TheChek News Flow

Head of UK’s biggest provider says some providers likely to be trading while technically insolvent

The head of British Gas-owner Centrica has warned that more UK retail energy suppliers will probably go bust this winter, with some who are “struggling for cash” already likely to be trading while technically insolvent.

Chris O’Shea, head of Britain’s biggest energy supplier, said some of the larger UK energy providers were also at risk of folding following 30 supplier failures in the past 18 months, even as government support for household bills was helping to prop up the market.

“I think we will see supplier failures,” O’Shea told the Financial Times during a visit to the Easington Gas Terminal in Yorkshire.

Asked whether he believed some suppliers were trading while technically insolvent, he replied “yes”, and warned that the “cash flow” created by government support schemes was one of the few things keeping “companies that are struggling for cash” afloat.

Britain’s energy retail market was plunged into chaos last year as surges in wholesale electricity and gas prices exposed the weak business models of many companies.

The demise of Bulb Energy alone, the biggest supplier to have collapsed, is forecast to cost taxpayers as much as £6.5bn after it was placed into special administration last November and funded with government loans.

O’Shea said a decision by Britain’s energy regulator last week not to force suppliers to ringfence customers’ cash was “deeply flawed” and an admission that “there are companies in our market that are unable to raise the capital required to properly back their business”.

He also predicted the sector as a whole had made losses as a result of warm weather in October and November, saying companies would have bought forward electricity and gas to meet expected demand, but they would have made losses when that level of consumption did not materialise.

“For a company like Centrica our shareholders bear that loss. For other companies including extremely large companies where they don’t have adequate capital . . . everyday this happens they become risker,” he said.

Ofgem last Friday set out a series of reforms for the energy retail market and said it would “closely” monitor company use of customers’ money, but it stopped short of forcing suppliers to ringfence those deposits. It had been consulting on ringfencing proposals.

Households that pay their energy bills via direct debit normally build up credit with their suppliers in the summer when consumption is lower, but eat into that buffer in the winter when their usage rises.

O’Shea also hit out at the government’s decision to raise windfall taxes on energy producers and said it was damaging investor confidence in the UK.

The Easington terminal is where gas from Rough, Britain’s biggest storage site that was recently reopened by Centrica, is brought onshore. Rough was reopened in October and is currently operating at a fifth of its full capacity.

O’Shea said Centrica had been in talks with UK ministers over potential financing mechanisms to help it justify a £150mn investment to double gas storage capacity to 60bn cubic feet by next winter. But an agreement had not been reached on the “right regulatory framework”, he added.

“We won’t be able to expand the capacity for next winter,” O’Shea said.

Centrica will be hit by windfall taxes on its gas production assets in the UK North Sea and on clean electricity generators as it has a 20 per cent stake in Britain’s nuclear power stations. The company has yet to disclose how much tax it will have to pay under the levies.

“It’s damaged the investibility of the UK in investors’ eyes and that’s obviously a concern as the only way you get that back is by a prolonged period of stability,” O’Shea said.

Internet billionaire has spent almost six months in Japan

Jack Ma, the Alibaba founder and once the richest business leader in China, has been living in central Tokyo for nearly six months, amid Beijing’s ongoing crackdown on the country’s technology sector and its most powerful businessmen.

Ma’s months-long stay in Japan with his family has included stints in hot spring and ski resorts in the countryside outside Tokyo and regular trips to the US and Israel, according to people with direct knowledge of his whereabouts.

Ma has largely disappeared from public view since he criticised Chinese regulators two years ago, accusing the state banks of having a “pawnshop mentality” and calling for bold new players that can extend credit to the collateral poor.

Since then, both companies he founded, Ant and ecommerce group Alibaba, have faced a series of regulatory obstacles. Chinese regulators called off Ant’s blockbuster $37bn initial public offering and fined Alibaba a record $2.8bn for antitrust abuses last year.

