InvestMacro Forex News

By Profit Confidential

Face it: there is no real economic growth in the U.S. economy. The only reasons the key stock indices keep rising are nothing more than easy money and false optimism. They are anything but a key indicator, and you should not use them as one.

The reality of the U.S. economy is completely the opposite of what’s happening in the markets.

I often say in these pages that economic growth only occurs in the U.S. economy when consumers feel good and spend money. But I see more and more evidence of consumers not spending—many are actually struggling. Don’t buy into the mainstream media’s belief in economic growth.

Instead, look at indicators like the U.S. retail and food services sales for June. They increased 0.4% from the previous month to $422.8 billion and have increased 5.7% from June of 2012. In the second quarter (April through June), retail and food services sales in the U.S. economy were up 4.6% from the same period a year ago. (Source: U.S. Census Bureau, July 15, 2013.)

While that might sound impressive, the chart below will show you something you won’t see the in the mainstream. It shows the percentage change in retail and food services sales from a year ago.

 Clearly, the retail sales increases aren’t nearly as amazing as they seem at first glance. The rate of change is actually slower than it was a year ago—and has been trending downward since 2011.

But there’s further proof consumers are not buying. Manufacturing and trade inventories for the month of May have increased 0.1% from April, and 3.8% from a year ago.

And some industries are feeling it worse than others. Inventories at motor vehicle and part dealers were up 12.7%, and inventories for clothing and clothing accessories stores increased 4.6%. (Source: U.S. Census Bureau, July 15, 2013.)

Here’s what is actually happening: consumers in the U.S. economy are spending their money on basic needs. From April to June, consumer spending at gas stations has increased little more than 3.3%.

What’s even more troubling is that crude oil prices have jumped due to tensions in the Middle East. That means that gas prices will soar even higher. And that will result in even more trouble for consumers in the U.S. economy.

On top of all this, contrary to economic growth, Americans have another problem. Instead of getting full-time jobs, many are only able to get part-time work. This year, on average, the number of part-time jobs that have been added each month in the U.S. economy, seasonally adjusted, sits at 93,000. But only about 22,000 full-time jobs have been added. (Source: Wall Street Journal, July 14, 2013.)

Dear reader, I find myself tired of saying this, but numbers don’t lie. They are saying economic growth in the U.S. economy is simply a myth. You must keep in mind that consumers are the driving force behind any economic growth in the U.S. economy. The longer they suffer, the longer it will take the U.S. economy to get back on its feet.

We may see higher corporate earnings from big-cap companies for now. They are buying back their shares, but consumers are the ones who buy their products. The numbers will eventually catch up, and their corporate earnings will suffer.

Article by profitconfidential.com

By Profit Confidential

The cement business is as good a benchmark as you are going to get on the U.S. economy. And if this company is any indication, cement sales are accelerating at a double-digit rate.

Texas Industries, Inc. (TXI) sells cement and aggregates mostly in Texas and California, the two largest cement markets in the U.S.

In 2007, the company’s cement capacity was two million tons per year. Today, the company can produce six million tons per year and is targeting eight million tons per year over the next several years.

The company’s latest earnings results were excellent.

In its fiscal fourth quarter of 2013 (ended May 31, 2013), the company’s total sales grew to $213.5 million, up solidly from comparable quarterly sales of $158.5 million.

Company management said its latest quarter saw double-digit percentage growth in all its products shipped. The Texas market in particular is experiencing a “strong recovery” in cement demand.

The company reported that total cement shipments increased 23% in Texas and 22% in California over the prior fiscal year. Average prices increased four percent in Texas and decreased three percent in California.

For a cement company, Texas Industries trades like a high-flying technology stock. It’s a trader’s paradise with a high valuation and significant price volatility.

While cement unit costs increased markedly in its latest quarter, mostly due to higher energy expenses, the big rise in cement shipments surprised the marketplace and was way ahead of Wall Street expectations. The numbers support new construction growth in the two largest U.S. markets.

Oddly, a lot of the cement business in the U.S. is foreign controlled. The largest cement company in the world is generally considered to be Paris-based Lafarge S.A. (LG.PA), followed by Mexico-based CEMEX S.A.B. de C.V. (CX).

Both companies reported weaker earnings results in their latest quarters, but that was due to operations in foreign markets. CEMEX noted in its 2013 first-quarter earnings report that U.S. sales grew eight percent, reflecting improving demand in spite of unfavorable weather conditions.

The company said that there is momentum in industrial and commercial sectors, but that the residential sector of the U.S. market continues to be the main driver of domestic cement consumption.

Certainly, what Texas Industries reported in its recent earnings results was encouraging. Wall Street expects the company to grow its sales just over 25% in fiscal 2014 and 14% the following year. Double-digit sales growth is a tough thing to come by these days. (See “How Big Institutional Investors Will React to This Quarter’s Weak Earnings Results.”)

Cement and aggregate is commoditized and consumption demand is inconsistent. But like I’ve said before, if there is to be meaningful economic recovery in the global economy, it will be led by the U.S. economy.

The numbers for new demand in cement shipments support that view. Whether the growth is sustainable or not is a whole other question.

Article by profitconfidential.com

By Profit Confidential

In an ironic twist, the subprime credit crisis was probably what was needed to save the banking sector. The failure of Lehman Brothers that drove the financial crisis and recession also prompted the government to force big banks to clean up their business.

I still recall when Citigroup Inc. (NYSE/C) was trading at $1.00 a share in 2008, before its stock consolidation. A friend of mine at the time, who was the head of a global money management unit of a large bank, asked what I thought of Citigroup and whether I would buy it. My quick response was “yes.” I argued that I doubt the government would allow the bank to fail after what had happened at Lehman. In hindsight, I was right. Citigroup, along with some of the other big banks, was saved by the government.

I still feel it was a correct move and continue to believe the big banks were “too big to fail.” Without the emergency capital injection into the banking system, America’s financial infrastructure would have collapsed, which would have resulted in economic chaos and tens of thousands of lost jobs.

The best development in the process of reorganizing banking in America was the establishment of the “Volcker Rule.” Named after ex-Federal Reserve chairman Paul Volcker, it essentially required the big banks to play by his rules. In other words, banks were required to cut down the risk on their balance sheets with added disclosure. Of course, there are still some issues regarding banking improprieties, but essentially, the Volcker Rule has helped to create a stronger, viable U.S. banking system.

Evidence of that was shown last week with the big banks continuing to deliver relatively strong results.

JPMorgan Chase & Co. (NYSE/JPM), Wells Fargo & Company (NYSE/WFC), and Citigroup all delivered results that beat Wall Street estimates for both revenues and earnings.

I was not surprised by this, as I have long been a backer of the big banks. (Read “With Higher Interest Rates Coming, This Is Where You Need to Be.”)

In fact, the strong leadership from the big banks has helped drive up the overall market this year.

Just take a look at the chart of the Philadelphia Bank Index below—it’s a thing of beauty. Note the bullish flag formations indicated by the parallel lines that are preceded by a rally and followed by another rally, based on my technical analysis. This is bullish, and we’ll see if another flag may be in formation.

Chart courtesy of www.StockCharts.com

Moreover, I expect a potential upward push for the shares of Bank of America Corporation (NYSE/BAC) and Citigroup by institutional and retail money once these big banks are allowed to raise their dividend payout from their current low levels to what is now being paid out by Wells Fargo and JPMorgan.

Article by profitconfidential.com

Source: Tom Armistead of The Energy Report (7/18/13)

http://www.theenergyreport.com/pub/na/15445

As an oil analyst at SunTrust Robinson Humphrey, it’s a given that Neal Dingmann has his eye on energy stocks come rain or shine. But whether you’re bullish or bearish on U.S. shale development, it’s wise to know which stocks are poised to deliver shareholder value. In this interview with The Energy Report, Dingmann tiptoes through North America’s major shale plays (including an interesting hybrid) and points out the cream of the crop.
The Energy Report: Neal, between offshore and shale, is the U.S. on a path to energy independence?

