Newsletter

Energy Rolling Over, But FED Speak Dominates: KAL, HDY, DSEN, NWWV

October 15, 2005
Volume VI, Issue 89
Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com

To OTC Journal Members:
 

Comments in the BLOG

Today's edition focuses on the traditional 4th quarter rebound. In light of the market's sharp sell off in the last two weeks, one can't help but wonder if the 4th quarter rally is in jeopardy this year. I believe energy prices and the long end of the yield curve will cause the inflection points one way or the other. More on this issue below.

There are four new BLOG postings for you to review. A few stocks are finally moving to tradable ranges. I believe DSEN, GEPT, and KAL are outstanding buys right now. HDY and NWWV are breakouts- too late to buy. Here's the headlines:

  • HDY: Coverage is reinitiated in light of revelations concerning the offshore drilling program in Guinea. I wouldn't pick it up now- it has traded up too high in the short term. Comments in the BLOG. Click here.
  • GEPT: The stock, which has been very good to OTC Journal subscribers twice now, has finally dropped to a tradable level. It is now a buy in my view. Click Here for the BLOG entry.
  • DSEN: A sell of on very little volume makes this one very attractive. The stock has rebounded off this level twice for 40% gains. No reason why it shouldn't do it again. It is a buy now in my view. Click Here for the BLOG entry.
  • KAL: After trading up very nicely in the first couple of post coverage weeks, this stock has recently swooned a little with the market as a whole. News Saturday morning should have a positive effect next week. More comments below.
  • NWWV: The stock traded big volume and started moving up on Thursday and Friday. With the infomercial close to rolling out, it's nice to see someone taking an interest. If you didn't buy it when it was cheap and no one wanted it, it's too late unless it pulls back and quiets down.  Click Here to read my comments.
To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.

Next week I will be out of touch. Any questions for the BLOG postings need to go up this weekend. I will bring it current on Monday and that will be it for the remainder of the week. Also, no editions will be published. Be sure to keep your eyes on your favorite stocks for news or events.
 

FED Speak Hammers Market: Update on Energy Price Rollover

You have been asking for commentary on the potentially impending rollover of energy prices, and here it is today. Compliments of Adam Olensis at TheAgileTrader.com, here are a couple of charts which gives us a picture of a pending short term correction.

As you can see from the charts, both oil and unleaded gas, as measured by November future prices, have rolled over into corrective phases. This past week there was a relief rally predicated on a forecast for increasing demand in '06- DUH!!- can you spell "already priced into the market".

Thanks to an usual hurricane related anomaly, oil and unleaded gas have traded somewhat independent of each other. Nevertheless, both have started to roll over and are now making a series of lower highs and lower lows.

I believe energy prices will either correct with oil trading somewhere in the $52 to $58 range, or energy prices will grind sideways for a period of about six months before resuming a multi year climb. At this point it would take another natural disaster to get energy prices headed higher.

While it's a big factor, energy prices are not the only component driving non energy stocks down to 2005 lows. I believe "FED Speak" is even a bigger culprit. There is nothing the market hates more than the threat of inflation, and in the last two weeks several FED governors have been publicly vocalizing concern over the issue. 

This past week's CPI number was reasonably tame, so statically speaking inflation, sans energy, is not too bad. Like many, I believe the FED's mission here is to "talk up" the long end of the yield curve. The FED has been raising short term interest rates, but long term rates are controlled by the market. They have not been rising. There is talk of an inverted yield curve, which is generally a leading indicator that a recession is in the cards. 

It seems to be working- FED Speak is causing long term interest rates to rise a little, which should cool off the red hot real estate market somewhat, and reduce the possibility of core inflation.

Retracting energy prices combined with slightly higher interest rates 10 years out should have the FED less fearful of inflation and lead to a nice 4th quarter rally. 

Increasing energy prices and stubbornly low interest rates on the long end of the yield curve would create a poor environment for non energy stocks, and the usual 4th quarter rally won't come. It will be a tough market.

There will probably be one more "wash and rinse" cycle. The market will tank, and CNBC will trot out every perrenial bear. That will be the ideal point to buy.
 

Callisto Pharmaceuticals (AMEX: KAL) Delivers Mission Statement

On Saturday morning KAL issued a press release which addresses investors questions about where this company is headed for the remainder of '05 and into '06.