His absence from China has coincided with the escalation of President Xi Jinping’s zero-Covid controls this year. This led to a harsh lockdown of Shanghai and the surrounding Yangtze river delta in April and May and sparked nationwide protests over recent days. Ma has a home in Hangzhou, a city near Shanghai where Alibaba is headquartered.

Since his fallout with Chinese authorities, Ma has been spotted in various countries including Spain and the Netherlands. Spending less time in his home in China means the billionaire has avoided the tough Covid-19 quarantines imposed on anyone entering the country, as well as thorny political issues arising from his previous push to build influence in the country’s halls of power.

Ma has kept a low profile during his stay in Tokyo, bringing his personal chef and security with him and keeping his public activities to a minimum, said the people with direct knowledge of his whereabouts.

His social activities centre around a small handful of private members’ clubs, with one based in the heart of Tokyo’s swish Ginza district and another in the Marunouchi financial district facing the Imperial Palace.

The exclusive Ginza-based club has become a busy but discreet social centre for wealthy Chinese who have either settled in Tokyo or are on extended visits, according to members.

People involved in Japan’s modern art scene said that Ma had become an enthusiastic collector. Friends close to the billionaire in China said he has turned to painting watercolours to pass the time after being forced to retreat from his frenetic public life jet-setting between meetings with top officials in China and around the globe.

Others said that Ma had used his time in Japan to expand his business interests beyond the core ecommerce technologies of Alibaba and Ant, and into fields of sustainability. He has largely turned over the reins to a new generation of leaders at both companies.

Ma’s whereabouts have been the subject of intense speculation with the Alibaba founder spotted on the Spanish island of Mallorca last year, according to local media reports. In July, Ma also visited a university in the Netherlands to learn about sustainable food production.

Ma playing golf in Prague, Czech Republic, in July © Marek Patek David Kundrát/CNC/Profimedia/Shutterstock

Activities at the elite Hupan University executive training programme he founded seven years ago have also quieted down, after some top officials saw it as a means for Ma to extend his network.

His charity the Jack Ma Foundation, where Ma pledged to dedicate his post-Alibaba years, has toned down its publicity, after years of worldwide donations, such as distributing millions of face masks at the start of the pandemic, helped Ma build up his global brand.

Its last tweet was in November 2020, just as Beijing’s regulatory push against tech companies and entrepreneurs was getting under way.

Ma’s six months in Japan have coincided with a historic selldown by SoftBank of its long-term shareholding in Alibaba after the Japanese technology group suffered a heavy hit from a global tech rout earlier this year.

The Jack Ma Foundation and Ant did not respond to requests for comment regarding his visit to Tokyo.

The Milan-based photographer Gabriele Galimberti said he has received "thousands" of personal threats.

After days of backlash, Balenciaga publicly on Monday condemned child abuse and took full responsibility for the controversies surrounding two of its recent ad campaigns. But one of the photographers swept up in the firestorm, Gabriele Galimberti, said that was a little too late.

The fashion house tried to clear up some erroneous media reports that mistakenly linked elements of two different campaigns. Social media critics have been blasting the company along with photographers and other creatives involved with the shoots, as well as one of the brand’s leading fans, Kim Kardashian. The reality star and entrepreneur said Sunday that she was reevaluating her relationship with Balenciaga.

The criticism kicked off after Balenciaga released a campaign for its Gift Collection featuring six children, including some holding plush bear toys that some perceived to be strapped in bondage. That was shot in Paris by Galimberti.

A separate spring 2023 campaign was shot in a Manhattan skyscraper office setting and featured such A-listers as Nicole Kidman and Bella Hadid. Photographer Joshua Bright, who did not respond immediately to a request for comment, handled the portrait images. Still-life images of accessories amid “era-specific workplace clutter,” including one of a Balenciaga/Adidas bag resting on legal documents were shot in New York by Chris Maggio, who did not respond to interview requests Monday. Upon closer inspection, documents highlighting the 2008 U.S. Supreme Court decision, “United States v. Williams,” which upheld a provision of a federal child pornography law that makes it a crime to advertise, promote or present child pornography, could be seen in the background.

