The Mission Report

The MissionIR Report - Mid-September 2013

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Economists Project a Cut in Fed Stimulus this Week

Five years to the week after the darkest days of the financial crisis, the Federal Reserve will take its first step toward unwinding the easy money policies that helped save the global economy, a USA TODAY survey of top economists predicts.

More than 60% of 44 economists say Fed policymakers will dial back their $85 billion in monthly government bond purchases when they meet Tuesday and Wednesday. Almost a third pick either October or December.

The purchases are aimed at holding down long-term interest rates, thus increasing borrowing and investing in order to create jobs and lower unemployment.

The other major component of the Fed's post-crisis policy has been holding its key interest rate close to zero since 2008, which has kept down short-term rates. More than 80% of the economists in USA TODAY's survey predict the Fed will raise that rate in 2015.

Since the Fed began buying longer-term Treasury bonds and mortgage-backed securities a year ago, the unemployment rate has fallen to 7.3% from 7.8%. The program also has fueled a stock rally, but raised concerns such as eventual high inflation.

"When they started, they were worried that (economic) growth was very weak and the unemployment rate was starting to rise," says JPMorgan economist Robert Mellman. Now, he says, the jobless rate "is actually coming down fairly quickly."

Fed Chairman Ben Bernanke first said in May that the Fed likely would rein in the purchases this year and end them by mid-2014, assuming unemployment falls to 7% by then. His remarks roiled stocks and pushed up bond yields.

Mixed economic data recently prompted some analysts to say the Fed will put off tapering until the economy is on firmer footing.

On the bright side, jobless claims have fallen and measures of manufacturing and service-sector activity rose in August. But employers added a disappointing 169,000 jobs last month, capping a three-month slowdown in job gains. The jobless rate fell because of a sharp drop in the number of people working or looking for work.

Several economists say the middling data will prompt a more modest reduction in bond purchases than the Fed initially intended.

Fifty-two percent of those surveyed said the Fed will trim them by $6 billion to $10 billion, while 32% expect a decrease of $11 billion to $15 billion. Richard Moody, chief economist of Regions Financial, expects a $15 billion cut, less than the $20 billion he anticipated a month ago.

The Fed each month is buying $45 billion in Treasury bonds and $40 billion in mortgage-backed securities.

Seven in 10 of the economists say the Fed initially will reduce the Treasury purchases only or mostly, continuing to heavily buy mortgage bonds to hold down mortgage rates. Since Bernanke first mentioned tapering, 30-year fixed mortgage rates have risen from 3.51% to 4.57% and mortgage applications have declined.

Some economists say the weak reports will delay the tapering entirely.

Paul Edelstein of IHS Global Insight expects it to begin in December. "The labor market is still too uncertain," he says.

Even if the Fed does downsize its purchases Wednesday, most economists say the move is largely priced into stocks and bonds.

Michael Englund, chief economist of Action Economics, says a limited bond-buying cut of about $10 billion could even lift stocks a bit and lower bond yields.

Chrysler to File for Initial
Public Offering

Chrysler is expected to file documents in the next two weeks outlining an initial public stock offering despite Fiat's preference to buy 100% of Chrysler's shares, the two companies' CEO Sergio Marchionne has said.

The filing with the U.S. Securities and Exchange Commission will come by the end of this month, Marchionne said last week. It would resolve a protracted legal fight between Fiat, which owns 58.5% of Chrysler, and the UAW's Retiree Medical Benefits Trust, which owns the other 41.5%.

The Italian automaker has offered to buy another 9.9%, but the trust has rejected Fiat's offered price. Fiat sued the trust in Delaware Chancery Court, but a judge has declined to establish a price.

Delaware Chancery Court Judge Donald Parsons said the matter should be settled through a trial, but that might not happen until 2015.

There is a gap of about $200 million between what Fiat offered for the first 3.3% increment and what the UAW trust argues it is worth.

"We need to go through this process of determining value," Marchionne said told reporters in Italy Friday. "(The trust) have been very clear that they are not long-term holders of the assets. They want to monetize, so we need to find a way for them to exit in a way that does not create what I consider to be exceptionally high ... expectations of value.. The market will tell us. Let the market talk."

The trust needs to convert its Chrysler stake to cash because it is responsible for the health care coverage of tens of thousands of UAW retirees.

An IPO will let investors determine what Chrysler shares are worth. But Marchionne is not happy with that solution because it means Fiat won't own 100% of its U.S. partner. His vision is to fully integrate the two automakers and have Fiat shares traded on the New York Stock Exchange.

