There is one concern here… The company’s release last week noted that the GaxoSmithKline partnership may be in doubt because Glaxo has noted that it may end research on depression and pain treatments.  GSK and XenoPort are discussing the next steps in the development plan for XP13512 in the neuropathic pain area and will disclose this development plan at a future date.

XenoPort shares closed up 3.4% at $19.01 Friday on 422,000 shares. Average volume is 337,000 shares, but the stock trading has been elevated over the last week.

Date  Volume  Close
5-Feb 422,100 $19.01
4-Feb 504,800 $18.38
3-Feb 373,200 $19.90
2-Feb 420,200 $19.99
1-Feb 216,400 $18.50

There is also a binary options event factored in here, although on far fewer options contracts than what you normally see.  Here is the CALL and PUT volume for Feb-2010 expiration that expire on February 19, with data on the Friday volume and the open interest:

CALL    Volume    OpInt
17.50    44    1,006
20.00    167    1,995
22.50    170    1,938
PUT$    Volume    OpInt
12.50    209    1,062
15.00    95    1,467
17.50    114    2,055
20.00    170    2,812

The stock did manage to close up for the week, which might be impressive considering the weak stock ticker tape action we saw this last week.  It looks like the company still has $150 million or so in liquidity with revenues from partnership income looking very spotty and also looking like they are in the rear-view mirror.  Analysts expect losses in 2010 and revenues of only about $63 million per Thomson Reuters consensus data.

XenoPort will be able to survive without GSK if push comes to shove.  But the restless leg syndrome is not an area without controversy.  Ask someone with it if they think it is real or not.  Then ask one of their younger family members if they think it largely from inactivity or what the RLS patient consumes daily.

This PDUFA date may not seal the fate of XenoPort, but a very positive review will be of help.  The stock has a 52-week trading range of $13.36 to $28.33 and a market cap of about $576 million.

JON C. OGG

After the close of trading today, the maker of treatments for anemia and imaging agents provided a safety update on Feraheme®.  The company noted, “Since the commercial launch of Feraheme in July 2009, serious adverse events have been reported at a rate consistent with that contained in the U.S. package insert. Of the estimated 35,000 patient exposures to date, 40 serious adverse events have been reported, an approximate rate of 0.1 percent. No mortality signal has been observed. A single reported death occurred in a patient two days post-Feraheme treatment, which the Company does not believe was the result of Feraheme.”

Shares closed down 0.9% at $37.77 today, and shares are now up 5% at $39.75 in the after-hours trading session.  Including the after-hours trading this one has traded 4.6 million shares today versus an average volume of 630,000 shares.

The drop today was not with as much volume as the stock traded over 8.5 million shares on Thursday.  The 52-week range is $22.20 to $58.23 and the market cap here is $647 million as of the closing price.

JON C. OGG

Yet when you see insiders making share sales, and some significant share sales, it probably makes you think no real deal is on the table.  In short, buying Human Genome Sciences here now better be for that pending FDA approval and for its pipeline rather than for a hope of a buyout.  Here were the insider sales we have seen so far this month:
Read more

According to the press release, The FDA noted no clinical hold issues.  It did add that the agency may have some comments on the specifics of the Phase II design.  But the company also noted that doses to be tested in the Phase IIa study have been safely tested for longer durations in trials in men for the treatment of secondary hypogonadism.

Repros plans to enroll a total of 60 men into three balanced parallel arms at several clinical sites comparing placebo to two active doses.  In a 200 patient study of Androxal in hypogonadal men it was noted that fasting glucose levels were reduced in a significant manner in men whose glucose levels were greater than 104 mg/dL. It was further noted that the higher the glucose level the greater the reduction.

The market is not quite open and at 9:22 AM EST we have seen a 35% gain to $1.01 on 322,000 shares.  The average daily volume is 989,000 shares and the 52-week trading range is $0.64 to $10.60.

As of September 30, 2009, the balance sheet here was tiny at 2.5+ million in cash.  Just keep in mind that it already announced a capital raise in October, shortly after good news.

We noted that it is at least easy to see why traders, speculators and investors would be chasing this stock.  Even at $1.01 after such a large pop… Even considering its news-bump followed by a capital raise, this was a $10 stock just a year ago.  This company has also been around since the early 1990’s and used to trade at significantly higher prices.

