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Source: JT Long of The Energy Report (4/17/14)

http://www.theenergyreport.com/pub/na/do-you-practice-quality-of-life-investing-michael-berry-does

Energy and food will be hot commodities as emerging middle classes start buying cars and beef. That is why, in this interview with The Energy Report, Discovery Investing Founder Michael Berry explains the importance of quality of life investing. Oil and gas, uranium and fertilizer stocks are on sale now, but might not be in the years to come.

The Energy Report: When we last interviewed your son, Chris Berry, he advised to invest based on the reality of a growing, emerging market in China. That included both energy and agriculture sectors. Are you also bullish on quality of life-based (QOL) investing?

Michael Berry: I am bullish; I developed the QOL concept a few years ago. What I’m seeing is quite a few big institutions—life insurance companies, family offices and money management companies—opening quality of life funds, although often with different names. They are beginning to recognize that as people move from the country to the cities in the emerging markets, and a new middle class develops, they will want more animal-based protein—chicken, fish, pork, beef and eggs. By 2030, once the credit cycle is corrected, I’m very bullish that quality of life funds are going to push forward. I think both the energy and the agriculture sectors are going to be interesting investment areas.

Chris and I have been spending a fair amount of time lecturing and presenting our QOL thesis and talking to investors and companies that have big stakes in this area. When you have 2 billion (2B) new consumers who want to live longer, healthier and easier, and who want better food, education and transportation, energy and nutrition will be key sectors.

TER: Does that mean that you are not worried about reports of slowing economic growth in China?

MB: I’m not worried about the long term because growth in China must slow. As economies expand, growth, by definition, slows. I’m not saying we won’t have serious economic headwinds in the next few years. We have talked before about the impact of possible deflation in the metals sector. But ultimately, that will be overcome because members of the new and much larger middle class want to live better and they want to consume.

China and India are changing their models from export-driven economies to consumer-based economies. That might take a decade or more, but the Chinese government is transforming it now. China has its own credit problems that it must solve. Same goes for the United States. Regardless of the timeframe, energy and food are still keys to a higher quality of life. We are prepared to watch as this secular tsunami develops, and then take investment positions.

TER: A big part of that energy play is oil and gas. When we last interviewed Matt Badiali, he was very excited about shale plays because, “these are real companies producing real profits” compared to gold explorers. What’s your approach to the controversial shale oil sector?

MB: Shale oil is a great diversification play for all of your readers in either the metals sector or the energy sector. You want to spend some time and understand the Bakken and also the Eagle Ford Shale. I’m very bullish on the Eagle Ford. It is clear fracking technology works. The biggest oil producers are involved, including Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE).

Specifically, I like the royalty play in the Eagle Ford Shale Trend. The U.S. is a great country because if you own the land, you own all of the mineral rights beneath the land. We are the only country in the world where private citizens can own the minerals. The first 25% of oil that comes out of the land comes to the property owner, with no working interest risks and no environmental risks. The royalty owner pays only his share of the taxes; other than the cost of purchasing the royalty, he has no capital costs associated with drilling and completing the wells, or monthly lease operating expenses.

It is a great dividend-like diversifier for people who are looking for yield and a hedge against inflation. Just in the Eagle Ford Shale alone, there have been approximately 9,000 wells drilled since its discovery in 2008, with a 97% success rate. The current average estimated ultimate recovery (EUR) per well is 351,000 barrels of oil equivalent (351 Mboe). This recovery rate appears to be increasing over time as the technology improves. There will likely be an additional 200,000 wells drilled in the Eagle Ford over the next 50 years.

TER: So you’re not worried about decline rates.

MB: Not at all, because the initial rate of production is about 1,000 barrels per day (1 Mbbl/d) or more. First-year declines are 76%, second-year declines are 35%, 20% for the third year and 6% or less thereafter. So 40% of the total estimated ultimate reserves are produced in the first five years, then it tapers off. But a company like EOG Resources Inc. (EOG:NYSE) is now drilling one well on 20 acres. There is lots of potential, even though the decline rates are steep and it’s $10 million ($10M) to drill a well. When you’re producing 11,500 bbl/d at $100/barrel ($100/bbl), the economics work. The risk is if oil were to fall to $40 or $50/bbl.

TER: What are some other companies that have been active in the shales?

MB: Penn Virginia Corp. (PVA:NYSE) and Carrizo Oil & Gas Inc. (CRZO:NASDAQ) are producers that know where the profitable properties are located.

TER: My understanding is that Penn Virginia is buying on the outskirts of the Eagle Ford, where the property is cheaper. Is that working?

MB: The Eagle Ford Shale in Texas is more than 450 miles long and 50 miles wide. Moving west to east across south Texas, it is about 300 feet thick, thinning to 50 feet thick around central south Texas, and thickening to 1,000 feet as you move east, to the Eaglebine. That is why the best properties may not be found in the heart of the Eagle Ford, but to the east, on the fringes. The whole oil window play is moving east across Texas now. In fact, the Eagle Ford probably goes all the way into Florida. Penn Virginia is doing a great job of buying properties before they are overpriced. Carrizo is another great operator in the Eagle Ford Shale. There is a lot of potential here, and I’m just talking about Texas. I’m not talking about North Dakota, the Bakken, Pennsylvania or any of the other ones that are there. The future energy scenario for the U.S. is very positive.

TER: You mentioned that you think we’re about a year from uranium prices returning to higher levels. What would be the catalyst behind that?

MB: The spot price of uranium has fallen to around $32.50/pound ($32.50/lb). That can’t last with the rest of the world building out its nuclear power capability. I don’t know what Japan and Germany will do, but China and India are building reactors as we speak. I think we’re a year away from a realization that the Russians aren’t going to be our friends anymore when it comes to sending us uranium to be down blended for commercial reactors. We are going to need more uranium soon and that means higher prices to make some of the great deposits in the Athabasca economic and hence mineable.

Chris and I attended the SME Conference on uranium in Corpus Christi in October and recognized the difference between the successful companies and those that might not survive to see higher prices. Presently, what’s really important about uranium is being able to produce it cheaply. So the in situ leach (ISL) producers are the place to be right now.

TER: What companies have that ISL advantage?

MB: One is Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT). The company recently announced that the NRC has allowed Uranerz to commence production at Nichols Ranch in Wyoming. Production means cash flows and liquidity. U3O8 Corp. (UWE:TSX; UWEFF:OTCQX) has Colombian and Argentinian assets of uranium and vanadium. It’s an earlier stage play that looks promising. I met with management at PDAC in March. I like Ur-Energy Inc. (URE:TSX; URG:NYSE.MKT) because it has been producing via ISL in Wyoming for several months. ISL is particularly economic in a low uranium spot and term market. Uranium Energy Corp. (UEC:NYSE.MKT) interests me because it’s a domestic producer.

We’ve had some wonderful discoveries in the Athabasca led by Fission Uranium Corp. (FCU:TSX.V). These will require a higher uranium price to enhance the economics of hard rock discoveries. We think we will require $50/lb or $60/lb uranium before we start to gain share price momentum in the sector.

TER: Despite the low uranium prices, some of the companies have had some traction in the market. Uranerz did an update on the Nichols Ranch ISL project and the stock is way up from the beginning of the year. What happened there?

MB: First of all, it is an ISL producer, which is where you probably want to be invested today. Second, I think there’s been a lot of hype in the sector itself, generating some behavioral excess in some of these stocks. Having said that, I think the ISL producers are probably going to hold their value as we go forward.