With separately traded Chrysler shares, the companies would face more accounting and regulatory oversight. By offering those shares to investors, Chrysler will have to disclose how much access Fiat has to its cash and other resources.

In contrast to Chrysler's near-death experience in 2009 and a taxpayer-funded bankuptcy that gave Fiat operating control, Chrysler is now the stronger of the two companies.

Under an agreement that gave Fiat managing control of Chrysler in 2009, the Italian automaker can purchase increments of 3.3% of Chrysler stock every six months.

In January, the UAW trust asked Chrysler to pursue a public offering. Marchionne had hoped to reach a compromise, but the two sides remain far apart.

Marchionnne told reporters last Friday in Italy that Chrysler could receive approval to sell shares before the end of this year or early next year.

"Really in my opinion it is beneficial to both sides to come to an agreement and avoid going through the market," said Richard Hilgert, an analyst with Morningstar.

Chrysler will have to pay attorney fees, investment banking fees and broker fees related to the IPO, Hilgert said.

Fiat is struggling to restructure its European operations that have lost money without the portion of Chrysler that it owns. While auto salesin Europe remain near a 30 year low, Italy, which is Fiat's most important market, has been particularly hard hit.

JPMorgan Nears Deal on ‘London Whale’ Probes

Two published reports from yesterday say securities regulators may fine JPMorgan Chase up to $750 million for its role in the so-called "London Whale" trading scandal.

Citing unnamed sources, Bloomberg News Service and The New York Times website said negotiations between the bank's executives and federal prosecutors and regulators will likely wrap up the next day or two.

A fine of up to $750 million may be levied against the investment bank for the events that led the firm to take outsized bets in complex derivatives trades that resulted in trading losses of more than $6 billion.

JP Morgan's CEO Jamie Dimon apologized for the firm's role after being widely criticized for characterizing the losses as a "tempest in a teapot."

U.S. prosecutors have charged Javier Martin-Artajo and Julien Grout for wire fraud and conspiracy to falsify records related to the losses. Bruno Iksil, the "London whale" who is said to have carried out much of the ill-fated trading and worked under Martin-Artajo, is cooperating with investigators and will likely avoid prosecution.

Advaxis Inc. (ADXS)

Advaxis recently announced that it has published the preclinical research for ADXS-HPV, Advaxis’ Lm-LLO lead drug candidate. The product is designed for use in the treatment of HPV-associated cancers in combination with the PD-1 antibody.

Among the studies’ various findings, it was demonstrated that treatment with an Lm-LLO immunotherapy, in combination with an anti-PD-1 antibody, significantly improved immune and therapeutic efficacy in preclinical mouse models. The study also showed that a significant reduction of regulatory T cells and myeloid-derived suppressor cells in spleen and tumor microenvironments were mediated solely by the Lm-LLO immunotherapy.

About Advaxis Inc. (ADXS)

Advaxis, Inc. is a clinical-stage biotechnology company developing the next-generation of immunotherapies for cancer and infectious diseases. The company’s immunotherapies are based on a novel platform technology that uses live, bio-engineered bacteria to secrete antigen/adjuvant fusion protein(s) that redirects the powerful immune response all human beings have to the bacteria to fight off cancer and disease. A second effect is to reduce the immune suppressive cells cancer tumors recruit to protect themselves from immune attack by over 80%. It is this combination that makes Advaxis special.

The company has more than fifteen distinct constructs in various stages of development, many in strategic collaborations with recognized centers of excellence such as the National Cancer Institute, Cancer Research – UK, the Wistar Institute, the University of Pennsylvania, the University of British Columbia, the Karolinska Institutet, and others.

Advaxis’ lead construct, ADXS-HPV, is currently in Phase 2 clinical development for recurrent/refractory and advanced cervical cancer, anal cancer, and HPV caused head and neck cancers. This important construct was recognized as the Best Therapeutic Vaccine (approved or in development) at the 5th Annual Vaccine Industry Excellence (ViE) Awards by the vaccine industry and the journal Expert Reviews of Vaccines.

The estimated global market for immunotherapies is projected to exceed $37.2B by 2012, with cancer vaccines forecast to grow into an $8B market. Protected by 75 issued and pending patents, Advaxis is extremely well positioned to capitalize on the burgeoning opportunities in the healthcare sector as it advances the development of next-generation treatments for today’s most challenging diseases.


CytRx Corporation reported its financial results for the three and six months ended June 30, 2013, and provided a clinical update. Importantly, the company reported cash, cash equivalents and short-term investments of $28.0 million and no debt as of June 30, 2013. To read the full release, visit: CytRx Reports 2013 Second Quarter Financial Results.

