TheChek News Flow

Asian Market Update: Regional indices sell off, while Shanghai Composite remains supported by the latest PBoC injection; AUD plummets on RBA's Ridout comments

***Economic Data*** - (US) NORTH AMERICA DEC SEMI BOOK/BILL RATIO: 1.02 V 1.11 PRIOR (3rd straight month above parity) - (NZ) NEW ZEALAND DEC CREDIT CARD SPENDING M/M: -1.2% V +3.5% PRIOR; Y/Y: 4.7% V 6.9% PRIOR - (SG) SINGAPORE DEC INDUSTRIAL PRODUCTION M/M: 5.2% V 0.5%E; Y/Y: 6.2% V -1.4%E - (PH) PHILIPPINES NOV TRADE BALANCE: -$944M V -$700ME - (VN) Vietnam Jan Consumer Price Index (CPI) M/M: 0.7% v 0.5% prior; Y/Y: 6.8% v 6.1%e - (VN) Vietnam Jan Trade Balance: -$100M v +$548M prior

***Observations/Insights*** - Starbucks, eBay, Microsoft, Altera, KLAc, and Juniper all rally in extended session after earnings/guidance, but S&P futures remain under pressure as Thursday selloff reverberates in Asia. - Shanghai Composite is the only regional index to trade higher, with 7-day repo rate falling over 100bps in the wake of China liquidity injection this week; Nikkei225 leads the decliners with a 2.3% selloff in afternoon session, tracking firmer JPY. - Samsung Electronics trading up about 0.5% after reporting final Q4 results and forecasting solid demand in DRAM/NAND memory, better supply/demand conditions in LCD segment, and rising sales in TVs ahead of the world cup. Notably, Samsung also sees tighter competition in handsets and tablets, along with seasonality, leading to sequential declines in the mobile segment. - RBA's Ridout comments torpedo the Aussie below the $0.87 handle; 3 1/2 year AUD/USD lows.

***Fixed Income/Commodities/Currencies*** - (US) Weekly Fed Balance Sheet Total Assets Week ending Jan 22nd: $4.10T v $4.07T prior; Reserve Bank Credit: $4.05T v $4.03T prior; M1 y/y change: 8.4% v 8.6% w/w; M2 y/y change: 5.8% v 5.9% w/w - (AU) Australia MoF (AOFM) sells A$800M in 4.75% 2027 Bonds; avg yield: 4.3331%; bid-to-cover: 2.12x - (JP) BOJ offers to buy ¥250B in 1-3yr JGB, ¥250B in 3-5yr JGB and ¥200B in JGB with maturity over 10-yr as well as ¥2.5T in T-bills outright - USD/CNY: China 7-day repo rate opens at 4.0% v 5.4% previous close (sharpest slide in a month) - USD/CNY: (CN) PBoC sets yuan mid point at 6.1035 v 6.1107 prior setting (strongest Yuan setting since Jan 14th)

- Regional currencies traded in narrow ranges during the morning session, but volatility picked up across the board in the afternoon as RBA Board member Ridout called for AUD/USD to fall as low as $0.80 to achieve a "fair deal" for the economy. AUD/USD fell over 50pips on the comments below the $0.87 handle - a fresh 3.5-year low - while NZD/USD was down over 30pip on the comments and nearly 50pips on the day below $0.8260. AUD/JPY and NZD/JPY hit 4-month and 1-month lows below ¥89.90 and ¥85.30 respectively. The key dollar majors USD/JPY and EUR/USD were rangebound - Yen was in a 40pip range around 103.40 and EUR backed away from the $1.37 handle below $1.3680.

