TheChek News Flow

Radical plans for recovery at the entertainment group are thin on the ground

Disney chief executive Bob Iger likes to say that the company he runs is fuelled by storytelling. If that is the case then someone needs to punch up the script. Disney’s share price is down by more than 50 per cent from its 2021 peak. Despite input from two CEOs and multiple activist investors, radical ideas for recovery are thin on the ground. 

This week, investor ValueAct Capital used its stake in the company to strike a deal to consult on strategy. It will also support Disney’s board nominees. The move is a counter to activist investor Nelson Peltz, who has restarted his battle to join the media company’s board. 

Everyone agrees that the stock is underperforming as it transitions to streaming. No one has a new plan to address it. Peltz wants Disney to cut costs. Iger is cutting costs. His predecessor Bob Chapek left before he could begin to cut costs. 

On the surface, everyone also agrees that a leadership succession plan is needed. In reality, Peltz has backed down from a proxy fight on the issue once before. The arrival of ValueAct makes it more likely that Iger will stay put. 

The scale of Disney’s $7.5bn cost-cutting plan is impressive. Enjoy the Marvel blockbusters while you can because content spend is falling. Dividends are back. At less than 0.7 per cent, the yield is not head-turning, but if free cash flow increases to $8bn from less than $5bn in the past financial year there is scope to raise it. 

But those don’t address the longer-term problem of lacklustre franchises, quieter theme parks and the end of television. If Disney wants a radical change it needs to consider sales. Sports network ESPN, which once bankrolled splashy purchases elsewhere, is slowing. Competition from the likes of Amazon is raising rights fees. Disney’s sports division reported a fall in revenue and profits for the year.  

Iger is considering “partnerships”. His long history at Disney may leave him reluctant to unwind a business that he helped to grow. Time for one of the activist investors around him to step forward. 

Biotech boss tells Europe to invest if it wants a homegrown sector

Argenx is one of the bloc’s largest biotech companies but its shareholder base is dominated by US specialist investors

Europe needs to learn from US shareholders willing to make big bets on biotech if it wants to create a thriving homegrown industry, according to the chief executive of Argenx, one of the bloc’s largest biotech companies. 

Tim Van Hauwermeiren told the Financial Times that Europe has a “chicken and egg” problem: specialist healthcare funds are scarce because not enough biotechs are available to invest in — and biotechs are scarce because domestic investors do not support them.

Argenx’s shareholder base is dominated by specialist US investors, who Van Hauwermeiren said really take the “long-term view and are willing to take the risk”. “Because in a sector like biotech, the returns can also become disproportionate if you have a real benefit,” he said. 

Despite having a product on the market and being identified by analysts as a potential acquisition target for several large pharmaceutical companies, many European shareholders are still reluctant to invest in Belgium-based Argenx, with Scottish fund Baillie Gifford a rare exception. 

“I think we have been ticking a number of important boxes for European shareholders. I think the last box they’re still waiting for will be the point of break-even, where we turn the corner on profitability,” he said. 

Argenx had a rollercoaster year in 2023, with shares rising about 40 per cent after a positive trial result in July, and then dropping as much as 29 per cent after a negative finding from a different study published in December.

The company is trying to expand the use of its immunology drug Vyvgart to different diseases. It is used against a rare chronic immune disorder called myasthenia gravis, which causes muscle weakness. 

The immunology drug market is growing as researchers discover how to take a more targeted approach to treating autoimmune disease, similar to scientists’ efforts to tackle cancer over the past decade. 

In July, Argenx reported a positive trial result that showed Vyvgart could be used as a treatment for chronic inflammatory demyelinating polyneuropathy, a condition where the immune system attacks the protective coating around nerves. On the back of this success, the company raised $1.1bn in a follow-on offering, the largest of its kind in the biotech sector last year according to research firm Dealogic.

But a trial to use the drug to treat primary immune thrombocytopenia, a blood-clotting disorder, failed to achieve its goals, hitting the stock when the results were published in late November. Van Hauwermeiren said the company is still analysing what happened in the study. 

In December, Argenx said it would not pursue using the drug for the skin disease pemphigus, after a trial failed to show it worked significantly better than a placebo.

Many European biotechs are bought by large drugmakers long before they have an approved product. Van Hauwermeiren said he is bucking that trend by building a “global sustainable company” and a “company which can fly on its own wings”. 

But he said the management will always do what is in the best interests of shareholders if presented with a deal offer. 