TER: You mentioned that energy and food are directly related. What fertilizer companies could benefit from an increased need for food?

MB: We’re going to see a massive need for new fertilizer development globally. The three things farmers need to grow more food on less land are nitrogen, phosphorus and potassium.

There’s an advanced phosphate developer in Quebec that I like called Arianne Phosphate Inc. (DAN:TSX.V; DRRSF:OTCBB; JE9N:FSE). It currently has an NI 43-101 feasibility study completed. Arianne has a very high-grade phosphate deposit at Lac ŕ Paul in Quebec. The feasibility study shows a 25-year mine life with annual production of 3 million tones (3 Mt) of phosphate concentrate with a grade of 38.6% P2O5. There are many zones still to explore that will expand the resource. The feasibility study shows that after beneficiation, the resource will provide among the highest P2O5 grades in the world.

I think the company is an attractive takeover target given its location in Quebec, the vertical integration of the phosphate market and the very strong economics of the project. The phosphate market is comprised of a handful of big players, including OCP in Morocco (state owned), PhosAgro (PHOR:LSE) in Russia and The Mosaic Co. (MOS:NYSE) in the U.S.

TER: I understand Arianne has some permitting that it expects to get approved this year. Will that be an important catalyst?

MB: That should be a very important catalyst. The stock went up to CA$1.69, and it’s backed off to CA$1.15. I think it’s way too cheap right now. I think it’s a stock that you want to own now. It’s a big resource of 590 Mt of 7.13% Measured and Indicated ore. I don’t think it will have any major problems on the permitting side. The one area it’s going to have to deal with is the capitalization of the project. It may require a capex of $1.21B.

On the other hand, it certainly has a really strong following, with a very low estimated production cost of $93.70 per tonne. The average selling price will likely be around $200 per tonne. This is a wonderful margin. Furthermore, it’s a commodity that is relatively scarce in North America.

TER: You mentioned that potash has been much more volatile lately. What are some companies you like that could survive in a depressed potash market?

MB: The good news is the potash market is probably pretty close to a bottom right now because of big producers flooding the market. As the middle class consumer grows worldwide, I think we’re going to have much more demand for fertilizer, particularly overseas.

A Canadian company called Allana Potash Corp. (AAA:TSX; ALLRF:OTCQX) has a big, low-cost potash project in Ethiopia that is going fertilize Africa and some of Asia. It has an offtake agreement with Israel Chemicals Ltd. (ICL:TASE) that could be transformational for the fertilizer space itself. This 80% offtake agreement places Allana in a different league from its competitors.

These are the Discovery Investments we love to understand.

The stock is in strong hands; Liberty Metals & Mining, an offshoot of an insurance company, is a big shareholder. If I were investing in potash companies, I would pick some producing companies overseas to supply demand overseas. Allana fits that bill, and the stock is trading for CA$0.38.

Some investors are nervous about Ethiopia, but the asset is there and the management is excellent. I know CEO Farhad Abasov very well. I’ve worked with him on other situations. I will be shortly travelling to Ethiopia to visit the Allana site.

The fertilizers are going to be very strong over the next few years as demand for protein skyrockets from the urbanization of the emerging world’s new middle class. Be patient and select good management with quality assets and sustainable business plans.

TER: Any final advice for energy investors trying to get through the rest of 2014?

MB: Look at the shale plays. Look for royalty trusts on the shale plays, particularly the Eagle Ford in Texas. There are all kinds of new rules. You can even put royalties in your IRA now. We haven’t gotten very much yield from the junior miners. It’s time to start rewarding yourself.

TER: Thank you for all the ideas.

MB: Thank you.

From 1982–1990, Michael Berry served as a professor of investments at the Colgate Darden Graduate School of Business Administration at the University of Virginia, during which time he published a book, “Managing Investments: A Case Approach.” He was the Wheat First Professor of Investments at James Madison University. He has managed small- and mid-cap value portfolios for Heartland Advisors and Kemper Scudder. His publication, Morning Notes, analyzes emerging geopolitical, technological and economic trends. He travels the world with his son, Chris, looking for discovery opportunities for his readers.

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DISCLOSURE:

1) JT Long 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 employee. She owns, or her 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: Fission Uranium, Uranerz, Arianne. Streetwise Reports does not accept stock in exchange for its services.

3) Michael Berry: I own, or my family owns, shares of the following companies mentioned in this interview: Arianne Phosphate Inc. 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: Arianne Phosphate Inc. and Allana Potash Corp. 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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Article By RoboForex.com

Analysis for April 18^th, 2014

EUR USD, “Euro vs US Dollar”

Just as we expected, Eurodollar rebounded from local level of 61.8% (1.3860) and started falling down. Earlier pair rebounded from the group of upper fibo levels (1.3900). Most likely, bears may break minimum next Monday.

As we can see at H1 chart, I’ve got three sell orders already. Considering that price is moving below local level of 50% (1.3847), I decided to open another order, just as I planned before. Target is close to the group of lower fibo levels (1.3760).

USD CHF, “US Dollar vs Swiss Franc”

Franc managed to rebound from level of 50% (0.8785). Earlier price rebounded from the group of fibo levels at 0.8745. During correction, I opened another buy order, the third one.

As we can see at H1 chart, price rebounded from local correctional levels right inside temporary fibo-zone. Franc successfully reached new maximum and started correction. Most likely, pair will consolidate during Friday and break maximum in the beginning of the next week.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Article By RoboForex.com

Analysis for April 18^th, 2014

DJIA Index

It looks like Index completed double three pattern inside wave [2]. On minor wave level, price is finishing initial ascending impulse. After completing local correction, instrument is expected to start growing up inside the third wave.

As we can see at the H1 chart, Price is finishing the fifth wave inside wave (1). Earlier, at the end of wave 4, I opened another buy order. In the near term, price may start correction, which may take the form of zigzag pattern.

Crude Oil

It looks like Oil finished wave 2. Earlier, price formed bearish impulse inside wave 1. I’ve got only one sell order so far, but as soon as market start falling down I’m planning to increase my short position.

More detailed wave structure is shown on H1 chart. After completing zigzag pattern inside wave [Y], Oil formed initial bearish impulse inside wave (1). Possibly, in the beginning of the next week price may break local minimum while forming the third wave. After that, I’ll move stop into the black.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

By Dennis Miller, Senior Editor, “Miller’s Money Forever”

There are many creative ways to screw up your retirement. Let me show you how it’s done.

Supporting adult children. My wife Jo and I have friends with an unmarried, unemployed daughter who had a child. Our friends adopted their grandchild and are now in their late sixties raising a kid in grade school. The same daughter had a second child, and they adopted that one too. When she announced she was pregnant a third time, they finally said, “Enough! It’s time for a third-party adoption.”

Last time I spoke with them, their unemployed daughter and her boyfriend were living in their basement, neither contributing financially nor lifting a finger around the house. What began as a temporary bandage had become a permanent crutch. Our friends love their grandchildren; however, they’ve become bitter.

Jo and I also know of retirees who make their adult children’s car payments. I’m not talking about college-age kids; some of these “children” are close to 50. What’s their justification? “If we don’t make the payments, they won’t be able to go to work.” What I can’t grasp is how these adult children have iPads and iPhones, go on vacations, and do other cool things, but can’t seem to make their car payments.

You are not the family bank. There is generally a brief window of opportunity between children leaving the nest and retirement. Use it to stash away enough money to retire comfortably!

