FT : Has Starlink already won the new space race?

Has Starlink already won the new space race?
Elon Musk’s satellite system dominates the battle for the future of global connectivity. Amazon and Chinese rivals are working to catch up

After years of effort and some frustrating delays, Amazon’s dream of delivering high-speed internet to some of the remotest places on Earth quite literally got off the ground last month.

On a warm evening in April, United Launch Alliance’s Atlas V rocket roared away from its launch pad at Florida’s Cape Canaveral, carrying the first operational satellites for Project Kuiper, the tech giant’s new broadband network.

Within minutes, the rocket had hit more than 6,400km an hour, dropping Kuiper’s 27 satellites 450km above the Earth, from where they will climb to their final orbit at 630km.

The successful deployment marked more than the birth of a new internet service provider. It was the opening shot in a battle over the future of global connectivity, one that pits Amazon founder Jeff Bezos against fellow billionaire Elon Musk, owner of the world’s largest satellite broadband network Starlink, a subsidiary of parent company SpaceX.

But the two tech titans also face competition from global powers such as China and the EU in a race to control the space-based infrastructure that will influence economic, military and digital power. It is a rivalry that has the potential to determine future digital divides — some countries under western systems, others under tightly controlled Chinese networks.

“We are in the midst of a global space race that will have very significant consequences in terms of economic opportunity, connectivity . . . and national security,” says Brendan Carr, chair of the US regulatory agency, the Federal Communications Commission (FCC).

The jostling is taking place in low Earth orbit (LEO), one of the most contested regions of space, located up to 2,000km above the Earth.

Ten years ago, this was the preserve of Earth observation, science and military satellites, and satellite phone providers, with around 1,300 active spacecraft in orbit. Today, thanks to SpaceX’s reusable Falcon rockets, there are more than 11,000 active satellites, supporting everything from weather tracking to broadband.

Experts forecast that the number of satellites in LEO will balloon to as many as 100,000 over the next decade as companies, governments and militaries rush to exploit the potential of the new space frontier.

But it is the world’s voracious appetite for connectivity that is driving the boom in the LEO market.

Being nearer to Earth, LEO systems offer lower latency — the time it takes for a signal to travel from Earth to satellite and back again — than geostationary satellites, traditionally used for broadcasting, which orbit much higher at altitudes of about 36,000km.

Project Kuiper is just one of many contenders vying for a share of this expanding business. The top eight players have permission for more than 50,000 satellites; Starlink alone is approved for 12,000, according to space consultancy Analysys Mason.

Others include Eutelsat’s OneWeb, the world’s second biggest operational LEO network, which is seeking to serve the government and enterprise markets with its 648-strong constellation, or cluster of satellites.

Canada’s Telesat is developing Lightspeed, which will have about 200 spacecraft also focused on higher-margin government and enterprise markets. Others are proposing constellations dedicated to connecting mobile phones in regions where cell towers cannot reach.

And at least two Chinese systems under development — Guowang and SpaceSail — are proposing to fly some 26,000 satellites combined.

But all these constellations will have to reckon with Musk’s Starlink, by far the dominant force.

Since 2019, Musk has launched more than 8,417 satellites — 39 per cent of all those launched since Sputnik, the first artificial satellite to be sent into orbit. Starlink has about 7,300 operational satellites circling the Earth, representing almost two-thirds of all operational spacecraft, according to Jonathan McDowell, astrophysicist and space flight historian.


Starlink’s success stems from SpaceX’s unique in-house capabilities: low-cost and frequent Falcon 9 launches; a manufacturing facility producing more than eight satellites daily, according to consultancy Quilty Space; a rapid innovation culture; and abundant financing from its billionaire owner.

The project has also prioritised usability and affordability, targeting the high-volume consumer market with small but highly complex antennas, or terminals, priced at a few hundred dollars.

These flat, notebook-sized antennas are able to automatically align with the satellites speeding across the sky. They were initially estimated to cost about $2,000 to make and SpaceX had to subsidise them to keep prices affordable. But the rapid pace of iteration and expansion, with roughly two launches a week, has created the volumes needed to bring down the cost and subsidy.

“Starlink has more flexibility because it can add bells and whistles to its initial constellation with relatively minor adjustments,” says Patricia Cooper, founder of Constellation Advisory and a former vice-president in charge of regulatory affairs at SpaceX. “They have both the production line and the launch machine. That is their superpower.”

The result of Starlink’s speed and innovation is a system that even competitors struggle to fault.

“It is a good network and it’s going to get better over time,” says Telesat’s chief executive, Dan Goldberg.

Today it is delivering low-latency broadband to more than 5mn customers in 125 countries and is expected to generate $12bn in revenue and $2bn in free cash flow this year, according to Quilty. Ultimately, it aims to fly more than 40,000 satellites.


With such a lead, the challenge for competitors is enormous. For a start, LEO constellations are expensive. Amazon will need to spend between $16bn and $20bn to build Kuiper, Quilty estimates.

Satellites must also be replaced every five to seven years, adding costs. Eutelsat faces a €2bn bill to upgrade OneWeb, and may have to rely on its French state shareholder to provide the funds. Telesat has only been able to afford the Lightspeed investment thanks to a Canadian government loan of C$2.14bn ($1.54bn).

Financing is unlikely to be a problem for the Chinese constellations. SpaceSail, for example, is heavily supported by the Shanghai municipality and the Chinese Academy of Sciences, and raised almost $1bn in 2023. Guowang is owned by the national government’s China Satellite Networks, known as SatNet, with a mission to develop a Chinese Starlink. It was founded with capital of Rmb10bn ($1.4bn), according to think-tank Ifri.

Neither constellation is yet operational. But SpaceSail has launched 90 satellites and appears to be moving more quickly than Guowang. Although several of SpaceSail’s first satellites appear to have failed, the company intends to have hundreds flying by the end of the year.

For China, the biggest constraint appears to be getting satellites into orbit in the first place. “They have their satellite production lines running but . . . they need rockets that can launch more often, that can launch more satellites at a time and they really need the reusable first stages to make it more economic,” says McDowell, the astrophysicist.

Once launch bottlenecks ease — and rockets are being developed to do just that — China could scale fast, says Blaine Curcio of Orbital Gateway Consulting, an expert in Chinese satellite communications.

Curcio recently warned a US congressional commission that China has a deeper bench of start-ups and engineers advancing the latest satellite technology.

