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Dollar Thumped

Overview: The prospects of a UK-EU deal and US stimulus continue to underwrite risk appetites and weigh on the dollar.  Equity markets are moving higher.  Led by Australia and China, the MSCI Asia Pacific Index rose to new record highs, while Dow Jones…



Overview: The prospects of a UK-EU deal and US stimulus continue to underwrite risk appetites and weigh on the dollar.  Equity markets are moving higher.  Led by Australia and China, the MSCI Asia Pacific Index rose to new record highs, while Dow Jones Stoxx 600 in Europe is at its best level since February.  US shares are also trading higher.  Bond markets are quiet, with European yields paring yesterday's gains while the US 10-year benchmark is hovering around 0.92%.  The dollar has lurched lower against nearly all the world currencies today.  The Norwegian krone, aided by a central bank suggesting it could be among the first major central banks to begin normalizing monetary policy (not until H1 22). The Australian dollar,  boosted by a strong employment report, are leading the majors.  The euro's roughly 0.25% gain to a new 18-month high is a laggard.  Meanwhile, emerging market currencies are mostly higher, and the JP Morgan Emerging Market Currency Index is higher for the third consecutive session.  Gold is shining in the weak dollar environment.  It has risen by about $50 an ounce over the past three sessions, and straddling $1880, it reached its best level in nearly four weeks.  Oil is bid as well.  Ideas that demand will improve, and a drawdown in US stocks, coupled with the dollar's weakness, lifted the January WTI contract to almost $49 a barrel, while Brent is closing in on $52.  

Asia Pacific

For the second month in a row, Australia reported employment data considerably better than economists forecast.   It created more than double the 40k jobs the Bloomberg median forecast anticipated, and the October surge pushed even higher to 180.4k (from 178.8k).  Nearly all the new jobs were full-time positions (84.2k).  While the participation rate increase to 66.1% from 65.8%, the unemployment rate eased to 6.8% from 7.0%.  Last November, the participation rate was 65.9%.

China avoided being cited as a currency manipulator by the US Treasury Department, but it remains on its watch list. It renewed its call for greater transparency.  It noted as many observers have that its large current account surplus, relatively steady yuan, and a small increase in reserves does not add up.  It notes that large banks are short yuan.  No one has argued that the yuan is free-floating.  It is not fully convertible.  Several other areas are problematic, including the rising errors and commissions catch-all category. 

MSCI announced that, like the other benchmark providers, it too was going to drop companies cited by the US as tied to the Chinese military.  MSCI will drop seven companies in early January.  S&P Dow Jones is dropping eight companies, and FTSE Russell is dropping 8.  A further adjustment could be necessary, as the subsidiaries and affiliates of the 35 companies cited by the US were not excluded on this first cut.  MSCI estimated that 0.04% of its global benchmark and 0.25% of its emerging market index are impacted.  After surveying 100 fund managers, MSCI concluded that reversing the decision will not a top priority for the Biden administration.   

With the US Treasury keeping Japan its fx watch list as well, Japanese officials may be quieter as the dollar is poised to break below JPY103 than they were a month ago when the dollar was slipping through JPY104. The greenback has not been above JPY103.60 in Asia and is testing JPY103 in the European morning.  This is a new nine-month low for the dollar, which hit JPY101.20 in the March chaos.  The Australian dollar jumped above $0.7600 and is at a new 18-month high near $0.7640.  The next chart point is around $0.7675.  It is the fourth consecutive gain for the Aussie.  Barring a dramatic reversal tomorrow, it will be the seventh straight weekly advance that began near $0.7000 at the end of October.   The PBOC's reference rate for the dollar was CNY6.5362, spot on the Bloomberg bank survey's median forecast.  The yuan is flat on the day.  Against the offshore yuan, the dollar traded to CNH6.50 before returning to yesterday's settlement level (~CNH6.5125).  


On the heels of the Treasury's announcement, the Swiss National Bank argued that it is not manipulating its currency, but it will continue to intervene as necessary.  All intervention is not manipulation, and if a country acts like a judge and a jury in determining the difference, it undermines the effort for international cooperation. At the conclusion of its policy meeting today, the SNB left rates unchanged and reiterated that the franc was "highly valued."  SNB President Jordan argued that its intervention is not aimed at securing a trade advantage but fighting deflationary pressures.  Unlike the US, eurozone, and Japan, there are not sufficient domestic bonds for its to buy as a result of its fiscal policies.  Note that the SNB's reserves have risen by more than $100 bln in H1 20. 