“The only thing which we can do as a management team is make sure everyone understands what is the business plan . . . [in] a standalone scenario over the next five years. And then people can also make an objective comparison if and when there would be a bid on the table.”

Suzanne van Voorthuizen, head of life sciences equities at investment bank Kempen, said the company’s potential “wholly owned megablockbuster” drug makes it attractive to acquirers.

But she added that given Argenx has a market capitalisation of $20bn, a suitor would need to bid up to $40bn. “Deals of that size occur once a year, every two years. There are not that many potential buyers.”

European holidaymakers turn to cooler climes after scorching summers

Travellers are booking shorter, cheaper trips but winter bookings are still strong with UK airlines flying at capacity

Climate change is driving a change in travel bookings as more holidaymakers seek out cooler destinations and countries in northern Europe, according to the head of one of the region’s largest travel agents.

Dana Dunne, chief executive of eDreams Odigeo, said his business had seen some changing travel patterns following a scorching summer last year, when extreme heat forced the closure of some tourist attractions in Greece and led to wildfires ripping through some southern European holiday hotspots.

While the majority of travellers still book classic summer destinations in the Mediterranean, Dunne said climate change was “having an impact” on bookings, with some customers turning to typically overlooked destinations.

“We see a shift, with those [cooler] places seeing very material increases during the hottest part of the year,” he said.

Cooler parts of northern Spain had sharp rises in bookings during the hottest weeks of the year, said Dunne, with bookings to Bilbao rising 120 per cent year-on-year, La Coruña up 79 per cent, and a 65 per cent rise to Oviedo.

Cooler countries including Sweden, Norway and Denmark have also had more bookings.

The head of tour operator Tui last year forecast a rise in bookings to Northern European countries, and said the typical summer season had lengthened in the Mediterranean.

Travel companies do not yet see the changing travel patterns as a threat to businesses around the Mediterranean, and Dunne said that it was too early to call permanent the redrawing of travel patterns.

“2022 and 2023 were really hot, and yet still Spanish destinations showed up as being among the top destinations in Europe,” he said.

Dunne said holidaymakers in Europe were also booking shorter and cheaper trips as high inflation and a sluggish economy have started to eat into travel spending.

He said that people have continued to prioritise travel post-pandemic, but that the weak economy had led many to “trade down” rather than cancel trips.

Average spending per trip at eDreams was “significantly lower” than before the pandemic, said Dunne, while short-haul trips have proved more resilient than more expensive long-haul options, with many travellers opting to stay in Europe.

“All these types of things are ways in which a family or household just tries to manage their expenditure under these macroeconomic uncertainties,” said Dunne.

eDreams’ findings back up data from Advantage Travel Partnership, a network of independent travel agents, which said the average length of holidays sold last summer was 7.6 nights, down from 10 before the pandemic.

The rush to budget friendlier holidays has come as the price of travel rose last year, with airlines and hotel operators reporting booming profits.

The industry also had a busy year end. In the UK, airlines expect to have flown capacity for more than 2.9mn people in December, up from 1.4mn last year, according to travel data firm OAG. easyJet operated its busiest Christmas Day last year, with 542 flights across Europe.

Dunne said early bookings showed demand for travel in 2024 was “fine”, but added that the next three months, typically the busiest period for summer holiday bookings, would be a “key indicator” of demand. Paris leads for 2024 worldwide flight bookings, ahead of the Paris Olympics.

A 60% decline in 2023 from the year before sends a gloomy signal to funders and the start-ups that rely on them

Fundraising by US venture capital firms hit a six-year low in 2023, an ominous sign for start-ups with dwindling cash reserves and fledging businesses reliant on such backing for survival.

The $67bn raised by US VCs in 2023 is the lowest annual total since 2017 and represents a 60 per cent drop from the $173bn raised in 2022, the peak year for fundraising, according to analysis by private markets data provider PitchBook and the National Venture Capital Association.

Globally, in 2023 venture investors raised the lowest level of capital since 2015.

The sharp decline ratchets up pressure on start-ups, which have endured a funding drought over the past 18 months. VCs are reluctant to pour more cash into businesses they backed at the top of the market while private tech valuations are falling.

Kyle Stanford, lead VC analyst at PitchBook, said: “The bottom still feels a ways off. A lot of these companies that are still private will still struggle, we’ll see a lot more down rounds and a struggle to exit. There’ll be a lot of competition for the money that’s available.”

