A reasonable start to the week but like we were for a long time last year, it is going to take more than a good day to repair the damage.  That being said, it is also going to take rates to stop moving higher.  Ideally, they would start to decline but I also think even sideways trading on rates would be enough to help the sector but that would also require inflation to cool a little as well.

1. Some deals to talk about. I do not think that I mentioned this last week but LLY bought a fill/finish manufacturing facility.  LLY and NVO are quite active in building out manufacturing capabilities, which makes sense.  NVO has already bought 3 facilities and this is LLY first.  We do not know exactly how much capacity is being increased with these deals, but I would not be surprised to see more of these in the coming year.

2. The big news yesterday was Ono buying DCPH for $25.60 ($2.4B), which was about a 75% premium. This is an oncology deal and unlike some of the other recent deals is a TKI and not an ADC or radioligand.  The small molecule TKI oncology space was pretty hot a couple years ago but it has cooled with ADC and radioligands becoming a lot more popular.  It is nice to see both a TKI as well as a small molecule company get bought with large premium.

3. The other interesting aspect of this deal is that the bulk of the value is coming from a phase II asset and so clinical stage assets are now seeing some interest. A lot of deals have been for commercial or very near commercial assets and this broadening into earlier stage asset is good (although phase II oncology is not necessarily that far away from potential commercialization but still this is a little earlier).  I am not sure if the move yesterday was from the M&A or simply a much needed bounce from the selling but it never hurts to have strong M&A trends, which will really help to the upside when the macro pressures ease.

4. So we made it past the bulk of large cap earnings and there were some clear winners and losers. The biggest loser was BMY as we talked through those earning last week and it ended down 8.3%.  That was a pretty clear leader to the downside with ABBV being the second worse but it was “only” down 4.1% on the continued erosion of Humira.  Surprisingly NVS was third worse at -3.1% but I saw their earnings as pretty strong with a beat and a raise.

5. We did have some solid winners with BIIB up there at +7.6% with the Aduhelm momentum potentially starting. That being said, BIIB was not the biggest winner.  It was AZN at 9.9% as it reported 19% year on year growth.  That is pretty rare to see a large pharma at that level of growth, which explains the strong move.  You also saw SNY and MRK higher at 5.1% and 4.3% respectively.  While there was a mix of positive and negative moves, the net effect was a definite increase in the market cap of the reporting companies but a lot of that came from AZN.

I will end it here as we still have some earnings to come this week and perhaps we can build off of the early week momentum.