Ignore your health. I served on the reunion committee for my 50^th high-school class reunion. We diligently tried to track down our classmates, but many had not lived long enough to RSVP to the party. The number of deaths from lung cancer and liver cancer were shocking. Many of those six feet under had been morbidly obese or simply never went to the doctor for checkups.

I know this sounds obvious, but your health choices really do affect how long and how well you live. Retiring only to become homebound because of health problems won’t be much fun.

Not keeping your retirement plan up to date. In the summer of 2013, the Employee Benefit Research Institute (EBRI) published a survey about low-interest-rate policies and their impact on both baby boomers and Generation Xers, who are following right behind. The bottom line (emphasis mine):

“Overall, 25-27 percent of baby boomers and Gen Xers who would have had adequate retirement income under return assumptions based on historical averages are simulated to end up running short of money in retirement if today’s historically low interest rates are assumed to be a permanent condition, assuming retirement income/wealth covers 100 percent of simulated retirement expense.”

It is a sad day when people who thought they’d saved enough realize they have not. Run your personal retirement projection annually to make sure you’re keeping up with the times. Otherwise you may have to work longer or step down your retirement lifestyle—drastically.

Thinking you can continue working as long as you wish. While age discrimination is illegal, you may not be able to work forever. If illness doesn’t push you out the door, your employer might downsize (we all know who goes first) or buy you out with a lucrative lump sum.

Many companies want older employees off the payroll because their healthcare costs are high; plus, they are often at the top of the salary scale. More than one employer has made the workplace so uncomfortable that an older employee felt he had to quit. Other employers will systematically build a case to terminate a senior employee with their legal team waiting in the wings to help.

Whatever the reason, you may have to stop working even if you enjoy your job, so plan for it.

Not increasing your rate of saving. A surefire way to end up short is to pay off a large-ticket item like your home mortgage and then continue spending that money every month. Start paying yourself instead! Don’t prioritize saving after it’s too late to benefit from years of compounded interest.

Continually taking equity out of your home. Too many of my friends have been duped into taking out additional equity when refinancing with a lower-interest mortgage. If you can secure a lower rate, use it to pay off your home off faster. When you have, start making those payments to your retirement account.

Retire with a substantial mortgage. The general rule of thumb is your mortgage payment should be no more than 20-25% of your income. If you retire and still have a mortgage, it might be tough to stay within those guidelines.

Taking out a reverse mortgage at a young age. Debt-laden baby boomers are taking out reverse mortgages at an increasingly younger age. Just read the HUD reports. Many have very little equity to begin with and use a reverse mortgage to stop their monthly bank payments for pennies in return.

Locking yourself into a fixed income at a young age is a great way to kiss your lifestyle goodbye. Many of these young boomers will find themselves wondering, “Why is there is so much life left at the end of my money?”

Putting your life savings into an annuity. While annuities have their place in a retirement portfolio, going all in is dangerous, particularly at a young age. After all, your monthly payment depends in part on your age.

I know folks who put their entire life savings into variable annuities. They thought they were buying a “pension plan” and would never have to worry again. The crash of 2008 slashed their monthly checks, and they have yet to recover. Retirement without worry is not that simple.

Thinking your employer’s retirement plan is all you need. The era of pensions is gasping its dying breath. We have many friends who retired from the airlines with sizable pensions. When those airlines filed for bankruptcy, their pensions shriveled. No industry is immune to this danger, so we all need a backup plan.

Government pensions are following suit. Just ask anyone who has worked for the city of Detroit! While the unions are fighting the city to preserve their pensions, an initial draft of the plan indicates underfunded pensions (estimated at $3.5 billion) may receive $0.25 on the dollar.

Don’t fall for the trap! If you work for the government, you still need to save for retirement. Contribute to your 457 plan or whatever breed of retirement account is available to you. The federal government has over $100 trillion in unfunded promises, and many state governments are woefully underfunded. That doesn’t mean your retirement has to be.

Reverse mortgages and annuities are often the undoing of many income investors and retirees. They can be used properly, however, if your situation or the opportunity fits with your needs. With all of the misinformation out there about these two products, we decided to pen two special reports to help you decide whether these are right for you. They are The Reverse Mortgage Guide and The Annuity Guide. Check out one – or both – today and learn where, if at all, these fit your needs.

By MoneyMorning.com.au

Your editor doesn’t own a mobile phone.

We haven’t for about four years.

And we don’t intend to own one either (although we do own a tablet computer).

So it came as a surprise to many that we decided to launch a technology investment advisory last year.

After all, what would a guy who doesn’t own a mobile phone know about technology?

But those people who questioned our move didn’t understand an important point. In order to understand the specifics of something, you need to understand the bigger trends.

And that’s exactly why we’re set to make another big move that will have even more people scratching their heads…

In Money Morning and at the recent World War D conference we mentioned that we’re focusing on three key investment opportunities:

• Technology
• Resources
• Emerging Markets

Our view is that as a speculator these markets should provide investors with some of the biggest investment opportunities over the next 20 years.

In a way, each of these markets has a similar profile. They are what we call ‘bounceback’ plays.

Three ‘bounceback’ plays for the next 20 years

But while they have a similar profile they are each at a different stage of progress.

The bounceback of technology stocks is already in full swing more than 14 years after the dot-com crash.

The resources bounceback has had a few false starts, but following the crashes of 2008 and 2011-2013 there is new life in the resource sector.

The final opportunity — emerging markets — is at a much earlier level. In fact, there’s the possibility that emerging markets could crash further before the real bounceback begins.

That’s possible. But with China’s market already down 62% since the 2007 peak, our bet is that the worst has already happened.

For that reason we’ve decided it’s time to do what all real contrarian investors should do — spot an opportunity and then attack it with force.

In this instance, it’s time for contrarian investors (heck, any type of investor) to look at what could be one of the biggest generational investment opportunities seen in decades.

We’re talking about emerging markets generally, and China specifically.

One of the few Aussie analysts to tip these stocks

That brings us back to the point we made at the top of this letter.

Although your editor doesn’t own a mobile phone we aren’t a technology Luddite. In fact, we spent several years in the IT sector during the turn of the century as the tech boom took hold.

We saw plenty of exciting things at the time. We also saw plenty of things that made us scratch our head…thinking back on it now, we still can’t believe some of the things that went on (such as telcos delivering many tens of fibre optic lines to the spare bedrooms of suburban houses as anyone thought they could become an ISP back then).

But the fact is, you don’t need to be an expert in something to identify a trend. Social networking is another example. Personally, we find the whole concept shallow and ridiculous. But that doesn’t mean we can’t see the opportunity.

That’s why your editor was one of the few analysts in Australia who said that investors should buy into Facebook [NASDAQ:FB] and Twitter [NASDAQ:TWTR].

The same thing goes for an exciting new project we’re working on right now.

Investing can be terribly frustrating if you’re someone who likes to invest in big trends. The problem is that not everyone can see those trends as clearly as you.

Take for example the recent sell-off in emerging markets. Three major events drove the sell-off: Argentina’s potential to default, Russia’s potential to invade Ukraine, and China’s potentially slowing economy.

It was frustrating as an analyst because we didn’t have the necessary vehicle or the expertise to give you advice on which markets to buy right now. And we’re sure as an investor it was frustrating for you that there was no one to give you that advice.

Well, that’s about to change.

A unique analyst for a unique project

At the recent World War D conference we floated the idea of an investment advisory focusing on emerging markets to our most select group of subscribers — Alliance Members.

