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June Starts with a Bang

June Starts with a Bang



Ironically, the pandemic and progress toward a vaccine will play second fiddle to more mundane concerns in the week ahead.  Still, investors have shown that the most strained relationship between the US and China in 30 years (Tiananmen Square) is insufficient in the first instance to derail the recovery equity markets.  Major benchmarks in the US, Europe, and Asia reached new recovery highs.

European heads of state will have a difficult situation later this month when they meet to find a compromise on the Recovery Plan.   The UK, in part, has left the EU because many felt it has lost its voice as more countries joined.  However, the shift to qualified majority voting from unanimity was not complete, and the decision about an EU-level response requires the assent of all members.  It used to be that when Germany and France agreed, it would drive Europe.  Not so quick this time.

The Berlin-Paris proposal has run into opposition by two blocs.  The first is a set of European countries that want loans not grants.  Some fear that those who clamored that the proposal was a step toward fiscal union, even though it is debatable and that many on the center-right in Germany, for example, perhaps even Merkel, does not believe it is, are right and do not want it.  Others, in Eastern and Central Europe, cringe at the Franco-German condominium and these proposals, ostensibly in their name, without consultation.

German officials, including Merkel herself, seemed to play down the likelihood that an agreement will be reached at the summit toward the middle of the month.  The funds proposed by the EU are relatively modest (750 bln euros) given the number of members (27) and the size of GDP (~17 trillion euros).  Still, for some countries, the funds could make more than a marginal difference.  Enthusiasm should be tempered by the fact what happens in an emergency or war cannot often be extrapolated to more normal times.  However, the lasting value may lay in the construction of scaffolding for the next fight over the European Project, including the strengthening of the role of the European Parliament.  The EU bonds could also provide a new benchmark for Europe, which can enhance the euro’s international role.   The ECB may not be the only central bank to buy them.  

Investors looked past this as well.  In Europe, the real and anticipated liquidity not only lifted equity markets but also narrowed the premium southern Europe pays to borrow over Germany.  The 10-year Italian premium narrowed by nearly 25 bp last week to less than 190 bp, the lowest since the crisis erupted.  It peaked near 280  bp in mid-March.  It finished last year near 160 bp.  In absolute terms, Italy's 10-year yield fell for 9 consecutive sessions until the last session, over which time it has fallen from 186 bp to nearly 140 bp.

Broadly the same is true for Spain.  The premium narrowed by 12 bp over the last week and to slip below 100 bp for the first since early March.  It was near 65 bp at the end of 2019.   It does not enjoy the same streak as Italy, but in the past two weeks, Spain's 10-year yield has fallen from 76 bp to almost 56 bp.

It is not just geopolitics or Europe's perennial challenge of joint action that investors are looking past.  Latin America, home to about 8% of the world's population, now accounts for 40% of the reported virus cases.  Brazil, Peru, Chile, and Mexico have been hit hard by the Covid-19.  Last week, the Brazilian real and Mexican peso were the strongest currencies in the world, gaining 3.8% and 3.2% respectively.  The real rose the best level since April 20, and the peso saw its best level since mid-March.

Three major central banks meet next week, the Reserve Bank of Australia, the Bank of Canada and the European Central Bank.  The first two will likely assure investors and businesses that they are prepared to do more if necessary, but are probably not going to take fresh initiatives.   On the other hand, the ECB is likely to move.  It will have the cover of new staff forecasts and ECB President Lagarde already warned that the more optimistic scenario has been superseded by events and the region's economy is between the medium and severe scenarios, which mean a contraction of around 10% this year.

The ECB is likely to increase the 750 bln euro Pandemic Emergency Purchase Program substantially.  An increase of less than 500 bln euros may be disappointing, but the reaction may also be a function of how long the program is extended. There are several other measures that the ECB may consider, but cutting interest rates deeper into negative territory is not one of them.

On the contrary, as part of a broader effort to help the financial system overcome the challenges, it could adjust the amount of deposits that are subject to negative rates.  It could broaden its corporate bond-buying program to include some bonds that recently lost their investment-grade status (fallen angels).  ECB President Lagarde is likely to stress the flexibility in its purchases and investments.  She will likely underscore the fact that EU's Recovery Bonds fit well into the ECB's bond-purchase programs.

The beginning of the monthly cycle of economic data, including the final PMI readings, may be of passing interest.  China's official and Caixin PMI will likely show a continued recovery in the world's second-largest economy.  The official PMI shows the manufacturing and service sectors have begun expanding, even if slowly, while the Caixin PMI, in which small businesses are more represented, has not confirmed it.

The US auto sales and employment data are two data highlights.  US auto sales averaged 16.9 mln last year.  It was the first year that the average was below 17 mln since 2014.  In shelter-in-place halved auto sales, which fell to 8.58 mln in April.  The recovery likely began in May with an increase to nearly 11 mln (seasonally-adjusted annual rate).   In May 2019, US auto sales were 17.3 mln.  The auto sales report will be among the first non-survey reports for May outside of the weekly jobless claims.

The US labor market remained distressed in May.  Of that, there is no doubt.  The median forecast in the Bloomberg survey calls for an 8 million decline in non-farm payrolls in May after the 20.5 mln job loss in March.  About 5% of the job loss (or 400k) is thought to come from the manufacturing sector.  The unemployment rate, derived from a different survey (households rather than establishments) may rise to almost 20% from 14.7% in April.  What the April income numbers seem to confirm (+10.5%) is that the government has replaced much of the wage income lost.

The workweek may have ticked back up to 34.3 hours, where it was at the end of 2019, after slipping to 34.1 hours in March.  Given that the 133 mln employees in the US in April, a 0.1% hour increase is the equivalent of about 380k full-time equivalents.  Average hourly earnings seem distorted by the composition of the workforce, with lower-paid workers service sector workers hit particularly hard by the shutdowns.

Canada will also report May jobs data at the end of on June 5, two days after Governor Macklem chairs his first policy meeting at the central bank.  In April, Canada lost nearly two million jobs, twice the number of jobs lost in March.  The unemployment rate rose to 13% in April from 7.8% in March, and 5.6% at the end of last year.  Canada's "hourly wage rate for permanent workers" is being distorted by the composition of the workforce.  Canada's economy was harder hit than the US in Q1.  While the US economy contracted a revised 5% at an annualized rate, the Canadian economy contracted 8.1% after barely growing in Q4 19 (0.6%).

Karin Kimbrough, chief economist at Linkedin recently shared the platform's global hiring data.  China's hiring rate has recovered over the past few months and is now near last year's levels.  Europe looks several weeks behind China.  France, Kimbrough says, is seeing hiring rates rise for the depress April lows.  The US hiring rate has leveled out about a third below year-ago levels.  Nearly a quarter of US professionals expect their earned income or wages to decline over the next six months.


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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.

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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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