Neal Dingmann: We’ve been heading in that direction, and the development of technology has really expedited that. I think increased production is a trend that’s going to continue. Even the U.S. Energy Information Administration (EIA) said we could become an exporter for some oil products down the road. So I believe we’re reaching that goal incrementally and U.S. shale plays have been a deciding factor.

TER: How do the risks and rewards compare for players in shale and offshore, respectively?

ND: With any sort of oil drilling, you always have some risk. Offshore exploration, at least to some degree, carries more exploration risk. When you’re onshore in a lot of these shale plays, you’re not looking at if you’re going to have oil, gas or a dry hole. You’re usually just trying to decide if the economics justify the entire drilling program.

TER: Of the companies you cover, which ones are the top picks for their shale production and which ones for their offshore production?

ND: Currently, I continue to be a bit cautious offshore, recommending only a company called W&T Offshore Inc. (WTI:NYSE). WTI is attractive because of its higher-than-average historical well success rate in addition to the cash flow from producing assets in the region. The company also has some attractive Permian assets that make for a nice complement to the offshore blocks.

Onshore, my favorite play is the Utica Shale, in which my top plays are Gulfport Energy Corp. (GPOR:NASDAQ) and Rex Energy Corp. (REXX:NASDAQ). Both companies have highly economic acreage, solid balance sheets and industry-leading production growth. I also like Rex Energy for its likely production upside. Another one of my favorite plays is the Eagle Ford Shale, in which my top plays arePenn Virginia Corp. (PVA:NYSE) and Sanchez Energy Corp. (SN:NYSE). Both have core acreage in the region, improving operating results and experienced management. Another favorite name of mine isMidstates Petroleum Co. Inc. (MPO:NYSE). The company has assets in three solid plays and a management team with a long successful track record. Those are my favorite names at this time.

TER: How does the Utica compare with the Eagle Ford and the Marcellus?

ND: The Utica shares some similarities with the Marcellus and the Eagle Ford. But each of these plays has different commodity windows, and you’re just hoping with the economics out there today to have more oil and liquids versus dry gas. Unfortunately, for much of the Utica play, it appears that the oil window does not work as well as it does in the Eagle Ford. However, it seems that both the Utica and Eagle Ford have a higher total percentage of liquids than the Marcellus, on average.

TER: What other shales rank high with you?

ND: We’ve seen a transformation in the Permian Basin. Exploration and production companies (E&Ps) have been finding new zones in there. So the Permian ranks very high right now. The Bakken is still on the map, though that play is a bit more price sensitive. Today’s oil prices can certainly support it, but at lower oil prices, it gets more difficult.

TER: Are there any new shale plays to talk about?

ND: I would say there currently are no meaningful or material new shale plays out there. There are some smaller offshoots of existing plays. You have the Woodbine, near the Eagle Ford, and the so-called Eaglebine, a combination play. But is there a new Utica that has come along? No, not recently. What we’re seeing is just progress in the existing plays because technology continues to improve.

TER: There is some controversy over whether gas should be exported or used domestically for fuel and feedstock. Do you think Congress is going to try to restrict exports?

ND: There is certainly a large lobby from the plastics and fertilizer industries. I think that lobbying power is going to be the initial challenge, but I believe that the EIA and other agencies in the U.S., along with the Independent Petroleum Association of America (IPAA) and other gas agencies, can basically justify exporting natural gas.

TER: Even so, if there were an export restriction, what effect would that have on the gas market and the explorers and producers?

ND: If Congress does step in and announce that there are going to be some restrictions, that would put more pressure on gas producers. It would keep somewhat of a cap on dry natural gas prices.

TER: Cheniere Energy Inc. (LNG:NYSE.MKT) has commercial contracts for five of its six planned liquefied natural gas (LNG) trains. What are the prospects for more companies to build LNG plants?

ND: I think the prospects are high. I know there are a couple of companies in Texas and other regions that are proposing this. But I think it would be easier if a Chevron Corp. (CVX:NYSE) or an Exxon Mobil Corp. (XOM:NYSE) decided to get into U.S. gas exports, given their immense capital and solid safety records. Whereas if it’s a small independent, I think it might have trouble getting approval any time soon.

TER: How will natural gas exports affect large and junior oil and gas companies?

ND: Any natural gas exports would be a net positive for the large and junior oil and gas companies, as the shipments would increase the price of the commodity. However, the larger companies would likely have better access to any export infrastructure. Those companies would likely benefit first.

TER: What are your forecasts for oil and gas prices?

ND: Right now, we expect prices to stay rather range bound. I would say oil prices for the next 12 months would peak around the $110 per barrel ($110/bbl) level and then fall just below $90/bbl. For natural gas, again, you might have a little bit of a run coming into this next winter that would take it back over $4 per thousand cubic feet ($4/Mcf), but because of the supply, I don’t see it lasting much over $4/Mcf very long. It would probably get back to $3.75 or $3.50/Mcf, closer to the handle where it is today.

TER: What effect will President Obama’s climate change plan have on the oil and gas companies that you cover?

ND: It might influence what some of the companies I cover decide to do on next year’s capital plan, for example, but I don’t really expect anything material to arise in the near term.

TER: You cover a lot of companies. What draws you to cover these companies in particular?

ND: I generally look play by play in the U.S. I look at a lot of the basins you and I spoke about today—the Utica, Eagle Ford, Permian, etc., I look at a number of companies in each, and then identify which plays we like the best. We recommend several names in a play like the Utica Basin. If it’s an area like the Granite Wash, which is not our favorite play, we’ll generally only focus on one company or two at most.

TER: What are your favorite companies right now?

ND: Definitely my top pick of all our stocks is Gulfport Energy. It is the most leveraged to the Utica shale and has tremendous upside.

Sanchez Energy and Penn Virginia are two of the most levered plays in the Eagle Ford. Both companies are likely to continue to announce record well results.

Last, Midstates Petroleum is in three areas—the Gulf Coast, Anadarko Basin and the horizontal Mississippi. The company should see solid production growth in each play.

TER: In one of your recent newsletters listing your favorites in the Utica, you had ranked Gulfport as the first in the Utica but Rex Energy second and Carrizo Oil & Gas Inc. (CRZO:NASDAQ) third. How does Carrizo fit in here?

ND: The Utica names are still some of our favorites out there and we continue to like most names in the southern part of the play. So we also recommend Carrizo, but the difference is the company is not as levered to the Utica as Gulfport or Rex. However, Carrizo also has solid asset positions in the Eagle Ford, Marcellus and Niobrara, all of which should generate positive returns.

TER: How has the shrinking spread between West Texas Intermediate (WTI) and Brent affected the companies in your portfolio?

ND: What we’re seeing, all the way from the Eagle Ford down to the Gulf Coast and offshore, is that companies with Louisiana Light Sweet crude pricing have had a very nice benefit over the last year to two where we’ve seen a premium of over $10/bbl. Although they have lost some of that spread, they’re still in a very positive situation and continue to enjoy a premium, albeit a smaller one. So companies priced off WTI are now realizing returns closer to those that are levered to Brent or Louisiana Light Sweet.

TER: What’s your biggest nightmare and what’s your biggest dream for the E&P space?

ND: I think the nightmare is always regulation restricting fracking or other well completion activity. Inaccurate information could set policies that have a very negative influence on the energy industry. If legitimate data show that fracking has negative effects on the environment, I’m all for restrictions that would mitigate those risks. But the industry has more than documented that the chances of fracking causing any of these issues is very slim. The more relevant issues these days appear to involve the midstream segment, especially shipping, as seen by the recent derailment in Quebec. While it is difficult to know if more regulation could have prevented this accident, it appears more oversight might be needed.

