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Key Events This Week: GDP Revised Lower; PCE And Durables On Deck

Key Events This Week: GDP Revised Lower; PCE And Durables On Deck

This week one of the main highlights will take markets through what DB’s…

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Key Events This Week: GDP Revised Lower; PCE And Durables On Deck

This week one of the main highlights will take markets through what DB's Jim Reid calls "a full on Back to the Future and Quantum Leap (his favorite show as a teenager) moment" as the-every-5-years US GDP revisions take place on Thursday alongside the final Q2 2023 revisions (unch at 2.4% expected). GDP will be revised (lower) from Q1 2005 through Q1 2023, although revisions prior to the first quarter of 2013 will be offsetting across industries within each period. Gross domestic income (GDI) and select income components will be revised from Q1 1979 through Q1 2023. As Reid showed in a recent Chart of the Day, the current big gap between US GDI and GDP could be explained by erroneous recent data showing that net interest payments have been going down in the US as rates and yields have been soaring in the last 2 years.

While it's possible that revisions could make GDI look more healthy (interest payments add income to parts of the economy) but also make interest costs in the economy look more realistic and hurt fundamental models of interest cover for those indebted. Anyway, the revisions are potentially an important event and could make us think differently about the US economy in the recent past and therefore the future.

Outside of the downward GDP revision, the core PCE deflator on Friday is as important. DB economists point out that the data from the August CPI and PPI releases point to a slightly softer reading (+0.20% vs. +0.22% last month), which would have the effect of lowering the year-over-year growth rate by a little over 30bps (to 3.9%). As they highlight, the Fed's latest SEP forecast for Q4/Q4 core PCE inflation last week was 3.7%, which implies a modest re-acceleration in the monthly prints. This is one reason why they - and many others - believe that the bar is relatively high for the Fed to hike again before year-end.

Staying with inflation, over in Europe, the flash September CPIs kick off with prints from Germany on Thursday. The numbers for the Eurozone, France and Italy will be out on Friday. Friday also sees Tokyo CPI which is an important economy wide lead indicator as the BoJ considers more radical changes to its monetary policy soon.

Elsewhere in the US we have new home sales and consumer confidence tomorrow, durable goods on Thursday with trade numbers and personal income and consumption numbers on Friday.

In Europe, Germany sees the Ifo survey today, consumer confidence on Wednesday and labour market data on Friday. In France, consumer confidence will be out on Wednesday and consumer spending data is due Friday. Sentiment gauges will also be out in Italy and the Eurozone on Thursday.

Here is a day by day summary of key events this week courtesy of DB:

Monday September 25

  • Data: US September Dallas Fed manufacturing activity, August Chicago Fed national activity index, Japan August nationwide department store sales, Germany September Ifo survey
  • Central banks: Fed's Kashkari speaks, ECB's Villeroy speaks

Tuesday September 26

  • Data: US September Conference Board consumer confidence, Richmond Fed manufacturing index, business conditions, Philadelphia Fed non-manufacturing activity, Dallas Fed services activity, August new home sales, July FHFA house price index, Japan August services PPI
  • Central banks: Fed's Bowman speaks, ECB's Lane speaks
  • Earnings: Costco

Wednesday September 27

  • Data: US August durable goods orders, China August industrial profits, Germany October GfK consumer confidence, France September consumer confidence, Eurozone August M3
  • Central banks: BoJ minutes of July meeting
  • Earnings: H&M, Micron

Thursday September 28

  • Data: US September Kansas City Fed manufacturing activity, August pending home sales, initial jobless claims, Italy September manufacturing confidence, economic sentiment, consumer confidence, August PPI, Germany September CPI, Eurozone September services confidence, industrial confidence, economic confidence
  • Central banks: Fed's Powell, Cook and Goolsbee speak, ECB's Holzmann speaks
  • Earnings: Nike, Accenture, BlackBerry

Friday September 29

  • Data: US September MNI Chicago PMI, Kansas City Fed services activity, August personal income and spending, PCE deflator, advance goods trade balance, wholesale and retail inventories, UK September Lloyds business barometer, August net consumer credit, mortgage approvals, M4, Q2 current account balance, Japan September Tokyo CPI, consumer confidence index, August retail sales, jobto-applicant ratio, jobless rate, industrial production, housing starts, Italy September CPI, July industrial sales, Germany September unemployment claims rate, France September CPI, August PPI, consumer spending, Eurozone September CPI, Canada July GDP
  • Central banks: Fed's Williams and Barkin speak, ECB's Lagarde speaks

* * *

Finally, looking at just the US, Goldman writes that the key economic data releases this week are the durable goods report on Wednesday and the core PCE report on Friday. There are several speaking engagements from Fed officials this week, including chair Powell, governors Bowman and Cook, and presidents Kashkari, Goolsbee, Barkin, and Williams.

Monday, September 25

  • 10:30 AM Dallas Fed manufacturing activity, September (consensus -13.0, last -17.2)
  • 06:00 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in Q&A at University of Pennsylvania’s Wharton School. A Q&A with audience is expected. On September 22, Kashkari said, “Consumer spending continues to exceed our expectations. I would have thought with 500bp or 525bp of interest rate increases we would have slammed the brakes on consumer spending, and it has not.”

