The R&D World Index (RDWI) for the week ending April 15, 2022, closed at 5,057.72 for the 25 companies in the RDWI. The Index was down -4.13% (or 218.04 basis points) from the week ending April 8, 2022. Two of the 25 RDWI members gained value from 0.45% (General Motors) to 2.86% (Ford Motor Co.). Twenty-three of the 25 RDWI members lost value from -0.23% (Novartis) to -7.77% (Alibaba).
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The U.S. Department of Labor last week reported that the Consumer Price Index (CPI) rose in March at its fastest pace since December 1981–8.5%, up from the 7.9% annual rate in February 2022. This marked the sixth consecutive month that the CPI has been above 6%, well above the Federal Reserve’s 2% target. The core price index, which excludes food and energy data, was up 6.5% in March, exceeding the 6.4% rise seen in February. Analysts were relieved to see that there was not any data suggesting that the CPI will accelerate further in the near future. The analysts reasoned that the inflation rates will cool off as they start to reflect comparisons with those in mid-2021 when inflation first became a serious economic concern. They see that the inflation surge that started in early 2021 is close to a peak. This reasoning was further supported with a slowing rise in the monthly core index. In similar news, the United Kingdom’s Office for National Statistics reported last week that UK inflation rose to a 30-year high of 7% in March 2022. Economists expect an even higher rise in April due to an increase in utility bills owing to effects of the Russia-Ukraine war.
Great Wall Motors (GWM), Baoding, China, last week announced that it invested about $1.5 billion in R&D in 2021. Compared with 2020, this was a 76% year-on-year increase and represented about 6.6% of the company’s operating revenue. Much of this R&D increase was dedicated to the development of new automotive hybrid propulsion systems and intelligent driver-assistance systems. GWM also said it would continue to expand its R&D staff to 30,000 and its R&D budget to more than $16 billion over the next five years.
Halozyme Therapeutics, San Diego, announced last week that it will buy specialty pharmaceutical company Antares Pharma Inc., Ewing, New Jersey, for about $1 billion which is expected to strengthen Halozyme’s focus on drug delivery technologies. Healthcare mergers and acquisitions such as this have slowed from $160 billion in 2021 to just $72 billion in 2022 in similar timeframes. Global pharma deals across all sectors are down about 28% from last year, according to FactSet.
R&DW Index member General Motors, Detroit, announced last week that it has finalized a multiyear agreement with Glencore PLC, Baar, Switzerland, to source cobalt for use in the production of electric automotive batteries. This deal came one day after R&DW Index member Ford Motor Co., Dearborn, Michigan, announced it had signed a preliminary agreement with an extraction operation in Argentina to buy lithium, another key material used in battery production. Battery-grade cobalt prices have roughly tripled over the past three years, while lithium carbonate prices have increased by 670% over the same period. Tesla Motors, Austin, Texas, tweeted last week that the rapid rise in lithium prices may necessitate the EV company getting into the mining and refining of lithium at scale, unless costs improve.
R&DW Index member Intel, Santa Clara, California, last week announced that it is planning fundamental changes in its computer chip manufacturing process to meet its net-zero emissions goal by 2040. The company will need to look fundamentally at the chemistry to come up with new processes which have zero global warming potential, according to the company’s chief sustainability officer. This will involve a cross-industry R&D effort to prevent the release of chemicals and put alternatives into widespread use.
R&DW Index member Honda Motors, Tokyo, announced last week that it plans to spend $64 billion on R&D over the next decade to develop 30 new electric vehicles (EVs) by 2030. The company wants to produce 2 million EVs by 2030 and will create a dedicated EV production line in North America where it will procure Ultium batteries from General Motors. Honda also plans to create a separate joint venture company for battery production in North America, aside from its GM partnership.
The world’s largest contract semiconductor chip manufacturer, Taiwan Semiconductor Manufacturing Co. (TSMC) last week announced that the global chip shortage was likely to continue, with tight production capacity for all types of chips. The Russia-Ukraine war and China’s lockdown due to an increase in COVID-19 infections are the latest factors pressuring the global supply chain. TSMC’s current production capacity is not enough to support their customers according to its CEO. This is despite a 30% increase in revenue in 2022 over 2021. TSMC counts Apple and Intel as its leading customers.
Efforts by the U.S. and other countries to solve their supply chain problems by boosting domestic production are not likely to be effective, according to a report released last week by the International Monetary Fund (IMF), Washington, D.C. Reshoring policies are likely misguided, according to the report, adding that supply chain resilience to shock is better built by increasing diversification away from domestic sourcing of inputs. This analysis is based upon studying how economies behaved during the past two years of rolling shutdowns as COVID-19 surges hit different countries at different times.
GlaxoSmithKline, Brentford, UK, announced last week that it will buy Sierra Oncology Inc., Vancouver, British Columbia, Canada, for $1.9 billion. The deal is focused on Sierra’s drug, momelotinib, which treats patients with a rare bone marrow cancer and have developed anemia. Sierra plans to submit the drug to the U.S. Food and Drug Administration in the next several weeks and expects to market it later this year. While changing focus over the past several years to higher value drugs, Glaxo plans to spin off its large consumer healthcare business in July, which has been rebranded as Haleon.
R&D World’s R&D Index is a weekly stock market summary of the top international companies involved in R&D. The top 25 industrial R&D spenders in 2019 were selected based on the latest listings from Schonfeld & Associates’ June 2020 R&D Ratios & Budgets. These 25 companies include pharmaceutical (10 companies), automotive (6 companies) and ICT (9 companies) who invested a cumulative total of nearly 260 billion dollars in R&D in 2019, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D World’s 2021 Global R&D Funding Forecast. The stock prices used in the R&D World Index are tabulated from NASDAQ, NYSE, and OTC common stock prices for the companies selected at the close of stock trading business on the Friday preceding the online publication of the R&D World Index.
What’s the “relief” from all the purchasing power the Federal Reserve and the Congress created?