Sparks Newsletter: Breakthroughs and brick walls ⚡

Eureka

Welcome to Sparks, your weekly breakdown of some of the most interesting market news.

Here’s what sparked our interest this week:

• Historic developments in Alzheimer’s treatments
• Uber urged to report complaints of sexual assault
• Elon’s Twitter deal is back on
  

Forget me not

Biogen (NASDAQ: BIIB) and Eisai announced encouraging results last week from a clinical trial for patients with Alzheimer's disease: a monoclonal antibody treatment called Lecanemab reduced cognitive decline by 27% in people with early-stage Alzheimer's compared to those on a placebo after a year and a half. Multiple drugmakers have tried and failed to develop a viable treatment for the brain-wasting condition, and this trial may give hope to the roughly 55 million individuals worldwide who are currently affected. A breakthrough could also provide a significant boost to competitors Roche and Eli Lilly (NYSE: LLY), who are carrying out similar studies.

There’s no cure for Alzheimer’s disease and the treatments currently available are limited, costly and, in some cases, controversial. The results of this test have given new credence to the ‘amyloid hypothesis’ which posits that sticky plaques found in the brains of dementia sufferers contribute to brain cell damage and cognitive impairment. Previous drugs have managed to reduce levels of amyloid in the brain without slowing progression of the disease. This new treatment is, apparently, the first to do both. Another Biogen drug that targets amyloid plaques, Aduhelm, was approved by the Food and Drug Administration (FDA) in 2021, without strong evidence that it slows progression of the disease. Before Aduhelm, US officials hadn’t greenlighted an Alzheimer’s drug for almost 20 years. Eisai, Biogen’s partner in the Lecanemab development, is seeking FDA approval via an accelerated pathway, with a decision likely in early January. It plans to have the medicine fully approved and commercialised in the United States, Europe, and Japan by the end of 2023.

Another pharmaceutical company, Cassava Sciences (NASDAQ: SAVA), is currently trialling a drug, Simufilam, that it says can effectively treat Alzheimer’s disease. CEO Remi Barbier has made claims that Simufilam is ‘the first drug — to our knowledge — that can restore cognition’. The huge implications a drug like this would have, and its profit making potential, led to SAVA stock becoming a meme stock and surging in value in early 2021, with devotees of the company referring to themselves as ‘SAVAges’. However, doubts have since emerged about the reliability of the data Cassava was basing its claims on. In July 2022, the US Justice Department opened a criminal investigation into the company over allegations it manipulated research results for the drug.

The numbers

• 12 - The number of high profile Alzheimer’s disease trial failures in the last 20 years, as reported by Reuters
  
• 139 million - The potential number of people globally that could be affected by Alzheimer’s disease by 2050 if an effective treatment is not developed
  
• $56,000 - The initial cost per year for Aduhelm treatment. Following its controversy and the reluctance by some payers to cover the drug, the cost has since been cut to $28,000
  

Uber the law

Sam Liccardo, the mayor of San Jose, and associate district attorney Terry Harman are urging Uber (NYSE: UBER) to notify law authorities of all instances of sexual assault so that they can be thoroughly investigated. Uber has so far refrained from doing so, arguing sexual assault victims should be the ones to determine whether to share their stories and with whom. Uber has stated: ‘Our position wasn’t created in a vacuum. It was guided by the foremost experts on this issue and by survivors themselves, all of whom have consistently told us that assuming someone wants the police involved, or pressuring them to do so, risks re-traumatizing them’.

Harman has said that, by investigating and handling all complaints internally, the ride-hailing giant ‘has essentially carved out its own justice system’. In order to hold offenders accountable and stop them from harming other residents, Liccardo said he plans to call this week for a new municipal policy requiring Uber and other ride-sharing firms to report sexual assault cases to law authorities. Both Uber and Lyft (NASDAQ: LYFT) have recently made data available that shows how many assault and harassment occurrences have been reported to the companies and they have also begun exchanging information about risky drivers. However, some people think they should go further.

Some sexual assault survivors have sued major ride-hailing businesses over the last decade, alleging that they failed to protect riders. All of these cases are still in the early stages, and none have yet gone to trial. On 29 September 2022, it was also reported that Uber had lobbied behind the scenes against the SPEAK Out ACT. This legislation is an attempt to limit the widespread use of nondisclosure agreements, also known as ‘gag orders’, which have created continuing barriers for workers alleging sexual harassment and assault, even as more protective state laws have emerged in the post-#MeToo age.

