The Mission Report

The MissionIR Report - January 2012

In-depth analysis, timely updates, latest market news


Market News

Company Updates


What to Expect for the Housing Market in 2012

It's been a pretty long ride down from the meteoric highs the housing market hit in the boom years. Who knew more than five years later, Americans would still be trying to shake off the one of the worst financial hangovers the country has ever known.

Millions of homes have been foreclosed on and millions more Americans have underwater mortgages, the lasting legacy of the housing bubble that grossly overinflated home values. Now, living in homes they can't sell, Americans today are "stuck." Stuck financially, stuck in their homes, and stuck wondering when things will get better.

Is 2012 the year the housing market turns around? Of course, no one can say for sure, but plenty of economists say signals are pointing in the right direction.

"It has become increasingly apparent that the pieces for a housing rebound next year are beginning to fall into place," wrote Barclays Capital analyst Stephen Kim in a recent report.

Still, obstacles remain for the housing market. Here's look at what to expect in 2012:

Home prices bottom out. Nationally, home prices have plummeted almost 24 percent off of their peak, and most economists expect prices to continue to decline as much as 4 or 5 percent before leveling out in late 2012.

While experts don't expect a rapid conclusion to the saga of ever-declining home prices, "the trend of eroding expectations for the housing market recovery has come to a halt," said Terry Loebs, founder of Pulsenomics.

More foreclosures. Foreclosure filings have edged downward over the past few months, suggesting improvement in clearing the gigantic inventory of distressed properties in the United States. But according to a recent report from Realty Trac, a new wave of foreclosures could hit the market in early 2012.

Foreclosures have fallen near the end of this year due to eviction moratoriums during the holiday season and continued hold-ups in the legal process as states' attorneys negotiate with mortgage servicers over foreclosure practices.

Clarity on that issue should restart the process and begin flushing homes through the foreclosure pipeline. That's likely to contribute to further prices declines in some markets, particularly those affected by the foreclosure epidemic.

Low mortgage rates. Rock-bottom low mortgage rates are likely here to stay, at least through the first half of 2012, in large part due to the Fed's commitment to keep interest rates low to spur borrowing.

All bets are off, though, if politicians come to a decision on the qualified residential mortgage measure included in the Dodd-Frank financial reform act. "One of the most substantial things that will impact the market will be the definition of the qualified residential mortgage," says Cameron Findlay, chief economist at LendingTree. "That has the potential of entirely changing the way mortgage rates are offered to consumers and it has the risk of raising rates by about 1.25 percent."

Rising rents. The foreclosure crisis has converted millions of previous homeowners to renters and many would-be homebuyers have continued to stay on the sidelines and rent, waiting for prices to "hit bottom" before jumping into the housing market fray.

With more demand comes rising rents, a trend already being seen in many metro areas across the nation. Ultimately that can be a good thing for the housing market, since it generally tips more people into buying homes.

"Rising rents have traditionally been a good factor for home sales," stated Lawrence Yun, chief economist at the National Association of Realtors.

Also, with rental demand heightened, real estate investors' ears have perked up. With prices in many metro areas at historic lows, investors are taking advantage and scooping up properties to convert into rentals.

Are Emerging Markets Decoupling from the Developed World?

Our generation has seen and heard its fair share of bunk economic theories. These are high-sounding theories that are often touted by recognized investors or higher learning institutions - and for that reason, they mostly remain unchallenged. At the top of the list is economic decoupling between emerging and developed countries.

Countries that are in the midst of rapid business growth and industrialization are generally referred to as 'emerging markets.' With a combined population of almost 2.5 billion people, China and India are among the largest emerging market countries.

The theory behind economic decoupling is that emerging market countries can prosper and remain unaffected by adverse financial conditions elsewhere, particularly developed countries. Decoupling has been heavily promoted over the past several years, especially by academic types in the mainstream press.

While decoupling may sound like a plausible idea, the performance for emerging market stocks this year doesn't support that view.

Emerging market stocks are down 16.50 percent year-to-date compared to flat performance for U.S. stocks and a 10 percent loss for developed stocks.

What about mega emerging market countries like Brazil, Russia, India, and China? As a group, BRIC country stocks are down 14.90 percent since the beginning of the year.

Stocks in India, Russia, and Brazil are in bear market territory, down between 20 to 30 percent in value. Based upon the stock market's performance, the theory of economic decoupling isn't holding up and neither is the argument of a soft landing.