Probably the home run is for the U.S. to make enough oil and gas and be allowed to export it, much like the 1970s or 1980s, when the U.S. had so much oil and gas production, we were no longer a price taker, as the U.S. has been for some time in the energy industry.

TER: Thank you, Neal. I appreciate your time.

ND: Thank you for the questions.

Neal Dingmann has over 12 years of equity research experience. At SunTrust Robinson Humphrey, he covers companies in the E&P and oilfield services sectors. He held similar positions at Wunderlich Securities, Dahlman Rose, RBC Capital and Bank of America Securities. Dingmann was recognized last year by the Wall Street Journal as “Best on the Street” and has been recognized as a “Home Run Hitter” by Institutional Investor magazine. He received his Masters of Business Administration from the University of Minnesota and his Bachelor of Arts degree in business from the University of Arkansas.

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DISCLOSURE:

1) Tom Armistead conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Neal Dingmann: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) The following companies are clients of SunTrust Robinson Humphrey, Inc. and the firm has received or is entitled to receive compensation for investment banking services involving their securities within the last 12 months: Gulfport Energy Corporation, Midstates Petroleum Company, Inc., Penn Virginia Corporation, Rex Energy Corporation. The following companies are clients of SunTrust Robinson Humphrey, Inc. and the firm has received compensation for non-investment banking services within the last 12 months: Midstates Petroleum Company, Inc. An affiliate of SunTrust Robinson Humphrey, Inc. has received compensation for products or services other than investment banking services from the following companies within the last 12 months: Gulfport Energy Corporation, Midstates Petroleum Company, Inc., Rex Energy Corporation.

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By MoneyMorning.com.au

Some things are easy.

Some things are hard.

Some people make hard things look easy — like darts players or crane operators.

While others make easy things look hard.

Many investors fall into the latter category. And we’re not just talking about novice investors either. Even the pros can take a simple concept and turn it into something completely unintelligible.

We’ll show you what we mean…

This week the Financial Times claimed that macro hedge fund managers (those who make big bets on big macro-economic events) had come back to the fore after a torrid few years.
The report quoted hedge fund manager Arvin Soh:

‘In Q1 it was all about Japan. Macro managers played that through the Nikkei and the yen. In Q2 it was about getting out of that and shorting precious metals. And in June and July it has been about shorting emerging markets – there have been opportunities in a whole bunch of asset classes.’

Wow! Buying the Nikkei…shorting precious metals…short selling emerging markets. Impressive. Or is it?

Not when you look at the alternative…

Don’t Muddy the Investing Waters

This is a classic example of taking something relatively easy and making a meal of it.

Because when you look at the results of the macro hedge funds that have supposedly made a comeback, well, given the market conditions they actually haven’t done that well.

As the FT reports, funds run by Caxton Associates are up 17% this year, those run by Tudor Investment Corporation have gained 12%, and Moore Capital’s hedge fund clients have made 10.5% so far.

Not bad. But as we say, consider the alternatives.

US investors who just bought plain old stocks in the S&P 500 are up 19% for the year so far…without paying huge hedge fund fees.

And to be honest with you, seeing as gold has slumped more than 20% this year and the Japanese market gained over 40% from January to May…a 10.5% gain isn’t that great.

Look, we’re not saying investing is simple, because it isn’t. But what we are saying is that you as an investor have a choice. You can choose to keep your investments as simple as possible or you can add in unnecessary complications.

To our mind, elements of macro investing do just that.

While it’s a good idea to look at the big picture, sometimes it can confuse you or muddy the waters.

It’s why we prefer a simple approach to investing. We recommend allocating your money to a few key asset classes: cash, gold, dividend stocks, and growth stocks.

Short and Long Term ‘Meddling Protection’

To us, macro investments are the things on which we focus the least amount of time. That’s cash and gold. If you like, they are the short and long-term protection against meddling.

We recommend buying and owning gold for the long term because ultimately governments will always devalue paper money. We don’t care about the shorter term booms and busts.

And we recommend holding cash in a savings account because, well, it’s important to have some security during the short-term booms and busts.

You see what we mean? That’s as complicated as you have to make it.

As an investor you should focus most of your attention on the micro-economic events — e.g. individual stocks.

This is where things get more complicated — but only relatively speaking. You can still choose to make stock investing easy, or you can complicate things.

Where possible, we prefer the former, and we recommend you do the same.

So, how can you keep things simple?

Easy Investing 101

For a start, you can limit the amount of income stocks in your portfolio. Rather than picking 20 OK stocks, spend a bit more time and pick 5, 6 or 7 great or outstanding stocks.

Then, if you don’t need the dividend cash, subscribe for the company dividend reinvestment programs (providing the companies offer it).

On the growth side, you can have as many stocks as you like. But again, we suggest keeping things manageable. Divide your speculative growth portfolio into short-term and long-term positions. You may have half a dozen punts you expect to hold for five or ten years.

Plus you may have another half a dozen punts you’re holding for the short term.

Whichever you choose, the decision is yours. Naturally, the more time you can devote to monitoring your stocks the more you can afford to own. If you barely have time to follow stocks then you should put a limit on the number you own.

Put simply, to be a successful investor in this market or any other market you don’t have to trade Japan, short sell gold, and gamble on emerging markets.

If you want some exposure to those markets go for it. Just don’t presume that’s the only way to make money in this market, because it isn’t.

As we’ve explained all the way through this current bull market rally, the best way to build wealth is with stocks. So keep it simple.

Cheers,
Kris+

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From the Port Phillip Publishing Library

Special Report: The Sixth Revolution

Daily Reckoning: The End of The Economy Deformed by Easy Money

Money Morning: Read This Before You Buy Another Stock or Bond…

Pursuit of Happiness: The Dark Side of Technology

By MoneyMorning.com.au

Tick.

Tick.

Tick.

No, we’re not ticking off a checklist. That’s the steady beat of an important event that’s about to hit the world.

Unfortunately, most people can’t hear it. The noise of day-to-day life muffles the noise of the demographic time bomb. But in time the blast will echo throughout society.

Nearly three decades of unprecedented credit expansion (1980 to 2007) created (abnormal) expectations about economic growth. Rob Arnott and Denis Chaves wrote in the Financial Analysts Journal:

‘Until recently 3-4% growth in real GDP was considered "normal." So it should come as no surprise that the economic performance of the past few decades has strongly influenced expectations about economic growth. However, when optimistic expectations get detached from reality we risk creating a significant expectations gap – a disconnect between what we take for granted given our recent experiences and what we should anticipate given simple arithmetic.‘

‘Recentism’ is the extrapolation of recent past events into the future. If markets have been down for a long period, then the consensus view is that the depressed conditions will continue, and vice versa.

The boffins charged with treasury computer models (that politicians and senior bureaucrats rely on) factor in 3-4% real GDP growth because that’s the 30-year average. The name for this is ‘rear view mirror’ forecasting.

But the economic drivers of the past 30 years aren’t relevant to what lies ahead.

Baby boomers (the largest demographic in western society) were ‘long and strong’ credit funded consumption – homes, furniture, luxury goods, travel etc. The boomers consumption ethos is best summed up as, ‘We bought things we didn’t need, with money we didn’t have, to impress people we didn’t like or know.’

Don’t Bank on Gen X & Y Bailing Out the Economy

The debt crisis that confronts the world is largely (but not entirely) due to boomer consumers, boomer bankers, boomer bureaucrats and boomer politicians.

This ‘boomer’ generation is an apt name, because that’s the sound you’ll hear when the demographic time bomb explodes.

