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Intellipharmaceutics Announces First Quarter 2021 Results

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TORONTO, ON / ACCESSWIRE / April 14, 2021 / Intellipharmaceutics International Inc. (OTCQB:IPCIF)(TSX:IPCI) ("Intellipharmaceutics" or the "Company"), a pharmaceutical company specializing in the research, development and manufacture of novel and generic controlled-release and targeted-release oral solid dosage drugs, today reported the results of operations for the three months ended February 28, 2021. All dollar amounts referenced herein are in United States dollars unless otherwise noted.

  • On July 2, 2020, the Company had announced that the parties in the cases, numbers 17-cv-392-RGA, 18-cv-404-RGA and 20-cv-515-RGA (the "Litigations") between Purdue Pharma L.P. et al ("Purdue') and Intellipharmaceutics entered into a stipulated dismissal of the Litigations. The stipulated dismissal, which was subject to approval by the bankruptcy court presiding over Purdue Pharma's pending chapter 11 cases, provides for the termination of patent infringement proceedings commenced by Purdue against the Company in the United States District Court for the District of Delaware in respect of the Company's NDA filing for Aximris XRTM with the FDA. The stipulated dismissal also provides that (i) for a thirty (30) day period following a final approval of the Company's Aximris XRTM NDA the parties will attempt to resolve any potential asserted patent infringement claims relating to the NDA and (ii) if the parties fail to resolve all such claims during such period Purdue Pharma will have fifteen (15) days to pursue an infringement action against the Company. The terms of the stipulated dismissal agreement are confidential. On July 28, 2020 the United States District Court for the District of Delaware signed the stipulations of dismissal into order thereby dismissing the claims in the three cases without prejudice. In consideration of the confidential stipulated dismissal agreement and for future saved litigation expenses, Purdue has paid an amount to the Company.

  • On January 15, 2020, at a joint meeting of the Anesthetic and Analgesic Drug Products Advisory Committee and Drug Safety and Risk Management Advisory Committee ("Advisory Committees") of the FDA to discuss our NDA for Aximris XR™, abuse-deterrent oxycodone hydrochloride extended-release tablets, the Advisory Committees voted 24 to 2 against the approval of our NDA for Aximris XR™ for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. We expect the FDA to take action on our application, on completion of their review of the NDA.

Results of Operations
The Company recorded net loss for the three months ended February 28, 2021 of $924,566 or $0.04 per common share, compared with a net loss of $1,747,373 or $0.08 per common share for the three months ended February 29, 2020.

The Company recorded revenues of $Nil for the three months ended February 28, 2021 versus $377,554 for the three months ended February 29, 2020. Such revenues consisted primarily of licensing revenues from commercial sales of the 15, 25, 30 and 35 mg strengths of our generic Focalin XR® under the Par agreement.

Expenditures for R&D for the three months ended February 28, 2021 were lower by $400,360 compared to the three months ended February 29, 2020. In the three months ended February 28, 2021 we recorded $8,592 of expenses for stock-based compensation for R&D employees compared to $43,428 for the three months ended February 29, 2020. After adjusting for the stock-based compensation expenses discussed above, expenditures for R&D for the three months ended February 28, 2021 were lower by $365,524 compared to the three months ended February 29, 2020. The decrease is primarily due to significantly reduced third party consulting fees, decreased materials expenses and decreased patent expenses, and the reduction in R&D staff consistent with reduced R&D activities.

Selling, general and administrative expenses were $172,046 for the three months ended February 28, 2021 in comparison to $523,231 for the three months ended February 29, 2020, resulting in a decrease of $351,185. The decrease is due to a decrease in administrative costs and a decrease in wages and marketing costs.

As of February 28, 2021, our cash balance was $202,669. We currently expect to meet our short-term cash requirements from quarterly profit share payments from Par and by cost savings resulting from reduced R&D activities and staffing levels. If we are able to obtain sufficient funds to supply products to our marketing and distribution partner, Tris Pharma, Inc. ("Tris Pharma") and it achieves sales of our generic Seroquel XR®, generic Pristiq® and generic Effexor XR® products at anticipated rates, then we may satisfy some of our cash needs with cost-saving measures. Even if that occurs, we will still need to obtain additional funding to, among other things, further product commercialization activities and development of our product candidates. Potential sources of capital may include, if conditions permit, equity and/or debt financing, payments from licensing and/or development agreements and/or new strategic partnership agreements. The Company has funded its business activities principally through the issuance of securities, loans from related parties and funds from development agreements. There is no certainty that such funding will be available going forward or, if it is, whether it will be sufficient to meet our needs. Our future operations are highly dependent upon our ability to source additional funding to support advancing our product candidate pipeline through continued R&D activities and to expand our operations. Our ultimate success will depend on whether our product candidates are approved by the FDA, Health Canada, or the regulatory authorities of other countries in which our products are proposed to be sold and whether we are able to successfully market our approved products. We cannot be certain that we will receive such regulatory approval for any of our current or future product candidates, that we will reach the level of revenues necessary to achieve and sustain profitability, or that we will secure other capital sources on terms or in amounts sufficient to meet our needs, or at all.

