TheChek News Flow

Verve’s effort is gradually making clinical progress and would be a significant upgrade from statins and other available medicines

More than 200 million people around the world take statins with brand names such as Lipitor and Crestor daily to lower their bad cholesterol, known as LDL. Unfortunately, a majority fail to stick with their daily pills, putting them at risk of heart disease.

A biotech company formed by one of the top heart-disease experts wants to change that with a single injection that would permanently reduce bad cholesterol.

It is a treatment based on a Nobel-prize-winning gene-editing technology known as Crispr. But unlike the traditional Crispr approach, which acts like a pair of scissors to make a cut to the DNA, Verve VERV -2.82% is employing a new technology known as base editing, which acts more like a pencil and eraser, substituting a single letter of DNA for another. The gene Verve seeks to edit, PCSK9, regulates LDL levels in the body.

While the treatment is highly experimental and the chance of failure is high, early results look promising. The company raised $259 million last month at a time when early-stage biotechs are struggling to tap the capital markets. It also recently struck a deal with the larger biotech Vertex to develop a treatment for liver disease, giving it yet another source of cash during turbulent times for small biotech companies.

Verve’s chief executive and co-founder is the cardiologist Sekar Kathiresan, a former professor at Harvard Medical School and former director of the Massachusetts General Hospital Center for Genomic Medicine. Dr. Kathiresan left academia to form a company inspired by his own discoveries around natural mutations that lower LDL.

While the gene-editing approach could in theory apply to anyone at risk of heart disease, Verve’s strategy for now is to focus on patients suffering from an inherited form of high cholesterol known as familial hypercholesterolemia, or FH, which increases the likelihood of having coronary heart disease at a younger age.

Earlier this summer a New Zealand patient suffering from the condition was the first to receive the injection. Another 39 patients are set to be tested with different doses over coming months, with results starting to read out next year. The injections previously reduced bad cholesterol in monkeys by over 60%.

It is a very long shot and will take years of testing, but the start of the process in New Zealand marked a step forward for the gene-editing space. Verve’s next step is to seek approval to begin trials in the U.S., where the Food and Drug Administration has set a high bar for conducting gene-editing trials where alternative therapies already exist. FDA-approved treatments for high cholesterol currently include not only statins but newer injections targeting PCSK9.

Dr. Kathiresan says Verve has been in talks with the FDA and is confident the company can meet the high bar for a trial in the U.S., though some analysts are skeptical. The company will submit a clinical trial application in the U.S. and the U.K. later this year.

“The bottom line right now is that despite all the treatments available, roughly 3% of patients with FH are actually at the right LDL level,” says Dr. Kathiresan. “So there’s still a huge unmet need, despite the fact that there’s all these medications out there.”

Even if Verve’s technology works, it would be up against recently approved injections. The shots from Amgen Inc. and Sanofi SA must be taken every few weeks while a new Novartis injection is taken twice a year. None of the drugs have so far become blockbusters, partly because insurers balked at their price and they require repeated injections to be effective. To win over insurers, doctors and patients, Verve would have to offer its therapy at an attractive price.

Kostas Biliouris, an analyst at BMO Capital Markets, says the company might be able to charge $90,000 for a one-time treatment, which is equivalent to about 15 years of PCSK9 injections at $6,000 yearly. The price could be lower and the market limited to a subset of the million or so patients with FH in the U.S. But, if the company were to expand into the broader heart-disease market, Mr. Biliouris reckons potential revenue could reach billions of dollars annually. Its market value net of cash is just below $2 billion today.

The other big challenge would be persuading patients to accept the risk of permanently altering their genes. Dr. Kathiresan says it is important to remember that this procedure doesn’t edit inheritable genomes but rather makes changes to a patient’s own body, like placing a stent.

“This kind of editing that we’re doing, it’s not that different from some surgical procedures because we’re not passing on the edit to future generations,” he says.

Verve’s technology is a scientific moonshot, at the forefront of a novel approach to medicine whose risks are still largely unclear. Verve’s stock has more than tripled from a June low of $11.14 but it is still trading at about half its peak of $74 last year when biotechnology was more in favor.

For those with appetite for some risk, though, the payoff could be large.

Country Garden’s plight highlights ‘humongous moral hazard’ for Beijing from cash-strapped developers

EEarnings at Chinese property developer Country Garden fell as much as 70 per cent in the first half of the year, as the country’s largest real estate group by sales was drawn into a crisis that has raged through the heavily indebted sector.