JON C. OGG

CALL    Volume    OpInt  Last
15.00    1,755    5,074   $5.40
17.50    14,991    7,596  $4.50
20.00    8,065    2,863  $3.70
22.50    2,375    158     $3.00
PUT$    Volume     OpInt  Last
10.00    6,610    541     $1.85
12.50    1,745    1,101  $2.70
15.00    3,521    2,136  $4.00

We’ll save on the technical jargon, but the closest speculative volatility bet being long the closest CALL and PUT effectively puts this stock having to go above $27.00 or below $5.50… The combined premiums are roughly $9.50, up almost $5.50 from when we looked ta this last week.  Keep in mind that those are major price changes from what was seen last week and those spreads should compress over the coming days…. barring any real new news.

Joe Kunkle of OptionsHawk.com pointed this one out last week and gave a brief heads-up alert on this one again.

Keep in mind that there is a huge discrepancy over analyst price targets as this is a battleground stock with many bears and many bulls on both sides of the fence.  To show just how active the bets are for and against this one…. it had 6.425 million shares listed in the short interest based upon the settlement date of January 15, 2010.

The company announced this morning that the FDA Pulmonary-Allergy Drugs Advisory Committee (PADAC) is scheduled to discuss the company’s New Drug Application (NDA) for pirfenidone on March 9, 2010.

This covers InterMune’s investigational drug candidate for the treatment of patients with idiopathic pulmonary fibrosis, a uniformly fatal disease that affects about 100,000 Americans.  More than 30,000 new cases are diagnosed annually.  The company even noted that this has a higher mortality rate than colorectal cancer, breast cancer or prostate cancer, but noted that there are currently no approved medicines to treat IPF.

JON C. OGG

CALL    Volume    OpInt  Last
15.00    1,755    5,074   $5.40
17.50    14,991    7,596  $4.50
20.00    8,065    2,863  $3.70
22.50    2,375    158     $3.00
PUT$    Volume     OpInt  Last
10.00    6,610    541     $1.85
12.50    1,745    1,101  $2.70
15.00    3,521    2,136  $4.00

We’ll save on the technical jargon, but the closest speculative spread bet being long the closest CALL and PUT effectively puts this stock having to go above $27.00 or below $5.50… The combined premiums are roughly $9.50, up almost $5.50 from when we looked ta this last week.  Keep in mind that those are major price changes from what was seen last week and those spreads should compress over the coming days…. barring any real new news.

Joe Kunkle of OptionsHawk.com pointed this one out last week and gave a brief heads-up alert on this one again.

Keep in mind that there is a huge discrepancy over analyst price targets as this is a battleground stock with many bears and many bulls on both sides of the fence.  To show just how active the bets are for and against this one…. it had 6.425 million shares listed in the short interest based upon the settlement date of January 15, 2010.

The company announced this morning that the FDA Pulmonary-Allergy Drugs Advisory Committee (PADAC) is scheduled to discuss the company’s New Drug Application (NDA) for pirfenidone on March 9, 2010.

This covers InterMune’s investigational drug candidate for the treatment of patients with idiopathic pulmonary fibrosis, a uniformly fatal disease that affects about 100,000 Americans.  More than 30,000 new cases are diagnosed annually.  The company even noted that this has a higher mortality rate than colorectal cancer, breast cancer or prostate cancer, but noted that there are currently no approved medicines to treat IPF.

JON C. OGG

Posted on December 5th, 2009 in API, American Petroleum Institute, Leading Economic Indicators, Sarah Palin American Petroleum Institute, API, Leading Economic Indicators, Sarah Palin

John Felmy has been the chief economist of the American Petroleum Institute (API) for years. He’s well respected. And I appreciate his experience. But the two of us disagree more often these days.

Sorry folks, the API just doesn’t get it. And what it refuses to get is becoming one of the most important factors investors in the energy sector will need to watch – carefully. This is all about supply and demand. But it’s not the traditional lecture from Econ 101.

According to corporate consultant AlixPartners, Mexico has leapfrogged China to be ranked as the cheapest country in the world for companies looking to manufacture products for the U.S. market. India is now No. 2, followed by China and then Brazil.

