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Daily Intelligence Briefing
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Tuesday, October 29, 2019
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Identifying Change-Driven Investment Themes – Five sections, explained here.
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We bring you our Daily Intelligence Briefing courtesy of McAlinden Research Partners. The report is provided to Hedge Connection members for free. Below is snapshot, login to view the full report. Not a member? Join today. McAlinden Research Partners is offering a complimentary one-month subscription to receive the Daily Intelligence Briefing – to Hedge Connection clients/friends. Activate yours by contacting Rob@mcalindenresearch.com and mentioning “Sent by Hedge Connection”
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I. Today’s Thematic Investment Idea
A deep dive into a market driver with alpha generating potential.
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Gene-Editing Revenues Beat Wall Street Bets While Novel Methods Promise Thousands more CRISPR Treatments →
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Summary: New developments in CRISPR gene editing technology have opened the door to potential cures for 89% of known disease-causing genetic variations in DNA. Advancements have also focused on using CRISPR enzymes to fight viruses in human cells. Additionally, positive sales figures for treatments from Novartis and Spark Therapeutics have injected optimism into the market and bolstered CRISPR’s case for commercial viability in the near-term. Read more +
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II. Updates of Themes on MRP’s Radar
Follow-up analysis of key market drivers monitored by MRP.
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Aviation: Boeing’s Max Crisis May Turn Pliant Congress From Friend to Foe
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Banks: McKinsey’s Global Banking Report Finds A Majority Of Banks Not Economically Viable
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Plant-Based: Beyond Meat turns its first profit, topping estimates, but shares sink
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Telecoms: T-Mobile adds 1.7 million subscribers as 5G launch and Sprint merger loom
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Batteries: World’s Largest Storage Battery ― 2.5 GWh ― To Replace Gas Peaker Plants In Queens
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FDI: Global Foreign-Direct-Investment Flows Decline 20%
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IV. Active Thematic Ideas
MRP’s active long and short themes, with an archive of follow-up reports.
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See Them Here →
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V. Macroeconomic Indicators
Key data releases relevant to MRP’s Active Thematic Ideas.
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See Them Here →
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THEME ALERT: AN ACTIVE MRP THEME
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Gene-Editing Revenues Beat Wall Street Bets While Novel Methods Promise Thousands more CRISPR Treatments
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New developments in CRISPR gene editing technology have opened the door to potential cures for 89% of known disease-causing genetic variations in DNA. Advancements have also focused on using CRISPR enzymes to fight viruses in human cells. Additionally, positive sales figures for treatments from Novartis and Spark Therapeutics have injected optimism into the market and bolstered CRISPR’s case for commercial viability in the near-term.
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Until recently, CRISPR has always been best at snipping away defective pieces of a patient’s genes, cutting DNA at a site to which a target-finding molecule, called guide RNA, led it. That triggers DNA’s natural repair machinery, which can respond in several ways: mending the break by knitting the two loose ends together; filling the gap with nucleotides randomly grabbed from the cell; or patching the break with a piece of repair DNA supplied by scientists.
Simply splicing DNA has proven an apt treatment for some disorders, but not for all. If you want to expand CRISPR’s potential by replacing a faulty gene with a healthy one, scientist have been working to introduce copies of new DNA in the place of what was removed and then hope the cell’s repair machinery installs it correctly. Most often, this process was a failure and scientists found themselves at a dead end. Until now.
Using an enzyme which is actually two that have been fused together ― a molecule that acts like a scalpel combined with something called a reverse transcriptase, converting RNA into DNA – a new process dubbed “prime editing”, may now enable much greater flexibility in CRISPR’s editing abilities. In prime editing, guide RNA not only finds the DNA in need of fixing, but also carries a copy of the edit to be made. When it locates its target DNA, it makes a little nick, and the reverse transcriptase starts adding the corrected sequence of DNA letter by letter, like the strikers on a typewriter.
In short, prime editing essentially allows scientists to precisely change any of DNA’s four nucleotides, or “letters” (A, T, C, and G), into any other and insert or delete any stretch of DNA ― all more efficiently and precisely than previous versions of CRISPR.
As reported by STAT, Prime editing’s inventors, led by David Liu of the Broad Institute of MIT and Harvard and postdoctoral fellow Dr. Andrew Anzalone, say it has the potential to correct 89% of known disease-causing genetic variations in DNA, from the single-letter misspelling that causes sickle cell to the superfluous four letters that cause Tay-Sachs disease. All told, they report making 175 edits in human and mouse cells. “There are more than 75,000 DNA changes associated with genetic diseases,” Liu told reporters ahead of the online publication in Nature describing prime editors. “Collectively, they cover all of these.”
