💊 Amgen’s $28B pharma bet
Hey Snackers,
If the Grinch doesn’t steal Christmas, the goblins will. Oxford Dictionary’s word of the year is “goblin mode,” a Twitter-viral term defined as being “unapologetically self-indulgent, lazy, slovenly, or greedy.” Like taking a Zoom call in jammies from bed with a tropical background.
The S&P 500 gained 1.4% yesterday ahead of today’s November inflation numbers and tomorrow’s big Fed meeting. The central bank’s expected to hike rates by 50 basis points, breaking a streak of jumbo(er) 75 bps hikes.
Amgen strikes the year’s biggest healthcare deal as drugmakers splurge on rare treatments to boost sales
Double dose of profits… Healthcare giants are shelling out big bucks to bolster their drug portfolios. Yesterday, biotech behemoth Amgen signed a deal to buy Horizon Therapeutics for $27.8B — in this year’s biggest healthcare merger. Horizon specializes in rare-disease treatments, and its new thyroid eye disease drug, Tepezza, helped double revenue last year. Over the past month, Tepezza’s success had fueled takeover bids from pharma titans like Sanofi and Johnson & Johnson.
- High risk: Amgen plans to pay $116.50/share as part of the deal — a nearly 20% premium from the stock’s pre-merger-announcement price.
- High reward: Horizon thinks Tepezza could haul in $4B+ in sales if it’s approved outside the US. It could also help Amgen offset lost revenue from its biggest drugs, whose patents are about to expire.
Billion-dollar buying spree… Pharma companies frequently look for new sources of revenue to make up for lost patent protection on blockbuster drugs (patents typically last 20 years). While deal making has slowed this year, some healthcare heavyweights have used the broader sell-off to snatch up smaller drugmakers at a “discount.” Just this year: J&J struck a $16.6B deal to buy heart-device maker Abiomed; Pfizer agreed to buy Global Blood Therapeutics for $5.4B; and Merck acquired blood-cancer biotech Imago BioSciences for over $1.3B.
Rare treatments command high prices… Of the 7K known rare diseases, 95% have no approved treatment. Rare treatments may have a smaller addressable market, but they can lead to a treatment monopoly that can lure higher payouts from insurance companies — and patients.
Americans ball out in Europe as the strong US dollar puts foreign luxuries on sale
“I could have my Gucci on”… That Meghan Trainor song you keep hearing in every single TikTok video is the current soundtrack for Americans in Europe. They’re flocking to designer stores across the old continent to take advantage of holiday deals, courtesy of the strong dollar. Since the Fed began hiking rates, the USD has strengthened against other currencies.
- Europe’s on sale for Americans. Last year, a buck would get you 0.82 euro. Today, you can exchange $1 for about €0.95. (Read: one dollar buys more euros.)
- American tourists in Europe spent, on average, 1.2K euros per transaction during the week of Black Friday, up from 500 euros three years ago.
“I could wear my Louis Vuitton”... in Paris with John. Luxe retailers like Kering-owned Gucci and LVMH-owned Louis Vuitton are raking it in thanks to American splurging. That’s helping them make up for the lack of high-rolling Chinese tourists (see: China’s Covid restrictions). For Americans, it’s a triple savings whammy:
- Strong Washington: The dollar is hovering at its strongest exchange rate in two decades compared to the euro.
- Home advantage: Since many luxury goods are made in Europe, they tend to be cheaper there (no US import costs). American shoppers are paying an average of 38% more for the same designer clothes bought in the US (vs. 20% historically).
- Tax bonus: Tourists who spend a certain amount at an EU store can often claim a refund on the sales tax (think: saving hundreds in tax on a designer bag).
Strength is a two-sided coin… The strong dollar is helping inflation-battered European retailers, who are dealing with low consumer confidence at home. On the flip side, it discourages tourism (and spending) in the US. That could make an economic downturn worse.
Heard on the Block: "depeg"
🕺 Like "Dance Dance Revolution" when you can’t keep up…
Stablecoins are a type of cryptocurrency whose value is pegged to another asset. For example, Tether’s USDT (the biggest stablecoin) is pegged 1-to-1 to the US dollar. But stablecoins have "depegged" in the past, losing that 1-to-1 value. Binance’s CEO reportedly accused FTX founder Sam Bankman-Fried of trying to depeg USDT (which could’ve been a crypto disaster) as his exchange collapsed.
What else we’re Snackin’
- Twist: Former FTX CEO Sam Bankman-Fried was arrested yesterday by Bahamian authorities. SBF, whose companies reportedly lost billions of customer funds, had been set to testify (remotely) before Congress today.
- Cap: Grubhub and DoorDash want to change an NYC law that limits the fees they can charge restaurants (capped at 15%, plus listing/card fees). If successful, platforms could charge restos for things like marketing.
- Forecast: Oracle shares spiked after the cloud company beat revenue and profit estimates, with quarterly sales up 18% from last year. CEO Safra Catz cited strong enterprise-software growth.
- Chop: Blue Apron said it's laying off 10% of its staff. The meal-kit-delivery company saw its market cap plunge to $30M this year from $1.9B in 2017 as appetite for kits faded.
- Choo: France banned short passenger flights that have train-trip alternatives under 2.5 hours, and other EU countries are likely to follow. The airline industry is pushing back against the emissions-fighting plan.
Tuesday
- November consumer price index
- Earnings expected from Braze
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