In fact, Mexico’s cost advantages and has become so cheap that even Chinese companies are moving there to capitalize on the trade advantages that come from geographic proximity.

I noticed you recently told the Japanese press that you intended to maintain a strong dollar, and that the Obama administration would bring the U.S. fiscal deficit back to a “sustainable balance.”

Tell me, don’t you feel your nose extending like Pinocchio’s when you tell these fibs to innocent Asians?

By Shah Gilani

Contributing Editor
Money Morning

Two years ago, an associate of mine lost $100,000 because he didn’t listen to me. A year ago, I saved a manufacturing company from the same scam. And just last week I saved a friend of mine $300,000.

For several years now, a far-fetched but seemingly plausible investment opportunity has been wreaking havoc across the globe. In the United States alone, an estimated $10 billion has been lost in this particular gambit. The scheme is typically hidden behind such legitimate-sounding names as “Prime Bank Trading Programs,” “High-Yield Investment Programs,” or “Roll Programs.”

These are not legitimate investment opportunities. The reality is, they are outright scams. And my role as a professional investor has provided me with an up-close-and-personal vantage point from which to observe some of these con games.

Everything I am relating in this story is true. This story – along with real names, contact information and associated documents – has been forwarded to the Federal Bureau of Investigation and the U.S. Securities and Exchange Commission in an effort to catch these brazen conmen and to save unsuspecting investors from further losses.

While there are variations of this scam, once you read this article you should be able to see the set-up and con game from a thousand miles away.

And that’s as close as you ever want to get to any of this.

Raymond’s story

When the real estate market collapsed, my friend “Raymond” had several million dollars invested in the development of a couple of tracts of land in Florida. With the bank threatening foreclosure, he turned to a mortgage broker he knew. The broker, in turn, put Raymond in contact with someone she had not met. But, as the broker subsequently told me, this contact – a man we’ll call “Moss” – had been approved by her company as a source of funds for borrowers that the mortgage company wasn’t able to accommodate.

Raymond called “Moss” to discuss his predicament. Moss identified himself as an Atlanta attorney and offered to put Raymond into an “investment opportunity” that would generate huge gains. But it was only available to a select few big-time investors, Moss said.

The “No Collateral” Come-On

The first oddity about this “investment opportunity” is that it doesn’t require any collateral. Even though Raymond had a multi-million dollar piece of land that was serving as collateral for the bank loan he needed to pay off, Moss wasn’t interested in the property. What made his deal so enticing to Raymond was that Moss was offering to make Raymond twice what he owed on the bank loan – without requiring him to put up any collateral.

A variation on the “no-collateral-required” theme was evident when I steered the manufacturing company away from this same scam. In that variation, conmen offer to raise money for a worthy cause, such as a humanitarian program, or for the construction of a facility that would provide employment for a certain number of people.

But the organizers of these scams never request that part, or all, of the project being “financed” be put up as collateral. They make it sound like all they need to know is what the money is being used for. If it “fits” into one of their “programs,” you don’t need to put up any collateral.

That’s your first red flag: They don’t want collateral, only cash.

“Secret Trading Platforms”

Secret trading platforms are where giant banks and the super rich make tons of money.

In explaining the “investment opportunity” to Raymond, Moss said that it’s really pretty simple. Apparently, there are “trading platforms” out in the market, where “traders” trade “debentures,” which are described as “bonds” or “MTNs” (medium-term notes) that are issued by the big “prime” banks around the world.

Other banks and rich investors trade these instruments. You haven’t heard about these “platforms” because they’re secret, and that’s why the rich get richer and banks make so much money.

There are different programs that get traded on these platforms. But your contact will tell you that he can get you into one of these programs, so that you’ll soon be earning the same returns as the super rich.

But wait. You haven’t yet heard the best part: It’s risk-free!

I was so excited for Raymond that I decided to call Moss and hear the pitch for myself.

A Personal Pitch

What the traders do, Moss explained to me, is match buyers and sellers. The traders are the only ones who can do this. They find a seller – maybe a bank or a rich person – who wants to sell their debentures, their MTNs, or some other high-yield investments. Or maybe the seller is executing a “roll program,” where an investor or institution rolls over an investment, and must then find a buyer to take the other side of the “trade.”