So far, Liu’s team has tested the prime editor on human cells and on mouse neurons. In both, the rate at which unintended spots in the genome were edited was extremely low: rates of such off-target edits were below 10%. Efficiency was high, typically 20% to 50%, depending on the kind of edit, and as high as 78%. Other CRISPR systems struggle to get into the double digits. And only 1% to 10% of prime-edited cells had unwanted insertions or deletions (“indels”) of nucleotides, compared to upwards of 90% for some older CRISPR systems.
While prime editing still faces some obstacles and will take years to fully integrate into mainstream gene editing treatments, it shows that development of CRISPR techniques continues to expand to new frontiers.
Along with prime editing, scientists have also recently found a way to adapt CRISPR to fight viruses in human cells using a Cas13 enzyme, as opposed to the traditional Cas9. Cas13 naturally targets viral RNA in bacteria and is also relatively easy to deliver into cells. In a recent study, Catherine Freije and Cameron Myhrvold, both at the Broad Institute of the Massachusetts Institute of Technology and Harvard University, programmed Cas13 to target three different single-stranded RNA viruses in embryonic kidney cells (as well as human lung cancer cells and dog kidney cells): lymphocytic influenza A virus (IAV), vesicular stomatitis virus (VSV), and choriomeningitis virus (LCMV), an RNA virus that mostly infects mice―but it is in the same family as the virus that causes Lassa fever, which is found in West Africa and is much more dangerous to study in the lab.
Researchers saw a twofold to 44-fold reduction in RNA, depending on which virus they were looking at and the time point. They also looked at how well the released RNA was able to go on and infect new cells. In most cases, they saw a 100-fold reduction in infectivity―and in some cases, more than 300-fold.
In a separate experiment, also conducted by the Broad Institute, scientists recently screened a suite of more than 350 human-associated viral (HAV) genomes to identify viral RNA sequences that could be effectively targeted by Cas13, identifying thousands of potential sites, in hundreds of viral species, which might represent effective targets.
If further experiments show this process works in living animals, Scientific American reports it could eventually lead to new antiviral therapies for diseases such as Ebola or Zika in humans.
2019 has seen huge success for the commercial viability of CRISPR outside of the lab as well. Results from sales of 2 major treatments produced by Novartis and Spark Therapeutics have been especially positive.
Sales of Novartis’ gene therapy for spinal muscular atrophy, Zolgensma, exceeded early forecasts, with about 100 infants treated in the drug’s first full quarter of commercial availability in the US. The treatment, which delivers a functional copy of an SMN1 gene to motor neurons, earned the Swiss pharma $160 million between July and September, a “big surprise” given some Wall Street predictions of just over $100 million, according to Evercore. Novartis aims to expand Zolgensma’s approval with clinical data in two- to five-year-olds. Novartis said Tuesday that roughly 99% of SMA patients who qualified for Zolgensma got coverage of the one-time therapy, although some had to go through an approval process to receive the drug. Novartis is now waiting on approvals for Zolgensma in Europe and Japan.
Sales of Spark Therapeutics’ Luxturna which targets genetic mutations contributing to blindness, amounted to about $21 million over the first six months of 2019. After injecting Luxturna, an active replica of the gene RPE65 is transferred to the retina cells through a modified carrier virus (which is harmless to humans), the layer in the rear part of the eye that identifies light. This enables the retina to produce the protein necessary for vision. Following US and EU regulatory registrations, Luxturna is also expected to continue expanding. Just this month, Saudi Arabia’s Food and Drug Authority (SFDA) approved of the treatment.
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THEME ALERT
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MRP added Long CRISPR to our list of themes on June 14, 2018 to capitalize on the transformational impact of gene editing technology on various industries. We are tracking the theme via the ARK Genomic Revolution Multi-Sector ETF (ARKG) which provides exposure to CRISPR, gene editing, and agricultural biology.
Since MRP launched the theme, ARKG has been quite volatile but, as of now, has underperformed the broad market, declining 5% against the S&P 500’s 8% gain over the same period. On a year-to-date basis, however, ARKG’s performance has been right on par with that of the SPY at 20% and 21%, respectively. We expect to see stronger performance ahead for CRISPR stocks as commercial viability increases.
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Gene Editing (ARKG) vs S&P 500 (SPY)
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Source material for today’s market insight…
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CRISPR
New CRISPR tool has the potential to correct almost all disease-causing DNA glitches, scientists report
A new form of the genome-editing tool CRISPR-Cas9 appears to significantly expand the range of diseases that could be treated with the technology, by enabling scientists to precisely change any of DNA’s four “letters” into any other and insert or delete any stretch of DNA ― all more efficiently and precisely than previous versions of CRISPR.
