Connect with us

International

Investment fuels AI-driven development of breakthrough genomic medicines

David Del Bourgo (CEO and co-founder, Whitelab Genomics) has always been passionate about introducing disruptive, innovative technologies to
The post Investment…

Published

on

David Del Bourgo (CEO and co-founder, Whitelab Genomics) has always been passionate about introducing disruptive, innovative technologies to markets. Now, he leads Whitelab Genomics as its artificial intelligence (AI) platform powers the development of genomic therapies – an emerging field in which genetic sequences are injected into cells to target and repair damaged genes. Del Bourgo, Tom Gibbs (investment director, Debiopharm Innovation Fund), and Renaud Poulard (partner, venture capital, Omnes Capital) spoke with pharmaphorum about the organisation’s recent $10 million Series A fundraiser – led by Debiopharm Innovation Fund and Omnes Capital – and how Whitelab Genomics will use the capital to advance genomic medicine.

“We founded Whitelab Genomics after realising the potential to use data, data science, and AI in a more systematic way to develop genomic therapies,” Del Bourgo says.

Having spent 10 years working in the genomics field, Del Bourgo noticed manufacturers spending extensive resources on drug development without harnessing the transformative power of data. He explains that bringing cutting-edge genomic therapies to market which could treat or cure life-threatening diseases can take up to 15 years and cost $2 billion – far too slow to match patients’ needs, and far too expensive on the healthcare system.

“We thought, there has to be something to help use data to make [drug developers] more efficient in bringing therapies to market faster, and at a lower price,” Del Bourgo explains.

In 2019, Del Bourgo and co-founder Julien Cottineau launched Whitelab Genomics and its AI platform dedicated to supporting the discovery and design of genomic therapies. The software applies machine learning to patient data to support therapeutics companies as they develop novel treatments.

“David and Julien have gathered a very talented team with unmatched competences both in AI and cell therapy development,” says Poulard. “We have been very impressed by their vision and the relevance of their platform.”

Poulard goes onto add that, “we think that for the last five years digital technologies and AI have demonstrated the strong value they add to the drug discovery process. We have analysed this area extensively and Whitelab Genomics is one the best companies that we have identified.”

“We see in-silico and simulation approaches as very important tools to help improve the efficiency of drug development, in terms of speed and success rate,” Gibbs further explains. Not only will approaches like Whitelab Genomics’ inform better decision-making in drug development, but also enable more rapid work in early development and the discovery of entirely new therapeutic agents – from small molecules traditionally used as pharmaceuticals, to biologics such as antibodies, to genomic therapies, as in the case of Whitelab Genomics.

“Genomic medicine is a rapidly growing space in which researchers use the information in a person’s genes to identify and administer medical treatment.”

 

The evolving field of genomic medicine

Genomic medicine is a rapidly growing space in which researchers use the information in a person’s genes to identify and administer medical treatment. Genomic therapies target genes that are broken or functioning improperly, aiming to repair or rebuild the gene to improve a patient’s health.

Over 4,000 diseases across multiple therapeutic areas could potentially be treated, or even cured, with genomic therapies, Del Bourgo says. These include Alzheimer’s disease, Parkinson’s disease, cystic fibrosis, and Duchenne muscular dystrophy, as well as cardiovascular diseases and some types of cancer.

Del Bourgo explains that about 20 genomic medicine cures exist today for muscular dysfunctions, such as spinal muscular atrophy – a devastating disease that affects infants – and for inherited eye diseases that can cause blindness in adults and children. “This is just the beginning; the potential is enormous,” he says.

There are two components to genomic medicine, known as the payload and the vector. The payload, Del Bourgo tell us, is the therapeutic DNA or RNA sequence that will cure or fix damaged cells. This is inserted into the viral vector, which acts as a vehicle to deliver the payload to the cell. Inactive viruses often act as the viral vector, as they’re able to deliver genetic therapies efficiently.

Del Bourgo highlights that genomic treatments work in a similar way to mRNA, which has been used in COVID-19 vaccines. “Similar to how we injected mRNA into people to trigger an immune response and train their immune system against COVID-19, genomic medicine repairs cellular or molecular mechanisms that are dysfunctional and cause disease,” Del Bourgo says, with the caveat that engineering genomic medicines comes with the added challenge of finding the right RNA or DNA sequence and the best viral vector to ensure the treatment is effective. Once this is done, “you actually fix the cells and cure the person from the root cause.”

