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Eli Lilly halted two late-stage clinical trials of an experimental Alzheimer’s treatment on Tuesday. At the early stage, the drug was jointly developed by Lilly and Elan and the latter had retained marketing rights and was also expected to enjoy royalties from sales. Alzheimer’s disease affects an estimated 5.3 million Americans. Five of EL's six leading products face generic competition in the next four years.
During August, we will not be providing the 'Markets Afternoon' report due to
holiday and site development work. Use the relevant links below for the latest
Irish economy properly emerged from recession in Q2; growth
likely to remain sluggish: outgoing chief economist of Davy, Rossa
White, comments: "Ireland was absent (like some other small euro
area nations) from the 'flash' Q2 GDP estimate that brightened last
Friday. Detailed Irish national accounts for the
second quarter will not be released until the end of September.
Those figures will genuinely confirm that Ireland has emerged from
recession: the volume of GNP grew in Q2 after eight quarters of
decline (note that GDP expanded in Q1, but GNP is the best guide to
the Irish economy). Yet it will be important to take cognisance of
nominal aggregates in the next 18 months. The cash size of the
economy will struggle to increase, at least in H2 2010 (nominal GNP
has in fact contracted in 12 of the last 13 quarters).
The implications of rising real GNP (catch-up annualised growth
of at least 3% from a low base is likely for the next couple of
years) twinned with relatively flat nominal national income are
varied. First, the cyclical part of the deficit may not close until
about 2013 as automatic stabilisers take time to unravel. Second, it
will impact bank balance sheet growth (that tends to depend more on
money growth in the economy rather than the level of real activity)
and the state of the legacy loan book. With regard to existing
loans, lack of inflation makes it more difficult to reduce the real
size of debt outstanding. Finally, the better news: if nominal GNP
lags real GNP, it means that that the average level of prices across
the economy will still be falling (albeit that construction will
account for a large part of that trend). That will make Ireland
increasingly competitive on international markets. In other words,
further adjustment in the shorter term will bear fruit beyond 2012.
We tweaked our forecasts slightly to take account of the recent
revision to the national accounts. Annual average GNP may slip 1.1%
this year versus our previous -0.9%. But that is less relevant than
the 2011 number and, of course, hides the fact that GNP will rise
sequentially in H2 over H1. For next year, GNP may not quite grow 3%
for the full year (our previous projection); 2.7% is our new
forecast. The unemployment rate is still set to peak at around 13.5%
in Q3: it is likely that the Live Register has overestimated the
recent rise in the absence of the labour force estimates from the
Quarterly National Household Survey. As regards the public finances,
the overall GGB deficit may hit 25% of GDP this year (as it will
include all of the banking hits) before a dramatic drop to 10% next
year. But that masks the more encouraging trend in the underlying
deficit, which will nudge down from 12.1% of GDP last year to about
11% this year to that 10% figure in 2011.
This is my last Market Comment before leaving Davy to take up my
new role. I would like to thank all of you who have read it and
responded to it over the last eight years."
Eli Lilly is halting the
development of an Alzheimer's drug, with John Lechleiter, Eli Lilly chairman &
Economic View: NTMA to fund 40% of 2011 requirements by the end of the year;
Goodbody chief economist, Dermot O’Leary, comments -- "With yesterday’s successful sale of €1.5bn in Irish government
bonds, Ireland has completed its funding requirement for 2010. There was some
trepidation ahead of the auction but bid-cover ratios remained strong (2.4x and
5.4x for the 10-year and 2-year, respectively), although there was the expected
increase in interest rate spread with German bunds at which the debt was sold
(spread on 10-year issue rose to 303bps, relative to 289bps in July). The NTMA
should not, and will not, rest on its laurels for the rest of the year, as
pre-funding will now begin for an expected net funding need of €25bn for 2011.
€25bn is a lot of money in anyone’s language, but the NTMA expects to have about
40% of this funding completed by the end of this year.
Even at the current time, the
Irish Exchequer is fully funded up to the second quarter of 2011. Funding,
therefore, is not the issue. However, the interest rate being paid on this
funding certainly still is. Paying 3% over 10-year German bunds is unsustainably
high. The process of fiscal consolidation is expected to continue in December’s
Budget judging from all the noises coming from Government of late, but the more
recent concerns stem from uncertainty around the banking sector. Bank of Ireland
has already completed its capital-raising, while AIB has plans to meet its
capital requirements by the end of the year, but we are still none the wiser on
Anglo Irish Bank, both in terms of its future and the final cost to the State.