Based on the reaction it was an idea that drew a lot of interest. That’s fortunate, because we had already set the wheels in motion to develop a new investment advisory that would focus entirely on emerging markets.

And as you can expect, seeing as the emerging markets sector is dominated by one economy, it’s natural that this service will have a big focus on that one economy — China.

For years you’ve read and heard a lot about the Chinese economy. But most of what you’ve read and heard has come from ‘outsiders’. But in order to provide genuinely useful and unique advice we felt you should only take advice from an ‘insider’.

We can see the big picture on China and other emerging markets. Our view is that this is one of those rare generational investing opportunities…one of the few chances you’ll get in your lifetime to bet on something that could change the course of history.

But what we’re happy to admit is that we aren’t an expert on China or Chinese companies. And so, just as we hired a tech expert to help launch Revolutionary Tech Investor last year, we’ve now hired a China expert to help launch an exciting new project.

You’ll find out more in the coming weeks as the project gains momentum. But the first thing we need to do is to introduce you to the emerging markets analyst who will help guide you through the political, cultural, social and business life of China.

His name is Ken Wangdong. He grew up in China before moving to Sydney. He then moved back to China and Hong Kong where he has spent years immersed in China’s business world.

This will give Ken the kind of view that no other analyst in Australia can give you. Importantly, it will help him provide guidance on the investment opportunities in this remarkable country.

Look out for Ken as he becomes a regular in Money Morning. You’ll get to read his first contribution on Monday — and we can assure you, it will be like nothing you’ve ever read from a mainstream analyst on China.

Enjoy the long weekend.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: How to leave wealth to your kids without destroying your family…

Join Money Morning on Google+

By MoneyMorning.com.au

Source: Peter Byrne and Tracy Salcedo-Chourré of The Life Sciences Report (4/17/14)

http://www.thelifesciencesreport.com/pub/na/build-biotech-wealth-on-solid-platforms-grant-zeng

Potential. That’s what every investor is looking for in a biotech investment. Grant Zeng of Zacks Small-Cap Research zeroes in on three primary factors when he looks at whether a particular company has the potential to succeed in the fast-moving life sciences industry. In this interview with The Life Sciences Report, Zeng dissects his process and names 10 companies that have survived his exacting examination.

The Life Sciences Report: As an analyst you focus on promising junior biotechs. What primary qualities do you look for in a company that you rate hold or outperform? And what do you think makes a junior biotech attractive to someone who might want to acquire it?

Grant Zeng: As an analyst with Zacks Small-Cap Research, I’m focused on finding undervalued or underfollowed small-cap biotech companies. My analysis is based on the individual company’s fundamentals, which involves a comprehensive analysis of the company, the industry and also the broad market. That analysis includes, but is not limited to, looking at the company’s operations, pipeline, the market potential of its products and its financials.

First, I look at the technology. It’s critical that the company has a platform technology, because that enables the creation of products and processes that support present or future development. If a biotech owns a platform technology, it is much easier to build a robust pipeline in a cost-effective way, and save time.

Second, I look at the company’s pipeline. Generally speaking, a diversified, robust pipeline, with multiple product candidates in various stages of development, is more valuable than a single-product pipeline. Of course, I also look at each individual drug candidate, its targeted population and its market potential.

Third, I look at the company’s balance sheet. Cash burn is always a concern for a small-cap biotech. A strong balance sheet allows a company to focus on its long-term growth without considering short-term cash strains. On the other side, if a company has a weak balance sheet and a high cash-burn rate, valuation will be under pressure, since equity financing always dilutes the existing shareholder base. If a biotech company has all three—or at least one or two—of these characteristics, it could be a potential outperform name.

Having said that, investors are always interested in a company’s acquisition potential. But it’s difficult to predict whether an individual company is attractive to a potential acquirer. When a bigger company looks for a target, the most important thing is the target’s technology and pipeline. A platform technology and a diversified, robust pipeline are always attractive to a potential acquirer. Valuation is also a concern.

TLSR: How about therapy areas? Do you look at the markets for the particular drugs that a company’s developing?

GZ: Yes. We certainly look at the markets of the targets. Sometimes we also look at the unmet medical needs for the pipeline.

TLSR: Are you attracted to companies developing orphan drugs?

GZ: Yes. This is a very lucrative area and has unmet medical needs to target.

TLSR: Do these features make a biotech attractive to a company interested in doing a merger and acquisition (M&A)?

GZ: Yes, always. Mergers and acquisitions have been booming in the biotech and biopharmaceutical industry because large biotechs and large pharmaceutical companies are looking for small biotechs that have strong pipelines or strong product candidates. This is always a very exciting area for investors.

In addition to M&A, licensing and partnerships remain the lifeline of the biotech industry. As I’ve said before, I expect to see continued partnership and licensing activities for biotech companies in the coming years. I also expect further consolidation throughout the industry. The big pharmaceutical companies have long faced big challenges, such as patent expiration for blockbusters, low research and development (R&D) productivity and generic competition. Platform technologies and efficient R&D efforts in smaller biotech companies may be part of the solution to the challenges faced by big pharma. As long as those challenges exist, the buyout of smaller biotechs by big pharma/biotech companies will continue to make sense. Investors should pay attention to large, profitable biotechnology stocks, as well as small-cap biotechnology stocks with promising pipelines.

TLSR: Is 2014 shaping up to be better or worse than 2013 for investors in the life science sector?

GZ: Biotech investors had a terrific year in 2013. We saw the NASDAQ Biotechnology Index gain 66%. In 2014 I think the trend will continue, but it may not be as terrific as in 2013.

TLSR: It’s been a rollercoaster ride for the past 3 or 4 weeks. Biotechs have lost ground. Can you comment on this volatility?

GZ: I think the biotech industry has undergone a correction in the past 3 weeks. There are companies that had corrections of about 50%. This may be good for the healthy development of the market. After a terrific year of 2013, some companies actually are overvalued, but there are still companies that are undervalued or fairly valued. After the correction, the biotech sector will take a step forward again.

A number of strong secular growth drivers still power the biotech industry—namely an aging population, and an enormous R&D effort to bring new, better drugs to market. Recent breakthroughs in oncology, neurology and cardiology offer sizable market opportunities. Biotechnology research is finally starting to deliver. Expanded work in genomics and proteomics (the study of proteins) is attracting significant attention from larger players. Demand for innovative medicines remains strong, and as biotechnology delivers the next wave of pharmaceutical products, the group should continue to outperform the broader sector.

TLSR: How about the Technical Component (TC) Grandfather Clause expiration (the clause permitted labs providing pathology services performed at hospitals to receive direct payment from Medicare)? Is that something you feel has affected the industry?

GZ: That kind of event has had some negative impact on the molecular diagnostic industry. For example, I cover NeoGenomics Laboratories (NEO:NASDAQ). As I’ve written previously, effective July 1, 2012, NeoGenomics was required to bill hospitals for the technical component of certain tests performed on behalf of Medicare inpatients and outpatients. Previously, the company was allowed to bill Medicare directly for such services, if the services were provided to hospitals that were “grandfathered” under the regulations.

As I’ve noted before, about 80% of NeoGenomics’ lab tests are billed off the physician fee schedule, with the remainder billed off the clinical lab fee schedule. Lab tests billed off the physician fee schedule usually have two separable billing components: the technical component (sample treatment and testing), and the professional component (interpretation of the test results).

The company was impacted by the TC clause expiration, but will move forward with new clients, new development and tests. The expiration won’t have a long-lasting impact.