Core profit could have dropped to between Rmb4.5bn and Rmb5bn ($6634mn-$736mn) in the first six months of 2022, down from Rmb15.2bn a year earlier, according to a filing on Thursday.

Country Garden, which lost its last investment-grade rating after Fitch downgraded it to junk status on Tuesday, cited a market downturn, the effects of the coronavirus pandemic and foreign exchange losses for the fall in earnings. Unlike a growing number of its highly leveraged peers, Country Garden has not defaulted on its debts.

The Chinese property sector has been rattled by a liquidity crisis following the high-profile collapse of Evergrande, the world’s most-indebted developer, last year.

Country Garden had managed to retain access to offshore bond markets for refinancing, helping the group maintain some stability at a time when tens of thousands of Chinese homebuyers are refusing to pay mortgages on unfinished apartments.

However, as Beijing has sought to revive the sector with refinancing loans, there are signs that confidence in Country Garden is receding.

The company’s Hong Kong-listed shares slumped as much as 15 per cent during a single trading session in July, wiping about $1.7bn from its market value, after it announced a heavily discounted capital raising.

Alicia García Herrero, chief economist for Asia-Pacific at French investment bank Natixis, said Country Garden was suffering from worsening investor sentiment towards the sector. There are fears of falling prices as demand wanes and new apartments remain uncompleted, with cash-strapped developers running out of money.

“Now even Country Garden couldn’t basically proceed with presales for new projects because the contagion is so extreme,” she said.

China’s economic planners have for months been moving to unwind efforts to deleverage the sector and encourage people to buy new houses. China’s central bankers have eased lending rules and cut interest rates in a bid to combat the downturn.

Shares in Chinese property companies, including Country Garden, rose sharply earlier this week on reports that Beijing may order state-run groups to guarantee some developer bonds issued in the country’s onshore market.

While García Herrero expects such policy loosening would continue, investors are also watching for clearer signs of direct state support for private sector property developers facing a liquidity crunch.

“The government’s strategy is not to extend the bailout to the worst performers . . . will they go beyond this for good names? My sense is that it’s going to be very risky because it’s a humongous moral hazard, which will then go into other sectors.”

The €10bn bet against European stocks is no more

Bridgewater’s big short on European stocks is no more. Well, almost.

In June we reported that the $150bn-in assets firm had been building a chunky short position in Europe. At its peak it totalled 33 disclosed short positions worth more than €10bn in aggregate, according to data group Breakout Point, across a range of companies in countries including France, Germany and Spain.

However, as of Wednesday all but one of these positions had been reduced below the 0.5 per cent disclosure threshold, with only Banco Santander at 0.59 per cent remaining.

Quite how investors should interpret this latest move is unclear (and Bridgewater declined to comment to FT Alphaville).

For starters, the shorts had been held at just above the disclosure threshold. It is unclear if the positions have now been taken off completely or simply reduced to just below the threshold.

Also uncertain is the extent to which these positions form part of a larger trade with different legs. Deducing trading strategies and investment theses from patchy public data is often a fool’s errand. However, given the stocks that were shorted are all components of the Euro Stoxx 50, the firm appears to be replicating the index – at least in part – potentially as a way of taking a particular position and very possibly hedged in some form.

But as Breakout Point highlights, this is the third iteration of this huge short position and has ended during a short squeeze in stock markets. The Euro Stoxx 50 has rallied almost 9 per cent since June, when Bridgewater’s position appears to have been built. That indicates that they lost money on the trades and were maybe forced into paring back the shorts.

The firm, founded by Ray Dalio and now led by Nir Bar Dea and Mark Bertolini, is having a strong year, helped by bets that the Fed and the market were behind the curve on inflation. It has been negative on a range of assets this year including US equities.

Given the world’s biggest hedge fund firm sees still trading opportunities from the Fed tightening monetary policy into a weakening economy, according to a person familiar with the firm’s positions, this is unlikely to be an overly bullish move by Bridgewater.

