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“A Historic Turning Point”: China Reports Blowout Q4 Economic Data As Population Falls For First Time In Decades

"A Historic Turning Point": China Reports Blowout Q4 Economic Data As Population Falls For First Time In Decades

If there was any doubt that…

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"A Historic Turning Point": China Reports Blowout Q4 Economic Data As Population Falls For First Time In Decades

If there was any doubt that China is back - or was back even when it was still largely mostly locked down with various now defunct Covid zero restrictions - all those doubts were magically whisked away moments ago when Beijing's not-so-random number goalseekatron published the data dump for Q4 which - drumroll - not only beat across the board, but absolutely smashed expectations.

Here is what China's National BS (which stands for Bureau of Statistics of course), reported moments ago for a quarter when Covid Zero was still all the rage (before China mysteriously called time on the worst economic policy of the past three years):

  • Q4 GDP +2.9% y/y; down predictably from the Q3 +3.9% as zero Covid policies hammered growth for most of Q4 (China was mostly locked down during the quarter), but smashing the estimate of +1.6% and not far from the highest forecast (range -1.1% to +3.5% from 28 economists).
  • 2022 cumulative GDP +3% y/y; also beating expectations of +2.7%; curiously this was unchanged from the estimate of the first 9 months which was also at +3%
  • Dec. industrial production +1.3% y/y; beating expectations of  +0.1%, and down from Nov's +2.2%
  • Dec. retail sales -1.8% y/y; smashing expectations of a -9% plunge, and a big improvement from Nov's -5.9% plunge.
  • Jan.-Dec. fixed-asset investment excluding rural households +5.1% y/y; also beating expectations of +5%, and a modest slowdown from the Jan.-Nov. print of +5.3%
  • Dec jobless rate 5.5%, down from 5.7% in Nov.

Solid data dump aside, there was continued weakness across property and housing, although as we already know this sector is poised for a huge surge now that China is phasing out its "three red lines" and its bad debt firms are planning up to $24 billion in support for developers.

  • Jan.-Dec. property investment -10% y/y vs -9.8% in Jan.- Nov.
  • Jan.-Dec. residential property sales -28.3% y/y vs -28.4% in Jan.-Nov.

A snapshot of the data:

On paper, all of the above looks great. On paper, however, it's of course all fake as Australia's Bill Birties points out:

It is extraordinary that an economic quarter that saw restrictions across multiple cities for Covid followed by mass nationwide outbreak in December… would see not only as much economic activity as the same period a year earlier, but almost 3% more…

But while the "surprise" beat in China's GDP (and everything else) was tonight's big headline, there was another big headline in the big (non-surprise) decline in China's population. As the NBS reported, China’s total population fell by 850,000 in 2022, to about 1.41 billion at end-2022, a drop for the first time since 1961, the final year of the Great Famine under former leader Mao Zedong.

According to the data, a total of 10.41 million people died, a slight increase from around 10 million recorded in recent years (good thing there were no pandemic at the time). At the same time, some 9.56 million babies were born in 2022, down from 10.62 million a year earlier, the lowest level since at least 1950, despite efforts by the government to encourage families to have more children.

“This is a truly historic turning point, an onset of a long-term and irreversible population decline,” said Wang Feng, an expert on Chinese demographic change at the University of California, Irvine.

While the decline officially began last year, with deaths outstripping births, the FT notes that some demographers argue that the trend likely started before then. Fuxian Yi, a demographer at the University of Wisconsin-Madison, estimated that China’s population started to fall in 2018, but the drop was obscured by “faulty demographic data”.

“China is facing a demographic crisis that far exceeds the imagination of Chinese authorities and the international community,” said Yi, noting that the trend will act as a long-term drag on the country’s property market, a crucial engine of growth.

“Abundant labor has been the fuel that has driven China’s rapid growth for more than four decades,” said Yi, “and now China is flying at high speed without enough fuel.”

Some economists argue that the rise of automation will offset rising labour costs as the number of workers shrinks.

China's demographic disaster aside, the stellar economic data - at least in the context of consensus expectations - was still quite poor: China’s economy grew at the second slowest pace since the 1970s in 2022 as Covid restrictions hammered activity, though better-than-forecast fourth quarter and December data add to optimism it may be primed for a recovery; it was also well below the governments target last year of around 5.5%, although that's where 2023 comes in. According to Ho Woei Chen, an economist at United Overseas Bank in Singapore, China’s latest economic data suggest the momentum for recovery will be stronger in 1Q this year with the reopening of the borders and relaxation of the regulatory oversight in some sectors including property. And it's all uphill from there.

“We are maintaining our forecast for 2023 at 5.2%. Economic recovery is likely to accelerate in 2Q as the population achieves herd immunity, which will pave the way for further normalization in activities and a v-shaped recovery in private consumption”

“On the key risks, we remain cautious on the external outlook and the sluggish real estate market could also take the tailwind out of this recovery.”

Still, even 5.2% might not be enough. According to the head of the National Bureau of Statistics, Kang Yi, China has to more than double the current per capita GDP of about $12,700 in order to achieve its 2035 goal, although now that the population is declining, this target may be easier to achieve even if it means eventually surrendering the superpower status to India which as of this moment is officially the world's most populous country.

Tyler Durden Mon, 01/16/2023 - 22:18

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…

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To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….

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Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 

 

About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. www.insilico.com 


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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.

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Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 

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This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

More Travel:

With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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