There can be no assurance that we will not be required to conduct further studies for our Aximris XR product candidate, that the FDA will approve any of our requested abuse-deterrence label claims, that the FDA will meet its deadline for review or that the FDA will ultimately approve the NDA for the sale of product candidate in the U.S. market or that the product will ever be successfully commercialized and produce significant revenue for us.

About Intellipharmaceutics
Intellipharmaceutics International Inc. is a pharmaceutical company specializing in the research, development and manufacture of novel and generic controlled-release and targeted-release oral solid dosage drugs. The Company's patented Hypermatrix™ technology is a multidimensional controlled-release drug delivery platform that can be applied to a wide range of existing and new pharmaceuticals. Intellipharmaceutics has developed several drug delivery systems based on this technology platform, with a pipeline of products (some of which have received FDA approval) in various stages of development. The Company has ANDA and NDA 505(b)(2) drug product candidates in its development pipeline. These include the Company's Oxycodone ER based on its proprietary nPODDDS™ novel Point Of Divergence Drug Delivery System (for which an NDA has been filed with the FDA), and Regabatin™ XR (pregabalin extended-release capsules).

Cautionary Statement Regarding Forward-Looking Information
Certain statements in this document constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and/or "forward-looking information" under the Securities Act (Ontario). These statements include, without limitation, statements expressed or implied regarding our expectations , plans, goals and milestones, status of developments or expenditures relating to our business, plans to fund our current activities, and statements concerning our partnering activities, health regulatory submissions, strategy, future operations, future financial position, future sales, revenues and profitability, projected costs and market penetration and risks or uncertainties arising from the delisting of our shares from Nasdaq and our ability to comply with OTCQB and TSX requirements. In some cases, you can identify forward-looking statements by terminology such as "appear", "unlikely", "target", "may", "will", "should", "expects", "plans", "plans to", "anticipates", "believes", "estimates", "predicts", "confident", "prospects", "potential", "continue", "intends", "look forward", "could", "would", "projected", "goals" ,"set to", "seeking" or the negative of such terms or other comparable terminology. We made a number of assumptions in the preparation of our forward-looking statements. You should not place undue reliance on our forward-looking statements, which are subject to a multitude of known and unknown risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those stated in or implied by the forward-looking statements. Risks, uncertainties and other factors that could affect our actual results include, but are not limited to, , the effects of general economic conditions, securing and maintaining corporate alliances, our estimates regarding our capital requirements, and the effect of capital market conditions and other factors, including the current status of our product development programs, capital availability, the estimated proceeds (and the expected use of any proceeds) we may receive from any offering of our securities, the potential dilutive effects of any future financing, potential liability from and costs of defending pending or future litigation, risks associated with the novel coronavirus (COVID-19) including its impact on our business and operations, our programs regarding research, development and commercialization of our product candidates, the timing of such programs, the timing, costs and uncertainties regarding obtaining regulatory approvals to market our product candidates and the difficulty in predicting the timing and results of any product launches, the timing and amount of profit-share payments from our commercial partners, and the timing and amount of any available investment tax credits, the actual or perceived benefits to users of our drug delivery technologies, products and product candidates as compared to others, our ability to establish and maintain valid and enforceable intellectual property rights in our drug delivery technologies, products and product candidates, the scope of protection provided by intellectual property rights for our drug delivery technologies, products and product candidates, recent and future legal developments in the United States and elsewhere that could make it more difficult and costly for us to obtain regulatory approvals for our product candidates and negatively affect the prices we may charge, increased public awareness and government scrutiny of the problems associated with the potential for abuse of opioid based medications, pursuing growth through international operations could strain our resources, our limited manufacturing, sales, marketing and distribution capability and our reliance on third parties for such, the actual size of the potential markets for any of our products and product candidates compared to our market estimates, our selection and licensing of products and product candidates, our ability to attract distributors and/or commercial partners with the ability to fund patent litigation and with acceptable product development, regulatory and commercialization expertise and the benefits to be derived from such collaborative efforts, sources of revenues and anticipated revenues, including contributions from distributors and commercial partners, product sales, license agreements and other collaborative efforts for the development and commercialization of product candidates, our ability