Companies feel impact of coronavirus outbreak in China

Some companies have warned that a coronavirus outbreak in China could disrupt supply chains or hurt bottom lines as factories and shops shut and airlines suspend flights.

FINANCIAL IMPACT:
* Electrolux said the epidemic could have a material impact if its Chinese suppliers were further affected and that it was implementing contingency plans.
* H&M said store closures in China – about 45 – hurt sales in January. The company said it sources “a lot” from China but its flexible supply chain had contained disruptions so far.
* China’s Baidu Inc said it was delaying the announcement of its fourth-quarter results and advised its employees to work from home.
* Hyundai Motor said it planned to halt South Korean production of a sport utility vehicle this weekend to cope with a supply disruption caused by the virus outbreak.
* Jaguar and Land Rover parent Tata Motors expects the outbreak to hamper production in China and hit profits.
*Japan Airlines Co said a quarter of reservations for China flights were cancelled in the past 10 days.
* Levi Strauss shut about half its stores in China and said it will take a near-term hit.
* LG Display said it had not yet closed any of factories in China but warned the outbreak increased uncertainty for suppliers.
* McDonald’s, which closed several hundred of its roughly 3,300 stores in China, said overall impact on profits would be “fairly small” if the virus stayed contained in China.
* Remy Cointreau warned that a potential impact from the outbreak would be significant because of its big exposure to China.
* Royal Caribbean Cruises, which cancelled three trips of its China-based cruise liner, trimmed its 2020 earnings forecast by about 10 cents per share, and said it would take a further 10-cent hit if travel restrictions continued until the end of February.
* Sangyong Motor said it would idle its plant in the South Korean city of Pyeongtaek from Feb. 4 to Feb. 12 for the same reason.
* Samsung Electronics said it had extended a holiday closure for some factories in line with Chinese government guidance but declined to comment on the impact.
* Samsung affiliate and battery maker Samsung SDI, which counts Volvo among its customers, warned of a hit to its March-quarter earnings.
* SK Hynix, which has a chip plant in the eastern Chinese city of Wuxi, said the outbreak had not yet disrupted production but that could change if the situation was prolonged.
* Starbucks, which closed more than half its roughly 4,300 stores in China, delayed a planned update to its 2020 forecast and said it expects a material but temporary hit.
* Tesla warned a 1-1.5 week delay in the ramp of Shanghai-built Model 3 cars could slightly hurt March-quarter profit after China ordered a shutdown of the factory. Tesla is also evaluating whether the supply chain for cars built in its California plant will be affected.
STORE/FACTORY CLOSURES:
* Apple Inc said it would shut all official stores and corporate offices in mainland China until Feb 9.
* Alphabet’s Google temporarily shut all offices in China, Hong Kong and Taiwan.
* Deere & Co said it has temporarily closed its facilities in China until the company determines it appropriate to reopen.
* U.S. makers of surgical masks including 3M, Owens & Minor and Alpha Pro Tech are ramping up manufacturing because of surging demand in China and around the world in response to the outbreak.
* Toyota Motor shut factories in China through Feb. 9.
* Walt Disney shut its resorts and theme parks in Shanghai and Hong Kong.
* Fast Retailing closed about 100 Uniqlo stores in Hubei.
* IKEA closed all 30 stores in China.
* Swatch closed five stores in Wuhan, Yum China closed some KFC and Pizza Hut stores in the city, Luckin Coffee closed its cafes and AB Inbev suspended production at its brewery.
* Imax delayed film releases in China.
AIRLINE CANCELLATIONS:
For airlines suspending flights to China, please click on https://www.reuters.com/article/us-china-health-airlines-factbox/factbox-airlines-suspend-china-flights-because-of-coronavirus-outbreak-idUSKBN1ZU131
HOTELS, BOOKING PLATFORMS, AGENCIES:
* Hyatt said it was extending its cancellation policy for Chinese travellers and hotels by nearly three weeks to Feb. 29.
* InterContinental Hotels and Hyatt Hotels said they would allow customers to cancel for free reservations booked for China for specific dates..
* Ctrip, China’s largest online booking platform, said more than 300,000 hotels on its platform had agreed to refunds on bookings between Jan. 22 and Feb. 8.
* Fliggy, Alibaba’s booking site, offered similar refunds, as did several Chinese and European tour operators.
LIMITING TRAVEL TO CHINA:
* Walmart Inc said it is temporarily limiting “non-business critical travel” to, from, and within mainland China amid the outbreak, while Chevron Corp asked its staff to postpone all non-essential travel to China.
https://www.marketscreener.com/news/Companies-feel-impact-of-coronavirus-outbreak-in-China–29920501/?countview=0

