News Archive

Seven $1 billion-plus drugs seen reaching market in 2016

LONDON Drug companies are likely to launch seven “blockbuster” drugs in 2016, each with $1 billion-plus annual sales potential, led by new treatments for liver disease and HIV, according to a Thomson Reuters analysis.

The assessment means the pharmaceuticals industry is on track for another productive year, although not as good as 2015, which saw the arrival of 11 new blockbusters.

The two top hits of 2016 are tipped to be Intercept Pharmaceuticals’ (ICPT.O) chronic liver disease drug obeticholic acid, with a consensus sales forecast of $2.6 billion in 2020, and Gilead Sciences’ (GILD.O) new fixed dose HIV drug emtricitabine plus tenofovir alafenamide, on $2.0 billion.

Other products expected to launch this year with forecast sales above $1 billion in 2020 include a new hepatitis C drug from Merck (MRK.N) and a leukemia medicine from AbbVie (ABBV.N), according to the annual “Drugs to Watch” report.

Two keenly awaited Roche (ROG.VX) drugs, each with forecast sales of around $3 billion, are not on list because it is unclear if atezolizumab for cancer and ocrelizumab for multiple sclerosis will be commercially available this year or next.

(Reporting by Ben Hirschler Editing by Jeremy Gaunt)

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G20 plays by the book as unnerved markets crave succour

LONDON For all the hopes of healing world markets, it’s hard to see how a ‘jarring January’ suddenly becomes ‘feel-good February’.

‘Febrile’ might be a better descriptor.

Tension is now growing between central banks and governments, urging calm, and global investors nursing heavy losses from one of the worst starts to the year on record.

Unnerved by the oil collapse and its fallout, China’s yuan ‘trilemma’ and growing fears of world recession, for many money managers this will be at best a long haul with no easy fixes.

“Central banks, although remaining vigilant on financial stability, are progressively losing effectiveness, and may fail to effectively curb market volatility in the medium term as they did after the Great Financial Crisis,” said Giordano Lombardo, Group Chief Investment Officer at Pioneer Investments.

So do policymakers go up a gear or stand back a little and hope warm words and small monetary tweaks limit the shakeout?

So far, they are sticking to the script. Measures mooted over the past two weeks are all consistent with G20 finance chiefs, meeting in Shanghai on Feb. 26 and 27, reading straight from last year’s playbook.

Sticking to standing G20 communiques, central banks have so far been true to the pledge “to monitor financial market volatility and take necessary actions.”

The Bank of Japan went furthest by adopting negative interest rates last week for the first time. The European Central Bank continues to stoke expectations of another cut in its already negative deposit rate as soon as next month.

Both the U.S. Federal Reserve and the Bank of England have cited the fresh market ructions as major policy considerations and, in doing so, pushed back market expectations for planned interest rate rises there into late 2016, or even 2017 in the case of the United Kingdom.

Again, this is straight from G20 texts: “In an environment of diverging monetary policy settings and rising financial market volatility, policy settings should be carefully calibrated and clearly communicated to minimise negative spillovers.”

China, the G20 chair for 2016, has insisted it can and will hold the yuan steady. Premier Li Keqiang phoned International Monetary Fund chief Christine Lagarde last week to pledge Beijing would keep the yuan “basically stable” and improve communication with financial markets.

For that, read G20 texts saying: “We reaffirm our previous exchange rate commitments and will resist protectionism.”

What’s more, alarmed by the relentless oil rout, major energy exporters, including G20 members Saudi Arabia and Russia, have at least started talking about draining the crude glut even if they’re still far from agreeing on how and when.

Prior communiques have been clear here too in stating that relentless oil price falls are not an unambiguous positive and can be deeply destabilizing. “There are important challenges including volatility in exchange rates and prolonged low inflation, sustained internal and external imbalances, high public debt, and geopolitical tensions.”

So far, so good. But is that enough?


The big concern for many investors and governments is that even though projections for aggregate global economic performance still look reasonable, a loss of financial market confidence in itself can catalyze a crunch.

So some reckon a more forceful ‘Grand Bargain’ is needed.

