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Article By RoboForex.com

Analysis for April 11^th, 2014

DJIA Index

Index is still being corrected. Probably, price is forming double zigzag pattern inside wave [2] with descending wave (Y) inside it. Most likely, during the next several days instrument will break minimum of wave (W) and then start new ascending movement.

More detailed wave structure is shown on H1 chart. It looks like price is forming zigzag pattern inside wave (Y). On minor wave level, Index completed initial impulse inside wave C, which means that after local correction instrument may continue falling down.

Crude Oil

Forecast is still bearish. Earlier Oil finished bearish impulse inside wave 1 and right now is completing the second wave. While price was forming first initial impulses, I opened sell order. In the future, I’m planning to increase my short position.

As we can see at the H1 chart, Oil completed zigzag pattern inside wave [Y]. Probably, price started forming bearish wave (1). I’ll move stop into the black as soon as market starts moving downwards.

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 11^th, 2014

EUR USD, “Euro vs US Dollar”

Euro expanded its consolidation upwards and is still moving inside ascending channel. We think, today price may fall down to expand this consolidation channel downwards. The first target is at level of 1.3754.

GBP USD, “Great Britain Pound vs US Dollar”

Pound continues forming descending impulse. We think, today price may reach the first target at level of 1.6740, grow up to return to 1.6780, and then continue falling down towards level of 1.6640.

USD CHF, “US Dollar vs Swiss Franc”

Franc is still moving inside descending structure. We think, today price may fall down to reach level of 0.8730 and then start new correction towards level of 0.8840.

USD JPY, “US Dollar vs Japanese Yen”

Yen is still consolidating; market completed another descending structure and reached new minimum.  We think, today price may continue falling down towards level of 100.00 without returning to level of 103.00. Alternative scenario implies that pair may start new correction towards level of 103.00 and only after continue moving downwards to reach level of 100.00.

AUD USD, “Australian Dollar vs US Dollar”

Australian is forming the second descending impulse. We think, today price may correct this impulse towards level of 0.9400 and then form the third descending wave with target at 0.9330. Later, in our opinion, instrument may continue forming head & shoulders reversal pattern by moving towards level of 0.9400. Target of this pattern is at 0.9150.

USD RUB, “US Dollar vs Russian Ruble”

Ruble is still being corrected towards level of 35.33. Later, in our opinion, instrument may ascending wave to break level of 35.80 and then continue growing up towards local target at level of 36.20.

XAU USD, “Gold vs US Dollar”

Gold is still consolidating near level of 1320. We think, today price may form reversal pattern to start new correction towards level of 1295. Later, in our opinion, instrument may start new ascending movement towards next target at 1357.

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.

Being contained by the upper line of the price channel on 4-hour chart, AUDUSD pulled back from 0.9461, suggesting that consolidation of the uptrend from 0.8924 is underway. Deeper decline would likely be seen, and the target would be at the lower line of the channel. However, as long as the channel support holds, the uptrend could be expected to resume, and one more rise to 0.9600 to complete the upward movement is still possible. Only a clear break below the channel support could signal completion of the uptrend.

Provided by ForexCycle.com

By CentralBankNews.info
     Peru’s central bank maintained its monetary reference rate at 4.0 percent, as expected, and said recent data and surveys pointed to economic growth that would be lower than expected in the first  half of this year.
    The Central Bank of Peru (BCRP), which last cut its rate by 25 basis points in November as a preventative move, also reiterated that inflation was forecast to remain close to the upper band of its target range due to the lagging effect of supply shocks but then converge toward 2 percent, the midpoint of the central bank’s 1-3 percent tolerance range for inflation.
    Peru’s inflation rate eased to 3.38 percent in March from 3.78 percent in February, with inflation without food and energy dropping to 2.78 percent from 2.96 percent.
   Last week a spokesman for the central bank said inflation this year is likely to be around 2.4 percent of 2.5 percent instead of 2 percent as previously estimated. In 2013 inflation was 2.8 percent.
    The BCRP, which has been lowering its reserve requirements several times over the past year, added that “if necessary, it will implement additional measures to ease its monetary policy instruments.”
    On April 1 the central bank lowered the reserve requirements on bank accounts in the sol currency to 12.0 percent from 12.5 percent to improve credit conditions.

