Source: Peter Byrne of The Energy Report (4/24/14)

http://www.theenergyreport.com/pub/na/andrew-coleman-wants-to-know-if-you-are-ready-for-the-global-oil-surplus

As North America continues to produce more oil and gas than the world knows what to do with, Raymond James Analyst Andrew Coleman thinks the sector is likely to remain sluggish. But if investing is a bit of a poker game, you need to learn to read the table if you want the best chance at a winning hand. In this interview with The Energy Report, Coleman explains the international supply/demand disparity and tells us which oil and gas producers he values highest in an uncertain energy market.

The Energy Report: We are at the end of Q1/14; how is the oil and gas space faring?

Andrew Coleman: Overall, the space was helped by stronger domestic gas prices as we came out of the cold winter. The Q1/14 numbers have not been fully reported yet, but gas prices were up to $5 per thousand cubic feet ($5/Mcf) at bid week. As a result of this increase, a number of gas-weighted exploration and production (E&P) companies outperformed the market.

TER: What changes do you see on the table for Q2/14?

AC: From the macro standpoint, we at Raymond James have been asking ourselves, “How and when will gas storage begin to replenish?” The answer to that question will dictate how the gas market reacts during the next three to six months. Clearly, the strength of the winter weather sales and the reduction in storage levels make us much more positive on 2014 gas prices than on 2015 gas prices. We think there will be enough coal switching to keep gas prices from getting too frothy. We also believe the E&P industry’s ability to bring new supply to the system will help close the storage gap. So, while we recently increased our 2014 gas price deck, we left 2015 unchanged.

TER: Are we looking at a global glut for oil and gas?

AC: That’s certainly been the sentiment at Raymond James for the last 24 months. Supply coming from the North American shale plays has overshadowed demand growth. The market remained tight last year due to supply curtailments made by the Organization of Petroleum Exporting Countries (OPEC) in the Middle East. And in the months to come, I think we’ll continue to see growth in North American production volumes and a trend toward oversupply, with the first pricing disruption coming from a widening Brent/LLS spread.

TER: What role are the Saudis and Chinese playing in the current oil and gas environment?

AC: Prior to the shale oil development boom, there was one marginal producer of oil—Saudi Arabia—and one marginal buyer of oil—China. However, the discovery of U.S. shale oil deposits introduced the country as a second marginal supplier. It is our view that Saudi Arabia will cut oil production to keep the market balanced, but there’s a question as to how much the Saudis will cut. The recent Saudi cut of 1 million barrels of oil per day was more than we expected in the short term. Will it cut more? A part of the answer depends upon the health of China’s growth trajectory, as the country’s slowed progress has given way to concern for the robustness of its oil demand.

TER: Will the North American shale fields keep producing for the long term?

AC: Raymond James recently published an article that attempts to answer that question, analyzing the Bakken Shale. We used our type-curve models to forecast what it will take on a rig count basis to get Bakken production to slow its growth rate. The report shows that the rig count would have to be cut by more than 50% in order for production to show a noteworthy decline. Growth is being driven by a combination of pad drilling (e.g. faster cycle times) and downspacing (e.g. higher-density drilling).

It used to take 60 days to bring a new well online in the Bakken, but now, the average time is half that. And even if the productivity of the rock in the basin is declining, producers don’t have to deal with infrastructure bottlenecks, such as transportation issues. Roads and other infrastructure were built throughout the Bakken during the first few years of the boom and those efficiencies are helping to offset any potential risks to reservoir productivity at this point. That scenario is likely to continue through the end of this decade.

TER: In your previous Energy Report interview, you discussed a number of exciting North American E&P companies. What are some of the names you’re following today?

AC: EOG Resources Inc. (EOG:NYSE) is the best run and most respected E&P company out there. It’s been my Top Pick for some time because it has a great balance sheet and the fastest growing large-cap E&P profile in the sector and the stock certainly reflects these strengths. It’s a dominant player in the Eagle Ford play, where it has experienced huge growth. It’s also one of the pioneers in the Bakken and is testing acreage in the Permian Basin. Given that Raymond James’ commodity outlook for the next two years models West Texas Intermediate (WTI) oil moving toward $75/barrel ($75/bbl), I see EOG as a great defensive name. It offers good production growth on a debt-adjusted basis.

TER: Do you think the stock is an attractive buy at the present time?

AC: Absolutely. It’s hard to argue with the company’s level of execution. Considering our overall risk aversion at Raymond James, EOG is a best-of-breed at almost any size market cap.

TER: What’s the main way that Raymond James factors risk into commodities analyses?

AC: The risk is that we are pricing WTI in the mid-$70/bbl range next year. The Bakken and midcontinent supply puts pressure on the Brent and WTI spread.

TER: Is that what makes Raymond James risk averse?

AC: Yes, that supply environment makes us cautious on E&Ps. We aren’t as cautious as we were two years ago, when we thought the WTI would drop to $65/bbl, but we’re still cautious, and we are not seeing enough growth on the demand side to offset that risk.

TER: How about another E&P name investors should keep an eye on?

AC: QEP Resources Inc. (QEP:NYSE) has a number of catalysts on the near-term horizon. In Q2/14, we expect it to finish the bid process for assets that it has targeted for divestiture. Last December, the company purchased properties in the Permian Basin for $950 million ($950M). Utilizing like-kind exchange rules, QEP is seeking to divest its Midcontinent properties to take advantage of the tax benefits it can gain by high-grading its portfolio. It also has saleable assets in the Cana and Granite Wash Basins, and we expect the proceeds from these two asset sales to potentially top the $950M that management spent in the Permian. These deals could be announced in 2–6 weeks and will help QEP deleverage and plow some money back into operations in order to generate production growth.