Strategists at Bank of America Merrill Lynch reckon something akin to a 1985-style Plaza Accord may require a large one-off devaluation of China’s yuan to lance speculation fuelling capital flight. They also talked of quid pro quo measures such as fiscal boosts from Germany, France and the UK.

But “our deep concern is that the macro and the markets may first need to worsen to inspire the correct policy response,” they added.

Reality for many in the marketplace is that the attrition is not just about sentiment or even monetary settings, it’s now about real distressed selling from sovereign funds and emerging market central banks, as well as blue-chip corporate hits or asset writedowns and fears for junk credit or dividends.

The full extent of the hit to leveraged U.S. shale companies has yet to be felt. Oil majors such as BP are only starting to register the scale of their losses as their credit quality deteriorates and dividends across all firms in the natural resource sector come under intense pressure.

With trillions of dollars now changing hands as a direct result of what looks like a sustained 70 percent drop in oil prices over 18 months, there are many shoes yet to drop.

Using publicly available models from oil exporters’ reserve managers and sovereign funds, and assuming only liquid assets were sold, JPM Morgan estimates they dumped about $90 billion of government bonds, $50 billion of public equities, $7 billion of corporate bonds and $15 billion of cash instruments in 2015.

Even if oil prices stay about $35 per barrel this year, it reckons on at least another $220 billion depletion of FX reserve and sovereign wealth fund assets this year. Western European equities and financials are most exposed, it said.

Selling from reserve managers and sovereign funds in China, where hard currency reserves are estimated to have dropped about $700 billion from the peak in 2014, is another pressure point.

As for more illiquid assets, such as high yield bonds or property and private equity, “to the extent that this liquidity risk triggers solvency risk, we need to be very nervous in certain areas,” wrote Axa Investment Managers’ Mark Tinker.

(Additional reporting by Patrick Graham; Editing by Ruth Pitchford)

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ChemChina makes agreed takeover offer for Syngenta

BASEL, Switzerland China’s state-owned ChemChina will make an agreed takeover offer for Swiss seeds and pesticides group Syngenta (SYNN.VX) for $465 (473.3 Swiss francs) per share in cash, the companies said on Wednesday.

The offer will allow for dividend payments to Syngenta shareholders of up to 16 francs per share, they added.

(Reporting by Ludwig Burger; Editing by Michael Shields)

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Oil futures drop for 3rd session on rising crude stocks, oversupply

SINGAPORE Oil futures extended losses into a third session in Asian trade on Wednesday, as U.S. crude stocks last week surged to more than half a billion barrels and as Iran plans to boost exports from March.

Brent for April delivery LCOc1 had dropped 24 cents to $32.48 a barrel as of 0524 GMT, after settling down $1.52, or 4.4 percent.

U.S. crude, also known as West Texas Intermediate (WTI) CLc1, fell 22 cents to $29.66, having ended the previous session down $1.74, or 5.5 percent.

“Oil prices are coming off again. Prices are going to zig-zag for a while,” said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo.

U.S. crude stocks rose by 3.8 million barrels to 500.4 million in the week to Jan. 29, data from industry group, the American Petroleum Institute, showed on Tuesday.

Weekly inventory data from the U.S. government’s Energy Information Agency is due on Wednesday.

“The (global) inventory situation is going to get worse in the second quarter as we hit the peak refining rate at the end of this quarter,” Nunan said.

“(But) this has been so well documented that it’s been built into prices. I do think we’re close to the bottom and the bottom in prices will be this quarter.”

Nunan forecast Brent would trade in a $25-$35 a barrel range in the first quarter, before slowly recovering over the rest of the year.

A rebalancing between oil demand and supply will not come until mid-2017, Morgan Stanley said in a note on Wednesday.

Implied crude stocks are set to climb by 1.1 million barrels per day this year, compared with an implied stock build of 1.3 million bpd last year, the note said.

“Despite the myriad announcements of capex cuts, production has yet to respond enough to rebalance the market,” Morgan Stanley said.