But since all the trader is doing is matching buyers and sellers, there is no risk. It’s really profitable because the “spread” – the difference between what the buyer pays and what the seller sells for – are far apart. The trader keeps the difference and would share that with Raymond. How profitable are these trading platforms, I asked?

Very, very profitable, came the reply.

Said Moss: “You’ve heard of the Rockefellers – haven’t you?”

If it Sounds Too Good To be True …

We’ve all heard the old investing adage: “If it sounds too good to be true, it probably is.”

Well Moss was essentially promising Raymond a 100% return on his money – every month.

And to get started down this golden pathway, all Raymond had to do was put $300,000 into an escrow account.

On its face, that seemed to promise safety. For the funds to be released, both Raymond and Moss had to sign. So Raymond didn’t have to worry, because if he never signed a release, Moss could never get the money.

In the meantime, the escrow account would be “blocked,” so that it would be guaranteed to stay there for a year. Moss would let his “traders” use the money in the escrow account as “show money.” The traders could claim that they were “attached” to the account, meaning they could then borrow up to 10 times that amount to trade prime debentures on their platforms.

With 10-1 leverage, the traders would find “one of the smaller programs” to trade (according to the pitch, there apparently are only two or three small programs … all the other programs are for the rich guys who trade in really big blocks). And since it’s all risk-free, Raymond was told that he could expect to make back his initial investment – about $300,000 – every month.

And he might even be able to make more if the traders could find more of these pesky “small” programs to trade, Moss told Raymond.

On a Scammer’s “Do Not Call” List

I asked Moss what would happen if there weren’t any of the small programs available for Raymond to trade.

His answer was priceless.

Moss said he would have suggested this earlier, but said he’d rather see Raymond make $300,000 a month and pay off his loan than to get involved with the alternative investment. The “alternative” was for Raymond to use his $300,000 to actually “buy” a “leased instrument.”

Under this scenario, Raymond would be buying into a leased instrument that would make him part owner of a giant pool of rich investor money. And because most of the trades are big block trades, he could then participate in the big trades and make enough money in one trade to pay off the bank and make a lot more, and it would probably take about a week.

I’d heard enough. It was now my turn to ask “Moss” some questions.

Needless to say, his answers were so unbelievable, impossible, or just plain ignorant that I found myself switching between wanting to laugh and wanting to explode in anger – and struggling to control both urges.

The bottom line: He apparently didn’t like the questions I asked, and he now won’t take any more calls from me or from Raymond.

Spotting a Scammer’s “Tell”

Here’s what you need to know to avoid becoming a victim of this gambit.

First, there’s no such thing as “buying” a “leased instrument.” In fact, if you just consider it for a moment, it doesn’t even make logical sense.

Second, there’s no such thing as putting money into an escrow account so someone else can leverage it to trade against. Here’s the hint: If the trader loses money, how are they supposed to get at the “blocked” money to settle up?

Third, there’s no such thing as “risk-free” trading – period.

There’s no such thing as special programs where you can get high returns on investments because you’re going to use the money you make to build a factory to employ people or to fulfill some other philanthropic void.

There’s no such thing as a secret trading platform where prime bank debentures or any other instrument is secretly traded by global banks or the super rich.

There’s no such thing as unlicensed traders trading in some “European” or cyberspace market where they are not registered. And to imply that they are governed by the International Monetary Fund(IMF), the World Bank, or some other international body such as the International Chamber of Commerce (ICC) is just plain stupid.

Don’t be stupid.

And don’t be greedy.

There’s no such thing as making 100% per a month, or a week.

They were going to get Raymond’s money by forging his signature on the escrow agreement, by talking him into writing a check for some non-existent leased instrument, or through any one of several other pathways they could lead him down – before parting him from his money.

Don’t just take my word for it. Do an Internet search on “bank debentures trading scam” (to see the results of that search, please click here). As you’ll see, there are literally pages upon pages of information on these ugly and expensive scams. A lot of sophisticated people have been drawn in and duped. These scammers are pretty sophisticated themselves.

Epilogue: It turns out that “Moss” was once a member of the Florida bar, but is not licensed to practice law in Georgia. I followed up on his e-mail contact information, which included an address at an Atlanta law firm. I contacted the firm and found that he actually had been hired there to do some research work, but then was fired for lack of performance. The partners of the firm were obviously not happy to hear that their good name was being employed as part of a scam. But they were obviously grateful that I alerted them to the problem.

