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Bonds Extend Recovery

Overview: Broadly speaking, the dollar’s
recent pullback was extended today but the momentum appears to be slowing,
perhaps ahead of tomorrow’s US CPI…



Overview: Broadly speaking, the dollar's recent pullback was extended today but the momentum appears to be slowing, perhaps ahead of tomorrow's US CPI report. The Dollar Index is slipped to its lowest level since September 25 before steadying. The greenback is mixed as the North American market is set to open. The dollar bloc and Swedish krona are the underperformers. The Swiss franc is the best, up about 0.2%, while the yen and euro are little changed. Most emerging market currencies but the Chinese yuan are firmer. Gold is extending its recovery after consolidating yesterday. It is above $1870 after bottoming at the end of last week near $1810.50. The next upside target is around $1880. 

The rally in bonds is continuing. The 10-year US Treasury yield peaked near 4.88% last Friday and is near 4.56% today, off around nine basis points to approach the 20-day moving average (4.53%), which it has not traded below in a month. The markets absorbed $209 bln in US bills yesterday and $46 bln sale of three-year notes. Today, the Treasury is back with $56 bln in a four-month bill offering and $35 bln 10-year notes. European benchmark 10-eyar yields are mostly 5-8 bp lower. Equities are mostly firmer. The MSCI Asia Pacific Index is up for the fifth consecutive session as Japan and China reportedly ready more fiscal support. Europe's Stoxx 600 is slightly firmer and US index futures are trading with a higher bias. November WTI is trading quietly in yesterday's range. Note that after rallying by more than 30% in the first two days of the week, Europe's natural gas benchmark is off slightly today despite what Finland says looks like sabotage of its pipeline with Estonia. The US natgas futures contract is higher for the seventh consecutive session. During this run, it has risen by about 20%.

Asia Pacific

The Bank of Japan raised its FY2023 CPI forecast to 2.5% in July from 1.8% in April. Kyodo reported that it is considering raising it to 3% when it updates its forecasts last this month (October 30-31). The report also suggested that officials may also revise up its GDP forecast from 1.3%, which it shaved in July from 1.4%. The IMF revised up its forecast for Japan's GDP to 2% from 1.4% it projected in July. The IMF raised its inflation forecast as well to 3.2% this year and 2.9% next year (from 2.7% and 2.2%, respectively). The BOJ's forecasts are based on the fiscal year while the IMF's forecasts are based on calendar years. Still, the IMF notes that Japan's per capita GDP may rise 2.4% this year to lead the G7. The US is in second place at 1.6%. The IMF expects Japan to lead the G7 next year as well in per capita growth. 

China reports Q3 GDP next week. The median forecast in Bloomberg's survey is for 1% quarter-over-quarter growth and 5% year-to-date year-over-year. Economists in Bloomberg's monthly survey look for faster growth this quarter. The IMF's news forecasts are for the world's second-largest economy to grow 5% this year (down from 5.2% in April's forecast) and 4.2% next year (0.3% lower than it previously anticipated). Reports suggest Beijing is considering fiscal stimulus as part of the new package of economic measures. The talk is of CNY1 trillion (~$137 bln) of new debt to fund more infrastructure projects.

The dollar briefly traded below JPY148.20 yesterday where options for about $830 mln expire today. On the topside, the dollar peaked near JPY149.10, a little below Monday's high (~JPY149.25). The dollar remains in that range today. We are monitoring two technical developments. First, the dollar has not closed below the 20-day moving average since late July. It is found now near JPY148.65. A close below it would signal a weakening of the trend, which is a good segue to the second technical development. The five-day moving average is poised to fall below the 20-day moving average for the first time since late July over the next day or two. With a minimum number of whipsaws, the moving average cross over has caught the big moves since early last year. It may be a proxy for trend-following, momentum, and model-driven participants. For the fifth consecutive session, the Australian dollar traded above the previous session's high today. Today's high near $0.6445, matches an eight-day high. Options for about A$615 mln at $0.6475 expire today. More important resistance, especially on a closing basis, is at $0.6500. Daily momentum indicators are constructive. The central bank meets next on November 7. The futures market sees practically no chance of a move. The convergence of the five, 20- and 30-day moving averages of dollar's exchange rate against the yuan (~CNY7.2935-CNY7.3015) suggests Chinese officials have been successful in steadying the yuan. The dollar has not settled below CNY7.2550 for the two months. The dollar is trading near the upper end of this week's range (~CNY7.3020). The PBOC set the dollar's reference rate at CNY7.1779 compared with the average in the Bloomberg survey for CNY7.2841. 


