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A Disordered World – Part 2: Susceptibilities

A Disordered World – Part 2: Susceptibilities

Authored by Satyajit Das via,

Ordinary lives are lived out amidst global…



A Disordered World – Part 2: Susceptibilities

Authored by Satyajit Das via,

Ordinary lives are lived out amidst global economic, social and political forces that they have no control over. Today, multiple far-reaching pressures are reshaping that setting.

This three-part piece examines the re-arrangement. This first part examined current great geopolitical divisions. This second part looks at key vulnerabilities. The final third part, which will appear on Friday, October 28, will look at possible trajectories.

Economic weakness is usually central to social and political breakdowns. The ability to meet the population’s inexorable demand for goods and services is essential to stability. Today, there are fundamental financial vulnerabilities.

Economic Susceptibilities

Application of standard metrics of resilience -internal (budget) and external (current account) deficits and debt levels, especially amounts owed externally- yields interesting results:


  • Budget Position, Current Account, Total and Public Debt (gross) are all stated as a percentage of GDP.

  • Total debt is taken as all non-financial private and public debt. External Debt is recorded as total debt owed externally as percentage of GDP.

  • All data is for 2021 or the most recent available.

While point-of-time data has its limitations, the West is running substantial twin deficits (budget and current account). Canada and Australia’s strong current account performance is driven by high commodity prices and volumes. These factors also underpin both nation’s government revenues and help keep budget deficits in check. Germany and Japan’s current account is vulnerable to falls in exports, such as to China, and elevated energy prices.

Western budget positions are precarious. Germany and the UK are spending €300 billion ($300 billion or 8.4 percent of GDP) and more than £100 billion ($110 billion, or 4.3 percent of GDP) respectively to protect households and businesses from higher energy costs largely funded by borrowings. The UK also proposed but later abandoned an ambitious fiscal program to boost growth with tax cuts totalling an additional 2 percent of GDP.

The West’s debt levels and external indebtedness are elevated. Weak public finances and excessive government borrowings can feed inflation and push up interest rates. It can weaken the currency which, in turn, drives price rises and further rate increases. The build-up of debt affects growth and limits the ability to respond to recurrent economic or financial crises, pandemics, climate change and wars.

China and India also exhibit deteriorating economic performance. However, high saving levels and the ability to finance without reliance on external sources is helpful. On all metrics, Russia’s position remains positive although its dependence on raw material exports remains untested, especially under prolonged harsh sanctions.

Kindness of Foreign Creditors

Higher interest rates, the shift from quantitative easing to tightening and restrictive monetary conditions will make it more difficult for the West to refinance maturing obligations or borrow to meet future needs. This may be affected by changing global capital flows.

Since the turn of the century, the West, especially the Anglosphere, has to varying degrees relied on German, Japanese, East Asian and Middle-Eastern savings for external funding. Outside of commodity producers, especially energy, these current account surpluses are now shrinking as a result of export slowdowns and higher energy costs.

Western actions against Russia– seizure of reserves, exclusion from the SWIFT payment system and international financial markets- are significant. US confiscation of Russian central bank reserves is difficult to distinguish from a selective currency default. It may undermine the willingness of surplus countries to hold reserves in US dollars and to a lesser extent Euros, Yen and Anglosphere currencies.

A related development is de-dollarization. In the post World War 2 period, the US dollar’s reserve currency status has provided America with what French Minister of Finance Valéry Giscard d’Estaing christened the “privilège exorbitant” . About half of international trade is invoiced in dollars, well above the US share of global trade of around 10-15 percent.  In foreign exchange markets, dollars are involved in nearly 90 percent of all transactions. 60 percent of reserves are held in US dollars, the bulk in Treasury securities de facto financing the American government. This may be changing, albeit slowly.

