In a research note published by Laura Sutcliffe, UBS advises its customers to buy the stock. The target price remains unchanged at CHF 96.
Tuesday, January 26, 2021
S. Korea Demonstrates Asia's Economic Resilience to Pandemic
In any normal year, a 1% contraction in South Korea's economy would be disappointing. In 2020, it is a mark of resilience, as strong exports and success in containing Covid-19 buoyed Asian economies against one of the worst global downturns in modern history.
The drop in gross domestic product, reported by the Bank of Korea on Tuesday, is expected to be one of the smallest among major economies, according to estimates from the Organization for Economic Cooperation and Development.
The relative economic strength is reflected across Asia, where China finished the year with 2.3% growth and Vietnam at 2.9%. Taiwan is expected to report a 1.9% expansion for the year Friday, according to Fitch Solutions.
The Bank of Korea attributed South Korea's relative economic durability during the pandemic to its large manufacturing industry, well-established online shopping base and strong pandemic-response measures.
"The recovery of global demand for our mainstream products like semiconductors in the second half of the year contributed to the economic cushioning," said Park Yang-su, director general at the Bank of Korea's economics statistics department.
The picture is much grimmer in the West, where a recent surge of Covid-19 infections has led to reimposing restrictions on businesses and social activities and the vaccine rollout has been sluggish. While many European manufacturers have learned lessons from the spring lockdowns and managed to keep factories running, consumers and businesses remain cautious, which is weighing on retail spending and investment, according to the European Central Bank.
The World Bank estimates the U.S. and eurozone shrank 3.6% and 7.4%, respectively, last year.
Economists worry that the eurozone economy will enter recession again in the three months through March. In Germany, Europe's largest economy, a closely watched business sentiment indicator this week dropped to its lowest level since July. German shops and restaurants have been shuttered since early November, with no clear end to the restrictions in sight.
South Korea has also seen a resurgence of cases this winter, but numbers are far lower than those in the West and have been dropping in recent weeks. Economists say the country is well positioned for a recovery this year, with exports remaining strong and room to roll out more stimulus measures if necessary.
Asia's economies have been held up by the twin pillars of strict Covid-19 controls and strong exports. Those were aided last year by massive stimulus and income-support programs in the West that fueled demand for goods made in Asia, a phenomenon some economists dubbed the "Zoom boom."
In Taiwan, tight Covid-19 restrictions quickly brought back daily social life and kept factories humming. In the third quarter, Taiwan's growth accelerated 3.3% from the same period a year earlier, following a modest 0.6% contraction in the second quarter. Taiwan's exports grew 4.9% in 2020, Taipei's Ministry of Finance said earlier this month.
Vietnam, which managed to keep new daily cases in the single digits for the majority of the year, never reported an economic dip last year.
"Vietnam and Taiwan did really well in terms of handling the virus early on. They didn't have to install lockdowns for a large part of last year, " said Anwita Basu, head of Asia country risk at Fitch Solutions. "There are pockets of contamination, but on the whole, activity is pretty normal there."
China epitomized the strength of Asian economies last year, with manufacturers quickly pivoting to personal protective equipment and masks as the pandemic came into full swing. The country's share of global exports jumped to 15.4% in November, the most recent month available, from 13.7% at the end of 2019.
China's share of global GDP increased 1.1 percentage points last year, the highest gain in a single year since at least the 1970s, according to Moody's Analytics.
Many European business leaders believe their Chinese counterparts gained a competitive advantage during the second half of 2020, according to a November survey conducted by business services firm Accenture, which polled 4,051 senior executives from 19 industries across 13 countries.
Of the European businesses that responded, 45% said they had lost ground against their Chinese rivals, compared with just 17% in May. Only 16% felt they had become more competitive, down from 40% in May.
The survey also found that executives in Asia expect to return to pre-pandemic levels of profit much sooner than their European or U.S. counterparts.
"There is a growing perception that European business is losing ground to Asia when it comes to competitiveness, reflected in lower confidence in growth and longer expectations for a rebound," said Jean-Marc Ollagnier, Accenture's chief executive for Europe.
South Korea-based manufacturer YoungjinIND Ltd. produces scrubbers, an equipment that purifies harmful gas emitted from semiconductor production. In the spring of 2020, the company had to halt production when orders dried up. This year, the company has orders filled up until March, as investments flow back into the semiconductor industry, according to Park Jong-jin, the company's planning team head.
