Markets: Happy Wednesday

Happy Wednesday. I hope you are not as tired as I am, from trying to figure out who won the election by watching the poll results come in. A big disappointment is that Ohio, where my family has 7 voters who voted and caucused for Biden, seems to have come in for Trump. My relatives live in the cities and not the boondocks.

Wall Street seems to be relieved that the Blue Wave which may yet happen will not give the Democrats controls of the Senate. And Wall Street seems to think that Pres. Trump's claim that he won and calling for counts to stop is being brushed off as Trump being Trump, although the risk if he tries anything is huge.

Despite fatigue, we have a bunch of company reports today so enough politics;

*Finnish Sampo Oyj reported on Q3 today in euros with profits before taxes of 632 mn for the quarter. In 2019 that quarter saw a loss of euros 116 mn so the comparisons looked good. But the details did not. Nine-mo total profit was euros 1.054 bn, before taxes, vs 1.073 bn in the prior year, down 2%. Earnings per share were euros 1.51 up 4% from prior 9-mos—but with a caveat discussed below.

Profits were very much dependent on Nordea whose net profit for the YTD came to euros 299 mn, vs prior 9-mo level of euros 147 mn. The problem is that SAXPY is under pressure from European Union competition watchdogs to lower its stake in Nordea. Hence Sampo's “total comprehensive income” which counts a market value of its assets came to euros 665 mn in the 9-mo down from euros 879 in the prior period. All other subs lost money however determined, with Topdanmark down a massive 53% in the period. The hope is that Nordea will be able to pay out a dividend for 2019 which the EU will let Sampo book, but this may not happen. All its other lines saw losses, If was down 6% to euros 616 m; Topdanmark down 53% to euros 85 mn; Mandatum down 53% also to euros 100 mn and for the first time its with-profits reserves with guarantees of 4.5% and 3.5% fell below euros 2 bn. .

Other indicators of trouble were the “Other Comprehensive Income” marked to market EPS figures down 32% in the 9 mos to euros 1.12/sh from 1.44/sh last year when Nordea had a euros 155 mn loss from distribution of shares. Net asset value per share fell to euros 18.63 from euros 20.71 a year earlier. Return on equity at the group level was 7% in the 3 quarters vs 9.2% a year earlier.

Another red flag was higher staff levels, 10,309, 540 more hands-on board. The key insurance metric, combined ratio, fell modestly to 82.4% from the prior 9-mo level of 84.3%. However, there was a hit from a discount rate cut in Finnish annuity reserves and if that had been counted the combined ratio would have been only 80.9%. The discount ratio shows how much an insurers earnings from premiums and investments cover its liabilities, the higher the better.

There is a bit of good news. Sampo and Rand Merchant Holdings are planning to take over Hastings Group Holdings plc and all approvals having been given by regulators, the court hearing to allow the cash offer for the UK firm to proceed will take place Nov. 13. All my calculations are subject to oversight by our insurance specialist Harry who is currently glued to his TV.

The financial sector is in a funk overall because of the US election uncertainty. Both our Japanese Warren Buffett stocks, Sumitomo Mitsui (SMFG) and Mitsubishi (MUFG) are down and Banco Santander (SAN) is off 3.5%.

Energy

*Another reporting company was Canadian uranium miner Cameco. Its adjusted loss was 20¢/sh (Can.) in the quarter versus a consensus forecast of 1 cent which excluded special items. Its stock plummeted 6.2%. Its overall loss adjusted for non-recurring gains came in at 15 loony ¢. The net loss attributed to shareholders was off from last year, at C$61 mn, versus 3 loony cents or a total of C$13 mn.

Revenue rose to C$379 mn, up 25% from C$303 mn the year before, but missed the consensus forecast of C$392.85 mn. CEO Tim Gitzel blamed the shut-in of its mines from the virus for the downtrend. The shut-in generated care and maintenance costs of C$18 mn from the suspension of production at Cigar Lake because of COVID-19 risk.

