The Mission Report

The MissionIR Report - Mid-August 2013

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Buyers Tackle a Fear of Debt

Investors, in general, aren't afraid of the bond market anymore.

After a broad selloff in May and June, investors are pouring money back into corporate bonds and riskier types of debt, some with complex structures and favorable terms for issuers. Pension funds, insurance companies, mutual funds and hedge funds are resuming a hunt for higher yields that petered out earlier this spring when the Federal Reserve said it may begin to wind down its $85 billion-a-month bond-buying program, known as quantitative easing.

While bond prices slipped slightly Tuesday, investment bankers from Goldman Sachs Group Inc., Citigroup Inc. and Jefferies Group LLC are plowing ahead with a $1.2 billion commercial mortgage-backed security at some of the lowest yields relative to their benchmarks in two months, investors said. Higher yields threatened to curb commercial-mortgage lending in June as issuers worried that higher interest rates would make their deals too expensive.

In the corporate-bond markets, media company Viacom Inc., whose credit rating was cut earlier this month, sold $3 billion of new bonds Monday with more orders for the debt than it was able to fill. In late July, Kodiak Oil & Gas Corp., rated below investment-grade, sold $400 million of new debt, up from a planned $300 million, with interest of 5.5% annually—the same rate it paid on a $350 million offering in mid-January.

After the spring rout, parts of the bond market went to levels that were "old-school attractive," said Jeffrey Gundlach, chief executive officer of DoubleLine Capital. Mr. Gundlach bought "junk" bonds at the end of June when some yields reached 8% even though corporate defaults remain low. DoubleLine has $57 billion in assets under management.

Paramount Pictures/Everett Collection Viacom Inc. sold $3 billion of new bonds Monday. "SpongeBob SquarePants" airs on Viacom's Nickelodeon.

Investors' return to bonds shows they have begun to buy into the Fed's statements that the financial health of the U.S. is improving, and into its assurances it would pull back only if the economy showed it could withstand less help. As the summer wore on, employment growth was moderate and inflation remained low, which helped ease concerns that the central bank may act quickly. Fed officials also said the central bank has no plans to raise benchmark interest rates before next year.

Money has flowed into investment-grade bond funds since the end of June, including $1.4 billion in the week ended August 7, according to Lipper. After losing $1 billion in May and $15.6 billion in June, high-yield bond funds have seen investors put money back into the market. The funds took in $5 billion in July and $490 million so far in August, according to Lipper.

The selloff "doesn't seem to have had as big an impact as you'd think," said Lynn Peterson, chief executive officer of Kodiak, the Denver-based energy company. He said Kodiak's deal priced much lower than the 6% rate bankers and investors initially had discussed as about $2 billion worth of orders came in.

"As people settled down and thought about it a little bit, the catalyst for the end of quantitative easing is going to be an improving economy," said Joe Mayo, managing director and head of credit research at Conning & Co., which manages $82 billion in assets largely for insurance companies. "An improving economy is positive for risk assets."

Mr. Mayo's firm bought Viacom's bonds and he said banks' bonds are attractive.

Since mid-July, some companies sponsored by private-equity firms also have been able to sell bonds investors deemed too risky in June. The four-week period starting July 18 has been the busiest ever for the sale of payment-in-kind toggle bonds, which allow companies to repay their debt with more bonds if they cannot find the cash, according to S&P Capital IQ Leveraged Commentary & Data.

Companies including Party City Holdings Inc., owned partly by Thomas H. Lee Partners and arts-and-crafts retailer Michaels Stores Inc., partly owned by Bain Capital, recently sold such bonds. Representatives from Party City and Michaels didn't immediately return calls for comment.

The bleeding in the fixed-income markets stopped in recent weeks even as U.S. Treasury rates remain at elevated levels compared with their record low in early May of 1.62%. The 10-year Treasury yield is hovering around 2.7%, while yields on other types of debt have moved lower relative to Treasurys since the height of the selloff. When bond prices fall, yields rise.

