105,000 for the fiscal second-quarter ended March 29, off 87% from $822,000 a year before, Vleeschhouwer said the return to profitability from the first-quarter loss came one quarter sooner than he had expected. Vleeschhouwer had expected the company to lose at least 12 cents a share, or about $800,000 in the quarter.

Earnings to 9 Cents a Share

The current quarter should be more even more encouraging, Vleeschhouwer said, with third-quarter net earnings likely to range between 6 and 9 cents per share, or $398,000 to $597,000. This contrasts with net earnings of 4 cents per share, or $261,000 a year ago.

Revenues for the quarter, he estimates, will total about $18 million, up 62% from $11.1 million last year.

For all of 1986, Silicon Systems is likely to "break even, give or take a few cents," Vleeschhouwer said, stressing that the earnings will be flat because "the second half of the year will be as profitable as the first half was unprofitable."

Fueling the recovery for Silicon Systems--as with many of the larger chip-makers--are strong orders from computer disk-drive manufacturers. About two-thirds of the company's business comes from that segment of the industry, Vleeschhouwer said.

Orders Viewed as Soft

Still, orders from the telecommunications industry are soft and after the pummeling chip-makers have taken, cautious investors should keep an eye trained on disk-drive makers and telecommunications firms, Vleeschhouwer said.

But a sustained rebound for the semiconductor industry would be especially good for Silicon Systems, which Vleeschhouwer believes will gain in market value because of its strong sales to the disk-drive makers.

"I think the stock will outperform the whole group as long as the recovery continues," he said. "They are servicing a portion of the industry that will be growing faster than the rest of the semiconductor industry."

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