The Mission Report

The MissionIR Report - May 2014

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Dow, S&P 500 Start Week at Record Highs

Investors snapped up shares of companies large and small, driving major indexes to records and reviving beaten-down technology stocks.

The Dow Jones Industrial Average climbed 112.13 points, or 0.7%, to 16695.47, notching its second record finish in as many sessions and its third new high of 2014. The Dow notched 52 records in 2013.

The S&P 500 added 18.17 points, or 1%, to 1896.65, squeezing out its ninth record close of the year.

In large part, the gains were driven by hedge funds piling back into stocks that have retreated this year—likely reversing bearish positions they took earlier this year—rather than by big investors placing fresh bets on the market’s future direction, according to Wall Street traders. Investors said there was little news behind the stock upturn, beyond a gradual warming in economic and earnings data in recent weeks.

“It’s the sectors and names that have gotten beaten up the most that are coming back the most,” said Reed Choate, a portfolio manager at New York money manager Neville, Rodie & Shaw, which manages $1.4 billion.

The upturn was most notable in the shares of smaller companies, which have fallen out of favor lately as investors have flocked to larger, more established companies. On Monday, the Russell 2000 small-cap index gained 26.43 points, or 2.4%, to 1133.65, its largest advance in two months. It remains 6% below its all-time high of 1208.65 reached in March, and was nearing a so-called correction—market parlance for a loss of 10%—until Monday’s rebound.

The Nasdaq Composite Index added 71.99 points, or 1.8%, to 4143.86. Despite the recent gains, the technology-heavy index remains 18% off its record of 5048.62, reached at the height of the dot-com bubble in 2000.

Despite Monday’s rise in beaten-down technology stocks, many investors continue to believe such shares may not have hit a floor, saying they remain too expensive compared with earnings.

Neville’s Mr. Choate said the recent pullback among so-called momentum stocks has led him to start scouring for attractively priced companies to start investing in again, but he is being picky and searching for companies with the strongest businesses.

“You start rolling up your sleeves and doing deep dives to see which are sound companies,” he said.

Monday’s rally came on the back of little news and light trading. Investors said a combination of better-than-expected quarterly earnings and improving economic data should pave the way for further gains in stocks in the near term.

“By and large, the data’s been pretty good on the U.S. economy,” said Jim Paulsen, chief investment strategist at Wells Capital Management, which oversees $357 billion.

Despite the recent spate of records among major indexes, stocks this year have seen much more subdued gains compared with 2013, when the S&P 500 rose 30%. For 2014, the S&P 500 is up 2.6%, while the Dow has risen 0.7%.

The soft trading in the Russell 2000 with the Dow and S&P at records echoed markets in 1998. That year, all three indexes hit records in April. But in July, the Dow and S&P advanced to new highs, while the Russell had fallen 6.5% from its peak.

Recently, investors have contended with a steep selloff in shares of some of last year’s biggest gainers in the biotechnology and consumer Internet sectors. The S&P 500 Utilities index, up 9.8%, remains the year’s biggest gainer among the 10 major S&P 500 indexes, though it slipped 1% Monday.

Underscoring the relative quiet in stocks this year, the CBOE Volatility Index slumped 5.3% Monday, to its lowest level since January, and is down more than 40% from a spike in February.

Jeff Yu, who heads trading in single-stock derivatives at UBS, said the stock market’s tight range this year has led to the pullback in the volatility measure, which tracks expected daily shifts in stock prices.

“We’ve been in such a tight corridor for the last three months,” he said. “As long as we continue to stay in this [narrow] range, there’s going to be no reason to buy” the downside protection stock derivatives can provide.”

Some of the hardest-hit consumer Internet stocks rebounded Monday.

Twitter Inc. rallied $1.89, or 5.9%, to $33.94 after slumping 18% last week. Inc. gained 10.62, or 3.6%, to 302.86, and Facebook rose 2.59, or 4.5%, to 59.83.

The Deal Between U.S. Authorities and Credit Suisse Could Exceed $1.5 Billion

New York state's banking regulator is seeking hundreds of millions of dollars from Credit Suisse in its probe of potential tax evasion involving the Swiss bank, according to sources close to the matter, which could push an eventual settlement with U.S. authorities over $2 billion.

The New York regulator made an opening bid of $1 billion, one of the sources said, though negotiations are expected to significantly drive down the final penalty amount.

The settlement with the New York State Department of Financial Services would be in addition to the fine that Credit Suisse is discussing with the U.S. Justice Department. Reuters reported last week that the Justice Department is seeking as much as $1.6 billion from the bank.

The talks between Credit Suisse and Benjamin Lawsky, New York's financial services superintendent, are ongoing, people familiar with the matter said. Credit Suisse could reach a deal with New York and federal authorities in the coming days, they said.