    Peru’s Gross Domestic Product expanded by 1.8 percent in the fourth quarter of last year from the third quarter for annual growth of 5.2 percent, up from 4.5 percent.
    In January the economy grew by an annual 4.23 percent, but BCRP President Julio Velarde said last month that growth in February and March would definitely be faster than January, which was affected by a dip in output from a large mine.
    Velarde also said growth this year was expected to reach 6 percent, or 5.9 percent, though tepid economic activity in China, the biggest buyer of Peruvian metals, could lead to lower growth.
    In 2013 Peru’s economy grew by 5.02 percent and the International Monetary Fund forecasts growth this year of 5.5 percent and 5.8 percent in 2015.

    http://ift.tt/1iP0FNb

By MoneyMorning.com.au

Dear reader, you already know this: Money Morning holds no love for the central bankers of the world. But we’ll grudgingly credit the Bank of England for releasing a paper on how the modern financial system creates money. It removes the fantasy most people have about how the system works. Read it if you can. But it boils down to this: banks create credit. They do not lend the money deposited by savers.

The fantasy is that we all diligently work hard, save our pennies and then the banking system lends this on at interest to productive enterprise. The reality is that banks create bank deposits when they make loans. The loan brings new money into existence. Money from nothing. Or as the paper puts it, ‘For this reason, some economists have referred to bank deposits as “fountain pen money”, created at the stroke of bankers’ pens when they approve loans.’

No stability in the system

One role of the central bank in our current system is to keep a rein on this credit creation. That’s why you might have seen the recent story about the Reserve Bank of Australia considering additional measures to limit risky lending in the Australian housing market. Here’s a clip from The Age recently:

‘The Reserve Bank’s preferred way of reining in a harmful housing credit boom would be to force banks to impose higher "buffers" when testing how borrowers coped with higher interest rates, new documents show.

‘But unlike its counterpart in New Zealand, Australia’s central bank appears unconvinced about restricting loans with high loan-to-valuation ratios.

‘With banks competing fiercely to sign up new borrowers, documents released under Freedom of Information laws on Monday show the Reserve Bank has examined various options for limiting riskier lending.’

If you feel a sense of comfort or security at the idea of more regulation preventing banks from lending money and making it easy for people to get credit until they blow themselves up, we urge you to heed the work of our colleague Phil Anderson.

He’s studied real estate and banking going back 200 years, primarily in the USA. And one conclusion is this: in the wake of every banking crisis for two centuries, the authorities took steps to ‘stabilise’ the system and prevent a future crisis with additional regulations and controls. And for 200 years, major banks have kept collapsing with regular monotony — roughly every 18 years.  Indeed, the scale and numbers get bigger over time.

Take the following examples from Phil’s work since 1970:

‘In October 1973 the collapse of the US National Bank of San Diego was the biggest in 40 years.

‘An even bigger bank failure followed twelve months later, in October 1974, the Franklin National Bank of New York.’

Then in 1989:

‘For the Bank of New England (BNE), the collapse of real estate values brought difficulties in the form of non-performing loans…The taxpayer funded bailout would ultimately cost $2.3 billion after the FDIC and Reserve Bank decided the bank was simply “too big to fail”.’

And in 2008:

‘The failure of IndyMac Bancorp is the second biggest bank failure in US history, and the largest regulated Savings and Loan institution failure.’

Don’t be suckered by the hubris of the RBA

Of course, we’re not suggesting the Australian banks are going to fall over any time soon. We’re just pointing out why you should be sceptical of any claims you hear from economists, politicians and bankers about how ‘risky lending’ is now contained, because they’ve been saying the same thing for decades, and been proven wrong at some point every time.

We vividly recall Trevor Sykes in his book The Numbers Game quoting the former Westpac Chairman Sir James Foots in the opening statement of the 1988 annual report, where Foots declared ‘a splendid performance’ by the bank. It was after a 69% profit increase for 1987–88. What happened in the next four years? Westpac wrote off $6.3 billion in faulty loans and had to have a $1.2 billion rights issue to maintain its capital base. It almost went broke.

We don’t know much more about Sir Foots. But we’ll assume he was just not looking in the right place at the time. Ben Bernanke had the same problem. Even the idolised Warren Buffett said in 2007, ‘Subprime mortgages do not pose a huge danger to the economy, and it’s unlikely that this factor will trigger anything of a massive nature in the general economy.’

Everything looks easy in hindsight, so we’re not laughing at these sanguine claims. But Phil’s work suggests banking failures will be here for a long time to come, as long as banks can create credit, especially against capitalised land value. This is how he called the GFC before it happened.

To find out more about how Phil views the economy, you should check out a free series of videos he’s doing with Dan Denning so you don’t get caught by these type of events. He says you’ll be alright if you time your investments within the rhythm of what he calls the real estate cycle.