China, Russia and the non-West have begun to settle trade in Roubles and Yuan through alternatives to SWIFT. Confiscation risk may reduce investment of reserves in dollars. Central banks and sovereign wealth funds may shift to other currencies or real assets to reduce exposure to confiscation. China has been moving away from US Treasuries for some time. It has cut US debt holdings by 9 percent to under $1 trillion from the end of 2021 to July 2022, a 12-year low and well below the all-time high of $1.3 trillion in Nov 2013. It has invested in its Bricks and Road Initiative, which has created different risks.

The switch away from dollars is difficult due to the lack of alternative liquid, large currency and money markets. Faith in non-Western currencies and their sovereign backing is not high. It will be resisted ferociously by the US which would risk losing economic and financial leverage.

But any shift away from the US dollar and Western currencies will make funding of ongoing deficits and refinancing external borrowings more challenging. Reliance on the kindness of foreign creditors is always a risky long-term strategy.

Domination Games

The dominance of the US dollar is under threat for other reasons. In 2022, higher interest rates pushed up the US currency to a 20-year high on a trade weighted basis. Dollar strength was only relative. Most currencies have lost actual purchasing power over recent decades significantly as a result of debasement and monetary excess over several decades. Portrayed as a flight to quality, it was, in reality, more akin to trying to find the least dirty shirt in a laundry basket on Monday morning.

For America, it reduced the competitiveness of exports, decreased translated overseas earnings and made dollar denominated investments expensive. However, the cost to the rest of the world was greater.

The strong dollar increased commodity prices which are mainly priced in US currency terms. The offsetting depreciation of other currencies imported inflation. For emerging markets with high levels of foreign currency debt, the combination of a strong dollar and higher interest rates was financially damaging. American firms could also buy up foreign businesses at bargain prices because of its soaring currency. A strong dollar historically tends to be contractionary for the world economy.

The ‘reverse currency war’, as it was labelled, forced countries globally to push up rates in increments up to 1 percent instead of normal smaller rises increasing the risk of a severe economic downturn and financial instability. Josep Borrell, the high representative of the European Union, publicly criticised the US central bank for its aggressive rates rises which  would most likely affect the continent far worse than the US. The former head of India’s central bank Raghuram Rajan posed the obvious question: “If a poorer country over borrows in the good times because global interest rates are low, what responsibility does the US have for that?”

Western weaknesses reflect underlying toxic pathologies. The predominant consumption and debt driven growth model is waning. Unfavourable demographics, especially an aging population, and rising commodity prices act as retardants. Financialisation, a major driver of activity, is less effective with high debt levels, overvalued assets and higher costs of capital.

For decades, eschewing structural adjustment, Western policymakers have relied primarily on shock and awe monetary finance – government deficit spending, ever lower interest rates and injections of liquidity. Accommodating markets seemingly placed no limit on debt levels. It was grounded in the theory that “quantity has its own quality” (Stalin’s alleged reference to Russia’s World War 2 strategy of using large numbers of under-equipped and less-well-trained soldiers). Borrowed money came to be equated to earned income.

The lengthy experiment with ultra-low rates and QE (quantitative easing or central banks purchasing bonds to inject liquidity) reveals the excesses. The rapid growth in debt, both public and private, was only sustainable at low rates. By 2022, higher inflation, resulting from rapid growth in demand, substantial increases in money supply as well as Covid19 and conflict driven supply disruptions, necessitated a winding back of expansionary policies and increases in interest rates. The rise in borrowing costs affected the ability of borrowers to meet commitments.

There were subtler effects. The central bank policy of purchasing long-dated government and, in some cases, private debt financed by creating reserves worsened the sensitivity to higher short-term rates. According to the Bank of International Settlements, perhaps 30-50 percent of advanced economy government debt was converted to overnight borrowings in this way. This is now magnifying the effect of rate rises. It has also left central banks with large unrealised losses on its holdings of government bonds which combined with rising borrowing costs may ultimately have to be borne by the state and taxpayers.

Monetary mechanisms have been corrupted. The financial system no longer simply aggregates savings and allocates them to finance productive enterprises. Instead, governments and central banks use financial institutions to channel supplied liquidity to refinance existing debt, supported by overvalued real estate or financial assets, or provide additional credit to prop up consumption to create phantom growth.

