Investors Need to Be Discerning About Biotech

"Merck's $10.8 billion acquisition of Prometheus Biosciences, which is developing a promising treatment for inflammatory bowel disease, is giving the entire biotechnology sector a lift.

On Monday, the SPDR S&P Biotech ETF, which has underperformed other growth sectors this year, closed up 4.7%. For the year, the Biotech fund is down 1.4% versus the Nasdaq-100's gain of 20%.

The biotech jump was higher than when Pfizer agreed to buy Seagen for $43 billion in March or when Amgen agreed to acquire Horizon Therapeutics for $27.8 billion in December.

The lack of a significant rally in the biotech sector so far this year despite a significant amount of deal making left many investors and analysts scratching their heads. But there is a certain logic to it. While the Pfizer and Amgen deals were large and pricey, they were bets on companies with approved products and growing sales. There are a handful of biotech companies with such a profile.

The Merck deal, while smaller, gives the industry more confidence. That is because Prometheus is an earlier-stage company. While Prometheus reported positive study results in midstage testing for ulcerative colitis and Crohn's disease, it has yet to prove the drug works in a larger study. If Merck was willing to acquire Prometheus at a 75% premium to where shares closed on Friday, the thinking goes that many other companies with no approved products could be undervalued, too.

But Jefferies healthcare strategist Will Sevush argues there are too many publicly traded companies with very little chance of ever launching a product. A 2021 bubble in the sector allowed many companies with highly speculative products to come to the market, and many of those companies will be a drag on the sector for some time.

The sector will likely continue to be volatile, especially with the presence of so many short sellers. Short interest, while significantly lower than the peaks reached in the summer of 2022, had been edging up in recent weeks, says Mr. Sevush. Many probably had to cover their bets after this past weekend's Merck news. While the sector tends to outperform during short periods of excitement, such as during the vaccine hype, it hasn't been a good long-term investment. In the past five years, the S&P Biotech ETF is down about 10% versus a gain of more than 90% for the Nasdaq-100.

The more promising strategy might be to bet on winners, companies that are on the cusp of a breakthrough or might be soon acquired by pharmaceutical companies. Prometheus was in Mr. Sevush's takeout basket, which includes other biotech stocks such as Madrigal Pharmaceuticals, Sarepta Therapeutics, BioMarin and Argenx SE.

Another biotech that outperformed on Monday was Roivant. While the company has holdings in different therapeutic areas, it is developing a treatment targeting the same TL1A protein as Prometheus. The stock was up 20% at Monday's close and rose 4.1% on Tuesday.

What many of these companies have in common is that they either have approved products gaining traction on the market, or, like Prometheus, they have compelling clinical data that backs up their scientific approach. Merck's splurge on a midstage company is no doubt encouraging news for the sector. It is even better news for companies with a credible pipeline." [1]

1. Investors Need to Be Discerning About Biotech
Wainer, David.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 19 Apr 2023: B.14.

Kinijos ekonomika prieštarauja tiems, kurie nelinki jai gero --- Šalies pirmojo ketvirčio augimas rodo, kad ji toli gražu nėra išeikvota ekonominė jėga

  „2020 m. pabaigoje ir 2021 m. pradžioje JAV smogė „Covid-19“, dėl pandemijos pavojaus ir toksiškos politikos.

 

     Daugelis stebėtojų padarė išvadą, kad tauta pasiekė galutinį ekonominį ir politinį nuosmukį. Tačiau po metų, nukentėjus nuo COVID-19 ir su juo susijusių politinių sukrėtimų, ji vėl stipriai augo ir vėl įsitvirtino pasaulinėje arenoje.

 

     Kažkas panašaus dabar vyksta Kinijoje.

 

     4,5 % Kinijos pirmojo ketvirčio augimo rodiklis nustebino daugelį ekonomistų, kurie tikėjosi maždaug 4 %, ypač atsižvelgiant į besitęsiančią Kinijos būsto rinkos žlugimo trukmę ir konservatyvią pinigų politiką.

