EU HEALTHCARE: Healthcare: Week in Review
• Baxter cut its dividend to 1c. This should free $300m annual cash flow to reduce net leverage. The company has a 3x leverage target ultimately. Equity was -18% at one point but bonds fared much better. Note, the 101 CoC Put on the EUR 29s if PE takes an interest.
• Novo Nordisk is bidding $9bn for Metsera, of which $6.5bn upfront. Follows the recent $4.5bn bid for Akero. Combined, we see Gross leverage going from 0.7x to 1.0x, some of which will be mitigated by the company’s substantial Free Cash Flow of ~$12bn. Pfizer had previously been expected to buy Metsera. If it doesn’t counter-bid, it may be forced to buy another weight-loss asset.
• Thermo Fisher buying Clario for $8.875bn cash. The company recently also bought Solventrum’s filtration business for $4bn. We see leverage rising from 3.3x to 3.7x and will require debt funding. Moody’s may withdraw the Pos Outlook.
• Novartis agreed to buy Avidity for $12bn which is less than 0.5x EBITDA but may see issuance. Novartis had good results and generated $15.9bn FCF in 9 months +26% y/y much of which is committed to shareholders.
• Philips received an FDA Warning letter for 3 manufacturing plants.
• Sanofi raised $3bn Blueprint financing following €1.5bn in June.
• Results from Merck, Eli Lilly, Sandoz, GSK, Galderma, AbbVie, were all solid. Revvity and Takeda were neutral which left equities a little lower.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US DATA: Final Manufacturing PMI Unchanged From Flash, Still Shows Modest Growth
The final September manufacturing PMI reading was unchanged from the flash report at 52.0 (53.0 prior). The initial reading had been in line with consensus and both suggest a manufacturing sector in modest if slightly weaker expansion in the month, alongside elevated if somewhat softening price pressures. The sustained +50 readings have been cited by some analysts as reason for optimism on upcoming ISM reports (which have been lagging PMI readings for several months).
- From the S&P Global report: "The latest survey showed a weaker gain in production, whilst new order book growth softened as tariffs continued to weigh on exports. Tariffs and broader policy uncertainty also dampened firms’ assessment of the business outlook, but expectations of manufacturing production reshoring and hopes of better demand in the year ahead meant sentiment remained positive overall."
- On inflation: "Cost pressures meanwhile were again elevated, with tariffs reportedly the dominant factor pushing up overall purchase prices. Whilst firms sought to pass on higher supplier costs to clients, competitive pressures and signs of faltering demand meant output charge inflation softened to an eight-month low."
- The final September services / composite readings are out Friday.
CANADA DATA: Manufacturing PMI Suggests Poor Activity, Softer Price Pressures
Canadian Manufacturing PMI softened in September, to 47.7 (no consensus) from 48.3 prior in what was an overall weak report. August had marked a 7-month high for the index, with the latest move lower keeping it below the 50 mark for an 8th consecutive month.
- The report showed poor demand, production, exports, and employment in the month, suggesting that a nascent pickup in activity over the summer (highlighted by better-than-expected GDP in July followed by anticipated flat growth in August) lacks momentum, at least in the beleaguered manufacturing sector. Per the S&P Global report:
- "Both output and new orders contracted in September, and at quicker rates than in August. Panellists continued to bemoan the adverse impact on demand of tariffs and wider economic uncertainty. Production and new orders have now fallen for eight months in a row. New export sales were again especially hard hit due to tariffs, with firms again pointing to continued weakness in sales to the United States. The lack of overall new orders and cuts to production meant firms generally chose to not replace leavers at their plants. Some firms also reported enforced layoffs. The net result was a decline in employment for an eighth successive month, although the rate of contraction was modest and the softest since February."
- While "Tariffs meanwhile remained an ongoing source of cost pressures in September and "Input prices again rose sharply", "the rate of inflation eased noticeably since August and was the second-lowest of the year so far." And importantly for the BOC's consideration, "Manufacturers struggled to pass on their higher input costs
to clients in the form of increased selling prices during the month. This was highlighted by the latest data on output charges, which increased only modestly in September and to the softest degree in nearly a year. Panellists attributed their lack of pricing power to market competition and a soft demand environment." - We get the Services/Composite PMI figures on Friday.
USDJPY TECHS: Clears Support At The 50-Day EMA
- RES 4: 151.62 61.8% retracement of the Jan 10 - Apr 22 bear leg
- RES 3: 151.21 High Mar 28
- RES 2: 150.92 High Aug 1 and a key resistance
- RES 1: 148.84/149.96 High Sep 30 / 26 and the bull trigger
- PRICE: 146.64 @ 14:45 BST Oct 1
- SUP 1: 146.59 Intraday low
- SUP 2: 146.36 Trendline support drawn from the Apr 22 low
- SUP 3: 145.49 Low Sep 17 and a pivot support
- SUP 4: 144.23 Low Jul 7
USDJPY continues to weaken as the retracement from last week’s high print extends. The move down has resulted in a clear breach of the 50-day EMA, at 147.60. This signals scope for a deeper retracement and exposes the key short-term pivot support at 145.49, the Sep 17 low. A clear break of this level would cancel a recent bull theme. On the upside a reversal higher would refocus attention on resistance at 149.69, the Sep 26 high and a bull trigger.