News about this “prime editing” began circulating among CRISPR-ites this month, when the inventors unveiled it at a meeting at Cold Spring Harbor Laboratory. Since then, “the excitement has been palpable,” said genetic engineer Fyodor Urnov of the University of California, Berkeley, who was not involved in the research. “I can’t overstate the significance of this,” he said.
Prime editing’s inventors, led by David Liu of the Broad Institute of MIT and Harvard and postdoctoral fellow Dr. Andrew Anzalone, say it has the potential to correct 89% of known disease-causing genetic variations in DNA, from the single-letter misspelling that causes sickle cell to the superfluous four letters that cause Tay-Sachs disease. All told, they report making 175 edits in human and mouse cells.
Read the full article from STAT +
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CRISPR
CRISPR-Cas13 Developed as Combination Antiviral and Diagnostic System
About two-thirds of the viruses that can infect humans, including deadly Ebola, Zika, and flu, have a single-stranded RNA genome, and for most of these types of virus there is no FDA-approved therapy.
Researchers have, more recently, adapted Cas13―which naturally targets viral RNA in bacteria―as a tool for cutting and editing human RNA, and as a diagnostic to detect the presence of viruses, bacteria, or other targets.
They next experimentally tested Cas13 activity in human cells infected with one of three distinct RNA-based viruses. The team first introduced the Cas13 gene and an engineered guide RNA into the cells. Then, 24 hours later, they exposed the cells to one of the three viruses. The results showed that after another 24 hours the Cas13 enzymes had reduced the level of viral RNA in the cell cultures by up to 40-fold. Encouragingly, further experiments indicated that eight hours after viral exposure, Cas13 had reduced infectivity of the flu virus by more than 300-fold.
Read the full article from Genetic Engineering & Biotechnology News +
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CRISPR
Geneticists retract study suggesting first CRISPR babies might die early
A study that raised questions over the future health of the world’s first gene-edited babies has been retracted because of key errors that undermined its conclusion.
The research, published in June 2019 in Nature Medicine, had suggested that people with two copies of a natural genetic mutation that confers HIV resistance (delta-32) are at an increased risk of dying earlier than other people. It was conducted in the wake of controversial experiments by the Chinese scientist He Jiankui, who had attempted to recreate the effects of this mutation in the gene CCR5 by using the CRISPR gene-editing tool in human embryos.
a flurry of studies that looked anew at the Nature Medicine research ― some of which analysed new data from genome databases comprising sequences from hundreds of thousands of people ― have rejected the results and find no evidence that people with the mutation die early.
A follow-up study, posted on a preprint server last week and based on genome databases that together include nearly 300,000 people from Iceland and Finland, also found no evidence that people with two copies of delta-32 die earlier than others.
Read the full article from Nature +
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CRISPR
Novartis gene therapy brings in $160 million, beating expectations
Zolgensma, a lifesaving treatment for infants and the world’s most expensive drug, has been used to treat 100 patients since its launch and brought in $160 million for its maker Novartis (NVS) last quarter, beating analysts’ expectations.
Zolgensma’s early success could be a worrying sign for Biogen, whose Spinraza has been the treatment of choice for SMA since its approval in 2016. More than 50% of patients treated with Zolgensma had switched over from Spinraza, according to Novartis, preferring a one-time therapy over Biogen’s every-four-months treatment.
Novartis expects revenue to grow. The company is counting on approvals for Zolgensma in Europe and Japan next year, and it recently presented data demonstrating the gene therapy’s effects on older SMA patients. Novartis is also counting on an expansion of newborn testing for SMA, which is currently done in 30% of U.S. states but could rise to 70% by 2020, according to the company.
Read the full article from STAT +
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Select a theme to see when and why we added it. Also included is a link to all recent Market Insight reports we’ve written about that theme, allowing you to track its progress.
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United States Chicago Fed National Activity Index Declines
The Chicago Fed National Activity Index fell to -0.45 in September 2019 from an upwardly revised +0.15 in the previous month and compared with market forecasts of -0.37. Production-related indicators contributed -0.37, down from +0.19 in August; sales, orders, and inventories contributed -0.02 from -0.01 in the prior month; and personal consumption and housing went down to -0.04 from a flat reading.
Click here to access the data +
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United Kingdom Retail Sales Continue Downtrend
The Confederation for British Industry’s monthly retail sales balance rose 6 points from a month earlier to -10 in October 2019 and beating market expectations of -20. Still, the latest reading pointed to the sixth consecutive month of decline in retail sales volume, the longest since the financial crisis amid ongoing digital disruption, layered on top of cost pressures from a weak pound and the cumulative burden of an outdated business rates regime.
Click here to access the data +
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United States Goods Exports and Imports Shrink
The US goods trade deficit shrank to USD 70.4 billion in September 2019 from USD 73.1 in the previous month, the advance estimate showed.