The numbers

• 1,243 - How many complaints of sexual assault on California rides Uber received between 2017 and 2018
  
• At least 40 - The number of women who have filed sexual assault lawsuits against Uber since September 2021. 13 women sued Lyft in August. None of these suits have yet gone to trial
  
• $59 million - The amount a judge ruled Uber should pay after refusing to comply with requests from California regulators for information about sexual assault claims. The company eventually reached a $9 million settlement in 2021
  

In other news

Some other sparks that have been flying this week:

• Taking over - Elon Musk has made a screeching U-turn and decided that he will, in fact, go ahead with his buyout of Twitter (NYSE: TWTR). After a back and forth that felt like it might well have continued eternally, Musk proposed to Twitter on 3 October 2022 that he would abide by his April 2022 agreement to buy the company for roughly $44 billion, if Twitter dropped its litigation against him. Following the change of heart, Musk tweeted enigmatically that the takeover would be an accelerant to creating ‘X, the everything app’.
  
• Swoosh - Nike (NYSE: NKE) reported a 22% decrease in net income to $1.5 billion for the three months ending in August in its quarterly update to investors. The sneaker giant, which generates more than half of its income outside of North America, also increased its estimate of the impact of the stronger dollar on its annual revenue to $4 billion. The amount of merchandise in transit grew as a result of supply chain challenges, causing overall inventories to grow by 44% to $9.7 billion.
  
• Juiced - A single charging port for smartphones, tablets, and cameras will become compulsory by 2024 in the EU following a vote by the European Parliament. The vote confirms an earlier agreement among EU institutions and will make USB-C connectors used by Android-based devices the EU standard, forcing Apple (NASDAQ: AAPL) to change its charging port for its devices. This could be a challenge for the company and its infamous ‘walled garden’. According to an estimate by the European Commission, the EU's executive body, consumers would save around €250 million with the single charger.
  

Top movers

Selected stocks are the three best and three worst performing stocks for the last seven days prior to the creation of this newsletter based on the stocks available to trade via the Revolut app in the UK.

Gainers

MYOV - Myovant Sciences (NYSE: MYOV) has seen its stock gain more than 37% in the period between 28 September 2022 and 5 October 2022. The company’s stock spiked on 3 October 2022 after reports that the company had rejected Simitovant’s $2.4 billion acquisition offer. Based in the United Kingdom, Myovant Sciences focuses on prostate cancer treatments for men and infertility in women.

AKRO - Shares in Akero Therapeutics (NASDAQ: AKRO) have gained more than 32% in the period between 28 September 2022 and 5 October 2022. The company has recently released topline data evaluating the efficacy and safety of its lead product candidate Efruxifermin (EFX) in patients with pre-cirrhotic non-alcoholic steatohepatitis (NASH), fibrosis stage 2 or 3 (F2-F3). The data showed EFX doses achieved statistical significance on primary and secondary histology endpoints after 24 weeks.

VSAT - ViaSat (NASDAQ: VSAT) has seen its shares rise by around 32% in the period between 28 September 2022 and 5 October 2022. The company, which is a provider of high-speed satellite broadband services and secure networking systems covering military and commercial markets, has recently agreed to sell a large portion of its military business to L3Harris Technologies (NYSE: LHX) for nearly $2 billion.

Losers

APE - The value of AMC Entertainment Preferred Equity Units (NYSE: APE) has fallen by around 27% in the period between 28 September 2022 and 5 October 2022. AMC Entertainment distributed preferred equity units with the ticker ‘APE’ as a dividend to its stockholders in August (the ticker name is a reference to its being a meme stock). Any holder of APE units may convert their shares into AMC common stock on a one-to-one basis through this stock split. On 26 September, AMC announced it was authorising an additional selling of 425 million APE units. If these shares are converted into common stock, it could be dilutive for existing AMC shareholders.

AMPS - Altus Power (NYSE: AMPS) has seen shares slide around 18% in the period between 28 September 2022 and 5 October 2022. On 3 October, Altus Holdings Ltd. Gso, a major shareholder in Altus Power, sold 7 million shares of the company’s stock.

CCL - Cruise line company, Carnival Corp (NYSE: CCL), has seen shares lose around 24% of their value in the period between 28 September 2022 and 5 October 2022. Cruise operators have been running at a loss since the beginning of the pandemic and Carnival has struggled to bounce back. On 30 September, the company forecast a loss in the fourth quarter after it reported results for the third quarter that fell short of Wall Street estimates. Higher fuel prices and cheaper fares have offset a rise in bookings.

Next week

Earnings reports are expected from PepsiCo (NASDAQ: PEP), Delta Airlines (NYSE: DAL), JPMorgan (NYSE: JPM), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C).

That’s all for this week!

Thanks,

Team Revolut

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