Interestingly, QEP is also on the cusp of finalizing its midstream business separation plan. We expect to see a filing with the Securities and Exchange Commission (SEC) soon, which will detail how it plans to go about that process. You may recall that JANA Partners LLC acquired shares of QEP stock late last year. QEP subsequently agreed to take on additional board members. Now, it seems everyone on the board agrees with Management’s plan to spin off the midstream business and to fully separate it from the rest of QEP.

The proceeds from the midstream separation—and the proceeds from its asset divestitures—could drive the company to trade at a much more attractive E&P multiple since it will be poised to generate more production growth. We could potentially see a $10/share increase.

TER: Are there any other companies that pique your interest?

AC: Last month, Energy XXI (EXXI:NASDAQ) announced that it will acquire Energy Partners Ltd. (EPL:NYSE). This is part of a plan to create the largest pure-play Gulf of Mexico shelf producer. In my view, this will allow Energy XXI to boost its low-risk inventory, effectively resetting the clock on its development plans. It is similar to what happened after the firm’s acquisition of properties from Exxon Mobil Corp. (XOM:NYSE) in 2010: the increased inventory allowed it to have a deeper backlog and to be more selective with its development plans. This deal with Energy Partners allows Energy XXI to do the same thing. In the short term, it will find low-hanging fruit to monetize, generating more production growth and cash flows over the next 12–24 months.

TER: Is the financing market robust right now for small energy firms that need operating capital?

AC: There is definitely some appetite for new issuers on the public equity side. We have seen a large number of energy-only initial public offerings in the last few months, including RSP Permian Inc. (RSPP:NYSE), Athlon Energy Inc. (ATHL:NYSE), Antero Resources Corp. (AR:NYSE) and EP Energy Corp. (EPE:NYSE). I can’t speak for the private equity market, but generally the circle of life in the E&P space continues. I don’t see any major headwinds aside from the normal concerns about what direction commodity prices will take, which is the top driver in the E&P space.

TER: Will there be an increase in the pace of mergers and acquisitions (M&A) in the E&P sector?

AC: That is hard to say. Generally, M&A picks up when operators feel they can buy properties cheaper than they can organically spend to find/develop them. Lower service costs and commodity price stability would suggest that we’ll see more organic options. Smaller deals remain more likely, in my view, than larger-scale ones for the time being.

TER: Andrew, thank you for your time.

AC: Thank you.

Andrew Coleman joined Raymond James Equity Research in July 2011 and co-heads the exploration and production (E&P) team. Since 2004, he has covered the E&P sector for Madison Williams, UBS and FBR Capital Markets. Coleman has also worked for BP Exploration and Unocal in a variety of global roles in petroleum and reservoir engineering, operations, business development and strategy. Coleman holds a Bachelor of Science in petroleum engineering from Texas A&M University and a Master of Business Administration in finance and accounting with a specialization in energy finance from the University of Texas at Austin. He is a director for the National Association of Petroleum Investment Analysts (NAPIA) and a member of the Texas A&M Petroleum Engineering Industry Board, the Independent Petroleum Association of America’s (IPAA) Capital Markets committee and the Society of Petroleum Engineers (SPE).

For additional comments on EOG Resources Inc. (EOG:NYSE), QEP Resources Inc. (QEP:NYSE), Energy Partners Ltd. (EPL:NYSE), and Energy XXI (EXXI:NASDAQ) from newsletter writers, money managers and analysts, click on their respective links or visit The Energy Report.

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1) Peter Byrne conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Energy XXI. Streetwise Reports does not accept stock in exchange for its services.

3) Andrew Coleman: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Energy XXI. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By CentralBankNews.info

By CentralBankNews.info
    Global bank lending shrank for the seventh consecutive quarter in the final three months of 2013 as euro-denominated credit continued to fall, boosting the total decline in international credit to $2.3 trillion, or 7.7 percent, since the end of March 2012, according to the Bank for International Settlements (BIS).
    But while total cross-border lending fell by $93 billion, Swiss-based BIS said the 0.3 percent contraction from end-September to end-December was considerably smaller than in the previous two quarters when the decline averaged $519 billion, or 1.8 percent.
    The worldwide lending pattern in the fourth quarter showed a further decline in euro-denominated while loans extended in U.S. dollars and yen rose, said BIS, known as the central banks’ bank.
    Euro lending fell by $325 billion, or 3.3 percent, while dollar-lending grew by $49 billion, or 0.4 percent, and yen-lending rose by $62 billion, or 5.3 percent.
    The sharp fall in euro-denominated lending is part of the broader global trend that has been seen since the global financial crises.
    The outstanding stock of euro-denominated claims, including intra-euro lending, has shrunk by $1.8 trillion, or 21 percent, since peaking at $8.8 trillion at the end of 2008. This fall accounts for nearly two-thirds of the overall fall in the stock of global cross-border in the same period.
    This decline since March 2008 and December 2013 has been widely distributed across euro zone countries and sectors, with claims on banking offices down by $1.2 trillion, or 32 percent, and those on non-bank borrowers down by $180 trillion, or 8.3 percent.
    Euro area banks accounted for the overwhelming majority of the decline in lending during the same period while loans by Swiss banks shank by 36 percent. In contrast, euro-denominated lending by U.S. and Japanese banks rose by 49 percent and 21 percent, respectively.
    Lending by UK banks, which had expanded from end-March 2008 to end-June 2012, then fell sharply, or by 36 percent, from mid-2012 to the end of 2013, BIS said.
    Despite the outflow of capital from many emerging markets since the U.S. Federal Reserve last May said it was preparing to reduce its asset purchases, cross-border lending to emerging markets grew by $95 billion, or 2.7 percent in the fourth quarter, boosted by strong growth in lending to China.
    Lending to China, primarily short-term lending, rose by $85 billion, or 11 percent, raising the share of international claims on Chinese borrowers with a remaining maturity of less than one year to 79 percent end-December from 56 percent end-2007 and 76 percent end-2010.
    Claims on the rest of emerging Asia rose by $36 billion, or 4.0 percent in the fourth quarter, including a $4.4 billion, or 5.6 percent, rise in loans to Indonesia. Lending to Korea shrank by $3.0 billion, or 1.6 percent, while claims on Indian borrowers was stable in the fourth quarter in contrast to a decline in the previous two quarters.
    In contrast to higher lending to borrowers in Latin America and the Caribbean, lending to emerging Europe, Africa and the Middle East fell by $12 billion, and $20 billion, respectively from end-September to the end of December last year, with loans to Russia contracting by $11 billion, or 6.1 percent.
    By the end of 2013, on the eve of the unrest in Ukraine, foreign banks’ claims on Russia stood at $219 billion on an an ultimate risk basis – which reflects guarantees and collateral and thus reduces risk – with French banks accounting for the largest stock of outstanding claims at $49 billion and Italian banks with claims of $29 billion.
    But BIS said most of the claims by French and Italian banks were based on loans extended by the Russian affiliates of those banks and typically funded locally. In contrast, most of the loans extended by U.S. banks were cross-border claims.
    In addition to the foreign claims on Russian residents, BIS said banks had other potential exposures, such as derivatives, guarantees and credit commitments, totaling $151 billion.
    The foreign exposure of major international banks to Ukraine amounted to $24 billion on an ultimate risk basis at the end of last year, with European banks accounting for more than 90 percent of of those claims. The majority of those claims, or $15 billion, comprised local claims of foreign bank’s Ukrainian affiliates and other potential exposures to Ukraine by major banks totaled a further $19 billion.
     International lending to Latin American and Caribbean borrowers rose in the fourth quarter, but only by $5.5 billion, or 0.9 percent, partly reversing sizable declines in lending in the second and third quarters of last year, BIS said.
    Lending to Mexico grew by $8.6 billion, or 7.5 percent, while claims on Brazil fell by $5.0 billion, or 1.6 percent, from end-September to end-December.