He also thinks that CCJ will gain from the suspension of Russian uranium supplies to US utes, which will give the Canadian firm a lot of business. As a low-carbon electric power production input, nuclear power is needed. Hence CCJ is working on long-term contracts to sell its fuel from the reopened McArthur River-Key Lake mines. CCJ declared a divvie of 8 loony cents per share payable Dec. 15 to shareholders of record Nov. 30.

*BP plc (BP) is selling its spectacular Thames-side HQ building in London for £236 mn, about $305 mn.

*Chinese electric vehicle maker NIO (NIO) gained 5.1% today to a new record high at $37.31.

*Engie of France, now controlled by Suez, has been ordered by the French government, a minority Engie shareholder, to halt its plan to invest in Next Decade's Rio Grande LNG business because it violates French environmental concerns.

Drugs

*Zymeworks of Canada reported its Q3 results. Revenue of $2.6 mn (US) for the quarter came from partner supports and payments which last year were boosted by $7.5 mn from Bristol-Myers (BMY) which did not repeat. Meanwhile, R&D spending rose to $53.5 from a mere $29.3 mn in Q3 2019, up from more clinical trials and production for zanidatamab, new hires, and development for ZW49 for licensing next. It also included non-cash stock benefits paid to staff of $6 mn up from $3.6 mn the year before plus $2.4 mn for marking to market earlier liability awards. SG&A expenses at $22.8 mn were nearly double those of the 2019 Q3 primarily from a $8.1 mn rise in non-cash stock-based compensation expense, plus the higher headcount and insurance costs plus more non-cash stock-based compensation expense of $12.6 mn, $4.1 mn from equity-classified awards and $8.2 mn related to the non-cash mark-to-market revaluation of different historic liability-classified awards.

In the end net Q3 loss was $72.6 mn, up from prior Q3 level of $30.5 mn because of the above payments and lower revenues because of clinical development and ZYME expects this to grow as it moves toward the clinic. Zymeworks also expects to get revenue from strategic partners if it manages to successfully complete the R&D they are funding. It closed the quarter with $497 mn in cash, cash equivalents, short-term and certain long-term investments.

CEO Ali Tehrani said Zanidatamab expanded in Q3 “having opened new sites across the globe for the pivotal trial in HER2-amplified biliary tract cancers toward our first potential BLA submission. We are well-resourced to achieve this [zanidatamab]milestone [and] advancing development of ZW49 into expansion.” ZW49, a bispecific antibody-drug conjugate targeting HER2 is now in phase I dose escalation. ZYME is providing compassionate access to patients without alternatives to its medicines.

The first phase II patient trial for Zanadatamab in endometrial cancers overexpressing HER-2 has begun at Memorial Sloan Kettering, to enroll 25 patients.

*As Biogen prepares for a vote on US FDA approval for release of its Aducanumab Alzeheimer's disease drug, its Japanese partner Eisai, ESALY, rose 41%, to over $111 and change from $80 yesterday. The FDA peripheral and central nervous system drug advisory committee today will give its views on the drug and the terms of an okay. The staff report is expected to include strictures about the post hoc re-evaluation of results after BIIB initially said the drug had not worked out. Biogen insists that it has evidence of efficacy and would not have re-filed without this. It is possible that the advisory committee's expected negative views can be overridden by an FDA approval. The Japanese expect this.

*Compugen will announce its Q3 earnings tomorrow Israeli time. It is expected to show a 10% lower loss than the last Q3 at 9 US cents. Over the last year, CGEN beat EPS or sales estimates most of the time.

*Dr Reddy's and Teva are both up 2.5%+ today. While TEVA has been a mess, RDY, picked by Abhimanyu Sisodia, has risen 74% YTD.

*AstraZeneca is up 4.5% on no news I can find. AZN.

Canadian General Investments, Limited (CGI) reports on an unaudited basis that its net asset value per share (NAV) at October 31, 2020, was $41.17, resulting in year-to-date and 12-month NAV returns, with dividends, reinvested, of 13.2% and 21.3%, respectively. These compare with the -6.1% and -2.3% returns of the benchmark S&P/TSX Composite Index on a total return basis for the same periods.

The Company employs a leveraging strategy,