The Mission Report

The MissionIR Report - March 2015

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Greenback Flex Triggers Investor Flinch - the Effect on Blue Chip Biz

The U.S. dollar is trading at a 12-year high against the euro and an 8-year high versus the Japanese yen, signaling that the U.S. economy is healthier than many other parts of the world. The surging greenback is good news for Americans traveling overseas and consumers looking for cheaper imported goods, but if Tuesday’s falling market is any inclination, investors aren’t happy.

According to CNN Money, there are two primary reasons for the discord.

First, large American firms with significant foreign sales will likely feel the pinch when it comes time to report quarterly results. Overseas revenues on international units will be weaker as currencies are moved back into America dollars. Big firms like Microsoft, Proctor & Gamble and Caterpillar are among many blue chips that have already issued caveats about the stronger greenback’s effect on sales and profits.

Another downside to the dollar upside: price tag appeal. A stronger dollar makes products manufactured by non-U.S. firms more appealing here in the U.S. when it comes to pricing. In the U.S., homegrown companies may have a harder time competing with cheaper, foreign-made products.

On the other hand, small-cap stocks tend to thrive when on the stronger greenback. Though they’re considered riskier investment options, small-cap stocks typically do little business abroad. Another set of thrivers: S&P 500 companies. According to FactSet Research, 107 companies in the S&P generate more than 85% of their revenues from domestic business.

Overnight Tuesday the euro fell toward $1.07 in dollar terms.

Hefty Price Tags Boost Drug Spending to 12-Year High

Marking the largest annual increase in more than a decade, Express Scripts, the nation’s largest pharmacy benefits manager, says prescription drug spending rose 13% last year driven by expensive specialty drugs that accounted for roughly 31 cents of every dollar spent on prescriptions – or a record 31% increase. In contrast, spending on traditional drugs increased 6.4%.

Advanced medications for complex and chronic conditions like hepatitis C and multiple sclerosis represent only about 1% of all U.S. prescriptions filled – but their heavy price tags contributed to the sharp increase in spending in 2014. How pricey? Specialty drugs can cost between $50,000 and $100,000 – per patient – per year.

While many of these medications are considered breakthrough treatments, the hefty prices are drawing criticism from patient groups, insurers and Express Scripts. The primary focus seems to be on like Gilead Sciences’ hepatitis C treatment Sovaldi, which can cost $84,000 for a 12-week course of treatment. Spending on hepatitis C drugs, driven primarily by Gilead’s medicines, rose an astounding 743% last year.

Drugmakers say the higher cost of their drugs can be recovered over time because the treatments will reduce future healthcare costs. They also say the trend on specialty drugs will hit sustainable levels in the next three years.

In an interview with CNBC’s “Squawk Box,” Express Scripts Chief Medical Officer Steve Miller said, “The reality is, these are great new drugs that are coming to the market. The trouble is it’s not just sustainable pricing. And so we have to do something to bring the products to the marketplace, but also make it affordable for patients.”

Spending on these specialty drugs rose an average of 38% across Medicare (13.8%), Medicaid (10.2%) and commercial insurance plans (13.1%). Express Scripts projects spending among commercial plans to grow an average of 10% annually for through 2017.

Labor Market in the U.S. Hits 14-Year High

Job openings in the U.S. increased 2.5% to 5 million spots in January, representing the most open positions in since 2001, the Labor Department said Tuesday. Also on the rise is the number of people who quit their jobs, which increased 3% to 2.8 million - the most in more than six years. Though the latter may sound contradictory, both figures are signs of a growing job market.

Because people tend to leave their job when a better paying or higher positioned gig comes around, more job quits typically signal confidence in the job market overall economy. Increased openings are also usually followed by stronger job gains as strong consumer spending gives businesses greater confidence in the economy and typically makes them more willing to hire.

The January jobs report follows net figures released by the government last Friday. U.S. employers added 295,000 jobs in February, extending a labor market boom that began last year and cutting the U.S. unemployment rate to 5.5% compared to 6.7% a year ago.

The number of Americans earning paychecks has jumped nearly 3.3 million in the past year, notching best 12-month gain since March 2000.

Tuesday's report also includes revisions to the previous five years of data that economists suggest indicates that employers are either taking their time filling openings or are struggling to find qualified candidates. Job openings in December were downwardly revised from more than 5 million to 4.88 million. Total hiring slowed in January to fewer than 5 million after reaching a seven-year high of 5.2 million in December. The number of layoffs also fell that month.

How does supply fare with demand? There were, on average, 1.8 unemployed workers for every open job in January. Some economists forecast the U.S. might achieve 3% annual growth in 2015 – the first time in a decade the labor market has seen such growth.

“Unbelievable” Year for Apple

Apple CEO Tim Cook addressed shareholders Tuesday calling 2014 an “unbelievable” year, citing the sale of 200 million iPhones and total revenues of $200 billion. For Apple an incredible year looks like this:

Shares of the company are up 65% from a year ago while the company reached a market value of $700 million and is set to bump AT&T to join the benchmark Dow 30 index.

