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Our briefing for Friday December 11, 2020:
Dec 11, 2020 3:13:26 PM
- In the United States, the Food and Drug Administration (FDA) will move rapidly toward issuing an emergency authorization for Pfizer’s COVID-19 vaccine after a key panel endorsed the drug on Thursday. The Biological Products Advisory Committee voted 17-4 with one abstention to recommend the vaccine for emergency use. According to CNN, most governors have informed Operation Warp Speed that they will exhaust their Pfizer vaccines within days of receiving the first shipment. Warp Speed officials have said additional shipments of the vaccine should arrive on a weekly basis.
- Canada’s Public Health Agency has released their latest COVID-19 modelling, which forecasts projected cases and it is not looking like it will be a very happy holiday season. Speaking at a news conference on Friday, Chief Public Health Officer Dr. Theresa Tam said if Canadians maintain their current contact levels, more than 12,000 new cases will be recorded daily by January. Canada is currently at around 6,000 cases a day so far this week. According to the modelling sheets if Canadians increase their contacts, which is entirely possible over the holiday season, the numbers could surge to 30,000 cases by January. “We have yet to see the kind of sustained decline in daily case counts that would indicate we are bringing the pandemic under control,” said Dr. Tam.
- The United Kingdom government said on Friday they would cut the self-isolation period from 14 days to 10 days and will apply to both those presumed to have been in contact with someone who had COVID-19 and those arriving from abroad. The shorter self-isolation period will begin on Monday December 14th, and will apply in England, Scotland and Northern Ireland. The shorter isolation period is already in effect in Wales. The Chief Medical Officers in the UK released the following statement on the move: “After reviewing the evidence, we are now confident that we can reduce the number of days that contacts self-isolate from 14 days to 10 days.”
- The European Union agreed to an historic $2.2 trillion budget and stimulus package, but it didn’t come without a little controversy. The deal was agreed on Thursday after Hungary and Poland angrily protested a clause in the agreement that tied funding to upholding democratic norms. The rule-of-law mechanism both countries objected to will remain in place. The seven-year budget includes a $909 billion USD pandemic relief package that will be financed by joint debt and is badly needed as the coronavirus tears through the European bloc of nations for a second time this year.
- Philippines Food and Drug Administration (FDA) confirmed on Friday that UK based drug firm AstraZeneca withdrew its application to conduct COVID-19 vaccine trials in the country. FDA Director General Eric Domingo clarified that even without holding clinical trials in the Philippines, AstraZeneca can still supply the country with coronavirus vaccines once they are approved for use. The FDA didn’t disclose what made the UK drug company change their mind after it had passed separate evaluations by a panel of vaccine experts last week. In October, Chinese state-owner Sinopharm also called off plans to hold vaccine trials in the Philippines stating they were only interested in supplying vaccines and not in clinical trials anymore.
- In Australia, the University of Queensland and pharmaceutical company CSL have pulled the plug on their COVID-19 vaccine candidate after an unusual result occurred in clinical trials. The COVID-19 vaccine candidate was abandoned after several participants returned “false positives” for HIV during testing. The University and CSL assured there was no possibility the vaccine could lead to HIV infection but didn’t want to progress for fear it would interfere with existing HIV testing procedures and dent public confidence in using the vaccine even if it were to eventually work. The Australian government has already entered into agreements to purchase vaccines from Pfizer/BioNTech, Novavax and AstraZeneca/University of Oxford.
Covid-19 – Due Diligence And Asset Management
Buyout Firms Bet Smaller is Better With Covid Trimming Deals
Brief: Private equity bosses have found a way to keep deals flowing during the economic crisis: going small. With blockbuster buyout activity hit by the pandemic early in the year, the industry has turned to smaller acquisitions that are aimed at expanding their stable of companies. These purchases are another tool in the arsenal that private equity firms have to build their portfolio companies before selling for a profit. Add-on transactions from firms including Cinven and HarbourVest Partners comprised 51% of global buyouts in the third quarter, a new high, according to data compiled by PitchBook. These transactions, where private equity-backed firms acquire businesses using their owner’s capital, are also on pace for a record year. “You’re seeing most investors working more closely with their existing relationships, focusing on assets and segments they know,” Brian Gildea, head of investments at alternative asset manager Hamilton Lane, said in an interview. Cinven of London has been among the most active European firms in this arena this year. The 34 portfolio companies in its fifth and sixth funds have made more than 300 add-on deals since the funds began, according to a company spokeswoman. In October, Cinven almost doubled the size of Dutch ingredient distributor Barentz International with the purchase of Maroon Group, a North American supplier of specialty chemicals.