But not every constellation will be judged by its commercial success. Musk’s personality and controversial interventions in international politics are making some governments wary of his company’s dominance. So too is his proximity to the Trump administration, which appears bent on overturning long-standing alliances.

His refusal to grant Ukrainian forces access to Starlink satellites over Crimea has also been a red flag. “Sovereign access to space is becoming critical,” says Lluc Palerm Serra, research director at space consultancy Analysys Mason.

These concerns are prompting some governments to develop their own solutions.

“There is a technological wave that’s astonishing,” says Constellation’s Cooper, referring to the rise of LEO satellite constellations. “But it is also predominantly an American flex that is creating geopolitical ripples in Europe and China and other places.”

Last year, the EU committed €6bn to the €10bn IRIS² project, a sovereign multi-orbit broadband service aimed at governments and public institutions, expected to launch around 2030. But it will arrive five years later than Kuiper, and more than a decade after Starlink.

Taiwan, concerned by Musk’s ties to China, is planning its own LEO system. Germany and Italy are also exploring national constellations in addition to Iris².

Such systems will depend on government backing, which comes with its own difficulties. Critics of Iris² suggest the project is already overly complex, weighed down by national rivalries and European bureaucracy. The risk is not only that it will be late to the market, but that it may not be commercially competitive.

But in some regions sovereign capability is worth the price. “European countries are waking up to the fact that they need homegrown solutions to sovereign issues if they are not to be dependent on the US or China,” says Joanna Darlington, a Eutelsat executive committee member.

China in particular sees Starlink’s rapid expansion as a threat to both national and economic security.

“Before 2020, there were a couple of OneWeb-like constellations being developed, but there wasn’t a lot of urgency,” says Orbital’s Curcio. “But after Starlink accelerated its cadence from 2020 the Chinese government prioritised satellite internet as a needed infrastructure.”

The US think-tank Rand published a study this year that found both the Chinese Communist party and the People’s Liberation Army “consider Starlink to be a tool of military power”, giving added impetus to the government’s strategy. Starlink’s role in providing connectivity to Ukrainian forces fighting Russia’s invasion “validated [their] view”.

For China, as for the US, the ability to offer LEO connectivity is a useful tool for influence. According to Curcio, SpaceSail seems to be the vehicle for China’s so-called digital silk road — which adds connectivity to its flagship Belt and Road Initiative, a trillion-dollar infrastructure programme. Guowang, by contrast, is likely to be focused on the national market.

In recent months, SpaceSail has been striking deals in Belt and Road countries such as Malaysia, where domestic satellite operator MeaSat was one of Starlink’s first distribution partners.

MeaSat’s agreement demonstrates the advantage that Chinese constellations may have over Starlink. Its agreement with the Chinese company goes further than the Starlink partnership, covering joint marketing, research and development, collaboration on new markets and studies into cutting-edge frequencies that could in future be used to transmit even more data across Leo networks.

Such an approach will “play into China’s favour in some countries because they are playing a longer game”, Curcio says. Africa, in particular, could be open to such trades, suggest several industry insiders. In addition, Chinese providers could focus on offering lower prices in emerging markets where Starlink’s terminal may still represent a hefty outlay.

“Their goals are not necessarily designed for profit,” says Larry Wortzel, senior fellow in Asian security at the American Foreign Policy Council think-tank. “They are designed to create dependency networks for financing, standards and equipment in infrastructure.”

China’s strategy has alarmed many in the US. “The bogey down the road is combining the Belt and Road Initiative with a high-speed LEO satellite system,” says the FCC’s Carr. “That has very serious geopolitical implications. That is why it is imperative to knock down any barriers that will slow down western satellite technology.”

Less than six months into the job, Carr has already begun taking down some of those barriers by easing regulations.

On the day Kuiper launched, the agency announced it intended to loosen power limits on LEO transmissions over the US, which were designed to avoid interference with geostationary orbit satellites. Raising the caps will help all LEO operators boost speeds and handle more customers.

But the one most constrained by those limits is Starlink, says Tim Farrar, of consultancy TMF Associates. “Loosening the limits will enable Starlink to get even further ahead, and gain even more economies of scale.”

Most new entrants are not trying to match Starlink’s scale, however, and instead are targeting high-margin government or enterprise markets.

“I don’t think about it as catching up to them or eclipsing them,” says Telesat’s Goldberg. “They are far ahead of everyone else. But I still think there is room for others to be successful,” he adds, noting the recent deal with American communications company Viasat to supply Lightspeed connectivity to aviation customers.

One Eutelsat shareholder believes OneWeb could be successful selling only a fraction of Starlink’s capacity to customers seeking diversity. “People will still need a small sliver of capacity to have backup,” says the shareholder, who asked to remain anonymous. “There is a market for that — at a much higher price.”

However, Starlink and soon Kuiper are also targeting these enterprise and government markets, and will have cheaper terminals.

Kuiper has said it intends to offer a limited service this year, with the industry expecting global reach by 2029.

While little is known about its planned business model, one former Amazon executive told the Financial Times that the aim is to be “better in quality and lower in price than SpaceX”.

The company could also leverage Amazon Web Services, the world’s largest cloud computing and storage provider, to offer secure bundled storage and connectivity.

But Amazon’s biggest advantage could be its global retail network, say observers. “[Bezos] could send everybody with an Amazon Prime subscription a laptop that automatically connects to his satellites and overnight have 200mn retail subscribers,” says Ruth Pritchard-Kelly, principal at consultancy RPK Advisors and a former executive at OneWeb. “That’s [the] ace up his sleeve.”

Still, Kuiper faces challenges. Unlike SpaceX, which is privately owned, the publicly listed Amazon will have to show returns on its Kuiper investment.

Amazon has also struggled with production delays that have hampered Kuiper’s deployment, according to a person familiar with the matter. But the company insists it is on track and has booked more than 80 launches for Kuiper over five years. Several of the launches are on new rockets, however, which still have to prove they can launch frequently and reliably.

These and other challenges have left Amazon behind its original schedule. It will almost certainly have to ask the FCC for an extension of the July 2026 deadline to launch half its satellites. Meanwhile, SpaceX is putting satellites into orbit every week.

Some in the industry believe that Starlink may have 18 months to two years before Amazon perfects its services. But once on the market, it will move quickly, industry observers say.

