- The Washington Times - Tuesday, November 19, 2002

Stock for Spherix Inc. reached a six-month high last week on news that cereal maker Kellogg Co. is buying the patent for tagatose, the firm's low-calorie sweetener.
Prices for the biotechnology firm headquartered in Beltsville closed yesterday at $7.35, down 99 cents from its record of $8.34 last Tuesday.
Dr. Gilbert Levin, company CEO, said the stock's slide was expected as Kellogg has not indicated it will use the sweetener in its cereal products.
"The stock is going to substantially react when we have an actual product out on the market," Dr. Levin said. "Right now, companies are interested in the patent and what the product will do for them in the future."
He added there was also shareholder confusion from a stock-sale plan Dr. Levin had initiated earlier in the year. One-third of Dr. Levin's shares went on sale to the general public last week after prices exceeded the minimum selling price of $8.
"A lot of investors thought I was bailing out of the company, but I've owned the stock [about 24 percent of all shares] for 36 years and my financial adviser told me it was time to diversify," he said. "It doesn't matter right now because the stock value is under the minimum selling price again."
Spherix shifted its resources and revenues from government services in the last year to producing a marketable application of tagatose through Arla Foods, a Danish dairy cooperative that licensed the patents, Dr. Levin said.
"Tagatose is our biggest product and we want to market the various patents so that we are closer to achieving a 1 percent dent in the U.S. sugar industry," which annually generates $3.8 billion, Dr. Levin said.
But the company's focus on tagatose makes it a higher risk for investors, said Lincoln Werden, senior investment analyst for HG Wellington & Co. Mr. Werden said he plans to continue rating Spherix a speculative buy until the tagatose product is used in consumer goods.
"The wait isn't over for long-term holders, who can warrant some considerably higher risks on their return investments," Mr. Werden said, adding he buys an undisclosed amount of Spherix stock for the New York brokerage firm.
"However, it's encouraging to see these larger food and beverage companies take interest and even buy into the patent before a product is there for testing," Mr. Werden said.
The jump in share value also helped the company after reporting lower than expected profits last week for the third quarter that ended Sept. 30, Dr. Levin said.
Spherix showed earnings of $113,533 (1 cent per diluted share), about one-twelfth the income from a year earlier at $1.43 million (13 cents).
The company's government and information services covered the majority of overhead costs, but failed to offset the shrinking commercial contracts with pharmaceutical companies and growing expenses for marketing FlyCracker, a patented pesticide, Dr. Levin said.
"It's been a less than glorious year on the commercial side of the company," he said. "But FlyCracker is showing promise in the agriculture industry, and our government contracts should help the company even out until tagatose is out in the market," which could be as early as spring or summer.


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