The Mission Report

The MissionIR Report - Mid-October 2013

In-depth analysis, timely updates, latest market news


Market News

Company Updates


JPMorgan Hit with $100M Fine in London Whale Trading Scandal

The bank has been slapped with yet another big fine as it works to clean up and wrap-up the mess created by the London Whale trading scandal. CNN Money reports that JPMorgan will pay $100 million to the U.S. Commodity Futures Trading Commission, conceding "reckless" behavior led to the trading debacle that generated about $6 billion in losses.

Former London-based JPMorgan (JPM) trader Bruno Iksil, whose team is thought to be responsible for the complex derivatives bet, was nicknamed the "London Whale" due to the massive trading position.

The CFTC said in a statement Wednesday that by selling a staggering volume of these swaps in a concentrated period, the bank "recklessly disregarded the fundamental precept on which market participants rely, that prices are established based on legitimate forces of supply and demand."

It's the latest in a series of financial blows to hit the bank. The most recent penalty relates to trading behavior, while earlier fines have punished JPMorgan for failing to maintain proper governance practices.

Last month, the investment bank agreed to pay about $920 million in penalties to U.S. and U.K. regulators to settle charges over the London Whale trades.

Through those fines, the bank acknowledged that it violated banking rules by not properly overseeing its trading operations. In legal language, regulators said that the bank engaged in "unsafe and unsound practices."

The bank is also wrestling with authorities over a possible settlement of government investigations related to mortgage-backed securities.

Chief executive Jamie Dimon met with Attorney General Eric Holder in Washington last month to discuss a potential deal thought to be valued $11 billion.

Mortgage-backed securities became a key cause of the financial crisis when they failed in droves as the housing market collapsed.

JPMorgan is one of several large lenders that have faced lawsuits for allegedly selling securities backed by risky, low-quality mortgages while misrepresenting them as safe investments.

All these legal woes are hurting earnings. The bank's sky-high legal costs led to a loss of $400 million during the third quarter, the first loss since Jamie Dimon took over as CEO in 2004.

Home Builder Confidence Slumps to Four-Month Low Weighed by Gov’t Shutdown

Confidence among home builders declined in October to the lowest level in four months, with mortgage-rate volatility and Washington’s impasse over the debt ceiling hurting builders’ views on single-family-home sales, according to a report released Wednesday.

The National Association of Home Builders/Wells Fargo housing-market index fell to 55 in October from 57 in September. A prior September estimate pegged the level at 58, which matched the highest reading since 2005.

Results above 50 signal that builders, generally, are optimistic about sales trends. Economists polled by MarketWatch had expected an October reading of 58.

“Interest rates remain near historic lows and we don’t expect the level of rates to have a major impact on sales and starts going forward,” David Crowe, NAHB’s chief economist told MarketWatch. “Once this government impasse is resolved, we expect builder and consumer optimism will bounce back.”

Despite the recent decline, pent-up demand is supporting builder sentiment, which has increased 34% over the past year, outpacing home-construction growth.

“The index has been inexplicably strong in recent months as mortgage applications and new home sales have fallen, so this reading goes some way towards closing the gap, but it still looks far too high,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Either...home builders see real fundamental strength in the market and are unworried about the rise in rates and the weakness of consumers’ confidence, or they are kidding themselves and are headed for disappointment.”

The government was slated to report its most recent data on home construction this week, but won’t because of the shutdown. NAHB created its own estimate, and forecast that the annual rate of housing starts in September reached between 875,000 and 900,000 units, which translates to growth about 2% to 5% from the year-earlier period. NAHB’s range is close to MarketWatch’s consensus forecast of a starts rate of 910,000 in September, which translates to growth of about 7% from the year-earlier period.

Details of NAHB’s report show that each of the three sentiment-index components declined two points in October. The gauge of present sales of single-family homes hit 58, while the barometer of sales over the next six months reached 62, and the gauge of prospective-buyer traffic fell to 44.

Looking at regions, three out of four posted lower housing-market-index results in October. The Northeast saw the biggest drop, with the gauge there falling 13 points to 31 in October from 44 in September. The West saw a five-point drop to 58, and the South had a four-point drop to 54. Meanwhile, the Midwest saw a two-point increase to 65.

Despite some recent signs of softness, economists expect the housing market to continue to add to economic growth this year. Analysts at CIBC World Markets recently forecast that home construction could surge in coming quarters, as buyers look to lock in good deals and it becomes easier to obtain a mortgage. Although mortgage rates have trended higher since early May, they remain relatively low by historical standards.

Still, in recent weeks, there’s been a cloud over the housing market from the protracted partisan debates in Washington over government spending. A shutdown government slowed down loan processing, while a U.S. debt default threatened to send mortgage rates higher.