U.S. to quarantine all American Wuhan evacuees as CDC eyes pandemic risk

U.S. health officials said Friday they would quarantine 195 U.S. citizens who were evacuated from Wuhan, China, amid an outbreak of a novel coronavirus — the first time in 50 years the Centers for Disease Control and Prevention has taken such action.
The order will be effective for 14 days from the date of evacuation.
Dr. Nancy Messonnier, director of CDC’s National Center for Immunization and Respiratory Diseases, told reporters health officials were prepared for the possibility that the outbreak of the coronavirus could become a pandemic — the worldwide spread of a disease. “We are preparing as if this is the next pandemic,” she said, stressing that the agency hoped it would not become one.

“If we take strong measures now, we may be able to blunt the impact of the virus on the United States,” Messonnier said.
She added: “Please do not let fear or panic guide your actions.”
The passengers arrived at March Air Reserve Base in Southern California Wednesday after being flown from Wuhan, with a stop in Anchorage. The passengers had been monitored for symptoms — including cough and fever — before, during, and after the flight.

U.S. officials said Wednesday that all passengers had volunteered to stay at the base in isolation for a few days while they could be assessed, but one person tried to leave the base that night and was placed under a 14-day quarantine by local authorities.
The federal quarantine issue was ordered for a number of reasons, CDC officials said. Among them: the number of confirmed cases and deaths in China has jumped every day this week; more countries are reporting infections, including incidents of human-to-human transmission of the virus; and evidence documented this week by German researchers that showed a person with no symptoms of the virus passing it on to others.
The virus, known provisionally as 2019-nCoV, has caused nearly 9,700 confirmed infections and killed 213 people in China. About 100 additional infections have been reported in 18 other countries, and no deaths. The large majority of cases outside China came from people who picked up the virus in China and then traveled to the other countries.
CDC officials framed the quarantine decision as the best way to preclude the potential spread of the virus to the people’s families and communities. They said that monitoring the people for 14 days also meant that should any of them become sick, they can be quickly identified.
CDC scientists have developed a test for the coronavirus, but Messonnier said it might not be advanced enough to detect the virus if people are not showing symptoms yet. The quarantine is set for 14 days because that is the longest amount of time the virus is thought to be able to “incubate” in a person before creating symptoms.
Quarantining people involves restricting the movements of people who may have been exposed to a pathogen but are not yet sick; it is different than isolation, which refers to containing people who are sick. The last time a federal quarantine order was issued for potential cases was in the 1960s for smallpox evaluation, CDC officials said.
The CDC also confirmed Friday that China had agreed to allow some of its experts into the country “to support” the Chinese response and help study the transmission of the virus and the range of severity seen with infections, a spokesperson said. The World Health Organization is sending another mission to China to collaborate on the response and investigation.
The repatriated passengers had been evacuated from Wuhan, the central Chinese city of 11 million people where cases of the virus were first documented last month and where the outbreak is centered. U.S. officials arranged the flight as the virus spread and China imposed lockdowns on Wuhan and other cities, shutting down travel to and from the areas and essentially quarantining tens of millions of people.
One person with a fever was not allowed to board the flight in Wuhan, U.S. officials said Wednesday.
Messonnier called the quarantine “an unprecedented action.” But, she said, “we are facing an unprecedented public health threat.”
CDC officials acknowledged that a quarantine came with downsides, including the potential for fear and for the stigmatization of people under quarantine. “We’re taking every measure to make sure people are treated with dignity and respect,” said Dr. Martin Cetron, CDC’s director of global migration and quarantine.
There have been six confirmed U.S. cases of the coronavirus infection. Five were travel-related. The sixth, announced Thursday, marked the first U.S. case of human-to-human transmission; one of the travel-related cases, a woman in Illinois, transmitted the virus to her husband before she was isolated.
U.S. health officials have said since the outbreak started that they expected travel-related cases and for some of those patients to pass the virus on to their close contacts. If they can restrict the virus to cases of limited spread among contacts and prevent the virus from circulating more broadly, it is much easier to snuff out the virus.
On Thursday, the State Department increased its travel warning to Americans, urging them to avoid travel to China. Secretary of State Mike Pompeo cited the WHO’s declaration of the outbreak as a global health emergency as part of the rationale for the warning. But WHO officials have stressed the declaration was being made to encourage countries not to impose travel and trade restrictions on China.
Several airlines have halted flights to and from the Chinese mainland, including, as of Friday, American, Delta, and United.