Callum Newman+
Contributing Editor, Money Morning

Publisher’s Note: Gain Priority Access to an exclusive FREE six-part video series where Phil Anderson, the world’s foremost authority on real estate, stock and commodity cycles reveals the secret life of the investment markets… You’ll learn what’s next for Australian stocks…why real estate and stock market cycles repeat every 18 years…why this means we’re just one year into a historic 14-year housing boom…what it means for Aussie resources…and much more. All you need to do is just click HERE.

From the Port Phillip Publishing Library

Special Report: Mining Boom Act II

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By MoneyMorning.com.au

By MoneyMorning.com.au

US Defense Secretary Chuck Hagel came under some heavy fire Tuesday morning in Beijing…

‘China’s development can’t be contained by anyone,’ defiantly proclaimed China’s defense minister, Chang Wanquan.

‘The China-US relationship is neither comparable to US-Russia ties in the Cold War, nor a relationship between container and contained,’ he concluded. Wanquan’s statement was made not long after he stood shoulder to shoulder with his American counterpart at the People’s Liberation Army National Defense University.

‘Hagel was sharply questioned by Chinese officers,’ relays a Reuters report from the scene. ‘One of them told Hagel he was concerned that the United States was stirring up trouble in the East and South China Sea because it feared someday “China will be too big a challenge for the United States to cope with.’’’

Maybe…just maybe, the bold Chinese officer was referencing the US encirclement of the Middle Kingdom. Yet Hagel assured them that in ‘the American rebalance to Asia-Pacific…our strategic interest is not to contain China… It never has been.’

Just moments earlier, he formally re-announced the latest addition to the US presence in the Pacific — two more Navy missile defense ships deployed by 2017 — to protect from an attack from North Korea, of course.

Click to enlarge

Semantically, Hagel is right. The term ‘containment’ hasn’t been bandied about in reference to China.

‘Pivot’ has.

It was November 2011 when then Secretary of State Hillary Clinton uttered the phrase, ‘The United States stands at a pivot point.’ That meant shifting troops out of the Middle East…and moving more than half of the empire’s naval might to East Asia. Since then, we’ve written that Clinton’s pivot could go down in history as a declaration of a new cold war.

Can’t you hear the top brass cheering in the background?

In an interview, Colin Powell remembered an encounter he had with Mikhail Gorbachev in one of the last years of the Soviet Union.

‘Ah, General,’ said Gorbachev, ‘I’m so sorry, you’ll have to find a new enemy.’

Searching for the next few decades…all the US found were the Saddam Husseins of the world…and terrorism at large. How lame.

Click to enlarge

Alas, 25 years later, China has become America’s default adversary. From 2003-2012 China has increased its military expenditures by 175%. The U.S. over that period? Just 32%.

Granted, the US spends the most money on defense of all nations, and China is compounding a lesser military might than the US — but it’s still indicative of the buildup going on. And barring serious economic setbacks (such as those Greg Canavan sees in China’s — and Australia’s — future), we don’t see the trajectory changing.

As for the prospect of conflict between the two nations, the same powder keg — a group of uninhabited islands in the East China Sea — lies in wait of a spark.

The lines crisscrossing the map nearby represent the competing territorial claims of not only China and the Philippines, but three more nations as well. The long, U-shaped line is China’s claimed domain.

Speaking in Beijing this morning, Hagel kept American troops and treasure on the hook. Speaking about Japan and the Philippines, he said, ‘We have mutual self-defense treaties with each of those two countries. And we are fully committed to those treaty obligations.’

At the risk of sounding like a broken record, we remind you that the empire has a logic of its own. ‘America,’ wrote Independent Institute scholar Ivan Eland recently, ‘is now borrowing money from China to subsidise the defense of rich East Asian allies in their quest to militarily counter…well…China.’

Click to enlarge

Given the pettiness of the situation, let’s hope the region’s military buildup will prove a big waste of money. In the meantime, we’ll continue to follow that flow of dollars and cents on your behalf. At the very least, perhaps you can recoup some of your tax dollars with the right investments.

Addison Wiggin,
Contributing Editor, Money Morning

Ed Note: The above article was originally published in The Daily Reckoning US.

From the Archives…

Why You Should Avoid the ‘Fake Contrarians’ and ‘Do Nothing Investors’
05-04-14 – Kris Sayce

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By MoneyMorning.com.au

So far this week GBP/JPY has been range bound between 171.60 and 170.00. The resistance level goes back to February, and this week we have seen multiple rejections off of it. Price action wise, the most notable rejection happened on Thursday, as the daily bar completely engulfed the previous, rejected off the resistance and closed lower.

This bearish price action pattern will put pressure on the support area today, even if low impact reports from BOJ slightly disappointing today. Japan Corporate Goods Price Index fell 0.1%, to 1.7% compared, while it was expected that it would remain at 1.8%; Japan Money Stock was 3.5%, 0.4% lower than the forecast and 0.5% lower than the previous month.