After the GFC, the central banker mandate has been to raise the needle on the economic tachometer back to the 3-4% range.

The Fed, ECB, POBC, BoJ, BoE, RBA et al have all stepped on the gas as they try to rev up the economic engine. They’ve supplied an abundance of fuel in the form of printed money, but the tachometer barely moves.

Anyone with even the most basic knowledge of the combustion engine knows that spark plugs must ignite the fuel. And therein lies the problem. The boomers credit-fuelled consumption spark is gone.

And the economy can’t rely on Gen X & Y. Tax bills and high housing costs are burdening them. They’ll never get to take up where the boomers left off.

The purring V8 of the past 30-years is now a coughing and spluttering Morris 1500.

Worsening demographics are destined to produce vastly different outcomes in the coming years.

Rob Arnott and Denis Chaves identified Australia along with the US, Canada, Britain, France, Germany, Italy, Japan, India, Russia, China, Brazil – all boosted GDP growth by at least 1% per annum (over the past 60 years) due to the power of demographics.

Boomers moving from consumption to retirement are about to throw the global economy into reverse.

The Demographic Nightmare Revealed

The ‘Dependency Ratio’ is the number of non-workers (children and elderly) compared to the number of workers. The lower the ratio the better.

The following chart shows from 1980 to 2010 (the same period as The Great Credit Expansion) the numbers were all going in the right direction.

Click to enlarge

From 2010 (the first wave of boomer retirees) onwards, the Dependency Ratio goes in the wrong direction.

You can see the difference between the next 30 years (to 2040) and the last 30 years.

The other major negative to consider is the level of welfare entitlement built into the system over the past 30-years of credit-fuelled prosperity.

With boomers going from taxpayers to tax receivers (via health and pension entitlements), you don’t have to be a whiz with a calculator to work out that the numbers don’t add up…

What’s that noise? Tick, tick, tick goes the demographic time bomb.

Based on the demographic shift in the Dependency Ratio, Rob Arnott and Denis Chaves produced the following chart on forecast economic growth:

Click to enlarge

If Arnott and Chaves are right, the economic tachometer for all 12 countries goes into negative territory for the next 40 years.

Real GDP growth of 3-4% will be nothing more than a freaky period in history – one at which future economic students will shake their heads in disbelief.

Negative economic growth colliding with a larger number of retirees living longer is more than a policymaker’s nightmare. It will profoundly change the administration and distribution of age pensions and other welfare entitlements.

This demographic time bomb is ticking, but its real impact is still at least a decade away.

In the meantime huge amounts of newly printed dollars, yen, euro, yuan and pounds are hiding the truth that’s embedded within our societal structure.

This deception will work…until it doesn’t. But by then the majority of boomers will have become a victim of the demographic time bomb they helped construct.

Vern Gowdie
Editor, Gowdie Family Wealth

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From the Archives…

Quantam Computers – Why It’s Time to Believe the Unbelievable
12-07-2013 – Sam Volkering

Red Alert: Why This Stock Market Rally is a Trap
11-07-2013 – Murray Dawes

Why Oil Could be the One Commodity to Defy the Doom…
10-07-2013 – Dr Alex Cowie

Gold Breaks A Record
9-07-2013 – Dr Alex Cowie

Time to Plan for the Year-End Stock Rally?
8-07-2013 – Kris Sayce

Article by Investazor.com

Chart: eBay Inc. Weekly

In almost 4 years eBay Inc. gained about 480%, rallying from 10$ per share all the way to 58 dollars per share, having an all-time high around 59 bucks. From the first day of 2013 the price started to consolidate itself in a rectangle.

This price pattern was drawn right above the rejection line of an ascending channel. Until now the buyers did not have enough force to drive the price through the key resistance and now it will be even harder. The company announced a profit of 0.63$ per share, missing the estimates of 0.64$ per share. The price dropped suddenly 4 dollars from 57.50 to 53.50.

Taking into consideration the factors mentioned earlier and combining them with a negative divergence on the 14 weeks RSI we can say that we have some good signals of shorting. The confirmation would come with a close under 50$ per share, sending the price back into the channel. The support it is found next to the trend line at about 45$ per share. From the current level to the support it is about a 15% drop.

Keeping in mind that until the end of 2012 bulls were pretty strong, we should keep an eye over the resistance. A break and close above 59 – 60$ per share could trigger another rally targeting 65 and 70.00 levels.

The post Looking for a 15% Drop on eBay Share Price appeared first on investazor.com.

Source: George S. Mack of The Life Sciences Report (7/18/13)

http://www.thelifesciencesreport.com/pub/na/15446

Small-cap, oncology-focused biotechs with novel technologies have always been bestsellers for investors. Subplots have emerged along the way, but Aegis Capital Corp.’s Managing Director and Head of Healthcare Equity Research Raghuram “Ram” Selvaraju maintains that these companies continue to drive the biotech story forward. In this interview with The Life Sciences Report, Selvaraju reflects on the state of the industry and shares reams of information on specific ideas for investors.

The Life Sciences Report: Ram, you’ve had a good 12-month run with your coverage. We are more than six months into 2013, and I wonder if you have seen transitions in momentum to new industries or companies. Has there been any shift in emphasis by investors?

Ram Selvaraju: We had a few rocky weeks moving from early to late June. There was a fear that the Federal Reserve would turn off the tap of unlimited liquidity for the U.S. economy and that the economy would go into a tailspin without continued support. I think those fears have abated somewhat, especially after recent reassurances by the head of the Federal Reserve, Ben Bernanke, that quantitative easing would continue until there is substantially greater strength in the U.S. macroeconomic recovery.

But I would remind investors that overall macroeconomic concerns have not, by and large, been significant impediments to the run-up in the biotech sector. The NASDAQ Biotechnology Index (NBI) and the Amex Biotechnology Index (BTK) are up more than 70% in the last 24 months. That just creams the heck out of the Dow Jones Industrial Average and the Standard & Poor’s index, both of which are only up about 20% over the same timeframe.

Biotech’s massive outperformance has principally been driven by a substantial appreciation in the stock prices of old-guard biotechs like Amgen Inc. (AMGN:NASDAQ), Biogen Idec Inc. (BIIB:NASDAQ),Celgene Corp. (CELG:NASDAQ), Gilead Sciences Inc. (GILD:NASDAQ) and Regeneron Pharmaceuticals Inc. (REGN:NASDAQ). But, in my view, a large number of smaller-cap companies have also benefitted. Only a few years ago these companies were trading at market capitalizations of only a few hundred-million dollars, and now they have market caps well in excess of $1 billion ($1B). Examples include Regeneron Pharmaceuticals Inc., Medivation Inc. (MDVN:NASDAQ) and Pharmacyclics Inc. (PCYC:NASDAQ).

TLSR: You have established that biotech has powerfully outperformed the overall market. What about emerging trends?

RS: Overall biotech outperformance is a significant trend in itself, and I do not anticipate that abating. As we have discussed in the past, this is driven by the more risk-tolerant stance at the U.S. Food and Drug Administration (FDA) and the fact that a record number of drugs were approved last year—39, in fact—more than those approved in 2010 and 2011 put together.

Also, it should be noted that many of these approvals were for new molecular entities, drugs that constituted entirely novel advances. We had not seen an approval pace like this since the late 1990s. If the pace continues, and more than 30 new drugs are approved this year, I think investors are going to view the FDA as much less an enemy to the drug industry, and are going to believe that the industry is worth investing in.

In addition, some subsectors of biotech that were really hot in 2010 and 2011 have lost a bit of their luster in 2013. That includes some hepatitis C (HCV) names, like Achillion Pharmaceuticals Inc. (ACHN:NASDAQ), which I still am bullish on. I don’t anticipate that this is going to be a significant issue, but the fever over HCV has subsided.