Over the last three decades, ‘Botox economics’ and ‘extend-and-pretend’ was used repeatedly to cover up problems or defer unpopular decisions. In an extension of Gresham’s Law, bad policies and complicit leaders crowded out good ideas and necessary reforms. Denial and cognitive dissonance masqueraded as plans. Today, with options dwindling, Western policymakers resemble chess players faced with the realisation that the best available move is nevertheless bad and will lead to ultimate defeat – the German term for the predicament is zugzwang.

Similarities and Differences

Dysfunctional societies complicate the West’s position.

Ostensibly participative political systems are approaching anarchy. The value of suffrage has been reduced by routine gerrymandering, choices between unpalatable, incompetent and absurd candidates, lack of understanding of key issues, and the absence of substantive policies. The result is civic and electoral disengagement. Narcissistic leaders, unable to accept rejection, routinely claim fraud when defeated. Election denial, the new pandemic, further reduces trust in the process.

Governments mainly serve well-funded or vocal special interests. As Mancur Olson forecast in The Logic of Collective Action and The Rise and Decline of Nations well-funded coalitions now influence policies ensuring benefits to narrow interest groups leaving large costs to be borne by the rest of the population. Alternatively, JK Galbraith’s countervailing forces create paralysis. In truth, it is difficult and perhaps impossible to govern nations which are  increasingly polarised (Presidential Trump received 47 percent of votes in his 2020 defeat).

The lack of consensus, complex challenges and lack of costless solutions is partially behind the culture wars of Western democracies. Worthy social causes -liberty, gender, sexuality, race, history, indigenous rights, multi-culturalism- are now central to delineating political differences. These power or hierarchy focused debates are difficult to resolve because they involve earnestly held beliefs and values. For politicians, they are priceless allowing them to project authenticity and manipulate a fissiparous electorate.

Leaders themselves are an uninspiring lot, long on cunning and media savvy but little else. Constant scrutiny of private lives and better financial rewards elsewhere mean politics attracts in the main uniquely unqualified aspirants whose highest potential is mediocrity. There is daily confirmation of Aesop’s observation that “We hang the petty thieves and appoint the great ones to public office”. Elected representatives, many unknown to voters, serve as Lenin’s parliamentary cretins rubber stamping the celebrity leader’s will or ensuring policy paralysis.

Politics is “panem et circenses” (bread and circuses) as Juvenal wrote in Satire X. Standard operating procedure is appeasement framed as glib announcements or a fashionable tweet which will largely remain unimplemented. The objective is to distract and divert while maintaining popular approval. Outside elections, it is the preserve of professional politicians, operatives and a breathless media providing low-cost, constant entertainment for political addicts.

There is parallel institutional decay. State bureaucracies, once capable of providing objective and independent advice, have been decapitated. Career specialist public servants have been replaced with malleable political appointees. Accreditation and domain knowledge, a fundamental requirement for most professions, does not apply now to public policy.

Law enforcement and the judiciary are increasingly politicised. Courts frequently operate as alternatives to or substitutes for legislatures. Police discrimination against minorities is routine. Justice requires deep pockets or ability to garner fickle public or press support and a popular podcast arguing your side of a case.

The traditional press, for the most part, now cannot distinguish between facts, analysis and opinion. Some have abandoned balance and impartiality becoming overt advocates. Others have evolved into semioticians, endlessly debating the accuracy of descriptors -fascism versus post-fascism- and correctness of pronouns for different sexual identities.

The cheap dissemination power of the Internet has seen the rise of highly variable independent bloggers (600 million at last count or around one for every 14 earth inhabitants) and websites (around 200 million active ones). A process of self-selection ensures that tribes congregate in cyber echo-chambers. Viral or trending items rather than factual accuracy or insight are the measure of success.

Western coverage of the Ukraine conflict was little more than Pravda-esque propaganda. Veteran correspondents, with field experience in covering conflicts, were struck by the one-sided and manipulative treatment of information and jingoism. It highlighted how verifiable facts necessary for an informed debate are no longer readily accessible to or even sought by most people. Ultimately, a world based on propaganda, manipulated factoids and conspiracy theories destroys trust without which institutions and authority cannot function.