TLSR: Did you want to talk a little about NeoGenomics? Why might investors be interested in this company now?

GZ: I have been following NeoGenomics since October 2011. This is a molecular diagnostic company providing molecular testing for cancer patients. The company grew revenue from $11.5 million ($11.5M) in 2007 to $66.5M in 2013, a 34% annual compound growth rate to date. The revenue will continue to grow to $145M in fiscal 2017, according to my model. NeoGenomics is focused on the cancer-testing niche market, a huge market. There is great potential for the company to grow in the future.

TLSR: Do you cover other companies working in the same arena?

GZ: Yes. In addition to NeoGenomics, I cover two other biotech companies in the molecular diagnostic business: GeneNews (GNWSF:OTCPK; GEN:TSX) and Rosetta Genomics Ltd. (ROSG:NASDAQ)).

GeneNews is marketing two products in the U.S. One is called ColonSentry, for the early detection of colon cancer, and the other is EarlyCDT-Lung, for the early detection of lung cancer. The company has a joint venture in the U.S., and is promoting these two products in the U.S. and around the world. I see total revenue for GeneNews growing at an impressive 173% compound annual growth rate from fiscal 2013 to 2018, and model that the company will break even in fiscal 2017. I have a price target of $3/share for GeneNews.

Rosetta Genomics has four products on the market: a cancer origin test, a lung cancer test, a kidney cancer test and a mesothelioma test. The current focus is on the cancer origin test, which identifies the primary origin of tumors. The tests generate revenue for Rosetta.

I am optimistic about the company’s microRNA platform technologies, which serve as the basis for continued development of molecular diagnostics. Shares are undervalued at this time. I have a price target of $10.50/share.

TLSR: Do you think there is a growing market for these kinds of molecular diagnostics?

GZ: Yes. In general, the molecular diagnostic market is growing very rapidly in the U.S. and around the world. These small companies are catching an opportunity to grow their businesses individually by targeting this very large market with their proprietary technology.

TLSR: Are there any nicely performing firms working with RNA interference (RNAi)? Can you describe innovative products that are in the pipeline or already on the market?

GZ: RNAi is a very exciting area for both therapeutics and diagnostics. I cover two companies engaged in RNAi therapeutics. One is Arrowhead Research Corp. (ARWR:NASDAQ) and the other is Bio-Path Holdings Inc.(BPTH:NASDAQ).

Arrowhead is a clinical-stage biotech with a candidate, ARC-520, targeting hepatitis B virus (HBV). Hepatitis B is a huge market around the world. The market in the U.S. may not be that big, but it’s very large in Europe and in Asia. The company just initiated a Phase 2 study in Hong Kong; the data from that trial will be available later this year. The company will also be able to apply its RNA interference technology to develop a robust and a diversified portfolio once it has verified the safety and efficacy of ARC-520 for HBV.

Bio-Path is another small-cap biotech company engaged in the RNA space, but not in RNA interference. The focus is on antisense. Its liposomal technology enables systemic delivery of antisense, small interfering RNA (siRNA) and hydrophobic small molecules for treatment of cancer. Bio-Path is currently testing its liposomal Grb-2 candidate in a Phase 1 trial in blood cancers. The trial will be finished in the first half of this year, and the company plans to move this candidate into a Phase 2 clinical trial later this year.

This is also a platform technology. Once the efficacy and the safety of the therapy are verified in the Phase 1 trial, the company can develop other candidates based on the same platform technology.

Bio-Path’s pipeline also includes liposomal Bcl-2, a liposome-delivered antisense cancer drug that targets the lymphoma and certain solid tumor markets, which could enter clinical trials in 2014.

For both Arrowhead and Bio-Path, I like their respective platform technologies, which have the potential to build up diversified and robust pipelines in a cost-effective way in a short period of time, once the proof-of-concept clinical evidence has been verified. Shares of both companies have had significant runs in 2013 and I believe there is room for further appreciation for the shares of both companies.

TLSR: Let’s move on to cancer supportive care. You have companies that you cover in this space?

GZ: I cover Soligenix Inc. (SNGX:OTCBB), which is focused on cancer supportive care, gastrointestinal disorders and biodefense. The company has a neat candidate, SGX942, which targets the treatment of oral mucositis, a terrible condition affecting some cancer patients. Most treatment options address the symptoms of mucositis and do not address the cause, while Soligenix’s SGX942 has a new mechanism of action, an innate defense regulator, that can address both the primary and the secondary causes. The company is testing the product in a Phase 2 clinical trial for oral mucositis in patients undergoing chemotherapy or radiation therapy. Oral mucositis is a huge market for this candidate.

TLSR: When might investors see catalysts or data readouts?

GZ: The company initiated a Phase 2 trial in December 2013. The trial is going very well. The results will be available in the second half of this year. Once the product’s safety and efficacy are verified in the clinic, Soligenix can use the platform to develop other product candidates addressing other indications.

Soligenix has a very diversified pipeline under development, including biodefense candidates—vaccines for bioterrorism—using its ThermoVax technology. In addition, Soligenix is developing oral BDP (beclomethasone 17,21-dipropionate) for a variety of indications, most notably in pediatric Crohn’s disease. The company will initiate a Phase 2 study in the second half of this year, I believe.

TLSR: Let’s move on again to checkpoint inhibitors. Are there penny stocks in that realm that catch your eye?

GZ: Checkpoint inhibitors are very promising new therapeutics under development for cancers. Key players are competing in this potentially high-profit market. In terms of small biotech companies under my coverage, I follow OncoSec Medical Inc. (ONCS:OTCBB), an emerging biotech focused on designing and developing its proprietary medical approach for the treatment of solid tumors.

The company has a platform candidate called the OncoSec Medical System. Basically, the company uses electroporation technology to deliver DNA-encoded cytokines or other immunomodulatory molecules directly into tumor cells. Once in the tumor cells the therapy can stimulate the patient’s immune system to fight cancer.

OncoSec has a Phase 2 trial ongoing for its lead candidate, ImmunoPulse, in melanoma. ImmunoPulse delivers plasmid DNA-encoding immunotherapeutic cytokine interleukin 12 into tumor cells, stimulating a patient’s immune system to fight cancer, and has demonstrated an impressive safety and efficacy profile in the trial. The company plans to initiate a pivotal trial in 2015. I estimate approval of ImmunoPulse for the treatment of melanoma may come in late 2017, if the pivotal trial data prove to be positive.

ImmunoPulse may also be used in combination with checkpoint inhibitors. This is a very promising area for the company. Right now, OncoSec is collaborating with Old Dominion University to evaluate the effects of the ImmunoPulse in combination with checkpoint inhibitors in melanoma. The company is going to move into Phase 1 trials very soon, I think. This is a very promising area because the combination technology is transforming the non-immunogenic tumors into immunogenic tumors. The combination can kill the tumor cells with increased efficacy.

As I have written, ImmunoPulse’s potential to convert the non- or weakly immune-responsive cancer into strongly immune-responsive cancer may represent a paradigm shift in cancer therapy. This area is an enormous unmet medical need and represents a huge market for OncoSec.

TLSR: Are you following another company in this field?

GZ: Another company engaged in combination therapy is Advaxis Inc. (ADXS:OTCBB). This company has a collaborative relationship with Georgia Regents University, and is going to initiate a combination study of its ADXS-HPV immunotherapy and the PD-1 (programmed cell death-1) antibody in patients with recurrent or refractory cervical cancer. The company is attacking several cancers with its immunotherapy combined checkpoint inhibitors.

