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Risk Appetites Survive China Keeping Zero Covid Policy

Overview: Chinese officials denied plans to end the zero-Covid policy and after a brief wobble, risk assets have traded better. Asia Pacific equities rallied,…

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Overview: Chinese officials denied plans to end the zero-Covid policy and after a brief wobble, risk assets have traded better. Asia Pacific equities rallied, led by Hong Kong and mainland stocks that trade in Hong Kong. Europe’s Stoxx 600 opened lower but recovered and is around 0.5% higher after the 1.8% gain before the weekend. US futures are firm. Benchmark 10-year yields are mostly 2-4 bp softer in Europe and the US. The dollar is mixed. The dollar-bloc, which led the advance before the weekend, is nursing small losses, while sterling and the Swedish krona are up 0.5-0.6%. Emerging market currencies are mostly firmer, led by a 1.3% rally in the South Korean won. The Chinese yuan is giving back around a third of its pre-weekend gains and is the weakest in the emerging market space with a little more than a 0.5% pullback. On the back of a weaker dollar and lower rates, gold rallied 3.2% at the end of last week, its biggest single day advance this year. It is consolidating at the upper end of the pre-weekend range that extended to $1682. Oil prices rallied to their best level since late August at the end of last week and remain firm today. The initial pullback saw December WTI approach the 200-day moving average (~$90.15) and recovered and made new session highs in late European morning turnover. Cold weather in the US Northwest has lifted natgas prices. After a 7.1% gain before the weekend, it has tacked on another 8.4% today. In contrast, Europe’s benchmark is off 2.8% and is lower for the third consecutive session. Iron ore edged up after a 5.2% gain ahead of the weekend. It is the fifth advance in a row. December copper’s pre-weekend 7.56% rally has been pared. It is off 1.5% today. December wheat is giving back its 0.85% gain from the end of last week.

Asia Pacific

Market participants want to believe Beijing is about to jettison the zero-Covid policy. They seem to think that given the harm it is doing to the economy means it cannot be sustained. Yet this is projecting our values onto Xi and his faction that dominates China's Communist Party, and that may not be fair. The risk-on rally ahead of the weekend was more based on hope than actual developments. Modest tweaks are already taking place but not a wholesale change. Some of those adjustments include the acceptance of the BioNTech vaccine for foreigners in China, possibly ending punishments for airlines that bring Covid-stricken passengers, and perhaps adding more international flights. Some reports suggest that inbound travelers' quarantine may be reduced to 7-8 days from 10. Perhaps because of the totalitarian nature of the PRC regime, observers may not appreciate the tension between the central government and regional governments (similar, but different from the tension in the US between the federal government and state governments). Beijing has been critical of the excessive implementation of its zero-Covid policy. Zhengzhou officials apologized over the weekend for the stringent approach. Hohhot, in Inner Mongolia, banned the use of locks, latches, and bolts in sealing hotspots. Still, the Haizhu district in Guangzhou, in Guangdong, has ordered people to avoid leaving their homes for three days as of November 5.

China's October trade surplus edged up ($85.15 bln vs. $84.74 bln), but the key takeaway is that imports and exports fell on a year-over-year basis for the first time since the outbreak of the pandemic. Exports, which the median forecast in Bloomberg's survey called for a 4.5% increase fell by 0.3%. In September, they had risen 5.7% from a year ago. Part of the decline seems to be a post-Covid change in consumption patterns and the shift from goods. Household appliance, furniture, and lighting equipment exports suffered. And shipments to the US, EU, Taiwan, and Hong Kong fell. There were two bright spots to note. First, auto shipments rose 60% year-over-year to 352k. Second, exports of ASEAN countries for by double digits for the sixth consecutive month. Imports fell by 0.7%. Economists in Bloomberg's survey looked for flat report after a 0.3% increase in the year through September. Oil imports reached a five-year high, but gas imports tumble. Iron ore imports fell. Separately, China reported October reserves rose more than expected. The $23.5 bln increase was only the third increase this year. The dollar value of reserves (~$3.052 trillion) are almost $200 bln less than at the end of last year.