Western societies, evolutionary biologist Peter Turchin argues, overproduce overeducated elites who expect high living standards and personal freedoms. They demand that governments shield their lifestyles, irrespective of practicality or cost, from the effects of economic downturns, extreme weather events, terrorism, influx of immigrants, disease or bad personal choices. They assume that bad things happen to others but not to them.

Today, limited employment options, stagnant incomes, the rising costs of middle-class life – housing, food, energy, health, education- and uncertainty mean that their expectations cannot be met. Shortages or rationing of food and energy would not sit well with a population for whom deprivation is a late online delivery, slow Internet download speeds or unavailable crudities of choice. It creates stresses reminiscent of the 1930s.

US founding father John Adams was correct in thinking that democracy wastes, exhausts and murders itself without the right conditions.

Differences and Similarities

These adverse trends extend beyond the West. Trade restrictions, sanctions, climate change and resource scarcity affect many nation’s ability to reach full potential. Deglobalisation is exactly the opposite of the traditional path favoured by low-income countries to improve living standards. Implementing import-substitution policies with the objective of going backwards and reversing technological modernisation is a novel development strategy. As the old saying goes: “you can’t get there from here.”

For the low- and middle income world, options are limited. The game of cheap raw materials and exploitation of a large, cheap workforce has largely run its course. Without access to the best global technologies, foreign investment, access to overseas markets and benign geopolitical conditions, further development is difficult. In addition, there are hangovers to be addressed. Real estate and infrastructure booms which relied on spectacular expansion in borrowing will leave behind bad debts and uneconomic or uncompleted developments. The primacy of political control, intriguing corrupt cliques, and ignorance of basic economics and finance means needed policy changes in most countries are unlikely.

Lack of progress creates a self-fulfilling cycle. Talent may leave, if not forcibly prevented, further limiting development. But the issues around technology and skill cut both ways. The West has benefitted from Russian, Chinese and Indian workers, highly trained in STEM (science, technology, engineering, mathematics) oriented education systems. They have frequently contributed significantly to innovation and technological advances. This would be lost in a more fractured world.

Most non-Western countries save money and energy by dispensing with plebiscites or pay lip-service to democratic formulas. In some, there is no pretence at citizen participation, independent institutions, toleration of dissent or civil society. In others, lack of enforcement of elaborate and much-praised best-in-class legislation and regulations alongside falsified key-performance-indicators has the same end result. Hungary’s Prime Minister Viktor Orban called this ideology – “illiberal democracy”.

The core concern is maintenance of power by individual leaders or the Party, irrespective of the means required. The existing machinery of the state, skilful adaptations of techniques of control and terror pioneered by past Imperial empires, is available to secure outcomes without heed to the cost. This is because the pressure for anything approaching full political enfranchisement is lower than in the West. Democracy means nothing to people who live for the most part in poverty without life’s basics. You can’t eat the right to vote although you might get a few cents for selling it.

These top down systems have advantages. Decisions can be made. Unpopular adjustments can be imposed. It is difficult to imagine China’s zero Covid policy being implemented elsewhere.  However, the choices made by unchallengeable leaders who demand slavish obedience are far from infallible and sometimes unsound. The state’s enormous influence over the economy often engenders a lack of dynamism and encourages corruption.

In any economic or military conflict, the willingness of the population to accept losses and deprivation is an important but not sufficient condition of success. In World War 2, the Soviet Union lost around 27 million (including 11 million military personnel) of its citizens, including nearly 5 million just between June and December 1941. Over the entire campaign, Germany’s Eastern front losses were around 4 million, a fraction of their opponents equivalent to a favourable 3:1 kill ratio. Yet Operation Barbarossa failed and the war was lost. Autocracies are able and willing to inflict greater suffering on subjects than is possible under more democratic systems.