"We've well recovered from the impact of the pandemic," said Mr. Park, adding how the company is having difficulty meeting orders due to the government's pre-pandemic cap on weekly work hours.
For the whole year, South Korea's exports declined 5.4%, but they grew at the fastest pace in more than two years in December at 12.6% from the previous year.
Economists say they expect several economies in the region to continue benefiting from strong exports this year, but add that export-driven rebounds have their limits, especially in highly automated sectors where rising manufacturing activity doesn't necessarily lead to job creation.
"The export model only gets you so far. It creates unbalanced growth," said Shaun Roache, an economist at S&P Global in Singapore. "It's not a sustainable strategy."
In South Korea, the gains in trade haven't translated into boosts in domestic consumption or jobs. In December, the country recorded the sharpest yearly drop in the number of people employed since 1999, with 628,000 fewer jobs than the same month the previous year. Private consumption slipped 5% in 2020, dropping more than any other year since 1998.
China also experienced a disconnect between its exports boom and sluggish domestic consumption. While China's retail sales returned to pre-pandemic levels in August, it slipped 3.9% for the full year of 2020 from 2019.
Still, economists say trade will continue to fuel Asia's economy this year as demand for electronic components remains strong as 5G and electric vehicle trends pick up.
"Demand is really much stronger, and it's not just from the pandemic related Zoom boom," said Rory Green, an economist at research firm TS Lombard.
AstraZeneca offers small concession, EU pleads for UK-made shots
AstraZeneca has offered to bring forward some deliveries of its COVID-19 vaccine to the European Union while the bloc has asked the British drugmaker if it can divert doses from the UK to make up for a shortfall in supplies, European officials told Reuters.
The Anglo-Swedish company unexpectedly announced on Friday it would cut supplies to the EU of its vaccine candidate in the first quarter of this year, a move that a senior EU official told Reuters meant a 60% reduction to 31 million doses for the bloc.
That complicated the EU's vaccination plans, after Pfizer had also announced a temporary slowdown in deliveries of its vaccine, and triggered an outcry in Brussels and EU capitals.
Two European officials told Reuters on Tuesday that AstraZeneca at two extraordinary meetings on Monday had offered the EU to bring forward to Feb. 7 the start of deliveries from an initial plan to begin on Feb 15.
One of the sources, briefed on talks, said that AstraZeneca had also revised upward its supply goals for February compared to the cuts announced last week, but the company offered no clarity on supplies for March.
This appears to be an overture by AstraZeneca to try and keep the peace with the EU as the row over its sudden cut to deliveries escalates, damaging trust between Brussels and the drugmaker before the shot has been approved in the region.
The second EU official, directly involved in the talks, said however there was no offer to increase supplies.
AstraZeneca has quarterly supply targets. Therefore an increase in February, if not followed by a rise in March, may not constitute an overall increase in the quarter.
The head of Lithuania's drugs watchdog Gytis Andrulionis told Reuters AstraZeneca on Monday increased its planned supplies for February for Lithuania and other EU countries compared to Fridays cuts, but noted that was still not enough to comply with the EU contract.
AstraZeneca was not immediately available for comment.
After Monday's meetings, EU health commissioner Stella Kyriakides said AstraZeneca had not offered adequate answers to questions posed by the EU.
The EU official involved in the talks also said that the EU had explicitly asked AstraZeneca whether it could divert to the 27-nation bloc doses produced in Britain, at least through March.
But the company did not answer these questions, the official said.
AstraZeneca has said the revised timetable was caused by production issues in Europe. One EU senior official told Reuters last week that the problem was at a vaccine factory in Belgium run by AstraZeneca's partner Novasep.
A spokesman for the EU Commission declined to comment on details of the talks with AstraZeneca, but added that the EU wanted "a precise delivery schedule".
On Dec. 30 Britain granted emergency approval to the shot developed by AstraZeneca and Oxford University. A decision on authorisation in the EU is expected on Friday.
Regeneron: Interim Data Positive With REGEN-COV as Passive Vaccine to Prevent Covid-19
Regeneron Pharmaceuticals Inc. said Tuesday initial results were positive from an ongoing Phase 3 clinical trial evaluating REGEN-COV.
The trial is looking at REGEN-COV, a casirivimab and imdevimab antibody cocktail, used as a passive vaccine for the prevention of Covid-19 in people at high risk of infection due to household exposure to a Covid-19 patient, the company said.
Shares were up 1.6%, to $556.80, in premarket trading.