As precision medicine continues to grow in prominence across the healthcare industry, Debiopharm Innovation Fund expects genomic medicine to be a therapeutic modality that is increasingly used to deliver the most effective treatments to the right patients. “Debiopharm is interested in innovative therapeutic platforms for tomorrow,” Gibbs says. “We believe that genomic therapies are going to be important arms in our arsenal to treat many diseases.”

“Similar to how we injected mRNA into people to trigger an immune response and train their immune system against COVID-19, genomic medicine repairs cellular or molecular mechanisms that are dysfunctional and cause disease.”

 

Forging an AI-enabled path toward precision medicine

As technology has evolved, biotech and pharmaceutical companies have increasingly leaned on AI to support drug development – including to make sense of the vast amounts of healthcare data available to them. By 2025, pharma’s investment in AI is expected to reach $3 billion.

Understanding the need for AI to leverage data in a more systematic way in the development of genomic medicines, Whitelab Genomics’ software platform supports pharma from discovery through to designing the payload’s genetic construction and the vector’s composition. The technology’s value has been validated through partnerships with biotechs and labs in the U.S. and France to accelerate the development of genomic therapies. Genethon, a French biotech, is one such collaborator.

“Genethon is one of the pioneers in gene therapy, and we’ve been helping them with machine learning to develop a new viral vector for metabolic diseases,” Del Bourgo says. “So far, we’ve seen promising results.”

Investing in a new paradigm for genomic treatment

As Whitelab Genomics accelerates its growth and builds out its capabilities – the company has already doubled in size in the last six months and expects to double again in the next year – Del Bourgo plans to use the new capital to further expand its impact on and relationships with the pharmaceutical industry.

“Now, we can grow our R&D more rapidly and hire more business development and marketing colleagues to extend our reach to customers,” Del Bourgo says. “The capital increase is going to enable us to develop our business and our technology and to scale our platform.”

The relationship between Whitelab Genomics and Debiopharm Innovation Fund will be mutually beneficial. Gibbs, through the investment in Whitelab Genomics, looks forward to learning from the company’s leaders to deepen their understanding of genomic medicine and in-silico approaches to drug development. Del Bourgo sees Debiopharm’s pharmaceutical industry expertise as an asset to the start-up as it expands its partnerships with new and international customers.

“In the next five years, I think this field is going to grow dramatically to address the unmet clinical needs of today. It can be life-changing for patients.”

 

Harnessing the potential of data and technology to improve outcomes for patients

The field of genomic medicine is facing an exciting period of growth, fuelled by scientific and technological innovation. Just as mRNA and COVID-19 showed the world that it’s possible to develop vaccines much faster, Del Bourgo explains, AI can help us develop new genomic medicines in a more efficient way. When the right data and technologies are used, it doesn’t need to take decades and billions of dollars to improve or save the lives of those with life threatening conditions.

But the work doesn’t stop here; there’s much more to be done to deliver new medicines to patients. Del Bourgo expects lots more data- and tech-driven innovation to come, and, following three years of team and platform building, he and Gibbs believe Whitelab Genomics is well-positioned to offer new value to life sciences partners and patients.

“There is more data to use, more data to create, and more models to design to make breakthrough therapies affordable and accessible for patients and healthcare systems,” Del Bourgo says.

“In the next five years, I think this field is going to grow dramatically to address the unmet clinical needs of today,” he continues. “It can be life-changing for patients.”

 

About the interviewees

David Del Bourgo is the CEO and co-founder of Whitelab Genomics. He has over 20 years’ experience in the growth of digital, biotech, and healthcare companies, including in marketing, sales, and business development leadership roles at Genomic Vision, Theraclion, Orbotech, and GE Healthcare. Del Bourgo holds an MBA from the University of Chicago School of Business and a Master of Science in bioengineering from the Université de Technologie de Compiegne (see more on LinkedIn).