“Amazon knows how to make consumer products. It has a culture of customer service that SpaceX did not have,” says another former SpaceX employee.

Caleb Henry, Quilty’s director of research, believes Amazon will become a formidable competitor. “Amazon has the balance sheet and the technology,” he says. “Kuiper intends to make tens of millions of terminals. When you get the volumes, that is when you drive terminal prices down to affordable consumer rates. When you get to consumer rates, your market explodes.”

While a head-to-head battle between Amazon and Starlink may benefit consumers, it could strain the wider LEO satellite communications industry, warns TMF’s Farrar.

“There will be a price war,” Farrar says. “Elon Musk has never really been concerned with economic returns. If you have one economically rational player in Amazon, competing with an economically irrational player in Starlink, then you know what’s going to happen. People go bankrupt.”

FT : Depot clashes and red tape: Eurostar rivals hit delays

Depot clashes and red tape: Eurostar rivals hit delays
Financing, regulation and different rail systems mean potential competitors are years away from launching services

Adrian Quine is a frustrated rail executive. The entrepreneur has spent two years trying to convince investors to back Gemini, a start-up looking to launch a rival to Eurostar, which has had no competition in its 30-year history.

Among the cross channel challengers, which include Italy’s state-owned railway giant FS Group and Sir Richard Branson’s Virgin Group, Gemini has pledged to run its first train from London to Paris in 2029.

The potential new entrants are all still years away from launching, underlining the challenge of opening an international rail service — with different track types and signalling systems — in a tightly regulated industry bound by strict safety controls.

Quine describes the process as “frustrating” but is resigned to the industry’s pace of working. “It is a complex [situation], but I suspect what will happen is that when we get a bit of clarity it will come together quite quickly,” he added.

Gemini, a start-up staffed by railway executives and chaired by Labour peer Lord Berkeley, is the smallest of the companies vying to take on Eurostar. On Wednesday, it announced a partnership with Uber, to use the ride-hailing app’s branding on its future trains.


Virgin Group, the Italian state railway FS Group and a consortium led by the biggest shareholder in Mobico, formerly National Express, have all also applied for regulatory permission to access the infrastructure needed to run trains on high-speed lines running from the UK to the continent.

Meanwhile, the Swiss national railway is exploring launching cross-channel services, after the Swiss and UK governments pledged to encourage direct trains between the two countries, and Eurostar itself has big growth plans.

“Demand for [high-speed train travel] is growing continuously,” said Stefano Donnarumma, chief executive of FS Group.

The biggest challenge facing companies looking to raise cash, such as Virgin Group and Gemini, is to convince investors there is a market for more than one operator on cross-Channel routes that come with high upfront costs, including specialised trains costing hundreds of millions of pounds.

Gemini has estimated it would need to spend £650mn to launch, including about £350mn on trains, while Virgin Group is looking to raise £700mn.

The long timescales have also complicated fundraising, people involved with the process said, although Virgin and Gemini have reported strong investor interest.

“Some investors would like a quicker return on this investment . . . it depends entirely on peoples’ appetite for risk,” Quine said. 

Many of the biggest blockages to growth, either for Eurostar or a rival, are within stations, which require airport style security and border checks in cramped buildings.

“Sure the cities served are huge, but the passport control and security check requirements make it really hard,” said Jon Worth, a cross-border rail consultant.

Some of these problems are easing: St Pancras station in London plans to expand its passenger capacity, and Channel Tunnel owner Getlink has also worked with national regulators to streamline the process to certify train operators.

But launching a cross-border service is still immensely complex. Eurostar train drivers must be able to speak in four different languages, and new entrants would need trains that are certified to run through the Channel Tunnel, and on tracks in different countries, often with different signalling systems.

“It’s a complicated ecosystem and we know it takes a lot of skills to succeed in this market,” said Gwendoline Cazenave, Eurostar’s chief executive.

Even when an operator is ready to order trains, these would take several years to build as they must be at least 200 metres long, comply with the Channel Tunnel’s fire safety rules and be able to operate across borders and signalling systems.

Investors were also looking for trains that would maintain a residual value and could be redeployed on the continent if a new operator went bust, several people involved in the process said.

But the biggest blockage has emerged in an unlikely place: a railway depot tucked into the industrial sprawl in east London.

The Temple Mills depot, which is leased by Eurostar from the British government, is the only place on the high-speed line down to the Channel Tunnel where trains can be stored or maintained.

Eurostar insists the depot is nearly full, and there is no room for another operator. Several new operators said the delay in being granted access rights to the depot had created a blockage, and the UK’s rail regulator was assessing access applications from the prospective entrants.

The cross channel rail group last month said there was “not sufficient [space] to accommodate all potential operators, including Eurostar’s own future plans” and called for other operators to invest in new facilities.

Investors will only commit to finance a project once they are certain a new company will be able to get into the depot, according to people familiar with the matter, and without this financing, operators cannot order trains.

“The biggest problem for everybody is the issue at Temple Mills,” Quine said. 

Space could also be an issue on the tracks. Eurostar has pledged to increase passenger numbers on its channel routes by about 50 per cent, and plans to order up to 50 new trains to deploy across its network, including intercity services within the EU. It announced plans to order its new trains a year ago, but has still not reached an agreement with a manufacturer.

“It’s coming soon. The finance is OK . . . We have some points still to be discussed with the manufacturer,” Cazenave said. “If I had a magic wand, I would have new train sets in the months to come . . . the demand is so strong that we need trains,” she added.

There will not be room for everyone: about 400 trains a day use the tunnel, which has capacity for 1,000, pitting all the companies involved against each other in a race to order trains and establish routes.

Italy’s FS Group, a late entrant into the race last month, thinks it is in a strong position, given the complexity facing start-ups.

The company operates a complex web of high-speed trains across Europe, and has teamed up on the cross-Channel routes with Evolyn, the consortium led by Mobico’s largest shareholder.

Donnarumma said he planned to add trains for the London routes to an existing order for high-speed trains with Hitachi, and noted that its Trenitalia brand was already certified to operate in France.

“We want to be fast, and we have the possibility to be . . . it's not so easy to start from zero,” he said.