Renowned Oil Expert Dr. Kent Moors Details Shortages of Oil, the Impact of Higher Prices, the Promise of New Technologies and the Opportunities For Investors Dr. Kent Moors is one of the world’s foremost experts on oil, energy policy, finance, risk management and new technologies. Moors advises the leaders of six oil-producing countries, including the United States, as well as global corporations and banks operating in 25 countries.

Moors is the founder and director of the Energy Policy Research Group, which conducts analyses and makes recommendations on a range of energy-related issues. He is also the president of ASIDA Inc., a worldwide advisor on the oil-and-natural-gas markets.

In an interview with Money Morning Executive Editor William Patalon III this week, Dr. Moors detailed the top current energy challenges in the global economy, and also provided investors with a look at some of the looming new technologies, as well as a future in which China is a dominant global energy player.

Some of these issues are already at work. Although oil prices remain well below the all-time record of $147 a barrel set in July 2008, crude prices have been on the march of late. Just yesterday (Wednesday), in fact, supply concerns pushed oil futures up above $81 a barrel, their highest level in more than a year.

“If you think the run up to July 2008 was a wild ride, you haven’t seen anything yet,” Dr. Moors told Money Morning. “In the next five years, investors who focus on medium- to small-sized producers and oil-field-service companies having a well-developed specialty niche will outperform the overall energy sector.”

Money Morning (Q): In an earlier discussion, you said that the successful energy investor of the future wouldn’t be a person who just goes out and invests in ExxonMobil Corp. (NYSE: XOM). Can you explain?

Dr. Kent Moors: We are entering a period of rising prices. There is still some play left in the large verticals (vertically integrated oil companies, or VIOCs) such as ExxonMobil, but the primary profits will be made with smaller, leaner exploration-and-production (E&P) outfits, field-service companies and specialized producers (unconventional gas producers - shale gas, coal bed methane, tight gas, hydrates - heavy oil and biodiesel).

(MM): How will investors have to play this future? What types of companies should they be looking for, and where should they look?

Moors: The market rapidly approaching will be more volatile with valuation often more difficult to determine than in the past, even with prices increasing. How much of the increases result from actual product margins and how much results from oil becoming a financial asset rather than just a commodity is a major concern. It requires some careful homework. The types of categories mentioned above – smaller producers, new developments in field services and technology (especially those providing ways to decrease wellhead and operational costs, increase productivity, use associated gas, treat and utilize produced water, increase efficiency per barrel … there is a long list here) as well as the specialized producers and providers of their technical needs are the main targets.

(MM): When we look at the U.S. economy, you said that investors would be stunned to discover how much of our oil is produced by small players. In that discussion, in fact, you even described the type of firm that could be the “savior” of the U.S. energy sector, and perhaps even the economy. Could you take a moment to describe that situation and explain what that means for the economy?

Moors: The United States remains one of the top five producers of crude and will shortly ramp up production of natural gas (once the current glut has moved through the system). Sixty percent of crude produced in the U.S. market is at stripper wells providing less than 10 barrels of crude a day, but more than 20 barrels of water, a major byproduct. As America enters an accelerating field maturity curve (and an intensifying decline in well debit – well production), the efficiency of production declines. Therein lies a significant area for innovation and leaner companies. And that spells greater profitability at lower entry prices. Some offshore and Alaskan National Wildlife Refuge (ANWR) production will be done at scale, but that is not where the future of U.S. production will be. It will be the result of greater profitability at existing depleting wells with the new technology rolled out (on the oil side) and unconventional gas production.

(MM): Let’s take a look at the global markets, too. China’s global shopping spree has been well chronicled. As China locks up suppliers and supplies of oil and natural gas, what are the chances there could end up being what’s almost a two-tiered market, where China has access to oil and natural gas at lower prices levels, creating a shortage of non-captive supplies and leading to Western countries having to pay much higher prices?

Moors: Price rises for Westerners will occur anyway, and not just because of China (where a rising energy bubble resulting from the recent acquisitions is a concern). The competition for available energy sources will usually result in those regions prepared to pay more, increasing the overall aggregate price for most others. China, India, a resurgent East Asia, Japan and even regions such as West Africa will occupy important positions moving forward in this regard. Also, rising demand will center in places other than OECD countries. The new oil market emerging can hardly discount the developed countries, but the primary demand spikes are going to come from elsewhere.