Tuesday, September 26

  • 09:00 AM FHFA house price index, July (consensus +0.4%, last +0.3%)
  • 09:00 AM S&P Case-Shiller 20-city home price index, July (GS +0.8%, consensus +0.65%, last +0.92%)
  • 10:00 AM New home sales, August (GS -3.0%, consensus -2.2%, last +4.4%)
  • 10:00 AM Conference Board consumer confidence, September (GS 105.7, consensus 105.5, last 106.1)
  • 10:00 AM Richmond Fed manufacturing index, September (consensus -7, last -7)
  • 01:30 PM Fed Governor Bowman speaks: Fed Governor Michelle Bowman will deliver welcoming remarks at a Fed Communities event on rental housing affordability. Speech text is expected. On September 22, Bowman said, “Inflation is still too high, and I expect it will likely be appropriate for the (Federal Open Market) Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2% goal in a timely way…Progress on inflation is likely to be slow given the current level of monetary policy restraint.”

Wednesday, September 27

  • 08:30 AM Durable goods orders, August preliminary (GS -1.5%, consensus -0.5%, last -5.2%); Durable goods orders ex-transportation, August preliminary (GS +0.6%, consensus +0.1%, last +0.4%); Core capital goods orders, August preliminary (GS +0.6%, consensus +0.1%, last +0.1%); Core capital goods shipments, August preliminary (GS +0.4%, consensus -0.1%, last -0.3%): We estimate that durable goods orders fell 1.5% in the preliminary August report (mom sa), reflecting a further decline in commercial aircraft orders. We forecast stronger details however, including a 0.6% rise in core capital goods orders and a 0.4% rise in core capital goods shipments, reflecting a pickup in global industrial activity.

Thursday, September 28

  • 08:30 AM Initial jobless claims, week ended September 23 (GS 215k, consensus 215k, last 201k): Continuing jobless claims, week ended September 16 (consensus 1,675k, last 1,662k)
  • 08:30 AM GDP (third), Q2 (GS +2.1%, consensus +2.2%, last +2.1%); Personal consumption, Q2 (GS +1.7%, consensus +1.7%, last +1.7%): We assume no revision on net in the third vintage of the Q2 GDP report (previously reported at +2.1% qoq ar).
  • 09:00 AM Chicago Fed President Goolsbee (FOMC voter) speaks: Chicago Fed President Austan Goolsbee will deliver a speech on economic policy at the Peterson Institute for International Economics. A moderated Q&A is expected. On September 7, Goolsbee said, “We’ve seen a lot of components of inflation coming down. But the overall level of inflation is still above where we want it to be. And you would need to see [the slowing in inflation] continue with some persistence, to really be feeling like...we’re going to get all the way down.”
  • 10:00 AM Pending home sales, August (GS -5.0%, consensus -1.0%, last +0.9%)
  • 11:00 AM Kansas City Fed manufacturing index, September (consensus -2, last 0)
  • 01:00 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will deliver closing remarks at the Minorities in Banking Forum. Speech text is expected. On September 22, when discussing the potential impact of AI on the economy and monetary policy, Cook said, “Empirical evidence is still patchy, but there is work showing that generative AI improves productivity in a variety of settings…Any large change in the labor force will generate disruptions and challenges that will need to be addressed to help workers adapt and thrive.”
  • 04:00 PM Fed Chair Powell speaks: Fed Chair Jerome Powell will host a town hall with educators. He will respond to questions from the in-person audience and participants who join the event virtually. In his post-FOMC press conference on September 20, Powell volunteered that neutral might have risen and that the short-run neutral rate could be higher than the longer run rate shown in the dot plot. We viewed the meeting as raising the bar for rate cuts next year and pushed the first cut in our forecast back from 2024Q2 to 2024Q4.
  • 07:00 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Tom Barkin will deliver a speech on the monetary policy outlook at a Money Marketeers of New York University event. The event is open to media. On August 22, Barkin said, “the reacceleration scenario has come onto the table in a way that it really wasn't three or four months ago… If I got convinced that inflation was remaining high and demand was giving no signal that inflation was going to come down, that would make the case [for a higher fed funds rate].”

Friday, September 29

  • 08:30 AM Advance goods trade balance, August (GS -$89.5bn, consensus -$91.4bn, last -$90.9bn)
  • 08:30 AM Wholesale inventories, August preliminary (consensus -0.2%, last -0.2%)
  • 08:30 AM Personal spending, August (GS +0.5%, consensus +0.4%, last +0.8%); Personal income, August (GS +0.6%, consensus +0.4%, last +0.2%); PCE price index, August (GS +0.37%, consensus +0.5%, last +0.2%); Core PCE price index, August (GS +0.12%, consensus +0.2%, last +0.2%): We estimate personal spending decreased 0.3pp and personal income increased 0.4pp. We also estimate August core PCE inflation was +0.12% (mom) and headline PCE inflation was +0.37% (mom), corresponding to year-over-year rates of +3.79% and +3.38%, respectively.
  • 10:00 AM University of Michigan consumer sentiment, September preliminary (GS 67.9, consensus 67.7, last 67.7); University of Michigan 5–10-year inflation expectations, September preliminary (GS 2.8%, last 2.7%): We estimate consumer sentiment edged up 0.2pt and that the report's measure of long-term inflation expectations rebounded by 0.1pp to 2.8%, reflecting higher gasoline prices.
  • 12:45 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at an event hosted by the Long Island Association. Speech text and a moderated Q&A are expected. On September 7, Williams said, “I think we’ve gotten monetary policy in a very good place in terms of we have a restrictive stance of policy…We’ll have to keep watching the data carefully analyzing all of that and really asking ourselves the question: is this sufficiently restrictive. Do we need to maybe raise rates again to make sure that we’re keeping that steady progress in terms of shrinking imbalances in the labor market and bring inflation back down?” He added, “all that talk about we're about to have a recession has vanished.”

Source: DB, Goldman, BofA,

Tyler Durden Mon, 09/25/2023 - 10:30

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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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