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COVID Kills New Zealand’s Chance To Be First G10 Nation To Hike Rates

COVID Kills New Zealand’s Chance To Be First G10 Nation To Hike Rates

As we previewed yesterday when we reported the surprise decision by New Zealand to impose a new draconian nationwide lockdown following the emergence of one new covid case,

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COVID Kills New Zealand's Chance To Be First G10 Nation To Hike Rates

As we previewed yesterday when we reported the surprise decision by New Zealand to impose a new draconian nationwide lockdown following the emergence of one new covid case, the kiwi tumbled as expectations of an imminent rate hike by the RBNZ - which would make it the first G10 nation tightening monetary policy - quickly crumbled.

And sure enough, after previously creating a market expectation that it would implement its first rate hike, overnight the Reserve Bank of New Zealand - which as a reminder is now tasked with also containing the country's massive housing bubble it helped create - opted for a (hawkish) hold vs dwindling expectations for a 25bps hike as RBNZ policymakers quickly shifted gears after the country was put into a snap COVID-19 lockdown over a handful of new cases.

The RBNZ's Statement laid out a very clear tightening bias, but it explained that the Bank chose not to tighten due to the recently imposed lockdown. The RBNZ concluded with the following: "The Committee agreed that their least regrets policy stance is to further reduce the level of monetary stimulus so as to anchor inflation expectations and continue to contribute to maximum sustainable employment. They agreed, however, to keep the OCR unchanged at this meeting given the heightened uncertainty with the country in a lockdown."

While the RBNZ just missed its chance to be the first in G-10 for a rate hike (Norway now on track, see below), the central bank’s rate projections suggest this is a "hawkish hold", and may not be bullish for rates in the medium term. The central bank's stance was framed as hawkish as it remains on a course towards removing monetary stimulus given the backdrop of strong economic data, with this decision merely a "pause" in the face of a COVID threat, whilst banks suggest that lockdown downfalls can be addressed by fiscal policy.

The NZD saw a knee-jerk lower to a new YTD low (0.6868) upon the surprise hold but quickly retraced it and reclaimed a 0.6900 handle as the rate path saw sizeable upgrades across the board. The kiwi however encounters some mild pressure as US players enter the fray and react to the RBNZ.

The adverse development our of New Zealand has implications far beyond just local markets. Akira Takei at Asset Management One in Tokyo said that the RBNZ's decision to keep its policy on hold “poured cold water” on the outlook for rate hikes and asset-purchase tapering globally. According to the strategist, RBNZ’s decision signifies the risk of virus infections that other central banks can’t ignore. At the same time, its projection for higher policy rates is unlikely to materialize

“It’s rare that central banks’ forecasts have proved correct.” That’s because “they reflect policy makers’ hopes” that economies will fare well. This especially relevant in the context of the Fed which also appears overly confident in the economic outlook, and the emerging risk is that unreasonable tapering could risk causing the economy to slow and shift inflation expectations downward, Takei added.

Echoing this sentiment, Reuters this morning notes that New Zealand’s decision on Wednesday to hold fire on a highly-anticipated rate hike "is a reminder of the challenges major central banks face in their bid to step away from emergency stimulus while the coronavirus remains a threat to growth." That said, a hike is still expected before the year-end, lending some support to a kiwi dollar that has taken a beating over the last two sessions.

So with the Delta variant delaying an expected rate hike in New Zealand, Norway will likely be the first G10 economy to begin the journey out of an era of emergency-level interest rate lows. Here's a look at where major central banks stand on the path out of pandemic-era money printing, via Reuters.

Norway

  • Norges Bank now looks set to lead, with a hike from Norway's record low 0% interest rate flagged for September. In fact, the central bank plans to raise rates four times by mid-2022 as the economy recovers. It doesn't intervene in bond markets, so the taper debate is not applicable.

New Zealand

  • The Reserve Bank of New Zealand kept its benchmark cash rate at a record-low 0.25% on Wednesday while it waits to see where a nascent COVID-19 outbreak will lead for the economy. It still thinks rates are rising soon, though, and published an aggressive outlook forecasting the cash rate above 0.5% by the end of this year over 2% in 2024.