What we are seeing instead is a massive appetite for small-cap, oncology-focused companies. Some have the equivalent of phase 1/2 data, and yet they’re trading at billion dollar-plus market caps. Infinity Pharmaceuticals Inc. (INFI:NASDAQ) had a massive run, from below $10 all the way up to $50, and now it’s somewhere around $17/share. Merrimack Pharmaceuticals Inc. (MACK:NASDAQ) still sports a roughly $480 million ($480M) market cap, despite not having any pivotal trial data. Clovis Oncology (CLVS:NASDAQ) added nearly $1B to its market cap after disclosing phase 1/2 data at the American Society of Clinical Oncology (ASCO) annual meeting in June. The list goes on and on.

TLSR: Ram, what is your favorite stock right now?

RS: Our favorite stock here at Aegis—and the best performing biotech idea of 2013 to date—is Stemline Therapeutics Inc. (STML:NASDAQ). I initiated coverage on this company back in March at $11.55. It is currently trading around $26. We brought this company public at the end of January at an initial public offering (IPO) price of $10/share. It has been a phenomenal performer. We believe significant additional upside is yet to come.

Stemline is in the vanguard of small-cap, oncology-focused companies because of its focus on cancer stem cells (CSCs). The company has the ability to specifically abrogate cancer stem cells involved in reconstituting tumors after the tumor bulk has been removed via surgery or chemotherapy. These cancer stem cells are the reason patients get recurrences of cancer. Stemline is developing a suite of therapies that would specifically target cancer stem cells. Its drugs hit the tumor bulk as well, which is how they are differentiated from other cancer drugs.

TLSR: What does the pipeline look like at Stemline?

RS: The firm’s most advanced candidate, SL-401 (human interleukin-3 coupled to a truncated diphtheria toxin), has a rapid path to market because it’s being developed in an ultra-rare hematological malignancy. So far there has been a 100% response rate. Every patient treated with this drug has had a response, and 60% have had complete responses, meaning the drug effectively got rid of their disease. That is unseen in the oncology domain; now the drug is potentially on a path toward accelerated approval.

TLSR: You said the disease is rare. What is it, and how rare is it?

RS: It is called blastic plasmacytoid dendritic cell neoplasm (BPDCN), and it affects about 2,000 patients every year in the U.S. and Europe. Because of the rarity, the drug could potentially be deployed at a very high purchase price per patient. It can also be deployed in other blood cancers, including acute myeloid leukemia (AML) in the post-third-line setting, as well as in hairy cell leukemia.

TLSR: I am familiar with cancer stem cells, which by definition are more durable, more aggressive and more resistant to therapies. Does SL-401 have a multitargeting capability?

RS: Effectively, SL-401 works via the same mechanism as a drug called Ontak (denileukin diftitox; Eisai Inc. [ESALF:OTCPK]). Ontak selectively delivered a portion of the diphtheria toxin protein into the interior of cancer cells by targeting cancer cells that expressed the interleukin-2 receptor (IL-2R) on their surfaces.

The same exact mechanism is being utilized by Stemline’s SL-401, except that Stemline’s drug targets the interleukin-3 receptor (IL-3R). What’s nice about the way SL-401 kills tumor cells is that it is very difficult for the cells to evolve resistance to it. It’s very cytotoxic. If delivered selectively into cancer cells and cancer stem cells, it will result in cell death, no matter how protective the cells are and how many resistance pathways they might have. The cell is doomed.

TLSR: Is this an antibody conjugate?

RS: It’s a conjugate, but not an antibody conjugate. It is a fusion protein. A portion of the diphtheria toxin is fused to the receptor-binding domain of the IL-3, which is a messenger or signaling molecule. SL-401 utilizes interleukin-3’s ability to fuse to the interleukin-3 receptor (IL-3R) and thereby is internalized by cancer cells and cancer stem cells. It works because the targeted tumor cells in BPDCN patients express very high levels of IL-3R on their surfaces.

TLSR: In the conjugated state, is SL-401 safe for the patient? In other words, is the toxin not released until it attaches to the tumor cell?

RS: Diphtheria toxin has no activity extracellularly. The therapy has a low side-effect profile, in high contrast to what is typically seen with oncology drugs. IL-3R is expressed on normal cells, too, but not anywhere near the level of cancer cells and CSCs.

SL-401 is entering phase 3. The company has had discussions with the FDA on the design of a single-arm, open-label trial. The FDA is more than happy to entertain this relatively small clinical trial, enrolling about 40 patients, because of the stellar response rates seen so far. I believe the drug will not have to go through to the end of a phase 3 trial before petitioning the FDA for approval. If the company gets 20 patients into this trial, and all 20 respond, Stemline will file for accelerated approval. Stemline could potentially have the drug on the market by late 2015, if not earlier.

TLSR: If you will go ahead and select another company, I’d love to hear about it.

RS: We continue to like Synergy Pharmaceuticals Inc. (SGYP:NASDAQ). The company recently raised more than $100M, so it is not going to need to raise additional capital for a very long time. In May, it unveiled additional safety and efficacy data from a previously reported phase 2/3 study of its lead drug candidate, plecanatide. These data clearly demonstrated that there is a very robust dose response from an efficacy standpoint in patients with chronic idiopathic constipation. The side-effect profile was extremely good—much better, in our view, than Linzess (linaclotide; Forest Laboratories Inc. [FRX:NYSE] and Ironwood Pharmaceuticals Inc. [IRWD:NASDAQ]), the only direct competitor.

Synergy is starting two phase 3 trials with plecanatide in chronic constipation at the beginning of Q4/13. We anticipate topline results from those studies in the summer of 2014, after which the company can file for approval in the U.S. for that indication. The company could potentially have an approval before the end of 2015, assuming a standard review. The drug could be on the market for chronic constipation in late 2015 or early 2016.

Synergy also has a phase 2b study running in irritable bowel syndrome (IBS) of the constipation-predominant subtype, which should report results early in 2014. If that study is positive, the company will have to do two more phase 3 trials in IBS. I anticipate it would start those studies in H2/14, complete them by the end of 2015, file for IBS approval in early 2016, and have an approval in early 2017.

TLSR: Why is plecanatide superior to linaclotide?

RS: In our view, linaclotide has an inferior safety profile. In essence, linaclotide works too well. It relieves constipation but causes diarrhea in 20–30% of patients. Five to 10% of those patients have to stop taking the drug because the diarrhea is so bad. We do not believe this will be an issue with plecanatide and, indeed, that’s not what Synergy saw in the phase 2/3 study. The discontinuation rate seen with plecanatide was about half of what was observed with linaclotide, without any discernible difference in magnitude of efficacy.

TLSR: Ram, go ahead to your next idea.

RS: We recently initiated coverage on a very small company called Catalyst Pharmaceutical Partners Inc. (CPRX:NASDAQ). It is developing a drug called Firdapse (amifampridine) to treat a very rare disorder called Lambert–Eaton myasthenic syndrome (LEMS), an ultra-rare disease that afflicts maybe 4,000 people worldwide. There is a registry of patients so it is relatively easy to find them, which is good from a drug development perspective. If the drug is effective, the company should be able to readily target patients who suffer from the disorder.

Catalyst trades at roughly $1/share, with a market cap of less than $40M. This drug, if approved, could generate $80–100M in sales every year. Firdapse is already approved in Europe for the treatment of LEMS, and is in a phase 3 trial now in the U.S. The company needs to complete that trial to file a new drug application (NDA).