Imports declined 2.3 percent month-over-month. Exports fell at a slower 1.6 percent.
Click here to access the data +
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South Korea Business Confidence Inches Up
The Business Survey Index (BSI) on business conditions in the manufacturing sector in South Korea climbed by 1 point from the previous month to 72 in October 2019, while the outlook for the following month inched down 1 point to 72. After seasonal adjustment, the BSI gained 2 points to 73 and the outlook for the following month edged up 1 points to 74.
Click here to access the data +
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Eurozone Lending Broadly Higher
Loans to households in the Euro Area increased 3.4 percent from a year earlier to EUR 6.16 trillion in September 2019, the same pace as in the previous month and compared with market expectations of a 3.5 percent rise.
Meantime, credit to non-financial corporations advanced 3.7 percent to EUR 4.59 trillion, its slowest rate since January, easing from a 4.3 percent in August.
Private sector credit growth including households and non-financial corporations went up 3.7 percent in September, after a 3.8 percent rise in the prior month.
Click here to access the data +
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United States Dallas Fed Manufacturing Index Skids
The Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas fell to -5.1 in October 2019 from 1.5 in the previous month and well below market consensus of 1.4. The production index, a key measure of state manufacturing conditions, fell 9 points to 4.5, suggesting a moderation in output growth.
Click here to access the data +
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MARKET INSIGHT UPDATES: SUMMARIES
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Aviation
Boeing’s Max Crisis May Turn Pliant Congress From Friend to Foe
Boeing Co. President Dennis Muilenburg will testify before House and Senate committees overseeing aviation starting Tuesday over a pair of disasters that raise questions about the safety of the company’s marquee jet and could result in tightened oversight of the world’s biggest planemaker.
Political contributions from Boeing-affiliated political action committees and individuals more than doubled over the last decade to $4.3 million in the 2018 election cycle, according to figures from the Center for Responsive Politics, which tracks political funds. Boeing has emerged as the transportation sector’s largest contributor in the 2020 election cycle by giving nearly $1.2 million, more than FedEx Corp., Delta Air Lines Inc. and General Motors Co.
Lawmakers have indicated they want to ask whether Boeing had too much sway in certifying the 737 Max through a longstanding program at the U.S. Federal Aviation Administration that deputizes company employees to issue safety approvals on the agency’s behalf.
Earlier this month, a panel of global aviation regulators found that the FAA had little awareness of MCAS, and ultimately delegated safety-critical elements of the system to Boeing under the designee program.
Read the full article from Bloomberg +
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Banks
McKinsey’s Global Banking Report Finds A Majority Of Banks Not Economically Viable
McKinsey suggests the banking industry is approaching the end of the current economic cycle in less-than-ideal health. Nearly 60 percent of banks are not generating the cost of capital/trading below book.
Growth in volumes and topline revenues is slowing with loan growth of just four percent in 2017/18 – the lowest in the past five years and a good 150 bps below nominal GDP growth. Yield curves are also flattening. And, though valuations fluctuate, investor confidence in banks is weakening once again. All the while, the digital disruption of the entire industry continues unabated.
For challenged banks, just over 35% globally, the situation is dire and inorganic solutions seem to be the only game in town.
Read the full article from Forbes +
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Plant-Based
Beyond Meat turns its first profit, topping estimates, but shares sink
Beyond Meat on Monday reported its first quarterly profit and topped analysts’ expectations for its fiscal third-quarter earnings and revenue.
Beyond reported fiscal third-quarter net income of $4.1 million, or 6 cents per share, up from a loss of $9.3 million, or $1.45 per share, a year earlier. Analysts surveyed by Refinitiv were expected earnings of 3 cents per share.
Beyond CEO Ethan Brown told analysts that he has “every expectation” that the McDonald’s test will result in continued work with the fast-food giant. Despite increased competition, its grocery business saw net sales of $50.5 million during the busy summer grilling months. Brown said that the company has not seen any diminished grocery sales or shelf space as a result of new competition entering the space.
Impossible Foods, which is still privately held, began selling its meatless burgers in grocery stores in September and will continue making it available in more regions nationwide. Big Food companies and traditional meat producers have rolled out their own versions in grocery stores.
Read the full article from CNBC +
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| There is much more to this report! McAlinden Research Partners offers Hedge Connection members weekly access to the Daily Intelligence Briefing research for free – click here to view. (You must be logged in first). Not a member? Join today. McAlinden Research Partners is offering a complimentary one-month subscription to receive the Daily Intelligence Briefing – to Hedge Connection clients/friends. Activate yours by contacting Rob@mcalindenresearch.com and mentioning “Sent by Hedge Connection” |
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