"During a panic like we had in May and June, institutional credit buyers take their foot off the gas," said Brian Reynolds, chief market strategist at Rosenblatt Securities Inc. "But once the panic has run its course, they have to buy even more aggressively to make up for lost time."

A rush of new money helped push the average junk-bond yield lower to 6.18% as of Monday, below the 7% levels reached in late June, according to Barclays.

GDP Reading Boosts
European Stocks

European stock markets moved higher on Wednesday, as investors welcomed second-quarter GDP data from the euro zone that showed the region has emerged from a six-quarter-long recession.

Victoria Clarke, economist at Investec Securities, said the upbeat euro-zone data had already largely been priced in, explaining why the index failed to post a stronger gain.

“We’ve seen a wave of survey data coming through a bit more positive lately, and yes the GDP was a bit better than expected, but still in the range of what people had been looking at. So that’s why we’re not seeing a big rally today,” she said.

“It was a good headline for the press, but for the markets there wasn’t a whole lot of new news,” she added.

European markets started to move higher after data showed the euro zone has emerged from an 18-month recession. The region’s gross domestic product rose 0.3% in the second quarter, ahead of market expectations of a 0.1% to 0.2% expansion. The currency bloc’s GDP contracted by 0.3% in the first three months of the year.

But even if the data paint a rosier picture of the area, it is too early to talk of a sustainable recovery, analysts said.

Tom Rogers, senior economic adviser to the Ernst & Young Eurozone Forecast, said “that even in those countries with the sharpest rebounds the pace of recovery is unlikely to be sustained in the second half of the year.” “

Last weeks’ retail sales data underlined the weakness of household spending power even in the north; credit is still only flowing to firms in certain countries, and demand from emerging markets is slowing down,” he said. “More needs to be done if the apparent recovery of the past few months is to be more than simply a bright spot in an otherwise difficult few years,” he added.

The Housing Recovery Begins to Raise Concerns

The real estate market is starting to heat up-so much so in some areas, the "b" word-bubble-is starting to pop up.

"Nationwide, the housing market is not in a bubble. But there are probably some markets that are at risk for getting into bubble territory if they continue at the pace that they're going," said Daren Blomquist, vice president at RealtyTrac.

In a recent report from, the towns seeing the hottest recoveries, based on factors such as inventory, median list price, days on the market and search activity, were primarily on the West Coast, with six of the top 10 in California. Six months ago, eight of the top 10 were in Florida. So, is the recovery, like the settlement of the U.S., moving east to west?

Actually, there are some methods to the recovery madness-but geography isn't one of them.

The pros estimate the housing recovery started just over a year ago. Those early buyers? It was a lot of foreign investors buying up real estate in Sun Belt areas like Miami and Phoenix.

"There were stories in 2012 of people being outbid for homes-individual homeowners getting outbid by all-cash buyers," said Steve Berkowitz, CEO of Move Inc., the parent of

Blomquist said buying activity really started to pick up in mid-2012 after Warren Buffett said on CNBC that he would buy up "a couple hundred thousand" single-family homes and rent them out if he had the logistical ability to manage the properties.

"That was really when there was a paradigm shift in the market," Blomquist said. "We started to see these institutional investors jump in and buy single family homes."

"Investors really were the leading edge, the front line of this real-estate recovery," Blomquist said. "They're willing to stomach more risk." And that, in turn, helped trickle down to the average homeowner as it helped boost prices and get a lot of homes back above water.

He estimates that roughly 10 to 20 percent of investors buying real estate today are foreign investors-mostly from Canada, Mexico, China and, in places like Miami-South America. He's also heard of a lot of investors from Russia and other eastern European countries in the New York market.

One common denominator is that many of the markets with big price increases had been among the hardest hit when the housing bubble burst.

According to the latest data from RealyTrac, the markets with the biggest recent pickups are Honolulu; Flint, Mich.; and Albany, N.Y.

Another factor has helped speed the recovery in some markets more than others: how the foreclosure process is handled. Markets like California, Nevada, Arizona and Georgia have seen their recoveries take off because they allow what's called a nonjudicial foreclosure process, which tends to be quicker than the courts.

