David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

    Europe Set to Overhaul Its Entire Economy in Green Deal Push

    This article by Ewa Krukowska and Nikos Chrysoloras for Bloomberg may be of interest to subscribers. Here is a section:

    The EU plan, set to be approved as the high-profile United Nations summit in Madrid winds up, would put the bloc ahead of other major emitters. Countries including China, India and Japan have yet to translate voluntary pledges under the 2015 Paris climate accord into binding national measures. U.S. President Donald Trump has said he’ll pull the U.S. out of the Paris agreement.

    In a pitch of her Green Deal to member states and the European Parliament on Dec. 11, von der Leyen is set to promise a set of measures to reach the net-zero emissions target, affecting sectors from agriculture to energy production. It will include a thorough analysis on how to toughen the current 40% goal to reduce emissions by 2030 to 50% or even 55%, according to an EU document obtained by Bloomberg News.

    Make It Irreversible
    In the next step, the commission will propose an EU law in March that would “make the transition to climate neutrality irreversible,” von der Leyen told the UN meeting. She said the measure will include “a farm-to-fork strategy and a biodiversity strategy” and will extend the scope of emissions trading.

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    5G, Royalties, Chip Mix Turn Qualcomm to Growth

    This note focusing on Qualcomm and 5G may be of interest to subscribers. Here is a section:

     

    THESIS: A strong position in 5G chips, coupled with expanded royalties, may position Qualcomm for sales and EPS growth in fiscal 2020. Higher-priced 5G handsets aid its royalty business, while increased use of its advanced 5G chips will drive up chip content and average prices. This content is further enhanced by a wider portfolio of radio-frequency chip offerings. The company is set up to gain from a richer 5G handset mix and pricing, as well as a higher-end chip mix and content expansion of its own portfolio. Royalty mix aids margin, expanding EPS faster than sales. A softer, slower global 5G ramp up, especially outside China, is the key risk.

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    Biotech Rallies as Novartis' $9.7 Billion Deal Revives Optimism

    This article by Bailey Lipschultz for Bloomberg may be of interest to subscribers. Here is a section: 

    Monday’s news continues a trend of large-cap drugmakers snapping up smaller developers in an attempt to refill their depleted pipelines. Even before the Medicines Co. announcement, Basel, Switzerland-based Novartis had announced close to $16 billion of acquisitions since Vas Narasimhan took over as CEO in February 2018, according to data compiled by Bloomberg.

    Alnylam Pharmaceuticals Inc., which receives milestone payments tied to Medicines Co.’s heart drug inclisiran as well as royalties on drug sales, jumped 7.6% pre-market Monday. That’s on top of last week’s 16% gain after it won FDA approval for a second drug.

    Jefferies’ Yee highlighted that the $9.7 billion price tag implied a higher multiple on potential peak sales of inclisiran than historically has been seen in other biotech deals. On a deal value to peak sales comparison, he said the valuation is similar to Bristol-Myers Squibb Co.’s acquisition of Celgene Corp., which closed last week.

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    Bitcoin Pre-Halvening Dump Could Spell Disaster

    This article by Jon Buck may be of interest to subscribers. Here is a section:

    The halving occurs every 210,000 blocks and reduces the block mining reward by half—now 12.5 Bitcoin per block. Each of the adjustments is designed to continually manage inflation on the network.

    The consequence of each halvening is a massive profit slash among miners, with just half the current block reward as revenue. This leads to a massive reduction in miners, with the weak hands being forced out.

    However, as miners are no longer able to continue, the total hashrate on the network drops dramatically. This leads to a subsequent reduction in difficulty for each block mined, reducing costs for miners who make it through. In the end, the genius of Nakamoto shines.

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    Crispr Surges as Gene Editing Shows Promise in Blood Disease

    This article by Bailey Lipschultz and Michelle Fay Cortez for Bloomberg may be of interest to subscribers. Here is a section:

    “While the data are early, we are quite excited about what we are seeing,” he said in a telephone interview. “This is a pretty significant milestone, not just for us as a company but for the entire field. This could be an important landmark in medicine, when we saw the first promise for providing cures for a number of diseases using a gene editing approach.”

    The early findings may benefit rival companies also studying medicines based on Crispr technology, as they are the first results from publicly traded companies using the platform. Editas Medicine Inc.’s lead drug will be given to its first patient at the start of next year as a treatment for a form of blindness, while Intellia Therapeutics Inc. is on track to file for its first human trial by mid-year.

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    Ford Unveils Electric Mustang SUV to Challenge Tesla Dominance

    This article by Keith Naughton for Bloomberg may be of interest to subscribers. Here is a section:

    The Mach-E will make a profit “on vehicle one,” he said in a Bloomberg TV interview. “That’s surprising a lot of people because electrics have not had a history of making money. This will.”