    http://ift.tt/1iP0FNb

Source: George S. Mack of The Life Sciences Report (4/24/14)

http://www.thelifesciencesreport.com/pub/na/charles-duncan-2014-is-for-careful-stock-pickers-not-dart-throwers

Veteran Senior Biotechnology Analyst Charles Duncan of Piper Jaffray & Co. sees platform companies as the perfect way to play a consolidating market. We’ve had a big run in biotech, and Duncan believes now is the time to identify, through careful diligence, companies that can advance in a more temperate market. In this interview with The Life Sciences Report, Duncan discusses five biotech and specialty pharma innovators poised to produce therapies enabled by versatile and scalable technology platforms that target multiple disease indications.

The Life Sciences Report: Charles, you are a veteran biotech sellside analyst. What differentiates your work from that of other analysts in the field?

Charles Duncan: I am firmly committed to being a biotech generalist, but I am a neuropharmacologist by training, and have a fair amount of experience in that area—that’s where I can differentiate my work from other analysts. Analysts generally gravitate toward oncology and therapy areas with a well-bedded set of success factors in the clinic. By contrast, I deal with relatively complicated sets of endpoints, at least in terms of clinical development in neurology. I have more comfort and experience in this area than most on the Street.

One example is Acadia Pharmaceuticals Inc. (ACAD:NASDAQ), a company that I assisted in taking public while at a previous firm. We currently cover it here at Piper Jaffray, where we have it rated Overweight, which is the top rating in our system.

We were involved in not only interpreting the Phase 2 trial data of its compound pimavanserin in Parkinson’s disease psychosis (PDP), but also its initial Phase 3 data. We were frankly disappointed in that first Phase 3 study, so we got involved in understanding the changes made to the Phase 3 protocol, and in helping investors become comfortable with the second Phase 3 trial. That study read out well, and there was a dramatic transition from the $100–150 million ($100–150M) market cap level to roughly $2 billion ($2B) today.

TLSR: Can you elucidate a theme about your work?

CD: Thematically, we’re focused on small-cap neurology and oncology innovators. I believe small caps generally outperform larger caps over time. We have some coverage in gene therapy, as well as in other clinical areas and special situations where we believe we can conduct diligence and get a handle on a differentiated viewpoint.

TLSR: In the April 3 edition of Nature, there’s a short news article entitled “Drug Development: The Modelling Challenge.” Preclinical drug development is about translating research from animal models to human clinical trials. But in the case of neurocognitive disease, it’s hard to understand preclinical data because investigators can look at the signs of disease, but the animals can’t tell the investigators their symptoms. That’s clearly the biggest problem preclinical investigators, analysts and investors face in neurodegenerative disease, isn’t it?

CD: That absolutely is the case. Animal models have better predictive value in some areas: An example would be in antiviral drug development, where it’s pretty easy to gauge efficacy in animal models. When investigators are able to eradicate the virus, or at least reduce viral load, there is direct predictive evidence. There are other diseases—even oncology or hematology—where animal models demonstrate good predictive value for later success in humans.

<href=”#quote” target=”_blank”>”By the end of 2014, you’re going to have some pretty good news flow out of BioDelivery Sciences International Inc.“

But in the case of neurocognition and behavioral studies, including pain, it is much more subjective. Also, skeletomuscular disorders, such as weakness, can be very subjective.

TLSR: Let’s continue with Acadia. Even with the recent and significant pullback in the biotech space since the end of February, Acadia is still up about 165% over the past 52 weeks. It is truly one of the great success stories of the past year. What’s the next milestone we could see from the company?

CD: The next step for Acadia is to file its new drug application (NDA) for pimavanserin in PDP. We anticipate that will occur by the end of 2014.

TLSR: You have a lot of names under coverage, and I’d like you to cover a few of them. Could you go ahead and address BioDelivery Sciences International Inc. (BDSI:NASDAQ), please?