Besides being a large round number, the psychological 170.00 handle also shows a huge support confluence from a technical standpoint:
1. 38.2% Fibonacci Retracement on the 163.86 – 173.56 upswing, located at 169.85;
2. 61.8% Fibonacci Retracement between 167.75 – 173.12 upswing, located at 169.80;
3. 50-Day Simple Moving Average at 169.91;
4. 100-Day Simple Moving Average at 169.76;
5. Triangle support trendline at 170.00;
6. Previous resistance levels from March located at 169.65.

Thursday’s Bearish Engulfing price action pattern has already been activated, yet the large triangle formation break will be confirmed only if price closes below 169.80, preferably even below 169.60. If a breakout does not occur, a bullish pullback towards the 171.60 resistance remains in play, and the range personality will linger for a few more trading sessions.

Resistance levels: 171.58; 173.12; 173.56; 174.81.

Support levels: 169.60-170.00 area; 168.80; 167.57-167.75 area.

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

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Source: George S. Mack of The Life Sciences Report (4/10/14)

http://www.thelifesciencesreport.com/pub/na/dont-miss-the-boat-on-big-biotech-catalysts-keith-markey

Keith Markey, veteran analyst and science director of Griffin Securities, tells us the 2014 pipeline calendar is positively glowing with important milestones that could ignite portfolios. In this interview with The Life Sciences Report, Markey talks about four powerful biotech names with exciting early- to late-stage development projects and one medical device and supply company with serious growth potential. Be warned—huge catalysts are on the horizon that investors won’t want to miss.

The Life Sciences Report: We all understand the importance of catalysts in biotech stocks, but sometimes we’re not clear on which are the most powerful. Would you provide us with a general overview of the drug development stages and valuation points as you see them?

Keith Markey: We see a number of valuation-driving points in the drug development process. The first important inflection point is the submission of an investigational new drug (IND) application to the U.S. Food and Drug Administration (FDA), which is the company’s request to initiate clinical trials based on the preclinical research that’s been conducted. The next three valuation inflection points—in chronological order, as well as magnitude of importance—include having Phase 1 data, having Phase 2 data, and having Phase 3 data. At each step along that development pathway, more information is derived about the drug’s safety and efficacy, both of which are equally necessary for winning FDA approval.

Completing a Phase 1 clinical trial successfully, with an acceptable adverse event profile in a fairly small number of healthy patients, is evidence of the potential for demonstrating safety at some later point in time in a larger group of actual patients.

Phase 2 studies are typically designed to gain additional safety information within the target patient population, while also providing an initial indication of the drug’s efficacy. The Phase 3 trial will either make or break the drug and decide whether it will be approved. If efficacy is successfully proven and if the drug still appears safe in a larger patient population, chances are high for an FDA approval.

The next inflection point would be the new drug application (NDA) submission, though this step is not nearly as exciting to the investment community as getting pivotal Phase 3 data. The NDA just means that the company was able to assemble all the necessary cumulative clinical data and provide it to the FDA.

The final inflection point occurs during the FDA’s advisory committee (AdCom) meeting, where a disease-specialty panel votes on the drug. The date for the Prescription Drug User Fee Act (PDUFA) is the FDA’s target date for deciding the drug’s fate.

TLSR: We might think of the AdCom meeting as a huge valuation driver because that’s when the panel votes yes or no on a drug, but in some cases, a positive vote and drug approval might be baked into investor community perception. AdCom meetings can vary greatly as value-creation points, can’t they?

KM: They can, and that’s an interesting point. Some AdCom meetings are held in high regard and considered to be a very important determinant of whether a drug is going to get approved or not. I do recall a number of AdCom meetings that have given rise to a significant increase in a stock’s value, but those are most likely instances in which there has been uncertainty over whether the FDA would approve the drug, and therefore the investment community wasn’t as confident about the drug’s safety and efficacy data. In these cases, the advisory committee’s support of a drug would provide the first true evidence of how the experts are viewing the drug and how it should be used.

TLSR: This makes me think of a name in your active coverage— MannKind Corp. (MNKD:NASDAQ), with its inhalable insulin product Afrezza (human insulin of recombinant DNA origin delivered via Technosphere particles). It had an AdCom meeting on April 1 and the PDUFA date is now set at July 15. Sometimes the FDA doesn’t have an AdCom meeting, but in the case of Afrezza, I’m thinking it was necessary because the agency made MannKind jump through so many hoops during the drug approval process, including extra trials and years of added development. Do you think that’s the FDA’s reason for holding an AdCom meeting? To finally pull all that information together?