U.S. to quarantine all American citizens evacuated from Wuhan, as CDC raises pandemic possibility

Top WHO official says it’s not too late to stop the new coronavirus outbreak

Mike Ryan, head of the World Health Organization Emergencies Program WHO

There is still reason to believe the growing coronavirus outbreak in China can be contained, a top World Health Organization official said Saturday, pointing to some evidence that the disease may not be spreading as rapidly as is feared. He also downplayed reports that people infected with the virus may be contagious before they show symptoms — a feature that, if true, would make it much harder to control. “Until [containment] is impossible, we should keep trying,” Dr. Mike Ryan, head of the WHO’s Emergencies Program, said in an interview with STAT. The WHO declared the outbreak a global health emergency on Thursday.
The gargantuan efforts China is making to try to halt the spread of the virus is buying the rest of the world “precious lead time” to prepare for the possibility they might have to cope with it as well, he said: “We need to thank China for that opportunity.”

“That is not to say that the disease won’t get ahead of the Chinese authorities completely or get ahead of the other countries that are containing it,” Ryan said. “But there’s enough evidence to suggest that this virus can still be contained.”
For instance, data from some studies in China looking at how much transmission occurs when the virus gets introduced into a household suggests the secondary attack rate — the number of people the first case infects — isn’t that high. “But that’s obviously a few studies across a very large event,” Ryan cautioned.
There haven’t been many reports of health worker infections, a feature that fueled the earlier outbreaks of SARS and MERS, coronaviruses that are related to this new pathogen, provisionally called 2019-nCoV. Likewise, there has not been a lot of spread from cases discovered in other countries in tourists from China or people returning from China.
Still, numbers of cases are growing in big leaps — China reported 2,102 new cases and 46 additional deaths on Saturday. And those numbers might be higher still but for the fact that China has a backlog of tests to be processed. Ryan said the problem isn’t testing reagents — the country has indicated it has adequate supplies — but the sheer number of tests that need to be run.
“So there are clear indications obviously that the disease numbers are growing. But there is also some contradictory evidence as well that doesn’t completely align with the kinds of R0s that are being estimated,” Ryan said.