Advaxis uses an immunotherapy technology based on its bacterial platform. The platform can be used to stimulate the patient’s own immune system. By using immunotherapy in combination with a checkpoint inhibitor, efficacy will be increased and side effects may be reduced.

TLSR: How about treatments for brain cancer? Have you got any companies under coverage for that indication?

GZ: DelMar Pharmaceuticals Inc. (DMPI:OTCQB) is focused on brain cancer therapy. The company has a candidate called VAL-083; it is in clinical trials already. This is a first-in-class small-molecule chemotherapeutic.

The target is glioblastoma multiforme (GBM), the most common, most aggressive type of primary brain tumor. GBM accounts for about 50% of primary brain cancers. The median survival time from the time of diagnosis, without treatment, is typically less than a year.

Historically, VAL-083 has been tested in clinical trials by the National Cancer Institute (NCI), where it demonstrated strong efficacy and safety for the treatment of brain cancer. However, as I have written, further research was not pursued in the United States due to an increased focus by the NCI on targeted therapies during the era.

I’ve also written that DelMar has a broad portfolio of new patent applications to protect its intellectual property, and that patent applications claim compositions and methods related to the use of VAL-083, related and next-generation compounds, as well as methods of synthesis and quality controls for the manufacturing process of VAL-083.

DelMar initiated Phase 1/2 clinical trials in late 2011 with VAL-083 targeting GBM. The company also presented a positive interim data from the trial at the 18th Annual Society for NeuroOncology meeting in November 2013.

The interim data are very positive, the safety is excellent and the efficacy is very strong. I expect the company will move forward into a pivotal Phase 2 trial in H1/14. I expect DelMar to increase the dose because of the strong safety profile of the compound. This is a significant milestone for the company, which will position it in late-stage development.

TLSR: When might we see a catalyst involved with that pivotal Phase 2?

GZ: DelMar recently presented updated data from the Phase 1/2 trial at the American Association of Cancer Research annual meeting. The company stated that the VAL-083 therapy is well tolerated to date; dose-limiting toxicity has not been reached after fifth cohort. The company also confirmed that sixth cohort is fully enrolled.

I also believe it is possible that the U.S. Food and Drug Administration (FDA) may grant fast-track, accelerated approval status to VAL-083, which would enable DelMar to begin filing for commercial approval during the clinical trial process. I have an Outperform rating on DelMar shares and a 12-month price target of $4.50/share.

VAL-083 has been approved in China for leukemia and lung cancer and DelMar has acquired its commercial rights in the China market. The company is also seeking a marketing partnership that could generate fees, milestones and royalty revenue, which is a derisking event.

TLSR: Are there any other companies with innovative technologies that you think investors might be interested in?

GZ: I’d like to mention a very small company in a very specific area. GeoVax Labs, Inc. (GOVX:OTC) is engaged in developing both therapeutic and preventative vaccines for HIV/AIDS. The company has candidates in clinical trials, and has already presented interim data—positive data—for both the preventive vaccines and the therapeutic vaccine.

The company has a specific and proprietary platform technology. As I have written, GeoVax’s preventive HIV vaccine is among only five candidates, out of more than 90 vaccines entering HI Vaccine Trials Network Phase 1 testing, chosen to progress to Phase 2 clinical trials. The company’s preventive vaccine is the only HIV vaccine for America/Europe entering an efficacy trial. Safety is good and efficacy is strong at this point.

Entering 2014, GeoVax plans to initiate a second Phase 1 trial with its second-generation therapeutic vaccine, and should enter a Phase 2 trial with its preventive vaccine in 2015. Those would be the next catalysts. I have an Outperform rating on GeoVax and a price target of $1.50/share.

TLSR: Are there any other developments in life sciences that you think might be of interest to a small-cap investor?

GZ: Again, in general, I’m positive on the biotech industry, especially for small-cap biotech companies with platform technologies, strong pipelines and strong balance sheets. In the next few years. I also believe more products will be approved by the FDA in general.

When it comes to biotech investing, I always remind investors to do their own research, to diversify their portfolios. I also advise investors to keep a look out for the catalysts for small-cap companies.

Investors also need to look at a company’s balance sheet, because development-stage biotech companies always need cash to advance their clinical programs. If a company doesn’t have much cash sitting on its balance sheet, it may need to raise new funds in the future. Equity financing will always dilute the existing shareholder base and also reduce the share price.

TLSR: Good advice. Thank you very much.

GZ: Thank you.

Grant Zeng has more than 10 years’ professional experience in equity research and analysis. He is currently a senior biotech analyst with Zacks Investment Research Inc., and has been with Zacks since March 2006. Before joining Zacks, Zeng worked for TheStreet.com as a biotech analyst from 2005–2006. From September 2001 to December 2003, Zeng worked for China Pacific Insurance Co. as an equity/fund analyst. Zeng was a healthcare equity analyst with Young & Partners LLC from August 2000 to September 2001. Zeng also has teaching and research experience in pharmaceutical science. Zeng obtained his master’s degree in business administration with a major in finance in 2000 from McMaster University, Canada. He also holds a master’s degree in biochemistry from the University of Western Ontario, and earned a master’s degree in pharmacology and a bachelor’s degree in medicine from Second Military Medical University in China. Zeng is a Chartered Financial Analyst (CFA).

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By CentralBankNews.info
    Chile’s central bank held its policy rate steady at 4.0 percent, as expected, and reiterated that it will “consider the possibility of making additional cuts to the policy rate in line with the evolution of domestic and external macroeconomic conditions and its implications on the inflationary outlook.”
     The Central Bank of Chile, which last month cut its rate for the fourth time since October 2013 for total reduction of 100 basis points, added that recent data had confirmed the “low dynamism of output and demand,” in line with the bank’s projections from March.
    In its latest quarterly monetary policy report the central bank cut its 2014 growth forecast to between 3.0 and 4.0 percent from a previous 3.75 to 4.75 percent and yesterday the bank said its latest poll on bank credit showed that conditions for corporate loans became more restrictive in the first quarter and demand for consumer credit also tightened.
    Chile’s Gross Domestic Product contracted by 0.1 percent in the fourth quarter of 2013 from the third quarter for annual growth of 2.7 percent, down from 5.0 percent in the third quarter. The unemployment rate rose marginally to 6.13 percent in February from 6.12 percent in January.
    The International Monetary Fund projects 2014 growth of 3.6 percent and 4.1 percent in 2015, down from 4.2 percent in 2013.
    Chile’s inflation rate accelerated to 3.5 percent in March from 3.2 percent in February and 2.8 percent in January. The central bank attributed the March rise to higher prices of foods and fuel along with the depreciation of the peso, but inflation expectations remain around 3.0 percent.
    The central bank, which targets inflation of 3.0 percent, plus/minus one percentage point, has revised upwards its forecast for inflation to end 2014 around 3 percent, with a temporary rise to between 3.5 and 4.0 percent.
    In 2013 inflation averaged 1.8 percent and the IMF forecasts average 3.5 percent this year.
    The central bank said moderate growth in emerging markets is continuing, a point that is relevant for the prices of copper and other metals. Chile is the world’s largest copper exporter and has been affected by a slowdown in global demand, especially from China.
    Chile’s peso began depreciating in May last year, along with most other emerging market currencies, and continued to decline through early March. But since March 11 when it hit 575.5 to the U.S. dollar, it has rebounded, trading at 557.3 today. But for the year, the peso is still down 5.7 percent.

    http://ift.tt/1iP0FNb

Source: George S. Mack of The Life Sciences Report (4/17/14)

http://www.thelifesciencesreport.com/pub/na/four-hidden-australian-life-sciences-growth-stocks-revealed-scott-power

To find undiscovered stories, investors must venture into unfamiliar territory. In this interview with The Life Sciences Report, we go halfway around the world to speak with Scott Power of Morgans Financial Ltd. about companies under coverage in Australia. Power helps investors get comfortable with the idea of putting money into newfound names, and unveils four strong ideas that could invigorate adventuresome portfolios and investors hungering for excitement.