***Speakers/Political/In the Papers*** - (AU) Reserve Bank of Australia (RBA) board member Ridout: AUD has not fallen enough; AUD at $0.80 is fair deal for the economy - financial press interview - (CN) China vice Commerce Minister Fang: sees 2014 China retail sales +13.0% y/y v +13.1% y/y in 2013 - (CN) China National Development and Reform Commission (NDRC) to maintain basic stability of general price level in 2014 - Chinese press - (CN) China State Administration of Foreign Exchange (SAFE): China banks bought net of $31.1B of total forex in Dec; China faces pressure from capital inflow - financial press - (CN) China Foreign Minister Wang Yi: Japan PM Abe's remarks in Davos on Yasukuni shrine visit is unacceptable - financial press - (JP) Current account deficit in Japan may persist, as weak JPY may be less effective in boosting exports amid soft external demand - Nikkei - (JP) Japan Fin Min Aso: Deflationary conditions have nearly ended in Japan; Must consider overall perspective for corporate tax cut - (JP) Japan Econ Min Amari: Sees recovery in Japan to continue in FY14 - (KR) Bank of Korea (BOK) Gov Kim: 3.8% GDP target for 2014 is a "reasonably good" estimate; Further decrease in yen could hurt South Korean exporters - financial press - (SG) Singapore FY13 private home sales 14.9K units v 22.2K y/y, private home prices +1.1% y/y v 2.8% y/y in 2012; Q4 home prices saw first q/q decline since Q1 of 2012 - financial press - (NZ) New Zealand Fin Min English: Remain on track for a surplus in 2014/2015 despite challenges

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -1.9%, S&P/ASX -0.2%, Kospi -0.8%, Shanghai Composite +0.9%, Hang Seng -0.7%, Mar S&P500 +0.2% at 1,826, Apr gold -0.2% at $1,260, Mar crude oil +0.2% at $97.55/brl

US markets: - FTNT: To be added to S&P400 following the close of Jan 28th; +3.9% afterhours - JNPR: Reports Q4 $0.43 v $0.37e, R$1.27B v $1.22Be; Jana Partners, one of the largest shareholders in Juniper, also said to recommend new board members, cost cuts, capital returns; +3.6% afterhours - MSFT: Reports Q2 $0.78 v $0.67e, R$24.5B v $23.5Be; CFO: no comment on the search for a new CEO and will not provide an update on the conf call today; Exec: Sees FY capex at $6B vs $6.5 prior; sees Q3 D&C Hardware $1.9-2.0B - conf call; +3.5% afterhours - ALTR: Reports Q4 $0.31 v $0.30e, R$454.4M v $442Me; +3.3% afterhours - ENDP: Announce Positive Top-Line Results with BioDelivery Sciences from the Phase III Clinical Trial of BEMA Buprenorphine; +2.5% afterhours - SBUX: Reports Q1 $0.71 v $0.69e, R$4.24B v $4.30Be; CEO: Sees opportunity for more drive-thru stores in the US - conf call; +1.1% afterhours - KLAC: Reports Q2 $0.85 (adj) v $0.79e, R$705M v $712Me; Guides Q3 $1.00-1.20 v $1.06e, R$790-850M v $803Me - conf call; +0.7% afterhours - SHOR: Reports Q2 $0.05 v $0.04e, R$84.5M v $83.2Me; -1.5% afterhours - ISRG: Reports Q4 $4.28 v $3.79e, R$576M v $551Me; ISRG: Will not provide FY14 revenue guidance at this time; expect to sell fewer systems this year than the 546 sold last year - conf call; -4.6% afterhours

Notable movers by sector: - Consumer Discretionary: FAW Car 000800.CN +1.2% (FY13 results); Jiangling Motors 000550.CN +0.7% (prelim FY13 results); Great Wall Motor 2333.HK -0.1% (prelim FY13 results) - Financials: Haitong Securities 6837.HK +0.2% (prelim FY13 result) - Technology: Samsung Electronics 005930.KR +0.5% (final Q4 results); Wangsu Science & Technology 300017.CN +10.0% (FY13 guidance; proposes special dividend); Acer Inc 2353.TW +1.1% (launches smartphone) - Energy: Sinopec Yizheng Chemical Fibre 1033.HK -3.8% (FY13 guidance); Sinopec Shanghai Petrochemical 338.HK +4.2% (FY13 guidance) - Industrials: Kia Motors 000270.KR -1.7% (Q4 report); Hyundai Motor 005380.KR -3.0% (Q4 results); Gem-Year Industrial 601002.CN +2.1% (FY13 guidance); Nippon Shokubai 4114.JP -1.3% (9M results) - Utilities: Yaskawa Electric 6506.JP -6.5% (9M results)

