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US Dollar Punches Higher

Overview:  Disappointing
data in Asia and Europe has sent the greenback broadly higher. The strong gains
posted before the weekend were mostly consolidated…



Overview:  Disappointing data in Asia and Europe has sent the greenback broadly higher. The strong gains posted before the weekend were mostly consolidated yesterday when the US and Canadian markets were on holiday. The rally resumed today. The Antipodeans and Scandis have been hit the hardest (-0.7% to -1.25%) but all the G10 currencies are down. The Swiss franc and yen are off the least (-0.35%-0.45%), and the euro and sterling have taken out their recent lows. Emerging market currencies have also fallen. So far, none have been spared. 

Most of the large Asia Pacific bourses were under pressure, though Japan, Taiwan, and India posted small gains. The Hang Seng and mainland stocks that trade there suffered the most, with more than a 2% drop. MSCI's Asia Pacific Index snapped a six-day advance. Europe's Stoxx 600 is off by about 0.25% in late morning activity. It has fallen for the past four sessions. US index futures are trading heavier, with the S&P futures off about 0.2% and the NASDAQ futures down by around 0.35%. Bonds are also selling off. European benchmark 10-year yields are 2-3 bp higher and near 4.22%, the 10-year US Treasury yield is up about four basis points. Higher yields and a stronger dollar are pushing gold lower. After testing $1950 at the end of last week, it approached $1930 today. October WTI is steadying after pushing to $86 in early turnover. It is now near $85.50. 

Asia Pacific

With a steady stream of new measures to support the economy, Chinese officials rendered less relevant today's Caixin PMI. In any event, the services PMI softened to 51.8 from 54.1 in July. Recall that the Caixin manufacturing PMI had unexpectedly rose to 51.0 from 49.2. The August composite slipped to 51.7 from 51.9. China's CIS 300 snapped a three-week slide last week (2.2% gain). It advanced 1.5% yesterday and gave half of it back today. Tomorrow or Thursday, China is expected to report that the of decline in both exports and imports slowed.

Japan reported that household spending continued to fall on a year-over-year basis. The 5.0% decline in July followed a 4.2% decline in June, twice as much as expected. August will also likely show a sharp decline, but improvement is likely in Q4. Japan also reported the final services and composite August PMI. The services PMI was confirmed at 54.3 (53.8 in July), the first increase in three months. The composite edged up for the second consecutive month to stand at 52.6 (52.2 in July). Still to come this week are July labor cash earnings (may have risen slightly) and another look at Q2 GDP (which may be revised a little lower from 1.5% quarter-over-quarter, 6.0% annualized) in light of lower-than-expected business investment. 

The Reserve Bank of Australia stuck with it hawkish hold at Governor Lowe's final meeting. Last week, his successor Bullock, warned that interest rates may be needed to rise further, and suggested the decision is on a month-to-month basis. The market is less convinced and indicative pricing in the futures market has about a 20% chance of a hike discounted by the end of the year. The final August services PMI confirmed the fourth consecutive decline, but not as steep as expected. It stands at 47.8, down from 47.9, which is the lowest since January. The composite PMI stands at 48.0 (down from 48.2 in July), which is the lowest this year, but better than the 47.1 preliminary estimate. Lowe delivers a final speech on Thursday and steps down on September 17. Separately, note that Chevron's LNG export plants could be hit by strike activity as early as Thursday. The two facilities accounted for around 7% of global LNG supply in 2022. Employees voted down the companies pay offer last week. Still, note that Europe's natgas benchmark fell by 9.8% yesterday (after a 17.25% surge at the end of last week) and is off fractionally today, despite the strike risk and the drop in flows from Norway. Higher-than-normal inventories and soft consumption offset the supply issues. 

The dollar's pre-weekend gain was extended to JPY146.50 yesterday and is now straddling the JPY147.00 area. It has held a little below the year’s high set on August 29 slightly above JPY147.35. Note that the upper Bollinger Band is near JPY147.25. Initial support is near JPY146.80. After steadying yesterday, the Australian dollar has been driven lower sharply lower today. It settled slightly firmer yesterday (~$0.6460) after a poor finish last week. Today, it has reached $0.6375, slightly above the August 17 low for the year (~$0.6365). The measuring objective of the double top at $0.6900 (June and July) is about $0.6300. Without out a broader pullback in the US dollar, China will find it difficult to do more than slow the yuan's descent. In addition to market guidance, it has lowered the required reserves on foreign deposits, and it has repeatedly set the dollar's reference rate below market projections. There have been reports of dollar sales by state-owned banks, but their activity cannot be untangled from their own position-taking and execution on behalf of commercial clients. The dollar settled near CNY7.2665 at the end of last week and jumped to CNY7.3075 today, its highest level since August 21. The PBOC set the dollar's reference rate at CNY7.1783, well below the average of the Bloomberg survey (CNY7.2739). That puts the upper end of the 2% band at CNY7.3219.


The final eurozone August services PMI confirmed the first break of the 50 boom/bust this year at 47.9, down from 48.3 down initial estimate and 50.9 in July. It is also now below December 2022 (49.8). Indeed, it is the weakest since February 2021. Dragged down by the poor manufacturing sector, the composite has been below 50 since June's 49.9 reading. At 46.7 (47.0 flash estimate), it is the weakest since November 2020. Germany's final PMIs were in line with the preliminary estimates, while the final French services were revised lower (46.0 from 46.7) as was the composite (46.0 vs. 46.6). Italy's and Spain's service and composite PMIs softened. Italy's composite was below 50 for the third consecutive month (48.2 vs 48.9), while Spain's composite fell for the fifth consecutive month and broke below 50 (48.6 from 51.7) for the first time this year. Separately, note that yesterday, Germany reported a smaller than expected July trade surplus (15.9 bln euros, down from 18.7 bln and 17.8 bln expected). The decline in exports was less than expected (-0.9% instead of -1.5%) but imports were up more (1.4% vs.0.5%). Lastly, the results of the ECB's survey showed inflation expectations were unchanged at 3.4% in one year but 2.4% (up from 2.3%) in three years.