In an Instagram post Monday, Balenciaga said what was believed to have been a fake document turned out to be real legal papers that likely came from the filming of a television drama. Such “reckless negligence” resulted in Balenciaga filing a complaint, the company said. Despite that legal action against North Six Inc., which is not named in the post, and set designer Nicholas Des Jardins, Balenciaga took full responsibility.

North Six logistically managed the campaign in the office setting, but it was not involved with the Gift Collection campaign featuring the questionable teddy bears.

Representatives for North Six declined comment Monday, and lawyers working on behalf of the production company were not available to speak at this point. Des Jardins did not respond to media requests, nor did his agency Streeters.

Balenciaga said it is closely revising its organization and collective ways of working, reinforcing structures around its creative processes and “laying the groundwork with organizations who specialize in child protection and aim at ending child abuse and exploitation.”

Some social media critics and select members of the media mistakenly conflated the two campaigns and stated that the Supreme Court document was featured in the campaign with the children.

“Absolutely not. It was two different campaigns, two different photographers. The Supreme Court documents were not in the campaign with the children,” Galimberti said in an interview Monday. “Now Balenciaga is suing the production company [North Six] involved with the office campaign and the set designer [Des Jardins] – not me. I was not involved with that campaign.”

Above all, Galimberti wants people to know that he is not a pedophile. Shocked that certain media outlets wrote things about him “that were completely fake” without “even making a phone call,” Galimberti noted how in some instances photographs of him were featured in media reports. He alleged that “Fox News, Newsweek and The Daily Mail wrote terrible things about me. Now with my lawyers, I am suing them. They jumped on the news and wrote things without even checking if it was the truth or not. As a journalist myself, I think it’s terrible. They really are destroying my life.”

Representatives at Newsweek and The Daily Mail did not respond immediately to requests for comment. A Fox News spokesperson acknowledged a request but had not provided a response at press time.

Stating that he has not been able to sleep for the past week and is quite concerned about his personal safety, Galimberti said his family is also worried. “Luckily, I live in Italy and not in the States. Ninety percent of the messages are coming from the USA,” he said.

Contrary to media reports, Galimberti was not involved with the creative direction. With 20 years of experience as a documentary photographer, the Balenciaga campaign was his first assignment in the fashion industry. Describing the past week as “terrible,” Galimberti said he has received thousands of messages on his phone, his Instagram and Twitter accounts, and via email saying things like, “You have to die pedophile” and “You are a sick pervert.”

There have also been numerous threatening messages left on his voice mail in the middle of the night, he said. He hopes that the Balenciaga statement will mean that “this wave of s–t is stopping now. It’s been a week that I have been under attack, but I am not responsible for anything,” Galimberti said. “I really hope this scandal with Balenciaga will not destroy my career in documentary photography. I already have lost a few jobs that were scheduled for the next few weeks.”

A frequent photographer for National Geographic, an exhibition of his work slated to open Dec. 7 in Kazakhstan was just canceled due to the controversy. A few collectors have reneged on buying his prints, which typically cost $2,000 to $5,000. A shoot for a high-profile Italian musician’s latest cover has also been nixed. Speculating that the musician no longer wants to work with him due to the situation, he said, “He’s a big one so I cannot tell you his name. He’s one of the top 10.” He estimated that he has lost $10,000 in wages since the Balenciaga controversy.

Still inside the storm, he hasn’t had a chance to take a step back and analyze what has happened. As a documentarian, his first foray into fashion photography has not been a good experience, he said. Telling people’s stories through his work is what fascinates him. “When I accepted the project with Balenciaga, it was basically because they pay well. When you work as a photojournalist for magazines in Italy or Europe, they pay little. It’s not really easy to make a living,” he said. “Of course, when a big company approaches you about a two-day shoot for a good amount of money, it’s not really easy to say no — when you are in the [financial] position that I am.”