Canada

  • The Bank of Canada announced tapering in April and in July cut its weekly net purchases of government bonds to a target of C$2 billion ($1.6 billion) from C$3 billion. It is expected to further trim its bond-buying programme this year, setting the stage for a rate hike in late 2022. Canada's key rate is at a record low of 0.25%.

United States

  • The Federal Reserve has moved its first projected rate increases to 2023 from 2024. With the economy growing robustly and the jobs market rebounding, several officials have signalled it is nearly time to start withdrawing support. Most economists in a recent Reuters poll expected the Fed to announce a plan to taper its $120 billion monthly asset purchase scheme in September. A resurgent Delta variant of COVID-19 remains a headwind and any signs that the recovery is at risk could prompt a re-think of the taper timeline.

Australia

  • The Reserve Bank of Australia surprised markets this month by sticking with a decision to start tapering bond buys in September to A$4 billion ($2.9 bln) per week from A$5 billion. The RBA considered the case for a delay but decided fiscal stimulus was "more appropriate" to deal with virus lockdowns. But a rate rise seems a long way off. The central bank has stressed that its 0.1% cash rate will not be raised until inflation is sustainably within its 2-3% target band, a goal unlikely to be met before 2024.

Britain

  • The Bank of England this month laid out plans to wean the economy off pandemic-era stimulus, although for now it has kept its bond-buying at full speed and said an eventual reduction in support would be "modest".  Policymakers expect inflation to hit 4% by year-end -- double the BoE's target -- but they are confident the rise will be temporary. So the BoE's bond-buying programme remains unchanged at 895 billion pounds ($1.24 trillion) for now, with rates at just 0.1%. Economists polled by Reuters do not expect a rate rise until 2023. Markets are pricing one for the second half of 2022.

Sweden

  • Swedish inflation is rising and just below the Riksbank's 2% headline target but policymakers reckon the rise is temporary and warn against withdrawing support too quickly. Rates will stay at 0% for years, they believe. However, with Sweden's economy already back to pre-pandemic levels, the Riksbank has called time on bond purchases -- a 700 billion crowns ($80.92 billion) asset purchase programme is scheduled to expire at end-2021.

Euro zone

  • Economists expect discussions about rolling back the European Central Bank's 1.85 trillion euro ($2.21 trillion) Pandemic Emergency Purchase Programme (PEPP), scheduled to run until at least end-March, to begin in the next quarter. Even then, the ECB is expected to maintain hefty support via existing asset purchases -- a view cemented by a recent decision to change its inflation target to 2%. It looks likely to be one of the last major central banks to hike rates, which were last lifted in 2011.

Japan

  • Japan will remain a noticeable laggard at withdrawing pandemic-era stimulus. The $4.4 trillion economy will grow at a much slower pace than expected given a resurgent COVID-19. Economists expect the Bank of Japan to hold its short-term interest rate target at -0.1% and the 10-year bond yield target around 0% when it meets in September. And elusive inflation means rates will remain low for some time.

Switzerland

  • The Swiss National Bank also looks set to keep monetary policy ultra-loose for the foreseeable future and believes projected higher inflation  is no reason to change course. The SNB has the world's lowest interest rate at -0.75% and it uses foreign exchange purchases as a key monetary policy tool. One spot of bother is a resurgent franc, which has gained nearly 2.5% versus the euro since late June. Intervention to counter a strong currency would bloat an already vast SNB balance sheet, but not intervening means the export-led rebound takes a hit

Investors will also be hoping to get the latest clues on the timing and pace of the U.S. Federal Reserve’s asset purchase tapering meanwhile. They’ll be poring over the minutes due later on Wednesday of the July 27-28 meeting, when officials declared the recovery on course despite the rise of the Delta variant of the coronavirus.

The readout will be key to the short-term outlook for the greenback and Treasury yields, especially if it confirms more policymakers are leaning towards tapering bond purchase plans by the end of the year. Of course, economic data since then has muddied the waters: strong labor market numbers have spurred a number of policymakers to ramp up talk of an earlier-than-expected start to tapering. On the other side, an unexpectedly large miss in retail sales coupled with a plunge in consumer sentiment suggests a sharp slowdown in economic growth early in the third quarter.

Fed Chair Jerome Powell said on Tuesday it remained unclear whether the heightened outbreak of the coronavirus Delta variant will have a noticeable impact on the economy.

Tyler Durden Wed, 08/18/2021 - 09:00

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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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