FT : Kensington and Chelsea house prices fall to lowest since 2013

Kensington and Chelsea house prices fall to lowest since 2013
Sharp decline comes as prime London market suffers effects of higher property taxes, Brexit and non-dom changes

House prices in Kensington and Chelsea have fallen to their lowest since 2013, underscoring the underperformance of prime London property due in part to higher property levies, uncertainty over Brexit and non-dom tax changes.

The average price in the UK’s most expensive borough plunged 15.1 per cent year on year in March to £1.19mn, the lowest since May 2013, according to Financial Times analysis of data from the Office for National Statistics.

In the same month, UK house prices rose by an annual rate of 6.4 per cent to a record high of £271,000, the fastest annual pace since December 2022.

Local housing data is based on a smaller number of transactions, resulting in more volatility and larger revisions, but prices in affluent Kensington and Chelsea have fallen year on year for the past 30 consecutive months and for more than half the time since 2015.

In March, house prices were also down in other high-end locations in the UK capital, including Hammersmith and Fulham, and Westminster, which registered annual contractions of 13.2 per cent and 20.1 per cent. In both areas, the decline lasted for at least the past 15 months.

Lucian Cook, head of residential research at real estate company Savills, said the “prolonged bull run” enjoyed by the prime London market “really changed around 2014” when reforms to stamp duty drastically widened the gap in fees between high-end properties and cheaper ones.

Factors including Brexit, the abolition of the non-dom tax regime, the Covid-19 pandemic, increased stamp duty fees on second homes and higher interest rates had since “played against a market which has essentially been much more dependent upon flows of international wealth than it has necessarily on the cost and availability of domestic mortgage debt”, he added.


The non-dom regime — which allowed foreign domiciled nationals resident in Britain to earn money from abroad without paying UK tax on it for up to 15 years — was scrapped by chancellor Rachel Reeves last year, after her Conservative predecessor Jeremy Hunt said he would abolish it.

The ONS on Wednesday said the end of a temporary stamp duty holiday on April 1 — which took thresholds back to pre-2022 levels — boosted national house prices in March, particularly in the North East, where costs jumped by an annual rate of 14.3 per cent.

As of last month, first-time buyers will start paying the levy when they buy properties worth £300,000 or more, down from £425,000 during the holiday. Stamp duty on the most expensive properties, which make up the prime London market, remains unchanged.


Despite not being adjusted for inflation, house prices in prime London local authorities were down from their mid-2024 levels in March, but up by almost 60 per cent in the UK and by 33 per cent in London overall.

House prices in the capital underperformed the rest of the country during the pandemic, though detached properties in prime locations enjoyed temporary boosts.

Stuart Bailey, head of super-prime London sales at real estate group Knight Frank, said it had “been a 10-year slow ebbing in pricing, because there has been less demand” as stamp duty rose and “international buyers are thinking about what they want to do”.

A “massive price influx” in the four years to 2014, Bailey added, was “not sustainable over the longer term” and “we ended up on a longer downward trend”.

Across 21 international prime markets, London and Kuala Lumpur were the only markets to register a fall in property prices in dollar terms over the past decade, according to research by Savills.


While the ONS tracks all properties in each London local authority, Savills based its research on only high-end properties. Its analysis of the capital’s prime properties in the most expensive local authorities found the average property price in central London was 21.2 per cent down on its June 2014 peak in the first three months of this year — equivalent to a saving of £1.2mn on the typical property, which now costs about £4.6mn.

Savills expects house prices in prime central London to contract by 4 per cent this year.

Richard Donnell, executive director of property consultancy Houseful, said sustained house price growth in high-end parts of the capital would be “dependent upon stronger economic growth and increased inward investment into the London economy”.

Bailey at Knight Frank said “sentiments need to improve” for the trend to be reversed. While the capital’s long-term stability in terms of politics, personal security and financial stability meant it still had “allure and attraction” for many international buyers, “we mustn’t be complacent about that”, he added.

FT : Two Israeli embassy staff shot and killed in Washington

Two Israeli embassy staff shot and killed in Washington
Suspect in attack outside Jewish museum chanted ‘free Palestine’, police say

Two Israeli embassy staff members have been shot and killed outside an event at the Jewish museum in Washington late on Wednesday, according to law enforcement officials.

The victims — a woman and a man — were gunned down at about 9pm as they were leaving a reception for young diplomats hosted by the American Jewish Committee, a leading Jewish organisation in the US.

Metropolitan Police Department chief Pamela Smith said a suspect was in custody, who officers had “tentatively” identified as 30-year-old Elias Rodriguez of Chicago.

He chanted “free, free Palestine” while in custody, Smith said.

Tal Naim Cohen, spokesperson for the Israeli embassy in Washington, said the staffers were “shot this evening at close range” in a post on the X social media platform.

She said they had been attending “a Jewish event” at the museum. “We have full faith in law enforcement authorities on both the local and federal levels to apprehend the shooter and protect Israel’s representatives and Jewish communities,” she added.

Israel’s President Isaac Herzog said he was “devastated” by the killings. “This is a despicable act of hatred, of antisemitism,” he said. “We stand with the Jewish community in DC and across the US.”

US President Donald Trump wrote on his Truth Social platform: “These horrible D.C. killings, based obviously on antisemitism, must end, NOW! Hatred and Radicalism have no place in the USA.”

Smith said police believed the suspect had acted alone. She said he “was observed pacing back and forth outside of the museum” before “he approached a group of four people, produced a handgun and opened fire”.

The suspect then entered the museum and was detained by security, she said. Smith said police had recovered the weapon used.

Kristi Noem, secretary of homeland security, wrote on X that the department would “bring this depraved perpetrator to justice”.

Steve Jensen, assistant director of the FBI’s Washington field office, said the bureau was investigating the shooting “as a terrorism and hate crime incident”.

Michael Leiter, Israel’s ambassador to the US, said the victims were a couple about to be engaged. “The young man purchased a ring this week with the intention of proposing to his girlfriend next week in Jerusalem.”

He added that he had spoken to Trump, who “told me that his administration is going to do everything they can possibly do to fight and end antisemitism and the hatred that’s being directed the demonisation and delegitimisation of the State of Israel”.

Danny Danon, Israel’s ambassador to the UN, called the shooting “a depraved act of antisemitic terrorism”.

He wrote on X: “Harming the Jewish community is crossing a red line. Israel will continue to act resolutely to protect its citizens and representatives — everywhere in the world.”