 

Dr. Tom Gibbs is an investment director at Debiopharm Innovation Fund S.A. Gibbs received his BSc in Applied Biology from the University of Wales Institute of Science and Technology, and earned his Ph.D. in Microbial Genetics at the University of Warwick. He has spent more than two decades in the commercialisation of life science technologies, split equally between the pharmaceutical industry and scientific tool developers. He has been responsible for a wide range of activities including quality assurance, operations, late-stage product development and marketing, and increasingly business development. Gibbs has broad experience in both start-ups (Cytion, Covalys, Med Discovery) and more established companies (Delta Biotechnology, Molecular Devices, Debiopharm) in Europe and the USA. He joined Debiopharm International S.A. in 2012 (see more on LinkedIn).

 

Renaud Poulard is partner within the Venture Capital team at Omnes Capital. He began his career in 1991 in the SAGEM group in the Telecom and Defence sectors where he worked for nearly 10 years in Research and Development projects. After an MBA at INSEAD in 2000, he joined the world of venture capital in the Seventures fund as a partner, then Omnes Capital in 2005. He is mainly interested in the electronics and telecommunications sectors. Poulard has made more than 20 investments and seven disposals, including Erenis (sold to SFR – May 2007), Bizanga (sold to Cloudmark Inc – June 2010), 3D+ (sold to Heico Corp – April 2011), Envivio (IPO in Nasdaq – April 2012). He currently sits on the board of Scality, Nanomakers, EyeTechCare, and Splio. Poulard is an engineer graduated from the Ecole Supérieure d’Optique and holds an MBA from INSEAD (see more on LinkedIn).

 

About Whitelab Genomics

Whitelab Genomics operates a proprietary AI platform to accelerate the development of DNA and RNA-based therapies, also known as genomic therapies. Founded in 2019, Whitelab has contracted with key biotech and pharma players in the genomic medicine space. For more information, please visit www.whitelabgx.com or follow @WhiteLabG on Twitter.

 

About Debiopharm Innovation Fund

Debiopharm Innovation Fund, the strategic investment arm of Swiss biopharmaceutical company Debiopharm, provides strategic funding and guidance for companies with an ambition to improve the patient journey and re-imagine how clinical trials are conducted, along with companies offering digital platforms that support cutting-edge drug technologies. Since 2017, Debiopharm has invested in 14 digital health companies, typically leading the investment rounds.

For more information, please visit www.debiopharm.com/digital-health/ or follow @DebiopharmFund on Twitter.

 

About Omnes Capital

Omnes is a major player in private equity and infrastructure. With more than €5 billion in assets under management, Omnes provides companies with the equity capital they need to grow through its three core businesses: Venture Capital, Expansion Capital, and LBO and Infrastructure. Omnes is 100% owned by its employees. Omnes is committed to ESG issues. The company has created the Omnes Foundation in favour of children and youth. It is a signatory of the United Nations Principles for Responsible Investment (PRI). For more information, please visit www.omnescapital.com or follow @OmnesCapital on Twitter.

The post Investment fuels AI-driven development of breakthrough genomic medicines appeared first on .

Read More

Continue Reading

International

Congress’ failure so far to deliver on promise of tens of billions in new research spending threatens America’s long-term economic competitiveness

A deal that avoided a shutdown also slashed spending for the National Science Foundation, putting it billions below a congressional target intended to…

Published

on

Science is again on the chopping block on Capitol Hill. AP Photo/Sait Serkan Gurbuz

Federal spending on fundamental scientific research is pivotal to America’s long-term economic competitiveness and growth. But less than two years after agreeing the U.S. needed to invest tens of billions of dollars more in basic research than it had been, Congress is already seriously scaling back its plans.

A package of funding bills recently passed by Congress and signed by President Joe Biden on March 9, 2024, cuts the current fiscal year budget for the National Science Foundation, America’s premier basic science research agency, by over 8% relative to last year. That puts the NSF’s current allocation US$6.6 billion below targets Congress set in 2022.

And the president’s budget blueprint for the next fiscal year, released on March 11, doesn’t look much better. Even assuming his request for the NSF is fully funded, it would still, based on my calculations, leave the agency a total of $15 billion behind the plan Congress laid out to help the U.S. keep up with countries such as China that are rapidly increasing their science budgets.

I am a sociologist who studies how research universities contribute to the public good. I’m also the executive director of the Institute for Research on Innovation and Science, a national university consortium whose members share data that helps us understand, explain and work to amplify those benefits.

Our data shows how underfunding basic research, especially in high-priority areas, poses a real threat to the United States’ role as a leader in critical technology areas, forestalls innovation and makes it harder to recruit the skilled workers that high-tech companies need to succeed.