"Those markets have worked through the foreclosure problem more quickly than other markets," Blomquist said. "What that means is that they don't have that lingering distress ... that drags on home prices."

The recovery in California and other parts of the West Coast has largely been driven by the tech economy, Berkowitz said.

So much so, that the recovery in some markets may be getting close to its peak.

In San Jose, for example, prices are 70 percent off their bottom already, Blomquist said. San Francisco is 96 percent off its bottom. "I think many of the California markets, especially San Jose and San Francisco, are getting back to that bubble level," Blomquist said. "Some markets are close to plateauing in terms of home prices but scaling back the pace of recovery to single-digit growth, which going forward is much more healthy."

And, if you're wondering why some big Northeastern states like New York, New Jersey and Pennsylvania aren't on the hot list, you can sum it up in one word: courts. All of those states have a judicial foreclosure process. As a result, the pros are keeping their eyes on these markets.

You may not be able to find a geographic pattern in where the recovery will heat up next, but what the pros are seeing now is a lot of West Coast markets getting close to peak and a lot of East Coast markets, from New York to Florida, with more room to run.

Wholesale Prices Unchanged in July

Falling energy prices kept a lid on U.S. wholesale inflation in July after a jump in gasoline boosted prices in June.

The Labor Department reported Wednesday that wholesale prices showed no change last month compared with June, when they rose 0.8 percent. That was the most in nine months.

Energy costs fell 0.2 percent, after June's 2.9 percent surge. Gasoline prices dropped 0.8 percent, and natural gas costs slid 3.9 percent.

Excluding volatile food and energy costs, so-called core prices rose just 0.2 percent. Core wholesale prices are up 1.2 percent over the past 12 months, the smallest one-year increase since November 2010.

Tame inflation has helped consumers increase spending this year despite slow income growth and higher taxes.

Aside from sharp swings in gas prices, consumer and wholesale inflation has barely increased in the past year. Overall wholesale prices rose 2.1 percent in July compared with the previous July.

For July, drug prices rose 1 percent, the largest gain since a 2.5 percent rise in January. Drug companies have been introducing price increases in January and July of each year. Food costs were flat in July as a jump in pork prices was offset by a decline in the cost of fresh vegetables.

On Thursday, the government will report on consumer prices for July, and economists estimate that overall and core prices rose just 0.2 percent.

For the 12 months ending in June, overall consumer prices rose 1.8 percent and core prices 1.6 percent.

Those levels are below the Federal Reserve's 2 percent target for inflation. At its last meeting in July, the central bank added language to its policy statement to express concern that inflation persistently below 2 percent could pose risks to the economy.

The Fed announced after the meeting that it planned to keep buying $85 billion a month in bonds to keep downward pressure on long-term interest rates. It also said it planned to keep its key short-term rate near zero, where it's remained since December 2008 — at least as long as unemployment is above 6.5 percent.

Chairman Ben Bernanke and other Fed officials have said the central bank could start slowing its bond purchases later this year. Some economists think that could begin after the Fed's next meeting in September. Most expect the slowdown to be gradual. New bond purchases might not end until mid-2014 — and only then if the unemployment rate has dropped to around 7 percent.

Unemployment fell in July to 7.4 percent from 7.6 percent in June. The July figure was a 4½-year low, but it was still well above the 5 percent to 6 percent range that economists associate with a healthy economy.

The combination of modest economic growth and still-high unemployment has kept wages from rising quickly. That's made it harder for businesses to raise prices.

U.S. Household Debt Levels Plummet from Peak

U.S. households are holding less debt and are behind on fewer bills than at any time since before the recession began, putting consumers on a sounder footing to support a stronger economic recovery.

Total household debt, including mortgages, credit cards and auto loans, fell by $78 billion in the second quarter to $11.15 trillion, the lowest level since 2006, according to a report released Wednesday by the Federal Reserve Bank of New York.

