The Mission Report

The MissionIR Report - July 2014

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Retail Sales Forecast Cut for 2014

The National Retail Federation on Wednesday lowered its retail sales forecast for 2014, citing slow growth during the first half of the year.

The trade organization said it now expects retail sales to grow 3.6 percent this year, down from its 4.1 percent forecast in January.

It attributed some of the industry's sluggishness to the severe weather that kept consumers out of stores at the beginning of the year, and said it expects sales to grow "significantly faster" over the next five months.

"No retailer was immune to the doldrums witnessed during the first quarter, and as a result, the year's growth trajectory was impacted," NRF President and CEO Matthew Shay said.

The group estimates sales grew 2.9 percent during the first half of the year and expects sales will rise at least 3.9 percent in the second half.

NRF Chief Economist Jack Kleinhenz cited a strengthening employment picture and higher consumer confidence as reasons to be optimistic. But shoppers' lingering price sensitivity, as well as purchases of big-ticket items that reduce their discretionary dollars, will continue to weigh on the industry in the second half.

Shay also pointed to the bifurcation of the economic recovery, which has boosted confidence among home owners and those with stock market investments, but has lagged among low-income Americans. Earlier this month, executives at Dollar General and Wal-Mart commented on how their customer bases have yet to recover.

"I think while we see positive signs for the second half of the year this remains a tough environment," Shay said.

The organization's revised forecast comes as the back-to-school shopping season, the second-biggest selling season for the industry, is picking up. Last week NRF forecast total spending on back-to-school items will rise 3 percent to $74.9 billion this year, which it said is "good," but not "great."

According to the International Council of Shopping Centers, one-third of consumers have already started their back-to-school shopping—up from the 29 percent who had started at this time last year.

Looking forward, Shay predicted the remainder of the year, including the holiday season, will continue to be highly promotional.

He said there will be winners and losers across every category, whether it be discount or luxury, and the retailers who successfully integrate their online and in-store sales, select the right merchandise and sell it at the right price, and offer a high quality of service will come out on top.

"All of that goes back to creating a sense of loyalty and building a relationship with your customer," he said.

S&P 500 Rises to Record on Apple Results

The Standard & Poor’s 500 index rose to an all-time high, as Apple Inc. boosted technology companies and health-care shares rallied amid earnings. Boeing Co.’s results dragged the Dow Jones Industrial Average lower.

Apple surged to the highest since 2012 after signaling the long wait for new products is nearing an end. Biogen Idec Inc. rallied 11 percent after raising its full-year forecast, while Intuitive Surgical Inc. jumped 14 percent as results topped estimates. Boeing sank 2.3 percent as a cost for a tanker rekindled concern the planemaker would struggle with a new aircraft program. Juniper (JNPR) Networks Inc. tumbled 10 percent as its estimates trailed expectations.

The S&P 500 added 0.1 percent to a record 1,988.20 at 2 p.m. in New York. The Dow Jones Industrial Average slipped 16.52 points, or 0.1 percent, to 17,097.02. Boeing is the sixth-largest component of the Dow by weighting at 4.8 percent. Trading in S&P 500 stocks was 13 percent above the 30-day average at this time of day.

“The general tone of earnings has been positive not just on the bottom line but also top-line, and we’ve seen inflation numbers that gave comfort to those who believe the market will be supported by the Fed,” Russ Koesterich, chief investment strategist at New York-based BlackRock Inc., said via phone.

The S&P 500 rose yesterday after inflation data signaled the Federal Reserve won’t be compelled to raise interest rates in the near future and earnings reports boosted optimism about the economy. Chair Janet Yellen has said rates will stay low for a “considerable time” after the central bank stops its monthly bond purchases. It is on track to end them in October.

IMF Forecast

The Fed may have scope to keep interest rates at zero for longer than investors anticipate as inflation stays muted and a 2014 slowdown prolongs the labor-market recovery, the International Monetary Fund said in a conference call today.

The IMF cut its U.S. growth forecast for this year to 1.7 percent from 2 percent predicted in June, citing a first-quarter contraction.

The S&P 500 advanced 7.3 percent this year through yesterday amid better-than-estimated corporate earnings and central bank stimulus, as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter. The gauge trades at 18.4 times the reporting earnings of its members, the highest since 2010.