The Balenciaga job was 15 times more than what he typically earns for a one-day shoot — $400 to $500. “It’s a lot less than $50,000 and a bit more than $10,000,” the photographer said.

In the interview Monday, Galimberti said, “They made a statement one hour ago. But for me, it was too late.”

The company contacted the Milan-based creative because they liked his book “Toy Stories,” he said. During the two-day shoot in Paris, 20 Balenciaga staffers were on location, Galimberti said. “Everything was ready and decided by them. They chose the children, the location and the objects. My role was simply to photograph what I saw. Basically, I applied my documentary eye to that situation and photographed was there,” he said, adding that punk and bondage are not metiers that he works in. “To me, that [toy] bear was just one with pink hair and weird eyes.”

As for Kardashian’s response to the controversy, he said, “I have no idea about Kim Kardashian. I know her name. She is not somebody that I focus on. I am not part of this fashion industry.”

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Shares fall 11% following two patient deaths in trials of lecanemab

Just weeks ago at the company’s headquarters, Haruo Naito, the 74-year-old chief executive of Japan’s Eisai, was feeling vindicated after almost four decades of trying to develop an Alzheimer’s drug.

Ahead of the release of detailed information on Eisai’s new drug lecanemab, developed with Biogen, the company’s share price surged 60 per cent after results of a late-stage clinical trial showed that it slowed the progression rate of the memory-degenerating disease.

But on the eve of the presentation on Tuesday, news of a second death during trials emerged. That sent Eisai’s shares down 11 per cent, threatening to overshadow what Naito had hoped would be a convincing set of data to settle a debate among researchers about what causes the illness, which affects roughly 50mn people worldwide.

Initial results published by Eisai in September raised hopes of a new treatment for a disease that pharmaceutical companies have spent billions of dollars over several decades researching, only to be disappointed by repeated failures. There has been no major medical breakthrough since Eisai’s Aricept, the most widely prescribed treatment for Alzheimer’s disease, became available in the US in 1997.

At the centre of the debate among scientists is the so-called amyloid hypothesis, which holds that Alzheimer’s is primarily caused by the build-up in the brain of a sticky plaque called beta amyloid. But dozens of drug trials — including the latest by Swiss drugmaker Roche — have failed to prove clearing the plaques can slow the rate of cognitive decline.

Both Roche’s gantenerumab and lecanemab, co-developed by Eisai and Biogen, are monoclonal antibody treatments based on the hypothesis. But unlike many other drugs being developed, lecanemab specifically targets amyloid-beta aggregates called protofibrils.

“I think it is safe to say that the results have proved that the condition will improve by removing the amyloid-beta aggregates,” Naito, the grandson of Eisai’s founder, said in an interview held before the death of the second patient was disclosed. “With lecanemab as a beginning, we are feeling increasingly confident that we can develop the next Alzheimer’s drugs, one after the other.”

If the theory were proven, Naito said lecanemab could open the path to research on other neurodegenerative diseases, including Parkinson’s. It would also breathe new life into rival amyloid-reducing drugs in development such as donanemab, an antibody being developed by Eli Lilly.

Investors are betting that Eisai, a $20bn pharmaceutical company still little known outside of Japan, can succeed where many larger companies have failed. When it published lecanemab’s topline results in September, BMO Capital Markets concluded the trial amounted to a first “clean win” in the battle against Alzheimer’s disease.

Evan Seigerman, a BMO analyst, said that depending on the level of access granted by US national insurance schemes, Medicare and Medicaid, as well as other countries’ healthcare schemes, “we could see end-user peak sales at more than $13bn”.

Some scientists have expressed caution about reading too much into topline results, which show lecanemab reduced the rate of cognitive decline in early-stage patients by 27 per cent compared with a placebo after 18 months. They said it was critical that Eisai and Biogen present full trial data and publish their findings in a peer-reviewed journal to rebuild confidence in amyloid-targeting Alzheimer’s drugs following recent failures.