The amount of bills 30 or more days late fell by $3.3 billion during the quarter, also reaching the lowest level in seven years.

"Households improved their overall delinquency rates for the seventh straight quarter, an encouraging sign going forward," said New York Fed economist Andrew Haughwout.

The declining debt burden largely reflects changes in the housing market. Mortgage balances fell by $91 billion during the second quarter. Some Americans are in a better position to pay down mortgage principal. Increasing housing values also are allowing sales of homes that previously were worth less than the amount owed.

While total debt is declining, the report offered signs that U.S. consumers are boosting their spending.

Mortgage originations rose to $589 billion, the seventh consecutive quarterly increase. Auto-loan balances increased $20 billion from March to June, the largest quarterly gain since 2006.

Credit-card balances increased by $8 billion during the quarter after falling to the lowest level in more than a decade earlier this year. That suggests Americans are growing confident enough in the economic recovery to finance more of their purchases with plastic.

The fraction of consumer bills that are seriously overdue also declined during the quarter. Only 5.7% of all consumer debt is 90 or more days late, the lowest rate almost five years. The delinquency rate fell in every category measured, including mortgages and credit cards.

Advaxis Inc. (ADXS)

Advaxis yesterday said it has been granted Orphan Drug Designation from the U.S. Food and Drug Administration (FDA) for ADXS-HPV, the company’s lead drug candidate for the treatment of human papillomavirus (HPV)-associated anal cancer.

“We are very pleased to have been granted an orphan drug designation for ADXS-HPV in this unmet medical need,” Dr. Robert Petit, chief scientific officer of ADXS, stated in the press release. “Patients with anal cancer have limited treatment options and we hope to improve their survival by developing ADXS-HPV for this indication. We will continue the ongoing phase 1/2 study being coordinated by Brown University Oncology Group that is evaluating the safety and efficacy of ADXS-HPV when combined with standard chemotherapy and radiation treatment in patients with anal cancer.”

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.

Calpian, Inc. (CLPI)

Calpian reported that as of July 31, 2013, the Money-on-Mobile service offered by Calpian’s Indian subsidiary is being supported by 151,530 retail locations, an increase of 8,473 stores from just a month earlier. Additionally, Money-on-Mobile was accessed by approximately 62.6 million unique phone number customers as of July 31, 2013, up from the 57.8 million in June. At current exchange rates, July’s processed transaction volume alone was approximately $15 million.

According to Calpian CEO, Harold Montgomery, “We are extremely pleased with the consistent and steady growth of all three key metrics. We had previously added about 3,000 to 4,000 stores per month, but our marketing focused on key urban areas has increased store additions to over 8,000 this month. Month after month we are seeing further evidence of the increase in popularity of our Money-on-Mobile service.”

About Calpian, Inc.

Calpian, Inc. is focused on providing cutting-edge financial services in the payment processing and mobile phone-based transaction markets. In addition to earning revenue from the sale of point-of-sale terminals and various transaction fees, the company also receives strong cash flows from recurring income streams that stem from payment processing contracts in place at about 16,000 small retailers throughout the United States.

Calpian Commerce, a wholly owned subsidiary of Calpian, provides technology-focused payment solutions to assist customers in closing the gap between payment and their information technology requirements. Calpian Commerce can provide the merchant community with an integrated suite of payment services and related software enabling products by offering credit and debit card processing, ACH, mobile acceptance, and gateway payment solutions to merchants in the U.S. in traditional “brick and mortar” business environments and/or over the Internet in settings requiring wired as well as mobile payment solutions.

Money on Mobile, the fast-growing mobile payment platform known as the “PayPal” of India, has already signed up over 53 million users and more than 135,000 retailers. Only beginning to penetrate a massive mobile market, the service enables unbanked/underserved populations to handle everyday payments and transfers using simple SMS text functionality. The distribution model utilized offers strong incentives to retailers, distributors, and consumers. Historically, Money on Mobile has been growing 8-10% per month.