Norway's central bank sees a somewhat faster increase in rates starting in H2 2022 than it did in September.  It makes Norway a leading candidate to be among the first of the high-income countries to begin normalizing policy.   The Norges Bank has run a fairly orthodox policy.  No QE.  No negative rates.  The government did tap the $1.2 trillion sovereign wealth fund for resources.   The currency is the weakest of the majors this year, and that may be helping keep price pressures firm and allowing it to contemplate a hike in 18 months.  

The outcome of the Bank of England meeting is awaited.  No change is in rates, or Gilt purchases are expected.  Barring a surprise, it will be a non-event for sterling, where the market is focused on the weak dollar backdrop and the prospects for a last-minute UK-EU deal.  We had been skeptical that a deal could be struck.  From the outside, it looked like an old married couple talking at each other and not to each other, and there was much posturing.  The UK was jealously seeking to reassert what it sees as its sovereignty. The EU was jilted and determined not to give any incentive whatsoever to others who might contemplate leaving.  Still, since the middle of last week's  Johson/von der Leyen dinner, we have sensed a change and a greater commitment to getting a deal done.  And at the same time, we continue to recognize that even with an agreement, there will be frustrating disruptions in the UK-EU trade early next year. 

The euro pushed to nearly $1.2245 in late Asia turnover and has stabilized in the European morning.  An option for 2.2 bln euros expires tomorrow at $1.2250.  Support now is seen in the $1.2180-$1.2200 area.  Sterling is trading higher against the dollar for the fourth consecutive session and is approaching $1.36.  It finished last week near $1.3225. Partly, this reflects the weak dollar environment, but sterling is also recovering against the euro.  The euro is slipping below GBP0.9000 after hitting GBP0.9230 at the end of last week.  Important support is seen near GBP0.8980, which houses the lows from earlier this month and the 200-day moving average.  A convincing break could target GBP0.8900.  


The Federal Reserve said little new and did nothing.  What it did say was important, though. It linked its future bond purchases to "substantial" progress toward its targets.  The median forecast of the members for growth was ratcheted up and unemployment down.  In September, four officials saw a hike in 2023 as likely being appropriate, and now five do.  The extension of the dollar swaps and repo facility for foreign central banks is simply prudent and predictable, even if the former is a shadow of its former self. The latter does not appear to have been used.  The markets wobbled initially; maybe disappointment in some quarters that the pace and composition of its bond purchases were unchanged, but it quickly found its footing.  Stocks firmed into the close, and the long-end yields pulled back.  

Treasury issued its long-overdue report on the international economy and the foreign exchange market.  It cited Switzerland and Vietnam as currency manipulators and added India, Thailand, and Taiwan to the watch-list.  The watch-list also includes China, Japan, South Korea, Germany, Italy, Singapore, and Malaysia.  It is the first time since China was cited last year (and reversed quickly after signing the Phase 1 trade deal), which itself was the first time since 1994 that one or more countries were cited as manipulators.   It was a mechanistic exercise.  There are three criteria, bilateral imbalance with the US, large global imbalance, and repeated intervention on one side of the market.  It makes no difference if a currency is overvalued, as is the Swiss franc or is too small and too poor, like Vietnam.  The currency manipulators are to enter into talks with the US.  Treasury Secretary Mnuchin will not be there.   When Mnuchin took office, there was a coherent dollar policy.  Since 1995, the US refrained from talking the dollar down.  Rubin's strong dollar policy stuck more or less.  For the most part, other large countries refrained from doing the same.  It was an arms control agreement of sorts.  China's behavior complicated matters, but the dollar policy is in disrepair. 