Data showed a reduction in overall infections seen within the first week, with 100% prevention of symptomatic infections and markedly decreased levels and duration of viral shedding in asymptomatic infections that still occurred in REGEN-COV group, Regeneron said.
Confirmatory Phase 3 results are expected early in second quarter, the company said.
"These data using REGEN-COV as a passive vaccine suggest that it may both reduce transmission of the virus as well as reduce viral and disease burden in those who still get infected," said George D. Yancopoulos, president and chief scientific officer at Regeneron.
The trial is being run jointly with the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health.
Novartis: Q4 Earnings Miss
Novartis AG (NVS) reported that its fourth-quarter net income was $2.1 billion, up 86% from last year, driven by higher operating income and benefiting from lower taxes. Quarterly net income was up 93% at constant currencies basis. Earnings per share for the fourth-quarter were $0.92 up 84% or 93% at constant currencies basis, from the prior year.
At constant currencies basis, the company expects net sales to grow low to mid single digit; core operating income to grow mid single digit, ahead of sales for fiscal year 2021.
Operating income for the fourth-quarter was $2.6 billion, up 45% or 51% at constant currencies basis from the previous year, mainly due to lower impairments, lower legal charges and income from contingent receivables.
Core earnings per share was $1.34 up 2% or 3% at constant currencies basis from the previous year. Analysts polled by Thomson Reuters expected the company to report earnings of $1.36 per share for the fourth-quarter. Analysts' estimates typically exclude special items.
Net sales were $12.77 billion up 3% or 1% at constant currencies basis from the previous year, driven by volume growth of 6 percentage points, offset by price erosion of 2 percentage points and the negative impact from generic competition of 3 percentage points. Analysts expected revenues of $12.87 billion for the quarter.
The company's board has proposed a dividend payment of 3.00 Swiss francs per share for 2020, up 1.7% from 2.95 francs per share in the prior year.
The company's board has proposed that shareholders authorize the Board of Directors to repurchase shares up to a maximum of 10 billion francs between the annual general meeting 2021 and the annual general meeting 2024.
https://www.nasdaq.com/articles/novartis-q4-profit-rises-but-results-miss-view-2021-01-26
Merck (MRK): EC Approves KEYTRUDA in Colorectal Cancer
Merck (NYSE: MRK) announced today that the European Commission has approved KEYTRUDA, Merck’s anti-PD-1 therapy, as a monotherapy for the first-line treatment of adult patients with metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) colorectal cancer. This approval is based on results from the pivotal Phase 3 KEYNOTE-177 trial, in which KEYTRUDA monotherapy significantly reduced the risk of disease progression or death by 40% (HR=0.60 [95% CI, 0.45-0.80]; p=0.0002) compared with chemotherapy (investigator’s choice: mFOLFOX6 [oxaliplatin, leucovorin and fluorouracil (FU)] with or without bevacizumab or cetuximab; or FOLFIRI [irinotecan, leucovorin and FU] with or without bevacizumab or cetuximab). In the trial, treatment with KEYTRUDA also more than doubled median progression-free survival (PFS) compared with chemotherapy (16.5 months [95% CI, 5.4-32.4] versus 8.2 months [95% CI, 6.1-10.2]). There was a lower incidence of Grade ≥3 treatment-related adverse events (TRAEs) with KEYTRUDA compared with chemotherapy (22% versus 66%), and no new toxicities were observed. This approval marks the first gastrointestinal indication for KEYTRUDA in Europe and makes KEYTRUDA the first anti-PD-1/L1 therapy approved in Europe for these patients.
J&J earnings beat; guides higher
Johnson & Johnson (JNJ) reported adjusted earnings of $1.86 per share on $22.475 billion in sales for its fourth quarter. In response, JNJ stock rose early Tuesday, signaling a fresh high.
On average, analysts polled by FactSet expected Johnson & Johnson to earn $1.82 per share on $21.66 billion in sales.
In the year-earlier period, Johnson & Johnson earnings were $1.88 per share and the company reported $20.75 billion in sales.
For full-year 2021, J&J guided to EPS of $9.40-$9.60 on revenue of $90.5 billion to $91.7 billion. Analysts called for J&J earnings of $8.96 per share and $88.6 billion in sales.
In premarket trading on the stock market today, JNJ stock rose about 2% to 169. Shares of JNJ stock broke out of a flat base and a buy point at 155.57 in December, according to MarketSmith.com. Shares are now trading at a record high.
https://www.investors.com/news/technology/jnj-stock-johnson-johnson-earnings-q4-2020/
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