VCs have struggled to raise new funds as their own limited partners — institutional investors such as pension funds, insurers and university endowments and foundations — pull back because of rising interest rates, which have made risky tech bets a costlier proposition.

A number of prominent venture investors, including Insight Partners and Tiger Global, lowered fundraising targets to reflect the tougher environment last year.

That in turn has given US VCs less fresh capital to deploy. Last year, they invested a total of $171bn, according to PitchBook and the NVCA, less than half the amount they spent in 2021.

As well as a reduction in investment from limited partners, US VCs are contending with a sharp slowdown in start-up exits, such as initial public offerings or acquisitions, which is hampering their ability to return capital to their backers.

The value created by start-up exits in the US last year was just $61.5bn, compared to a 2021 peak of $797bn, according to PitchBook and the NVCA. In Europe, start-up exit value amounted to less than €12bn across the year, the lowest level for a decade.

The downturn is increasing the pressure on start-ups that spent last year burning through cash raised in 2021 and early 2022. As those companies run out of road, founders and existing investors are more likely to accept harsher terms for new funding, according to Peter Hébert, co-founder of US venture fund Lux Capital.

“The days of Band-Aids and hope are behind us, and people are accepting the new reality,” he said. “For new financings, you’re starting to see the presence of bids that are low. [In 2023] people were embarrassed to have that conversation, now everyone is becoming more constructive.”

This will also be the year in which VCs abandon poor performers, predicted Hébert: “It’s been two years of internal bridging. Now VCs are saying to companies: ‘I’m sorry we’ve gone as far as we can.’”

Late in 2023, a trickle of start-ups once valued at $1bn or more started to collapse. Among them were trucking start-up Convoy and healthcare company Olive, both valued at about $4bn at their peaks. Electric scooter company Bird, once valued at $2.5bn, also filed for bankruptcy in December.

Roughly one in six start-ups raising cash last year cut their valuations, according to PitchBook. That move is typically anathema for founders and investors who prioritise growth above all else, but Stanford expects that proportion to increase dramatically in 2024 as founders run out of other options.

As valuations fall towards a level that new investors can stomach, deal volume is likely to increase, said Hébert: “Those with capital are king in this market.”

Thanks to bumper fundraising years in 2021 and 2022, some venture firms have accumulated sizeable funds, which they have been reluctant to invest into a declining market.

Similarly, some cash-rich start-ups have chosen to wait for more certainty before making their next move. Nick Schneider, the chief executive of $4.3bn cyber security firm Arctic Wolf, said in an interview with the Financial Times that he would wait for as much clarity as possible on market conditions before launching a long-anticipated IPO.

As search engine incumbents — namely Google — amp up their platforms with GenAI tech, startups are looking to reinvent AI-powered search from the ground up. It might seem like a Sisyphean task, going up against competitors with billions upon billions of users. But this new breed of search upstarts believes it can carve out a niche, however small, by delivering a superior experience.

One among the cohort, Perplexity AI, this morning announced that it raised $73.6 million in a funding round led by IVP with additional investments from NEA, Databricks Ventures, former Twitter VP Elad Gil, Shopify CEO Tobi Lutke, ex-GitHub CEO Nat Friedman and Vercel founder Guillermo Rauch. Other participants in the round included Nvidia and — notably — Jeff Bezos.

Sources familiar with the matter tell TechCrunch that the round values Perplexity at $520 million post-money. That’s chump change in the realm of GenAI startups. But, considering that Perplexity’s only been around since August 2022, it’s a nonetheless impressive climb.

Perplexity was founded by Aravind Srinivas, Denis Yarats, Johnny Ho and Andy Konwinski — engineers with backgrounds in AI, distributed systems, search engines and databases. Srinivas, Perplexity’s CEO, previously worked at OpenAI, where he researched language and GenAI models along the lines of Stable Diffusion and DALL-E 3.

Unlike traditional search engines, Perplexity offers a chatbot-like interface that allows users to ask questions in natural language (e.g. “Do we burn calories while sleeping?,” “What’s the least visited country?,” and so on). The platform’s AI responds with a summary containing source citations (mostly websites and articles), at which point users can ask follow-up questions to dive deeper into a particular subject.

“With Perplexity, users can get instant … answers to any question with full sources and citations included,” Srinivas said. “Perplexity is for anyone and everyone who uses technology to search for information.”