Amongst a number of new initiatives is the pending new Phase II clinical trial for Annamycin, the company's developing treatment for relapsed Leukemia, and the release of clinical data concerning Antiprimod, KAL's developmental treatment for relapsed multiple myeloma.

I continue to believe KAL is significantly undervalued as compared to its peer group, consisting of VION, BIVN, and CTIC. If the stock achieves an average of these three comparables, a $4 to $5 stock would result. 

In any kind of a reasonable market environment, the stock should trade better as clinical data becomes available. Be in ahead of the crowd.

In the interim, the stock has been in nice uptrend since early September, making a series of higher highs and lower highs. Own this one for the speculative end of your portfolio.

Here is the complete text of Saturday's news for your review.
 

Press Release Source: Callisto Pharmaceuticals, Inc.

Callisto Outlines Key Goals and Milestones in Strategic Initiatives Report for 2005-2006

Saturday October 15, 2:00 pm ET

Company Anticipates Commencement of Next Stages of Preclinical and Clinical Research, Expansion of New Drug Candidate Portfolio

NEW YORK--(BUSINESS WIRE)--Oct. 15, 2005--Callisto Pharmaceuticals, Inc. (AMEX:KAL - News; FWB:CA4), a developer of new drug treatments in the fight against hematological cancers and related diseases, has detailed its overall business vision and major goals in a Strategic Initiatives outlook for the coming 12 months. Chief among the Company's strategic goals for the period is the expansion of its portfolio of new drugs for global health care markets, and the acceleration of clinical trials through 4Q 2005 and 2006 as it seeks to advance its lead drug candidates in the clinic.

The Company's two anti-cancer drug candidates Atiprimod and Annamycin are being developed to treat multiple myeloma, and two forms of relapsed leukemia. The Company is also developing a drug to treat inflammatory bowel disease, and has a homeland defense initiative termed the Superantigen Biodefense Project that is exploring development of a drug and vaccine to protect against biowarfare agents from the class of Staphylococcus and Streptococcus pathogens.

"Callisto is focused on vigorously advancing our clinical and pre-clinical programs throughout 2006," said Dr. Gary S. Jacob, CEO of Callisto. "We are committed to moving forward with both Atiprimod and Annamycin to explore their potential in treating multiple myeloma and leukemia, and at the same time, we are looking to add to our drug pipeline of development programs to build a more durable and robust future for the Company."

Callisto accomplished a number of key milestones during the past 9 months, including:

    * Obtained orphan drug designation for Annamycin for both acute lymphoblastic leukemia and acute myelogenous leukemia.
    * Announced in May, 2005, an interim analysis of the Atiprimod Phase I/IIa clinical trial in relapsed or refractory multiple myeloma patients.
    * Established the Annamycin project team after successful in-licensing, and accomplished all necessary goals to bring this drug forward into the clinic to explore the drug's potential to treat relapsed leukemia.
    * Announced positive animal data on Callisto's GCRA drug SP340 in an animal model of ulcerative colitis, and established the company's intention to move SP304 forward for filing an investigational new drug application and initiating a human trial in inflammatory bowel disease.
    * Received a $886,000 biodefense grant from NIAID to support further development of Callisto's superantigen biodefense project. 

The following are Callisto Pharmceuticals' Strategic Initiatives for the coming 12 months:

Strategic Initiative 1 -- Pursue Human Clinical Trials for Annamycin

    * Callisto anticipates starting in 4Q 2005 an open-label single-agent clinical trial of Annamycin in adult relapsed acute lymphoblastic leukemia patients. Annamycin is an anti-cancer drug candidate from the anthracycline family, which earlier completed a Phase I trial in refractory leukemia patients.
    * Commence a single agent trial of liposomal Annamycin in pediatric relapsed ALL patients.
    * Commence a combination trial of liposomal Annamycin in combination with Ara-C in adult relapsed acute myelogenous leukemia (AML) patients.
    * The Company will provide interim results on the first wave of Annamycin clinical trials as these data come available in 2006. 

Strategic Initiative 2 -- Further Clinical Development of Atiprimod

    * Callisto plans to announce up-to-date results on the Atriprimod Phase I/IIa clinical trial in relapsed or refractory multiple myeloma patients. Clinical and animal data will be presented at the American Society of Hematology annual meeting in December, 2005, in Atlanta, Georgia.
    * Based on the results from the Phase I/IIa clinical trial, Callisto will evaluate and plan further clinical development of Atiprimod. 