Federal prosecutors have also been pushing for the bank to plead guilty to criminal charges as part of the settlement, as the U.S. Justice Department has faced criticism that it has shied away from prosecuting financial firms.

Spokesmen from Credit Suisse and Lawsky's office declined comment.

The Swiss bank is eager to move past the long-running probe by the Justice Department into whether it helped thousands of Americans evade U.S. taxes.

Credit Suisse Chairman Urs Rohner told shareholders last week, "We are doing everything we can to resolve this matter within the given framework of U.S. and Swiss law, in the best possible way and in a timely manner."

New York authorities opened their investigation earlier this year in the wake of a damning U.S. Senate report that accused Credit Suisse bankers of secretly traveling to the United States to recruit clients.

The Senate report said Credit Suisse's practices facilitated tax evasion against the United States for years. By 2008 the bank had over 1,800 Swiss bankers who were handling one or more U.S. clients, according to the report.

In total Credit Suisse opened Swiss accounts for more than 22,000 U.S. customers with combined assets of as much as $12 billion, the report said.

In April the Lawsky's office ordered Credit Suisse to turn over employment and other records as it examined whether the bank lied to New York authorities about creating tax shelters.

The bank agreed in February to pay $196 million to resolve a related case from the U.S. Securities and Exchange Commission.

Exporters See Brighter Future as Euro Drops Further Against the Dollar

The euro hovered within 0.1pc of its weakest level in a month against the dollar yesterday as Citigroup and UBS forecast further declines amid signs the European Central Bank will add further stimulus.

A weaker currency helps boost exports but can drive up the real cost of goods and services bought in from outside the eurozone.

"We are bearish and think that finally the ECB is ready to back words with action," said Geoffrey Yu, a foreign-exchange analyst at UBS in London. "The market is pricing in some degree of accommodation ahead. The level of the euro is going to jeopardise the ECB's inflation forecasts."

The euro was at $1.3759 at 7:38am in New York yesterday after dropping to $1.3745 on May 9, its lowest level since April 8.

The single currency advanced 0.1pc to 140.25 yen after sliding 1.2pc last week. Japan's currency fell 0.1pc to 101.93 per dollar. The euro may extend losses to around $1.33 into the third quarter, UBS's Yu said.

The common currency's decline from last week's high of $1.3993, the strongest since October 2011, has formed a bearish reversal pattern that should lead to further losses, according to Citigroup analysts including Shyam Devani in London.

"Not only did we see a daily reversal at the trend highs but also a bearish weekly reversal," the analysts wrote. The euro "now looks vulnerable and is in danger of trending down over the weeks ahead," they said. Citigroup is the world's biggest currency trader, according to a Euromoney Institutional Investor Plc survey released last week. UBS is the fourth.

The euro has gained 5pc in the past 12 months, the third-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 1.5pc and the yen fell 1.9pc.

Methes Energies International Ltd. (MEIL)

Methes Energies last week reported that it is on the verge of establishing a strong business relationship with a large national aggregator and a downstream distributor in the United States. The company is finalizing the arrangements for the relationship, which would call for Methes Energies to provide up to 40 railcars of biodiesel per month for the rest of 2014 and beyond, or the equivalent of up to 1 million gallons of biodiesel per month.

Methes Energies has earned qualification to be an importer of biodiesel into the United States. The company has earned qualification for being able to generate renewable identification numbers in the United States as well. It now is able to sell directly to United States buyers.

About Methes Energies International Ltd.

Methes Energies uses its own proprietary technology to produce high-quality biodiesel processors and systems to capitalize on the growing demand for renewable energy, surging energy prices, and the value of biodiesel as a practical and realistic long-term replacement for conventional diesel fuel. The Company’s processors are flexible and can use a variety of virgin vegetable oils, used vegetable oil and rendered animal fat feedstock, allowing operators to take advantage of feedstock buying opportunities. Methes Energies also markets and sells high-quality biodiesel fuel produced at its 1.3 MGY (5 MLY) showcase production facility in Mississauga, Ontario, and at it’s 13 MGY (50 MLY) facility in Sombra, Ontario, to customers in the U.S. and Canada.

Methes Energies’ broad range of expertise and solutions include all aspects of the engineering, manufacturing, production, logistic, marketing and distribution processes. Among other services, the company leverages its cutting-edge biodiesel processors, pre-treatment systems, and other solutions to address real and specific biodiesel production challenges for large and small-scale biodiesel producers and entrepreneurs seeking to produce their own fuel.

In 2007 the company introduced the Denami 600, the industry’s first compact, full automated continuous flow biodiesel processor designed to run on a wide variety of feed stocks. This reliable, cost-effective and superior method of producing top-grade biodiesel exceeds current ASTM standards.