Underpinning the Perplexity platform is an array of GenAI models developed in-house and by third parties. Subscribers to Perplexity’s Pro plan ($20 per month) can switch models — Google’s Gemini, Mistra 7Bl, Anthropic’s Claude 2.1 and OpenAI’s GPT-4 are in the rotation presently — and unlock features like image generation; unlimited use of Perplexity’s Copilot, which considers personal preferences during searches; and file uploads, which allows users to upload documents including images and have models analyze the docs to formulate answers about them (e.g. “Summarize pages 2 and 4”).

If the experience sounds comparable to Google’s Bard, Microsoft’s Copilot and ChatGPT, you’re not wrong. Even Perplexity’s chat-forward UI is reminiscent of today’s most popular GenAI tools.

Beyond the obvious competitors, the search engine startup You.com offers similar AI-powered summarizing and source-citing tools, powered optionally by GPT-4.

Srinivas makes the case that Perplexity offers more robust search filtering and discovery options than most, for example letting users limit searches to academic papers or browse trending search topics submitted by other users on the platform. I’m not convinced that they’re so differentiated that they couldn’t be replicated — or haven’t already been replicated for that matter. But Perplexity has ambitions beyond search. It’s beginning to serve its own GenAI models, which leverage Perplexity’s search index and the public web for ostensibly improved performance, through an API available to Pro customers.

This reporter is skeptical about the longevity of GenAI search tools for a number of reasons, not least of which AI models are costly to run. At one point, OpenAI was spending approximately $700,000 per day to keep up with the demand for ChatGPT. Microsoft is reportedly losing an average of $20 per user per month on its AI code generator, meanwhile.

Sources familiar with the matter tell TechCrunch Perplexity’s annual recurring revenue is between $5 million and $10 million at the moment. That seems fairly healthy… until you factor in the millions of dollars it often costs to train GenAI models like Perplexity’s own.

Concerns around misuse and misinformation inevitably crop up around GenAI search tools like Perplexity, as well — as they well should. AI isn’t the best summarizer after all, sometimes missing key details, misconstruing and exaggerating language or otherwise inventing facts very authoritatively. And it’s prone to spewing bias and toxicity — as Perplexity’s own models recently demonstrated.

Yet another potential speed bump on Perplexity’s road to success is copyright. GenAI models “learn” from examples to craft essays, code, emails, articles and more, and many vendors — including Perplexity, presumably — scrape the web for millions to billions of these examples to add to their training datasets. Vendors argue fair use doctrine provides a blanket protection for their web-scraping practices, but artists, authors and other copyright holders disagree — and have filed lawsuits seeking compensation.

As a tangentially related aside, while an increasing number of GenAI vendors offer policies protecting customers from IP claims against them, Perplexity does not. According to the company’s terms of service, customers agree to “hold harmless” Perplexity from claims, damages and liabilities arising from the use of its services — meaning Perplexity’s off the hook where it concerns legal fees.

Some plaintiffs, like The New York Times, have argued GenAI search experiences siphon off publishers’ content, readers and ad revenue through anticompetitive means. “Anticompetitive” or no, the tech is certainly impacting traffic. A model from The Atlantic found that if a search engine like Google were to integrate AI into search, it’d answer a user’s query 75% of the time without requiring a click-through to its website. (Some vendors, such as OpenAI, have inked deals with certain news publishers, but most — including Perplexity — haven’t.)

Srinivas pitches this as a feature — not a bug.

“[With Perplexity, there’s] no need to click on different links, compare answers or endlessly dig for information,” he said. “The era of sifting through SEO spam, sponsored links and multiple sources will be replaced by a more efficient model of knowledge acquisition and sharing, propelling society into a new era of accelerated learning and research.”

The many uncertainties around Perplexity’s business model — and GenAI and consumer search at large — don’t appear to be deterring its investors. To date, the startup, which claims to have 10 million active monthly users, has raised over $100 million — much is which is being put toward expanding its 39-person team and building new product functionality, Srinivas says.

“Perplexity is intensely building a product capable of bringing the power of AI to billions,” Cack Wilhelm, a general partner at IVP, added via email. “Aravind possesses the unique ability to uphold a grand, long-term vision while shipping product relentlessly, requirements to tackle a problem as important and fundamental as search.”

The Florence-based luxury retailer has acquired the company of its CEO Tommaso Maria Andorlini, establishing the new LuisaViaRoma Group.