Bank of America Turns to Q3 Profit, Misses Sales Forecast

Bank of America swung to a profit in the third quarter after breaking even last year. Investors cheered the bank's results, pushing shares of Bank of America (BAC) up more than 2% Wednesday afternoon.

Despite the unfolding debt ceiling crisis in Washington, CEO Brian Moynihan sounded upbeat. "The economy and business climate will improve even more quickly as conditions normalize, and we are well positioned to benefit from that," Moynihan said in a release.

Bank of America managed to beat analysts' profit expectations for the third quarter, but it failed to meet revenue forecasts. The slowdown in mortgage lending weighed on Bank of America's revenues. However, cost cutting and $800 million from the sale of its stake in China Construction Bank (CICHY) helped Bank of America generate a profit, reports CNN.

Unlike most of the big banks that have reported earnings so far, Bank of America reported increased revenues in its consumer banking franchise helped by higher use of the bank's credit and debit cards. Small business lending rose more than 31% from last year.

Revenues dipped slightly in the bank's global markets business, which includes trading. Profits fell in that unit too. Bank of America's stock trading revenues increased but not by enough to offset the dip in bond trading that has hit all the major banks.

Bank of America has been aggressively cutting costs, largely by reducing its headcount. Since last year, Bank of America has eliminated more than 24,600 jobs, or 9% of its employees.

On a conference call, Moynihan said Bank of America will continue to cut staff that worked specifically on mortgage lending and refinancings. Moynihan warned that Bank of America could continue to take a hit from the drop in mortgage refinancings.

One set of costs that still worry analysts: litigation expenses. Bank of America recorded $1.1 billion in costs due to ongoing litigation related to the financial crisis and the bank's subprime lending. That was down from $1.6 billion in litigation costs a year ago but more than double what the bank spent in the second quarter.

Bank of America's CFO Bruce Thompson noted that litigation expenses were elevated but wouldn't predict whether or not costs would remain at these heightened levels.

The key numbers: Bank of America reported earnings of 20 cents per share on $2.5 billion on revenues of $21.7 billion. Analysts had expected the bank to report a profit of 18 cents per share on revenues of $22 billion.

Bank of America's stock is up 23% this year. Financial firms have been among the biggest winners in the market rally this year despite concerns about rising interest rates and the debt ceiling drama.

Citigroup Posts Worse-than-Expected Q3 Financial Results

Citigroup (C) is the latest big bank to disappoint investors. The company reported third quarter profits and revenues that fell short of analysts' expectations.

Despite the earnings miss, Citigroup CEO Michael Corbat said in a press release that the bank "performed relatively well in this challenging, uneven macro environment." Corbat touted the company's cost cutting, but the quarterly results show that Citigroup is having trouble trimming costs quickly enough to compensate for declining sales.

Citigroup's revenues dropped 5% from the same period a year ago, while its expenses were down 4%.

Revenue and profits at Citigroup's consumer banking franchises and its trading and investment banking units fell in the third quarter.

The rising interest rate hit: The spike in interest rates over the summer caused a slowdown in new mortgages and refinancings, as well as bond trading.

Citigroup noted that it took a big hit from the slump in mortgage lending. In North America, mortgage lending declined by 20% from last year.

The bank's bond trading unit reported a 26% drop in third quarter revenues compared to last year.

Citigroup is often deemed the world's financial supermarket because it caters to consumers and investors in all corners of the world. In the third quarter, that global footprint hit earnings, as revenues and profits in its consumer banking operations plunged in most corners of the world.

Chief financial officer John Gerspach noted the "high level of volatility in emerging markets" during the third quarter in a conference call with reporters. He said those regions took an outsized hit from worries over whether the Federal Reserve might cut back its bond buying program. The Fed wound up holding off on so-called tapering for now. But the damage was already done in markets like India, Brazil and Indonesia.

Citigroup continues to shrink the size of its so-called bad bank "Citi Holdings" -- which owns toxic assets from before the 2008 credit meltdown. During the third quarter, Citi Holdings' assets declined 29% from the prior year. But with $122 billion in assets remaining in the unit, it will take more time to completely exorcise Citi's financial crisis demons.

The key third quarter numbers: Citigroup reported $1.02 per share in third quarter earnings on $18.2 billion in revenues. Analysts were forecasting a profit of $1.04 per share on $18.74 billion in revenues.

Although the stock was set to fall on following its earnings release Tuesday, Citigroup's shares are still up 25% this year. Big bank stocks in general have been helping to lead the market higher.