Calpian has established itself as a multi-faceted payments company by combining a large emerging market mobile payments service and an electronic point-of-sale payment solutions under one corporate umbrella. Led by a management team with a combined 60 years of relevant business experience, the company is a well-managed operation with exceptional growth potential in burgeoning markets across the globe.

Cardium Therapeutics, Inc. (AMEX:CXM)

Cardium Therapeutics recently presented recent highlights and other business developments while reporting its financial results for the second quarter ended June 30, 2013. To view a summary of these highlights and developments, visit the following link: Cardium Therapeutics Highlights Recent Achievements, Reports Q2 Sales Growth.

About Cardium Therapeutics, Inc. (AMEX:CXM)

Cardium Therapeutics, Inc. is an asset-based, health sciences and regenerative medicine company focused on the acquisition and strategic development of new and innovative products and businesses with the potential to address significant unmet medical needs. Comprised of large-market opportunities with definable pathways to commercialization, partnering, and other economic monetizations, Cardium's current portfolio includes the Tissue Repair Company, Cardium Biologics, and the newly-acquired To Go Brands nutraceutical supplement business.

The company's lead commercial product Excellagen® topical gel for wound care management recently received FDA clearance for marketing and sale in the United States. In addition to plans to advance the product's commercialization in the U.S. and internationally via strategic partnerships, the company plans to develop new product extensions for additional wound healing applications and is working towards securing approval for marketing and sale in South Korea and through the CE Mark application process in the European Union.

Generx®, Cardium's lead clinical development product candidate, is a DNA-based angiogenic biologic designed to treat patients with myocardial ischemia due to coronary artery disease. Cardium recently initiated its Generx Phase 3 / registration study in Russia.

Cardium recently acquired To Go Brands® healthy nutraceutical supplement business with over 25 products being developed and sold by food, drug and mass channel retailers.

Consistent with its capital-efficient business model, Cardium is also actively evaluating new technologies and business opportunities. The company utilizes its team's skills in late-stage product development to bridge the critical gap between promising new technologies and product opportunities that are ready for commercialization.

Cardium is dedicated to building on its core products and product candidates to continually create new opportunities for greater success. Leveraging the advantages of its capital-efficient, asset-based business strategy, the company provides a diversified and more balanced portfolio of risk/return opportunities with the chief objective of providing long-term shareholder value.

Chanticleer Holdings, Inc. (HOTR)

Chanticleer Holdings signed a non-binding Letter Of Intent to purchase all of the outstanding shares of American Roadside Burgers, Inc. (ARB). Established in 2006, ARB is a casual dining restaurant chain with two locations in Charlotte, N.C., one location in Columbia, S.C. and the newest location in Greenville, S.C. Tom Lewison, a current director of ARB, will join HOTR’s board of directors to provide strategic direction for the companies.

“This intended acquisition of an exciting chain of restaurants is our first departure from our ongoing development of Hooter’s restaurants in foreign countries,” Mike Pruitt, CEO of HOTR, stated in the press release. “This acquisition will in no way change our focus on the development of Hooters restaurants internationally, but American Roadside presents a unique strategic opportunity in a high-growth space. We believe acquiring American Roadside at this stage of their development will allow Chanticleer to guide its growth and we plan to expand the chain as on-going improvements and future opportunities occur.”

About Chanticleer Holdings, Inc. (HOTR)

Chanticleer Holdings, Inc. owns and operates Hooters® branded restaurants in emerging international markets. As one of the most well-known restaurant brands in the world, Hooters has a menu that consists of moderately-priced American bar food and the world-famous Hooters girls. The company has ownership interests in the parent company of the Hooters brand, Hooters of America (HOA), four Hooters restaurants in South Africa, one restaurant in Hungary, one Hooters restaurant in Australia, and the exclusive franchise rights to develop and operate Hooters restaurants in three of the most populous states of Brazil: Rio De Janeiro, Minas Gerais, and Espirito Santo.