“This is a pivotal time at CytRx with multiple near-term significant clinical results,” Steven A. Kriegsman, CytRx President and CEO, stated in the release. “We are making preparations to begin in the coming months two late-stage clinical trials with aldoxorubicin, our improved version of the widely used chemotherapeutic doxorubicin, and expect to report data in the second half of 2013 from our global Phase 2b clinical trial testing aldoxorubicin head-to-head against doxorubicin as a first-line therapy for soft tissue sarcomas.”

About CytRx Corp. (NASDAQ:CYTR)

CytRx Corp., a biopharmaceutical research and development company, specializes in the enhanced delivery of proven oncology therapies to treat cancer. The company’s novel linker platform technology can be utilized with multiple chemotherapeutic agents and could allow for greater concentration of drug at tumor sites while minimizing side effects.

Aldoxorubicin, the company’s flagship compound, is an improved version of the widely used chemotherapeutic agent doxorubicin. CytRx is conducting a global Phase 2b clinical trial comparing aldoxorubicin to doxorubicin as a treatment for 1st-line soft tissue sarcomas. Top-line results are expected in Q4 2013. Preparations are underway for a Phase 3 trial in 2nd-line soft tissues sarcoma to begin in Q1 2014 based on results from a completed Phase 1b/2 clinical trial. The FDA granted CytRx a Special Protocol Assessment (SPA) for the Phase 3 clinical trial. The company is conducting a Phase 1b pharmacokinetics clinical trial and in Q4 2013 plans to start a Phase 2b trial in glioblastoma multiforme (stage IV brain cancer) and a Phase 2 trial in Kaposi’s sarcoma.

With no debt and significant cash resources, CytRx has the capital position necessary to support near and mid-term milestones across its entire oncology pipeline. CytRx also has rights to two additional drug candidates, tamibarotene and bafetinib, for which it plans to seek a partner for further development.

Collectively, CytRx's management and Board of Directors have significant oncology experience and have brought numerous oncology drugs to market. Daniel Levitt, M.D., Ph.D., EVP and Chief Medical Officer, served as President of R&D at Protein Design Labs, as head of oncology drug development at Sandoz Pharmaceuticals, as director of clinical oncology at Hoffmann-LaRoche, and was instrumental in the development of five approved cancer drugs. Joseph Rubinfeld, Ph.D., a director since July 2002 is a renowned expert in the field of oncology, was one of the four initial founders of Amgen, Inc. and was a founder of SuperGen, Inc. Max Link, Ph.D., Chairman of the Company's Board of Directors since 1996, was a former Chairman and CEO of Sandoz Pharma (now Novartis) and is currently the Chairman of the Board of Alexion Pharmaceuticals.

ForceField Energy, Inc. (FNRG)

In recent news, ForceField Energy announced that it has signed a three-year distribution agreement with First Choice Energy Ireland (FCEI), a global supplier of energy solutions.

According to the agreement, FCEI will sub-distribute ForceField’s full line of energy efficient Lightsky LED products in Ireland. To maintain its exclusivity rights, FCEI has a minimum purchase commitment of $250,000 over the first 90 days, and $12.0 million over the first 12-months. If these commitments are not met, FCEI will immediately revert to a non-exclusive global sub-distributer.

About ForceField Energy, Inc. (FNRG)

ForceField Energy, Inc. is an international manufacturer, distributor, and licensee of alternative energy products and solutions. The company operates in three of the largest and fastest-growing areas of the global renewable energy space: industrial waste heat recovery and conversion, commercial LED lighting products, and solar cell feedstock production.

TransPacific Energy, a subsidiary of ForceField Energy, has patented a technology that uses “waste heat” from various industry processes and other sources to provide clean electricity. The subsidiary’s process directly captures and converts heat from the heat source, without any heat transfer fluids, at temperatures from 80ºF up to 900ºF. This is a far broader range than any other competing systems on the market, unlocking a countless number of new applications.

Through its exclusive multinational distribution agreement with Lightsky, ForceField has a firm foothold in the commercial lighting products industry as well. The LED lighting market is growing at a 32% compound growth rate because of the absence of dangerous chemicals, government regulation phasing out old lighting technology, 50-70% lower energy costs, exceptionally long life, and beautiful illumination.

ForceField is also a significant manufacturer and distributor of trichlorosilane ("TCS") in China. TCS is a specialty chemical primarily used in the production of polysilicon, which is an essential raw material in the production of solar cells for PV panels that convert sunlight to electricity. TCS is considered to be the first product in the solar PV value chain before polysilicon, and is also the principal source of ultrapure silicon in the semiconductor industry.


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