 

 Be abejo, yra svarbių skirtumų: Kinijos namų ūkiai niekada negavo didelių vyriausybės čekių, todėl, nors vartojimo atsigavimas yra įspūdingas, jis greičiausiai nepasižymės tokia išlikimo galia, kokią turėjo JAV. Didelė struktūrinė žala šalies būsto rinkai ir aukštųjų technologijų sektoriui dėl pastarųjų dvejų metų politikos klaidų išliks, o demografiniai rodikliai stabdys.

 

     Tačiau nė vienas iš šių dalykų nereiškia, kad Kinija negali patirti didesnio, nei tendencijos, augimo laikotarpio, kai ji perėjo per gręžtuvą. Atsižvelgiant į dabartinį stiprų ekonomikos pagreitį ir žemos bazės efektą kitą ketvirtį dėl praėjusių metų Šanchajaus uždarymo, Kinijos antrojo ketvirčio augimas greičiausiai bus žymiai stipresnis.

 

     Vartojimo skaičiai, kaip ir tikėtasi, buvo įspūdingiausi: mažmeninė prekyba per metus išaugo 10,6%, o sausio ir vasario mėnesiais – 3,5%.

 

     Tačiau Kinijos būsto rinka yra geresnė nei atrodo. Nors investicijos kovo mėn. vėl šiek tiek susilpnėjo, o tai iš dalies gali paaiškinti, kodėl anglies ir plieno kainos vėluoja, parduotas gyvenamųjų patalpų plotas per metus išaugo pirmą kartą nuo 2021 m. birželio mėn. O užbaigtų būstų plotas padidėjo 35 %, palyginti su 2020 m. Sausio ir vasario mėnesiais padidėjo 10%, o dar lapkričio mėnesį sumažėjo dviženkliu skaičium. Būsto pradžia ir investicijos atsilieka, tačiau atrodo, kad nebaigtų statyti, iš anksto parduotų butų – pagrindinio rinką sveriančio veiksnio – atsilikimas sumažėjo.

 

     Atsižvelgiant į šį faktą ir stiprų vidaus vartojimo bei kelionių atsigavimą, nenuostabu, kad naftos paklausa taip pat šoktelėjo. Remiantis duomenų teikėjo CEIC duomenimis, akivaizdi naftos paklausa Kinijoje – naftos perdirbimo gamyklų eksploatavimas ir grynasis naftos produktų importas – kovo mėn., palyginti su per metus, išaugo beveik 10 proc. Tai buvo daugiau, nei 3,9 % kritimo 2022 m. gruodžio mėn., o tai patvirtina kitas šių metų užuominas, kad naftos paklausa atsigauna greičiau, nei tikėtasi. Tikėtina, kad antroje metų pusėje Kinijos nekilnojamojo turto atsigavimas ir naftos paklausa pradės daryti daug didesnį poveikį pasaulinėms žaliavų kainoms, nors statybų šėlsmas, panašus į ankstesnius skatinimo epizodus, ir toliau mažai tikėtinas.

 

     Viena sritis, kurioje optimizmas gali būti šiek tiek klaidingas, yra prekyba. Kovo mėnesį Kinijos eksportas stipriai nustebino, iš dalies dėl sparčiai augančios prekybos su Rusija, tačiau oficialus gamybos pirkimo vadybininkų indeksas rodė, kad naujų eksporto užsakymų augimas šiek tiek sulėtėjo. Pagrindinių su eksportu susijusių pramonės prekių, tokių, kaip išmanieji telefonai ir kompiuteriai, gamyba kovo mėn. taip pat išliko silpna: gamyba sumažėjo atitinkamai 6,7% ir 21,6%, palyginti su praėjusiais metais.