The US reports weekly jobless claims (a small decline is expected after last week's surprise increase), housing starts and permits (among the sectors leading the recovery), and the Philadelphia and Kansas City Fed surveys (likely softer).  These data points do not have the heft to reverses the dollar's weakness or substantially alter views of the economy.  The weakness seen in yesterday's retail sales bodes ill for next week's more comprehensive personal consumption report.  The flash PMI suggests the economic momentum waning into year-end, especially in services, which seems related to the pandemic.  Today, Canada has a light agenda after yesterday's CPI, where the firmness of the headline masked flat underlying measures.  Tomorrow it reports October retail sales, which are most unlikely to match September's strength (1.1% headline gain and 1.0% excluding autos.   Mexico's central bank meets and is widely expected to keep the overnight target rate at 4.25%.  There was one dissent last month, and it could be repeated again. Still, the majority seem to want to wait for confirmation that price pressures are moving lower in a sustained fashion rather than a one-off related to sales discounts.  

The US dollar is trading heavily against the Canadian dollar near CAD1.2700.  The 2.5-year low was set a couple of days ago, a little below CAD1.2680.  The price action has been chopped and has seen intraday upticks extent to almost CAD1.2800.  Note that today's high of CAD1.2750 matches the strike of a $1.1 bln option that expires today.  The greenback tested the MXN20.25 level earlier this week.  That may have been the bounce that some had looked for.  A four-day dollar bounce ended Tuesday, and today it is offered for the third consecutive session.   It is trading near MXN19.75, and the low seen last week was near MXN19.70.  A break of that targets the MXN19.50 area.  



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NYC biotech LB Pharmaceuticals eyes $75M for new take on decades-old schizophrenia drug

As Karuna Therapeutics wraps up its FDA approval request for what could be the first new type of schizophrenia drug in decades, another East Coast biotech…



As Karuna Therapeutics wraps up its FDA approval request for what could be the first new type of schizophrenia drug in decades, another East Coast biotech is raising $75 million to test an adjusted version of a decades-old medicine for the disorder next year.

LB Pharmaceuticals has secured about $35 million so far and expects another $40 million in the round, according to an SEC filing on Thursday. Per the financial document, its board includes directors associated with Vida Ventures, Pontifax, Deep Track Capital and TCGX, a crossover firm that has invested in multiple nine-figure biotech financings in recent months, including Carmot Therapeutics, Alkeus and Upstream Bio.

LB declined to comment.

The New York City biotech plans to run a Phase II trial of a chemically differentiated form of amisulpride, a D2 and D3 antagonist that has been available in Europe and more than 50 countries for decades, according to an investor deck from June. Sanofi marketed it as Solian, which generated €135 million in sales in 2002 for the French Big Pharma. It’s since become available as a generic.

LB’s board includes Piero Poli, CEO of Swiss drugmaker Rivopharm, which produces generic amisulpride. In February 2020, Acacia Pharma secured FDA approval for an IV formulation of amisulpride in certain postoperative patients with nausea, marketing it as Barhemsys.

With its methylated version of amisulpride, LB says its oral asset LB-102 has the potential to be more effective at lower doses by improving blood-brain barrier permeability, per the investor deck. Its new chemical structure gives LB-102 IP protection until “at least 2037.” LB has positioned the drug as a blockbuster treatment that could generate $1 billion or more in annual sales, pointing to antipsychotic prescriptions in the EU with an average price of $2,000 per month.

The drug is set to go into Phase II testing in adults with acute schizophrenia in the first quarter of next year, per the June document.

The company expects to enroll about 350 people at 25 sites, testing whether three doses of the drug are better than placebo based on the commonly used schizophrenia clinical trial measure known as PANSS, or Positive and Negative Syndrome Scale. Karuna’s M1/M4-preferring muscarinic agonist KarXT has passed two Phase III trials that use that measure, leading to massive financing hauls for the biotech and Cerevel Therapeutics. Boston-based Karuna plans to submit its approval request to the FDA this quarter. Meanwhile, Sumitomo and Otsuka’s ulotaront failed a Phase III on the PANSS test two months ago.

LB expects the study to focus on in-patients for four weeks. Pending the mid-stage results, the company would likely then take LB-102 into multiple Phase III trials in 2025, with plans to submit an NDA in 2028, per the June presentation. The company sees schizophrenia as the first step, with potential for studies in depression, bipolar depression and other indications.

Zachary Prensky

The drug developer is led by a former family office manager, CEO Zachary Prensky. LB’s medical chief is Anna Eramo, who previously ran clinical and medical affairs at Lundbeck’s US operations and worked on the development of Rexulti, approved for schizophrenia and other indications. Science chief Andrew Vaino and chief financial officer Marc Panoff were previous executives at Retrophin.