CD: We have BioDelivery Sciences rated Overweight. I consider this company to be a neuro innovator, and we think it is pretty interesting. It has three drugs in late-stage development, meaning Phase 3 or later. One of them is a drug for opioid addiction called Bunavail (buprenorphine + naloxone in soluble film for buccal mucosa). The NDA was submitted at the end of July 2013, and is pending review at the U.S. Food and Drug Administration (FDA). The Prescription Drug User Fee Act (PDUFA) date is in June 2014, and we anticipate this product will be approved. It would compete in a marketplace where the current market leader is called Suboxone (buprenorphine + naloxone sublingual film; Reckitt Benckiser Pharmaceuticals Inc. [RBGPY:OTCPK]), which did $1.5B in 2012 revenue. That’s pretty interesting market potential for a film-based drug that you put on the inside of your cheek, where it releases naloxone and buprenorphine and reduces the craving to seek out stronger opiates.

TLSR: Naloxone is a narcotic antagonist. Is that to help keep respiration up, or is it to antagonize the central effects of the narcotic?

CD: It’s more the latter. Naloxone also reduces craving. Buprenorphine is an opiate derivative, but it has a far different and interesting activity profile; it can be used to treat chronic pain. The naloxone, as you said, is really about modulation of the central activity—the reward pathway.

TLSR: Do you expect Bunavail to be approved on the June 7 PDUFA date?

CD: I’m not overly focused on that date because I know the agency has its hands full. I would like to see Bunavail approved then, and would anticipate approval within three months of that date. I usually use PDUFA dates as targets—with a three-month leeway.

TLSR: Although it’s been weak over the past month, like almost all biotech and specialty pharma stocks, BioDelivery Sciences is up about 80% over the past 52 weeks. Is the Bunavail approval baked into the stock, or do you believe there’s still upside with approval?

CD: I think there is upside, but that’s a good question. The drug is not yet approved, and there is still that regulatory risk. With approval that risk comes off the table and the stock should go up, assuming a logical market and a logical response. The greater source of upside is associated with the product’s market potential and timeline to market penetration, which has been a key point of debate among institutional investors. I believe that Bunavail could be a superior product to the reference product, Suboxone.

TLSR: You have led me right into my next question: What is the real value proposition here? Is Bunavail superior to Suboxone?

CD: I believe it’s a superior product. It hasn’t necessarily shown that yet because BioDelivery Sciences is utilizing the 505(b)(2) regulatory pathway, which means you only have show equivalence to the comparator. I believe we will see similar activity with a reduced amount of drug showing up in a patient’s gastrointestinal tract and, therefore, a reduced chance of side effects, such as constipation. The upside comes from the product getting into the market, in seeing its adoption and uptake, and in seeing that third-party payers will reimburse its use. At this point, we model Bunavail to take roughly 20% of the market. Certainly, we’d like to see physicians willing to write for Bunavail relative to their writing pattern on Suboxone.

I should mention that BioDelivery Sciences owns Bunavail outright, which is important. We believe the company could market the drug with a relatively small, capital-efficient sales force.

TLSR: You mentioned three late-stage drugs. What about the other two?

CD: Another drug under development is BEMA (BioErodible MucoAdhesive) Buprenorphine. This drug is under development, with partner Endo Pharmaceuticals Inc. (ENDP:NASDAQ), for moderate to severe chronic pain. Earlier this year, we saw a successful Phase 3 readout of BEMA Buprenorphine in a certain cohort of chronic pain patients who were naďve to opiates. We would anticipate a second Phase 3 to read out roughly midyear in a second cohort of patients who are opiate-experienced and chronic pain sufferers. If Phase 3 reads out positive, then we would anticipate Endo to fast-forward an NDA for that drug, perhaps even by the end of this year. In addition, Endo would need to pay BioDelivery a fair amount in milestone payments with the completion of the Phase 3, and then filing. That would be a good thing.

The third drug is topical clonidine gel, which the company in-licensed. It will be developed for painful diabetic neuropathy. The company’s Phase 2/3 study will read out at the end of this year. By the end of 2014, you’re going to have some pretty good news flow out of BioDelivery Sciences.

TLSR: You also follow Inovio Pharmaceuticals Inc. (INO:NYSE.MKT) and Threshold Pharmaceuticals Inc. (THLD:NASDAQ). Could you take those one at a time, and tell me your value proposition for each?

CD: We’ll talk about Inovio first. We have it rated Overweight. There are some pretty interesting Phase 2 data that could come in roughly midyear. This readout is going to be very important, but Inovio’s platform is broadly applicable for both cancers and infectious diseases, as both prophylactic and therapeutic vaccines.

The Phase 2 trial is testing the therapeutic vaccine VGX-3100 in cervical intraepithelial neoplasia (CIN), or cervical dysplasia resulting from human papillomavirus (HPV), the most common sexually transmitted infection in the U.S. This study is arguably the most rigorous test of Inovio’s platform thus far, because it is a double-blind, placebo-controlled study. It will be looking at the ability of VGX-3100 to downgrade the dysplasia from CIN 2/3 or CIN 3 to a more normal tissue, CIN 1 or less. Favorable data, I believe, will result in Inovio expanding into head-and-neck cancer, which is also caused by HPV in some patients. This trial could be a major clinical validation of the power of Inovio’s broadly applicable platform. Though this is an early-stage story, we’ll soon have the greatest validation that the company has had in its history.

TLSR: Charles, most everybody refers to VGX-3100 as a therapeutic vaccine, but I’ve always wondered if it could be considered a prophylactic immunization. Certainly there is that hoped-for therapeutic activity in which it would regress the dysplasia. But it is also proposed to prevent cervical cancer formation. Could it be thought of as a prophylactic, as well as therapeutic, intervention?

CD: That’s a great observation, and you’re right. There is kind of a dichotomy in this particular case. I would consider VGX-3100 a therapeutic vaccine, because it turns out that these cancers are the result of HPV and cervical dysplasia.