R0 — pronounced R-naught — is the reproductive number of a disease, the number of people, on average, each infected person goes on to infect. Most studies so far have estimated the R0 in this outbreak to be between 2 and 2.5, which is higher than seasonal flu — about 1.3 — but lower than SARS, which had an R0 of between 2 and 5.
Ryan would not say what circumstances would lead the WHO to declare this event a pandemic — an outbreak that might be expected to spread around the globe. That kind of discussion, he said, would be a distraction.
“If that becomes the discussion, then we’re all going to lose focus,” Ryan insisted. “We have to remain laser-focused on containment and slowing down the spread of disease.”
As of Saturday, he said, the world has seen nearly 12,000 confirmed cases, all but 133 of them in China. Nearly two dozen countries outside of China have diagnosed cases. The United States has reported eight cases, one of which contracted the virus in this country from a relative who had traveled to China. The latest U.S. case, confirmed on Saturday, is a University of Massachusetts Boston student in his 20s who returned from a visit to China on Tuesday.

The Trump administration declared the outbreak a public health emergency on Friday, saying it would temporarily bar entry to Chinese nationals who had been in China in the past 14 days and would quarantine Americans returning from China. On Thursday, the State Department told Americans not to travel to China.
There have been a total of 259 deaths reported so far, all in China. “Almost all of the mortality is in the over 40s,” Ryan said “and a strong preponderance of males.” About a third of the cases have pre-existing health problems.
One of the concerns about this outbreak has been reports that people may be able to transmit the virus before they develop symptoms — which, if true, would make containment tools like quarantine less effective than they were during the 2003 SARS outbreak.
A report published Thursday in the New England Journal of Medicine pointed to this type of transmission, sometimes called asymptomatic spread, in a cluster of cases in Germany.

But Ryan said the data the WHO are seeing suggests some people who have been publicly labeled “asymptomatic” were actually already experiencing some symptoms.
“We still believe, looking at the data, that the force of infection here, the major driver, is people who are symptomatic, unwell, and transmitting to others along the human-to-human route,” he said. “That is the pressure wave.”
Ryan admitted he was surprised by the speed with which the outbreak has taken off. China alerted the WHO to the fact that it believed a new virus was causing pneumonia in the central Chinese city of Wuhan on Dec. 31. On Jan. 7 it announced it had isolated a new virus.
The total number of confirmed cases in this outbreak — just a month old — has already surpassed the SARS outbreak, which played out over a period of at least eight months in 2002-2003.
“For me it’s been unusual to see a new disease emerge and, on the face of it, move so quickly,” he said. If the scientists studying the genetic sequences of the viruses are right and the outbreak began sometime in late November or early December, “then this is a very rapid emergence and very rapid infection of a lot of people.”

Top WHO official says it’s not too late to stop the new coronavirus outbreak

Vanda comes up short in lawsuit with FDA over tradipitant

Vanda Pharmaceuticals (NASDAQ:VNDA) is “determining the appropriate next steps” after the U.S. District Court for the District of Columbia ruled in favor of the FDA in a lawsuit brought by the company prompted by a dispute over the development of tradipitant (VLY-686) for the treatment of gastroparesis.

The disagreement arose over the proposed treatment duration. In April 2018, the company submitted a protocol for a 52-week open-label extension (OLE) study for patients who had completed a Phase 2 clinical trial (four weeks of therapy). A month later, based on agency feedback, it amended the protocol of the Phase 2 to a three-month treatment duration while it continued talks over a 52-week duration. In September 2018, it submitted a protocol for a new 52-week OLE study.

In December 2018, the FDA instituted a partial clinical hold (suspends enrollment but allows currently enrolled patients to continue treatment) on the two proposed studies, adding that toxicity testing in dogs, monkeys or pigs had to be done before it would consider signing off on treatment beyond 12 weeks. The company filed suit in February 2019 (10-K, page 51).

A Phase 3 trial assessing a 12-week treatment duration is in process.

https://seekingalpha.com/news/3537088-vanda-comes-up-short-in-lawsuit-fda-over-tradipitant

Gilead advancing experimental antiviral to treat coronavirus infection

In a statement, Gilead Sciences (NASDAQ:GILD) Chief Medical Officer Merdad Parsey, M.D., Ph.D., says the company has supplied experimental antiviral remdesivir to a small number of patients infected with 2019-nCoV, the coronavirus causing the current outbreak, on an emergency basis since there are no approved treatments for the respiratory ailment.