Chuck Schumer, Democratic leader in the Senate, said on X: “This sickening shooting seems to be another horrific instance of antisemitism which as we know is all too rampant in our society.”

FT : A look inside the US regulatory loophole that might keep weight-loss jabs a

A look inside the US regulatory loophole that might keep weight-loss jabs affordable
He who understands it, earns it. He who doesn’t, pays it

Today is a big day in drugs. It’s when the US Food and Drug Administration shuts down an emergency measure that allows pharmacies to sell copies of the most widely prescribed weight-loss injection. What happens afterwards is anyone’s guess.

As MainFT reported in April:

Millions of Americans must decide whether to give up on new weight-loss drugs or move to more expensive branded versions, after the US medical regulator in effect called time on the production of cheaper replicas.

While Novo Nordisk and Eli Lilly were unable to keep up with demand for their new blockbusters Wegovy and Zepbound, an unusually large market for “compounded” versions developed after the FDA medical regulator declared official shortages in 2022.

[ . . . ] In the past two years, patients have been able to buy compounded versions of Novo ingredient semaglutide and Lilly’s tirzepatide for as little as $199 a month. The US list price, charged to people without insurance, ranges from $1,000 to $1,300 for the branded drugs. But the FDA has now said the shortages are over.

Compounding in medicine is the age-old practice of altering a drug to match the individual needs of a patient. How the discipline has evolved in the US is, inevitably, by a combination of commercial expediency and regulatory arbitrage.

Two sections of the US Federal Food, Drug, and Cosmetic Act cover human drug compounding: Section 503A allows pharmacies to make compounds in small quantities for patients whose needs are not met by a standard formulation; and Section 503B permits pharmacies to outsource the manufacture of compounds that closely resemble drugs on the US shortage list.

To make a compound under 503A, the pharmacy has to be filling a prescription for a specific individual. Under 503B, a pharmacy or its outsourcer can compound drugs on spec. It’s a Section 503B order covering the bulk manufacture and sale of Nova’s semaglutide that has expired, with the grace period for manufacturers to switch off production due to expire today. A similar grace period controlling Lilly’s tirzepatide ended on April 22.

That’s a challenge for telehealth companies such as Hims & Hers Health, an NYSE-listed online pharmacy with a market cap of nearly $14bn. GLP-1

The US direct-to-consumer healthcare market is very crowded. Established chains like Walgreens and new entrants including Amazon have aimed for the middle ground, while start-ups like Nurx, Ro, Regenics, Keeps and Numan have been carving out niches by focusing on sexual health, hair loss and skincare. Morgan Stanley estimates a total addressable market of at least 100mn patients in the US alone.

Hims started out in 2017 by remotely prescribing treatments for hair loss and erectile dysfunction. By concentrating on problems people might be embarrassed to talk about in a doctor’s office, and that wouldn’t be covered by most insurance plans, Hims was able to recruit cash-paying customers on auto-repeating subscriptions at high mark-ups.

Hims’ move in May 2024 to start selling compounded weight-loss injections, a class of drugs known as GLP-1, really kicked things on.

Whereas Hims’ core customers pay $55 a month on average, it was charging $290 a month for a three-month GLP-1 subscription, or $165 a month if the patient signed up for a year. Weight loss treatments also attracted a different type of customer, which meant new opportunities to cross-sell.

Hims has 2.4mn subscribers and is growing the count by 30 to 40 per cent each year. The company this month posted a more than doubling of first-quarter revenue, to $586mn, and reported a 73 per cent gross margin.

The stock is a favourite among retail investors and is widely disliked by hedge funds. Nearly 20 per cent of its shares outstanding are on loan, according to S&P Global data. Volatility is, given those two competing camps, as you might expect:


In the background is a lot of litigation.

Actions brought by pharmacy trade groups that seek to block the FDA’s decision to Lily’s tirzepatide and Novo’s semaglutide from its shortage list have failed. The first of these defeats, in March, “has had a chilling effect on the compounding industry, leading to many players (eg, telehealth companies) ceasing operations,” says Morgan Stanley.

Meanwhile, Lilly has begun legal action against pharmacies and telehealth companies for allegedly making false claims about personalisation. Novo says it will step up legal action after today, having said in April it had filed 111 lawsuits across 32 states over what it calls “illegitimate, knockoff” drugs.

Hims shares soared in April after it and two rival telehealth pharmacies agreed non-exclusive deals with Novo to sell branded Wegovy through their platforms. The patient can buy branded Wegovy through NovoCare Pharmacy, Novo’s own direct-to-consumer site, while signing up for a Hims membership plan that offers access to online consultations, meal planners and the like.

It’s in effect a premium-priced off-ramp for patients who want to continue their existing treatment. Branded Wegovy costs at least $599 a month on Hims — a big jump from the old pricing, and a $100 premium to the dose price when buying direct from Novo. New and existing patients who can’t afford the high cost will be offered pills instead.

But Hims also plans to keep selling home-brew GLP-1 by offering doses that are not commercially available. Personalised dosing that reduces side effects will, it believes, allow its sales of compoundeds to pass Section 503A.

Prospective patients on the Hims website now take a multiple-choice questionnaire that begins with an explainer of why custom doses might be good for them:

Then they’re asked in general terms about possible side effects:

And are offered a diagnosis before they’ve even given an email address:



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A patient who qualifies for a custom dose can be offered compounded GLP-1 at estimated gross margin of around 80 per cent. Patients who’ll be fine with the standard dose will be directed towards the branded drugs, at a gross margin to Hims of approximately 15 per cent.

Between them, Novo and Lily have signed up most of the big US telehealth companies as direct-to-consumer sales partners over the past few months. What that shouldn’t suggest is an end of hostilities over customised compounds.

David Moore, Novo’s executive vice-president or US Operations, said on a May 7 conference call that its collaborations with telehealth providers were to protect patients:

The reason for this is increasingly, people living with obesity are seeking health care through telehealth companies, that we need to be where patients are and to have an offering for the real Wegovy. These collaborations allow a link to NovoCare Pharmacy, where the real Wegovy can be available through these telehealth companies.

As we’ve mentioned, on May 22, we fully expect the FDA to enforce the law. And at that time, we will continue to fight against unlawful compounding, for example, mass personalization.

Ten days later, the Novo board told CEO Lars Fruergaard Jørgensen to step down.