Outside the West, expectations are more limited. In a world of low living standards, the social contract entails different trade-offs within the Maslow hierarchy. Inequality, which is high in the non-West, can be an advantage as rulers can improve their popular standing by shifting the cost of adjustments onto the small group of the wealthy or privileged.

China’s crackdown on private businesses and corruption, frequently difficult to distinguish from Stalinist purges, enjoys support from many low-income citizens. The effect of Western sanctions on Russia have fallen disproportionately on wealthier, more cosmopolitan urban citizens and oligarchs. Being denied access to Apple-Pay, French cheese or your custom-built super-yacht are not major concerns to the vast majority of Russians.

Contradicting Western portrayals, both President Xi Jinping and Vladimir Putin have enviable personal power and support of ordinary citizens for their attempts to improve the position of China and Russia. Their attempts to correct historical slights and throw off Western yokes is popular, outside an Anglicised urban minority.

The fall for the West will be further and therefore harder, heightening discontent which may manifest publicly. It can be highly organised and effective, such as France’s gilets jaunes (yellow vests) movement. Outside the West, any dissent can and will be suppressed quickly and brutally.

But the fracture between different parts of the world will mean reduced global co-operation and little advancement on critical issues – climate change, public health and refugees. Lack of contact and scholarly or people-to-people exchanges will confirm biases and encourage adversarial worldviews. Misunderstandings and mistakes will escalate increasing the risk of conflict.

Universal blindness, the likely outcome in an eye-for-an-eye world, benefits few. 

Tyler Durden Sat, 10/29/2022 - 10:30

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EY Eyes Comeback for Biopharma M&A

EY noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021. The $88 billion accounted for most of the…



A recent trickle of mergers and acquisitions (M&A) announcements in the billion-dollar-and-up range suggests that biopharma may be ready to resume dealmaking this year—although the value and number of deals isn’t expected to return to the highs seen just before the pandemic.

2022 ended with a handful of 10- and 11-figure M&A deals, led by Amgen’s $27.8 billion buyout of Horizon Therapeutics, announced December 13. The dealmaking continued into January with three buyouts announced on the first day of the recent J.P. Morgan Healthcare Conference: AstraZeneca agreed to acquire CinCor Pharma for up to $1.8 billion, while Chiesi Farmaceutici agreed to shell out up to $1.48 billion cash for Amryt, and Ipsen Group said it will purchase Albireo Pharma for $952 million-plus.

Biopharmas generated about $88 billion in M&A deals in 2022, down 15% from $104 billion in 2021. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. The number of biopharma deals fell 17%, to 75 deals from 90. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine. [EY]
EY—the professional services firm originally known as Ernst & Young—recently noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021 [See Chart]. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. That $135 billion figure is less than half the record-high $313 billion recorded in 2019, including $261 billion in 70 biopharma deals.

The number of biopharma deals fell 17% to 75 deals from 90. EY’s numbers include only deals greater than $100 million. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine.

We expect this to be a more active year as the sentiment starts to normalize a little bit,” Subin Baral, EY Global Life Sciences Deals Leader, told GEN Edge.

Baral is not alone in foreseeing a comeback for biopharma M&A.

John Newman, PhD, an analyst with Canaccord Genuity, predicted last week in a research note that biopharma companies will pursue a growing number of smaller cash deals in the range of $1 billion to $10 billion this year. He said rising interest rates are discouraging companies from taking on larger blockbuster deals that require buyers to take on larger sums of debt.

“We look for narrowing credit spreads and lower interest rates to encourage larger M&A ($50 billion and more) deals. We do not anticipate many $50B+ deals that could move the XBI +5%,” Newman said. (XBI is the SPDR S&P Biotech Electronic Transfer Fund, one of several large ETFs whose fluctuations reflect investor enthusiasm for biopharma stock.)

Newman added: “We continue to expect a biotech swell in 2023 that may become an M&A wave if credit conditions improve.”

Foreseeing larger deals than Newman and Canaccord Genuity is PwC, which in a commentary this month predicted: “Biotech deals in the $5–15 billion range will be prevalent and will require a different set of strategies and market-leading capabilities across the M&A cycle.”