Production numbers from Canada, Brazil and Russia all grew last year, with Russian output in December hitting the highest level since the 1980s, the note said.

The increase in stocks at Cushing has led to renewed fears of overflowing oil tanks at the key U.S. storage hub, causing the spread between prompt and forward U.S. crude oil futures to slump to an 11-month low, stoking fears of a further price rout.

Meanwhile, Iran is aiming for crude exports of 2.3 million barrels per day in the fiscal year beginning March 21, the managing director of the National Iranian Oil Company was quoted as saying on Tuesday.

That is higher than the 1.44 million bpd Iran is expected to export in February and 1.5 million bpd in January, according to data on Iran’s preliminary tanker loading schedules.

South Korea, which imported 5.7 million tonnes of crude from Iran last year, unveiled a set of stimulus measures on Wednesday.

(Reporting by Keith Wallis; Editing by Joseph Radford)

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Yahoo to look at strategic alternatives, cut jobs as it pursues spin-off

Yahoo Inc said on Tuesday it would consider “strategic alternatives” for its core Internet business and cut about 15 percent of its workforce, even as it continues with its plan to revamp the business and spin it off.

The announcement is the strongest sign yet that the board and Chief Executive Marissa Mayer may be willing to sell the struggling Internet business – essentially websites, email and online search – under growing pressure from impatient shareholders.

In an interview with Reuters, Mayer said the company will entertain offers as they come but its first priority is the turnaround plan.

If it receives an offer this year, it was unlikely that the transaction would be completed before the 9 to 12-month timeline projected for the spin-off, she said.

“We would obviously engage but I think the one thing we’re trying to do is set our shareholders’ expectations in terms of complexity,” Mayer said.

The planned restructuring announced on Tuesday includes the closure of offices in five locations, a paring down of its products, shifting more resources to mobile search, and the sale of some non-strategic assets such as real estate and patents.

Investors were not immediately impressed, sending Yahoo shares down 1.2 percent after hours. They have now fallen 36 percent over the past 12 months.

“We believe the strategic plan does not fully address the core issues which have destroyed shareholder value – poor capital allocation, bad strategic partnerships, out of control spending and a bloated workforce,” said New York-based SpringOwl Asset Management, a shareholder which has called for changes at the company.

The web pioneer’s revenue peaked in 2008 and while it still runs some of the world’s most-read websites, it has been unable to keep up with Alphabet Inc’s Google and Facebook Inc in the battle for online advertisers.

In the rejig of its business, it will focus on three main consumer platforms, Search, Mail and Tumblr, and four “digital content strongholds” in the form of News, Sports, Finance and Lifestyle.

The changes are designed to increase mobile, video, native and social advertising revenue 8 percent to $1.8 billion and cut operating costs by $400 million this year. It is also aiming to generate $1 billion to $3 billion in asset sales.

Mayer dismissed accusations of excessive spending, saying a report of a $7 million bill for Yahoo’s holiday party was exaggerated by a factor of three.

Yahoo’s adjusted quarterly revenue tumbled 15 percent to $1 billion after deducting fees paid to partner websites, as it struggles to keep its share of online search and display advertising.

Mayer proposed in December that Yahoo spin off its main business after it abandoned efforts to sell its Alibaba stake.

In the interview on Tuesday, Mayer said the company intends to group its stake in Yahoo Japan with the main business, but would be open to splitting it off depending on market feedback.

The company reported a loss of $4.43 billion, or $4.70 per share, in the quarter, due to a large write-down to account for the lower value of some units. That compared with net income of $166.3 million, or 17 cents per share, a year earlier.

Among the write-downs, the company took an impairment charge of $230 million for Tumblr, the social blogging site for which it paid $1.1 billion in 2013.

Excluding items, Yahoo earned 13 cents per share in line with expectations.

(Reporting by Abhirup Roy and Anya George Tharakan in Bengaluru and Deborah M. Todd in San Francisco; Editing by Stephen R. Trousdale and Edwina Gibbs)

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Asian shares fall, safe assets shine as oil retreats

TOKYO Asian shares tumbled on Wednesday as oil prices dropped for a third day, prompting investors to seek shelter in safe-haven assets and lifting bonds and gold to multi-month highs.

The MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2.1 percent´╝îled by a 2.7 percent fall in Hong Kong shares .HSI.

Japan’s Nikkei .N225 lost 3.2 percent, wiping out almost all of its gains made after the Bank of Japan on Friday had announced it would introduce negative interest rates. Overnight, the U.S. SP 500 index fell 1.9 percent .SPX.

The selloff is likely to extend into the European session, with spread-betters expecting Germany’s DAX .GDAX and France’s CAC 40 lose as much as 1.1 percent each and Britain’s FTSE .FTSE 0.9 percent.

“There’s no sign of improvement in the oil market. Demand is slowing in many emerging markets and in the U.S, which is the world’s biggest consumer, oil inventories stood high,” said Shuji Shirota, head of macro economic strategy at HSBC in Tokyo.

Brent crude futures LCOc1, the world’s oil benchmark, fell 0.7 percent to $32.48 per barrel, extending losses so far this week to more than 6 percent. U.S. crude futures CLc1 slipped 0.5 percent.

Hopes for an agreement to cut production dimmed this week as no deal has emerged and talks between Russia’s energy minister and Venezuela’s oil minister on Monday failed to result in any clear plan to reduce output. [O/R]

Oil prices have fallen about 70 percent in the past 18 months, largely due to a growing supply glut but also exacerbated by cooling economic growth in China and other emerging markets.

Although a private survey on China’s services sector on Wednesday showed growth picked up to a six-month high in January, that was a drop in the bucket in markets full of pessimism on the global economy.

The gloom pervading markets bolstered the allure of government debt. As U.S. debt prices jumped, the 10-year U.S. yield hit a 10-month low of 1.828 percent US10YT=RR.

Uncertainty around global growth has prompted investors to slash back their expectation of future U.S. rate hikes, with Federal funds rate futures 0#FF: now pricing in only about a 50 percent chance of just one rate hike this year.

That stood in stark contrast to the projection by the Fed’s policy board members that rates could rise four times.

Japanese bond yields also kept falling as the market deals with the ramifications of the BOJ’s decision to charge interest on a portion of excess reserves, with the 10-year JGB yield hitting a record low of 0.045 percent JP10YTN=JBTC.

The two-year JGB yield sank to minus 0.190 percent JP2YTN=JBTC.

Dwindling bond yields around the globe made precious metals, which pays no interest, attractive asset for many investors, especially at a time when central banks in Japan and Europe are now adopting negative interest rates.

Gold XAU= hit a three-month high of $1,130.90 per ounce on Tuesday and last stood at $1,128.3.

In the currency market, the safe-haven yen strengthened 0.3 percent against the dollar to 119.56 JPY= while the euro was little changed at $1.0918 EUR=.

The Chinese yuan slipped to its weakest level in three weeks in offshore trade to 6.6451 yuan to the dollar CNH=D4, although it was stable in a more tightly-controlled onshore market.

Bets on further weakness in the yuan gathered momentum in derivative markets, with its three-month implied volatility CNHVOL= rising to record levels.

The prospects of a weaker yuan put pressure on Asian currencies. The Korean won fell one percent to its lowest level since July 2010, changing hands at 1,221.1 won to the dollar KRW=KFTC.

“We are bearish on Asia FX this year and look to buy USD/Asia FX on dips,” said Qi Gao, an emerging Asian currency strategist for Scotiabank in Hong Kong.

“A recovery in China, modest rise in oil prices, freezing of the Fed funds rate and a large size of QE or QQE by the ECB and BOJ could send Asian currencies higher. But it does not seem possible in the first half,” Gao said.

Investors are now anxiously awaiting U.S. economic data in coming days, starting from the services sector survey due later in the day.

“The U.S. economic data has been soft especially in the manufacturing sector so the key is how much the services sector is holding out,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The U.S. ISM non-manufacturing PMI is expected to dip to 55.1 in January from 55.8 in December. That would be the lowest reading in almost two years but still above the 50 mark that separate contraction and expansion.