Prensky co-founded LB with Vincent Grattan, a pharmacist who came across amisulpride in the 2000s while working on medication managements in multiple prisons. “As many are aware, correctional facilities are de facto mental health hospitals, and I wanted to make sure we were stocking the most reliable medications,” he told Psychiatric News in 2021.

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Dana-Farber, Brigham breakup could lead to a ripple effect for CGT clinical trials for cancer

Dana-Farber Cancer Institute announced on Sept. 14 that it is securing a new joint venture with Beth Israel Deaconess Medical Center, marking a breakup…



Dana-Farber Cancer Institute announced on Sept. 14 that it is securing a new joint venture with Beth Israel Deaconess Medical Center, marking a breakup of its decadeslong adult cancer care partnership with Brigham and Women’s Hospital.

The news shocked Brigham, which had been negotiating a partnership extension with Dana-Farber for the past 15 months, according to the Boston Globe.

There are around 20 ongoing cell therapy clinical trials under the Dana-Farber Brigham Cancer Center, which comprises 12 treatment centers with experts from Dana-Farber and Brigham working together. Brigham also has its own gene and cell therapy institute and a lab dedicated to next-generation, genetically-modified CAR-T cell therapies for cancer.

With the Dana-Farber contract set to end in 2028, concerns have been raised about the impact on current cell and gene therapy (CGT) studies and ones that are scheduled to start, due to the complex nature of the treatments involved.

Jason Foster

Manufacturing CGTs is a skill- and labor-intensive process. Ori Biotech CEO Jason Foster told Endpoints News that hospitals and research centers often work together to make them on-site for clinical trials, with highly skilled experts from the specialty centers playing a key role. UK-based Ori develops technologies that automates CGT manufacturing.

At Dana-Farber Brigham Cancer Center’s cellular therapies program, cells are processed at an outside commercial facility or at the Connell and O’Reilly Families Cell Manipulation Core Facility.

When such partnerships come to an end, “that kind of [specialist] knowledge loss is something that will impact both the trajectory of [CGT] trials, but also the time it takes to get these products to patients,” Foster added.

These potential negative impacts on trials would only compound preexisting barriers to access to CGTs, including high costs and lengthy manufacturing processes. Estimates suggest that 25% of patients die while waiting for CAR-T treatments, according to ASCO Post.

Lee Buckler

Lee Buckler, senior vice president of advanced therapies at Blood Centers of America, told Endpoints in an email that collaboration between research institutes and healthcare providers was of significant — if not critical — value to the testing of CGTs.

A Brigham spokesperson said that the hospital is one of the largest recipients of NIH funding and does not expect any changes to trials already under agreement, adding it would continue to be a leader in the CGT space. “We are also planning for a new, state of the art Brigham facility which will include the medical oncology specialty,” the spokesperson said.

Dana-Farber did not respond to Endpoints before deadline.

Problems with CGT trials could be both the cause and the effect of partnership breakdowns. Buckler said that general hospitals are often reluctant to facilitate the kinds of clinical trial protocols associated with innovative CGTs, which may drive research centers to align with partners more willing to prioritize them.

Under the new partnership with Beth Israel, Dana-Farber plans to create a free-standing state-of-the-art cancer hospital, which it said would have the flexibility to “incorporate the innovations and technology in cancer care that Dana-Farber’s and BIDMC’s researchers and clinicians are developing every day.”

Vered Caplan

But a dedicated cancer hospital is not necessarily better at carrying out CGT trials than a general hospital with a tightly-integrated cancer specialty.

“I’ve seen general hospitals with tremendous capabilities and specific hospitals with tremendous capabilities — it really depends on the particular hospital,” Orgenesis CEO Vered Caplan told Endpoints in an interview. Germantown, MD-headquartered Orgenesis rolls out CGT mobile processing units and labs for cancer treatment to hospitals.

Regardless, the breakup means Dana-Farber must convince patients that its program with Beth Israel will provide at least the same quality care as the Brigham partnership, while Brigham must rebuild its specialist capabilities without Dana-Farber expertise.