MILAN — LuisaViaRoma said Thursday it has acquired Holding IT, the firm helmed by Tommaso Maria Andorlini, who was appointed chief executive officer of the Florentine luxury retailer in July.

Holding IT is the parent company of FFW Srl, which has created and managed e-commerce sites for fashion brands since 2011, and Playground Srl, which operates luxury sportswear stores under the banner SOTF.

As a result of the deal, financial details of which were not disclosed, the new LuisaViaRoma Group has been established with the goal to consolidate and further favor synergies between all parties and offer an improved and heightened shopping experience to meet customers’ new demands.

Andorlini said the acquisition “represents a strategic opportunity to combine our strengths and create a new point of reference in the digital and physical retail sector.”

“I am extremely proud of what we managed to create with LuisaViaRoma, and even more excited about this new collaboration that will carry forward our plans for growth,” said LuisaViaRoma’s president Andrea Panconesi, whose grandmother Luisa Jaquin planted the seeds of the family company’s success by opening a small concept store on Florence’s Via Roma in 1929.

Gross merchandise volume of the LuisaViaRoma Group totaled almost 400 million euros in 2023, with the company expecting to reach the 450 million euro threshold in 2024.

As reported, in 2022 LuisaViaRoma’s sales totaled around 250 million euros, of which more than 90 percent were generated online. Last year Panconesi projected revenues to exceed 300 million euros in 2023.

The retailer’s acceleration has been boosted by a strong performance in its domestic market — where sales increased 40 percent in the past two years — and by its ever-increasing work in brand scouting and overall enhancement of its offering, now encompassing more than 500 luxury brands with highly curated selections.

The SOTF business will add to this performance in the brick-and-mortar and online channels. The first result of the deal will be the opening of a new SOTF store in Via De’ Tosinghi in Florence during Pitti Uomo next week. Covering 3,230 square feet over two floors, the unit is dominated by gray tones and steel elements and will showcase collections by both up-and-coming and established brands, as well as artistic installations. A cocktail event will be staged on Jan. 10 to celebrate the opening.

An acronym of “Store of the Future,” the SOTF banner was launched in September 2016, when the first sneaker shop opened in the city’s Via de Tornabuoni. Two years later a store in the Tuscan city of Prato was added, while in 2020 a SOTF outpost was opened in the luxury resort destination Forte dei Marmi. Now the retailer offers apparel and accessories collections from sportswear giants such as Nike, Adidas Originals and New Balance — including items in limited edition — as well as luxury players such as Jil Sander, Golden Goose, Acne, Coperni and Mihara Yasuhiro, among others.

Andorlini’s know-how in the sportswear area and sneakers category, in addition to his two decades of experience in the fashion industry, were key assets contributing to his appointment as LuisaViaRoma CEO last year. In the role he succeeded Alessandra Rossi, who joined the company in October 2021 following the closing of the deal with Milan-based private equity firm Style Capital. As reported, the fund, helmed by CEO Roberta Benaglia, invested 130 million euros to acquire a 40 percent stake in LuisaViaRoma.

Panconesi, who retains a 60 percent stake in the company, masterminded the retailer’s digital foray in the early 2000s with the pioneering launch of its e-commerce platform. Ever since, this has been enhanced with new sections, including the introduction of LVRSustainable in 2019. This is dedicated to environmentally sustainable brands and tie-ups with nonprofit organizations and has proven to be a strategic asset in attracting and engaging with new consumers.

In 2022, LuisaViaRoma also made its foray into the resale sector by partnering with Vestiaire Collective on a project enabling its clients to sell their previously worn fashions in exchange for credits to be spent on new goods on the e-commerce site.

Still, Panconesi has always highlighted the importance of physical retail and IRL events for the company’s success. To this end, in addition to its location in Florence, the retailer is to open its first international outpost in New York in spring 2024. As reported, LuisaViaRoma inked a long-term lease for a 7,855-square-foot retail space at 1 Bond St. in Manhattan’s NoHo.

The retailer is additionally known for its lavish events. Most recently it staged the “Runway Icons” fashion extravaganza in partnership with British Vogue in front of more than 1,500 guests during Pitti Uomo last June. The open-air multibrand fashion show featured a performance by Andrea Bocelli; a long VIP guest list led by Leonardo DiCaprio, and designs from emerging and established labels worn by models encompassing Natalia Vodianova, Irina Shayk, Mariacarla Boscono and Pat Cleveland, to name a few.