By the time the next
auction comes along on 21st September, one would hope we would have much-needed
clarity on the issue. Central Bank Governor Patrick Honohan stated yesterday
that the cost of the banking crisis to the State would be something of the order
of €26bn-€29bn, which is close to our own 20% of GDP estimate that we laid out
earlier in the year. This is indeed a huge amount of money and is contributing
to the government debt/GDP ratio rising to 100% over the next two years.
However, it is affordable for the Irish State if the debt level can stabilise at
that ratio, given that most of the developed world will have a similar ratio."
Union has received a letter from nine of its members calling for a change in the
way the debt of EU countries is calculated. Peter Attard Montalto from Nomura
Elan (Reduce, Closing Price $4.92); Elan's pipeline depleted as Lilly pulls AD
drug; Goodbody's Ian Hunter comments --
"Yesterday afternoon, Eli Lilly announced that it was halting the development of
semagacestat (LY450139) for the treatment of Alzheimer's disease (AD).
Preliminary results from two ongoing long-term Phase III studies showed that: (i)
it did not slow disease progression: and that it was associated with (ii)
worsening of clinical measures of cognition; (iii) worsening of the patients'
ability to perform activities of daily living; and (iv) an increased risk of
skin cancer. At the early stages, the drug was jointly developed by Lilly and
Elan and the latter had retained marketing rights and was also expected to enjoy
royalties from sales.
We were expecting data from the
LY450139 trials in FY12 and had pencilled in marketing and royalty income for
Elan of $8.0m, $14.6m and $22.1m in FY14, FY15 and FY16, respectively. Removing
them from our model would see our DCF valuation for the company fall from $4.72
to $4.58. In addition, this is the most advanced of a cohort of drug candidates
looking to control/ treat AD through the modulation of gamma-secretase. As such,
the results could place a question mark over this whole approach. Elan has a
couple of other drug candidates using the gamma-secretase inhibition approach on
the radar, namely ELND006 (in Phase I) and ELND007 (at the pre-clinical stage)."
Redemption of 2011 floating rate
note: "As expected, following its announcement on the11th of August of the
offer of $200m in senior notes with a coupon of 8.75% (due 2016), Elan yesterday
evening announced that it will redeem all of the $300m currently outstanding
Senior Floating Rate Notes, due 2011. The redemption is expected to occur on or
about the 17th of September. At the time of announcing the intention to offer
the $200m notes, Elan had indicated that the monies raised would go to partly
pay down the 2011 notes. This move pushes out Elan's debt profile, but does so
at a cost, with an interest rate increase of c.4% (we estimate the floating rate
notes - LIBOR + 4% - would currently equate to 4.75%), albeit on a smaller
amount of capital."
coalition government marks its first 100 days if office today. David Buik,
partner at BGC Partners, shares his thoughts on the government's policies thus
far, with CNBC's Steve Sedgwick, Chloe Cho and Yousef Gamal El-Din:
On Tuesday in New York, the
Dow Jones rose 104 points or 1.01% to 10,406.
The S&P 500 added 1.22% and
the Nasdaq rose 1.26%.
The MSCI Asia Pacific index
gained 0.5% Wednesday - - its fourth straight rise.
Nikkei added 0.86%; China's Shanghai Composite dipped
0.32%; Australia's S&P/ASX 200 Index fell 0.05% and India's Sensex Index
Europe, the Dow Jones Stoxx 600 fell 0.41%
ISEQ has declined 0.05% in
off 0.73%; Bank of Ireland has risen 0.86%.
APN News & Media, the Australian/New Zealand media group in which
Independent News & Media has a 32% stake, today released its
results for the six months to the end of June.
Its net profit
rose 11% from a year earlier to A$40m, while the group said its
underlying revenue rose by 5%.
Davy's Simon McGrotty commented:
"Revenues in two of the group's three primary divisions, outdoor
and broadcasting, came in behind expectations. Publishing revenues
were $296m versus our estimate of $286m, boosted by a strong
recovery in advertising revenues particularly during May and June
(up 13% and 15% respectively ), while national advertising also
recorded double-digit revenue growth.
Despite H1 numbers being somewhat disappointing, management
notes that the recovery in advertising is well underway, with the
group seeing strong growth in the second quarter. Total revenue was
up 8% and EBIT was up 22% on a like-for-like basis.
In terms of outlook, management expects the second half to
record an improvement over the first – further evidence of a
DAVY VIEW: Although these numbers were disappointing, the
outlook statement was positive and there are clear signs that a
recovery is taking place in APN's key markets. Although the second
half is expected to show further improvements, it is likely that
consensus numbers for the full year are likely to come back. The
market is looking for full-year EBIT of $226m and revenue of
We are unlikely to make any material changes to our H1 numbers
for INM as more positive foreign exchange rates are likely to offset
the lower level of EBIT."