Investors are also watching developments in Ukraine, where the Defense Ministry today said rebels in the eastern part of the country downed two government fighters.

The European Union yesterday threatened to restrict Russia’s access to capital markets and sensitive energy and defense technologies unless President Vladimir Putin expedites a probe into the downing of the Malaysia Airlines plane.

Earnings Scorecard

Of the members of the gauge that have reported results so far, 78 percent have exceeded analysts’ estimates for profit and 65 percent have beaten revenue projections, according to data compiled by Bloomberg.

“There may be some times when the geopolitical landscape hogs the spotlight but it’s always about earnings, and they’re coming in better than expected,” Karyn Cavanaugh, senior market strategist at New York-based Voya Investment Management LLC, said by phone. Voya oversees about $220 billion. “People say we’re at all-time highs and that we have to come down, but we’re not out of the ball park with valuations yet.”

The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 (SPX) options prices known as the VIX, fell 3.5 percent to 11.81.

Eight of the 10 main S&P 500 groups advanced today, led by a 0.8 percent gain among health-care stocks. The Nasdaq Biotechnology Index jumped 1.7 percent.

Intuitive Surgical rallied 14 percent for the biggest gain in the index. The maker of robotics used in surgeries reported profit that surpassed analysts’ estimates.

FCC Gives Speed Warning to ISPs

If you’re worried that you are not getting the Internet speed promised by your local ISP, then you will be happy to know the FCC is on the case.

The agency issued an advisory today reminding ISPs that they must disclose accurate information about connectivity speeds and services for home and mobile broadband. The Federal Communications Commission has received hundreds of complaints on the issue over the last several months.

The FCC adopted ISP transparency provisions in 2011 as part of the Open Internet rules. That Open Internet Transparency Rule remains active even though a federal court struck down some of the agency's Open Internet rules as part of the ongoing legal battle over net neutrality.

The agency would not comment on whether it had any ongoing investigations into ISP speed issues. Its transparency rule requires that ISPs make available information about expected and actual broadband speeds, pricing and fees, as well as network management practices, "such as congestion management practices and the types of traffic subject to those practices," the advisory reads.

"Consumers deserve to get the broadband service they pay for. After today, no broadband provider can claim they didn't know we were watching to see that they disclose accurate information about the services they provide," said FCC chairman Tom Wheeler in a statement. "The FCC's transparency rule requires that consumers get the information they need to make informed choices about the broadband services they purchase. We expect providers to be fully transparent about the details of their services, and we will hold them accountable if they fall down on this obligation to consumers."

Consumers should test their home broadband speeds using online tests and notify the FCC if their Net service doesn't meet its advertised speed. And to test mobile broadband speeds, the FCC has a Mobile Broadband Speed Test App for Android and iOS devices. Complaints can be filed on the FCC's site.

Breitling Energy Corporation (BECC)

Breitling Energy announced recently that it is now covered by BUYINS.NET, a provider of Regulation SHO compliance monitoring, short sale trading statistics and market integrity surveillance. BECC is an energy company based in Dallas, Texas, whose efforts involve the exploration and development of acquired, lower risk onshore oil and gas properties. BUYINS.NET will monitor BECC market-makers daily for compliance with Fair Market-Making Requirements.

In June it was announced that David Kovacs will act as Managing Director of Strategic Development. Mr. Kovacs will focus on helping executive management with strategic alliances. He is also currently the head of Investment Banking, Private Equity and Research for the Americas for Fitch Learning (Fitch Ratings). Prior to Fitch, Mr. Kovacs was a Managing Director at The Hinduja Group, one of the largest diversified finance groups in the world with over $50 billion under management, where he orchestrated the group's private equity investments and strategic relationships. He has held various Investment Banking and Private Equity roles at Blackstone Group and Citigroup.

About Breitling Energy Corporation

Breitling Energy is an energy company based in Dallas, Texas whose efforts involve the exploration and development of acquired, lower risk onshore oil and gas properties for the purposes of increasing shareholder value. The company has intentions of utilizing a combination of acquisitions and growth through the drill-bit to increase reserve and production value. Its oil and gas operations are conducted in the Permian Basin of Texas and the Mississippi oil window of southern Kansas. It also has numerous properties in North Dakota, Oklahoma and Mississippi.