 

     Kinija vis dar turi didelę ekonominę duobę, iš kurios reikia išlipti, tačiau šie naujausi skaičiai rodo, kad ji grįžta į verslą. Covid-19 eros politikos klaidos padarė tam tikros ilgalaikės žalos Kinijos perspektyvoms. Tačiau jų nepakaks, kad šalis būtų pašalinta kaip didžiulė pasaulinė ekonominė jėga, nors daugelis Vašingtono gali norėti, kad taip būtų.“ [1]

 

Ar šių metų žiemą ES gali pigiai pasisemti energijos? Nulis šansų, nes energijos reikės Kinijai. Kaip įdomu...

 

1. Chinese Economy Defies Naysayers --- The country's first-quarter growth shows it is far from a spent economic force
Taplin, Nathaniel.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 19 Apr 2023: B.14.

 

Chinese Economy Defies Naysayers --- The country's first-quarter growth shows it is far from a spent economic force

"In late 2020 and early 2021, the U.S. was being pummeled by Covid-19, by its scattershot response to the pandemic and by toxic politics. 

Many observers concluded the nation had entered terminal economic and political decline. But a year later, having suffered through Covid-19 and the associated political shocks, it was growing strongly again and had reasserted itself on the world stage.

Something similar is happening in China now.

China's 4.5% first-quarter growth figure surprised many economists, who expected somewhere in the neighborhood of 4%, particularly given continuing drags from China's housing-market crash and a conservative monetary stance. To be sure, there are important differences: Chinese households never received big government checks and so, while the consumption rebound is impressive, it likely won't have quite the staying power that the U.S.'s did. Significant structural damage to the nation's housing market and to its high-tech sector from the policy missteps of the past two years will persist, and demographics are a drag.

But none of that means China can't experience a period of above-trend rebound growth now that it passed through the wringer. Given the strong momentum the economy has now and given the low-base effect next quarter from last year's Shanghai lockdown, China's second-quarter growth will likely be significantly stronger.

The consumption figures were the most impressive, as expected: Retail sales rose 10.6% year over year, up from 3.5% in January and February.

But the Chinese housing market is in better shape than it appears. Although investment weakened again marginally in March, which may partly explain why coal and steel prices have lagged of late, residential floor space sold rose year over year for the first time since June 2021. And housing floor space completed rose 35%, up from a 10% gain in January and February and double-digit declines as recently as November. Housing starts and investment are lagging but the backlog of uncompleted, presold apartments -- the key factor weighing on the market -- appears to have been whittled down.

Given that fact, and the strong rebound in domestic consumption and travel, it is no surprise to see oil demand jumping back as well. China's apparent petroleum demand -- refinery runs plus net oil product imports -- rose nearly 10% year over year in March according to figures from data provider CEIC. That was up from a 3.9% fall in December 2022, confirming other hints earlier this year that oil demand was rebounding quicker than expected. By the second half of the year, China's property rebound and oil demand are likely to start having a much more noticeable impact on global commodity prices -- although a construction frenzy on the scale of previous stimulus episodes remains unlikely.

One area where optimism may be slightly misplaced is trade. China's March exports surprised strongly on the upside, partly on the strength of burgeoning trade with Russia, but the official manufacturing purchasing-managers index showed growth in new export orders slowing slightly. Output of key export-related manufactured goods like smartphones and computers also remained weak in March: Production fell 6.7% and 21.6%, respectively, year over year.

China still has a significant economic hole to climb out of, but these latest figures show it is back in business. The policy mistakes of the Covid-19 era have done some long-term damage to China's prospects. But they won't be enough to remove the country as a formidable global economic force -- even though many in Washington might wish that to be the case." [1]

Chances for the EU to scoop up energy cheaply this year's winter? Zero chance, because China will need the energy. How interesting...

1. Chinese Economy Defies Naysayers --- The country's first-quarter growth shows it is far from a spent economic force
Taplin, Nathaniel.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 19 Apr 2023: B.14.