It is working with Chinese health authorities on a clinical trial to determine the safety and efficacy of the nucleotide analog (it is being developed to treat infections from Ebola and Marburg viruses). It is also expediting laboratory testing of the drug against 2019-nCoV.

The New England Journal of Medicine reported that the first U.S. infected person, a man in Seattle, was treated with remdesivir on the seventh day of his hospitalization. Although he is still an in-patient, all symptoms, except his cough (which has improved), have resolved. The day after he received the drug, his temperature dropped from almost 103 degrees Fahrenheit to 99.1, reaching the normal range soon thereafter.

https://seekingalpha.com/news/3537087-gilead-advancing-experimental-antiviral-to-treat-coronavirus-infection

US IPO Weekly Recap: One Medical pops 57.6% in 5-IPO week

Five companies entered the public market this past week. The health clinic unicorn One Medical (ONEM) posted a 57.6% gain and was joined by titan of tin foil Reynolds Consumer Products (REYN), Black Diamond Therapeutics (BDTX), Arcutis Biotherapeutics (ARQT), and AnPac Bio-Medical Science (ANPC)
One Medical (ONEM) priced at the low end of the range to raise $245 million at a $1.95 billion market cap. The company which owns and operates a 77 clinic network of membership-based primary-care clinics expanded its gross margin and accelerated growth in the 9mo19.
In the largest household goods IPO ever, Reynolds (REYN) priced within the range at $26 to raise $1.2 billion at a market cap of $5.3 billion. The company has cut $126 million in costs in the past two years and 65% of 2018 sales were from products with #1 market share. Reynolds finished up 9.8%.
Oncology biotech Black Diamond Therapeutics (BDTX) priced above the range to raise $201 million at a market cap of $672 million. The Phase 1-ready biotech boasted a first day pop of 108% despite its very early stage and limited portfolio, and finished up 107.8%.
Late-stage dermatology biotech Arcutis Biotherapeutics (ARQT) priced its upsized deal at the high end of the range, raising $159 million ($50 million from existing shareholders) at a market cap of $657 million. The company’s leading candidate is currently in two pivotal Phase 3 trials for psoriasis, with topline results expected in 1H21. Arcutis finished up 28.2%
Chinese cancer screening provider AnPac Bio-Medical Science (ANPC) priced its downsized IPO at the low end of the range to raise $16 million at a market cap of $134 million. The challenging environment for Chinese issuers has carried into 2020, and AnPac finished down 15.7%.

5 IPOs During the Week of January 27th, 2020
Issuer Business	Deal Size	Market Cap at IPO	Price vs. Midpoint	First Day Return	Return at 01/31
Black Diamond Tx (BDTX)	$201M	$672M	12%	+108%	+97%
Phase 1-ready biotech developing targeted kinase inhibitors for solid tumors.
One Medical (ONEM)	$245M	$1,952M	-7%	+58%	+58%
Operates 77 membership-based health clinics under the One Medical brand.
Arcutis Biotherapeutics (ARQT)	$159M	$657M	6%	+28%	+28%
Phase 3 biotech developing topical therapies for common skin diseases.
Reynolds Consumer (REYN)	$1,226M	$5,272M	-2%	+10%	+10%
Leading provider of household and kitchen products.
AnPac Bio-Medical Science (ANPC)	$16M	$134M	-8%	-6%	-16%
Chinese provider of multi-cancer screening tests.

https://www.renaissancecapital.com/IPO-Center/News/67035/US-IPO-Weekly-Recap-One-Medical-pops-57.6-in-5-IPO-week

