Tuesday 24/11/20

  1. In PHARMACEUTICAL NEWS, we take a closer look at the impact of AstraZeneca/Oxford University’s vaccine, Merck buying OncoImmune and Amazon’s recent foray into pharmacy
  2. In RESCUE NEWS, Cineworld gets a lifeline, the AA gets a private equity offer and JD Sports is the frontrunner for Debenhams
  3. In INDIVIDUAL COMPANY NEWS, GM does a big recall and Danone cuts jobs
  4. AND FINALLY, I bring you dishwasher veggies…

1

PHARMACEUTICAL NEWS

So we look at the impact of AstraZeneca’s news, Merck buying OncoImmune and Amazon’s recent move into the pharmacy business…

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Oxford-AstraZeneca vaccine results raise hopes for Covid fight (Financial Times, Donato Paolo Mancini and Clive Cookson) highlights yesterday’s good news about results of their late-stage trials. However, an analyst from SVB Leerink, a US investment bank that concentrates on the healthcare sector, criticised recent data releases from pharmaceutical companies and said of AstraZeneca’s effort that he did not think it would win approval in the US – which probably added to AstraZeneca and Oxford University vaccine data disappoints investors (Daily Telegraph, Julia Bradshaw and Tim Wallace) as investors appeared to be underwhelmed by its 70% efficacy rate versus rates in the 90s for Moderna and Pfizer/BioNTech’s candidates. How the Oxford-AstraZeneca vaccine works and why it matters (Financial Times, Clive Cookson and Donato Paolo Mancini) is an excellent article which goes into more depth, which I would really recommend you read if you can. The average efficacy of this vaccine is 70% on the first full shot and then 90% with a lower second dose. This is quite interesting when you consider that efficacy is actually 62% on two full doses! AstraZeneca’s solution is still very compelling for a number of reasons, though – it can be stored long term 2-8ºC (i.e. normal fridge temperature) versus much lower temperatures for Pfizer/BioNTech’s at -70ºC and Moderna’s at -20ºC, which means that this would be more universally useful – and is also pretty cheap to buy as AstraZeneca promised to sell at cost. Each dose costs between $3-4, which is way less than the others. * SO WHAT? * UK health secretary Matt Hancock said that vaccinations could start as early as next month and be rolled out more widely from January. Coronavirus/vaccines: safety in numbers (Financial Times, Lex) says that, along with Russian drugmaker R-Pharm, Brazil’s Fiocruz and India’s Serum Institute, up to 3bn doses could be made next year and the jab would be able to cover 34% of the world’s population if you also include the number of jabs being produced by Pfizer and Moderna. The first countries that will benefit will be those who have pre-ordered successful vaccines (the US, UK, Japan Canada and possibly the EU and Australia) and analysts at Deutsche Bank reckon they will have enough to immunise vulnerable citizens by the first quarter of 2021. Some say that countries like the US, UK, Canada and Japan could reach herd immunity by the middle of next year. Amazing, no?

Vaccination will be ‘a necessity’ for international flights, says Qantas chief (Financial Times, Philip Georgiadis) highlights the potential way forward for air travel and David Powell, medical adviser to industry body Iata, confirmed that this course of action was highly likely. Interestingly, a number of digital health passes have been developed to be able to prove that passengers have had been vaccinated, including the World Economic Forum-backed CommonPass, where a digital certificate is downloaded onto a mobile phone. Test runs have been carried out in places like New York, London and Singapore. Iata said yesterday that it was developing a health pass with IAG, the owner of British Airways but many airlines say that this system will take too much time to implement and that airport testing will be quicker. On a separate note it is interesting to see that in Testing times for employers in rush to offer staff vaccines (Daily Telegraph, Julia Bradshaw) companies won’t be able to “jump the queue” by buying up doses (well not for a while anyway) as all doses have been spoken for, but in future workplace vaccination could become a common occurrence as per the flu jab.

