>>> US Close Dow+0,54% S&P +0.46% Nasdaq +0.12% Russell -0.52%


Closing Market Summary: Stocks Climb on Jobs Report Friday, Extending Weekly Gains

Stocks added to their weekly gains on Friday as investors took the July Employment Situation report in stride, pushing the S&P 500 higher by 0.5%. The Dow Jones Industrial Average advanced 0.5% as well, and the tech-heavy Nasdaq ticked up 0.1%. Small caps struggled though, sending the Russell 2000 lower by 0.5%.

The monthly jobs report showed the economy added 157K nonfarm payrolls last month, less than the 190K that the consensus was expecting. However, the June increase was upwardly revised to 248K from 213K, helping to offset the disappointing headline number for July. Meanwhile, average hourly earnings increase 0.3% as expected, and the unemployment rate ticked down to 3.9%.

In short, the July Employment Situation report was essentially the same 'Goldilocks' report that the market cheered in June when accounting for the revisions and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%. Equity futures slipped following the release, but the reaction was pretty mild overall.

The S&P 500 opened the session a tick higher and trended sideways for much of the morning before climbing to new highs in the afternoon. Countercyclical sectors, which are generally seen as less risky, led the charge, with consumer staples (+1.2%) closing near the top of the sector standings, helped by Kraft Heinz (KHC 64.48, +5.08, +8.6%), which rallied after beating both top and bottom line estimates.

In other earnings news, CBS (CBS 53.16, +0.44, +0.8%), Take-Two (TTWO 123.41, +10.17), DISH Network (DISH 34.20, +4.34, +14.5%), and GoPro (GPRO 7.05, +1.06, +17.7%) rallied after their releases, while Activision Blizzard (ATVI 71.32, -2.74, -3.7%) and Shake Shack (SHAK 56.34, -7.60, -11.9%) sold off.

The top-weighted technology sector held the broader market back in early action but eventually picked up the pace, closing higher by 0.3%. Energy was the only sector to finish Friday in negative territory, losing 0.5% and extending its weekly loss to 1.8% -- the worst among the 11 sectors.

Looking at other markets, U.S. Treasuries climbed on Friday, sending yields lower across the curve; the benchmark 10-yr yield dropped three basis points to 2.95%. Meanwhile, West Texas Intermediate crude futures slid 0.8% to $68.48 per barrel, and the U.S. Dollar Index finished flat at 95.00, just below a 13-month high.

Reviewing Friday's economic data, which included the Employment Situation report for July, the June Trade Balance, and the July ISM Services Index:

  • July nonfarm payrolls increased by 157,000 while the consensus expected an increase of 190,000. The prior month's increase was revised to 248,000 from 213,000. Nonfarm private payrolls rose by 170,000 while the consensus expected an increase of 187,000. The previous month's increase was revised to 234,000 from 202,000. Average hourly earnings increased 0.3% (consensus +0.3%), while the previous month's increase was left unrevised at 0.2%. The average workweek was reported at 34.5 (consensus 34.5), and the unemployment rate slipped to 3.9% from 4.0% (consensus 3.9%).
    • The key takeaway from the Employment Situation Report for July is that it is essentially the same Goldilocks report the market cheered in June when accounting for the upward revisions to nonfarm payrolls in May and June and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%.
  • The June trade balance report showed a deficit of $46.3 billion (consensus -$45.6 billion). The May deficit was revised to $43.2 billion from $43.1 billion.
    • The key takeaway from the report comes in the recognition that the year-to-date goods and services deficit is up $19.6 billion, or 7.2%, from the same period in 2017 when the trigger on tariffs had yet to be pulled.
  • The ISM Services Index for July ticked down to 55.7 (consensus 58.5) from an unrevised reading of 59.1 in June.
    • The key takeaway from the report is that it is a July number, and considering the size of the non-manufacturing sector, a cooling off there could feed expectations for a cooling off in third quarter real GDP growth.

Looking ahead, investors will not receive any notable economic data on Monday.