(Additional reporting by Jongwoo Cheon in Singapore; Editing by Kim Coghill Shri Navaratnam)

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Chipotle says California probe widens into national investigation

Chipotle Mexican Grill Inc (CMG.N) said a federal criminal probe linked to a food-safety incident at a California restaurant had widened into a national investigation, sending its shares down 7 percent in extended trading on Tuesday.

The burrito chain also said sales at established restaurants plunged about 36 percent in January, adding to a 14.6 percent drop in the fourth quarter, its first ever decline in its 10-year existence as a public company.

Chipotle said it expected to break even in the current quarter on a per-share basis as it spends heavily on beefing up food safety at its outlets. Analysts on average were expecting a profit of $2.07 per share, according to Thomson Reuters I/B/E/S.

Chipotle received a new subpoena at the end of January, seeking information related to company-wide food safety matters dating back to Jan. 1, 2013 and superseding an earlier subpoena that was limited to just one restaurant in Simi Valley.

The expanded investigation could focus on what managers at Chipotle’s headquarters knew about the conditions at restaurants around the country and when, said Bill Marler, an attorney representing the company’s customers.

Chipotle said it intended to fully cooperate in the investigation by the U.S. Attorney’s office for the Central District of California.

More than 50 people across 14 U.S. states fell sick in two E.coli outbreaks last year after eating at Chipotle’s outlets. Norovirus outbreaks were also reported in Massachusetts and California.

The outbreaks have driven away customers, wiped more than a quarter off the company’s stock price and resulted in a shareholder lawsuit.

“In addition to keeping the story in the media, this could also damage future earnings if a settlement is reached or compensation is granted,” said Neil Saunders, the CEO of research firm Conlumino.

The U.S. Centers for Disease Control and Prevention, however, said on Monday that the E.coli outbreaks linked to Chipotle appeared to be over.

The company’s net income plunged 44 percent to $67.9 million, or $2.17 per share, in the quarter ended Dec. 31.

Revenue declined 6.8 percent to $997.5 million.

“The fourth quarter of 2015 was the most challenging period in Chipotle’s history,” co-Chief Executive Steve Ells said in a statement.

Chipotle’s shares, which surged to an all-time high of $758.61 in August last year from an initial offering price of $22 in 2006, were trading at $442 after the bell.

(Reporting by Subrat Patnaik, Siddharth Cavale in Bengaluru and Tom Polansek in Chicago; Editing by Kirti Pandey)

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VW submits California plan to fix recalled 3.0 liter diesel SUVs, cars

WASHINGTON The California Air Resources Board and Environmental Protection Agency said late on Tuesday that Volkswagen AG (VOWG_p.DE) submitted a plan to fix 80,000 recalled 3.0 liter diesel SUVs and cars that emit up to nine times legally allowable pollution.

After more than four months of lengthy talks and making little apparent progress winning approval to begin fixing any U.S. VW diesel vehicles with excess emissions, the comprehensive proposal for 3.0 liter vehicles submitted by VW offers the German automaker a chance to finally win approval to start selling diesel vehicles again.

U.S. and California regulators said in November that the German automaker used undeclared auxiliary software to allow Audi, Porsche and VW vehicles to emit excess emissions.

The disclosure came six weeks after the EPA said VW had engaged in emissions cheating in 482,000 cars with smaller 2.0 liter engines that allowed vehicles to emit up to 40 times legally allowable pollution.

California had set a Tuesday deadline under state law for VW to submit a plan to recall and fix the vehicles with diesel engines that were designed by its Audi unit.

“We are fully cooperating with the U.S. authorities to make our V6 3.0L (diesel) engine compliant with regulations. After meetings between EPA and (California) and our technicians, we filed a recall plan,” Audi of America spokesman Mark Clothier said Tuesday.

The EPA said it also received the proposal. Federal regulators must separately approve any recall fix plan. EPA spokeswoman Laura Allen said Tuesday the agency will review the plan.