Elsewhere, Merck to buy OncoImmune amid race for Covid-19 treatments (Wall Street Journal, Dave Sebastian) shows that Merck & Co is buying OncoImmune, which has a coronavirus therapeutic candidate, for $425m as it bids to catch up with others in the coronavirus vaccine race. The deal is expected to close by the end of the year.

You may recall that I mentioned Amazon wading further into the world of pharmacies last week. Well Amazon’s drugs unlikely to prove fatal to pharmacies, say experts (Financial Times, Dave Lee and Alistair Gray) suggests that companies such as CVS, Walgreens, Cigna and United Health Group, who saw their share prices fall on the back of that news, will actually be OK. Industry figures have hit back, saying that people “like” going to the pharmacy (really??), that Amazon will not be able to deal with all drugs anyway and that customers won’t trust Amazon enough to go to them for everything (Walgreens Boots Alliance CFO James Kehoe said in a recent speech “When you want to go and get your Covid vaccination, are you going to call Amazon or are you going to call Walgreens or CVS?”). * SO WHAT? * This all sounds a bit like denial to me. OK, so Amazon doesn’t have the range and it may not have the discounts that other operators in this space currently have because their relationships aren’t as broad BUT Amazon has firepower and can very much afford to take over this space. I would be very worried if I was a smaller competitor…

2

RESCUE NEWS

We see that there are a few companies who are being rescued at the moment…

There’s a whole load of rescuing going on at the moment! In Cineworld shares soar 20% as lenders throw $750m lifeline (The Guardian, Mark Sweney) we see that the world’s second biggest cinema chain has managed to secure loans to weather the coronavirus storms. It had shut all of its 660 cinemas in the US and UK in October and said that it had enough liquidity to make it into next year, as long as cinemas were allowed to reopen by May. This will at least buy the company some time, a fact not lost on investors as they sent the share price northwards!

Elsewhere, AA says it would accept £218m private equity takeover offer (The Guardian, Julia Kollewe) shows that

the AA could return to private ownership as it is getting close to accepting a takeover proposal put forward by TowerBrook Capital Partners and Warburg Pincus. * SO WHAT? * A firm offer must be made by 5pm today under UK takeover rules. Given that the AA has had tons of debt for years, this injection could go some way to easing the stress.

Then in JD Sports in rescue talks to buy all of Debenhams (The Times, Ashley Armstrong) we see that the two retailers are in talks that will definitely anger Mike Ashley who has been rebuffed at least twice in his efforts to buy the ailing department store over three years. JD Sports is talking about buying the whole business and is particularly interested in the company’s website. * SO WHAT? * Nothing is finalised yet and it remains to be seen what JD Sports can really bring to the party here. I am sure that many investors will be worried about whether this could dilute JD Sports’ success.

3

INDIVIDUAL COMPANY NEWS

GM announces a recall and Danone cuts jobs…

In other news doing the rounds at the moment, GM to recall about 5.9million vehicles with Takata air-bag inflaters (Wall Street Journal, Dave Sebastian) shows that the car company failed in its appeal to the National Highway Traffic Safety Administration not to go down this road as it was felt that the Takata inflators installed in GM vehicles are prone to deadly explosions in the event of a crash. Vehicles from 2007 to 2014 will be included. GM said that replacing the inflators would cost about $1.2bn, but it seems it will be fixing them itself. It could well do without this at the moment given what’s going on in the wider economy…

There’s bad news in Danone to cut up to 2,000 jobs (Financial Times, Leila Abboud) as the French food company has decided to wield the axe to 2% of its workforce as part of a company-wide reorganisation and cost-cutting exercise. The company’s share price has fallen by 30% so far this year, so the management is trying to turn things around. * SO WHAT? * This is quite interesting when you consider that rivals such as Nestle and Unilever are doing so well at the moment. It seems that investors have tired of Danone’s inability to deliver on numerous strategic plans in the past and are running out of patience.

4

...AND FINALLY...

…in other news…

I thought I’d leave you today with a weird (and pretty pointless) food “hack” in Woman shares “baffling” guide on how to cook Christmas dinner in the dishwasher (The Mirror, Rosaleen Fenton). Just. Why??

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

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