The botched launch last year of aducanumab — the first amyloid-clearing drug to win approval and the first new treatment for the disease in almost two decades — has heightened concerns. Questions about its effectiveness and the robustness of two late-stage clinical trials, as well as a sky-high launch price of $56,000 a year, have led clinicians and US payment authorities to shun a treatment that was co-developed by Eisai and Biogen.

“The lecanemab study is the first trial to achieve a robust, statistically significant difference between drug and placebo — so that’s a huge achievement,” said Rob Howard, a professor of old-age psychiatry at University College London.

But he added that the clinical significance of the slowdown in progress of Alzheimer’s caused by lecanemab was “trivial” in terms of noticeable change in a patient, raising the question of whether the drug is worthwhile given potential side effects that include brain bleeds.

Medical authorities are investigating the deaths of the two patients during lecanemab’s trials to determine if they were linked to the treatment, according to a report by the journal Science.

Eisai said it could not comment on individual cases because of patient privacy. It added that all available safety information indicated the therapy was not associated with “an increased risk of death overall or from any specific cause”.

“The benefits are still really unclear,” said Howard, who would like Eisai to provide much more detailed information about the lecanemab trial during the presentation on Tuesday. “I want to see a proper breakdown of the data in terms of the efficacy.”

Experts are divided on whether the trial results prove the amyloid hypothesis.

Andrea Pfeifer, chief executive of AC Immune, a clinical-stage company developing drugs targeting neurodegenerative diseases, said the results validated amyloid beta as “a target for Alzheimer’s disease therapies”. But she said it might not be the only target for Alzheimer’s and future treatments could require different combinations of therapeutics, each targeting specific neurodegenerative disorders and inflammation of the brain.

Alberto Espay, a professor of neurology at the University of Cincinnati, said in addition to lowering amyloid levels in the brain, lecanemab increased the levels of a normal protein, amyloid beta-42, which could also be the cause of the benefits highlighted by the trial.

For Eisai and those affected by Alzheimer’s, however, lecanemab is a breakthrough they have been chasing for a quarter of a century.

“I’ve met with dementia patients and their families many, many times and they ask me each time when the next drug will come out,” said Naito.

Following the publication of trial data, he apologised for the long delay in developing lecanemab. Nonetheless, the drug represents a major coup for Eisai, a company dwarfed by rivals such as Roche and Eli Lilly. It licensed lecanemab in 2007 from a small Swedish biotech, BioArctic, which it continues to work closely with on research.

Lars Lannfelt, BioArctic’s founder, told the Financial Times that Eisai had proved a strong partner and lecanemab’s successful trial should help the company expand thanks to its royalty agreement with Eisai.

“We are very optimistic . . . and of course we are hopeful lecanemab will be approved,” he added.

To make up for its small scale, Eisai has partnered with larger peers, such as Merck and Biogen, to develop drugs. It has also narrowed its focus on two therapeutic areas: oncology and neurology.

“Everyone says it must be tough to develop a drug for dementia, but for Eisai this is a disease that we know most about, even more than cancer,” Naito said.

Under Naito, who took over as president in 1988, the company’s 11,000 employees have spent 1 per cent of their working hours — two and a half days a year — engaging with Alzheimer’s patients and their families. “It’s not by coincidence that our trial results were successful,” Naito said. “There has been a large amount of learning from our past failures.”

One of its biggest setbacks was the disastrous launch of aducanumab, which prompted the US Centers for Medicare & Medicaid Services to severely restrict reimbursement for all amyloid-reducing monoclonal antibody treatments. Eisai in March gave up its right to share the profits from that drug, whose benefits appear limited.

“The big lesson for us was to ensure transparency of data,” Naito said, referring to the controversy over whether the trial data of aducanumab provided enough evidence that the drug really worked.

“I don’t think there will be such a controversial debate this time since there is only one Clarity AD clinical trial for lecanemab so it is a very simple and easy to understand drug development.”