The dollar is little changed in relatively quiet turnover against the Japanese yen. Session highs were recorded near JPY147.60 in late Asia/early European turnover, but sellers quickly emerged to send the greenback to session lows around JPY146.65. The pre-weekend low was closer to JPY146.55. Key support is seen around JPY145. It has not traded below there since October 7. After rallying about two cents before the weekend, the Australian dollar initially pulled back from $0.6470 to almost $0.6400, where it found good bids and returned to unchanged levels in the European morning. Intraday momentum indicators are stretched. Last week's high near $0.6490 may provide the near-term cap. The greenback fell 1.6% against the Chinese yuan before the weekend amid speculation that the zero-Covid policy would end. Denials over the weekend saw the US dollar recover from CNY7.1850 at the pre-weekend close to CNY7.2505 today. It is trading quietly now around CNY7.2280. The PBOC set the dollar's reference rates slightly stronger than expected for the first time in more than nine weeks. The dollar was fixed at CNY7.2292 compared with the median in Bloomberg's survey for CNY7.2287. 

Europe

Many euro bears emphasize not just the aggressiveness of US hikes but also the unwinding of its balance sheet, which stands in contrast with the ECB. Yet, unlike the Fed's balance sheet, the ECB's was grown with loans as well as bond purchases. The rules changed at last month's ECB meeting, and banks have a greater incentive to repay the loans sooner. German and French banks are seen as the most likely candidates for early repayment next month, with amounts of 300-400 bln euros thrown around. Italian banks were among the largest borrowers, and some borrowed funds look to have been reinvested in Italian government bonds. Hence, repayment may reduce the demand for BTPs at the same time that the ECB is not buying as much as they were under QE but reinvesting maturing proceeds with an eye on rate divergence.

Italy's new government has proposed a budget deficit of 4.5% of GDP, somewhat larger than the Draghi government projected (3.4%). However, it still shows progress toward the 3% target, which the EU suspended for next year. That suggests Prime Minister Meloni may have an extended honeymoon and that the real challenge will come next year when the 2024 budget is to show a 3% deficit (or less). More immediately, tensions may raise with the EU over Rome's refusal to allow 100s of migrants rescued at seat to disembark in Italy. Italy is the first port of call, and the technical rules are for the first EU country that the migrant is bears the responsibility, but this clearly puts the burden on border countries whose finances are not as strong.

After a softer start, which saw the euro ease to slightly through $0.9900 after settling at almost $0.9960 at the end of last week, the single currency briefly poked above $1.0000, for the first time in eight sessions. While a new session high is possible, we suspect North American operators may be reluctant to extend the gains much, especially given the stretched intraday momentum indicators and the Thursday's US CPI figures. That said, above $1.0010 there seems to be little on the charts ahead of the late October high, slightly shy of $1.01. A close below $0.9950 would lend credence to this less than constructive near-term outlook. Sterling finished last week on a firm note near $1.1380. It reached $1.1470 in the European morning after it briefly slipped through $1.13 in last Asian turnover. With today's advance, sterling has met the (61.8%) retracement of the pullback from the $1.1650 area high in late October. The intraday momentum studies are stretched, and if the high is not in place for the day, it may have come close.

America

The key takeaway from the US October jobs numbers was that the labor market is still too strong for the Federal Reserve. Since the September dot plot (Summary of Economic Projections) saw 125 bp rate hikes in Q4, a 50 bp hike in December was the base case. The market had thought the odds of another 75 bp hike were greater, but after the employment data and the FOMC meeting, the market has about a 1-in-4 chance of a three-quarters-point hike next month. Businesses reported a gain of 261k jobs, and revisions were worth another 29k jobs. This is the least number of jobs created in nearly two years but was more substantial than expected and well above the 2018-2019 average. However, the household survey saw a decline of 328k jobs, and the unemployment rate rose by 0.2% to 3.7%. To reconcile the two does not mean to ignore one. The Solomonic solution is to split the difference: the labor market is slowing slowly and has not yet reached a point that will take the Fed off its tightening course.