DAX:

MDAX:

SDAX:

* Atlantic Sapphire ASA Raised to Buy at Fearnley; PT 27 kroner

* Devolver Digital Raised to Buy at Berenberg; PT 80 pence

* AutoStore’s Strong 2Q, In-Line Guide Both Positive: Jefferies

* Borregaard Cut to Hold at Berenberg on Limited Growth Potential

* *CITI STRATEGISTS RAISE EUROPEAN TELECOMS TO OVERWEIGHT (*)

* IMCD Currently ‘Over-Earning,’ Cut to Sell at Deutsche Bank

* New Legislation ‘Big Deal’ For Clean Tech, Morgan Stanley Says

Nikkei -0,86% Hang Seng -0,60% CSI -0,89% Shanghai -0,48% Shenzen -0,38%

Eur$ 1,0171 CNH 6,8025 CNY 6,7884 JPY 135,04 GBP 1,2036 CHF 0,9519 RUB 60,4176 TRY 17,9468 WTI$ 88,21 Gold 1,762,64 BTC 23,445 ETH 1,850,10

S&P -0,22% Nasdaq -0,31% EuroStoxx +0,05% FTSE +0,17% Dax +0,13% SMI -0,03%

Macro :

- Fed Minutes Note More Tightening Coming, Risks of Overdoing It

- Mubadala-Backed UAE Firm Sets Up $10 Billion Fund for Tech Deals

- Goldman Sachs, Nomura Cut China GDP Forecasts as Outlook Darkens

Keep an eye on :

- ADYEN NA : Adyen 1H Net Revenue Misses Estimates

- AMBEA SS : Ambea 2Q Operating Profit Beats Estimates

- ANG LN : Angling Direct Sees Earnings Marginally Below Market Views

- AAPL US : Apple Targets Sept. 7 for IPhone 14 Launch in Flurry of Devices

- AUTO NO : AutoStore 2Q Adjusted Ebitda Beats Estimates

- BAMNB NA : BAM 1H Revenue EU3.33B Vs. EU3.63B Y/y

- BCVN SW : BC Vaudoise Assets Under Management CHF107.2B Vs. CHF112.89B H/H

- CTM SS : Catena Media 2Q Ebitda EU7.31M Vs. EU12.7M Y/y

- CETK SS : Ctek Offering of 4.9m Shares by Holder Altor Fund III Prices

- EMMN SW : Emmi FY Ebit Forecast Misses Estimates

- ALERS FP : Eurobio Scientific to Acquire GenDx for EU135m Cash

- EURN BB : Euronav, Tanker Peers Rise as Optimism Grows Over Freight Rates

- RACE IM : Ferrari Prioritizes Combustion Profit to Pay for BEV Transition

- FME GY : Vifor Fresenius MCRP Says UK’s NICE Recommends Tavneos

- GN DC : GN Store Nord Narrows FY Hearing Organic Revenue Growth Forecast

- MANU US : Apollo in Talks to Buy Manchester United Stake: Daily Mail

- MSLH LN : Marshalls 1H Ebitda GBP45.7M Vs. GBP56.4M Y/y

- MBTN SW : Meyer Burger 1H Sales CHF56.7M Vs. CHF18.0M Y/y

- NLFSK DC : Nilfisk 2Q Revenue Beats Estimates

- PHIA NA : FDA Received More Medical Device Reports For Philips June Recall

- RNK LN : Rank Group FY Adjusted EPS Misses Estimates

- SFQ GY : SAF-Holland Completes Offer for Sweden’s Haldex

- SAN FP : Arvinas Sinks After Sanofi Ends Cancer Drug’s Development

- SAP GY : Francisco Partners to Buy Litmos From SAP, No Terms

- SFZN SW : Siegfried 1H Sales Beats Estimates

- SIP BB : Sipef 1H EPS $6.15 Vs. $4.18 Y/y

- TEF SM : Telefonica in Talks to Sell Peru Fiber Stake to KKR: Expansion

- VLA FP : Valneva Says US DoD Won’t Use 2nd Option Year for Ixiaro Vaccine

- VEI NO : Veidekke 2Q Ebitda Meets Estimates

- VIFN SW : Vifor Fresenius MCRP Says UK’s NICE Recommends Tavneos

- ROSE SW : Zur Rose 1H Adjusted Ebitda Loss CHF49.2M Vs. Loss CHF42.9M Y/y

In the U.S., most electric vehicle owners say that public chargers are easy to use. That is, when they actually work.

A new J.D. Power survey finds that, while public charging stations are a tad easier to come by these days, faulty chargers are souring the experience and hampering EV adoption. That’s no good, because the planet is only getting hotter and EVs are expected to play a key role in reducing greenhouse gas emissions in the transportation sector.

Out of 11,554 owners of battery electric and plug-in hybrid vehicles who were surveyed by J.D. Power, one in five said they “ended up not charging their vehicle during their visit,” the report said. And of the drivers who did not charge, “72% indicated that it was due to the station malfunctioning or being out of service.” The findings echo a smaller UC Berkeley study that made headlines earlier this year.