In some ways, however, it’s both prophylactic and therapeutic. I would say that when I use these two terms, I make the distinction from the kind of vaccine people get in the fall to prevent influenza. That is prophylactic. The prophylactic vaccine stimulates the immune system to recognize an antigen you could be exposed to in the future, whereas a therapeutic vaccine is used to recognize active antigens causing disease, like the proteins that VGX-3100 is targeting. But it’s a great observation because VGX-3100 is serving as a therapeutic vaccine in terms of regressing the cervical dysplasia, and a prophylactic vaccine that reduces the potential for cervical cancer.

However, to make a further distinction, we have companies under coverage that have vaccine candidates to treat established cancers. These are certainly therapeutic, and different from VGX-3100.

TLSR: You said we would be seeing a data readout from Inovio’s Phase 2 trial in the middle of this year. Given that this stock is up 400% over the past 52 weeks, could we see significant upside if we get that statistically significant validation?

CD: My view is yes. It’s a cautious yes, in that we don’t know when that value will be recognized because the biotech market has already been on a tear. I definitely think that 2014 is a year for consolidation and for stock picking, not a scattershot market where everything goes up. People will be turning their eyes toward value, and not only value relative to the absolute potential of one product. I think the value in Inovio will be seen and driven by the use of its platform in other cancer indications, such as head-and-neck cancer.

Also, Inovio signed an interesting partnership with Roche Holding AG (RHHBY:OTCQX) last November, whereby it is looking at prostate cancer with its therapeutic vaccine INO-5150 and hepatitis B virus with INO-1800. Both of these are preclinical programs. Roche made an upfront payment of $9.2M, with potential milestones worth more than $400M, plus double-digit tiered royalties on product sales if these programs make it to the market. Also, I should note that the deal with Roche is only for those two indications. It’s not for access to the entire platform. If another company was interested in a broader technology license or a certain indication, I think it could probably get that with Inovio—if that other company was committed and had the financial resources to put behind the program.

TLSR: Go ahead and address Threshold Pharmaceuticals, please.

CD: Threshold Pharmaceuticals is an oncology innovator that has partnered with Merck KGaA (MKGAY:OTCPK). I’ve covered Threshold for several years, as I have Inovio, Acadia and BioDelivery.

Threshold has a very innovative platform focusing on hypoxia-activated drugs for oncology. These drugs have a warhead or payload of chemotherapy attached that is activated within a low-oxygen (i.e., hypoxic) environment, which is a property of all solid tumors and some hematologic marrow cancers. In solid tumors this condition is characteristic because an established tumor may be walled off in tissue that is not well vascularized.

A drug that is only activated in that kind of environment could be pretty interesting because it could deliver a relatively higher concentration of chemotherapy into a tumor mass. This could result in greater efficacy. And when you think about it, it could also result in a reduced side-effect profile because a physician might be able to eliminate or reduce some of the systemic delivery of the chemotherapy.

TLSR: In effect, then, a hypoxia-activated drug is actually exploiting the weakness of current chemotherapeutic agents, which cannot get into the tumor mass because the surrounding tissue may be necrotic, with no vasculature to deliver the cytotoxic payload. Is that it in a nutshell?

CD: Yes, exactly. But there is something else. It makes sense to look at paradigms in which the use of Threshold’s drugs, such as its lead candidate TH-302 (hypoxia-activated prodrug releasing bromo isophosphoramide mustard) could be combined with Avastin (bevacizumab; Genentech/Roche Holding AG), or other vascular-disrupting agents. If it’s not TH-302, it could be a next-generation compound or something else that the company is working on.

TLSR: Charles, you have noted the relationship between a hypoxic environment and metastases, which are the true killers in solid tumors. Would you address that?

CD: This is a very important consideration in cancer therapy. Micrometastases are those cells that break away from the primary tumor. When they seed into distal tissues, they may not be able to attract blood flow, and they may therefore be in a hypoxic environment. These micrometastases often come back to haunt patients with a vengeance. A hypoxia-activated drug may be the way to get to these killer cells, which tend to be more resistant to chemotherapy than the primary tumor.

TLSR: Where is TH-302 in its development cycle right now?

CD: Toward the end of 2015 you could see Threshold’s soft-tissue sarcoma study read out. That could be a very exciting time for the company. The current timeframe for the NDA submission is the very end of 2015. An interim analysis could come roughly the end of this year or early next year, but we wouldn’t anticipate that to be sufficient to accelerate the timelines. In addition, the company has an ongoing pancreatic cancer study, which is being managed more by Threshold’s partner, Merck KGaA. It doesn’t take a long time, unfortunately, for events (defined as time from patient randomization to death) to accrue within a pancreatic cancer study. We’ll wait and see when that reads out.

TLSR: Can you address one more company?

CD: Orexigen Therapeutics Inc. (OREX:NASDAQ) has a very late-stage product pending review at the FDA for the treatment of obesity. We would argue that Orexigen’s drug Contrave (naltrexone + bupropion) is very likely to be the best drug with the best timing and the best partner of the three very visible obesity drugs out there. The other two drugs are Qsymia (phentermine + topiramate) from Vivus Inc. (VVUS:NASDAQ), which I cover and have rated Underweight, and Belviq (lorcaserin HCl) from Arena Pharmaceuticals Inc.’s (ARNA:NASDAQ), which is covered by my colleague, Ted (Edward) Tenthoff here at Piper.

The historical challenges for the obesity market have been well reported, and those issues are driven by a concern about the clinical value and safety in treating obesity with drugs. We think that Orexigen’s Contrave is going to be a drug for which patients have much greater tolerance and will want to persist in their dosing, and, therefore, it’s going to be the best overall drug.

TLSR: Orexigen has been weak, not just since we’ve been in this biotech slump, but all year, even when others have been up as doubles and triples. Orexigen is flat versus one year ago. What is the reason for this relative weakness?

