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Stocks, Bond Yields Tumble After Manchin “No” On Build Back Better, Goldman Slashes GDP

Stocks, Bond Yields Tumble After Manchin "No" On Build Back Better, Goldman Slashes GDP

A decisive "no" from Senator Joe Manchin on President Biden’s Build Back Better (BBB) social engineering spendfest has sparked anger from The White House.

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Stocks, Bond Yields Tumble After Manchin "No" On Build Back Better, Goldman Slashes GDP

A decisive "no" from Senator Joe Manchin on President Biden's Build Back Better (BBB) social engineering spendfest has sparked anger from The White House and economic outlook cuts from Wall Street.

While BBB enactment had already looked like a close call, in light of Manchin's comments Goldman has removed the assumption that BBB will become law from its forecast.

In light of their changed fiscal assumptions, Goldman lowers their real GDP forecast for 2022: 2% in Q1 (vs. 3% prior), 3% in Q2 (vs. 3.5% prior), and 2.75% in Q3 (vs. 3% prior).

The main points from Goldman's report are as follows:

1. Senator Joe Manchin (D-W. Va.) released a statement this morning indicating that he would not support President Biden’s Build Back Better (BBB) legislation, saying that his “concerns have only increased as the pandemic surges on, inflation rises and geopolitical uncertainty increases around the world”. His statement also cites electric grid reliability and the increased reliance on foreign supply chains as concerns, in reference to the bill’s energy and climate provisions. In apparent reference to the bill’s social benefits, he says “my Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face.” He also makes multiple references to concerns about the public debt and potential fiscal implications of the legislation.

2. BBB no longer looks like the base case. We recently put the probability of a modified version of the BBB legislation passing at slightly better than even but, in light of Manchin’s comments, the odds have clearly declined and we will remove the assumption from our forecast. With headline CPI reaching as high as 7% in the next few months in our forecast before it begins to fall, the inflation concerns that Sen. Manchin and others have already expressed are likely to persist, making passage more difficult. The omicron variant is also likely to shift political attention back to virus-related issues and away from long-term reforms. There is still a possibility that Congress passes a few smaller short-term fiscal provisions aimed at virus-related issues, and it also still looks likely that Congress will pass a version of the Senate’s competitiveness legislation, which included around $250bn in economic incentives related to research, manufacturing, semiconductors and supply chains.

3. The most important question for the near-term outlook is the fate of the expanded child tax credit. Sen. Manchin has already proposed adding work requirements on the credit, which could be done by making it only partly refundable, as it had been until 2021. In theory, congressional Democrats could finance a permanent extension of a partly- or non-refundable child tax credit at the current higher level ($3000/$3600 per child, depending on age) with the revenue from the tax increases in the House-passed BBB; Manchin has not objected to those tax increases. However, it would likely take several weeks to negotiate a new compromise, and with the expanded child tax credit expiring Dec. 31, the urgency to extend it is likely to fade while any negotiations take place. It is also unclear whether progressive Democrats would accept legislation that drops most of their other priorities. While we still think there is some chance that Congress extends the expanded child tax credit retroactively in some form, the odds of this happening seem to be less than even at this point.

4. A failure to pass BBB has negative growth implications. We had already expected a negative fiscal impulse for 2022 as a result of the fading support from COVID-relief legislation enacted in 2020 and 2021, and without BBB enactment, this fiscal impulse will become somewhat more negative than we had expected. Specifically, the expiration of the child tax credit and the lack of the other new spending we had been expecting will reduce the fiscal impulse to growth by around 1pp in Q1, 0.5pp in Q2 and 0.25pp in Q3. With this change, our GDP forecast for 2022 now stands at 2% in Q1 (vs. 3% prior), 3% in Q2 (vs. 3.5% prior) and 2.75% in Q3 (vs. 3% prior).

5. Most Fed officials likely expected the BBB Act or something like it to become law, and a failure to pass it would introduce some risk to our expectation that the FOMC will deliver the first rate hike in March.

6. While the apparent demise of the BBB legislation has negative implications for near-term consumption, for financial markets there are also likely to be some offsetting positive effects. The odds of corporate tax increases have now declined, for example, which our equity strategists had estimated would reduce S&P profits by 3%. And while a failure of the BBB legislation would be a clear setback for the renewable energy sector, it would be a positive for biopharma which would no longer be tapped for more than $100bn in price reductions in the Medicare program.

However, the bond and stock market have reacted (for now, apparently not seeing the 'bad news is good news' angle from Goldman) as one would expect, with futures lower (S&P futs are now underwater for December)...

And 30Y Yields lower (also lower for the month)...

The White House is furious.

White House press secretary Jen Psaki said in a statement on Sunday that Sen. Joe Manchin (D-W.Va.) went back on his word when he announced Sunday that he will not support President Joe Biden’s mammoth “Build Back Better” spending package, likely imperiling the measure.

“Senator Manchin’s comments this morning on FOX are at odds with his discussions this week with the President, with White House staff, and with his own public utterances."

Sen. Bernie Sanders (I-Vt.), a self-described democratic socialist, alleged Manchin “does not have the guts to stand up to powerful special interests” by voting for the bill. Sanders did not elaborate on who those “powerful special interests” may be.

The White House will continue to apply pressure on Manchin to see whether he will reverse his position, Psaki said.

Tyler Durden Sun, 12/19/2021 - 21:25

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide…

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide Black Lives Matter riots in the summer of 2020, some elite colleges and universities shredded testing requirements for admission. Several years later, the test-optional admission has yet to produce the promising results for racial and class-based equity that many woke academic institutions wished.

The failure of test-optional admission policies has forced Dartmouth College to reinstate standardized test scores for admission starting next year. This should never have been eliminated, as merit will always prevail. 

"Nearly four years later, having studied the role of testing in our admissions process as well as its value as a predictor of student success at Dartmouth, we are removing the extended pause and reactivating the standardized testing requirement for undergraduate admission, effective with the Class of 2029," Dartmouth wrote in a press release Monday morning. 

"For Dartmouth, the evidence supporting our reactivation of a required testing policy is clear. Our bottom line is simple: we believe a standardized testing requirement will improve—not detract from—our ability to bring the most promising and diverse students to our campus," the elite college said. 

Who would've thought eliminating standardized tests for admission because a fringe minority said they were instruments of racism and a biased system was ever a good idea? 

Also, it doesn't take a rocket scientist to figure this out. More from Dartmouth, who commissioned the research: 

They also found that test scores represent an especially valuable tool to identify high-achieving applicants from low and middle-income backgrounds; who are first-generation college-bound; as well as students from urban and rural backgrounds.

All the colleges and universities that quickly adopted test-optional admissions in 2020 experienced a surge in applications. Perhaps the push for test-optional was under the guise of woke equality but was nothing more than protecting the bottom line for these institutions. 

A glimpse of sanity returns to woke schools: Admit qualified kids. Next up is corporate America and all tiers of the US government. 

Tyler Durden Mon, 02/05/2024 - 17:20

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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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