The first Hooters® restaurant opened October 4, 1983, in Clearwater, Florida. Today there are more than 412 Hooters restaurants in 28 countries. During its history, Hooters has continued to rank high amongst the industry's growth leaders. The Hooters concept has stayed true to its roots with its beach-themed concept, logo, uniform, menu and ambiance being similar to what existed in its original store, and has proven successful in small-town America, major metropolitan areas, and internationally.

In 2011, Chanticleer (NASDAQ: HOTR; HOTRW), together with a group of major private equity investors, acquired Hooters of America (HOA) and its largest franchisee Texas Wings, Inc. Today HOA is the Atlanta-based operator and the franchisor of over 430 restaurants in 28 countries. Chanticleer has rights to develop and operate restaurants in South Africa, Hungary, and parts of Brazil, and has joint ventured with the current franchisee in Australia, while evaluating several additional opportunities.

Chanticleer's core growth strategy involves expanding the Hooters® brand in emerging markets and other rapidly developing global economies. The rising number of middle class consumers in emerging markets is driving the demand for recognized international brands. Targeting underpenetrated international markets with proven market success, the company aims to achieve consistent, above-average growth rates and favorable financial returns for its shareholders.

Galena Biopharma, Inc. (GALE)

Galena Biopharma, while reporting its second-quarter results, highlighted several company milestones, including its advances in taking Abstral® to market. To view a summary of the points discussed, visit the following link: Galena Biopharma Reports Q2 Achievements, Financial Results.

“We have made rapid progress toward successfully commercializing Abstral®,” Mark J. Ahn, Ph.D., president and CEO, stated in the press release announcing Galena’s financial results. “While the NeuVax™ PRESENT trial continues its enrollment and our other development programs advance, Galena has now evolved into a fully integrated biopharmaceutical company. Building our capabilities allows us to seize opportunities to better serve patients and increase shareholder value.”

About Galena Biopharma, Inc. (GALE)

Galena Biopharma is focused on developing and commercializing targeted oncology treatments to address major unmet medical needs and advance cancer care. The company’s peptide vaccine immunotherapies harness the patient’s own immune system to identify and destroy cancer cells. Utilizing peptide immunogens has many clinical advantages, including an excellent safety profile and long-lasting protection through immune system activation and convenient delivery.

Abstral® is Galena’s FDA-approved therapy for breakthrough cancer pain in opioid-tolerant cancer patients. It is estimated that at least 40% of cancer patients experience breakthrough pain episodes multiple times per day, each with a median duration of 30 minutes. The innovative Abstral formulation rapidly dissolves under the tongue in seconds, provides rapid relief of breakthrough pain in minutes, and matches the duration of the entire pain episode.

NeuVax™, currently in a Phase III trial, has been developed to bolster the immune response in breast cancer patients. The trial, entitled PRESENT (Prevention of Recurrence in Early-Stage, Node-Positive Breast Cancer with Low to Intermediate HER2 Expression with NeuVax Treatment), is being conducted under an FDA-approved Special Protocol Assessment (SPA). The therapy targets the 50% to 60% of patients with tumors that express HER2 in low-to-intermediate amounts and achieve remission with current standard of care, but who have no available HER2 targeted adjuvant treatment options to maintain their disease-free status. NeuVax can be used to help the body target and kill undetected cancer cells before they grow into metastatic tumors.

The company’s second product candidate, Folate Binding Protein (FBP), is a highly immunogenic peptide that can stimulate the immune system to recognize and destroy preclinical FBP-expressing cancer cells. FBP is over-expressed in more than 90% of ovarian and endometrial cancers, as well as 20%-50% of breast, lung, colorectal, and renal cell carcinomas. This vaccine is currently in a Phase 1/2 trial in two gynecological cancers: ovarian and endometrial adenocarcinomas.

Galena’s experienced management team has an excellent track record in clinical development, commercial operations, and successful partnership execution. Enhanced by multiple development and commercial collaborations, the company’s suite of immunotherapeutic solutions is poised to capitalize on the vast opportunities in today’s healthcare industry.

Note: Abstral carries a Black Box warning. Please refer to the full Prescribing Information for further information.


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