CD: I think the weakness is primarily driven by the negative perspective that institutional investors have generally associated with the obesity market. Although it is increasing, the adoption of Qsymia and Belviq has been weak. In addition, there has been both clinical risk and regulatory risk. The clinical risk has recently been dealt with via Orexigen’s large cardiovascular outcomes trial. It recently told the world that Contrave met its primary safety endpoint at the interim analysis. The regulatory risk is still perceived by some investors, but I don’t think that risk is very high. I think the greatest concern is commercial risk.

TLSR: You think there is a competitive risk between Contrave and the other two drugs, Qsymia and Belviq?

CD: Yes. We think that, in the short term, Contrave may not have better uptake than the other two drugs. But in the longer term, looking out a couple of years, I think Contrave will be the winner. The other thing that differentiates the Orexigen story from the two comparables is that the company has the potential to get approval for and launch Contrave in Europe. Neither of the other two products is positioned for that, because neither has completed a cardiovascular outcomes study.

TLSR: It’s been a pleasure speaking with you. Thank you.

CD: Thank you, too.

Dr. Charles Duncan is a managing director and senior research analyst at Piper Jaffray & Co. focusing on small- and mid-cap emerging growth biotechnology companies. Duncan brings more than 18 years of sellside experience and has been recognized by industry sources, including the StarMine Analyst Awards, as being among the best analysts for his fundamental and timely analysis. He is a graduate of the University of Wisconsin and holds a doctorate in neuropharmacology from the University of Colorado.

Read what other experts are saying about:

• BioDelivery Sciences International Inc.
• Inovio Pharmaceuticals Inc.
• Threshold Pharmaceuticals Inc.

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DISCLOSURE:

1) George S. Mack conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: Inovio Pharmaceuticals Inc.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Inovio Pharmaceuticals Inc., Threshold Pharmaceuticals, BioDelivery Sciences International Inc. Streetwise Reports does not accept stock in exchange for its services.

3) Charles Duncan: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has or may have a financial relationship with the following companies mentioned in this interview: Acadia Pharmaceuticals Inc., Orexigen Therapeutics Inc., Vivus Inc., Arena Pharmaceuticals Inc., Genentech/Roche Holding AG, Merck KGaA, Inovio Pharmaceuticals Inc., Threshold Pharmaceuticals, Endo Pharmaceuticals Inc., Reckitt Benckiser Pharmaceuticals Inc., BioDelivery Sciences International Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By Dennis Miller

Optimal diversification: We all want it. Diversification is, after all, the holy grail of portfolio management. Our senior research analyst Andrey Dashkov has said that many times before, and he echoes that refrain in his editorial guest spot below.

A brief note before I hand over the reins to Andrey. The last time the market tanked, many of my friends suffered huge losses. They all thought their portfolios were well diversified. Many held several mutual funds and thought their plans were foolproof. Sad to say, those funds dropped in tandem with the rapidly falling market. Our readers need not suffer a similar fate.

Enter Andrey, who’s here to explain what optimal diversification is and to share concrete tools for implementing it in your own portfolio.

Take it away, Andrey…

Floating-Rate Funds Bolster Diversification

By Andrey Dashkov

Floating-rate funds as an investment class are a good diversifier for a portfolio that includes stocks, bonds, and other types of investments. Here’s a bit of data to back that claim.

The chart below shows the correlation of floating-rate benchmark to various subsets of the debt universe.

As a reminder, correlation is a measure of how two assets move in relation to each other. This relationship is usually measured by a correlation coefficient that ranges from -1 to +1. A coefficient of +1 says the two securities or asset types move in lockstep. A coefficient of -1 means they move in opposite directions. When one goes up, the other goes down. A correlation coefficient of 0 means they aren’t related at all and move independently.

Why Correlation Matters

Correlation matters because it helps to diversify your portfolio. If all securities in a portfolio are perfectly correlated and move in the same direction, we are, strictly speaking, screwed or elated. They’ll all move up or down together. When they win, they win big; and when they fall, they fall spectacularly. The risk is enormous.

Our goal is to create a portfolio where securities are not totally correlated. If one goes up or down, the others won’t do the same thing. This helps keep the whole portfolio afloat.

As Dennis mentioned, diversification is the holy grail of portfolio management. We based our Bulletproof strategy on it precisely because it provides safety under any economic scenario. If inflation hits, some stocks will go up, while others will go down or not react at all.

You want to hold stocks that behave differently. Our mantra is to avoid catastrophic losses in any investment under any scenario, and the Bulletproof strategy optimizes our odds of doing just that.

When “Weak” is Preferable

Now, a correlation coefficient may be calculated between stocks or whole investment classes. Stocks, various types of bonds, commodities—they all move in some relationship to one another. The relationship may be positive, negative, strong, weak, or nonexistent. To diversify successfully and make our portfolio robust, we need weak relationships. They make it more likely that if one group of investments moves, the others won’t, thereby keeping our whole portfolio afloat.

Now, back to our chart. It shows the correlation between investment types in relation to floating-rate funds of the sort we introduced into the Money Forever portfolio in January. For corporate high-yield debt, for example, the correlation is +0.74. This means that in the past there was a strong likelihood that when the corporate high-yield sector moved up or down, the floating-rate sector moved in the same direction. You have to remember that correlation describes past events and can change over time. However, it’s a useful tool to look at how closely related investment types are.