The high octane growth from emerging countries that analysts have been preaching is not as high or as fast as previously thought. China's Consumer Price Index (CPI) and Producer Price Index (PPI) for November were a big disappointment. The year-over-year (y/y) results were weaker than projected.

CPI was ahead just 4.2% compared to 5.5% in November 2010 and PPI for the same period was 2.7% compared to 5%. Also, declines in both China's CPI and PPI were worse than what economists were projecting.

In the manufacturing sector, China's growth has slowed to its slowest level in two years and home sales along with exports are ebbing. Premier Wen Jiabao's formula to save China and the rest of the world by creating a lending boom is both odd and unimaginative. The strategy did not work in developed economies like the U.S. - and won't work elsewhere.

Europe's financial crisis has taught us that a financial crisis doesn't take a holiday nor does it play favorites. The problems that began with fringe countries like Greece and Portugal have now infected France and Germany. How does this relate to emerging markets?

Emerging market countries are not invincible, as the enthusiastic academics paint them to be.

Rather than buying into the popular theory of economic decoupling, investors should analyze the facts and remain skeptical.

FluoroPharma Medical Announces Appointment to Board of Directors

FluoroPharma Medical, a biopharmaceutical company providing proprietary PET imaging products to evaluate cardiac disease at the cellular and molecular levels, announced today that it has appointed Lawrence Atinsky to its Board of Directors. The appointment is effective January 3, 2012.

Mr. Atinsky has worked closely with a number of biotechnology companies over the past ten years, helping them execute their strategic growth plans, and is currently a partner at Ascent Biomedical Ventures. Ascent is a venture capital firm targeting early stage biomedical technology companies developing medical devices, biopharmaceuticals, healthcare services, and information technology. Prior to joining Ascent, Mr. Atinsky was an attorney at Skadden Arps where he specialized in mergers and acquisitions.

FluoroPharma President and CEO, Thijs Spoor, commented on the appointment: "I am delighted to welcome Lawrence to the FluoroPharma Board. His legal background, along with his extensive biotech business experience, brings invaluable knowledge and will complement the considerable expertise of the Board."

FluoroPharma's focus is the development of breakthrough positron emission tomography (PET) imaging agents for the efficient detection and assessment of acute and chronic forms of coronary artery disease. The goal is to enable personalized medicine through advanced imaging products that will help the medical community diagnose disease more accurately at the earliest stages, leading to more effective treatment, management, and better patient outcomes.

AdCare Health Systems, Inc.

AdCare Health Systems recently announced the appointment of David Rubenstein to the new position of chief operating officer. Rubenstein retains extensive operational experience in delivering long-term care, including P&L management, census development, and administrative support. He brings more than 23 years of experience in long-term care facility management.

Rubenstein was previously CEO of LaVie Management Services, managing the operations of 60 skilled nursing facilities across 16 states. Prior to LaVie, he served as CEO of Coastal Administrative Services and executive vice president of strategy and support for Genoa Healthcare, responsible for IT, accounting, and reimbursement in support of 145 skilled nursing facilities.

About AdCare Health Systems, Inc. (ADK)

AdCare Health Systems, Inc. is an expanding national leader in the development, ownership, and management of assisted living facilities, skilled nursing and retirement communities. The company's 3,600 employees provide high-quality care for patients and residents residing in the 44 facilities that it operates with a total of approximately 3,900 beds/units in service.

As a result of better health management and treatments allowing people to live longer, the Census Bureau projects that the population aged 85 and over could grow from 5.7 million in 2008 to 19 million by 2050. AdCare has been successfully pursuing an aggressive M&A growth strategy to bolster its portfolio during a depressed economic climate to capitalize on the imminent demand for senior care over the coming decades.

The fragmented skilled nursing market presents significant consolidation and acquisition opportunities to well-established providers like AdCare. With approximately 16,000 facilities currently in operation, no single provider has a market share of more than a few percent. Leveraging its seasoned senior management team's substantial senior living, healthcare, and real estate industry experience, the company is focused on advancing its strategic business plan to operate a much larger enterprise.

Since inception, AdCare's mission has been to provide the highest quality healthcare services to the elderly. With nine straight years of record revenue growth, the company has proven its ability to deliver high-quality care and strong operational efficiency. AdCare is well positioned to continue growing rapidly, both organically and via acquisitions, as industry trends and burgeoning opportunities across the U.S. increase the demand for long-term care.

FluoroPharma Medical, Inc.

In recent news, FluoroPharma Medical announced the appointment of Lawrence Atinsky to its Board of Directors. Mr. Atinsky has worked closely with a number of biotechnology companies over the past ten years, helping them execute their strategic growth plans.