to create an effective direct sales and marketing infrastructure for products we elect to market and sell directly, the rate and degree of market acceptance of our products, delays in product approvals that may be caused by changing regulatory requirements, the difficulty in predicting the timing of regulatory approval and launch of competitive products, the difficulty in predicting the impact of competitive products on sales volume, pricing, rebates and other allowances, the number of competitive product entries, and the nature and extent of any aggressive pricing and rebate activities that may follow, the inability to forecast wholesaler demand and/or wholesaler buying patterns, seasonal fluctuations in the number of prescriptions written for our generic Focalin XR® capsules which may produce substantial fluctuations in revenue, the timing and amount of insurance reimbursement regarding our products, changes in laws and regulations affecting the conditions required by the FDA for approval, testing and labeling of drugs including abuse or overdose deterrent properties, and changes affecting how opioids are regulated and prescribed by physicians, changes in laws and regulations, including Medicare and Medicaid, affecting among other things, pricing and reimbursement of pharmaceutical products, the effect of recent changes in U.S. federal income tax laws, including but not limited to, limitations on the deductibility of business interest, limitations on the use of net operating losses and application of the base erosion minimum tax, on our U.S. corporate income tax burden, the success and pricing of other competing therapies that may become available, our ability to retain and hire qualified employees, the availability and pricing of third-party sourced products and materials, challenges related to the development, commercialization, technology transfer, scale-up, and/or process validation of manufacturing processes for our products or product candidates, the manufacturing capacity of third-party manufacturers that we may use for our products, potential product liability risks, the recoverability of the cost of any pre-launch inventory, should a planned product launch encounter a denial or delay of approval by regulatory bodies, a delay in commercialization, or other potential issues, the successful compliance with FDA, Health Canada and other governmental regulations applicable to us and our third party manufacturers' facilities, products and/or businesses, our reliance on commercial partners, and any future commercial partners, to market and commercialize our products and, if approved, our product candidates, difficulties, delays or changes in the FDA approval process or test criteria for ANDAs and NDAs, challenges in securing final FDA approval for our product candidates, including our oxycodone hydrochloride extended release tablets product candidate, in particular, if a patent infringement suit is filed against us with respect to any particular product candidates (such as in the case of Oxycodone ER), which could delay the FDA's final approval of such product candidates, healthcare reform measures that could hinder or prevent the commercial success of our products and product candidates, the risk that the FDA may not approve requested product labeling for our product candidate(s) having abuse-deterrent properties and targeting common forms of abuse (oral, intra-nasal and intravenous), risks associated with cyber-security and the potential for vulnerability of our digital information or the digital information of a current and/or future drug development or commercialization partner of ours, and risks arising from the ability and willingness of our third-party commercialization partners to provide documentation that may be required to support information on revenues earned by us from those commercialization partners. Additional risks and uncertainties relating to us and our business can be found in the "Risk Factors" section of our latest annual information form, our latest Form 20-F, and our latest Form F-1 and F-3 registration statements (including any documents forming a part thereof or incorporated by reference therein), as amended, as well as in our reports, public disclosure documents and other filings with the securities commissions and other regulatory bodies in Canada and the U.S., which are available on www.sedar.com and www.sec.gov. The forward-looking statements reflect our current views with respect to future events and are based on what we believe are reasonable assumptions as of the date of this document and we disclaim any intention and have no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Trademarks used herein are the property of their respective holders.

Unless the context otherwise requires, all references (i) to "we," "us," "our," "Intellipharmaceutics," and the "Company" refer to Intellipharmaceutics International Inc. and its subsidiaries and (ii) in this document to share amounts, per share data, share prices, exercise prices and conversion rates have been adjusted to reflect the effect of the 1-for-10 reverse split which became effective on each of Nasdaq and TSX at the open of market on September 14, 2018.The common shares of the Company are currently traded on the OTCQB and the TSX.

Nothing contained in this document should be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of our actual operating results.

The condensed unaudited interim consolidated financial statements, accompanying notes to the condensed unaudited interim consolidated financial statements, and Management Discussion and Analysis for the three months ended February 28, 2021 will be accessible on Intellipharmaceutics' website at www.intellipharmaceutics.com and will be available on SEDAR and EDGAR.

Summary financial tables are provided below.