Those capabilities include leadership within a specific therapeutic category, for which companies will have to buy and sell assets: “Prepared management teams that divest businesses that are subscale while doubling down on areas where leadership position and the right to win is tangible, may be positioned to deliver superior returns,” Glenn Hunzinger, PwC’s U.S. Pharma & Life Science Leader, and colleagues asserted.

The Right deals

Rising interest and narrowing credit partially explain the drop-off in deals during 2022, EY’s Baral said. Another reason was sellers adjusting to the drop in deal valuations that resulted from the decline of the markets which started late in 2021.

Subin Baral, EY Global Life Sciences Deals Leader

“It took a little bit longer to realize the reality of the market conditions on the seller side. But on the buyer side, the deals that they were looking at were not just simply a valuation issue. They were looking at the quality of the assets. And you can see that the quality deals—the right deals, as we call them—are still getting done,” Baral said.

The right deals, according to Baral, are those in which buyers have found takeover targets with a strong, credible management team, solid clinical data, and a clear therapeutic focus.

“Rare disease and oncology assets are still dominating the deal making, particularly oncology because your addressable market continues to grow,” Baral said. “Unfortunately, what that means is the patient population is growing too, so there’s this increased unmet need for that portfolio of assets.”

Several of 2022’s largest M&A deals fit into that “right” category, Baral said—including Amgen-Horizon, Pfizer’s $11.6-billion purchase of Biohaven Pharmaceuticals and the $6.7-billion purchase of Arena Pharmaceuticals (completed in March 2022); and Bristol-Myers Squibb’s $4.1-billion buyout of Turning Point Therapeutics.

“Quality companies are still getting funded one way or the other. So, while the valuation dropped, people were all expecting a flurry of deals because they are still companies with a shorter runway of cash that will be running to do deals. But that really didn’t happen from a buyer perspective,” Baral said. “The market moved a little bit from what was a seller’s market for a long time, to what we would like to think of as the pendulum swinging towards a buyers’ market.”

Most biopharma M&A deals, he said, will be “bolt-on” acquisitions in which a buyer aims to fill a gap in its clinical pipeline or portfolio of marketed drugs through purchases that account for less than 25% of a buyer’s market capitalization.

Baral noted that a growing number of biopharma buyers are acquiring companies with which they have partnered for several years on drug discovery and/or development collaborations. Pfizer acquired BioHaven six months after agreeing to pay the company up to $1.24 billion to commercialize rimegepant outside the U.S., where the migraine drug is marketed as Nurtec® ODT.

“There were already some kind of relationships there before these deals actually happened. But that also gives an indication that there are some insights to these targets ahead of time for these companies to feel increasingly comfortable, and pay the valuation that they’re paying for them,” Baral said.

$1.4 Trillion available

Baral sees several reasons for increased M&A activity in 2023. First, the 25 biopharma giants analyzed by EY had $1.427 trillion available as of November 30, 2022, for M&A in “firepower”—which EY defines as a company’s capacity to carry out M&A deals based on the strength of its balance sheet, specifically the amount of capital available for M&A deals from sources that include cash and equivalents, existing debt, and market cap.

That firepower is up 11% from 2021, and surpasses the previous record of $1.22 trillion in 2014, the first year that EY measured the available M&A capital of large biopharmas.

Unlike recent years, Baral said, biopharma giants are more likely to deploy that capital on M&A this year to close the “growth gap” expected to occur over the next five years as numerous blockbuster drugs lose patent exclusivity and face new competition from lower-cost generic drugs and biosimilars.

“There is not enough R&D in their pipeline to replenish a lot of their revenue. And this growth gap is coming between 2024 and 2026. So, they don’t have a long runway to watch and stay on the sidelines,” Baral said.