A Hedge Fund Vet Makes a Fresh Start in the Pandemic
Brief : It’s been a good 2020 for John Thaler, who decided to stage a comeback in January after shutting down JAT Capital in 2015. After delivering eye-popping returns so far this year, Thaler’s new firm, Hampton Road Capital Management, is forming a strategic relationship with Leucadia Asset Management, the asset management division of Jefferies Financial Group. Leucadia will invest capital in Hampton Road’s long-short equity strategy, which is focused on technology, media, telecommunications, and consumer sectors globally. According to an investor letter distributed early Friday and obtained by Institutional Investor, Hampton Road is up 39.4 percent net year-to-date through December 10. The fund has garnered $250 million in assets under management so far, according to sources. “Leucadia will be beneficial to us as we scale our business over time and will allow us to concentrate on investing,” Thaler said in a statement. “Our team is very excited about the opportunities we are seeing in our core sectors on both the long and short side. We are pleased with the results we have delivered in our strategy this year and are optimistic about the future.” Thaler returned to fund management early this year, joining Wexford Capital as a portfolio manager of the Wexford Core Equities Fund. In August he spun out the fund and renamed it Hampton Road Capital Management. Thaler has ties to Julian Robertson Jr.’s Tiger Management through his work at Shumway Capital, a firm founded by a former Tiger analyst. He launched JAT Capital in 2007, specializing in the kinds of tech and media stocks popular with Tiger alumni.
Institutional Investors’ Long-Term Forecasts Brighter than a Year Ago Despite Covid-19, says State Street Study
Brief: Despite the impact of Covid-19, State Street's survey annual Growth Readiness Study reveals that more than two-thirds of European institutional investors (67 per cent) were able to meet or exceed their investment performance targets over the last 12 months. Confidence in the one-year growth outlook has dropped ten per cent since 2019, with 44 per cent of respondents now optimistic about meeting their growth objectives over the next 12 months. Long-term forecasts are also bright, with just over three-quarters (76 per cent) optimistic about achieving their growth targets in the next five years, representing a 10 per cent increase from 2019 – even though the majority believe that new regulations or taxation as a result of Covid-19 or an economic recession and vendors’ financial vulnerability will likely hinder expansion plans moving forward. Somewhat surprisingly, only 34 per cent of European respondents are worried about geopolitical tensions being a top threat to growth, compared to 40 per cent globally.
COVID-19 Concerns Won’t Spring Jailed State Street Exec
Brief: A former State Street Corp. vice president convicted of tacking on unauthorized charges to huge international transactions will not be able to get out of prison five months into his 18-month sentence, as a judge ruled Thursday he does not face a substantial COVID-19 risk. Ross McLellan had sought compassionate release from the minimum security prison camp in central Massachusetts where he is serving his term, citing Type 2 diabetes and obesity as factors that put him at a heightened risk should he contract the virus. But U.S. District Judge Leo T. Sorokin denied the request, saying that the novel coronavirus is not a pressing concern at the prison camp in question and that McLellan has not met the standard for early release. "The camp is presently less than half full and has no active COVID-19 cases among its inmates," Judge Sorokin wrote. "Nothing in the record suggests that McLellan is currently exposed to unduly harsh or excessively risky conditions of confinement." The judge also wrote that "McLellan committed a serious crime for which he has served less than a third of his sentence — and less than the amount of time his less culpable co-conspirator served as a result of a sentence also imposed by this court." A jury convicted McLellan in 2018 of wire and securities fraud for supervising a scheme in which pennies per share were tacked on to massive international transactions for huge foreign clients without their knowledge.
Asset Management Deals Are About to Get More Interesting
Brief: In 2020, asset managers joined up together to survive the Covid-19 downturn and industry pressures that had been mounting for years. Next year, tie-ups might be driven by more strategic motivations and new business initiatives, one firm predicted in a report issued Thursday. The shift comes as a number of recent deals haven’t rewarded the acquiring asset manager with a higher stock price, even though the transactions have resulted in successfully integrated firms, concluded PricewaterhouseCoopers in its 2021 outlook on asset and wealth management deals. Even when some firms have reduced costs and increased earnings, they’ve still watched their price-to-earnings multiples decline in the aftermath of deals, according to PwC. “As the Street may be downplaying the value of cost reduction, we’re already seeing a shift from deals driven by cost-cutting to deals driven by potential revenue synergies,” wrote Greg McGahan, deals leader for U.S. financial services and asset and wealth management, one of the report's authors. “These moves to broaden product offerings and expand distribution are designed to drive top-line growth, rather than expanding profit margins by reducing expenses.” McGahan noted that both Morgan Stanley’s $6.8 billion purchase of Eaton Vance and BlackRock’s $1 billion deal for Aperio are examples of what might be in store for 2021. Aperio and Parametric Portfolio Associates, owned by Eaton Vance, both offer what's called direct indexing, which allows individuals or institutions to design a custom portfolio where they hold the individual securities. It’s an alternative to an index fund that is customized.
Wall Street Sees World Economy Surging in 2021 From Rocky Start
Brief: Wall Street’s biggest banks are predicting the coronavirus-hit world economy will crawl through the early days of 2021 before bouncing back as vaccines and more fiscal stimulus flow into it. After a year which saw the unanticipated shock of the deepest recession since the Great Depression, economists are bracing for a shaky start to the new year as 2020 ends with a spike in infections and further rounds of restrictions. The most upbeat are the analysts at Morgan Stanley, who predict an expansion of 6.4% in the coming year and maintain their call for a V-shaped recovery. Less confident are the economists at Citigroup Inc., who predict growth of 5%.Both would be dramatic improvements on the 4.4% contraction the International Monetary Fund has penciled in for 2020.