Regarding the potential price for lecanemab, Naito expressed confidence that US insurers will be willing to pay for the drug.

“There is no point unless the drug reaches the patients and is administered, so our biggest priority is to make sure the drug reaches the patients that need it,” Naito said. “The basis of our pricing policy will be that it will be at a level that is affordable.”

US and Netherlands officials to hold talks as Washington steps up push for allies to mirror export curbs

The head of Europe’s second-largest semiconductor equipment maker has warned that the US is turning up the heat on its allies to ensure key global chip companies fall into line behind Washington’s tough export controls on China.

Benjamin Loh, chief executive of Dutch-listed ASM International, which develops equipment for the production of semiconductor wafers and chips, said the US was “putting a lot of pressure . . . to make sure that the Dutch government and the Japanese government follow as well”.

He added: “The US government is hoping that this is going to be a multilateral thing going forward because they need to stop everybody [selling high-end tools to China].”

Loh’s comments come as Alan Estevez, the top US commerce department official for export controls, and Tarun Chhabra, the White House National Security Council official who drove the process to impose unilateral controls on October 7, prepare to hold talks with Dutch officials in the Netherlands this week.

President Joe Biden’s administration has been trying to reach a trilateral deal with its allies for well over a year, as part of its strategy to make it much harder for China to develop advanced semiconductors needed for military purposes, but failed to secure an agreement in time.

ASMI is one of two major chip toolmakers in Europe, alongside rival Dutch group ASML, which is Europe’s largest and most important company in the chip sector.

This month, ASMI issued the most severe estimate of the hit from the US export controls of any major European chip company, warning it would affect about 40 per cent of sales to China, which has grown to account for 16 per cent of group revenue.

“China is not a small amount of our business, but at the same time it’s not something that will kill us,” Loh said, noting that ASMI’s “sizeable operation” in Arizona in the US made it more exposed to Washington’s sanctions.

The toolmaker, which receives more than half of its revenues from sales of equipment for advanced chips, is still assessing whether the cautious estimate is accurate, Loh said, but “in hindsight it is maybe not such a bad thing — being very conservative — because I think we have not seen the end of this yet”. 

Loh said its Chinese customers were “struggling now, trying to get all the different pieces” they needed to build their planned manufacturing lines.

Even if they were ultimately able to buy more equipment than anticipated from ASMI, Loh added, the lack of access to crucial US resources would make it “very difficult for Chinese advanced fabs to continue going forward”.

The US export controls, which bar American companies from exporting critical chip manufacturing tools to China and prevent “US persons” from providing the country with direct or indirect support, have immediately hurt the three biggest US chip toolmaking companies: Applied Materials, Lam Research and KLA.

But they have had much less impact on the other two non-US companies that dominate the global market — Tokyo Electron in Japan and ASML.

Estevez last month said US companies wanted “fairness”, which in the case of toolmakers meant “multilateral” export controls. “We intend to give them that as well so that it’s fair with their competition across the globe,” he added.

In recent comments, Estevez said he was confident the three countries would strike a deal in “the near term”, but many industry experts believe that timeline is overly optimistic given the concern in Tokyo and, particularly, The Hague.

Underscoring the less optimistic view, Dutch foreign trade minister Liesje Schreinemacher has in recent days suggested the US faces a difficult battle.

Speaking to the Dutch parliament last week, Schreinemacher said the Netherlands had to “defend our own interests”, which she said included economic interests.

In an interview with a Dutch newspaper this month, Schreinemacher said the Netherlands would look at the chip market with “a more critical eye” but cautioned it would not just “copy the American measures one-to-one”.

Her comments marked the first time the Dutch government has even indirectly referred to the negotiations it has been holding with the US and Japan.

One person familiar with the US talks with the Dutch and the Japanese said the Biden administration was committed to securing a trilateral agreement. “We’ve obviously seen the [recent] comments from the Dutch. I would just say that there are also private conversations going on,” said the person.