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


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992