The CEO also promised more diversity in the year ahead as civil rights leader Jesse Jackson and an Apple shareholder urged him to include more minorities in Apple's leadership.

The low-key shareholder address follows yesterday’s unveiling of the Apple Watch, which did little to lift shares of Apple Stock. The company disclosed its smartwatch back in September, but fell short of providing many juicy details. On Monday, the tech giant shed some light on the device, announcing that the Apple Watch will be available on April 24 for customers in Australia, Canada, France, Germany, Hong Kong, Japan, the UK and the U.S.

These are a few of the basics:

  • Apple Watch is available in three collections, Apple Watch Sport, priced at $349 (US) and $399 (US); Apple Watch, available from $549 (US) to $1,099 (US); and Apple Watch Edition, crafted from custom rose or yellow 18-karat gold alloys, with prices starting at $10,000 (US).
  • Apple Watch is available in two different sizes, 38 mm and 42 mm, and in three distinct collections—Apple Watch Sport, Apple Watch and Apple Watch Edition.
  • Communicates with iPhone over Wi-Fi and Bluetooth.
  • iPhone will download apps for Watch via Apple Watch Store.
  • Designed it with "all-day battery life" across a range of uses. 18 hours in typical day.
  • You can connect an Apple Watch to another Apple Watch (direct communication). Draw a sketch and have it pop onto friends' watches. Or tap to get a friend's attention. Or send your heartbeat.

When the news came out, traders were less than impressed. Shares of Apple, which traded as high as $129.57 during the early portion of Monday’s official watch unveiling, closed at $127.14, up 0.4% on the day. Shares of Apple slumped more than 1.5% in Tuesday’s mid-day trade, partially with the undercurrent of the broader market.

ENGlobal (ENG)

ENGlobal last week reported that Xcel Energy in Denver, a major U.S. electric and natural gas company with annual revenues of $10.9 billion, has awarded the company with a 5-year extension agreement. According to the press release, ENGlobal anticipates providing ongoing engineering, design, construction management and procurement support for Xcel Energy’s natural gas pipeline and facility projects in all of its operating regions.

ENGlobal and Xcel Energy previously teamed up on work that includes the 60-mile West Main segment pipeline replacement and the 34-mile Cherokee CACJ (Clean Air — Clean Jobs Act) pipeline. The two companies have also worked together on smaller capital and maintenance jobs involving Xcel Energy’s local gas transmission and distribution network. ENGlobal’s Broomfield, Colorado office, which has a growing staff of project execution professionals, will support this work.

About ENGlobal

As a top-ranked provider of energy-related automation and engineering services, ENGlobal Corp. (ENG) emphasizes quality and safety to deliver innovative, energy-related automation integration services and EPCM projects for clients worldwide. Operating through two strategic business segments, ENGlobal provides its services to the energy, pulp and paper, and government sectors throughout the United States and internationally.

ENGlobal's Automation segment provides a wide range of services related to the design, fabrication and implementation of distributed control, instrumentation and process analytical systems. Products and services supporting the environmental technology fields are also offered by the Automation segment. The Engineering (EPCM) segment provides consulting services for the development, management and execution of projects requiring professional engineering, construction management, and related support services. Within the Engineering segment, ENGlobal's Government Services group provides engineering, design, installation and operation and maintenance of various government, public sector and international facilities, and specializes in the turnkey installation and maintenance of automation and instrumentation systems for the U.S. defense industry worldwide.

In its 29 years of operations, ENGlobal has created a global workforce of more than 400 industry leaders in a variety of fields, ranging from drafters and designers to technical specialists. The company’s highly experienced core leadership team has established a solid financial foundation and proven ability to consistently grow company revenues and value.

Inventergy Global, Inc. (INVT)

On Monday, Inventergy announced the launch of a collaborative new Mobile User Device licensing initiative for its 3G/LTE mobility patent portfolio, providing standardized rates and terms to mobile equipment manufacturers. The portfolio includes Standards Essential Patents (SEPs), which are defined as patents covering technologies that must be used to comply with a technical standard.

Inventergy's Mobile User Device Portfolio includes at least 34 mobile broadband patent families, consisting of nearly 350 patents having claims directed to mobile end user devices, such as mobile phones, tablets, PCs, modems and mobile hotspots. Inventergy believes at least 15 patent families in this portfolio, consisting of at least 189 patents, contain SEPs covering 3G and LTE communications functionality in end user devices. Such User Device SEPs would generally be subject to fair, reasonable, and non-discriminatory (FRAND) licensing which Inventergy is honoring through its Mobile User Device licensing program.

About Inventergy Global, Inc.

Inventergy Global, Inc. is an intellectual property (IP) licensing partner specializing in IP value creation. Led by industry veteran Joe Beyers, former head of global licensing for Hewlett-Packard, Inventergy identifies, acquires and licenses patented technologies to help market-leading technology companies monetize and achieve more value from their innovations.

Inventergy partners with world-class, market-significant companies who may lack internal manpower, budget or other resources necessary to realize appropriate return-on-investment. Through collaborative, business-centered, and forward-thinking strategies, the company is able to create portfolios with significant market potential and optimize the innovator’s overall return-on-investment.