The company’s corporate strategy is aligned within four fundamental principles. The first principle involves maximizing the value of its properties by increasing production and reserves while controlling costs. Further, the company intends to maintain a highly effective team of personnel, stay focused on regions where they have established a competitive advantage and acquire properties where the feel additional value can be created through secondary and tertiary operations.

Discovery Labs, Inc. (DSCO)

Discovery Laboratories recently announced it has been awarded the final $1.9 million of a $2.4 million Fast Track Small Business Innovation Research (SBIR) Grant from the National Heart, Lung, and Blood Institute (NHLBI) of the National Institutes of Health (NIH). The award establishes support for Phase 2a clinical trials for AEROSURF® - the company’s investigational drug/device product.

AEROSURF is in development to provide KL4 surfactant therapy through nasal continuous positive airway pressure (nCPAP) for respiratory distress syndrome (RDS) in premature infants. With notification in 2010 that it was ‘eligible for consideration’ under this grant program, DSCO previously received $580,000 to support its research and development activities associated with capillary aerosol generator technology. Discovery Labs is expected to spend the $1.9 million this year.

AEROSURF has the potential to allow for the administering of KL4 to premature infants without invasive endotracheal intubation. Further, the treatment may pave the way allowing for a significantly greater number of premature infants who could benefit from surfactant therapy but are currently not treated.

About Discovery Labs, Inc.

Discovery Laboratories is a specialty biotechnology company with the mission of advancing a new standard in respiratory critical care. DSCO’s platforms include a novel proprietary KL4 surfactant, a synthetic, peptide-containing surfactant structurally similar to pulmonary surfactant, and proprietary drug delivery technologies being developed to boost delivery efficiency of aerosolized KL4 surfactant. The company’s strategy is foremost centered on neonatology and improving the management of respiratory distress syndrome (RDS) in premature infants. Discovery Labs believes that its RDS product portfolio can potentially become the new standard of care for RDS. Going forward, the company hopes to deliver the treatment to those currently not receiving it thereby significantly increasing the overall number of premature infants in need of positive outcomes from surfactant therapy.

Lipocine, Inc. (LPCN)

Lipocine, a specialty pharmaceutical company, announced recently that the United States Patent and Trademark Office (USPTO) issued U.S. Patent number 8,778,922, entitled "Steroidal Compositions." This patent references pharmaceutical compositions having testosterone undecanoate - an ester of testosterone used in androgen replacement therapy for the treatment of male hypogonadism and currently under research for use as a male contraceptive. The patent is expected to provide protection through January 2029 for LPCN 1021.

"This addition to our intellectual property portfolio, which we believe will be listed in the Food and Drug Administration Orange Book, has the potential to significantly lengthen our exclusivity period for LPCN 1021," said Dr. Mahesh Patel, President and CEO of Lipocine Inc. "We look forward to presenting top-line data from our pivotal phase 3 study, or SOAR trial, for LPCN 1021 in the third quarter of this year."

LPCN 1021 is an oral product with low gastro-intestinal drug exposure that the company expects will overcome the major shortcomings of existing products with a more user and physician friendly label that includes three simple dosing options and faster time to maintenance dose in most patients. This is expected to improve patient compliance. Differing from a selective estrogen receptor modulator ("SERM"), LPCN 1021 was not developed to interact with estrogen receptors and is targeted to address an oral option needed in the established testosterone replacement market for chronic use.

About Lipocine, Inc.

Lipocine is a specialty pharmaceutical company developing innovative pharmaceutical products for use in men's and women's health. The company incorporates the use of its proprietary drug delivery technologies. LPCN’s lead product candidate, LPCN 1021, is currently in Phase 3 and is intended to address symptoms of low testosterone for men in need of testosterone replacement therapy. Other pipeline candidates are LPCN 1111, a subsequent oral testosterone therapy product, and LPCN 1107, which potentially may become the first oral hydroxyprogesterone caproate product indicated for the prevention of recurrent preterm birth.


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