    Hackett said it will turn a profit because the vehicle “creates the passion that follows with Mustang” and prices start in the mid-$30,000 when U.S. subsides on electric cars are factored in. “So it’s attractive to customers.”

    Ford is building it in Mexico because it had an open factory there and it needed to be overhauled to build an electric vehicle, Hackett said. “As we start to adopt more electric vehicles — we had capacity down there, we had no capacity in the United States — we’re going to have electric capacity here in the United States. They’ll be building other electric platforms.”

    Still, it’s a high-risk gambit. The Mustang is Ford’s signature sports car, having sold more than 10 million units since it debuted in 1964 with simultaneous cover stories in Time and Newsweek. When Ford decided to abandon the traditional passenger-car business last year, it spared only one model: The Mustang.

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    CECL Symposium Highlights: Still More Questions Than Answers

    Thanks to a subscriber for this report from Raymond James which is dated August 6th but makes a number of worthwhile points. Here is a section:

    What is CECL?: CECL is a new accounting standard that modifies how companies estimate loan and lease losses, and affects all periods starting after December 15, 2019 (i.e., begins 1Q20). In the midst of the financial crisis in 2008, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) established the Financial Crisis Advisory Group (FCAG). FCAG believes it has identified a “weakness in current GAAP being the delayed recognition of credit losses that results in the potential overstatements of assets,” which ultimately led to its recommendation for this new standard. The new standard requires financial institutions to use a combination of historical information, current conditions and reasonable forecasts to estimate the expected losses over the life of a loan. This is a significant shift from the current methodology, which relies on incurred losses. We note on day one of implementation, there will be a balance sheet adjustment, creating additional general reserves for expected credit losses and negatively impacting capital levels, but implying limited income statement impacts.

    Conclusion: We walked away with more questions than answers, and anticipate a significant amount of variability in disclosures amongst the banks given the latitude FASB has provided in the standards. While many questions remain, FASB officials, consultants and management teams alike continue to work through the issues and are refining models as overall understanding of the standards improves. Fortunately, we anticipate regulatory capital relief for the banks as necessary, since capital levels remain elevated and the intent of the new standards was not to increase capital levels at the banks. However, we believe there could be some unintended consequences and potential ripple effects that will create further disruption in the space, potentially shifting assets out of the banking space and into the non-bank space, which has continued to gain share. Ultimately, we remain concerned with the uncertainty around CECL, anticipated volatility around disclosures and capital impacts, as well as potential negative implications on industry demand will serve to provide one more reason for investors to not own the space.

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    SoftBank Next 30-Year Vision

    Thanks to a subscriber for this report which may be of interest.

    This vision is designed with the time span of 300 years. The next 3 decades is merely the first step

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    Amarin Fish-Oil Heart Drug Will Be Big, Could Be Huge

    This article by Max Nisen for Bloomberg may be of interest to subscribers. Here is a section:   

    Part of that question was answered Thursday after a panel of experts convened by the Food and Drug Administration reviewed Amarin's data. They voted 16 to 0 that Vascepa was safe and cuts cardiovascular events. The vote doesn’t bind the FDA, but the agency often follows panel recommendations, so it would be a surprise now if the drug isn’t made available to more Americans. That’s big news for Amarin — and for many patients. 

    We still don't know exactly how good the news is, however, and won’t until the FDA makes a final decision by the end of the year. There was consensus on the drug’s overall effectiveness. Still, the panelists disagreed about how far that impact extends. Access for millions of additional patients and billions of potential sales are still up the air, which means there’s more volatility ahead for Amarin investors. The market seems focused on the positives for now: Amarin shares surged 7% in early trading Friday after rising more than 20% on Tuesday, when the FDA released briefing documents ahead of the panel that were seen as relatively supportive for the drug.

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    Google Deepens Push for Financial Data With Citigroup Tie-Up

    This article by Jenny Surane for Bloomberg may be of interest to subscribers. Here is a section:

    “We’re exploring how we can partner with banks and credit unions in the U.S. to offer smart checking accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools,” Google said in an emailed statement, adding that the accounts will carry federally guaranteed insurance.

    The move is the latest sign of Silicon Valley’s determination to muscle in on financial firms’ territory, looking to expand their hold on customers and accumulate data on their finances. At the same time, it shows banks are more willing to pair up with technology companies in their quest to avoid getting shut out of the relationship entirely. In the Google arrangement, the financial institutions will handle most of the compliance requirements.

    Google has spent years building out its payments capabilities, offering consumers the ability to send money to friends and check out both online and in stores through Google Pay. With the checking accounts, consumers will be able to receive their paychecks and transact solely inside the Google ecosystem.

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