We have suggested that three developments will get the Fed to stop: First, a dramatic slowing of the labor market, which is not happening. Second, a precipitous decline in inflation. The October CPI figures on Thursday will show that price pressures remain elevated. The third is a challenge to financial stability. While there are liquidity concerns, it has not yet reached a point that will disrupt the Fed's balance sheet unwind.

If US jobs data were mixed, Canada's report was unambiguously strong. Full-time positions jumped by nearly 120k, well above expectations. Average hourly wages rose by 5.6%, accelerating from 5.2% in September. It is the fifth month above 5%. The index of hours worked jumped by 0.7%, the largest since June. This may prompt economists to revise higher Q4 GDP forecasts, which had been near flat. The employment data were strong enough to encourage the market to begin taking seriously the possibility of another 50 bp rate hike next month. Separately, with the 2% tax on buybacks announced last week starting in 2024, next year could see a flurry of activity. Estimates suggest that over the past 12 months, there have been around C$70 bln in share buybacks.

Ahead of the weekend, the Canadian dollar rallied amid the risk-on mood spurred by speculation of the end of China's Covid-zero policy and on the strength of the employment report. The US dollar settled below CAD1.35 for the first time since September 22. This is potentially the neckline of a larger head and shoulders pattern that projects toward CAD1.30. The US dollar bounced to CAD1.3555 in the initial reaction of China's denial of a change its Covid stance. Support was found near CAD1.3465 in the Europe. The lower Bollinger Band is slightly lower. There is little chart support ahead of CAD1.3400. Consolidation may be the most likely scenario in North America today. Meanwhile, the US dollar is approaching the year's low against the Mexican peso, set in late May near MXN19.4135. The greenback saw about MXN19.4590 before the weekend and is consolidating in the lower end of the pre-weekend range. The initial bounce carried the US dollar to almost MXN19.58. The highlight of the week is the October CPI figures on Wednesday and what is expected to be a 75 bp hike from Banxico on Thursday. Brazil reports retail sales (Wednesday) and IPCA inflation (Thursday). Inflation peak in April around 12.1% and is expected to have fallen for the fourth consecutive month to slightly below 6.4% last month. Key dollar support is seen near BRL5.00. 


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EY Eyes Comeback for Biopharma M&A

EY noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021. The $88 billion accounted for most of the…

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A recent trickle of mergers and acquisitions (M&A) announcements in the billion-dollar-and-up range suggests that biopharma may be ready to resume dealmaking this year—although the value and number of deals isn’t expected to return to the highs seen just before the pandemic.

2022 ended with a handful of 10- and 11-figure M&A deals, led by Amgen’s $27.8 billion buyout of Horizon Therapeutics, announced December 13. The dealmaking continued into January with three buyouts announced on the first day of the recent J.P. Morgan Healthcare Conference: AstraZeneca agreed to acquire CinCor Pharma for up to $1.8 billion, while Chiesi Farmaceutici agreed to shell out up to $1.48 billion cash for Amryt, and Ipsen Group said it will purchase Albireo Pharma for $952 million-plus.

Biopharmas generated about $88 billion in M&A deals in 2022, down 15% from $104 billion in 2021. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. The number of biopharma deals fell 17%, to 75 deals from 90. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine. [EY]
EY—the professional services firm originally known as Ernst & Young—recently noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021 [See Chart]. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. That $135 billion figure is less than half the record-high $313 billion recorded in 2019, including $261 billion in 70 biopharma deals.

The number of biopharma deals fell 17% to 75 deals from 90. EY’s numbers include only deals greater than $100 million. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine.

We expect this to be a more active year as the sentiment starts to normalize a little bit,” Subin Baral, EY Global Life Sciences Deals Leader, told GEN Edge.

Baral is not alone in foreseeing a comeback for biopharma M&A.

John Newman, PhD, an analyst with Canaccord Genuity, predicted last week in a research note that biopharma companies will pursue a growing number of smaller cash deals in the range of $1 billion to $10 billion this year. He said rising interest rates are discouraging companies from taking on larger blockbuster deals that require buyers to take on larger sums of debt.

“We look for narrowing credit spreads and lower interest rates to encourage larger M&A ($50 billion and more) deals. We do not anticipate many $50B+ deals that could move the XBI +5%,” Newman said. (XBI is the SPDR S&P Biotech Electronic Transfer Fund, one of several large ETFs whose fluctuations reflect investor enthusiasm for biopharma stock.)