This explains buyers’ interest in replenishing pipelines with new and innovative treatments from smaller biopharmas, he continued. Many smaller biopharmas are open to being acquired because declining valuations and limited cash runways have increased investor pressure on them to exit via M&A. The decline of the capital markets has touched off dramatic slowdowns in two avenues through which biopharmas have gone public in recent years—initial public offerings (IPOs) and special purpose acquisition companies (SPACs).

EY recorded just 17 IPOs being priced in the U.S. and Europe, down 89% from 158 a year earlier. The largest IPO of 2022 was Prime Medicine’s initial offering, which raised $180.3 million in net proceeds for the developer of a “search and replace” gene editing platform.

Another 12 biopharmas agreed to SPAC mergers with blank-check companies, according to EY, with the largest announced transaction (yet to close at deadline) being the planned $899 million merger of cancer drug developer Apollomics with Maxpro Capital Acquisition.

“For the smaller players, the target biotech companies, their alternate source of access to capital pathways such as IPOs and SPACs is shutting down on them. So how would the biotech companies continue to fund themselves? Those with quality assets are still getting funded through venture capital or other forms of capital,” Baral said. “But in general, there is not a lot of appetite for the biotech that is taking that risk.

Figures from EY show a 37% year-to-year decline in the total value of U.S. and European VC deals, to $16.88 billion in 2022 from $26.62 billion in 2021. Late-stage financing rounds accounted for just 31% of last year’s VC deals, down from 34% in 2021 and 58% in 2012. The number of VC deals in the U.S. and Europe fell 18%, to 761 last year from 930 in 2021.

The decline in VC financing helps explain why many smaller biopharmas are operating with cash “runways” of less than 12 months. “Depending on the robustness of their data, their therapeutic area, and their management, there will be a natural attrition. Some of these companies will just have to wind down,” Baral added.

M&A headwinds

Baral also acknowledged some headwinds that are likely to dampen the pace of M&A activity. In addition to rising interest rates and inflation increasing the cost of capital, valuations remain high for the most sought-after drugs, platforms, and other assets—a result of growing and continuing innovation.

Another headwind is growing regulatory scrutiny of the largest deals. Illumina’s $8 billion purchase of cancer blood test developer Grail has faced more than two years of challenges from the U.S. Federal Trade Commission and especially the European Commission—while Congress acted last year to begin curbing the price of prescription drugs and insulin through the “Inflation Reduction Act.”

Those headwinds may prompt many companies to place greater strategic priority on collaborations and partnerships instead of M&A, Baral predicted, since they offer buyers early access to newer technologies before deciding whether to invest more capital through a merger or acquisition.

“Early-stage collaboration, early minority-stake investment becomes increasingly important, and it has been a cornerstone for early access to these technologies for the industry for a long, long time, and that is not changing any time soon,” Baral said. “On the other hand, even on the therapeutic area side, early-stage development is still expensive to do in-house for the large biopharma companies because of their cost structure.

“So, it is efficient cost-wise and speed-wise to buy these assets when they reach a certain point, which is probably at Phase II onward, and then you can pull the trigger on acquisitions if needed,” he added.

The post EY Eyes Comeback for Biopharma M&A appeared first on GEN - Genetic Engineering and Biotechnology News.

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IMF Upgrades Global Growth Forecast As Inflation Cools

IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday,…



IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday, painting a slightly less gloomy picture than three and a half months ago, as inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis following Russia’s invasion of Ukraine has been less severe than initially feared.

But, as Statista's Felix Richter notes, that’s not to say the outlook is rosy, as the global economy still faces major headwinds.

However, the IMF predicts the slowdown to be less pronounced than previously anticipated.

Global growth is now expected to fall from 3.4 percent in 2022 to 2.9 percent this year, before rebounding to 3.1 percent in 2024.

The 2023 growth projection is up from an October estimate of 2.7 percent, as the IMF sees far fewer countries facing recession this year and does no longer anticipates a global downturn.

Infographic: IMF Upgrades Global Growth Forecast as Inflation Cools | Statista

You will find more infographics at Statista

One of the reasons behind the cautiously optimistic outlook is the latest downward trend in inflation, which suggests that inflation may have peaked in 2022.