We believe Catalyst is another example of a risk-mitigated situation, trading at an extremely low valuation. We note that the company obtained the rights to Firdapse from BioMarin Pharmaceuticals Inc. (BMRN:NASDAQ), a well-known player in the ultra-rare, orphan disease space. BioMarin retains a 16% ownership stake in Catalyst, which indicates that BioMarin has high confidence in Catalyst’s ability to drive Firdapse through to approval in the U.S.

Catalyst has a backup molecule as well, called CPP-115. This drug is basically a pipeline in a single pill because it can be used to treat convulsive disorders like infantile spasm, a rare disease afflicting very young babies, as well as complex partial seizures, refractory seizures in epilepsy and conditions of that nature. It should have a very advantageous safety profile compared to vigabatrin (Sabril; H. Lundbeck A/S [HLUKY:OTCPK; LUN:OMX]), which has never seen broad usage because of its side-effect profile. CPP-115 could potentially achieve broad use.

This agent has gone through early-stage testing already and is advancing into phase 2 testing. We believe that Catalyst is getting no credit for this drug at this point from investors, yet it’s got a validated mechanism of action based on vigabatrin, an approved drug that has been around for many years, and has applicability in a wide range of convulsive disorders.

TLSR: Catalyst is up 118% over the past six months, 90% over the past 12 weeks and in a four-week period of real weakness in the sector, it is up 18%. The stock is now under $1/share, and you have a target price of $2.50, which represents a very nice implied return. What time period are we looking at?

RS: We expect Catalyst to wrap up its phase 3 study with Firdapse in early 2014—roughly a 12- to 15-month timeframe. It is one of the more risk-mitigated stories we are following right now.

TLSR: What is your next idea?

RS: We continue to like Neuralstem Inc. (CUR:NYSE.MKT), the only company we cover in the stem cell space that is focused on the neurodegenerative disease domain. We like it because of the company’s high-quality science.

Neuralstem is developing two different programs simultaneously. One is a neural stem cell-based solution called NSI-566 (human fetal neural tissue-derived stem cells), for the treatment of various neurodegenerative diseases, particularly amyotrophic lateral sclerosis (ALS; Lou Gehrig’s disease). ALS is relatively rare but is incurable; patients usually die within 3–5 years of diagnosis. The company is also going after spinal cord injury (SCI), which is a significant unmet need. Millions of people are living in the U.S. with SCI, or are chronically paralyzed. There are no available, effective therapies currently. Neuralstem has other possible indications with this technology as well.

Neuralstem also has a small molecule, NSI-189, which is aimed at the treatment of major depression. This small molecule is very interesting because it could have the ability to enhance cognitive performance in non-depressed or healthy people. Animal studies have shown that this drug selectively enhances neurogenesis in the hippocampus, which is the part of the brain used for learning and memory.

For all these reasons we believe Neuralstem is very interesting, with a rich calendar of catalysts over the remainder of 2013 and into H1/14. It is moving into phase 2b for ALS with the neural stem cell solution. We anticipate that study will begin in the U.S. in H2/13. It is also starting a phase 2a clinical study in the same indication in Mexico. We anticipate that the company will start a phase 1/2 study in SCI in the U.S. imminently.

A landmark paper published in the journal Cell last year demonstrated that Neuralstem’s human stem cells, when injected into rats with spinal cords severed by mechanical crush, could actually regenerate nerve tracts across the entire rostrocaudal length of the spinal cord, from head to tail. This is landmark stuff, the kind of thing that we’ve never seen before from a stem cell-focused company.

TLSR: This Cell paper references an acute-injury model of SCI, where the rodents regained motor function. But the company is about to begin treating patients with chronic spinal cord injury. Does Neuralstem ever speak of going to acute spinal injury?

RS: When the company starts dosing SCI patients in the U.S., it will dose chronic spinal cord injury sufferers, people diagnosed a couple of months to a year before they get the cells. I think it’s very possible that Neuralstem could deploy its neural stem cell solution in the acute setting as well. It is more difficult to do that because the patient must get immediate supportive therapy right after the injury occurs.

TLSR: Neuralstem is up 70% over the past 12 months, and its market cap is about $114M. I wonder if you think investors are ascribing any value whatsoever to the company’s small molecule, NSI-189?

RS: I think that, at the current valuation level, investors could justify an investment in Neuralstem for either program on its own, with the second program qualifying as a free call option. But this company has a roughly $80M+ enterprise value, and we don’t believe this is adequate for both of these highly compelling programs.

TLSR: Your target price on Neuralstem is $4. What’s the timeframe on that?

RS: We are aiming for 15–18 months from now. It currently trades at about $1.70. Aegis Capital has raised money for this firm in the past. Historically Neuralstem had a primarily retail-focused investor base, but we were successful in getting the company its first institutional investors.

We believe Neuralstem is one of the best stories in the stem cell arena. It’s appealing because it has been able to generate attractive, promising, scientific and preclinical data even while focusing on very difficult-to-treat neurodegenerative conditions. In the clinical setting, the company has had encouraging responses from a couple of patients, indicating its neural stem cells can, in fact, stimulate recovery in ALS. That’s practically unheard of; you don’t see spontaneous recovery from ALS. The company has a long track record of moving things forward on the clinical development front—and moving them forward successfully. It has never issued a negative clinical development announcement. It is very undervalued, and we think there is significant upside potential.

TLSR: Your next idea?

RS: I’m looking at Ampio Pharmaceuticals Inc. (AMPE:NASDAQ). We recently raised our price target to $12, a 12-month target. The company is currently trading at about $6. When we initiated coverage, the stock was trading at less than $4, so we’ve seen a pretty decent increase.

We think there is a lot of misinformation out in the blogosphere about this company. A lot of people like to trash Ampio, and, in our view, this company doesn’t deserve any of the criticism. Various commentators have stated that the company’s clinical-stage candidates do not target validated markets, which is untrue. Knee osteoarthritis, premature ejaculation and diabetic macular edema are all opportunities worth hundreds of millions of dollars individually. There has been criticism of the company’s clinical proof-of-concept data, which we believe denotes a poor understanding of the principles underlying statistical analysis and the mechanisms of action for Ampio’s lead agents.

Ampio is a classic example of how a company can develop drugs in a cost-effective and capital-efficient way. All three of Ampio’s clinical-stage drug candidates are already approved in the U.S. for use in other indications, and Ampio is developing these agents for new uses.

Ampio has a drug called Zertane (tramadol), which is being developed for the treatment of premature ejaculation. Tramadol is widely utilized as a nonsteroidal painkiller. Its second drug candidate, Optina, is a low-dose formulation of danazol, which was originally commercialized in the 1970s as a treatment for endometriosis. The new formulation is a proposed treatment for diabetic macular edema. Its third drug candidate is Ampion, which is a cyclic peptide derivative of human serum albumin. Albumin has been used for a variety of ailments for a very long time. Ampion is being developed, at least initially, for the treatment of pain associated with osteoarthritis in the knee.

TLSR: Ram, this company’s market value is about $226M. How much value is there in these repurposed drugs?

RS: From our perspective, the market could be worth hundreds of millions of dollars per year. Currently, the financial community is giving Ampio no credit whatsoever for its oxidation reduction potential diagnostic platform (for use in the diagnosis of serious inflammation and oxidative damage in patients who have suffered heart attacks and strokes, as well as other indications). Ampio has three separate shots on goal, plus the diagnostics, and it doesn’t spend much money. Its clinical development pathway is very cost-effective for all three drugs because none of the programs require massive evaluation time periods. We’re talking about clinical trials that typically last less than a year. Safety profiles are not going to be a problem because all of these compounds have been around for years and are well known. Plus, Ampio is using the drugs at significantly lower concentrations than in their current indications.

TLSR: Go ahead with your next idea.

RS: I initiated coverage on Galectin Therapeutics Inc. (GALT:NASDAQ) in September of last year, when the stock was trading under $2. It’s now at about $4.50.