FluoroPharma President and CEO, Thijs Spoor, stated, "I am delighted to welcome Lawrence to the FluoroPharma Board. His legal background, along with his extensive biotech business experience, brings invaluable knowledge and will complement the considerable expertise of the Board."

About FluoroPharma Medical, Inc. (FPMI)

FluoroPharma Medical, Inc. is a biopharmaceutical company focused on discovering and developing patented Positron Emission Tomography (PET) imaging products to improve patient management by evaluating cardiac disease at the cellular and molecular levels. The company is currently advancing two products in clinical trials to fulfill critical unmet medical needs. The agents will provide clinicians important tools for detecting and assessing pathology before critical manifestations of disease.

The company's proprietary molecules labeled with the radioactive isotope of fluorine combined with PET scanning provide non-invasive, highly specific and efficient assessment of heart metabolism and physiology. FluoroPharma's cardiovascular program addresses the largest segment of the nuclear medicine market.

Molecular imaging fulfills numerous unmet needs in diagnosis by enabling visualization, characterization and measurement of biological processes at the molecular and cellular level. Unlike traditional imaging modalities – MRI, CT, and Ultrasound – that reveal the anatomical abnormalities and cause for disease, PET provides insight into physiology and can detect disease before anatomical manifestation is identified. According to GAI, the market for molecular imaging agents currently exceeds $1.7 billion annually and promises rapid growth for the foreseeable future.

FluoroPharma's comprehensive technology platform was developed by scientists at the Massachusetts General Hospital. To date, the company has been issued four US patents and has seven applications pending in addition to strong international protection. With a solid and experienced management team in place and the necessary resources to advance clinical development, FluoroPharma is well positioned to capitalize on its superior imaging technology.

VistaGen Therapeutics, Inc.

VistaGen Therapeutics, Inc. and Synterys, Inc., a medicinal chemistry and collaborative drug discovery company, recently entered into a strategic medicinal chemistry services agreement. The collaboration will further VistaGen's stem cell technology-based drug rescue initiatives with the support of Synterys' medicinal chemistry expertise.

"After evaluating several high quality candidates, we are happy to have selected Synterys as the medicinal chemistry partner of choice for our drug rescue programs," stated Ralph Snodgrass, Ph.D., President and Chief Scientific Officer of VistaGen. "Synterys' scientists bring significant experience in medicinal and synthetic organic chemistry to our collaboration, as well as the skills and infrastructure necessary to drive our programs forward successfully and cost effectively."

About VistaGen Therapeutics, Inc. (VSTA)

VistaGen Therapeutics, Inc. is a biotechnology company applying stem cell technology for drug rescue and cell therapy. Drug rescue combines human stem cell technology with modern medicinal chemistry to generate new chemical variants ("drug rescue variants") of promising drug candidates that have been discontinued during preclinical development ("put on the shelf") due to heart or liver safety concerns. VistaGen also focuses on cell therapy, or regenerative medicine, which includes repairing, replacing or restoring damaged tissues or organs.

VistaGen's versatile stem cell technology platform, Human Clinical Trials in a Test Tube™, has been developed to provide clinically relevant predictions of potential toxicity of promising new drug candidates long before they are ever tested on humans. VistaGen's human pluripotent stem cell-based bioassay systems more closely approximate human biology than conventional animal studies and other nonclinical techniques and technologies currently used in drug development.

Using mature human heart cells produced from pluripotent stem cells, VistaGen leveraged its Human Clinical Trials in a Test Tube™ platform to develop CardioSafe 3D™, a novel three-dimensional (3D) bioassay system for predicting the in vivo cardiac effects of new drug candidates before they are tested in humans. The Company now plans to use CardioSafe 3D™ to build a pipeline of small molecule drug rescue variants of once-promising drug candidates that have been "put on the shelf" by pharmaceutical companies and academic research institutions because of heart toxicity concerns, despite positive efficacy data signaling their potential therapeutic and commercial benefits.

VistaGen is also developing LiverSafe 3D™, a novel predictive liver toxicity and drug metabolism bioassay system for drug rescue applications. In parallel with drug rescue activities, the company is funding early-stage nonclinical studies focused on potential cell therapy applications of its Human Clinical Trials in a Test Tube™ platform. Each of these nonclinical studies is based on the proprietary human pluripotent stem cell differentiation and cell production capabilities of VistaGen's Human Clinical Trials in a Test Tube™ platform.


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