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Week Ahead – A valentine’s day treat

US The Valentine’s Day inflation report is the main event of this week.  Disinflation trends will get tested here and we could potentially have a major…

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US

The Valentine’s Day inflation report is the main event of this week.  Disinflation trends will get tested here and we could potentially have a major turning point with Wall Street’s expectations on how high the Fed will have to take interest rates. The January inflation report is expected to show headline CPI from a month ago rose 0.5%, up from the -0.1% reading in the prior month.  Inflation from a year ago is expected to improve from 6.5% to 6.2%.  The core readings on a monthly basis are expected to keep the 0.3% pace, while on an annual basis is expected to improve from 5.7% to 5.4%.  If pricing pressures come in hotter-than-expected, this could be an inflation reckoning report that might drive Fed rate hike expectations above 5.25%. 

Investors will pay close attention to Fed speak after the January inflation report. Fed’s Logan, Harker, and Williams will speak shortly after the Tuesday inflation data.  On Thursday, we will hear from Mester, Bullard, and Cook.  Friday contains appearances by Barkin and Bowman. 

Earnings seasons continues with key updates from AIG, Analog Devices, Applied Materials, AutoNation, Barclays, Barrick Gold, Biogen, Coca-Cola, Deere, Devon Energy, DraftKings, Fidelity, Heineken, Hermes International, Hyatt Hotels, Kraft Heinz, Nestle, Orange, Pernod Ricard, Restaurant Brands International, Shake Shack, and Shopify

Eurozone

Not the most thrilling week but there is a scattering of data points, many of which the ECB won’t ignore even if they aren’t as impactful as the headline inflation numbers. GDP and employment on Tuesday fall into that category as we see how the bloc coped with the early winter period. That aside, central bank speak as ever remains key with President Lagarde on Wednesday the standout.

UK

The situation in the UK is very intriguing. The economy is basically drifting at the moment, fluctuating around zero growth, unable to recoup pandemic losses, and expected to remain near the bottom of the growth table. At the same time, its inflation problem has been among the worst and even now it’s only a little shy of 10% (and its peak). And yet, markets are pricing in only one more 25 basis point hike, the MPC is confident inflation will be below 4% by the end of the year and two policymakers even voted to hold at the February meeting.

GDP figures Friday confirmed the UK avoided recession by the finest of margins, a fact that could be easily revised out in the coming months. Next week we’ll get retail sales, labour market, and most importantly, inflation data. Last month it fell faster than the BoE expected; could we be in for another positive surprise or will Wednesday bring us back down to earth with a bang?

Russia

No major economic events next week. Focus remains on the war in Ukraine.

South Africa

Inflation is edging ever closer to the SARB’s target range of 3-6%, with CPI data next week expected to show it falling from 7.2% to 6.9%. That may allow the central bank to take its foot off the break and ease the pressure on the economy.

Turkey

No major economic announcements or events next week. 

Switzerland

With the SNB determined to get inflation back to target below 2%, attention will be on the CPI release on Monday. Chair Jordan has been adamant that getting a grip on inflation is their absolute priority and markets are convinced, pricing in a 56% chance of 50 basis points next month, and a 44% chance of 25. 

China

Amid rising optimism about China’s reopening, economic momentum is growing. Strong capital inflows into China may continue, especially as the country resumes work after the Chinese New Year holiday. 

The recent strengthening of the Fed’s hawkish stance and a slight tightening of overall risk sentiment, combined with heightened US-China tensions has also led to a wave of declines in regional equities. 

Next week, there will be no critical data. Investors are awaiting the work report of Premier Li Qiang in March, among other key policy events, which may include measures to boost consumption and stimulate economic growth. The People’s Bank of China may also cut its benchmark interest rate to boost credit demand for the private sector amid the grand economic resurgence.

India

Inflation is within the RBI 2-6% range and yet the central bank raised rates again last week by 25 basis points to 6.5%. It’s clearly concerned about the stubbornness of core inflation and fears under-tightening in the longer term over the alternative. The inflation data next week will help determine whether those are well-founded or not. Either way, further hikes look unlikely with two of the six RBI policymakers voting against the last hike.

Australia & New Zealand

Recent CPI data indicate that the RBA may have underestimated the stubbornness of Australian inflation. Policymakers may have little option but to reconsider the possibility of more significant interest rate increases.

Changes in the external environment, such as the weakening of the US dollar, the reopening of China, and improved China-Australia relations are supportive for the economies of Australia and New Zealand.