Beyond defective chargers, the survey looked into several other factors, such as price and “ease of payment.”

Overall, J.D. Power found that EV owners in the U.S. are less satisfied with public level 2 chargers in 2022 than they were last year. Using a 1,000-point scale, EV drivers gave level 2 stations an average score of 633, down from 643 in 2021. Level 2 chargers can fill up a battery-electric vehicle in as little as four hours, far outpacing a standard residential outlet (40-plus hours).

In contrast, the J.D. Power study found that satisfaction with Level 3 chargers — also known as DC fast chargers — had remained flat year over year, at an average score of 674. Level 3 chargers can fill an EV’s battery level to 80% in as little as 20 minutes, but they’re a lot rarer.

As for price, the survey found that charging costs had weighed down driver satisfaction scores across the board. Belying that point, a separate survey of 2,040 U.S. adults (paid for by EV financing company Tenet) found that a staggering “81% believe buying electric is too expensive.”

Among EV charging companies, Tesla led the pack in J.D. Power’s survey as the most-liked station operator, while EVgo and Blink brought up the rear.

Investors that rely on statistical trading models are quickly unwinding bearish positions

Quant funds are increasing their bets on US stocks, helping fuel a sharp rally that has added $7tn in value to markets since June even as economic data point to a slowdown in the world’s largest economy.

In many cases, the funds — which look for trends in the market and then attempt to ride the momentum — have quickly unwound positions taken in late 2021 and earlier this year that were structured to benefit from falling stock markets.

As they have closed out those bearish bets, they have helped push stock prices higher — and then followed the new trend by making fresh wagers that benefit from the rally.

Charlie McElligott, a strategist at Nomura, said quant funds “moved fast and unemotionally” to shift their stance, catching “a very bearish market . . . very flat-footed”.

These funds have spent tens of billions of dollars on futures, helping push the benchmark S&P 500 and tech-heavy Nasdaq Composite up double-digits from recent lows, according to traders and analysts.

Nomura estimates that trend-following hedge funds and volatility-control funds have purchased $107bn of global stock futures since markets hit a low in late June, with a large portion of that used to close short positions.

“With positioning basically at the low there was a lot of cash on the sidelines and so as the market stabilised and started to rally, more and more of this flow has come back into the market,” said Glenn Koh, the head of equities trading at Bank of America.

The role of the computer-driven funds helps partly explain the head-scratching advance in the $47tn US stock market.

Whether the “risk-on” shift can last depends in part on whether the Federal Reserve can raise rates to damp economic activity and stamp out inflation without pushing the world’s largest economy into recession.

Investors moved to the sidelines en masse as stocks slid earlier this year, and many trend-following hedge funds placed short bets on the market as they predicted further declines.

Markets were pummelled by Russia’s invasion of Ukraine in February, surging commodity prices and the threat of economic slowdowns in China, the US and western Europe just as central banks raised interest rates to snuff out inflation.

But after the S&P 500 fell into a bear market in June, the market snapped back, recouping more than half its losses this year.

Investors have pointed to other factors propelling the recovery in addition to the short-squeeze pushing some funds back into the market. Some managers are betting inflation could peak, while others argue a spurt of weak economic data might stop the Fed from lifting interest rates as aggressively as some policymakers believe it must.

Alongside the rally, the dramatic price swings that had characterised the sell-off earlier in the year have eased. Gauges of volatility have fallen, with the Cboe’s Vix volatility index closing this month below its long-term average of 20 for the first time since April.

Daily swings in the S&P 500 and in many of the stocks that comprise the index have become smaller than they were between January and June. If that trend continues, the door will be open for a large pool of funds that shift positions based on volatility to increase their wagers on equities.

JPMorgan Chase analysts said the buying may continue. It told its hedge fund clients last week that volatility-targeting and risk-parity funds were buying roughly $2bn to $4bn worth of equities a day. The bank estimated those purchases “can last perhaps another 100 days if volatility stays low”.

Marko Kolanovic, a JPMorgan strategist, said the rally had reached most corners of the market. Some 88 per cent of S&P 500 stocks are trading above their average over the past 50 days, up from just 2 per cent in mid-June.

“Strong participation is an indication that this rally is durable, and another expression the market’s tail risks have receded,” Kolanovic said. “Volatility targeters can be expected to add exposure overall, and especially to equities.”