The company also sells feedstock to its network of biodiesel producers, selling their biodiesel production and providing clients with proprietary software to operate and control their processors. Methes Energies remotely monitors the quality and characteristics of its clients' production, upgrades and repairs their processors as necessary, and advises clients on adjusting their processes to use varying feedstock to improve the quality of their biodiesel.

As a competitive and highly respected revenue-generating player in the North American biodiesel sector, Methes Energies is fast building a network of biodiesel operators and facilities to capitalize on buying power and economies of scale. The North American demand for biodiesel is sizeable and the company is well positioned for global expansion throughout Europe, South America, Africa and Asia.

VistaGen Therapeutics, Inc.

Recently, VistaGen Therapeutics announced that it has received broader intellectual property protection for its stem cell technology platform. The United States Patent and Trademark Office issued a notice of allowance (NOA) for U.S. Patent Application 12/836,275, entitled “Cell populations enriched for endoderm cells.” The NOA extends VistaGen Therapeutics’ intellectual property portfolio for pluripotent stem cell culture systems that produce human cells of the endoderm lineage, including liver, lung, pancreas, parathyroid, and thyroid cells.

“In addition to expanding the scope of our drug rescue opportunities, this patent allowance and our world-class differentiation expertise put VistaGen in a unique position to pursue potential stem cell research collaborations related to liver biology and drug metabolism assays, as well as pancreatic beta-islet cells for drug and regenerative cell therapy for diabetes,” said Ralph Snodgrass, Ph.D., VistaGen’s President and Chief Scientific Officer.

About VistaGen Therapeutics, Inc.

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 once-promising drug candidates that have been discontinued during late-stage preclinical development 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 heart and liver toxicity of promising new drug candidates long before they are ever tested on humans.

By more closely approximating human biology than conventional animal studies and other nonclinical techniques and technologies currently used in drug development, VistaGen's human stem cell-based bioassay systems can improve the predictability of the drug development cycle and lower the cost of new drug research and development by identifying product failures earlier in the cost curve. According to the Food and Drug Administration even only a ten percent improvement in predicting failure before clinical trials could save $100 million in development costs, which savings ultimately could be passed on to patients.

Using mature human heart cells produced from stem cells, VistaGen has developed and internally validated 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. VistaGen is now focused on using CardioSafe 3D™ to generate up to two new, safer small molecule drug rescue variants every twelve to eighteen months. VistaGen anticipates that these drug rescue variants will be modified versions of once-promising new drug candidates that have been discontinued by pharmaceutical companies and academic research institutions because of heart toxicity concerns, despite substantial prior investment and positive efficacy data demonstrating their potential therapeutic and commercial benefits.

VolitionRx Ltd. (VNRX)

VolitionRx announced that preliminary data from University Hospital Bonn, Germany, has been published online in the leading peer-reviewed journal, Anticancer Research. The data, first presented at CNAPS (Circulating Nucleic Acids in Plasma and Serum) congress last year, shows VolitionRx's single proprietary NuQ®-5mc assay detects 75% of colorectal cancers with 70% specificity. Since then, VolitionRx has achieved even better detection rates by combining its assays.

"It is encouraging to see data supporting the use of our blood tests for the detection of colorectal cancer being published for the very first time; it is a pivotal moment for us. Dr. Holdenrieder's study was the first to acknowledge the potential of our NuQ tests," said Jake Micallef, Chief Scientific Officer of VolitionRx. "It's promising that similar results have been found independently from our own trials as we look to bring the test to market."

About VolitionRx Ltd.

VolitionRx Ltd. is a life sciences company focused on bringing to market its inexpensive, accurate, and scalable cancer detection blood tests. The company intends to use its NuQR suite of products to fill a looming void in cancer diagnostic testing, for which there currently is only one blood test in common clinical use.

NuQR is based on VolitionRx's proprietary NucleosomicsR technology, capable of measuring and identifying nucleosome structures in the blood. The company has secured strong intellectual property protection for its products, further strengthened by patent applications in the United States, Europe and worldwide. Following ongoing clinical trials and regulatory approval, VolitionRx will market its diagnostic and screening tests for individual cancers under the NuQR brand.

The company is currently conducting clinical trials for its first product, a diagnostic test for colorectal cancer. Colorectal cancer is the third most common cancer in the United States - current tests are expensive, invasive and unpleasant, resulting in a significant need for an improved alternative for colorectal diagnoses.

VolitionRx's primary office and laboratory are based in Namur, Belgium, from which the company's strong team of professionals spearhead corporate initiatives. The company's executive management team is further supported by a scientific advisory board staffed with senior scientists from around the world, as well as a highly experienced board of directors.


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