A promised investment

Less than two years ago, in August 2022, university researchers like me had reason to celebrate.

Congress had just passed the bipartisan CHIPS and Science Act. The science part of the law promised one of the biggest federal investments in the National Science Foundation in its 74-year history.

The CHIPS act authorized US$81 billion for the agency, promised to double its budget by 2027 and directed it to “address societal, national, and geostrategic challenges for the benefit of all Americans” by investing in research.

But there was one very big snag. The money still has to be appropriated by Congress every year. Lawmakers haven’t been good at doing that recently. As lawmakers struggle to keep the lights on, fundamental research is quickly becoming a casualty of political dysfunction.

Research’s critical impact

That’s bad because fundamental research matters in more ways than you might expect.

For instance, the basic discoveries that made the COVID-19 vaccine possible stretch back to the early 1960s. Such research investments contribute to the health, wealth and well-being of society, support jobs and regional economies and are vital to the U.S. economy and national security.

Lagging research investment will hurt U.S. leadership in critical technologies such as artificial intelligence, advanced communications, clean energy and biotechnology. Less support means less new research work gets done, fewer new researchers are trained and important new discoveries are made elsewhere.

But disrupting federal research funding also directly affects people’s jobs, lives and the economy.

Businesses nationwide thrive by selling the goods and services – everything from pipettes and biological specimens to notebooks and plane tickets – that are necessary for research. Those vendors include high-tech startups, manufacturers, contractors and even Main Street businesses like your local hardware store. They employ your neighbors and friends and contribute to the economic health of your hometown and the nation.

Nearly a third of the $10 billion in federal research funds that 26 of the universities in our consortium used in 2022 directly supported U.S. employers, including:

  • A Detroit welding shop that sells gases many labs use in experiments funded by the National Institutes of Health, National Science Foundation, Department of Defense and Department of Energy.

  • A Dallas-based construction company that is building an advanced vaccine and drug development facility paid for by the Department of Health and Human Services.

  • More than a dozen Utah businesses, including surveyors, engineers and construction and trucking companies, working on a Department of Energy project to develop breakthroughs in geothermal energy.

When Congress shortchanges basic research, it also damages businesses like these and people you might not usually associate with academic science and engineering. Construction and manufacturing companies earn more than $2 billion each year from federally funded research done by our consortium’s members.

A lag or cut in federal research funding would harm U.S. competitiveness in critical advanced technologies such as artificial intelligence and robotics. Hispanolistic/E+ via Getty Images

Jobs and innovation

Disrupting or decreasing research funding also slows the flow of STEM – science, technology, engineering and math – talent from universities to American businesses. Highly trained people are essential to corporate innovation and to U.S. leadership in key fields, such as AI, where companies depend on hiring to secure research expertise.

In 2022, federal research grants paid wages for about 122,500 people at universities that shared data with my institute. More than half of them were students or trainees. Our data shows that they go on to many types of jobs but are particularly important for leading tech companies such as Google, Amazon, Apple, Facebook and Intel.

That same data lets me estimate that over 300,000 people who worked at U.S. universities in 2022 were paid by federal research funds. Threats to federal research investments put academic jobs at risk. They also hurt private sector innovation because even the most successful companies need to hire people with expert research skills. Most people learn those skills by working on university research projects, and most of those projects are federally funded.

High stakes

If Congress doesn’t move to fund fundamental science research to meet CHIPS and Science Act targets – and make up for the $11.6 billion it’s already behind schedule – the long-term consequences for American competitiveness could be serious.

Over time, companies would see fewer skilled job candidates, and academic and corporate researchers would produce fewer discoveries. Fewer high-tech startups would mean slower economic growth. America would become less competitive in the age of AI. This would turn one of the fears that led lawmakers to pass the CHIPS and Science Act into a reality.

Ultimately, it’s up to lawmakers to decide whether to fulfill their promise to invest more in the research that supports jobs across the economy and in American innovation, competitiveness and economic growth. So far, that promise is looking pretty fragile.

This is an updated version of an article originally published on Jan. 16, 2024.

Jason Owen-Smith receives research support from the National Science Foundation, the National Institutes of Health, the Alfred P. Sloan Foundation and Wellcome Leap.

Read More

Continue Reading

International

What’s Driving Industrial Development in the Southwest U.S.