The Life Sciences Report: You are based in Brisbane, Australia, where your firm, Morgans Financial, is headquartered. All the names on your coverage list have traded on the Australian Securities Exchange (ASX). How would you compare investing in Australian biotech or medtech stocks to investing in those same types of stocks in the U.S. or Europe?

SP: The Australian market is well established, and the rules and controls around listed companies are clear and transparent. In terms of medtech and biotech, in particular, the limited pool of venture and development capital in Australia tends to make companies list at an earlier stage than they would in the U.S, which has its advantages and disadvantages.

But access to capital for early-stage companies is more readily available in Australia than in other parts of the world, in part because the resource market over here is fairly well established, and has some similar risk characteristics to biotech. Australian investors are more educated about putting small amounts of money into higher risk biotech and medtech investments.

The other point to make is about cycles: The window for raising capital opens at certain points, and closes at certain points. Certainly, in the last 12–18 months, with the activity in the U.S. biotech market, we’ve found increasing interest in Australia. It’s been a little bit patchier in 2014, but, again, what we’re finding is the better quality names in Australia are not having too much trouble finding the necessary cash at the moment.

TLSR: One thing you said really got my attention—that limited access to venture capital causes Australian biotech companies to go public a little earlier. By implication you are saying that companies go public when they are less mature than they might be in North America and Europe.

SP: Yes, that’s correct.

TLSR: In the U.S., small investors are unable to access the venture capital market. Is it plausible to say that an investor putting money into publicly traded Australian biotechs might be able to invest at levels similar to venture capital levels in the U.S.?

SP: Yes. A number of companies in Australia are at much earlier stages and have much lower valuations than is typical in the U.S. That’s just a function of the market. The point is that interest comes and goes. When things are running, there’s the opportunity to fund earlier-stage projects, but when the window closes, it’s pretty tough to get much interest.

TLSR: I want to ask you about how small life sciences companies interface with regulators. For reasons of proximity or regulatory leniency, do Australian biotechs and medtechs typically seek clearances in Europe, or Japan versus coming to the U.S.?

SP: No. Generally, the U.S. is seen as the largest market for Australian programs and products, and I think the European regulatory framework is becoming as strict as in the U.S. So proximity or the ease of getting through isn’t necessarily an issue anymore. Also, management teams are looking for where their products have the biggest markets and biggest potential. The U.S. is where Australian companies quite often have a lot of resources—both people and products.

TLSR: You have a lot of stocks under coverage that U.S. investors may never have heard of. Could you go ahead and talk about one?

SP: Sure. Let’s talk about Alchemia Ltd. (ACL:ASX), which first listed on the ASX more than 10 years ago. There are a couple of parts to this business. One is a revenue-generating generic drug being marketed by Dr. Reddy’s Laboratories Ltd. (RDY:NYSE) in the U.S. The drug is a generic version of fondaparinux, a synthetic heparin. Dr. Reddy’s has about 30% of the market share of that business.

Another part is that Alchemia is about to complete a Phase 3 trial with its HA-irinotecan (hyaluronic acid-irinotecan) for metastatic colorectal cancer. Those results are due to read out in the next couple of months.

In addition, the company has some newer shareholders on board, and attempted a NASDAQ listing in 2012, before the biotech boom started to pick up heat. The listing effort wasn’t successful; however Alchemia did raise some money back in Australia. Now, with any success in this clinical trial—which is what we’re expecting—Alchemia will be in a position to possibly license HA-irinotecan out. With its HyACT platform technology, the company is positioned such that if this particular trial works, the opportunity exists to use the technology in other solid tumors. Alchemia would then be able to run clinical programs for other drugs.

TLSR: Would you briefly describe the HyACT platform?

SP: HyACT refers to hyaluronic acid, which is wrapped around the existing chemotherapy treatment FOLFIRI (folinic acid + fluorouracil + irinotecan), the regimen of chemo drugs used in treatment of colorectal cancer. HyACT is essentially a drug delivery system that gets more of the drug into the tumor site.

TLSR: A known problem in treating solid tumors, unlike hematologic cancers, is getting the drug inside the tumor mass. Hyaluronic acid is a way to enzymatically get into the tumor—is that right?

SP: Yes. The pivotal trial includes almost 400 patients. The primary endpoint is six-weeks progression-free survival.

TLSR: Scott, you noted that Alchemia’s board has some very strong U.S. ties.

SP: Yes—most of the board is now U.S.-based. The new nonexecutive chairman is Santo Costa, who, among other things, was president and chief operating officer of Quintiles Transnational Holdings Inc. (Q:NYSE), the world’s largest contract research organization, which drug developers use to outsource clinical trials. There is also Susan Kelley, an oncologist, formerly with Bayer (BAYN:XETRA), where she was involved with global strategic development. Up until 2011 she was chief medical officer of the Multiple Myeloma Research Foundation/Consortium. The new CEO, Thomas Liquard, came on board in 2013. He spent the previous seven years with Pfizer Inc. (PFE:NYSE), where he had various commercial functions. Alchemia has a very U.S.-centric look about it.

TLSR: Another company?

SP: ImpediMed Ltd. (IPD:ASX) has an early-detection bioimpediance device system to detect early onset of lymphedema. It is working toward Category I CPT (current procedural terminology) coding, which it expects to see by Jan. 1, 2015. It currently has a Category III experimental code assigned to its test.

Moving from the experimental code to the mainstream Category I code will be a major step for the company. Right now the ImpediMed technology, called L-Dex, is being used primarily by breast cancer physicians and surgeons to detect lymphedema post-surgery. The product works by detecting small changes in the cellular fluid levels, which is far more accurate and can enable an earlier reading than the current method, which is simply to use a tape measure to determine changes in the arm circumference. For investors, moving to a new Category I code represents an opportunity to expand the market by a factor of three.

TLSR: Will the company have to seek clearance and do trials on the lower extremities?

SP: No. The expectation is that the device will have a broad claim. Once it has proven that it can detect lymphedema in the upper extremity—in the axilla of the arm—then a physician could use it for the lower extremities.

TLSR: How is the device used?

SP: Electrode sensors are placed onto the body. It takes 15 minutes or less to get the base reading, and that’s followed by a regular reading done every four months post-surgery. Semi-annual or annual tests are conducted thereafter. It is a very noninvasive test.

TLSR: Scott, another name you follow is QRxPharma Ltd. (QRX:ASX). Could you describe it and its value proposition?

SP: QRxPharma is a very simple story. The product is called Moxduo (Q8003; morphine sulfate + oxycodone HCl)—basically two opioids put together. The indication is for use in the hospital for acute pain after bunionectomy, knee replacement or hip replacement surgery—in other words, when a lot of pain is expected. The product has gone through all clinical trials, and it will be evaluated by a U.S. Food and Drug Administration (FDA) Advisory Committee on April 22. The Prescription Drug User Fee Act (PDUFA) date is May 25.