Newman added: “We continue to expect a biotech swell in 2023 that may become an M&A wave if credit conditions improve.”

Foreseeing larger deals than Newman and Canaccord Genuity is PwC, which in a commentary this month predicted: “Biotech deals in the $5–15 billion range will be prevalent and will require a different set of strategies and market-leading capabilities across the M&A cycle.”

Those capabilities include leadership within a specific therapeutic category, for which companies will have to buy and sell assets: “Prepared management teams that divest businesses that are subscale while doubling down on areas where leadership position and the right to win is tangible, may be positioned to deliver superior returns,” Glenn Hunzinger, PwC’s U.S. Pharma & Life Science Leader, and colleagues asserted.

The Right deals

Rising interest and narrowing credit partially explain the drop-off in deals during 2022, EY’s Baral said. Another reason was sellers adjusting to the drop in deal valuations that resulted from the decline of the markets which started late in 2021.

Subin Baral, EY Global Life Sciences Deals Leader

“It took a little bit longer to realize the reality of the market conditions on the seller side. But on the buyer side, the deals that they were looking at were not just simply a valuation issue. They were looking at the quality of the assets. And you can see that the quality deals—the right deals, as we call them—are still getting done,” Baral said.

The right deals, according to Baral, are those in which buyers have found takeover targets with a strong, credible management team, solid clinical data, and a clear therapeutic focus.

“Rare disease and oncology assets are still dominating the deal making, particularly oncology because your addressable market continues to grow,” Baral said. “Unfortunately, what that means is the patient population is growing too, so there’s this increased unmet need for that portfolio of assets.”

Several of 2022’s largest M&A deals fit into that “right” category, Baral said—including Amgen-Horizon, Pfizer’s $11.6-billion purchase of Biohaven Pharmaceuticals and the $6.7-billion purchase of Arena Pharmaceuticals (completed in March 2022); and Bristol-Myers Squibb’s $4.1-billion buyout of Turning Point Therapeutics.

“Quality companies are still getting funded one way or the other. So, while the valuation dropped, people were all expecting a flurry of deals because they are still companies with a shorter runway of cash that will be running to do deals. But that really didn’t happen from a buyer perspective,” Baral said. “The market moved a little bit from what was a seller’s market for a long time, to what we would like to think of as the pendulum swinging towards a buyers’ market.”

Most biopharma M&A deals, he said, will be “bolt-on” acquisitions in which a buyer aims to fill a gap in its clinical pipeline or portfolio of marketed drugs through purchases that account for less than 25% of a buyer’s market capitalization.

Baral noted that a growing number of biopharma buyers are acquiring companies with which they have partnered for several years on drug discovery and/or development collaborations. Pfizer acquired BioHaven six months after agreeing to pay the company up to $1.24 billion to commercialize rimegepant outside the U.S., where the migraine drug is marketed as Nurtec® ODT.

“There were already some kind of relationships there before these deals actually happened. But that also gives an indication that there are some insights to these targets ahead of time for these companies to feel increasingly comfortable, and pay the valuation that they’re paying for them,” Baral said.

$1.4 Trillion available

Baral sees several reasons for increased M&A activity in 2023. First, the 25 biopharma giants analyzed by EY had $1.427 trillion available as of November 30, 2022, for M&A in “firepower”—which EY defines as a company’s capacity to carry out M&A deals based on the strength of its balance sheet, specifically the amount of capital available for M&A deals from sources that include cash and equivalents, existing debt, and market cap.

That firepower is up 11% from 2021, and surpasses the previous record of $1.22 trillion in 2014, the first year that EY measured the available M&A capital of large biopharmas.

Unlike recent years, Baral said, biopharma giants are more likely to deploy that capital on M&A this year to close the “growth gap” expected to occur over the next five years as numerous blockbuster drugs lose patent exclusivity and face new competition from lower-cost generic drugs and biosimilars.

“There is not enough R&D in their pipeline to replenish a lot of their revenue. And this growth gap is coming between 2024 and 2026. So, they don’t have a long runway to watch and stay on the sidelines,” Baral said.