Icahn Says He Is Prepared for eBay Proxy Fight

Carl Icahn says he is prepared for a proxy fight to win two seats on the board of eBay Inc. and push the company to split off its PayPal unit. In an interview Thursday night, Mr. Icahn said he expects eBay to resist the proposal, as eBay executives and directors have done. "The company seems to be sort of dug in on the fact they don't want to do the PayPal spinoff," Mr. Icahn said. "We hope we don't [have a proxy fight], but if we have to, we will." Mr. Icahn has acquired a nearly 2% stake in the online retailer. In the interview, he said an independent PayPal might be snapped up. "I think PayPal might be acquired and that would make it even better for shareholders," Mr. Icahn said. "And it's a shame to have it held back by eBay and that I think is what's happening." At stake for eBay is the future of what many consider its most promising business. PayPal, while still smaller than eBay's marketplace unit, is growing sales at a faster clip and has been the driving force in digital payments for more than a decade. EBay bought PayPal in 2002 for $1.5 billion and has grown it into a business with nearly $7 billion in annual revenue, from less than $1 billion ten years ago. Under its chief, David Marcus, the unit has shifted to drumming up more business from brick-and-mortar retailers, including digital cash registers and mobile payment apps. PayPal last year boosted sales by 19%, while the traditional marketplace unit grew 12%. As well, PayPal's dependence on eBay is lessening, with just 30% of its total payment volume in 2013 coming from its parent. Still it is facing stiffer competition from a host of rising startups, including Square Inc.— known for its quarter-sized card readers for smartphones and tablets—and Stripe Inc., which have recently garnered lofty valuations. EBay closed on a deal to buy mobile payments firm Braintree last year for $800 million and is integrating it into PayPal. PayPal is growing faster "and would be much better without eBay," said Mr. Icahn. "PayPal is the gem." However, the payment unit is less profitable than eBay's traditional marketplace business. EBay hasn't released full-year results by unit, but for the first nine months of the year, payments generated $1.1 billion in operating profit for the company, less than half the $2.4 billion from the marketplace unit. An eBay spokesman declined to speak for this article, pointing to the company's prior stated opposition to Mr. Icahn's proposal. "We believe that our collection of assets drive more growth and more success together, than apart," Chief Executive John Donahoe said in an interview Wednesday. Directors Pierre Omidyar, the company's founder, and Marc Andreessen wrote separately on Twitter that they are "fully aligned that eBay and PayPal are best together." Mr. Icahn nominated two employees of his investment firm to the eBay board on the Jan. 18 deadline last week, he said. He called eBay Chief Executive John Donahoe that day to warn him, he said. "We spoke very briefly and we intend to speak again," said Mr. Icahn.

Samsung Profit Growth Slows Sharply Fourth-Quarter Net Profit Rises 3.7%, Significantly Lower Than Third Quarter's 25.6%

SEOUL—Samsung Electronics Co. forecast a weak first half after releasing fourth-quarter earnings that showed growth slowed sharply. Samsung, the world's biggest smartphone maker by shipments, saw growth at its mobile unit, which accounts for more than half of the company's profit, flattening and said fluctuations in the local currency hurt its earnings by 700 billion won ($651 million). It also incurred an 800 billion won one-time charge related to employee bonuses. Fourth-quarter net profit rose 3.7% from a year earlier but slowed significantly from third quarter's 25.6%, as healthy margins from the company's chip unit weren't enough to offset cooling profit momentum for Samsung's high-end Galaxy series of smartphones. "Amid macroeconomic uncertainties such as a strong Korean won and increased concerns over possible quantitative easing tapering in the U.S., our earnings were lower than what the market expected," Robert Yi, head of Samsung's investor relations, said in a statement Friday. Samsung said net profit for the three months ended Dec. 31 rose to 7.3 trillion won from 7.04 trillion won a year earlier. But it was down sharply from the 8.24 trillion won posted in the third quarter, which was the company's seventh straight record-high quarterly figure in a row. Sales rose 5.7% from a year earlier to 59.3 trillion won. Operating profit fell 6% from a year earlier to 8.31 trillion won, the first decline in two years. The drop reflects slowing momentum at the company's telecoms unit, where profit growth has gradually fallen. Cellphones and telecom equipment represented 66% of the company's fourth-quarter operating profit. While the mobile business has accounted for more than half of Samsung's profits in the last two years, margins came under pressure in 2013 as the company sold more lower-margin smartphones and spent heavily on marketing. The operating profit margin for the business fell to 16% from 17.8% a year earlier. Analysts estimate Samsung sold between 85 million to 87 million smartphones during the quarter, including the company's flagship Galaxy S4 smartphone. Investors are concerned about the company's falling stock price and a lack of clarity over future growth as average selling prices of smartphones fall further. In China, Samsung will have to walk a fine line between positioning itself as a smartphone vendor of both high-end and low-end phones following Apple Inc.'s recent deal with China Mobile Ltd. to sell iPhones there, while competition from homegrown low-cost phone makers increases. Samsung said it would spend a similar amount on capital expenditure this year after spending 23.8 trillion won in 2013. Another challenge is a new round of patent litigation with Apple, slated to go on trial in March, involving a more recent array of Samsung products such as the Galaxy S III smartphone. Analysts expect bigger provisions to cover for future costs and damages.