The Hollywood-like production echoed the buzzy gala soirées LuisaViaRoma is known to host with UNICEF in Capri and St. Barths, which over the years have drawn celebrity guests such as Jamie Foxx, Jared Leto and Spike Lee, as well as live performances from the likes of Jennifer Lopez, Drake, Lenny Kravitz and Dua Lipa.

Moscow in recent weeks has also begun receiving ballistic missiles from North Korea

Russia is planning to buy short-range ballistic missiles from Iran, a step that would enhance Moscow’s ability to target Ukraine’s infrastructure at a critical moment in the conflict, U.S. officials said.

Moscow’s plans have provoked deep concern within the Biden administration and come as support wanes in Congress for continued U.S. military assistance for Ukraine. Lawmakers have yet to pass a bill that would provide additional funding for Ukraine.

“The United States is concerned that Russian negotiations to acquire close-range ballistic missiles from Iran are actively advancing,” one of the U.S. officials said. “We assess that Russia intends to purchase missile systems from Iran.”

Delivery of the Iranian missiles could happen as soon as this spring if the purchase proceeds, but U.S. officials don’t believe the deal has been completed.

The Iranian missiles would add to Moscow’s recent acquisitions, which include ballistic-missile launchers and several dozen ballistic missiles from North Korea, the officials said.

On Thursday, National Security Council spokesman John Kirby said that Russian forces fired at least one of the missiles into Ukraine last week and that it had landed in an empty field.

Several days earlier, Russia had launched multiple North Korean ballistic missiles, which have a range of about 550 miles, and the U.S. was still assessing those attacks, Kirby said.

“We expect Russia and North Korea to learn from these launches,” Kirby said. Pyongyang was seeking fighter planes, surface to air missiles, armored vehicles, ballistic missile technology and other military technology in return for providing missiles to Russia, he added.

U.S. officials said that Moscow’s desire to acquire Iranian missiles was evident in mid-December when a Russia delegation visited an Iranian training area to observe ballistic missiles and related equipment displayed by Iran’s Islamic Revolutionary Guard Corps Aerospace Force, including its short-range Ababil missile.

That visit, which hasn’t previously been disclosed and marks a further step toward acquiring Iranian missiles, followed a September trip by Russian Defense Minister Sergei Shoigu to the headquarters of the IRGC Aerospace Force in Tehran. During that visit, Shoigu observed a display of the Ababil and other missile systems, U.S. officials said. He also met Maj. Gen. Mohammad Bagheri, the chief of staff of Iran’s armed forces, and boasted that Russian-Iranian relations were reaching a new level.

Engulfed in a grinding war of attrition and facing international sanctions, Russia has also turned to North Korea to supplement its efforts to produce arms at home. Russian President Vladimir Putin and North Korean leader Kim Jong Un held a summit at a spaceport in Russia’s far east in September and pledged greater cooperation on economic and security issues.

In the past several weeks, North Korea has begun to ship a range of weaponry to Russia, including, for the first time, short-range ballistic missiles to eastern Russia, according to several officials familiar with the transaction. The weaponry includes previously reported stocks of artillery, officials said.

Military analysts say that Moscow’s acquisition of the Iranian and North Korean missiles could provide an important boost for Russia as it is stepping up its attacks and trying to overwhelm Ukraine’s antimissile defenses.

“The strikes that Russia has executed in recent days demonstrate the importance to the Russians of having a large supply of ballistic missiles,” said Frederick Kagan, director of the Critical Threats Project at the American Enterprise Institute, a Washington think tank.

Russia has been looking for ways to overcome Ukrainian air defenses by increasing the number of missiles launched, and adjusting the types of weapons it is using, according to Kagan. “Having enough ballistic missiles in their arsenal is a very important part of that,” he added.

Russia has already acquired a large number of drones from Iran to attack Ukraine. Moscow and Tehran have also been building a new factory in Russia that could make thousands of drones for the conflict, U.S. officials have said.

Russia’s outreach to Iran and North Korea represents a shift from its posture in past years when it cooperated with the U.S. and other Western powers in trying to limit the two nations’ capabilities.

The U.S. fears that Russia’s growing cooperation with Tehran will not only help Moscow’s war effort in Ukraine but also strengthen Iran’s military capabilities in the Middle East and potentially provide revenue to bolster its economy, which has been battered by Western sanctions. In November, U.S. officials said that Russia has been helping Tehran develop its satellite collection capabilities and has also been offering “unprecedented defense cooperation” on missiles, military electronics and air defense.