The company is gearing up for clinical development of a small molecule agent designated GR-MD-02 for the treatment of liver fibrosis. It also has an ongoing, early-stage clinical trial in Germany with another agent that works via the same galectin-inhibiting platform for the treatment of cancer. If you look at the data generated in liver fibrosis in animal models, it is nothing short of stunning. The company has been able to demonstrate reversal of well-established fibrosis in the animal models. In our view, GR-MD-02 could be a best-in-class antifibrotic drug. The company is primarily going after treatment of nonalcoholic steatohepatitis (NASH), not treatment of patients who suffer from alcoholic liver cirrhosis. NASH is classified as fatty, fibrotic liver, and is a chronic condition for which there is currently no approved treatment.

TLSR: Ram, you have noted that Galectin has potential competitors targeting NASH. How do you read them versus Galectin?

RS: Galectin faces competition from a number of other companies, including Raptor Pharmaceutical Corp. (RPTP:NASDAQ) with a phase 2b program in NASH in children, and La Jolla Pharmaceutical Co. (LJPC:OTCBB), which is getting in on the act with an investigational new drug (IND) application and is ready for phase 1. Intercept Pharmaceuticals Inc. (ICPT:NASDAQ), which was an IPO last year, also has a phase 2 candidate.

In our view, Galectin has a best-in-class drug because the molecule selectively reverses liver fibrosis by specifically impacting the galectin pathway. Galectins are known to be upregulated in conditions of fibrosis and metastatic cancer disease. You can bind them and inactivate them to shut down inflammation causing fibrosis. There is a very good mechanistic rationale to support Galectin’s technology platform.

TLSR: Although Galectin has been weak over the past couple of months, it has nearly doubled over the last six months. Does that worry you?

RS: We think there is significant upside potential. The scientists working with Galectin are top notch. As to valuation, even after its recent run-up, Galectin is still only a $74M market cap company. The potential for additional upside is also clear when you look at how other companies are valued. For instance, Intercept Pharmaceuticals’ $839M market cap is more than 10 times that of Galectin’s.

TLSR: Your next idea?

RS: I’ll mention a couple of the larger-cap names that I follow, which I think still have significant additional upside. We correctly anticipated that Medivation’s prostate cancer drug, Xtandi (enzalutamide), currently marketed in the U.S. for treatment of chemotherapy-experienced, hormone-refractory prostate cancer, would get approval in Europe. The company is also in a phase 3 study looking at this drug’s activity in chemotherapy-naïve, hormone-refractory prostate cancer. We anticipate the drug’s effectiveness will increase the earlier it is deployed in prostate cancer treatment. Since chemo-naïve prostate cancer is clearly an earlier stage, the survival-promoting benefits should be comparatively greater in this patient population. We anticipate interim results from that phase 3 trial, known as PREVAIL, sometime in the next three to four months.

TLSR: Medivation had a huge run-up at the end of 2011 and through the end of 2012. How do you value this company with these upcoming catalysts taken into consideration?

RS: We believe that Medivation’s shares are attractively valued, especially in the context of the valuations of comparable companies. For example, Pharmacyclics trades at close to a $7.4B market cap, whereas Medivation only trades at a $4.1B market cap. Medivation does share the revenue from Xtandi with its large pharma Japanese partner, Astellas Pharma Inc. (ALPMF:OTCPK), but the company still takes home half the profits associated with the drug in the U.S., and gets a substantial double-digit royalty on net sales outside the U.S.

We believe this drug could generate as much as $6–7B/year in sales, especially if approved and commercialized successfully in all of the sub-indications of prostate cancer and for earlier-stage disease. It also appears to have applicability in breast cancer. We think there is significant additional upside for Medivation. It trades currently at about $57/share, and we have a $100 price target on it. We’d also note that this is one of the most attractive potential merger-and-acquisition (M&A) candidates in the oncology sector—and that there is renewed probability of M&A transactions occurring in the space following the recently publicized interest of Amgen Inc. in acquiring Onyx Pharmaceuticals Inc. (ONXX:NASDAQ), another oncology-focused specialty company.

TLSR: Do you have another name?

RS: Acorda Therapeutics Inc. (ACOR:NASDAQ) trades at about $37/share with a $1.5B market cap. We have a $40 price target, but that is very conservative because we’re only ascribing a $150M net present value (NPV) to the usage of Acorda’s currently marketed drug Ampyra (dalfampridine) in post-stroke deficit. The drug is already approved to improve walking in patients with multiple sclerosis (MS). But the company has demonstrated positive results from a mid-stage trial in post-stroke deficit, which affects 7M people in the U.S. today. There are only about 500,000 MS patients in the U.S.

If the drug were approved for post-stroke deficit as well, its potential market would be massively expanded. In that context, we believe investors should be looking at Acorda Therapeutics. This is a risk-mitigated company. It’s profitable. It’s very well run. It has a significant amount of cash with which to do additional strategic acquisitions, if necessary. And there is significant additional upside inherent in Ampyra, which is already a marketed, profitable product.

TLSR: Ram, you and I have spoken in previous interviews about Lpath Inc. (LPTN:NASDAQ) and Galena Biopharma Inc. (GALE:NASDAQ). You also follow CytRx Corp. (CYTR:NASDAQ). Can you mention these companies briefly?

RS: We continue to be very bullish on Lpath’s prospects to deliver positive results in the ongoing NEXUS study, which is looking at the company’s proprietary antibody iSonep (sonepcizumab for intravitreal administration) in the treatment of wet age-related macular degeneration (AMD). We anticipate those results sometime early next year.

The company also recently started a phase 2 study in solid tumors with Asonep (sonepcizumab in a systemic formulation for intravenous administration). The same antibody is used in both indications. The company’s partner in the AMD program is Pfizer Inc. (PFE:NYSE), which has also the right of first refusal in the oncology, MS and colitis indications with Asonep. We believe Lpath could be the subject of an acquisition transaction by Pfizer if the NEXUS study demonstrates a positive result. In our view, if iSonep works, Pfizer would want to bring it in-house, and would definitely like to get its hands on Asonep as well, especially considering that Asonep has demonstrated safety advantages versus agents like Avastin (bevacizumab; Genentech/ Roche Holding AG [RHHBY:OTCQX]) in the solid-tumor setting.

With respect to CytRx, we put out an update on June 19 and slightly lowered our price target from $8 to $7. But we still think there is significant upside for these shares. The company’s lead compound, aldoxorubicin, which is being studied for soft tissue sarcoma, is a risk-mitigated opportunity primarily because the drug is based on an approved product, doxorubicin, a chemotherapeutic agent that has been used for years. Aldoxorubicin is essentially doxorubicin conjugated to an acid-sensitive linker that will bind to circulating albumin after it is injected. The acid-sensitive linker is attracted to tumor tissues, which are acidic. Effectively, aldoxorubicin is a targeted version of doxorubicin because it hones in on tumor cells.

The company presented phase 1b data at ASCO detailing the fact that by combining aldoxorubicin with doxorubicin, it is able to significantly drop the dose of doxorubicin, and when it adds aldoxorubicin at a higher concentration to doxorubicin, no additional side effects are introduced, including cardiac toxicity. CytRx also released data very recently demonstrating that aldoxorubicin was much more effective than native doxorubicin for treatment of brain cancer, showcasing animal data that was impressive. The brain cancer indication—glioblastoma multiforme (GBM)—is potentially strategically important for CytRx, since it could qualify aldoxorubicin for breakthrough designation at the FDA. Breakthrough designation is a newly formulated classification for drug candidates that are aimed at addressing drastically unmet medical needs, and that have demonstrated significantly better proof-of-concept clinical efficacy than the standard of care. The FDA allows such candidates to pursue an accelerated path toward approval, which could involve completely waiving the requirement to conduct phase 3 trials.