Inventergy partners with world-class, market-significant companies who may lack internal manpower, budget or other resources necessary to realize appropriate return-on-investment. Through collaborative, business-centered, and forward-thinking strategies, Inventergy is able to create portfolios with significant market potential and optimize the innovator’s overall return-on-investment.

Net Element, Inc. (NETE)

Earlier this week, Net Element announced that its Unified Payments subsidiary provided the technical setup, support and credit card processing for the sale of merchandise at the January 2015 College Football Playoff National Championship event in Dallas, Texas. The three-day task included installing the payment processing system within 68,000 square feet of combined merchandise space and setting up 24 registers, iPad based terminals, Bluetooth scanners and receipt printers in five separate sites to enable seamless, centralized inventory controls and replenishment, fast checkout, good customer service, and the ability to accept Apple Pay.

“Net Element will actively pursue additional opportunities and events for which we can provide our competitively priced, on-demand, scalable, mobile, technologically advanced processing solution along with additional payment means such as Apple Pay, and extensive merchant analytics tools. Event processing is a new niche for us and we are very excited with this new business line and the opportunities it creates for us,” said Net Element CEO Oleg Firer.

About Net Element, Inc.

Net Element is a technology-driven group specializing in mobile payments and value-added transactional services that add convenience to mobile phone users’ lives and everyday commerce. The company’s innovations enable consumers to conduct commerce transactions from their mobile device, while online and offline payment capabilities allow merchants to reliably transact business anywhere and anyhow.

The company owns and operates TOT Group, Inc., a global mobile payments and transaction processing provider. TOT Group companies include Unified Payments, which was recognized by Inc. Magazine as the No. 1 fastest growing private company in America in 2012; Aptito, a next-gen cloud-based point of sale (“POS”) payments platform; and TOT Money, a mobile billing solutions provider and Russia’s top-ranked SMS content provider, according to Beeline, the country’s second largest telecommunications operator.

Net Element has headquarters in Miami, Florida, with international presence in selected emerging markets. Utilizing its global development centers and high-level business relationships, Net Element has positioned itself for continued growth in the mobile commerce and alternative payments environments.

VistaGen Therapeutics, Inc.

In its most recent press release, VistaGen announced a Cooperative Research and Development Agreement (CRADA) with the U.S. National Institute of Mental Health (NIMH), a component of the U.S. National Institutes of Health (NIH). The CRADA enables VistaGen and the NIMH to partner on an NIH-sponsored Phase 2 clinical study of AV-101 in subjects with Major Depressive Disorder (MDD). MDD is a pervasive and debilitating mental disorder which affects millions of people worldwide. It has been noted that as many as 7% of all adults have some form of MDD.

Dr. Carlos Zarate, Chief of the Section on the Neurobiology and Treatment of Mood Disorders and Chief of the Experimental Therapeutics and Pathophysiology Branch at the NIMH, will be the Principal Investigator of the NIH-funded study, which will be a randomized, double-blind, placebo-controlled, crossover Phase 2 clinical trial designed to study the efficacy and safety of an oral dose of AV-101 taken once per day for two weeks. The study involves approximately 25 subjects with MDD. The main efficacy measure will be the Hamilton Depression Rating Scale (HDRS) – the subject standard for measuring the severity of MDD. The study is anticipated to be completed this year.

About VistaGen Therapeutics, Inc.

VistaGen is a clinical-stage biopharmaceutical company developing innovative medicine for depression and diseases and conditions involving the central nervous system (CNS). VistaGen's AV-101 is a new generation orally-available NMDA receptor glycine B-site antagonist entering Phase 2 clinical development for Major Depressive Disorder. Based on preclinical studies, AV-101 may also have potential as a treatment for other CNS-related conditions, including chronic neuropathic pain and epilepsy, as well as neurodegenerative diseases such as Parkinson's disease and Huntington's disease.

AV-101's fundamentally novel mechanism of action places it among a new generation of glutamatergic antidepressants with breakthrough potential to treat millions of MDD sufferers worldwide who are poorly served by SSRIs, SNRIs and other current depression therapies. Like ketamine, AV-101 modulates (down-regulates) NMDA receptor channel activity. However, unlike ketamine's antagonistic activity, which results from its blocking the NMDA receptor channel, AV-101's antagonistic activity results from its selective binding to, and blocking of, the functionally-required glycine-binding co-agonist site of the NMDA receptor. Targeting the glycine-binding co-agonist site of the NMDA receptor may bypass potential adverse effects that occur with ketamine without affecting the robust efficacy observed in previous clinical studies. This may then result in the "glutamate surge" that has been associated with the rapid-acting antidepressant effects of ketamine.

VistaGen is also leveraging its proprietary pluripotent stem cell technology and clinically-predictive bioassay systems, CardioSafe 3D™ and LiverSafe 3D™, for drug rescue applications focused on producing proprietary new chemical entities (NCEs) that are novel, safer versions of drug candidates previously optimized and tested for efficacy by pharmaceutical companies and others but terminated before FDA approval due to heart or liver toxicity.


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