This explains buyers’ interest in replenishing pipelines with new and innovative treatments from smaller biopharmas, he continued. Many smaller biopharmas are open to being acquired because declining valuations and limited cash runways have increased investor pressure on them to exit via M&A. The decline of the capital markets has touched off dramatic slowdowns in two avenues through which biopharmas have gone public in recent years—initial public offerings (IPOs) and special purpose acquisition companies (SPACs).

EY recorded just 17 IPOs being priced in the U.S. and Europe, down 89% from 158 a year earlier. The largest IPO of 2022 was Prime Medicine’s initial offering, which raised $180.3 million in net proceeds for the developer of a “search and replace” gene editing platform.

Another 12 biopharmas agreed to SPAC mergers with blank-check companies, according to EY, with the largest announced transaction (yet to close at deadline) being the planned $899 million merger of cancer drug developer Apollomics with Maxpro Capital Acquisition.

“For the smaller players, the target biotech companies, their alternate source of access to capital pathways such as IPOs and SPACs is shutting down on them. So how would the biotech companies continue to fund themselves? Those with quality assets are still getting funded through venture capital or other forms of capital,” Baral said. “But in general, there is not a lot of appetite for the biotech that is taking that risk.

Figures from EY show a 37% year-to-year decline in the total value of U.S. and European VC deals, to $16.88 billion in 2022 from $26.62 billion in 2021. Late-stage financing rounds accounted for just 31% of last year’s VC deals, down from 34% in 2021 and 58% in 2012. The number of VC deals in the U.S. and Europe fell 18%, to 761 last year from 930 in 2021.

The decline in VC financing helps explain why many smaller biopharmas are operating with cash “runways” of less than 12 months. “Depending on the robustness of their data, their therapeutic area, and their management, there will be a natural attrition. Some of these companies will just have to wind down,” Baral added.

M&A headwinds

Baral also acknowledged some headwinds that are likely to dampen the pace of M&A activity. In addition to rising interest rates and inflation increasing the cost of capital, valuations remain high for the most sought-after drugs, platforms, and other assets—a result of growing and continuing innovation.

Another headwind is growing regulatory scrutiny of the largest deals. Illumina’s $8 billion purchase of cancer blood test developer Grail has faced more than two years of challenges from the U.S. Federal Trade Commission and especially the European Commission—while Congress acted last year to begin curbing the price of prescription drugs and insulin through the “Inflation Reduction Act.”

Those headwinds may prompt many companies to place greater strategic priority on collaborations and partnerships instead of M&A, Baral predicted, since they offer buyers early access to newer technologies before deciding whether to invest more capital through a merger or acquisition.

“Early-stage collaboration, early minority-stake investment becomes increasingly important, and it has been a cornerstone for early access to these technologies for the industry for a long, long time, and that is not changing any time soon,” Baral said. “On the other hand, even on the therapeutic area side, early-stage development is still expensive to do in-house for the large biopharma companies because of their cost structure.

“So, it is efficient cost-wise and speed-wise to buy these assets when they reach a certain point, which is probably at Phase II onward, and then you can pull the trigger on acquisitions if needed,” he added.

The post EY Eyes Comeback for Biopharma M&A appeared first on GEN - Genetic Engineering and Biotechnology News.

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IMF Upgrades Global Growth Forecast As Inflation Cools

IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday,…

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IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday, painting a slightly less gloomy picture than three and a half months ago, as inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis following Russia’s invasion of Ukraine has been less severe than initially feared.

But, as Statista's Felix Richter notes, that’s not to say the outlook is rosy, as the global economy still faces major headwinds.

However, the IMF predicts the slowdown to be less pronounced than previously anticipated.

Global growth is now expected to fall from 3.4 percent in 2022 to 2.9 percent this year, before rebounding to 3.1 percent in 2024.

The 2023 growth projection is up from an October estimate of 2.7 percent, as the IMF sees far fewer countries facing recession this year and does no longer anticipates a global downturn.