I want to make three points with this chart:

• Floating-rate loans are closely connected to high-yield bonds. The debt itself is similar in nature: credit ratings of the companies issuing high-yield notes or borrowing at floating rates are close; both are risky (although floating-rate debt is less so, and recoveries in case of a default are higher).Floating-rate funds as an investment class are not as good a diversifier for a high-yield portfolio. They can, on the other hand, provide protection against rising interest rates. When they go up, the price of floating-rate instruments remains the same, while traditional debt instruments lose value to make up for the increase in yield.
• Notice that the correlation to the stock market is +0.44. If history is a guide, a falling market will have less effect on our floating-rate investment fund.
• The chart shows that floating-rate funds serve as an excellent diversifier for a portfolio that’s reasonably mixed and represents the overall US aggregate bond market. The correlation is close to zero: -0.03. This means that movements of the overall US bond market do not coincide with the movements of the floating-rate universe.Imagine two people walking down a street, when one (the overall debt market) turns left, the other (floating-rate funds) would stop, grab a quick pizza, get a message from his friend, catch a cab, and drive away. No relationship at all… at least, not in the observed time period. This is the diversification we’re looking for.

Floating-rate funds provide a terrific diversification opportunity for our portfolio. This gives us safety, and that is the key takeaway.

Our Bulletproof income portfolio offers a number of options for diversification above and beyond what’s mentioned here. You can learn all about our Bulletproof Income – and the other reasons it’s such an important one for seniors and savers – here.

By CentralBankNews.info
    Turkey’s central bank maintained its benchmark one-week repo rate at 10.0 percent but cut the lending rate at its late liquidity window by 150 basis points to 13.5 percent, saying the “recent decline in uncertainties and partial improvement in the risk premium indicators have reduced the need for an additional tightening in liquidity policy.”
    The Central Bank of the Republic of Turkey (CBRT), which raised its repo rate by a sharp 550 basis points on Jan. 28 in response to a sharp fall in the lira currency, said its “strong and front loaded monetary tightening” had helped contain the adverse impact on inflation expectations.
    “Inflation expectations and pricing behavior will be closely monitored and the tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook,” the bank said, repeating its guidance from February when rates were held steady.
    In addition to raising the repo rate to its current level of 10.0 percent, the CBRT in January also shifted its overnight interest rate corridor upwards by raising the marginal funding rate, or the ceiling in the corridor, to 12.0 percent from 7.75 percent, and the borrowing rate, or the floor in the corridor to 8.0 percent from 3.5 percent.

    The impact of the January rate rise helped stabilize the lira currency and the central bank said loan growth was continuing to slow in response to its tight policy and there are signs of a deceleration of private domestic demand in the first quarter of 2014.
    Based on a recovery in foreign demand, the CBRT expects exports to support economic growth and disinflation and “lead to a significant improvement in the current account deficit in 2014.”
    Turkey was among the emerging market countries that were most heavily hit last year when financial markets started to prepare for the shift in monetary policy by the U.S. Federal Reserve, which started to reduce its asset purchases in January.
    The Fed’s injection of liquidity into global markets since the global financial crises led to large capital inflows into many emerging market countries but this flow started to reverse last year due to the prospect of stronger economic growth in advanced economies.
    Turkey’s current account deficit and external debt rose in recent years but the current account deficit narrowed in January and February, hitting US$3.191 billion, down from $4.930 in January and $8.322 in December 2013.
    Turkey’s inflation rate accelerated further in March to 8.39 percent in March, the fourth consecutive month of rising prices, but on April 17 the central bank’s governor, Erdem Basci, said inflation was expected to peak in May but still remain well above the bank’s 5.0 percent target for 2014.
    Turkey’s economy slowed in 2012 and 2013 after strong growth of 8.5 percent in 2011 and Basci last week also maintained his forecast for 4.0 percent growth this year, the same as in 2013 and up from 2.1 percent in 2012.
    The International Monetary Fund (IMF) has cut its 2014 growth forecast to 2.3 percent from a previous forecast of 3.5 percent, citing lower public consumption, and forecast inflation at 7.8 percent by the end of the year. The current account deficit is forecast to narrow to 6.3 percent.
    Turkey’s Gross Domestic Product expanded by 0.5 percent in the fourth quarter from the third quarter for annual growth of 4.4 percent, slightly up from 4.3 percent in the third quarter.
    The central bank has been under pressure recently to cut rates to help stimulate economic growth. On April 4 Turkish Prime Minister Tayyip Erdogan, days after strong showing in local elections, called on Basci to convene an emergency meeting of the bank’s monitor policy committee and cut rates.
    Basci responded a few days later by saying measured rate cuts were possible, but there was no reason for an emergency meeting and the bank alone would decide on the timing of the rate cuts. The central bank’s rate rise in January had come shortly after Erdogan spoke out against higher rates.
    The rate rise in January was in response to a fall in the Turkish lira to a record low of 2.39 to the U.S. dollar on Jan. 27. Since then it has strengthened, helped by a more favorable view of emerging markets by global investors.
    Today the lira rose in response to the central bank’s decision to maintain rates, hitting 2.13 to the dollar from 2.15 yesterday, the same rate as at the end of 2013.

    http://ift.tt/1iP0FNb

Technical Sentiment: Bullish

Key Takeaways
• EUR/AUD broke a triangle formation to the upside;
• Price closed above the 200-Day Moving average;
• EUR/AUD bullish towards 1.4490 / 1.5100.
After a prolonged downtrend, the Euro appears ready to recover more ground against the Australian Dollar. The pair finally managed to break the downtrend configuration by establishing a Higher Low (1.4715) and a Higher High (1.4928).

Technical Analysis

Half-way through the European session, EUR/AUD is trading around the 1.4900 handle. The triangle breakout, due to its size, led to the formation of a Bullish Engulfing Bar on the Daily timeframe. This price action pattern has not been confirmed yet, as price never broke above Wednesday’s high at 1.4928.

Since the pair has not reached any major resistance levels, a continuation towards the upside is likely in the coming sessions. Before moving higher, EUR/AUD can still correct from the current levels in order to test the support areas and form a fresh Higher Low.

Support begins at 1.4837, marked by the 200-Day Moving Average and the previous resistance area. A second support area is located around the 1.4790, where the 50 and 100 Simple Moving Averages from the 4H timeframe meet the old triangle resistance. The third support is at 1.4715 – if price breaks below this level all bullish scenarios will be invalidated.