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Zelensky Departs Washington Mostly Empty-Handed Amid Mood Shift In West

Zelensky Departs Washington Mostly Empty-Handed Amid Mood Shift In West

By all accounts, Zelensky came away from his Washington visit with…



Zelensky Departs Washington Mostly Empty-Handed Amid Mood Shift In West

By all accounts, Zelensky came away from his Washington visit with nothing new. Biden did announce a fresh $325 million aid package for Ukraine from already committed funds, but the hoped-for long range missile approval never came (however, more cluster bombs are being sent). And as we detailed Thursday, House Republican leadership once again failed to move forward on a mere procedural vote for the Pentagon funding bill, due in large part to GOP members rejecting Biden's proposed $24 billion more in Ukraine aid.

Thursday's package announced by Biden, as Zelensky visited the White House and Capitol Hill, was run-of-the-mill and entirely to be expected. "Today I approved the next tranche of U.S. security assistance to Ukraine including more artillery, more ammunition, more anti-tank weapons and next week, the first U.S. Abrams tanks will be delivered to Ukraine," Biden said.

As for the earlier in the day (Thurs.) meeting with Congressional leaders, House Speaker Kevin McCarthy explained when asked why the Ukrainian leader's request to address Congress was denied, "Zelensky asked for a joint session, we just didn't have time. He's already given a joint session."


Instead in a closed-door meeting, Zelensky later acknowledged he discussed with lawmakers "the battlefield situation and priority defense needs."

But if there is any level of consolation for Kiev, it's seen in the Pentagon announcement which came late in the day Thursday. Facing potential US government shutdown on Oct.1st, given at this point Congress is not expected to pass the 12 appropriations bills needed to fund government operations before next fiscal year, the Pentagon has said it will exempt its operations supporting Ukraine from a shutdown. 

The military typically suspends any activities not deemed vital to national security during government shutdowns, thus the DoD is in effect saying Ukraine aid remains "vital to national security". 

"Operation Atlantic Resolve is an excepted activity under a government lapse in appropriations," Pentagon spokesman Chris Sherwood told Politico, in reference to the operational name still used for actions supporting Kiev.

But Politico points out a potential shutdown would still negatively impact US support to Ukraine:

Sherwood noted that while DOD’s activities related to Ukraine will continue, furloughs and other activities halted under the shutdown could still have a negative impact.

"Training would happen, but depending on whether or not there were certain personnel that were not able to report for duty, for example, that could have an impact," said Pentagon spokesperson Brig. Gen. Patrick Ryder on Thursday.

This Pentagon exemption to keep Ukraine-related support active during a government shutdown seems to be the only significant thing Zelensky came away with. 

It appears to have been the main object of discussion when Zelensky met with Secretary of Defense Lloyd Austin in Washington during the trip. The Pentagon said this was "to reaffirm the steadfast US support for Ukraine."

Meanwhile, Bloomberg takes note of Zelensky "showing the strain" amid increasing divisions among allies:

The Ukrainian president allowed a dispute with one of his biggest allies to spin out of control at the United Nations General Assembly this week, and that’s just a hint of the tensions building behind the scenes.

Zelenskiy has been leading his country through Russia’s brutal assault for 19 months, all the time fighting on another front to wring the weapons and finance he needs from his US and European supporters. Now he suspects that President Joe Biden’s commitment is wavering and other leaders may be taking their cue from the US, according to a person who met with him recently.

He grew very emotional at times during that discussion, the person said, and was scathing in his criticism of nations that he said weren’t delivering weapons quickly enough.

Washington's lackluster greeting of Zelensky this week (compared to how he was received in December 2022) came simultaneous to Poland declaring it will no longer arm Ukraine, amid a fierce diplomatic spat over blockage of Ukraine grain imports by Warsaw, to protect Polish farmers.

The Economist is also taking note of the significant mood shift among Western allies...

A "long war" indeed... given a G7 leader from a European country has told reporters this week that the West is prepared for a years-long war, something likely to last some six or seven years, according to the quote.

"A senior official from one European G-7 country said the war may last as much as six or seven more years and that allies need to plan financially to continue support for Kyiv for such a long conflict," Bloomberg wrote.

Tyler Durden Fri, 09/22/2023 - 10:15

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