Infographic: IMF Upgrades Global Growth Forecast as Inflation Cools | Statista

You will find more infographics at Statista

One of the reasons behind the cautiously optimistic outlook is the latest downward trend in inflation, which suggests that inflation may have peaked in 2022.

The IMF predicts global inflation to cool to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent, but significantly lower than the 8.8 percent observed in 2022.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post released along with the report.

“Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.”

The risks to the latest outlook remain tilted to the downside, the IMF notes, as the war in Ukraine could further escalate, inflation continues to require tight monetary policies and China’s recovery from Covid-19 disruptions remains fragile. On the plus side, strong labor markets and solid wage growth could bolster consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for more monetary tightening.

In conclusion, Gourinchas calls for multilateral cooperation to counter “the forces of geoeconomic fragmentation”.

“This time around, the global economic outlook hasn’t worsened,” he writes. “That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.”

However, just because the 'trend' has shifted doesn't mean it's mission accomplished...

That looks an awful lot like Central Bankers' nemesis remains - global stagflation curb stomps the dovish hopes.

Tyler Durden Tue, 01/31/2023 - 14:45

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Nike Escalates Design Battle Against Lululemon

The sportswear giant is accusing lululemon of patent infringement.

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The sportswear giant is accusing lululemon of patent infringement.

The Gucci loafers. The Burberry  (BBRYF) trench coat. When it comes to fashion, having a unique design is everything. This is why brands spend millions both creating and protecting their signature looks and the reason, as in the case of Adidas  (ADDDF) , extricating a brand's design from creators who behave badly is a costly and difficult process.

There is also the constant effort to release new styles without infringing on another group's style. This week, sportswear giant Nike  (NKE) - Get Free Report filed a lawsuit accusing lululemon  (LULU) - Get Free Report of infringing on its patents in the shoe line that the Vancouver-based activewear company launched last spring.

After years of selling exclusively clothing, accessories and the odd yoga mat, lululemon expanded into the world of footwear with a running shoe it dubbed Blissfeel last March. These were soon followed by training shoe and pool slide styles known as Chargefeel, Strongfeel -- all three of the designs (including a Chargefeel Low and a Chargefeel Mid design) have been mentioned in the lawsuit as causing "economic harm and irreparable injury" to Nike.

Nike's History Of Suing Lululemon Over Design

The specific issue lies in the technology used to build the shoes. According to the lawsuit filed in Manhattan federal court, certain knitted elements, webbing and tubular structures are too similar to ones that had been used by Nike earlier.

Nike is keeping the amount it hopes to receive from lululemon under wraps but is insisting the company infringed on its patent when releasing a shoe line too similar to its own. Lululemon had previously talked about how its shoe line "far exceeded" its leaders' expectations both in terms of sales and ability to expand.

In a Q1 earnings call, chief executive Calvin McDonald said that the line "definitely had a lot more demand than we anticipated."

Nike has already tried to go after lululemon through the courts once before. In January 2022, it accused the company of infringing on six patents over its at-home Mirror Home Gym. As the world emerged out of the pandemic, lululemon has been billing it as a hybrid model between at-home and in-person classes. 

The lawsuit was also filed in the U.S. District Court in Manhattan but ultimately fizzled out.

When it comes to the shoe line lawsuit, Lululemon has been telling media outlets that "Nike's claims are unjustified" and the company "look[s] forward to proving [their] case in court."

Lululemon

Some More Examples Of Prominent Design Battles

In the fashion industry, design infringement accusations are common and rarely lead to high-profile rulings. While Nike has gone after the technology itself in both cases, lawsuits more often focus on the style or pattern on a given piece.

Shein, a China-based fast-fashion company that took on longtime leaders like H&M  (HNNMY)  and Fast Retailing  (FRCOF) 's Uniqlo with its bottom-of-the-barrel pricing, has faced numerous allegations from smaller and independent designers over the copying of designs -- in some cases not even from fashion designers but artists painting in local communities.

"They didn't remotely bother trying to change anything," U.K.-based artist Vanessa Bowman told the Guardian after seeing her painting of a local church appear on a sweater on Shein's website. "The things I paint are my garden and my little village: it’s my life. And they’ve just taken my world to China and whacked it on an acrylic jumper."

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