  • Nasdaq Composite +13.2% YTD
  • Russell 2000 +9.0% YTD
  • S&P 500 +6.2% YTD
  • Dow Jones Industrial Average +3.0% YTD

>>> Allergan dermatology portfolio sold to Almirall

Allergan dermatology portfolio sold to Almirall
03 AUG 2018
Almirall [BME: ALM] today 3 August announced in a stock exchange filing the acquisition of Allergan's [NYSE: AGN] dermatology portfolio. What follows are excerpts from the announcement.
Highlights
  • Almirall entered into a definitive agreement to acquire an Allergan U.S. portfolio of mature and growth brands for acne and dermatoses, including a new innovative NCE, SeysaraTM (sarecycline) for the oral treatment of acne. The closing of this transaction is expected in Q4 2018
  • With this strategic and very focused transaction, Almirall significantly reinforces its position in the largest dermatology market in the world
  • All products will be distributed through our US platform and team, which has deep knowledge of the oral acne market and the acquired portfolio. They will provide critical mass to launch KX2-391, which has the potential to become the new standard of care in actinic keratosis
  • The acquired portfolio generated net sales of USD 70m in the first half of 2018 and offers medium to long-term growth potential. We expect peak sales of SeysaraTM (sarecycline) from USD 150m to USD 200m
  • The acquisition has been announced for a cash consideration of USD 550m at closing. It is imediately EPS accretive from 2019 onwards
Almirall [BME: ALM] announced today (3 August) the acquisition of a portfolio of five products from Allergan’s Medical Dermatology unit in the United States, conditional to the clearance by the relevant authorities. It comprises a balanced portfolio of mature and growth brands, Aczone® (dapsone), Tazorac® (tazarotene), Azelex® (azelaic acid) and Cordran® Tape (fludroxycortide), as well as SeysaraTM (sarecycline), a new, innovative first in class tetracycline-derived antibiotic with anti-inflamatory properties for the treatment of moderate to severe acne vulgaris, in patients 9 years of age and older, with a best-in-class safety profile. The FDA approval of SeysaraTM (sarecycline) is anticipated in Q4 2018.
Peter Guenter, Chief Executive Officer, Almirall, comented, “This is a transformational deal for Almirall. It will reinforce and consolidate our position in the world’s largest dermatology market and is a well-balanced portfolio of mature and growth brands with a major launch opportunity of an innovative New Chemical Entity (NCE). It is perfectly complementary to our existing platform and will be imediately accretive to our earnings. It offers us medium to long term top and bottom line growth opportunities. Moreover, it will allow for an expanded platform to launch KX2-391, which has the potential to become a new standard of care in actinic keratosis”
Strategic considerations
  • With this acquisition, Almirall consolidates and reinforces its presence in the US, the largest market in the world, and expands its range of dermatological products, representing a transformational step for Almirall US as well as Almirall as a whole.
  • The portfolio is a balanced mix of mature and growth brands with a first in class, innovative NCE for the treatment of acne. This will result in imediate earnings accretion, create critical mass and provide medium to long term growth opportunities. We expect peak sales of SeysaraTM (sarecycline) from USD 150m to USD 200m.
  • The portfolio had net sales of USD 70m in H1 2018.
  • Our global and US leadership team is comprised of several former Allergan senior executives with a deep knowledge of the acquired product portfolio.
Transaction highlights
  • The acquisition has been announced for a cash consideration of USD 550m at closing.
  • The transaction is subject to be approved by antitrust authorities in the US. Almirall does not envisagenany significant obstacles to closing by Q4 2018.
  • Strategic and straight forward transaction in one single geography.
Synergistic portfolio
The acquired portfolio entails an excellent fit with Almirall US’s selling capabilities and its current team, which has deep knowledge of the US oral acne market and the acquired products. The four products already marketed generated total sales in US of USD 70m in the first 6 months of 2018. In addition, SeysaraTM (sarecycline) offers strong medium to long term growth potential.
Aczone® (dapsone), Tazorac® (tazarotene), Azelex® (azelaic acid), for the treatment of acne and Cordran® Tape (fludroxycortide), indicated for dermatoses, are recognized brands in the US market, which are among the top 10 US prescription dermatologist-driven portfolio. Cordran® Tape is a unique product, a low potency topical corticosteroid-tape that provides a higher potency effect, with a significant growth potential.
Regarding the NCE SeysaraTM (sarecycline), an oral, once-daily, narrow spectrum, tetracycline-derived antibiotic with anti-inflamatory activity, it offers the same efficacy as an oral doxycycline with improved safety and tolerability. A New Drug Application for SeysaraTM is currently under review by the U.S. Food & Drug Administration (FDA) based on the positive results of two identical Phase 3 registration studies. Its approval is expected in Q4 2018. This transaction will further boost Almirall’s R&D & In-Licensing engine, allowing additional investments that will drive future innovation and competitiveness.
Bhushan Hardas, R&D Vice-President, Chief Scientific Officer, Almirall, comented, “SeysaraTM is the first oral antibiotic in 40 years, specifically designed for dermatology, that has demonstrated to be an effective, safe and well-tolerated treatment option for physicians treating patients with moderate to severe acne. It’s an innovative product that fits perfectly with our current pipeline, entirely dermatological”.
Financial Impact
  • The transaction reinforces Almirall dermatology franchise and positions it as a key growth driver, representing circa 45% of net sales (proforma).
  • Sales growth acceleration will come from the launch of SeysaraTM (sarecycline), which is expected to launch imediately after FDA approval.
  • It is imediately EPS accretive, as it leverages current infrastructure in the U.S.
Link to stock exchange announcement and presentation (Register numbers 268856, 268848)

