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Week Ahead – ECB set to pause tightening cycle, a big week for earnings

US Now that Fed Chair Powell signaled that the Federal Open Market Committee will keep rates on hold at the next policy meeting, Wall Street will look…

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Now that Fed Chair Powell signaled that the Federal Open Market Committee will keep rates on hold at the next policy meeting, Wall Street will look to see how high growth will peak before the economy cools in Q4.  Expectations are for the advance reading of Q3 GDP to rise from 2.1% to 4.3%.  Investors will also want to see if the September income and spending data show the consumer is still in good shape, as both readings are expected to post 0.4% monthly gains. 

Big earnings for the week will come from 3M, Alphabet, Amazon, Barclays, BNP Paribas, Boeing, Boston Scientific, Bristol-Myers Squibb, Chevron, Chipotle Mexican Grill, Coca-Cola, Colgate-Palmolive, Exxon Mobil, Ford Motor, General Electric, General Motors, Hershey, Intel, International Business Machines, Merck, Meta Platforms, Microsoft, Novartis, PG&E, United Parcel Service, United Rentals, Verizon Communications, Visa, and Volkswagen  

Washington DC will remain in the spotlight as House Republicans continue to struggle to elect a new House speaker.  

Eurozone

The ECB is expected to leave interest rates unchanged next week, as per the communication following its last meeting in September. The question for many traders is whether the central bank is in fact done or if it can be tempted into another increase. Recent moves in bond yields suggest investors are increasingly coming around to the idea of higher for longer. It will be interesting to see if the ECB addresses this or welcomes the recent moves. Flash PMIs will also be of interest considering the risk of recession going into next year.

UK 

Delayed unemployment data and flash PMI surveys will be in focus next week. There’s still significant uncertainty around the UK from the sustainability of declining inflation – which Governor Bailey claimed will fall sharply in October – to high wages, weak retail sales, and the potential economic drag. Unemployment has been ticking higher in this time which may give the BoE comfort that wage growth will soon normalize. Central bank appearances later in the week will also be of interest. 

Russia

Higher inflation is keeping up the pressure on the Russian central bank to raise rates, which it’s expected to do again next week, taking the Key Rate to 14% from 13%, currently. The rouble remains extremely weak so it may take more than a 1% increase to improve its fortunes and get inflation back under control.

South Africa

Inflation came in slightly above expectations in September and despite it still being well within the SARBs 3-6% target range, that will make policymakers a little uncomfortable. Against that backdrop, the PPI figures next week will be eyed for signs of further inflationary pressures in the pipeline. 

Turkey

The focus next week will be on the CBRT rate decision, with there once more being a wide range of forecasts, but the consensus falling somewhere around a 5% hike. This comes amid inflation running at more than 60% in September and the lira continuing to hit record lows. 

Switzerland

No major economic releases or events next week.

China

A quiet week on the economic calendar where we only have year-to-date industrial profits to September on Friday. It is expected to contract at a slower pace of -9% y/y versus -11.7% recorded in August.

The limelight will be on Country Garden, China’s biggest private property developer which is now in a “technical default” situation after it failed to honor the overdue coupon payments of US$15.4 million of an offshore dollar bond following its grace period which expired on 18 October. The focus now will be on the negotiation with its bondholders on restructuring the overdue coupon payments and the time taken for the company to deliver a blueprint.  

Also, the grace period on another set of overdue coupon payments on offshore bonds is near expiration with one due on 27 October for US$40 million. A messy debt overhaul of Country Garden increases the systemic risk and social stability threat in China.

Several key earnings releases to take note of; CNOOC (Tuesday), China Life Insurance (Thursday), Sinopec (Thursday), China CITIC Bank (Thursday), Guangzhou Automobile (Thursday), China Construction Bank (Thursday), Agricultural Bank of China (Friday), Bank of China (Friday), China Merchants Bank (Friday), Ping An Insurance (Friday).

India

No key data releases.

Australia

On Tuesday, we will have flash manufacturing and services PMI numbers for October.

A rather hawkish rhetoric in the RBA minutes – in which one sentence stated, “the board has a low tolerance for a slow return of inflation to target than currently expected” – led to a jump in expectations of an interest rate hike in the next RBA meeting on 7 November. Based on data from the pricing of the ASX 30-day interbank cash rate futures as of 18 October, there’s a 23% chance (up from 3% a week ago) of an interest hike of 25 basis points (bps) to bring the official cash rate to 4.35% after a fourth consecutive pause in early October.