KM: Yes. It’s a rather complex drug application. Insulin is a biologic, and we clearly know how it functions, but it’s being delivered attached to a unique particle MannKind calls Technosphere, through a route of administration that is not typical—pulmonary absorption. Also, the inhalation delivery device, called Gen-2 or Dreamboat, is brand new, as it had to be specifically created for this particular drug. I suppose the FDA felt that this AdCom was the best way to be certain that all factors and data were being addressed. And indeed, that was the case—the advisory committee weighed the merits of the drug thoroughly. I think the experts’ near-unanimous support of Afrezza for both type 1 and type 2 diabetes was a strong signal to the FDA in favor of approval.

TLSR: Keith, no one could deny that the approval vote on Afrezza was anything but a positive event. Yet, looking at the relative strength of MannKind shares over the past six months, I get the feeling that some investors are looking at opportunities to sell. What do you think?

KM: I hate to say it, but that attitude certainly exists. There are a number of people who have made a fair amount of money shorting MannKind stock over the years, partly because of the amount of time that it’s taken to develop the drug and take it over the various hurdles of the regulatory process. There are still a number of people out there who are betting against it, simply because they have made a fair amount of money on it in the past, and probably feel that they can do the same again. It’s hard to know exactly where the stock is going to be when the next news breaks, but it’s possible that there could be corrections along the way to commercialization.

TLSR: Your target price on MannKind is $13/share. That’s more than a 100% implied return on this stock. At this point, and given what you’ve just said, are we now looking at MannKind as a market penetration and revenue story?

KM: It depends on how far out you’re looking. I think a couple of things are going to have to take place before we get to a true revenue-and-earnings story. We still have to get FDA approval, and we expect to see MannKind partner with a major drug company to market the product. It will need to be a company with a strong and experienced sales force dedicated to the family/general practitioner (GP) segment of the medical community.

The last time I spoke with Al Mann, MannKind founder and CEO, he said that his goal would be to find a good partner experienced in promoting drugs to the GP. Al knows that most diabetics are going to be treated first in the primary care setting, whether they are type 1 or type 2 diabetics. The more difficult cases will obviously be handed off to endocrinologists, who will be the key opinion leaders on uptake of the drug. For that reason, I think it will be equally crucial for MannKind to have some success penetrating that specialty-clinician market. After finding a marketing partner, it will probably take about six months from approval to launch. So, if we get the approval by July 15, the PDUFA date, that would place the launch in Q4/14 or early 2015.

In that interim, between approval and launch, we may have a relatively quiet period. The two companies—the partner pharma and MannKind—will start to work together while inventory builds. But that kind of work doesn’t really generate any news, and so investors will probably just have to sit tight for the actual revenue-and-earnings story to begin.

TLSR: Back in 2007, Pfizer Inc. (PFE:NYSE) didn’t even last a year with its inhalable insulin product Exubera (recombinant human insulin with particle diameters between1–5mm), which was developed by Nektar Therapeutics (NKTR:NASDAQ). Exubera’s inhalation device was an inconvenient and cumbersome bonglike device that was not really usable in a public place such a restaurant, and Pfizer eventually dumped the product and gave it back to Nektar. Clearly, MannKind’s palm-size Dreamboat inhalation device, designed for Afrezza, is a huge improvement over Exubera’s delivery device. But could Exubera’s failure be an overhang on MannKind’s shares?

KM: To a certain extent, I think it has been an overhang, because when people in the investment community hear “inhalable insulin,” they immediately think of Exubera. It has taken a fair amount of time to educate some investors about the difference. I imagine there’s also an overhang within some of the other major pharmaceutical companies that have watched Afrezza’s development, but remember what happened with Pfizer and Exubera. I don’t know exactly where MannKind is in the partnering process, but I know that it has been talking to multinational corporations and some regional companies in various parts of the world, and it may have had to overcome some reluctance to even discuss Afrezza. We may also see some overhang in the adoption by the medical community. The important thing is, I don’t think that the individual consumer—the diabetic patient—is going to care one iota about what happened with Pfizer and Exubera seven or eight years ago. I imagine, in their eyes, Afrezza offers a distinctly new approach to treating this chronic disease.

TLSR: Back in November, I spoke with Nobel laureate Craig C. Mello, who is a cofounder and member of the scientific advisory board of RXi Pharmaceuticals Corp. (RXII:NASDAQ; RXII:OTCQX). I see that your target price for RXi is $13.50/share, which would give investors more than a double from current levels. What is your growth theory for RXi?