The post-COVID-19 pandemic pipeline, supply imbalances, investment and construction challenges: these are just a few of the topics address by a powerhouse…

Published

on

The post-COVID-19 pandemic pipeline, supply imbalances, investment and construction challenges: these are just a few of the topics address by a powerhouse panel of executives in industrial real estate this week at NAIOP’s I.CON West in Long Beach, California. Led by Dawn McCombs, principal and Denver lead industrial specialist for Avison Young, the panel tackled some of the biggest issues facing the sector in the Western U.S. 

Starting with the pandemic in 2020 and continuing through 2022, McCombs said, the industrial sector experienced a huge surge in demand, resulting in historic vacancies, rent growth and record deliveries. Operating fundamentals began to normalize in 2023 and construction starts declined, certainly impacting vacancy and absorption moving forward.  

“Development starts dropped by 65% year-over-year across the U.S. last year. In Q4, we were down 25% from pre-COVID norms,” began Megan Creecy-Herman, president, U.S. West Region, Prologis, noting that all of that is setting us up to see an improvement of fundamentals in the market. “U.S. vacancy ended 2023 at about 5%, which is very healthy.” 

Vacancies are expected to grow in Q1 and Q2, peaking mid-year at around 7%. Creecy-Herman expects to see an increase in absorption as customers begin to have confidence in the economy, and everyone gets some certainty on what the Fed does with interest rates. 

“It’s an interesting dynamic to see such a great increase in rents, which have almost doubled in some markets,” said Reon Roski, CEO, Majestic Realty Co. “It’s healthy to see a slowing down… before [rents] go back up.” 

Pre-pandemic, a lot of markets were used to 4-5% vacancy, said Brooke Birtcher Gustafson, fifth-generation president of Birtcher Development. “Everyone was a little tepid about where things are headed with a mediocre outlook for 2024, but much of this is normalizing in the Southwest markets.”  

McCombs asked the panel where their companies found themselves in the construction pipeline when the Fed raised rates in 2022.   

In Salt Lake City, said Angela Eldredge, chief operations officer at Price Real Estate, there is a typical 12-18-month lead time on construction materials. “As rates started to rise in 2022, lots of permits had already been pulled and construction starts were beginning, so those project deliveries were in fall 2023. [The slowdown] was good for our market because it kept rates high, vacancies lower and helped normalize the market to a healthy pace.” 

A supply imbalance can stress any market, and Gustafson joked that the current imbalance reminded her of a favorite quote from the movie Super Troopers: “Desperation is a stinky cologne.” “We’re all still a little crazed where this imbalance has put us, but for the patient investor and owner, there will be a rebalancing and opportunity for the good quality real estate to pass the sniff test,” she said.  

At Bircher, Gustafson said that mid-pandemic, there were predictions that one billion square feet of new product would be required to meet tenant demand, e-commerce growth and safety stock. That transition opened a great opportunity for investors to run at the goal. “In California, the entitlement process is lengthy, around 24-36 months to get from the start of an acquisition to the completion of a building,” she said. Fast forward to 2023-2024, a lot of what is being delivered in 2024 is the result of that chase.  

“Being an optimistic developer, there is good news. The supply imbalance helped normalize what was an unsustainable surge in rents and land values,” she said. “It allowed corporate heads of real estate to proactively evaluate growth opportunities, opened the door for contrarian investors to land bank as values drop, and provided tenants with options as there is more product. Investment goals and strategies have shifted, and that’s created opportunity for buyers.” 

“Developers only know how to run and develop as much as we can,” said Roski. “There are certain times in cycles that we are forced to slow down, which is a good thing. In the last few years, Majestic has delivered 12-14 million square feet, and this year we are developing 6-8 million square feet. It’s all part of the cycle.”  

Creecy-Herman noted that compared to the other asset classes and opportunities out there, including office and multifamily, industrial remains much more attractive for investment. “That was absolutely one of the things that underpinned the amount of investment we saw in a relatively short time period,” she said.  

Market rent growth across Los Angeles, Inland Empire and Orange County moved up more than 100% in a 24-month period. That created opportunities for landlords to flexible as they’re filling up their buildings. “Normalizing can be uncomfortable especially after that kind of historic high, but at the same time it’s setting us up for strong years ahead,” she said. 