Trading a Market Panicked by the China Virus

Panic is a strange emotion.  We can have extreme reactions to minor events if our minds blow those up into catastrophes.  We can also go into denial about genuine threats.  Panicky markets create opportunity, as good assets are dumped alongside the not-so-good ones.  What we don’t know is whether panic is justified.  As the saying goes, if you can keep your head about you when everyone else is losing theirs, perhaps you’re not aware of the situation!
The current situation with the coronavirus in China is a great example of a fear-filled scenario, as uncertainty is built into the situation and the possibility of a horrendous outcome is present.  Here are a few observations that may be helpful for traders adjusting to markets quite different from what we’ve seen so far this year:
*  Volatility and Correlation – This is a different market regime.  Volume and volatility are greatly increased and correlations among markets will be higher than recently has been the case.  When markets are more volatile, the price movement is sizing up positions for you:  risk and reward are much higher for a given position.  Adjusting sizing of positions to account for this change is essential.  Adjusting existing hedges to positions may also be important, given shifts in correlations.  For investors, portfolios that looked invincible a week or so ago (think stocks and high-yield bonds) may suddenly seem quite vulnerable.
*  Following the Story Closely – I’m watching to see if the virus story gains significant traction in the media outside Asia.  I have concerns.  One data point:  if you go online and try to order surgical respirator masks, you’ll see a lot of sites and retailers that are sold out.  Another data point:  China is treating this as a genuine emergency.  You don’t lock down tens of millions of people and build a new, large hospital for nothing.  Still another data point:  Wuhan, the epicenter of the viral outbreak, is also the location for China’s only bio-lab designed to study BSL-4 level pathogens.  Concerns about the safety of the lab were voiced as early as 2017.  And I’m not sure we’ll ever know whether that lab has been involved in the design and manufacturing of bio-weapons.  Bottom line:  when the country closest to the situation is reacting the strongest, that situation has to be taken seriously, especially given the mathematics of viral contagions.
*  Thinking Through Broad Market Impacts – Increases in volatility measures; flight to safe assets; and a new reason for central banks to stick with low rate policies are some expectable impacts.  To the degree that this hampers growth in China, we can also expect some re-rating of global growth estimates.  If we thought tariffs could slow China, this could have a far greater impact on the economic activity of Chinese citizens and companies doing business in China.  Recall how Asian crises impacted the equity markets in the late 1990s.  That didn’t stop markets from rising to major highs by early 2000, but that rise was punctuated by sharp declines and increased volatility.  I’m watching equity prices in China especially closely.  Note that we broke out to new highs earlier in the year and now have returned to the prior trading range in FXI.  Tough to imagine a roaring global bull market and China not participating.  Even tougher to imagine should contagion meaningfully spread beyond China.
*  Timing is Everything – Money managers who are paid on annual performance had started 2020 nicely in the green with the bull market in stocks and handsome returns from risk parity strategies.  Are they really going to want to go red on the year and face investors already wondering why they don’t just invest passively in low-cost ETFs?  Just as we saw quite an unwind in January, 2018 following great strength, a similar dynamic may be at work at present.  Everyone goes for exits at the same time when payouts are at risk.  That created opportunity later in 2018, but it was not a one and done day or two of weakness either.
*  Sometimes This Time Really *Is* Different – I recently wrote about the value of historical market analyses and how those can illuminate current market scenarios.  I also noted how, historically, very strong equity markets tend to be followed by strength in the bigger picture.  Market history is probably the best guide we have to an uncertain future, but idiosyncratic influences can make the present quite different from the past.  Blindly following the past can be dangerous for traders when they face unique situations such as the September, 2001 attack.
If history plays out, the current situation could lead to a great investment opportunity, such as those corrections in the late 1990s, but could also last longer–and can be deeper–than investors can tolerate in the short run.  The one thing we know is that we are facing a more uncertain global landscape, and that will likely be reflected in volatility and increased herd behavior.
http://traderfeed.blogspot.com/2020/01/trading-market-panicked-by-china-virus.html