KM: RXi has some very important valuation-driving events in progress, including a couple of clinical trials currently underway. One is for use of its connective tissue growth factor (CTGF) gene-targeting agent, RXI-109 (antisense oligonucleotide inhibitor of connective tissue growth factor [CTGF/CCN2] mRNA). RXI-109 is a small-interfering RNA (siRNA) molecule being tested as an adjunct to plastic surgery of the lower abdomen for scar revision, which will be administered at the time of the surgery. These patients are women who have had a hysterectomy or Cesarean section or abdominoplasty surgery that left a transverse scar of 11 cm in length or more. The other application of RXI-109 that’s in clinical trials involves surgical revision of keloids, another type of hypertrophic scar, but rather different than the one that normally would occur after a surgical procedure.

TLSR: These trials are designed so that each patient acts as her own control with half the hypertrophic scar injected in the abdominal scar revision field, or just one ear injected in the case of a keloid excision. It’s a sure way of eliminating age and genetic factors in a patient population and getting a true read on the efficacy of the drug. Was this design a top-management decision?

KM: Yes, it was. Geert Cauwenbergh, CEO of RXi, has a background with Johnson & Johnson (JNJ:NYSE) as head of research and development, and he worked a great deal in dermatology, so he’s clearly the right person for this particular task. Another smart decision will eliminate a drug-delivery problem we normally see with siRNA molecules when they are used systemically—simply getting these drugs to the right place is usually a very big hurdle. However, RXI-109 is injected locally and visibly into the scar revision field exactly where you want it to act. RXI-109 is designed with the company’s self-delivering technology specifically for rapid uptake into cells. It gets into the tissues you want and the cells comprising those tissues take up the drug. This particular approach eliminates that delivery issue entirely.

TLSR: In one of your recent notes, you made a very perceptive comment that the keloid trial added risk to the stock. When keloids are excised, they often return with a vengeance, because they’re a result of a genetic predisposition, whereas post-surgical scarring is a more normal phenomenon. If I were an investor in RXi, I would just as soon have the company not do this keloid trial until it got good proof of concept in the abdominal hypertrophic scar formation study. Am I being too cautious?

KM: The keloid indication is somewhat riskier to go after, but the size of the market and the fact that there really isn’t a suitable approach for treating keloids makes it an attractive opportunity. This keloid trial is not an enormous investment because there are only perhaps 16 people in this study, while there are about 22 million (22M) people in the U.S. with keloids. That’s an enormous population with no opportunity to seek relief from the condition. This treatment has tremendous potential for the company.

The Approval Process in Action (infographic)

Furthermore, the hypertrophic scar formation that arises post-hysterectomy is a very low-risk investment of time and money. The keloid indication is worth pursuing in this Phase 2 clinical trial, because the Phase 1 trials already demonstrated that the drug actually has an effect on dampening scar formation. I believe the reduction or prevention of abdominal scarring with the anti-CTGF drug RXI-109 is already pretty much proven.

TLSR: We should receive a data readout on these 16 patients sometime in Q2/14 or Q3/14. Is this a value-driving catalyst?

KM: Absolutely. But I think we’ll see the data from the hypertrophic scar formation trial sooner than we will the keloid indication.

TLSR: Are there other programs in the RXi pipeline that you find interesting?

KM: The company has a different formulation of RXI-109 that will be used for ophthalmic purposes, and is planning to start a trial in proliferative vitreoretinopathy in Q4/14. The standard treatment today is a vitreous surgical procedure and retinal attachment, but patients suffer loss of vision and retinal detachment commonly recurs, so this new treatment would definitely be merited. This indication is not being pursued just yet because RXi is still small and has limited resources, so it wants to keep its focus on the dermatological applications.

I would mention that the ophthalmic area actually has a larger portfolio of products now because of a deal RXi made with OPKO Health Inc. (OPK:NYSE) in March 2013, when it in-licensed all of OPKO’s RNA interference (RNAi)-related patents, which gives RXi a couple of other opportunities to pursue in the field of ophthalmology.

TLSR: Keith, you also follow Intrexon Corp. (XON:NYSE). The company came up in my recent conversation with JMP Securities Senior Analyst Michael King regarding OvaScience (OVAS:NASDAQ). Intrexon seems to partner or collaborate with other companies in one way or another. Could you tell me why you like it?