Issues that owners and landlords are facing with not as much movement in the market is driving a change in strategy, noted Gustafson. “Comps are all over the place,” she said. “You have to dive deep into every single deal that is done to understand it and how investment strategies are changing.” 

Tenants experienced a variety of challenges in the pandemic years, from supply chain to labor shortages on the negative side, to increased demand for products on the positive, McCombs noted.  

“Prologis has about 6,700 customers around the world, from small to large, and the universal lesson [from the pandemic] is taking a more conservative posture on inventories,” Creecy-Herman said. “Customers are beefing up inventories, and that conservatism in the supply chain is a lesson learned that’s going to stick with us for a long time.” She noted that the company has plenty of clients who want to take more space but are waiting on more certainty from the broader economy.  

“E-commerce grew by 8% last year, and we think that’s going to accelerate to 10% this year. This is still less than 25% of all retail sales, so the acceleration we’re going to see in e-commerce… is going to drive the business forward for a long time,” she said. 

Roski noted that customers continually re-evaluate their warehouse locations, expanding during the pandemic and now consolidating but staying within one delivery day of vast consumer bases.  

“This is a generational change,” said Creecy-Herman. “Millions of young consumers have one-day delivery as a baseline for their shopping experience. Think of what this means for our business long term to help our customers meet these expectations.” 

McCombs asked the panelists what kind of leasing activity they are experiencing as a return to normalcy is expected in 2024. 

“During the pandemic, shifts in the ports and supply chain created a build up along the Mexican border,” said Roski, noting border towns’ importance to increased manufacturing in Mexico. A shift of populations out of California and into Arizona, Nevada, Texas and Florida have resulted in an expansion of warehouses in those markets. 

Eldridge said that Salt Lake City’s “sweet spot” is 100-200 million square feet, noting that the market is best described as a mid-box distribution hub that is close to California and Midwest markets. “Our location opens up the entire U.S. to our market, and it’s continuing to grow,” she said.   

The recent supply chain and West Coast port clogs prompted significant investment in nearshoring and port improvements. “Ports are always changing,” said Roski, listing a looming strike at East Coast ports, challenges with pirates in the Suez Canal, and water issues in the Panama Canal. “Companies used to fix on one port and that’s where they’d bring in their imports, but now see they need to be [bring product] in a couple of places.” 

“Laredo, [Texas,] is one of the largest ports in the U.S., and there’s no water. It’s trucks coming across the border. Companies have learned to be nimble and not focused on one area,” she said. 

“All of the markets in the southwest are becoming more interconnected and interdependent than they were previously,” Creecy-Herman said. “In Southern California, there are 10 markets within 500 miles with over 25 million consumers who spend, on average, 10% more than typical U.S. consumers.” Combined with the port complex, those fundamentals aren’t changing. Creecy-Herman noted that it’s less of a California exodus than it is a complementary strategy where customers are taking space in other markets as they grow. In the last 10 years, she noted there has been significant maturation of markets such as Las Vegas and Phoenix. As they’ve become more diversified, customers want to have a presence there. 

In the last decade, Gustafson said, the consumer base has shifted. Tenants continue to change strategies to adapt, such as hub-and-spoke approaches.  From an investment perspective, she said that strategies change weekly in response to market dynamics that are unprecedented.  

McCombs said that construction challenges and utility constraints have been compounded by increased demand for water and power. 

“Those are big issues from the beginning when we’re deciding on whether to buy the dirt, and another decision during construction,” Roski said. “In some markets, we order transformers more than a year before they are needed. Otherwise, the time comes [to use them] and we can’t get them. It’s a new dynamic of how leases are structured because it’s something that’s out of our control.” She noted that it’s becoming a bigger issue with electrification of cars, trucks and real estate, and the U.S. power grid is not prepared to handle it.  

Salt Lake City’s land constraints play a role in site selection, said Eldridge. “Land values of areas near water are skyrocketing.” 

The panelists agreed that a favorable outlook is ahead for 2024, and today’s rebalancing will drive a healthy industry in the future as demand and rates return to normalized levels, creating opportunities for investors, developers and tenants.  


This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at www.us.jll.com or www.jll.ca.

Read More

Continue Reading

International

Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.

Published

on

They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to Investing.com

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

More Tech Stocks:

Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

Read More

Continue Reading

Trending