The IMF predicts global inflation to cool to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent, but significantly lower than the 8.8 percent observed in 2022.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post released along with the report.

“Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.”

The risks to the latest outlook remain tilted to the downside, the IMF notes, as the war in Ukraine could further escalate, inflation continues to require tight monetary policies and China’s recovery from Covid-19 disruptions remains fragile. On the plus side, strong labor markets and solid wage growth could bolster consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for more monetary tightening.

In conclusion, Gourinchas calls for multilateral cooperation to counter “the forces of geoeconomic fragmentation”.

“This time around, the global economic outlook hasn’t worsened,” he writes. “That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.”

However, just because the 'trend' has shifted doesn't mean it's mission accomplished...

That looks an awful lot like Central Bankers' nemesis remains - global stagflation curb stomps the dovish hopes.

Tyler Durden Tue, 01/31/2023 - 14:45

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Nike Escalates Design Battle Against Lululemon

The sportswear giant is accusing lululemon of patent infringement.



The sportswear giant is accusing lululemon of patent infringement.

The Gucci loafers. The Burberry  (BBRYF) trench coat. When it comes to fashion, having a unique design is everything. This is why brands spend millions both creating and protecting their signature looks and the reason, as in the case of Adidas  (ADDDF) , extricating a brand's design from creators who behave badly is a costly and difficult process.

There is also the constant effort to release new styles without infringing on another group's style. This week, sportswear giant Nike  (NKE) - Get Free Report filed a lawsuit accusing lululemon  (LULU) - Get Free Report of infringing on its patents in the shoe line that the Vancouver-based activewear company launched last spring.

After years of selling exclusively clothing, accessories and the odd yoga mat, lululemon expanded into the world of footwear with a running shoe it dubbed Blissfeel last March. These were soon followed by training shoe and pool slide styles known as Chargefeel, Strongfeel -- all three of the designs (including a Chargefeel Low and a Chargefeel Mid design) have been mentioned in the lawsuit as causing "economic harm and irreparable injury" to Nike.

Nike's History Of Suing Lululemon Over Design

The specific issue lies in the technology used to build the shoes. According to the lawsuit filed in Manhattan federal court, certain knitted elements, webbing and tubular structures are too similar to ones that had been used by Nike earlier.

Nike is keeping the amount it hopes to receive from lululemon under wraps but is insisting the company infringed on its patent when releasing a shoe line too similar to its own. Lululemon had previously talked about how its shoe line "far exceeded" its leaders' expectations both in terms of sales and ability to expand.

In a Q1 earnings call, chief executive Calvin McDonald said that the line "definitely had a lot more demand than we anticipated."

Nike has already tried to go after lululemon through the courts once before. In January 2022, it accused the company of infringing on six patents over its at-home Mirror Home Gym. As the world emerged out of the pandemic, lululemon has been billing it as a hybrid model between at-home and in-person classes. 

The lawsuit was also filed in the U.S. District Court in Manhattan but ultimately fizzled out.

When it comes to the shoe line lawsuit, Lululemon has been telling media outlets that "Nike's claims are unjustified" and the company "look[s] forward to proving [their] case in court."


Some More Examples Of Prominent Design Battles

In the fashion industry, design infringement accusations are common and rarely lead to high-profile rulings. While Nike has gone after the technology itself in both cases, lawsuits more often focus on the style or pattern on a given piece.

Shein, a China-based fast-fashion company that took on longtime leaders like H&M  (HNNMY)  and Fast Retailing  (FRCOF) 's Uniqlo with its bottom-of-the-barrel pricing, has faced numerous allegations from smaller and independent designers over the copying of designs -- in some cases not even from fashion designers but artists painting in local communities.

"They didn't remotely bother trying to change anything," U.K.-based artist Vanessa Bowman told the Guardian after seeing her painting of a local church appear on a sweater on Shein's website. "The things I paint are my garden and my little village: it’s my life. And they’ve just taken my world to China and whacked it on an acrylic jumper."

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