The release of Australia’s Q3 inflation data on Wednesday is likely to be pivotal in altering the expectations of a potential interest rate hike. A deceleration to 5.3% y/y is expected for Q3 from 6% in the previous quarter. The Q3 trimmed mean CPI  is expected to fall to 5% y/y versus 5.9% in Q2.

However, the less lagging CPI indicator for September is expected to show another uptick in inflation to 5.4% versus 5.2% in August. That would be the second consecutive month of higher inflation which may put a hawkish RBA vibe back on the agenda.

New Zealand

ANZ-Roy consumer confidence data for October will be released on Friday where it is forecasted to decline to 82.6 from 86.4 in September. That would be the lowest reading since May 2023.

Japan

Flash manufacturing and services PMIs for October will be released on Tuesday with the former expected to improve slightly to 49 from 48.5 in September while growth in the latter is expected to dip slightly to 52.9 from 53.8.

On Friday, the leading Tokyo area inflation data for October is expected to show core CPI remaining at 2.5% y/y but growth in the core-core CPI (excluding fresh food and energy) dipping slightly to 2.2% y/y from 2.4%. That would be the slowest core-core inflationary growth in Tokyo since March 2023.

Singapore

A slew of key economic data releases starting on Monday with the CPI report for September. The headline inflation rate is expected to increase slightly to 4.2% y/y from 4% in August while the expectation for the core inflation rate is a dip to 3.1% y/y from 3.4%; a declining trend in place since May 2023.

Industrial production for September will be released on Thursday and a smaller contraction of -2.6% y/y is expected from -12.1% in August. That would be a significant improvement after it previously recorded its sharpest drop since November 2019.

On Friday, we have the preliminary Q3 unemployment rate which is expected to hold steady at 1.9%. PPI (factory gate prices) is expected to decline again in September at a rate of 3.0% y/y, almost the same pace as the -3.7% in August, and the softest since January 2023.


Economic Calendar

Sunday, Oct. 22

Economic Data/Events

Federal elections in Switzerland

Monday, Oct. 23

Economic Data/Events

Eurozone consumer confidence

Singapore CPI

Taiwan jobless rate, industrial production

Thailand customs trade

EU foreign ministers meet in Luxembourg

Japan PM Kishida delivers policy speech at Diet session

Singapore International Energy Week runs through Friday

Australia PM Albanese visits the US and meets with President Biden on Wednesday

Tuesday, Oct. 24

Economic Data/Events

US Flash PMIs 

European Flash PMIs: Eurozone, Germany, France, and the UK

UK jobless claims, unemployment

Mexico international reserves

Megacap tech earnings from Microsoft and Alphabet

UN Security Council expected to discuss the Middle East situation

European Union expected to unveil plans for wind energy industry

RBA Gov Bullock speaks at the Commonwealth Bank Annual Conference in Sydney

Euro-area bank lending survey

International Energy Agency releases its World Energy Outlook annual report

Wednesday, Oct. 25

Economic Data/Events

US new home sales

Australia CPI

Canada rate decision: Expected to keep rates on hold at 5.00%

Germany IFO business climate

Russia industrial production

Hong Kong Chief Executive Lee delivers his second policy address

Thursday, Oct. 26

Economic Data/Events

ECB rate decision: Expected to keep main refinancing rate at 4.50%

US Advance Q3 GDP Q/Q: 4.3%e v 2.1% prior, Personal Consumption 3.7%e v 0.8% prior, Sept wholesale inventories, Sept durable goods, weekly initial jobless claims

Hong Kong trade

Mexico unemployment

Singapore industrial production, unemployment

South Korea GDP

Turkey rate decision: Expected to raise rates by 500bps to 35.00%

Earnings from Intel and Amazon

EU leaders summit in Brussels

Outgoing BOE’s Cunliffe speaks on cross-border payments in Washington

Friday, Oct. 27

Economic Data/Events

US personal spending and income, University of Michigan consumer sentiment, PCE Core Deflator

China industrial profits

Japan Tokyo CPI

Mexico trade

Russia rate decision: Policymakers will discuss the possibility of a further rate hike from the current level of 13%

Singapore home prices

Spain GDP

Earnings from Exxon

Sovereign Rating Updates

France (Fitch)

Sweden (Fitch)

Finland (S&P)

Sweden (S&P)

Belgium (Moody’s)

EFSF (Moody’s)

ESM (Moody’s)

Italy (DBRS)

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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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