The plan covers the diesel 2009-2016 VW Touareg, 2013-2016 Porsche Cayenne and 2014-2016 Audi A6 Quattro, Audi A7 Quattro, Audi A8, Audi A8L, Audi Q5 and 2009-2016 Audi Q7. VW faces a U.S. stop sale that bars it from selling 2016 diesel models.

The Air Resources Board (ARB) said it will give the 3.0 liter proposal a “thorough and complete review to make sure the plan addresses” excess emissions.

Audi said it hopes ARB will make a decision on whether to approve the plan in the “near future.”

Last month, California rejected VW’s proposal to fix 482,000 2.0 liter cars, calling it “substantially deficient.”

A VW lawyer said last month the automaker is considering buying back some vehicles. The U.S. Justice Department sued VW last month for up to $46 billion for allegedly violating environmental laws.

Last week, VW won approval to start fixing 8.5 million vehicles in Europe. VW said excess diesel emissions impact up to 11 million vehicles worldwide.

(Reporting by David Shepardson; Editing by Sandra Maler, Bernard Orr)

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Wall Street slides with Exxon, oil; Chipotle dips after close

U.S. stocks dropped on Tuesday after another steep fall in oil prices and a disappointing spending forecast from Exxon Mobil.

Shares of Exxon (XOM.N) fell 2.2 percent to $74.59 after the oil major reported its smallest quarterly profit in more than a decade, forecast a 25-percent drop in capital spending from 2015 levels and suspended share repurchases.

With Exxon, “not only did the earnings disappoint people, but the fact that they slashed capex so much and they (suspended) their share repurchase program. It’s a good indication that one more large oil company is not seeing an improvement in the environment,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Data so far this earnings period shows the capital spending slump that originated in the hard-hit energy sector was spreading more widely across other U.S. industries.

Earlier Tuesday, BP Plc (BP.N) reported an annual loss of $6.5 billion, its largest ever.

The SP energy index .SPNY slid 3.3 percent, the biggest drag on the SP 500. Oil prices CLc1 LCOc1 slid sharply as hopes faded for a deal between OPEC and Russia to cut output. The SP utility index .SPLRCU rose 0.4 percent, the only sector to end in positive territory.

The Dow Jones industrial average .DJI closed down 295.64 points, or 1.8 percent, to 16,153.54, the SP 500 .SPX lost 36.35 points, or 1.87 percent, to 1,903.03 and the Nasdaq Composite .IXIC dropped 103.42 points, or 2.24 percent, to 4,516.95.

The Dow Jones transportation average .DJT ended 2.9 percent lower following news of the first U.S. transmission of the Zika virus.

The SP 500 is down 6.9 percent since the start of the year. Investors have been concerned about a China-led global economic slowdown, tepid U.S. economic data, the pace of interest rate hikes by the Federal Reserve and weak earnings. Fourth-quarter SP 500 earnings are expected to have fallen 4.4 percent from a year earlier, according to Thomson Reuters data.

Bucking the day’s trend, Alphabet (GOOGL.O) was up 1.3 percent at $780.91. Quarterly profit beat estimates late Monday and the Internet major surpassed Apple (AAPL.O) as the most valuable U.S. company.

After the bell, shares of Chipotle (CMG.N) fell 3 percent after it reported its first fall in quarterly sales at established restaurants since it went public. The stock ended the regular session up 0.6 percent at $475.67.

Also, Yahoo (YHOO.O) dipped 1 percent in extended trading following its results.

Investors are keeping an eye on the U.S. election cycle. Iowa results created greater uncertainty because there were no clear winners, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

“The bottom line for people who are investing is they prefer a little more certainty than they are seeing right now in either the election or in the energy markets,” he said.

About 8.5 billion shares changed hands on U.S. exchanges, below the 9.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

NYSE declining issues outnumbered advancers 2,478 to 603 and on the Nasdaq, 2,237 issues fell and 577 advanced. The SP 500 posted 15 new 52-week highs and 28 lows; the Nasdaq recorded 22 new highs and 143 lows.

(Additional reporting by Tanya Agrawal and Lewis Krauskopf; Editing by Nick Zieminski and James Dalgleish)

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