The ECB's survey of one- and three-year inflation expectations were little changed in August from July. Eurozone CPI is seen at 3.5% over the next 12-months, up slightly from 3.4% in June and July. Expectations peaked at 5.0% last year and was at 5.0% as recently as March. The three-year project ticked up to 2.5% from 2.4%. It has been between 2.3% and 2.5% since the end of Q1. Recall that the preliminary estimate was that CPI rose 4.3% in the 12-months through September and the core rate at 4.5%. Another large decline is expected when the October CPI is reported at the end of the month as last October's 1.5% surge drops out of the 12-month comparison. A conservative estimate puts eurozone October CPI 3.3%-3.5%. 

When bad news is good news:  The German government announced it will downgrade this year's growth forecast to a contraction of 0.4% from the previous projection of 0.4% growth. That is the bad news. The good news is that contraction will allow the federal government to increase borrowing next year by about 5 bln euros. Finance Minister Linder had projected 2024 net borrowing of 16.6 bln euros, which would be consistent with the "debt brake."  Yesterday, the IMF's updated World Economic Outlook cut Germany's growth this year to -0.5% from -0.3% in April.

The UK reports August GDP tomorrow. After contracting by 0.5% in July, 0.2% growth is expected in August. It will not be because of the industrial sector as it likely continued to contract, led by declining manufacturing output. Instead, a recovery in services may be the key driver. Output fell by 0.5% in July and appears to have bounced back (~0.3%) in August. Construction output may have steadied after falling by 0.5% as well in July. The trade balance looks to have widened.

The euro ended an 11-week slide last week and rose to an 11-session high yesterday of $1.0620. It extended the gains to almost $1.0630 in late Asia Pacific turnover where sellers lurked and quickly took the single currency back slightly through $1.0595. Recall that it bottomed last week with a new low for the year, slightly below $1.0450. Many still are not persuaded that anything more than a counter-trend bounce is happening and are looking for places to sell it. The $1.0640 area corresponds to the (38.2%) retracement of the leg down from late August's high (~$1.0945). The (50%) retracement if closer to $1.07. Sterling rose to a 13-session high yesterday near $1.2290 and edged briefly through $1.2300 today. However, the momentum has stalled. Initial support may be around $1.2260. Last week's low, slightly above $1.2035, was a six-month low. It settled yesterday above its 20-day moving average (~$1.2255) for the first time since late August. The five-day moving average is set to move above the 20-day moving average today or tomorrow for the first time since late July. A move above $1.2310 could lift the tone and could spur a move toward $1.2400. If we are right about the bottoming pattern, over the slightly longer term, sterling can challenge the 200-day moving average (~$1.2440) and the (61.8%) retracement objective (~$1.2475). 


US producer prices are not a problem. The headline pace has fallen from 6.4% year-over-year at the end of last year to 0.1% in June. It has recovered by to 1.6% in August and is expected to have remained there in September. That said, the best news is behind us. At an annualized rate, PPI was flat in Q1 and was slightly negative in Q2. However, with a 0.3% increase in September, the annualized increase in Q3 would be 4.2%. The core rate may have risen to a 2.3% year-over-year pace from 2.2%. August's 2.2% rate was the lowest since January 2021. More important, is the CPI, which will be reported tomorrow. After rising in July and August, the year-over-year rate is expected to slow to 3.6% from 3.7% and the core rate, which has not risen since March, is seen slipping to 4.1%. That would be the slowest pace in May 2021. Lastly, late in the session, the minutes from last month's FOMC meeting will be released. Recall that the FOMC fully embraced the soft-landing scenario through its forecasts. The staff backed away from its recession call. A dozen of the 19 officials still saw a hike here in Q4 and the median dot showed two cuts next year rather than four.

The US dollar recorded its low yesterday (~CAD1.3570) against the Canadian dollar in the Asia Pacific session. It primarily traded between about CAD1.3575 and CAD1.3610 in North America. It was the greenback's first gain in three sessions. The failure to take out CAD1.3560 warns that this leg down may be over. It began with the six-month peak last Thursday near CAD1.3785. A move above CAD1.3620 could signal a move toward the CAD1.3650 area, and maybe CAD1.3680-CAD1.3700. The Mexican peso rose by about 1.5% yesterday, its largest increase in a month. Lower US rates and the risk-on backdrop may have encouraged the wave of peso buying. The dollar peaked before the weekend a little below MXN18.49. It traded inside Friday's range on Monday and then broke lower yesterday to a little below MXN17.92. The low today has been closer MXN17.85. Nearby support is seen in the MXN17.78-79 area, which houses the 200-day moving average and the (61.8%) retracement of the last leg up that began on from MXN17.35 on September 29.



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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…



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….



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. 

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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.



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. 


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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