The ousting doesn’t appear to have altered Novo’s strategy. Goldman Sachs, after meeting with Novo Foundation CEO Mads Krogsgaard Thomsen and its head of investor relations, Jacob Martin Wiborg Rode, wrote in a note published yesterday:

Personalisation accounts for just under half of the current compounded market. With the passing of the FDA shortage list deadline, Novo believes the risk/ reward has changed for compounding pharmacies that engage in mass or bulk personalisation, as now Novo can litigate with a view to recovering lost profits. In terms of the compounding impact [ . . . ] there are around 1m patients on compounded product (c.1/3 of the market), while compounding impacts c.5% of the diabetes care market (larger volume market, so still a meaningful number). The challenge for Novo is conversion of patients from compounded product to branded product, which could take some time, which includes reinstating [direct-to-consumer] campaigns highlighting that branded product is the only safe product and also by broadening out the cash channel through NovoCare and through additional partnerships.

Legal action on top of falling GLP-1 sales could serve a double-whammy for Telemedicine companies, but estimating Hims’ direct exposure is not easy. The company doesn’t break down the sales mix it projects to reach a 2025 target of $725mn from weight-loss treatments, and has declined to say how many of its GLP-1 patients are moving to custom doses.

To be legal under Section 503A, personalised drug compounding must be patient-specific based on their prescription. Andrew Dudum, Hims’ founding chair and CEO, said on a conference call this month that he’s confident of meeting the requirement:

We aim in all of our adventures to be extremely blue chip and play by the rules. And with regard to compounding and the personalization exemption, the rules are extremely straightforward and clear. So we continue to expect the personalized semaglutide to exist on the platform. That’s something we’ve shared as of last fall and something we shared early with Novo. But we also believe that the necessity of that should be limited to when providers feel it is clinically needed. And so the ability to do hyper personalization for side effects mitigation, whether it’s agnogia, vomiting, muscle loss, et cetera, is something that we continue to allow on the platform to continue to give providers that flexibility and the tools to make that type of personalization.

But generally we think of it as relatively additive to the ecosystem because for the most part, these are patients that frankly just cannot use commercial doses or a lot of them have actually tried the commercial dose and then have turned off due to the high side effect rate. And so we think it’s really additive as part of the mix.

But relations with Novo seem to still need some work. Any agreement cap sales of personalised doses sold would be “something we’re definitely not comfortable with”, Dudum added:

We believe that personalized semaglutide is both clinically necessary for some patients because of the side effects that are very widespread and well known. [ . . . ]

I think there’s an alignment that both the regulation allows for it and we believe there’s a need, whether or not there’s total agreement with regard to how much of that should be available to what types of consumers. Will our organizations ever align on that perfectly? Probably not.

One irony is that, at least until cheaper GLP-1 generics arrive over the next few years, Novo and Lily may not stand to benefit much from shutting down telehealth companies they say are exploiting the custom-drug loophole. Morgan Stanley says:

[B]ased on our conversations with physicians, we believe that the majority of patients on compounded GLP-1’s have either no insurance coverage or high co-pays (>$300/month). Therefore, we believe that only a portion of patients losing access to compounded GLP-1’s may switch to branded GLP-1’s.

…which puts all the short-term focus on Hims, with its fervent retail boosters and its crowd of short sellers who are praying for any setback in the courts or with its partner relationships. One cease-and-desist order might be all it’d take for things to get very heavy, very quickly.

>>> US After Hours Summary: Healthcare stocks falling as CMS plans stepped up au

After Hours Summary: Healthcare stocks falling as CMS plans stepped up audits; URBN +15.3%, SNOW +7.5%, RAMP +7.3% higher on earnings; NVTS +186.4% on collab with NVDA; LUMN +12.2% on AT&T acquiring LUMN's Mass Markets fiber business; PBI +9.9% names new CEO

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: URBN +15.3%, SNOW +7.5%, RAMP +7.3%, DOMO +6.5%, AMSC +5.5%, ZM +0.2%

Companies trading higher in after hours in reaction to news: NVTS +186.4% (NVIDIA and NVTS announce collaboration on next-gen 800 V HVDC architecture), LUMN +12.2% (AT&T to acquire LUMN's Mass Markets fiber business for $5.75 bln, also reaffirms guidance), PBI +9.9% (names new CEO, will conduct a comprehensive strategic review), TIGO +2.7% (to acquire Telefónica Móviles del Uruguay S.A. for $440 mln), NKE +2.3% (to raise prices as soon as this week, according to CNBC; also NIKE to sell to Amazon for first time since 2019, according to TheInformation.com), NUVB +2% (to present new data), LNW +1.5% (shares multi-year growth strategy), CI +1.1% (CMS to enhance and accelerate Medicare Advantage audits), DNA +0.9% (names new CFO), INSM +0.7% (presents data on Brensocatib), T +0.4% (AT&T to acquire LUMN's Mass Markets fiber business for $5.75 bln), RTX +0.4% (awarded a $380 mln modification to previously awarded US Air Force contract), PFE +0.3% (sees FDA setback on prostate cancer drug, according to Bloomberg), RDN +0.2% (authorizes new $750 mln share repurchase program), F +0.1% (Nissan nearing deal to procure EV batteries in US from Ford / SK JV, according to Bloomberg), DIS +0.1% (NBCUniversal bids for MLB rights that ESPN dropped, according to WSJ), PLTR +0.1% (awarded a $795 mln modification to US Army contract)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ENS -2.9%

Companies trading lower in after hours in reaction to news: SOC -6% ($200 mln stock offering), UNH -4.5% (CMS to enhance and accelerate Medicare Advantage audits), ESLT -4.3% (files mixed securities shelf offering), LAZR -4.3% (obtains $200 mln capital commitment), CVS -4.2% (CMS to enhance and accelerate Medicare Advantage audits), HUM -4% (CMS to enhance and accelerate Medicare Advantage audits), MELI -2% (names new CEO), ELV -1.5% (CMS to enhance and accelerate Medicare Advantage audits), CNC -1.4% (CMS to enhance and accelerate Medicare Advantage audits), AWK -1.1% (court affirms desalination project), CCI -1% (decreases dividend), UVV -0.8% (increases dividend), SYNA -0.7% (hires former Qualcomm exec as its new CEO), EQH -0.6% (increases dividend), MOH -0.4% (CMS to enhance and accelerate Medicare Advantage audits), NVDA -0.2% (NVIDIA and NVTS announce collaboration on next-gen 800 V HVDC architecture), LLY -0.1% (announces marketing authorization for Kisunla in Australia), CVEO -0.1% (awarded contract with met coal producer), WMT -0.1% (to cut around 1,500 jobs in a restructuring, according to WSJ), CMCSA -0.1% (NBCUniversal bids for MLB rights that ESPN dropped, according to WSJ)

WSJ : NBCUniversal Bids for Major League Baseball Rights ESPN Dropped, Sources S

NBCUniversal Bids for Major League Baseball Rights ESPN Dropped, Sources Say

Comcast's NBCUniversal has made an offer to Major League Baseball to take over the package of regular-season and postseason games that ESPN is walking away from, offering much less than its rival currently pays, according to people familiar with the matter.

