‘The Great Lockdown’
IMF projections
The International Monetary Fund expects the global economy to contract by 3 per cent in 2020 – marking the worst recession since the Great Depression. After the ‘Great Lockdown’, a partial recovery is projected for 2021 – but the level of gross domestic product is expected to remain below the pre-coronavirus trend, “with considerable uncertainty about the strength of the rebound”. In a baseline scenario, assuming that the pandemic fades in the second half of this year, the economy is expected to expand by 5.8 per cent in 2021 as economic activity returns to normal.
GSK and Sanofi join forces
Possible vaccine
GlaxoSmithKline (GSK) and French pharma giant Sanofi (FR:SAN) are joining forces to develop a Covid-19 vaccine. Sanofi will contribute its S-protein Covid-19 antigen to the partnership, while GSK will contribute its pandemic adjuvant technology. GSK claims that the use of an adjuvant – a substance that enhances the body’s immune response to an antigen – can help in a pandemic situation, because it is able to reduce the amount of vaccine protein needed per dose. If successful, the companies would hope to make the vaccine available in the second half of 2021.
Blackstone invests in Alnylam
$2bn injection
Private-equity firm Blackstone (US:BX) is injecting $2bn (£1.6bn) into Alnylam Pharmaceuticals (US:ALNY) to provide the latter with the cash it needs to bring its late-stage drugs onto the market. The largest part of the deal is a $1bn investment by Blackstone Life Sciences in exchange for 50 per cent of the future royalties from Inclisiran, a drug to treat high cholesterol that is expected to be approved for use in the US by the end of the year. Only $100m is being used to purchase Alnylam’s newly issued shares, to avoid any significant dilution of the company’s existing shareholders.
Contact-tracing apps
Apple and Google lead the way
Tech giants Apple (US:AAPL) and Alphabet (US:GOOGL) are coming together to release tools that will help governments and non-government organisations create contact-tracing systems, potentially fast-tracking the creation of apps that notify users if they come into contact with someone who has coronavirus. If successful, the technology could help to stop the spread of Covid-19 when countries emerge from lockdown. But, to work, the project needs to be widely adopted; and, it relies on governments adopting widespread testing. There are also questions about whether all nations will support the idea, because of data privacy concerns.
Vision Fund suffers
Softbank to report loss
SoftBank expects to record a staggering $13bn full-year operating loss, after the value of investments in its flagship ‘Vision Fund’ contracted amid a “deteriorating market environment”. Within its Vision portfolio, Softbank holds stakes in transportation tech companies such as DiDi, Grab, Ola and Uber – all of which depend on consumers being able to leave their homes and travel between locations. Yet the fund is also invested in the likes of Slack – which facilitates home-working and communications – and Grofers, which delivers groceries to customers’ doorsteps. Such organisations should, arguably, be more resilient to lockdown measures.
NMC in administration
Beleaguered operator
Alvarez & Marsal have been called in as administrators for struggling hospital group NMC Health (NMC). The appointment was made by the High Court of England and Wales, in response to a petition presented by one of NMC’s largest creditors – Abu Dhabi Commercial Bank. Things have gone from bad to worse for NMC – starting with short-seller Muddy Waters issuing a bear report on the group in December. Since then, evidence of suspected fraudulent behaviour has emerged; billions in undisclosed debt identified; and questions have arisen about the number of shares held by NMC’s major investors.
Insurers told to pay up
But cover limited
The Financial Conduct Authority (FCA) has ordered insurers to pay out claims from companies for business interruption cover, or explain themselves to the watchdog. If there was reasonable grounds to pay out only part of a claim, insurers must make an interim payment, the FCA said in a letter to insurers. If they do not they must explain how they have reached their decision and how it was a “fair outcome for customers”. However, most business interruption policies held by small- and medium-sized businesses only had basic cover, which did not include pandemics, the regulator’s interim chief executive Christopher Woolard said.
The Office for Budget Responsibility (OBR) has warned that UK gross domestic product (GDP) could contract by more than a third during the second quarter of 2020 alone, if people’s movements (and, therefore, their economic activity) were heavily restricted for three months.
That said, in this scenario, GDP would bounce back quickly afterwards. Meanwhile, the OBR projected that unemployment would rise by more than 2m to 10 per cent in the second quarter – but found that this would decline more slowly than the economy recovered.