TLSR: My understanding is that a pivotal phase 3 trial with aldoxorubicin is about to begin under a special protocol agreement as a second-line therapy for soft tissue sarcoma. When could we see an approval for aldoxorubicin?

RS: There is a good likelihood that aldoxorubicin could be approved in 2016 for use in soft tissue sarcoma. The company could also advance additional linker-based chemotherapeutic drugs from its pipeline. We think CytRx is not being given adequate value for either aldoxorubicin, which is a relatively advanced product with proof of concept and clinical data already established—and which is also based on an existing approved medication—nor is the company being given credit for the pipeline of drug candidates behind aldoxorubicin.

TLSR: You said you lowered your target on June 19. Why?

RS: We lowered our price target because the company recently discontinued development of tamibarotene, its non-small cell lung cancer-focused, synthetic retinoid-based drug. But that was only contributing about $90M in NPV to our overall enterprise value calculation. We still believe that the appropriate enterprise value for CytRx should be in excess of $250M. The current enterprise value of CytRx, if you take into account existing cash, is only about $40M. This remains an undervalued, risk-mitigated opportunity in the small-cap oncology space.

TLSR: Go ahead and speak to Galena, please.

RS: We continue to be positive on Galena’s prospects in breast cancer with its lead candidate NeuVax (nelipepimut-S or E75), which is proposed to prevent recurrence of breast cancer in disease-free patients who are HER2/neu negative—those expressing very low levels of HER2.

The fact that Roche Holding AG is partially paying for the phase 2 NeuVax study is encouraging. We also note that Galena has been very active on the business development front, bringing in an additional product, Abstral (fentanyl sublingual tablets) for breakthrough cancer pain. Abstral will provide some cash flow. On the diagnostics front, the company has signed an agreement with Leica Biosystems (private) to develop a companion HER2/neu screen. In December it signed a partnership agreement with Teva Pharmaceutical Industries Ltd. (TEVA:NASDAQ) to commercialize NeuVax in Israel. We think the company continues to be favorably positioned, and we continue to like the prospects of NeuVax and the ongoing phase 3 study.

TLSR: I understand that the phase 2b study, which led to the phase 3 PRESENT study now in progress, did not deliver statistically significant results, presumably because that study included both node-positive and node-negative patients. The phase 3 PRESENT trial is being conducted in the most aggressive cancers only—those patients recovering from node-positive disease. Can you comment on that?

RS: When Galena looked at the phase 2b data, it became clear the timing at which NeuVax intervention occurs is important because you have to have the most appropriate antigen presentation. We believe the current phase 3 clinical trial design has been optimized to take into account what the company saw in phase 2b. There also is a high likelihood that Galena will capture a significant cross-section of the breast cancer population by combining its agent with Herceptin (trastuzumab; Roche/Genentech). As Galena gets closer to unveiling the results of the phase 3 trial, the stock is most likely going to trend upward because there is a good mechanistic rationale here.

TLSR: What is the next catalyst we’re looking at for Galena?

RS: The next meaningful catalyst is completion of enrollment. If the company completes enrollment on target, we should see interim results in H1/14.

TLSR: Would you like to comment on NeoStem Inc. (NBS:NYSE.MKT) briefly? The firm, which is an emerging competitor in the development of autologous stem cell-based therapeutic approaches, recently announced a 1-for-10 reverse stock split.

RS: We recently initiated coverage on NeoStem with a Buy rating and a $2.50 price target. Considering the impact of the recently announced 1-for-10 reverse stock split, our new implied price target would be closer to $25 per share.

In our view, the reverse split is well timed, since the company had roughly 280M fully diluted shares outstanding before the split. The split could pave the way for easier institutional ownership of the stock. The most significant catalyst coming up for NeoStem is phase 2 data for its most advanced clinical candidate, AMR-001, an autologous bone marrow-derived stem cell therapy aimed at treatment of ST-elevation myocardial infarction (STEMI), a form of heart attack. The phase 2 STEMI trial of AMR-001 is slated to report topline results early next year. Positive data could potentially result in a transformative partnership for NeoStem.

TLSR: I enjoyed our conversation very much. Thank you, Ram.

RS: Thank you. My pleasure.

Raghuram “Ram” Selvaraju’s professional career started at the Geneva-based biotech firm Serono in 2000, where he discovered the first novel protein candidate developed entirely within the company. He subsequently became the youngest recipient of the company’s Inventorship Award for Exceptional Innovation and Creativity. Selvaraju started in the securities industry with Rodman & Renshaw as a biotechnology equity research analyst. He was the top-ranked biotech analyst in The Wall Street Journal’s “Best on the Street” survey (2006). Selvaraju went on to become head of healthcare equity research at Hapoalim Securities, the New York-based broker/dealer subsidiary of Bank Hapoalim B. M., Israel’s largest financial services group. While at Hapoalim, Selvaraju was regularly featured in The Wall Street Journal, Barron’s, BioWorld Today, and Reuters/AP. He was also a regular guest on the Bloomberg TV program “Taking Stock,” and was a guest on CNBC’s “Street Signs with Herb Greenberg.” He is currently an analyst and managing director with Aegis Capital Corp.

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DISCLOSURE:

1) George S. Mack conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Life Sciences Report CytRx Corp., Galena Biopharma Inc., Lpath Inc., Neuralstem Inc., Catalyst Pharmaceutical Partners Inc., NeoStem Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Ram Selvaraju: I or members of my immediate household own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Ampio Pharmaceuticals Inc., Neuralstem Inc., CytRx Corp., Galectin Therapeutics Inc., Synergy Pharmaceuticals Inc., Stemline Therapeutics Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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Article by Investazor.com

As I mentioned in my early statement, Ben Bernanke didn’t manage to really impress the markets neither yesterday nor today. Maybe the only factor that would make a difference is the fact that yesterday the chairman of Fed made it clear that is very flexible in taking decisions while today his attitude may have shift more towards a dovish one, with the promise that even if by the end of next year the QE3 will be ended, the Fed will keep its policy highly accommodative.

The manufacturing in Philadelphia increased considerably at values last met in March 2011, possible marking the start of an upward trend for the American economy. Last month, only 334.000 individuals filled an unemployment insurance, leading the labor market to the greatest shape since May. In an attempt to approach the situation of gold, Ben Bernanke highlighted another positive aspect of the current economic situation, the fact that investors feel safer now and they don’t make safe deposits as much as in the near past. For all that, taking in consideration a more consistent period of time, the data are mixed, so it’s too soon for the Fed to take a firm position concerning the QE3.  Along with close supervision of the evolution of the economy, gradual steps will be made and changes of situations can occur.

The post Any Movement is Tied to the Economy appeared first on investazor.com.

By The Sizemore Letter

From Jeff Reeves at The Slant:

U.S. stocks rose again on Thursday, with benchmark stock market indexes hitting fresh records. Part of it was jobless claims falling, part of it was strong earnings from blue chip stocks and part of it was Ben Bernanke talking about continued Fed support.

But will the run continue?

Charles Sizemore says yes, and while we may not get another 19% in the next six months, it’s realistic to think we add another 5% to 10%. After all, the Federal Reserve rattled the markets several weeks ago with talk of “tapering” and now that everything looks normal again it has been off to the races. Charles thinks that was the correction the market was looking for before another leg up.

It’s worth noting, too, that stocks are a forward looking indicator. Yes, there are troubles now — but investors are moving their money based on what things may look like in 2014.

And besides, what other assets look good right now? Emerging markets? Bonds? No thank you.

Check out the video and share your thoughts about the market’s direction in the comments section below.