ESPN in February exercised a clause to opt-out of the final three years of its $550 million-per-year contract after the 2025 season. The move ended a 35-year partnership with MLB and put the rights into play for others.

If the bid is successful, NBC would air games on Sunday night, the slot ESPN has occupied since 1990. Games would also appear on NBC's sister streaming service Peacock. NBC is also interested in ESPN's rights to the first round of the postseason and the annual Home Run Derby.

The NBC offer was made earlier this month, but MLB and NBC had been talking for several weeks prior to that, one of the people involved said. League commissioner Rob Manfred has also discussed a potential deal with Brian Roberts, chief executive of NBC parent Comcast, people familiar with the matter said.

A deal with NBC would give MLB a prominent home on another broadcast network known for carrying big-time sporting events. The league is planning a broad overhaul of how it manages its national and local rights and aims to consolidate control of them after the 2028 season.

NBC is offering significantly less than what ESPN pays, the people said, in part because it is not seeking the international and radio rights that the Disney-owned sports network licenses from MLB, or the rights to highlight clips.

When ESPN told the league it was likely to opt out of its right package, the network said it was willing to pay $200 million annually in a renegotiated pact, but the league declined, The Wall Street Journal previously reported.

NBC also has rights to air National Football League and, starting later this year, National Basketball Association games on Sundays. It would air some baseball games on the broadcast network and others on Peacock when NBC is carrying other sports.

Separately, Versant, the company comprising NBCUniversal cable channels including USA Network, is also interested in potentially acquiring a baseball package. Versant isn't part of NBC's discussions with MLB.

>>> US Close Dow -1.91% S&P -1.61% Nasdaq -1.41% Russell -2.80%

Closing Stock Market Summary
The stock market hit a wall today, and it didn't have so much to do with the disappointing earnings report and outlook from Target (TGT 93.01, -5.11, -5.2%) as it did with the concerning movement in Treasury yields.

The 10-yr note yield settled the cash session at 4.60%, up 12 basis points, while the 30-yr bond yield settled the day at 5.09%, up 13 basis points. The selling interest in the Treasury market was precipitated initially by inflation angst after the UK printed a hotter-than-expected CPI number for April and deficit angst. Press reports highlighted an agreement to raise the SALT deduction cap to $40,000 (from $10,000) and noted that conservative House GOP members were dropping their demands for larger cuts to Medicaid.

It is unclear at this point if the latter is the case, as the debate within the GOP continues as of this writing. There has been a suggestion, though, that the House may press ahead with a full vote on the reconciliation bill as early as tonight.

Treasury yields took another turn for the worse in the afternoon following a $16 billion 20-yr bond auction that saw some relatively soft dollar demand, evidenced by a 2.46 bid-to-cover ratio that fell short of the prior 12-auction average of 2.58. The high yield of 5.047% at the auction tailed the when-issued yield of 5.035% by more than a basis point.

The major indices, which had been vacillating with relatively modest changes, saw selling interest pick up and bids fall by the wayside after the auction. The spike in yields triggered renewed growth concerns that hit the small-cap Russell 2000 (-2.8%) the hardest and that ultimately contributed to losses in 10 of the 11 S&P 500 sectors.

The lone holdout was the communication services sector (+0.7%), which garnered support from Alphabet's (GOOG 170.06, +4.74, +2.9%) outperformance following its I/O event.

The real estate (-2.6%), health care (-2.4%), financials (-2.1%), consumer discretionary (-1.9%), and utilities (-1.9%) sectors were the biggest losers.

Market internals showed decliners outpacing advancers by a nearly 9-to-1 margin at the NYSE and by a 4-to-1 margin at the Nasdaq. Dow component UnitedHealth Group (UNH 302.98, -18.60, -5.8%) was among the decliners, pressured by an HSBC downgrade to Reduce from Hold and a report in The Guardian that chronicled allegations of the company paying nursing homes to reduce transfers between hospitals. UnitedHealth denounced the report, saying the DOJ investigated the allegations and declined to pursue the matter due to its finding of significant factual inaccuracies in the allegations.

Still, that didn't help the managed care company's stock, which joined many others today on the losing end of things. The major indices closed just off their worst levels of the session.

The only economic data out this morning was the MBA Mortgage Applications Index. It was down 5.1% week-over-week, with refinance applications and purchase applications both down 5.0% as demand weakened with rising mortgage rates.
  • DJIA: -1.6% YTD
  • S&P 500: -0.6% YTD
  • Nasdaq Composite: -2.3% YTD
  • S&P Midcap 400: -4.3% YTD
  • Russell 2000: -8.2%

FT : Honeywell close to securing Johnson Matthey catalyst unit in £1.8bn deal

Honeywell close to securing Johnson Matthey catalyst unit in £1.8bn deal
Tie-up would mark the latest acquisition of a UK asset by a US group

US industrials group Honeywell is close to securing a £1.8bn all-cash deal to buy the catalyst technologies arm of FTSE 250 chemicals company Johnson Matthey.

The unit, which develops catalysts that improve the efficiency of chemical manufacturing processes, will be folded into Honeywell’s automation unit, according to people familiar with the matter. Analysts expect the business to generate nearly £613mn in revenues in the year to the end of March.

The acquisition would be the latest in a series of takeovers in which US groups have scooped up UK assets. London’s mid-cap FTSE 250 has proven to be a particularly fertile hunting ground.

This year, US-based American Axle & Manufacturing struck a £1.2bn deal to buy UK automotive parts manufacturer Dowlais Group, and DoorDash agreed to buy UK food delivery service Deliveroo for £2.9bn.