5 New Drugs That Could Be Blockbusters in 2014

Important new drugs are coming down the pipeline, offering the promise of help for patients with serious medical problems, and big sales for drug makers. The U.S. Food and Drug Administration gave the green light last year to 27 new drugs, for diseases that include hepatitis C, breast cancer and multiple sclerosis. While that was a good showing, it lags 2012, when the FDA approved 39 new drugs, the highest number in a single year since the mid-1990s. The outlook for 2014 is promising. Pharmaceutical and biotechnology companies could launch as many as 76 new drugs worldwide, capable of generating annual sales of nearly $23 billion by 2019, according to Lisa Murch, a senior analyst at Decision Resources, a drug industry market-research firm. It isn't easy to predict which drugs will not only win FDA approval, but also go on to beat expectations by enough to boost the stock price of a big drug maker. Barrons.com picked five candidates that advance the treatment of serious illness, have a high probability of regulatory approval in 2014, and have the potential to deliver annual sales of more than $1 billion—in layman's terms, to become blockbusters. Even for a pharmaceutical giant such as Merck (ticker: MRK), with annual revenue north of $45 billion, a drug with $1 billion a year in sales moves the needle. To be sure, the FDA is unpredictable. Though more Americans may be able to afford prescriptions under the Affordable Care Act, new medicines are facing a skeptical and cost-conscious market. "The sustainability of drug pricing is a big long-term issue facing drug makers," says Mark Schoenebaum, an analyst with ISI Group. "The common sense question is how much longer companies can charge $100,000 for a cancer drug." Here's our list of five of the most promising new drugs for 2013, and their top-line potential. Idelalisib Idelalisib is the first in a new type of "targeted" therapies that could transform the treatment of blood cancers. Known as a PI3 kinase inhibitor, Gilead Sciences' (GILD) idelalisib blocks an enzyme known to promote tumor growth in some blood cancers without harming healthy cells. Thus, patients don't suffer the same toxic side effects often associated with chemotherapy drugs. Gilead is testing idelalisib on many blood cancers, and so far results have been impressive (see Barron's Take, "Gilead Cancer Pipeline Is on the Rise," Oct. 10, 2013). An FDA decision on the drug's use as a treatment for indolent non-Hodgkin's lymphoma could come by September. Competition is fierce, as many pharmaceutical companies are investing in similar research, but idelalisib sales could nonetheless reach $2.5 billion by 2020, says Bernstein Research analyst Geoffrey Porges. RLX030 Novartis' (NVS) RLX030 could be the first treatment breakthrough for acute heart failure patients in two decades. Americans suffer roughly 3.5 million episodes of acute heart failure annually. Current treatments alleviate immediate symptoms, but every episode contributes to a patient's downward spiral. RLX030, a man-made version of a hormone that relaxes blood vessels and eases stress on the heart, has been shown to extend patient survival. In June, U.S. regulators granted the drug "breakthrough status," and an FDA advisory panel will issue a recommendation following a meeting next month. Analysts see the drug generating revenue of a little more than $1 billion by 2020. All Oral Hepatitis C Drug Regimen Gilead's drive to develop better treatments for hepatitis C didn't stop when it received FDA approval last month for the drug Sovaldi. The biotech giant plans to seek FDA approval by April for the first-ever once-daily tablet that merges two treatments for the viral infection. The pill, which doesn't yet have a name, joins Sovaldi with ledipasvir, an experimental drug that, like Sovaldi, blocks the hepatitis C virus from replicating. In study results unveiled last month, the new pill produced high cure rates and eliminated the need for injections of older and tough-to-tolerate medications. High expectations for Sovaldi and the combination therapy have pushed Gilead's share price more than 200% higher over the past two years, with shares now trading at $82, or roughly 30 times forward earnings. Critics worry about high prices for the drugs. Still, Bernstein's Porges sees sales for the combination pill reaching $9 billion to $10 billion by 2017. Nivolumab Drugs that use the body's immune system to fight cancer have been the talk of the town—or at least the oncology neighborhood—since the American Society of Clinical Oncology meeting in June. Much of that talk has been about nivolumab. Developed by Bristol-Myers Squibb (BMY), the drug targets the PD-1 protein used by malignant tumors to evade the body's immune system. Impressive clinical trials have fueled high hopes for the drug, and pushed Bristol's share price 59% higher over the past year (see Barron's Take, "Bristol-Myers Stock Has Room to Run," Oct. 28, 2013). Analysts expect Bristol to submit its FDA application in the next few months, which could allow for a late-December regulatory approval. Last week, rival drug maker Merck surprised the medical world by initiating a rolling FDA application for its own PD-1 inhibitor, which some analysts say puts Merck on track to hit the U.S. market first (see Barron's Take, "Merck Turnaround Is Working Out Well," Jan. 13). Critics caution that more study data are needed on both drugs. Still, Morgan Stanley analyst David Risinger sees nivolumab sales reaching $8 billion by 2020, compared to $3.5 billion for Merck's drug. Palbociclib This oral breast cancer drug is the wild card of the bunch. Though many expect FDA approval in early 2015, it could come sooner if Pfizer (PFE) files its regulatory application before the middle of the year. Palbociclib fights cancer in a new way, by blocking a pair of enzymes known as cyclin-dependent kinases 4 and 6. Now in advanced testing in postmenopausal women undergoing treatment for metastatic breast cancer, it is regarded as Pfizer's most valuable late-stage pipeline asset. Rival Novartis is hot on Pfizer's heels with a similar drug, known as LEE011. Still, Morgan Stanley's Risinger sees palbociclib sales reaching $5.5 billion by 2020 if regulators approve the drug for multiple cancer types. E-mail: johanna.bennett@barrons.com