Advaxis Inc. (ADXS)

Advaxis announced that it has published the preclinical research for ADXS-HPV, Advaxis’ Lm-LLO lead drug candidate. 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 paper, titled “Anti-PD-1 antibody significantly increases therapeutic efficacy of Listeria monocytogenes (Lm)-LLO immunotherapy,” has been e-published in the Journal for Immunotherapy of Cancer. Dr. Samir N. Khleif and his research team conducted the research at the Georgia Regents University Cancer Center. Advaxis provided the Lm-LLO immunotherapies and partial research funding.

About Advaxis Inc.

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.

ForceField Energy, Inc. (FNRG)

ForceField Energy announced this week that its shares of common stock have been approved for listing on the NASDAQ Capital Market. Trading on the NASDAQ Capital Market is expected to commence on Thursday October 17, 2013, and the Company’s common stock will continue to trade under the symbol “FNRG”.

“We are very excited to be uplisted to the NASDAQ Capital Market,” said David Natan, Chief Executive Officer of ForceField Energy. “The transition to the NASDAQ underscores the strength of our transformation to a global provider of efficient energy solutions. We believe this move will support our evolution as a public company, further enhance our reputation and provide increased visibility, greater liquidity and increased exposure to the institutional investment community and customers.”

About ForceField Energy, Inc.

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.

OxySure® Systems Inc. (OXYS)

OxySure Systems, a medical technology company that has pioneered an FDA-approved solution to produce medically pure oxygen from dry, inert powders for emergency and short duration use, reported the launch of OxySure Commercial Finance(SM), a service that enables easy and convenient lease of OxySure’s suite of medical devices and products, including the OxySure Model 615, Automated External Defibrillators (AEDs), and other medical equipment, supplies and accessories.

Powered by LeaseQ, OxySure’s new service allows customers to do comparison shopping for lease quotes from dozens of third party lenders with one simple online form that takes only two minutes to complete. The system can pre-qualify customers instantly and display the top results, allowing customers to select from multiple, pre-qualified offers. The system also provides customers the flexibility to select lenders of choice and payment plan characteristics such as monthly payment, finance term and terminal value.

About OxySure® Systems Inc.

OxySure® Systems Inc. is a medical technology company focused on developing, manufacturing, and distributing specialty respiratory and medical solutions. The company has developed a unique platform technology that instantly creates medically pure oxygen from two dry, inert powders, allowing oxygen to be delivered on demand. This cutting-edge technology has already been granted FDA-approved for commercial sale.

The company is targeting multiple enormous end markets with no direct competition. OxySure initially plans to focus on the 102,265 educational campuses, 350,735 manufacturing facilities, 350,000 churches, 12 million recreational vehicles (RVs), 8 million boats and yachts, 950,000 restaurants, and hundreds of thousands of other commercial and municipality facilities in the U.S. Outside the US, OxySure has also already signed significant distribution agreements, including Australia, New Zeeland, the United Kingdom, the Netherlands, Luxembourg, Belgium, Brazil, and South Africa. OxySure’s potential market is at least as large as AEDs and potentially as large as fire extinguishers, which together total at least 500+ million units worldwide.

OxySure’s flagship product, OxySure Model 615, introduces the first new oxygen technology in 50 years. There are no compressed tanks, no dials, no valves, no regulatory maintenance, no hydrostatic testing, no batteries, and no required training, and the technology is both safe and easy-to-use for the layperson. It can be placed virtually anywhere to help save lives by bridging the gap between a medical emergency and the arrival of first responders on the scene.

The company aims to capitalize on market opportunities primarily through partnerships with distributors and OEM customers. Protected by numerous issued patents and patents pending, the company’s products are available over-the-counter without the need for a prescription and has already saved thousands of lives around the globe during various types of medical emergencies.

VistaGen Therapeutics, Inc.

VistaGen Therapeutics recently announced an update on the status of its strategic financing agreement with Autilion AG. Under the terms of the parties' April 2013 agreement, as amended, Autilion AG has committed to invest $36 million in VistaGen in consideration for 72 million shares of restricted VistaGen common stock in a series of closings. As noted previously, the self-placed strategic financing does not include warrants or investment banking fees.

Shawn K. Singh, VistaGen's Chief Executive Officer, stated, "I met with Autilion's team earlier this week, and we have been working closely with them since signing our agreement in April. We are confident and excited about completing this transformative financing. Building on the positive developments in our labs presented during the Annual Meetings of the Society of Toxicology and International Society of Stem Cell Research in March and this month, respectively, we look forward to accelerating our lead programs towards valuable outcomes for our shareholders."

About VistaGen Therapeutics, Inc.

VistaGen Therapeutics 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.


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