But QRx has had a couple of slipups already—two complete response letters (CRLs) from the FDA. The company believes it has answered all questions raised by the FDA.

TLSR: What did the CRLs require? Was the new drug application (NDA) incomplete or sloppy?

SP: No. In one of the data sets, there was some confusion between time zones—a daylight savings time issue—that meant the data had to be rescrubbed. It was a small oversight that cost QRx some data integrity.

TLSR: What is the advantage of Moxduo versus other opioids?

SP: Lower side effects. In particular, the respiratory depression data are much better than for existing analgesics used in these indications, either morphine or oxycodone. Ironically, the combination of the two drugs results in fewer side effects than when the drugs are used individually or alone.

TLSR: Because of this safety/side-effect profile, do you foresee dramatic uptake of Moxduo if it is approved?

SP: Yes. Also, the company’s marketing partner will be Actavis Inc. (ACT:NYSE), so once the product is approved, it should be available for patient use within the next month or so.

TLSR: You are also following an in vitro fertilization (IVF) company. Can you tell me about it?

SP: Yes. The Australian IVF market is quite well corporatized, and the leading player is Virtus Health Ltd. (VRT:ASX), which listed on the exchange last year. The company has done very well since then. Right now Virtus is looking at the possibility of overseas destinations, where it can duplicate its successful corporatization model.

TLSR: Is the company business model like a physician practice management group?

SP: That’s exactly right. Basically, Virtus has 84 fertility specialists who provide IVF services for patients. It has a number of day hospitals and laboratories that perform all tests for a couple. It has a 35% market share in Australia, where it is the No. 1 operator.

TLSR: What is the value proposition here? Is it the fact that the company has a proven model, along with efficient use and economies of scale?

SP: All of that. Also, Virtus has a very attractive model for the fertility specialists to work under. It is able to offer flexibility to the physicians who are contracted, so that they also have the opportunity to maintain their own private practices.That’s a very attractive proposition for a number of these specialists, who also own equity in the company.

The incentive is attractive because it provides some upside potential to those relationships. The infrastructure is there. The flexibility is there. And Virtus is looking to duplicate what has been a very successful corporatization model in Australia in other geographies.

TLSR: Scott, Virtus has been weak for about six months, while some of the other stocks in your coverage have been quite strong. Are there any issues that have caused this phenomenon?

SP: That’s a good observation. Virtus has had a very strong run, so part of the weakness was that the stock may have gotten a bit expensive. Weakness in the market, plus the prospect of another player getting into the IVF market in Australia, has caused some uncertainty. The stock has since recovered. We are seeing a real buying opportunity right now.

TLSR: Would you think of Virtus as the least speculative of the four names we’ve talked about?

SP: Absolutely. It’s a revenue-generating, profitable business. The others are still very much in the development phase or, in ImpediMed’s case, the early sales phase.

TLSR: I’ve enjoyed talking with you. Thank you.

SP: Thanks to you too.

Scott Power has spent 20 years investing in and researching emerging companies, first in the venture capital industry and as portfolio manager with Queensland Industry Development Corp., and more recently with Morgans Financial Ltd., which he joined in 1997. He has a wide network of contacts across the healthcare and life sciences sectors, which help with identification of key trends and developments. He has a bachelor’s degree in commerce from the University of Queensland, and a graduate’s degree in applied finance (FINSIA). He is also a certified practicing accountant. Read Power’s blog for regular industry updates and assessments.

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By CentralBankNews.info
    Serbia’s central bank maintained its policy rate at 9.5 percent but said plans to cut the government deficit “will open up the scope for monetary easing, which should have a positive effect on the sustainability of economic growth.”
    The Bank of Serbia (NBS), which has been intervening in foreign exchange markets to limit the rise in the dinar currency since the Progressive Party won a parliamentary majority in last month’s election, said its decision to keep the rate on hold was “guided by instability in international financial markets and heightened uncertainties surrounding the current geopolitical tensions.”
    The central bank has maintained its rate since December despite a decline in inflation, citing the need to keep Serbian assets attractive to international investors.
    The instability in financial markets may affect Serbia through a drop in capital inflows and higher prices in global commodities markets, including energy and agriculture, the NBS said, warning that EU countries may experience lower economic growth, which would dampen demand for Serbian exports.
    The central bank has maintained its rate since December despite a decline in inflation, citing the need to keep Serbian assets attractive to international investors.

     In 2013 the NBS cut its rate by 175 basis points as inflation declined in response to the bank’s 150-basis-point increase in rates in 2012. Inflation averaged 7.7 percent in 2013 but NBS expects it to fluctuate around the low end of its tolerance range of 2.5 to 5.5 percent in coming months.
    In March Serbia’s headline inflation rate fell to 2.3 percent from 2.6 percent in February but the central bank expects inflation to rise in coming months due to higher administered prices and the one-off impact of higher valued-added tax on some goods in January.
    The central bank targets inflation at midpoint of 4.0 percent and the IMF has forecast inflation of4.0 percent this year, 2015 and 2016.
    “The expected stepping up of fiscal consolidation and structural reforms will contribute to stabilizing inflation at low levels and preserving price and financial stability over the medium term, and will also reduce the exposure of the domestic economy to the exogenous risk,” the central bank said.
    Last week the Serbian central bank intervened for three consecutive days to limit the gains in the dinar against the euro, the sixth time it had intervened Prime Minister-elect Aleksandar Vucic won a majority in the parliament on March 16, according to dealers.
    On Wednesday Vucic, whose cabinet is expected to be confirmed on April 27, said he would cut spending by reducing public sector jobs and ending subsidies.
    The Serbian dinar has been relatively stable this year, trading at 115.5 to the euro today, down 0.8 percent since the start of the year.
    So far this year the central bank is reported to have spent a total of 70 million euros in managing the dinar and on March 31 the bank’s governor, Jorgovanka Tabakovic, said the NBS had enough reserves to defend the currency, noting foreign exchange reserves at 10.6 billion euros.
    Serbia’s economy has been improving in recent months after a recession in 2012. In 2013 Gross Domestic Product expanded by 2.5 percent and the central bank has forecasts growth of 1.5 percent this year. The IMF has forecast 1.0 percent growth this year, up to 1.5 percent in 2015.

    http://ift.tt/1iP0FNb

Technical Sentiment: Bullish

Key Takeaways

• EUR/AUD invalidated the triangle chart pattern boundaries;
• The pair is in a bullish trend configuration, with a higher low already in place and a higher swing high in the making;

EUR/AUD has slowly but surely developed a bullish technical sentiment. On Wednesday the pair tested the resistance trendline for the third time, retraced to 61.8% Fibonacci level, creating a higher low in the process. EUR/AUD has been steadily rising since then, invalidating the triangle, thus confirming the overall intentions to move even higher, towards 1.4955-1.4990.

Bullish Trend Scenario

The resistance trendline at 1.4817, which marked the triangle chart pattern, was also backed up by the 200-Day Moving Average and the 100 Simple Moving Average on the 4H timeframe.  By breaking above this area, EUR/AUD cleaned out a few stop losses held by traders who were shorting the pair while it was still priced within the range.

Wednesday’s correction to 1.4716, 61.8% Fibonacci Retracement between 1.4661 and 1.4818, is now the most recent higher low. While this support level remains intact EUR/AUD will continue to be bullish, even price dips below 1.4800 again.

The current swing should target 1.4850 and above. A higher high above 1.4850 suggests the pair will be marching towards 1.4955-1.4990 next week.

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