>>> US Gapping down


Gapping down
In reaction to disappointing earnings/guidance:

  • VREX -22.7%, TSRO -12.7%, BRS -11%, SYMC -10.7% (also announces set of cost reduction actions designed to eliminate redundancies and focus its resources on key strategic opportunities), IMMR -10.4%, SEDG -9.8%, LOCO -9.2%, SRCL -9.1%, PACB -9%, AMN -7.2%, NBL -6.8%, PODD -6.3%, GDDY -6.3%, FTAI -6.1%, COHU -5.4%, PDFS -5.3%, BGS -5%, PI -4.8% (expects to outperform Q2 guidance on revenue, EPS, adjusted EBITDA and inventory but delays release/10-Q and commences Audit Committee investigation), GBT -4.8%, RTEC -4.4%, TWI -4.2%, AIG -4.1%, NE -3.9%, SHAK -3.8%, BOJA -3.1%, SSTI -2.5%, CARB -2%, FLT -1.7%, MSI -1.7%, VRAY -1.6%, RMD -1.5%, MGI -1.4%, CBS -1.2%, DATA -1.1%, EOG -1%, ANET -1%

Other news:

  • MFA -4.5% (announces public offering of 50.0 mln shares of common stock)
  • TNDM -4.1% (announces proposed underwritten public offering of common stock)
  • SKY -3.8% (prices 9 mln common stock offering at $22.00/share)
  • DRRX -2.6% (files $175 mln mixed securities shelf offering )
  • FCPT -2.2% (prices upsized underwritten registered public offering of 3.5 mln shares of common stock at a public offering price of $25.00 per share)

Analyst comments:

  • RUN -4.1% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
  • MSI -1.7% (downgraded to Underweight from Neutral at JP Morgan)


>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • MED +22.6%, CATM +20.2%, SWIR +18.5%, ACIA +14.5%, ADMS +13.5%, TTWO +12.6%, XLRN +10%, TTOO +9.9%, CTRL +8.7%, WING +8.7%, ELY +8.6%, ERII +7.4%, KHC +6.9%, CCS +5.9%, CERS +5.9%, TCP +5.6%, HMSY +5.6%, DISH +4.8%, CERN +4.7%, STAR +4.6%, TWOU +4.5%, GPRO +4.3%, USX +3.9%, BNFT +3.5%, HTGC +3.3%, RYAM +3.3%, RBS +3.2%, SWN +3.1%, STRL +2.9%, OTEX +2.9%, CC +2.8%, ERI +2.7%, APPN +2.4%, TDC +2.4%, Y +2.3%, CNP +2.3%, TDS +2.3%, ESNT +2%, ENB +2%, GHDX +1.9%, PMT +1.8%, CRC +1.7%, CBOE +1.5%, AGS +1.3%, EAF +1.3%, NBLX +1.3%, RLGY +1.2%, MDCA +1.1%

M&A news:

  • NTNX +0.9% (to acquire Mainframe2)
  • CPB +3% (Kraft (KHC) is in talks to acquire CPB, but have not yet made an offer, according to NY Post)

Other news:

  • HQCL +25.8% (announces receipt of preliminary non-binding 'going private' proposal)
  • GRPN +3.4% (Groupon discloses update on litigation with International Business Machines-- on July 27, a jury returned a verdict and awarded damages of $82.5 mln to IBM)
  • ACOR +3.1% (provides update on litigation, has entered into a conditioned settlement agreement with Mylan (MYL) and affiliates)

Analyst comments:

  • PCRX +1.4% (upgraded to Buy from Hold at Needham)