New Zealand’s inflation rate rose less than the RBNZ forecast in the fourth quarter. This has led to a slight reduction in expectations for the February meeting, although the market is still pricing in a 50 basis point hike. 

Australia’s labour market figures are released on Thursday, while appearances by Philip Lowe, Governor of the RBA, will be eyed.

Japan

There is growing speculation in the market that the BoJ is about to shift its policy after widening its yield target range last December. Some market participants believe that a new BoJ leadership would be the ideal catalyst for a policy shift. The Japanese government is expected to present its nominee for the next Governor of the Bank of Japan next week, with Kazuo Ueda the reported choice.  

Japan’s preliminary fourth-quarter GDP eyed on Tuesday.

Singapore

GDP data is the only notable release on Monday.


Economic Calendar

Saturday, Feb. 11

Economic Data/Events

China FDI

ECB’s Visco addresses the Warwick Economics Summit in Coventry, UK

Labor protests expected in France of proposed pension reforms

Sunday, Feb. 12

Economic Data/Events

The Kansas City Chiefs and the Philadelphia Eagles play in Super Bowl LVII

Regional elections in Lombardy and Lazio, Italy

Berlin holds repeat vote for regional parliament and district councils

Monday, Feb. 13

Economic Data/Events

India CPI

New Zealand performance services index

Singapore GDP

Turkey current account

Euro-area finance ministers meet in Brussels to discuss energy markets and other topics

Fed’s Bowman speaks at the American Bankers Association National Conference for Community in Orlando, Florida

ECB’s Centeno speaks at a London School of Economics event on “Challenges and new approaches to European monetary policy”

The United Arab Emirates hosts the World Government Summit

Norwegian PM Gahr Store meets Lithuanian President Nausėda in Oslo

Tuesday, Feb. 14

Economic Data/Events

US CPI

Eurozone GDP

Hungary GDP

Norway GDP

Japan GDP 

Australia consumer confidence

France unemployment

India wholesale prices

Japan industrial production

Mexico international reserves, inflation expectation

New Zealand food prices, house sales

UK jobless claims, unemployment

Fed’s Logan takes part in a moderated discussion hosted by Texas A&M University in Prairie View, Texas

Fed’s Williams gives the keynote speech at an event hosted by the New York Bankers Association

Fed’s Barkin discusses inflation in an interview with Bloomberg Television

EU finance ministers meet to discuss the impact of Russia’s war

Singapore releases 2023 budget

Wednesday, Feb. 15

Economic Data/Events

US business inventories, industrial production, retail sales, empire manufacturing

India trade

Poland CPI 

UK CPI

China medium-term lending

Canada housing starts, existing home sales

Eurozone industrial production

Japan tertiary index

South Africa retail sales, CPI

RBA Governor Lowe appears before the Senate Economics Legislation Committee

Thursday, Feb. 16

Economic Data/Events

US housing starts, PPI, initial jobless claims

Australia unemployment, household spending, consumer inflation expectations

China property prices, Swift global payments

Italy trade

Japan machinery orders, trade, department store sales

New Zealand net migration

Spain trade

New Zealand government releases financial statements for six months to Dec. 31

ECB’s Panetta speaks at a Center for European Reform conference focused on “Monetary policy after the energy shock” in London

ECB’s Nagel lectures on “Reforms for greater stability and prosperity” at the German Institute for Economic Research

ECB’s Lane delivers the NIESR Dow lecture on “The Euro area hiking cycle”

Norges Bank Q1 expectations survey. Governor Wolden Bache gives annual address to the Supervisory Council of Norway’s central bank

BOE chief economist Pill has a “fireside chat” on the UK economy at the Warwick Think Tank

Fed’s Mester speaks at an event hosted by the Global Interdependence Center in Florida. Mester later discusses the economic outlook at a meeting of Financial Executives International of Northeast Ohio and ACG Cleveland

Fed’s Bullard discusses the US economy and monetary policy at an event hosted by the Greater Jackson County Chamber in Jackson, Tennessee

Friday, Feb. 17

Economic Data/Events

France CPI

Russia, Thailand GDP

Singapore trade

Thailand foreign reserves, forward contracts, car sales

RBA Gov Lowe appears before House Economics Committee

Fed’s Barkin speaks on labor market at an event hosted by the Rosslyn Business Improvement District in Arlington, Virginia

Sovereign Rating Updates

Poland (S&P)

Switzerland (Moody’s)

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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.

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With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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