Johnson Matthey’s catalyst technologies unit is expected to be combined with Honeywell’s UOP brand, which specialises in developing technologies including catalysts for use in petroleum refining and gas processing, the people added.

Johnson Matthey confirmed on Wednesday that it was in “advanced discussions” about a possible sale, but did not identify the buyer. A deal was likely to be announced at the company’s annual results on Thursday, the people added.

Honeywell and Johnson Matthey did not immediately respond to requests for comment.

Shares in Johnson Matthey stand at a third of their all-time high from 2018, having fallen nearly 24 per cent in the past year, following a series of unsuccessful acquisitions, bumpy earnings and margin pressures in some of its businesses, especially its clean air business, its largest division.

Languishing performance led Johnson Matthey to become the target of an activist campaign by its largest shareholder Standard Investments, which published an open letter to the board last December calling for the company to launch a strategic review “exploring all potential paths for maximizing shareholder value”, including a full or partial sale. Johnson Matthey already sold its medical device manufacturing arm to private equity group Montagu early last year.

Honeywell, one of the few remaining US conglomerates, earlier this year unveiled its own plans to break up into three separate units as part of an agreement with activist hedge fund Elliott Management, which took a $5bn stake in the business, its biggest position ever. The company makes everything from aviation equipment to air conditioning control systems and has a market capitalisation of about $145bn.

Under the leadership of chief executive Vimal Kapur, Honeywell is poised to make its sole focus automation by the end of next year. First, Honeywell plans to spin off its Solstice Advanced Materials unit as a separate listed company, which could be worth as much as $10bn, by early 2026 at the latest. Then, Honeywell will break up its automation and aerospace technologies businesses into two separate businesses by the end of next year.

As part of its efforts to streamline its operations around aerospace, aviation and energy-focused technologies, Kapur has divested some parts of the business and decided to acquire other assets. Honeywell sold its personal protective equipment arm to Protective Industrial Products for $1.3bn.

Meanwhile, Honeywell has also been on a $11bn acquisition spree since December 2023, including the $2.1bn buyout of pump manufacturer Sundyne and the $1.9bn takeover of defence electronics group CAES Systems Holdings.

FT : US Speaker hails $3tn Trump budget bill deal but Republican hardliners hold

US Speaker hails $3tn Trump budget bill deal but Republican hardliners hold out
Mike Johnson overcomes sticking point on taxes but needs to placate fiscal conservatives in his party ahead of vote

Congressional Republican leaders on Wednesday launched an intense push to win over holdouts and advance President Donald Trump’s sweeping tax bill to a House vote.

Mike Johnson, Speaker of the US House of Representatives, said he was hopeful he would later take the $3tn-plus bill to the floor of the House after striking an agreement with party holdouts over state tax deductions. Republicans hold a slim 220 to 213 majority.

“We plan to do it tonight if possible,” he said.

But the deal drew immediate criticism from fiscal conservatives, who have pushed for steeper cuts to state-backed healthcare spending and clean-energy tax credits.

Andy Harris, the chair of the far-right House Freedom Caucus, told Newsmax that the bill “actually got worse” after late-night negotiations and said there was “no way” it would pass on Wednesday. Ralph Norman of South Carolina also signalled his discontent.

The White House invited Harris and the Freedom Caucus to hear their concerns on Wednesday afternoon and sent National Economic Council director Kevin Hassett to meet with other Republicans in the basement of the Capitol.

Global markets have been watching progress of the bill, amid warnings from economists about the US’s growing fiscal deficit and signs of anxiety in the bond markets about the country’s debt burden.

Longer-dated Treasury yields rose as traders bet that the budget bill would lead to a surge of issuance in government debt. The 30-year Treasury yield rose 0.11 percentage points on Wednesday to 5.08 per cent.

A number of Republican lawmakers from high-tax states had threatened to derail the passage of the legislation, which the president has called his “big, beautiful bill” and includes sweeping tax breaks and deep cuts to spending programmes such as Medicaid.

But on Wednesday, Johnson said that an “agreement” had been reached over raising the cap on the amount of state and local taxes, known as Salt, that can be deducted from federal levies.

“I think the Salt caucus, as they call themselves, it’s not everything they wanted, but I think they know what a huge improvement that is for their constituents and it gives them a lot to go home and talk about,” Johnson said.

The legislation would need to be subsequently passed by the Senate, which is also controlled by the Republicans. Democrats in both chambers are expected to vote against the bill.

Johnson had spent the night trying to unite the warring factions within the House Republican conference on a host of issues in the legislation.

To earn the votes of a handful of Republicans in New York, New Jersey and California, he offered to raise the Salt deduction cap to $40,000 with certain income limits. Harris, the Maryland Republican, said the offer had “upset a lot of conservatives”.

The bill would be the centrepiece of Trump’s legislative agenda in his second term in office and extend many of the tax cuts he delivered in 2017.

Its passage would mark a big political victory for the president, whose approval ratings have been languishing following weeks of market turmoil triggered by his trade war.

Trump himself went to Congress on Tuesday to try to quell a pocket of Republican opposition to the bill.

But its proposed tax cuts have also spooked investors who are concerned that the bill would increase the US’s debt burden and damage its fiscal position. Some Republicans have sought deeper tax cuts, while others have called for more spending to be slashed.

It would also extend individual income tax cuts, as well as an increased standard deduction and child tax credit, as well as slashing taxes on tips and overtime pay, as Trump pledged on the 2024 campaign trail.  

The non-partisan Committee for a Responsible Federal Budget estimates that the bill will increase US national debt by more than $3.3tn over the next decade.

This would increase the federal government debt held by the public from about 98 per cent of GDP today to a record 125 per cent of GDP by the end of that period, according to the committee.

Moody’s last week stripped the US of its triple-A credit rating on fears of the ballooning deficit, and long-term Treasury yields have risen. 

Trump has tried to appeal to moderates by saying the bill does not cut anything “meaningful”, just “waste, fraud and abuse”. 

Russell Vought, director of the Office of Management and Budget, has said the legislation includes the most significant spending cuts in the past three decades. However, conservatives have pushed for more cuts. 

During his Tuesday meeting with the lawmakers Trump “made it clear he wants us to pass this bill”, Dusty Johnson, a South Dakota Republican, told the Financial Times. “He wants us to quit screwing around.”