Towards the upside, for a bullish continuation above 1.4928, EUR/AUD has immediate targets at 1.4955 and more importantly at 1.4490. The latter represents a strong resistance confluence between:
– the 4H 200 Simple Moving Average;
– the 38.2% Fibonacci Retracement between 1.5536 down to 1.4653;
– February 2013 Low.
The third resistance, just as valid, is the Fibonacci confluence around 1.5100, where the 50-Day Moving Average is also located.

*********
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets

Technical Sentiment: Bearish

Key Takeaways
• After consolidating for a week, Silver tripped stop losses below $19.22;
• 2014’s low of $18.98, was reached and the market respected it;
• Silver in serious trouble below $18.90;
• Upside potential based on year old triangle formation.

As investors flee the safe haven provided by precious metals, gold and silver continue to take hit after hit. Silver went on another selling frenzy during the European session, only to hit 2014’s Low of $18.98 before rising back above the $19.00 handle. Silver is at an interesting cross-road now, with more losses expected if the current low fails; with some chances for bullish potential due to a year old triangle formation.

Technical Analysis

The Silver Daily chart shows a large triangle formation. The support trendline is based on 28th June 2013 Low and 31st December 2013 Low, while the resistance trendline dates back to 28th August.

Silver almost touched the support of the triangle formation at $18.91. Hence, we could state this is a crucial location for the commodity. A break and close below the support $18.91 could spell trouble as it opens the way towards $18.20. If the multi-year downtrend from 2011 also comes into play, it will be very hard for Silver to resuscitate and end the year on a positive note.

The only intermediary support level between $18.91 and $18.20 is December’s Low of $18.64. If price drops accelerate heavily below $19.00, these support levels are not likely to present any bottom-catching opportunities.

For any upside potential to be viable, the Daily bars should close above $18.91. There is still a long way up until price can beat the most notable recent swing high, priced at $19.54. Only a higher high would change short-medium term outlook to bullish.

*********
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets

By HY Markets Forex Blog

Europe

European markets saw gains on Thursday, as stocks in the region bounced back from yesterday’s losses. Meanwhile, traders are focusing on earning deliveries from some major companies in the region.

The Euro Stoxx 50 climbed 0.59% higher to 3,194.56, while the German DAX rose 0.54% to 9,596.06 at the time of writing. At the same time, the French CAC 40 edged 0.56% higher to 4,475.90, while the UK benchmark FTSE 100 gained 0.35% to 6,697.82.

The release of the Purchasing Managers’ Index (PMI) data for Germany, France and the eurozone sent shares in Europe lower on Wednesday.

The Ifo business climate indicator for Germany is expected to be released later in the day with analysts expecting to see a drop from the previous reading of 110.7 to 110.4 in April.

Stocks – Asia

In Asia, stocks were seen mixed on Tuesday after a sharp drop was seen in US home sales and investors weighed upbeat earnings from Apple and Facebook.

The Japanese benchmark Nikkei 225 index edged 0.97% lower at 14,404.99 points at the time of writing, at the same time Tokyo’s broader Topix index dropped 0.76% to 1,164.90 points.

The carmaker giants, Toyota Motor Corp, shed 1.4%, while Toshiba Corp slid 4% and Kansai Electric Power sank 4.2% in Tokyo.

In China, the Hong Kong Hang Seng index rose 0.21%, trading at 22,558.59 points at the time of writing, while the mainland benchmark Shanghai Composite edged 0.50% lower to 2,057.03 points at the mark close.

Telecom provider, China Unicorn gained 3.6%, while China Resources Land added 3%. Meanwhile, the energy company, Power Assets Holdings fell 2.8%. Korea’s benchmark Kospi index lost 0.10% to 1,998.34 points. According to the Bank of Korea, Korea’s gross domestic product edged 0.9% higher in the first quarter; while on an annual basis, the country climbed 2.9% in the quarter.

Stocks – Australia

In Sydney, the benchmark S&P/ASX 200 index rose 0.10% higher at 5,523.40 at the closing bell. Among the top gainers were Alacer Gold Corp climbed 5.8%, while the Resolute Mining rose 3.2%, in contrast; the Bank of Queenland lost 2.98%.

Meanwhile, New Zealand benchmark NZX 50 index rose 0.21% to 5,153 points. The Reserve Bank of New Zealand increased its policy rate 25 basis points to 3% on Thursday.

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By HY Markets Forex Blog

Crude prices were seen trading lower on Thursday, as prices fell near its lowest level in two week, while crude inventories in the US rose to the highest in 83 years. Meanwhile the escalated tension in Ukraine continues to remain in spotlight.

The North American West Texas Intermediate crude for June delivery edged 0.24% higher to $101.70 per barrel on the New York Mercantile Exchange at the time of writing, near the lowest level in two weeks.

While Futures for the European benchmark Brent crude for June settlement rose 0.18% to $109.31 a barrel on the ICE Futures Europe exchange at the time of writing.

US Crude stockpiles

Oil stockpiles in the US climbed 3.52 million barrels, compared to analysts forecast of 2.27 million barrels, according to data from the Energy Information Administration (EIA). US crude stockpiles climbed to the highest since May 1931, according to government data dated back to 1920.

Stockpiles at Cushing, Oklahoma, fell by 788,000 barrels to 26 million, the EIA said. Supplies at the storage hub dropped since when the southern port of the Keystone XL pipeline started moving oil to the Gulf of Mexico.

Meanwhile reports from the American Petroleum Institute released on Tuesday showed that US crude oil inventories climbed by 519,000 barrels in the week ending April 18, below estimates of a rise of 2.3 million barrels.

Russia

On Tuesday, the Russian Prime Minister Medvedev said that Russia should prepare for self-reliance, as the country faces warnings of additional sanctions from the Western nations.

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