(MM): After some significant turmoil in recent years, you said that Russia is finally opening up to foreign investment. Will that last, and what effect will that have on global energy prices?

Moors: To offset a more rapidly declining traditional production base (primarily Western Siberia), Russia must move north of the Arctic Circle, into Eastern Siberia and out on the continental shelf. These moves are technologically sensitive and very expensive. Moscow needs the outside investment and that will remain. However, projects must be carefully structured. Foreigners cannot own 50% of “strategic fields” under new laws or anything on the shelf. This means watch out for the smaller, focused operators and oilfield service companies. They will include companies currently trading on the Alternative Investment Market (AIM) in London: The AIM and London Stock Exchange (LSE) are the sources of the new external investment phase in Russia.

(MM): From a global perspective, which markets show promise? And which ones – either because of overly restrictive investment policies, or because of the risk of nationalization – are markets to be avoided?

Moors: Many markets show promise or telegraph restraint. Let’s look at some of the more noticeably promising markets, organized by energy category:

• Conventional Oil: Sub-Saharan Africa, Brazil, Kazakhstan, Russian Eastern Siberian and Far East smaller fields.

• Conventional Natural Gas: Turkmenistan (if recent government overtures to outside investment remain genuine), Uzbekistan, Northwestern Australia (region of the Gorgon project) and New Guinea.

• Unconventional Oil: Tatarstan (Russia) for bitumen and heavy oil, Alberta for oil sands (assuming an average and multi-year sustainable crude price of $72 [USD] a barrel or above).

• Unconventional Gas: The United States for shale (especially Marcellus Shale) and coal bed methane (Powder River Basin, Wyoming, also basin into Montana – if that state reduces regulations), Poland, Turkey and Germany for shale, south central Russia and Ukraine for coal bed methane. If Baghdad and Erbil can finalize central Iraqi and regional Kurdish oil legislation – and if security is maintained – Iraq will become a major play in both oil and gas.

• TO BE AVOIDED: Iran (sanctions and buyback contract frustrations), Mexico (collapsing infrastructure and nationalization), Venezuela (significant technical shortcomings, concerns over productivity assessments, and absence of Western operators).

(MM): If an investor were to divide the energy market into short/intermediate/and long-term segments, what will be the dominant energy plays (oil, natural gas, solar, coal-bed methane, for example) in each of those three time segments? What time periods would you tack onto the short-term, intermediate-term, and long-term segments? And which energy plays will be the real winners?

Moors: To make this easier to see, let’s divide this into short-term, intermediate and long-term segments and look at the key players, issues and technologies in each category.

• Short-Term (five years out): Here we’ll see an increasing efficiency at existing oil wells; Marcellus Shale natural gas; an extension of large fields into known deeper production layers – for example, BP-led (NYSE ADR: BP) multinational plays such as the Azeri-Chyrag-Guneshli and Shah Deniz deposits offshore Azerbaijan. Other developments to watch are the huge Chevron-led (NYSE: CVX) Tengiz field in Western Kazakhstan, initiatives in the central Gulf of Mexico and all satellite fields operated by other companies.

• Intermediate-Term (five to 15 years out): All U.S. and Canadian shale plays, Wyoming, Montana, New Mexico and Russian coal bed methane, selected wind power Western U.S. and Baltic Sea region (Denmark, Germany, Poland).

• Long-Term (20 years or more): All alternative and renewable energy (by this point, crude oil will be too volatile with supply problems and natural gas from whatever source will be the main power source both for conventional applications and for new technologies – fuel cells will obtain most of their price-sensitive hydrogen from natural gas).

Moors: Here’s the bottom line. Looking forward, successful energy investors will be those who: (1) weigh volatility as well as opportunities; (2) understand the rapidly changing supply/demand balance; (3) hedge within a focused time-frame; (4) watch the development of new technology to improve production, processing or transport; and (5) have a flexible approach to the market.

(MM): Spotlighting and providing detail and in-depth analysis of the specific winners would require a much-more-detailed category breakdown than we have here. But stay tuned: Dr. Moors will delve into these topics in future issues of Money Morning.