The UK's final August services PMI confirmed the break of 50 but not as poor as the preliminary estimate of 48.7 (from 51.5) to stand at 49.5. It peaked in April at 55.2. The final composite reading of 48.6 (47.9 flash estimate). The swaps market is slightly less than fully convinced of a 25 bp hike later this month. It favors one more hike in Q4 that would bring the base rate to 5.75% by year-end, where it is seen remaining well into 2024.

Yesterday, the euro held the pre-weekend low, a little above $1.0770, which is just above the low set in late August (~$1.0765) but slumped to almost $1.0740 today. The euro settled for the second consecutive session below the 200-day moving average yesterday (~$1.0820). The break brings the low from last May near $1.0635 into view. There are 1.45 bln euro of options struck at $1.0750 that expire tomorrow that may have also been a drag. The (38.2%) retracement of the rally from last September's multiyear low (~$0.9535) comes in near $1.0610. Sterling's price action looked a bit better than the euro's. It settled back above $1.2600 yesterday, but today has been punched below the gradual uptrend off the lows comes that came in around $1.2585 today. Like the euro, the intraday momentum indicators are stretched, and sterling has found bids after slipping below $1.2530 in early European activity. Initial resistance may be seen in the $1.2570-80 area. 


The markets continue to digest last week's US employment data. However, the odds of a hike later this month is less than 7% down from nearly 23% at the start of last week. Arguably, more importantly, the odds of a hike in November have fallen too. The futures market shows a probability of less than 40%, down from nearly 70% last Monday. The jobs data were consistent with the labor market becoming less tight. That said, increase in the average work week and the participation rate is not typically seen late in the cycle. However, the decline in temporary workers, and continued sharp downward revisions, and the slowing of the hourly earnings increase to 4.3%, matching this year's low, which are the smallest year-over-year increases since June 2021, are what one would expect as the labor market cools.

Today's economic calendar features factory orders, for which the 5.2% decline in the preliminary estimate of durable goods orders is a good tell for weakness. The decline in durable goods orders was concentrated in transportation equipment. Excluding transportation and defense, durable goods orders eked out a 0.1% gain after a 0.4% decline in June. Tomorrow sees the July trade balance deficit, the final PMI, and the services ISM. The Fed's Beige Book, the anecdotal survey, compiled in preparation of the September 19-20 FOMC meeting will be released late tomorrow after the Boston Fed's Collins and former St. Louis Fed's Bullard speak. In terms of Treasury supply, it is all bills this week (about $233 bln without counting the 4- and 8-week bills), with the first coupon sale (three-year note) not until September 11.

Canada reports July merchandise trade figures today. A deficit in line with the C$3.7 bln shortfall in June is expected. There has been a notable deterioration in Canada's merchandise trade balance. In the first half of 2022, Canada recorded a merchandise trade surplus of near C$18 bln. The first half of this year, it swung to a deficit of almost C$4.5 bln. This is a big week for Canada. The Bank of Canada meets tomorrow, and after hiking rates at its last two meetings, it will most likely stand pat. The unexpected contraction in Q2 GDP removed practically whatever residual chance of a hike there may have been. The odds of a hike began last week a little below 25% and finished the week at less than 4%. Canada finishes the week with the August employment report. Canada's labor market is also slowing. In the first seven month, Canada grew an average of almost 35k full-time jobs a month, almost a 25% less than the average in the Jan-July 2022 period.

Mexico reports August auto sales figures today. It is not a market mover but does illustrate an element of the underlying resilience of Mexico's economy. Through July, Mexico's vehicle sales are running nearly 23% above the pace in the first seven months of 2022, which is roughly twice the increase seen in the US. The highlight of the week are the CPI figures on Thursday. The takeaway is that prices pressures continue to ease in Mexico and the data for the second half of August shows the momentum has continued. 

After posting a bullish outside up day against the Canadian dollar ahead of the weekend, the greenback consolidated in a narrow range yesterday, with both US and Canadian markets on holiday. It is has been flirting with CAD1.36 recently but has not closed above it since late May, but this looks likely to change today. The greenback is tested the highs from late April near CAD1.3670. There is little meaningful chart resistance if ahead the trendline off last October's high (~CAD1.3975) and March's high (~CAD1.3860) that comes in near CAD1.3735 today. The Mexican peso bulls are being challenged by the reaction to last week's decision to wind down the central bank's peso hedging facility. Yesterday, the dollar settled near MXN17.1740, its highest close in a month and follow-through buying today lifted the greenback to almost MXN17.30. The July and August highs were set in the MXN17.3950-MXN17.4250 area. Before the weekend, Brazil reported Q2 GDP expanded by 0.9%, three-times more than the median forecast in Bloomberg's survey and a rise in the August manufacturing PMI to 50.1 from 47.8 (first time above 50 since last October). It also reported that while the trade surplus expanded by nearly 10% over July, and was more than double the August 2022 surplus, the August 2023 trade surplus was smaller than economists projected. Still, the Brazilian real could make little headway against the dollar. The greenback spent August consolidating in a BRL4.84-BRL5.00 range. For the past three sessions the dollar has closed near session highs between BRL4.9350-BRL4.9550. Lastly, Chile's central bank is seen cutting its overnight target rate at least 75 bp to 9.50%. It delivered the first cut in the cycle in July of 100 bp.


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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…



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…



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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