KM: Yes, Intrexon is the leader in synthetic biology and has been expanding its portfolio of technologies and capabilities through a couple of recent acquisitions. One that I’ve written about recently is the very important acquisition of Medistem Inc. (MEDS:OTC), a deal that closed on March 7. Medistem was developing endometrial regenerative cells for various clinical applications, and Intrexon saw something intriguing in the platform that would probably have broader uses. These specific stem cells don’t survive for very long in the human body; they don’t implant or durably engraft. Intrexon sees this as a unique opportunity to deliver new therapeutic molecules by creating new genes and inserting them into cells to produce a living biotherapeutic agent that expresses specific proteins. It could be a cytokine or a monoclonal antibody designed through a genetic engineering process. You could create a gene for a particular purpose, such as a specific cancer or an autoimmune disease.

TLSR: Before its $26M acquisition, Medistem had a market valuation in the mid-single digits—roughly a $6M market cap. Investors got a nice bump from this deal, for which they received cash and Intrexon stock. From what you say, it seems there was a tremendous amount of value languishing with Medistem’s cells prior to this acquisition. Is this Intrexon’s basic business model—adding value to other platforms?

KM: I think you hit the nail on the head. Because these endometrial regenerative cells don’t engraft in the human body, Medistem’s original thought of developing them as therapies just didn’t meet the objective. The question then became, “Well, what are they good for?” Without Intrexon having shown an interest in using the endometrial stem cells as delivery agents of synthetic biological products, Medistem probably would have fallen by the wayside entirely.

I think this was a great acquisition for both the Intrexon investors and the Medistem shareholders. Medistem investors should be able to reap some very nice rewards from the acquisition.

TLSR: Intrexon has a solid mid-cap valuation of $2.2 billion ($2.2B), and you recently raised your target price from $36/share to $40/share, which is quite significant in that it represents nearly a $300M increase in market valuation. Did you hike your target because of this Medistem acquisition?

KM: The acquisition was the driving force behind the target price increase. We don’t know exactly what the first two or three applications are going to be as a result of these stem cells and Intrexon’s synthetic biology platform, but I think the $4/share hike is really just an acknowledgement that the acquisition adds value to the company. Investors need to understand that this is not just a bolt-on acquisition—it’s going to be very important for the future of this company.

TLSR: I notice you follow Synthetic Biologics Inc. (SYN:NYSE.MKT), which is also partnered with Intrexon.

KM: The Synthetic Biologics/Intrexon partnership includes a couple of projects involving monoclonal antibodies. Synthetic Biologics is an interesting company. It’s making some progress in developing SYN-005, an antibody that will knock out whooping cough, or pertussis, and the toxin that is produced by Bordetella pertussis. This childhood disease has been lost in the mix of infectious diseases that children encounter, largely because there have been treatments for pertussis in the past. The treatments worked for a couple of decades, but the lack of herd immunity due to waning interest in immunization and the development of mutated, multidrug-resistant strains of B. pertussis has allowed this disease to return to a point where it requires some attention.

The company also has a monoclonal antibody, SYN-001, that targets hospital-acquired infections caused by Acinetobacter baumannii, which is in the discovery phase. With these new monoclonal antibodies, which Synthetic Biologics is producing in collaboration with Intrexon, there is going to be an opportunity to address these infections in a new fashion, by not only knocking out the bacterium but also removing the toxins, which can linger in the body for days after the bacterium that produced it has been killed.

TLSR: My understanding is that Synthetic Biologics initiated IND-enabling studies for SYN-005 to address pertussis recently. What is the stage of that drug’s development?

KM: The company is conducting a confirmatory large animal study that should report topline results in the current quarter. Assuming all goes well, the company will likely submit an IND in the not-too-distant future.

TLSR: The collaboration with Intrexon is interesting, but isn’t Trimesta (oral estriol) Synthetic Biologics’ primary driver right now? I notice that it’s already in Phase 2 studies for multiple sclerosis (MS).

KM: Trimesta’s trial is a near-term catalyst that everybody is getting excited about. Initially, Rhonda Voskuhl, an insightful neurologist at UCLA, noticed that when her patients with MS became pregnant, their symptoms diminished as the pregnancy progressed. She realized that something related to the pregnancy was having an effect on the disease activity, so she began a thorough investigation to identify what the potential agents were that could be responsible for that effect. What she found was the hormone estriol, which occurs only in pregnant women. Once pregnancy is initiated, estriol levels begin to rise from a relatively low level, and as the pregnancy progresses, estriol reaches a peak. After the baby is delivered, the hormone level falls and MS activity resumes pretty much where it left off.

This led Synthetic Biologics to develop Trimesta, which allows for oral administration of estriol to MS patients. Dr. Voskuhl will report the results from a very large Phase 2 clinical trial on April 29–30 at the annual American Academy of Neurology meeting in Philadelphia. If the data looks good, the drug would undoubtedly be out-licensed to a large pharma, providing Synthetic Biologics with a nondilutive source of capital.

TLSR: Is there another name you want to discuss?

