Biogen approval is not without risks; what benefits from inflation? Biogen approval is not without risks; what benefits from inflation? Biogen approval is not without risks; what benefits from inflation?

Biogen approval is not without risks; what benefits from inflation?

Equities 6 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Biogen got an accelerated approval yesterday of its Alzheimer drug which sent its share price up by 38%. But an accelerated approval requires a phase 4 confirmatory trial to confirm the clinical benefits, and the FDA approval came despite an expert panel said that there is not enough evidence to approve the therapy for marketing. Investors buying into the Alzheimer approval should be aware that it comes with a risk of not getting the final approval. We also take a look at the winners and losers so far during the rising inflation expectations, and what investors should look out for if the inflation rate persists at a higher level.

Yesterday’s biggest news came from the US biotechnology industry with Biogen getting an accelerated approval of its new Aduhelm drug against Alzheimer; the stock gained 38% adding $17bn in market value to Biogen. An accelerated approval is given based on a surrogate endpoint which means that there are markers indicating clinical benefits, but this must be shown in a phase 4 confirmatory trial to get the final approval. The FDA approval went against an expert panel saying there was not enough evidence for an approval. The reason for the FDA approval is in a specific clause about Biogen focusing on reducing amyloid which is a sticky and harmful protein that clogs the brain of Alzheimer’s patients. While the drug can reduce amyloid, the debate is ongoing on whether reducing amyloid is the key to treat patients with Alzheimer.

Source: Saxo Group

The news was big and caused a positive spillover effect into our NextGen Medicine basket, which also consists of biotechnology companies researching antibody therapy drugs. Other growth pockets in US equity markets such as bubble stocks and e-commerce also gained yesterday on the general rise in sentiment. While the FDA is potentially a landmark decision and key milestone in treating Alzheimer, there is still risk that the drug will not get the final approval. The next weeks will show whether the market believes in the drug or not.

The winners and losers from inflation

Since 8 November 2020, inflation expectations have risen dramatically reflecting a much faster reopening path due to effective Covid-19 vaccines. With rising inflation expectations, the discussion about transitory vs. permanently higher inflation rate has raged among investors and economists. Consensus still bets on transitory inflation, while we are leaning towards more permanent inflation driven by historical stimulus not seen in size since economic records began after WWII. If we are right that the world economy is flirting dangerously with inflation dynamics that could drastically counter the trend in inflation over the past three decades, equity investors must be prepared. So, what gains and losses during inflation?

If look at our theme baskets and how they have performed since 8 November 2020, we see a clear tendency. Companies operating in the physical world have gained the most with themes like India, logistics, and commodity sector being the best performing themes, while China consumer & technology, gaming and bubble stocks themes have done worst.

Aswath Damodaran, finance professor at NYU, has created this excellent graphics showing how inflation impacts equities. Higher inflation lifts nominal GDP growth and thus creates higher growth rates across all industries and thus also higher future cash flows. The operating margin is determined by the company’s market power and cost efficiency, and input costs which do not hit equally all companies as inflationary pressures have varying size in an inflation cycle. Higher growth also leads to higher need for investments (capex) which subtracts from cash flows to free cash flows available to shareholders or creditors. However, while higher growth leads to higher cash flows and thus higher equity values, the discount rate subtracts from these cash flows. The discount rate is a function of the risk-free rate and an equity risk premium. For now, the risk-free rate has not followed inflation expectations measured in markets, hence consensus is betting on inflation being transitory, and has recently settled around 1.6%. The risk premium on equities has declined recently (but could rise significantly if inflation sticks above 3.5%), and when factoring in these two developments the rising discount rate has not offset the higher growth expectations and thus equities have risen to new all-time highs.

Our view is still that investors should get exposure to the commodity sector, semiconductors, logistics, green transformation (but be selective on quality), and mega caps (pricing power).
Source: Aswath Damodaran

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.