Fund managers have grown more optimistic. After polling portfolio managers this month, Bank of America strategist Michael Hartnett said they were “no longer apocalyptically bearish”.

Big caveats remain. Fed policymakers have warned they could raise rates higher and keep them there for longer than traders currently predict. And an inflation or growth shock could yet rattle markets.

That explains why the rally so far has been led by systematic funds rather than traditional money managers and long-short equity hedge funds.

“You see some people taking shorts off,” said Mike Lewis, the head of US cash equity trading at Barclays. “But you haven’t really seen people taking money and putting it back to work.”

It’s time for Europe to ask Norway to cut the price of gas

While any reduction might be politically difficult, it might be in the interests of Oslo to accept one

In the gas crisis there has been one bright spot. Norway — democratic, friendly, reliable Norway — has stepped up to help keep the lights on in Europe, maximising production even at the expense of its own oil output to try and replace every molecule it can of Russian supply.

But as the price of gas has continued to soar, more than doubling since Russia started openly choking exports in June, there are quiet rumblings in the industry. They suggest that it is time to ask Norway to do more, even something that might once have seemed unthinkable: Norway should agree to cut the price at which it sells its gas.

Before the howls of protest from Oslo and complaints from free-market purists, it is worth saying this is nowhere near a formal proposal. But that these views are even being aired privately by hardened oil and gas executives outside Norway suggests they are worth exploring.

The argument is as follows: Europe, whether it wants to admit it or not, is embroiled in an economic war as a result of Russia’s invasion of Ukraine.

The greatest threat to Europe’s support for Kyiv, well understood by Vladimir Putin, is that the energy crisis becomes an economic crisis and western voters turn inward. Gas prices are no longer just high but rapidly becoming economic weapons.

However nice the gas windfall Norway is reaping seems today — and at the equivalent of almost $400 a barrel of oil it is mind-bogglingly huge — it is not in the country’s strategic interests to see its neighbours fall into a deep recession or to have an emboldened Russia pushing up against the EU’s borders.

The hard numbers are enlightening. The vast majority of gas Norway supplies goes by pipeline to Europe, making up about a quarter of the continent’s supplies. For the UK, they account for an even higher 40 per cent of supplies.

The Norwegian government forecast in May that its revenues from oil and gas would already approach €100bn this year. In a country of 5.4mn people that is about €18,000 per person, or more than total UK government public spending per capita in 2020/21.

Gas prices have doubled since then and now trade at more than ten times the level they averaged over the previous decade. Norway clearly has significant fiscal headroom. Revenues from oil and gas were less than €30bn last year.

If Oslo was to agree to cap the price at something like the equivalent of $150-$200 a barrel of oil — more than Norway earned on average in the first half of this year, when state-backed energy champion Equinor enjoyed record profits — that would still be painful but manageable for European economies.

Long-term investors in the country’s energy sector, including the government, would still be rewarded. Aslak Berg, an economist who has worked for the Norwegian government and the European Free Trade Association, said that while any reduction in the price might be politically difficult to swallow, Oslo had an interest in contributing to a stable European economy and to supporting Ukraine.

“An option that could make sense for both parties is to commit to long-term contracts at prices significantly lower than today’s spot price, but well above the historical average,” he said.

Such a solution would not be a panacea. European gas market prices would probably remain high in order to attract the necessary cargoes of liquefied natural gas away from Asia. There are risks to interfering with normal market signals. But it would, almost undoubtedly, help to bring down the bill for bailing out households and industry this winter around Europe.

Norway is also more exposed to swings in the global economy — in large part driven by volatile energy prices this year — than might be immediately apparent. Its $1.2tn sovereign wealth fund, which invests the proceeds from decades of oil and gas production, lost 14.4 per cent, or $174bn, in the first half of this year — more than the government stands to make from record oil and gas prices.

Norway is also aware of the threat to long-term gas demand from this crisis. Its desire to build a future energy economy based on renewables like offshore wind and ‘blue’ hydrogen relies on close co-operation with its neighbours too. High-level executives in Norway speak candidly of the dangers of being seen to pursue a “Norway first” approach.

It is crucial for Europe to avoid falling into the resource nationalism trap, which would play into the hands of Putin. No one should suggest that Norway be treated as a profiteer or its contribution to European energy security forgotten. But it is worth at least debating if anything can be done to bring down prices.

Turning up the taps to full capacity is already appreciated. Doing it at a price that helps soothe the pain for European economies might be in Norway’s interests too.