Strategic Initiative 3 -- Expand Drug Portfolio

    * Callisto will continue to take steps to identify new proprietary drugs and compounds in an effort to develop needed medical therapies for cancer and other important health care markets.
    * The Company will seek promising in-licensing opportunities to extend its IP portfolio with new drug candidates that present potential high-growth revenue opportunities.
    * Callisto recently appointed Dan D'Agostino, a veteran investment banker who has specialized in the biotechnology sector, to spearhead the Company's M&A and corporate development activities to expand the Company's technology and product portfolio. Mr. D'Agostino will also lead due-diligence efforts as the Company identifies potential new drug candidates. 

Strategic Initiative 4 -- Pursue Development of SP304 for Inflammatory Bowel Disease
# Based on encouraging animal model data on Callisto's proprietary guanylate cyclase receptor agonist SP304, the Company will continue to advance the preclinical development of this innovative therapy with the intention of filing an investigational drug (IND) application in late 2006.

Strategic Initiative 5 -- Continue Development of Superantigen Platform

    * Based on successful funding via an NIAID grant to support the Superantigen program, the Company will continue its in-house development of the basic technology along with additional animal model studies, in collaboration with the U.S. Army Medical Research Institute of Infectious Diseases, necessary to advance this program.
    * The Company will continue to explore strategic alternatives and partnerships for expanding this effort to build the Superantigen-based biodefense program. 

About Callisto Pharmaceuticals, Inc.

Callisto is a biopharmaceutical company focused on the development of drugs to treat cancer and osteolytic bone disease. Callisto has two lead drugs in clinical development, Annamycin to treat relapsed leukemia, and Atiprimod to treat relapsed multiple myeloma. Callisto intends to initiate a clinical trial of Annamycin in relapsed acute lymphoblastic leukemia patients in 4Q 2005. Annamycin, a drug from the anthracycline family, has a novel therapeutic profile, including activity against resistant diseases and significantly reduced cardiotoxicity. Callisto's second drug, Atiprimod, is in a Phase I/IIa clinical trial in relapsed multiple myeloma patients, and is a small-molecule, orally-available drug with antiproliferative and antiangiogenic activity. Callisto also has drugs in preclinical development for gastrointestinal inflammation, and a program focused on the development of a drug to protect against staphylococcus and streptococcus biowarfare agents. Callisto has exclusive worldwide licenses from AnorMED Inc. and M.D. Anderson Cancer Center to develop, manufacture, use and sell Atiprimod and Annamycin, respectively. For investor-specific information about Callisto, including recent news and stock price data, please visit http://www.trilogy-capital.com/tcp/callisto/. For an Investor Fact Sheet about Callisto, please visit http://www.trilogy-capital.com/tcp/callisto/factsheet.html. To view an informational presentation of the Company's development pipeline of drug candidates, visit http://www.trilogy-capital.com/tcp/callisto/powerpoint.html. Callisto is also listed on the Frankfurt Stock Exchange under the ticker symbol CA4. For additional information, visit www.callistopharma.com.

Forward-Looking Statements

Certain statements made in this press release are forward-looking. Such statements are indicated by words such as "expect," "should," "anticipate" and similar words indicating uncertainty in facts and figures. Although Callisto believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations reflected in such forward-looking statements will prove to be correct. As discussed in the Callisto Pharmaceuticals Annual Report on Form 10-K/A for the year ended December 31, 2004, and other periodic reports, as filed with the Securities and Exchange Commission, actual results could differ materially from those projected in the forward-looking statements as a result of the following factors, among others: uncertainties associated with product development, the risk that products that appeared promising in early clinical trials do not demonstrate efficacy in larger-scale clinical trials, the risk that Callisto will not obtain approval to market its products, the risks associated with dependence upon key personnel and the need for additional financing.
Contact:

     Callisto Pharmaceuticals, Inc.
     Dan D'Agostino, 212-297-0010 ext. 227
     dagostino@callistopharma.com
     or
     Trilogy Capital Partners, Inc.
     Paul Karon, 800-592-6067 (Investor Relations)
     paul@trilogy-capital.com
 

Source: Callisto Pharmaceuticals, Inc.


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