KM: Unilife Corp. (UNIS:NASDAQ) is an interesting story that I started to follow about five years ago, when it was trading only in Australia. The company came to the U.S. to get closer to its primary customer, the pharmaceutical industry. It has developed a number of different drug delivery devices, all of which are patented. The company markets to pharmaceutical companies, which can utilize Unilife’s delivery devices and have the drugs ready for use by the patients themselves or their caregivers, physicians or nurses.

Over these last five years, Unilife has done a number of capital raises, most recently securing a $60M debt financing through a rather well-respected asset management company called OrbiMed. The terms of the deal include a $40M initial payment and two additional $10M tranches that will be available at the end of this year and at the end of 2015, assuming Unilife chooses to take them.

TLSR: What will Unilife use this capital for?

KM: The company is setting up new clean rooms for four high-speed production lines for its syringes. It’s completed deals with Sanofi SA (SNY:NYSE) and a generic drug company based in Jordan called Hikma Pharmaceuticals Plc (HIK:LSE), which sells most of its products in Europe. Unilife has also entered into supply agreements with Novartis AG (NVS:NYSE) for a targeted organ delivery system, and AstraZeneca Plc (AZN:NYSE) MedImmune subsidiary for a wearable drug pump for a variety of therapies.

TLSR: Keith, a $60M financing for a company with a $345M market cap makes me curious about how big these pharma deals are. Do you know the magnitude of these deals?

KM: Hikma will be using a minimum of 150M syringes/year by the time it’s three to four years into its contract with Unilife. Sanofi is going to have a minimum purchase order of 175M syringes/year, again within three to four years after shipping commences. All this additional production capacity is going to be used primarily for those two customers.

When I spoke with the Unilife people, I was reminded that Sanofi’s anticoagulant Lovenox (enoxaparin sodium injection) is already selling 400–450M doses/year in the U.S. alone, so four high-speed production lines producing about 200M syringes/year are actually indicative of the business volumes the company needs to be ready for in the next couple of years. The idea is to get them installed and running now in anticipation of that point in time. I don’t think anybody else has picked up on this growth story yet.

TLSR: OrbiMed had to perform deep diligence on this deal for the 10.25% per year it will earn over six years. It makes Unilife look derisked. Is there a growth component to this deal for OrbiMed?

KM: I have to agree with you about Unilife being derisked. And yes, there is a small growth component to the terms of the deal. OrbiMed will get a royalty rate starting at 2.75%, which will then decline as sales of the syringes and devices ramp up. This caps the overall royalty payments. I think this deal is indicative of just how Orbimed sees the growth opportunity in Unilife.

TLSR: Thanks so much for your time, Keith. I’ve enjoyed this very much.

KM: Thank you very much. I’ve enjoyed it, too, and look forward to our next exchange.

Keith Markey has been an equities analyst for more than 25 years, specializing in the biotechnology, pharmaceutical, medical device and research tools sectors. He is currently the science director for Griffin Securities Inc., an investment bank, where he follows emerging healthcare companies with novel technologies. He also works with privately owned companies, helping them restructure their operations, license products under development or near commercialization and raise funds from venture capital and high net-worth investors. In addition, Markey serves on the board of directors of DS Healthcare Group, which specializes in products that address hair loss. Previously, he held various managerial positions in the Research Department of Value Line Inc., publisher of the Value Line Investment Survey and Value Line Select. Markey began his career as a biochemist, working in the fields of endocrinology and neuroscience at New York University Medical School and Weill Cornell Medical College. His research, which involved several international collaborations and resulted in more than 30 scientific publications, contributed to the understanding of regulatory biochemistry of the nervous system and stem cell plasticity. Markey received his doctorate in neurochemistry from the University of Connecticut and a master’s degree in business administration and finance from the Leonard N. Stern School of Business at New York University.

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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: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: RXi Pharmaceuticals Corp. and OPKO Health Inc. Streetwise Reports does not accept stock in exchange for its services.

3) Keith Markey: I own, or members of my family own, shares of the following companies mentioned in this interview: MannKind Corp. and Unilife Corp. Within the past 12 months, Griffin Securities Inc. has received compensation for investment banking and/or noninvestment banking services from the following companies mentioned in this interview: MannKind Corp., RXi Pharmaceuticals Corp., Synthetic Biologics Inc., Intrexon Corp. and Medistem Inc. The following companies mentioned in this interview are either currently, or within the past 12 months have been, clients of Griffin Securities Inc. with services consisting of investment banking and/or noninvestment banking services: RXi Pharmaceuticals Corp., Synthetic Biologics Inc., Intrexon Corp. and Medistem 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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