After Hours Summary: OTEX +4.8%, BONE +4.2%, MSFT +3.7%, DGII -11.2%, RMD -9.1%, IGT -7.9%, ISRG -4.1% following earnings/guidance

After Hours Gainers:

* Companies trading higher in after hours in reaction to earnings: OTEX +4.8%, BONE +4.2%, MSFT +3.7%, MSCC +3.5%, ALTR +2.8%, DFS +2.7%, ETFC +2.7%, JNPR +2.3%, SBUX +1.0%, KLAC +0.7%, CPWR +0.1%

* Companies trading higher in after hours in reaction to news: - BDSI +27.2% (Endo Health and BioDeliver Sciences announce positive top-line results from the Phase 3 clinical trial of BEMA buprenorphine in opioid naive patients with chronic pain), - FTNT +3.0% (to replace Harris Teeter Supermarkets (HTSI) in the S&P MidCap 400), - IMOS +2.7% (DLS Capital Management discloses 5.07% passive stake), - INFI +2.2% (reported phase 1 data of IPI-145 at sixth annual t-cell lymphoma forum; 38% response rate in patients with t-cell lymphomas, suggesting broad potential of IPI-145 in blood cancers), 

After Hours Losers:

* Companies trading lower in after hours in reaction to earnings: DGII -11.2%, RMD -9.1%, IGT -7.9%, COVS -6.5%, ISRG -4.1%, AMCC -2.2%, HEOP -2.0%, DLB -1.3%, SHOR -1.0%, INFA -0.9%, SYNA -0.9%, MXIM -0.1%

* Companies trading lower in after hours in reaction to news: - ATOS -18.8% (announced public offering of common stock and warrants), - KIPS -14.3% (announced public offering of common stock), - TNXP -4.3% (announced proposed public offering of common stock, no amount given), - CST -3.9% (updated Q4 guidance, provided cautious outlook), - PGNX -3.4% (filed for $150 mln mixed securities shelf offering), - GNVC -2.0% (filed for $75 mln mixed securities shelf offering)