A U.N. Security Council resolution adopted soon after the 2015 Iran nuclear deal banned Tehran from exporting or importing some types of missiles and drones, as well as military technology that can be used to produce and operate missiles, without the approval of the council.

But that restriction formally expired in October, raising concerns among some Western officials that Tehran may now seek to turn to military sales to Russia and other nations.

With the expiration of the U.N. ban, the U.S. imposed sanctions intended to discourage Iran’s missile trade and issued a statement with 47 other nations vowing to block Iran’s sale of ballistic missiles and related technology. But Russia’s Foreign Ministry has said the U.N. restrictions on buying missile technology from Iran or providing it to Tehran no longer need to be followed.

Before its full-scale invasion of Ukraine, Russia was a more cooperative partner with Washington. It joined the U.S., European nations and China in negotiating the 2015 nuclear deal with Tehran. It also supported tough sanctions in the U.N. Security Council on North Korea through 2017 in response to Pyongyang’s nuclear and ballistic missile activities.

“Russia was basically supportive of getting North Korea to accept all kinds of restrictions,” said Robert Einhorn, a former senior State Department official, referring to the bygone era of cooperation.

Moscow’s latest actions reflect a shift in its strategic orientation, according to Einhorn. “Its foreign policy is largely based on undermining U.S. interests,” he said.

Novo Nordisk signs deals worth up to $1bn with US biotechs in race for obesity drugs

Danish manufacturer Wegovy invests in two start-ups as part of efforts to stay ahead in major new market

Novo Nordisk has signed deals worth up to $1bn with US biotech start-ups developing treatments for obesity and other cardiometabolic diseases, as the Wegovy manufacturer seeks to stay ahead in a major new market.

The Danish drugmaker is investing in two biotech companies founded by Flagship Pioneering, the Massachusetts-based life sciences incubator that founded Covid-19 vaccine manufacturer Moderna.

Each of the two will receive up to $532mn upfront and if certain milestones are hit. Novo Nordisk will also pay royalties on developed products and have the right to advance potential treatments through clinical trials.

The popularity of Novo Nordisk’s diabetes treatment Ozempic and weight-loss drug Wegovy has made it Europe’s most valuable company and placed it at the forefront of a new market. Barclays forecasts that sales of Wegovy will reach $7.3bn this year, while Ozempic sales are expected to be worth $16.5bn in 2024.

The deals come as investor interest in weight-loss drugs grows and pharma groups seek new treatments.

Novo Nordisk’s competitors want to win a share of the market for diabetes and weight-loss drugs, which is forecast by Canadian investment bank BMO to grow to as much as $130bn to $140bn in annual sales.

Both Novo Nordisk and the world’s largest drugmaker Eli Lilly committed to spend up to $3.5bn on companies developing obesity medication in 2023, according to figures from data provider Dealogic.

Last month, Swiss pharmaceutical company Roche agreed an up to $3.1bn takeover of obesity drug developer Carmot Therapeutics.

Under the latest deals, Novo Nordisk will reimburse research and development costs for Omega Therapeutics, a developer of messenger RNA treatments, which is trying to develop weight-loss drugs that work by altering genetic code to increase metabolic activity in a targeted way, rather than by restricting the appetite, a traditional focus of many weight-loss treatments.

Eli Lilly is also researching how to tackle obesity by speeding up metabolic activity, spending up to $494mn on a US start-up that studies how a US squirrel species called the thirteen-lined ground squirrel gains and loses weight during hibernation.

Novo Nordisk is also backing Cellarity, which is using artificial intelligence to develop treatments for MASH, a chronic liver disease that increases the risk of developing type-2 diabetes and cardiovascular disease and is estimated to affect up to 6.5 per cent of US adults.

The deals are the first signed under a collaboration between Novo Nordisk and Flagship Pioneering in May 2022.

“We look forward to advancing these research programmes with Omega and Cellarity . . . as we explore bold new treatment strategies with the potential to make a significant impact for people living with obesity or MASH,” said Marcus Schindler, executive vice-president and chief scientific officer of Novo Nordisk.

“By bringing these innovative platforms together with Novo Nordisk’s deep expertise in cardiometabolic disease we have incredible potential to make a bigger leap forward for patients,” said Paul Biondi, executive partner of Flagship Pioneering.