Intellipharmaceutics International Inc.
Condensed unaudited interim consolidated balance sheets
As at
(Stated in U.S. dollars)

February 28,

November 30,

2021

2020

$

$

Assets

Current

Cash

202,669

202,046

Trade and other receivables, net

-

566,384

Investment tax credits

482,135

482,135

Prepaid expenses, sundry and other assets

78,116

115,750

Inventory

112,672

112,672

875,592

1,478,987

Property and equipment, net

1,704,755

1,770,137

Right-of-use asset

102,688

137,931

2,683,035

3,387,055

Liabilities

Current

Accounts payable

4,250,690

4,103,966

Accrued liabilities

1,748,746

1,780,272

Employee costs payable

1,771,305

1,665,236

Operating lease liability

118,769

157,110

Income tax payable

38,511

38,511

Promissory notes payable

167,224

163,758

Convertible debentures

1,773,728

1,791,791

9,868,973

9,700,644

Shareholders' deficiency

Capital stock

Authorized

Unlimited common shares without par value

Unlimited preference shares

Issued and outstanding

23,678,105 common shares

46,144,402

46,144,402


(November 30, 2020 - 23,678,105)

Additional paid-in capital

44,406,355

44,354,138

Accumulated other comprehensive income

284,421

284,421

Accumulated deficit

(98,021,116

)

(97,096,550

)

(7,185,938

)

(6,313,589

)

2,683,035

3,387,055

Intellipharmaceutics International Inc.
Condensed unaudited interim consolidated statements of operations and comprehensive loss
For the three months ended February 28, 2021 and February 29, 2020
(Stated in U.S. dollars)

2021

2020

$

$

Revenues

Licensing

-

377,554

-

377,554

Expenses

Research and development

547,485

947,845

Selling, general and administrative

172,046

523,231

Depreciation

65,382

102,699

784,913

1,573,775

Loss from operations

(784,913

)

(1,196,221

)

Net foreign exchange gain (loss)

(64,053

)

22,788

Interest expense

(75,600

)

(573,940

)

Net loss and comprehensive loss

(924,566

)

(1,747,373

)

Loss per common share, basic and diluted

(0.04

)

(0.08

)

Weighted average number of common

shares outstanding, basic and diluted

23,678,105

23,210,927

Intellipharmaceutics International Inc.

Condensed unaudited interim consolidated statements of cash flows

For the three months ended February 28, 2021 and February 29, 2020

(Stated in U.S. dollars)

2021

2020

$

$

Net loss

(924,566

)

(1,747,373

)

Items not affecting cash

Depreciation

65,382

102,699

Stock-based compensation

10,550

53,749

Accreted interest

23,604

514,437

Non-cash lease expense

36,948

-

Unrealized foreign exchange loss

1,761

-

Change in non-cash operating assets & liabilities

Trade and other receivable

566,384

(87,035

)

Prepaid expenses, sundry and other assets

37,634

(15,696

)

Inventory

-

102,375

Accounts payable, accrued liabilities and employee costs payable

221,267

1,018,274

Operating lease liability

(38,341

)

-

Cash flows provided from (used in) operating activities

623

(58,570

)

Increase (decrease) in cash

623

(58,570

)

Cash, beginning of period

202,046

64,622

Cash, end of period

202,669

6,052

Company Contact:
Intellipharmaceutics International Inc.
Isa Odidi
Chief Executive Officer
416.798.3001 ext. 102
investors@intellipharmaceutics.com

SOURCE: Intellipharmaceutics International Inc.



View source version on accesswire.com:
https://www.accesswire.com/640251/Intellipharmaceutics-Announces-First-Quarter-2021-Results

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Heading into earnings season, FactSet projected overall S&P 500 Financial Sector (IXM) earnings to rise 78.7% year-over-year in Q1, so things are definitely looking up. In fact, the average Wall Street Financial earnings forecast has risen pretty substantially even from just a month ago. The banking sector has sputtered a bit lately after a great start to the year. Energy also slowed its pace a bit. Some analysts see this as a temporary slowdown while the Treasury market continues to consolidate. If Q1 earnings and coming economic data shape up as strong as many Wall Street watchers are starting to think they will, 10-year yields could start to rise again and lift the so-called “cyclicals” like Financials and Energy that tend to do better in a recovering economy. Pandemic Provides The Backdrop There’s always a caveat, and here’s one: The Covid situation isn’t really retreating much. Average caseloads are still rising despite the great vaccine progress. Even Fed Chairman Jerome Powell expressed caution over the weekend, telling “60 Minutes” that he’s concerned about the recent case spike and its possible impact on the economy. And of course, there was today’s bad news about the JNJ vaccine being paused due to blood clots. If cases keep climbing, watch the other data like hospitalizations and deaths carefully. They tend to be lagging indicators, and if they stay relatively tame it could mean the vaccinations are protecting some of the most vulnerable people. Leaving Covid behind for the moment, FactSet pegs overall S&P 500 earnings to rise 24.5% in Q1, led by Consumer Discretionary, Financials, Materials, and Info Tech. Energy and Industrials are the only sectors analysts see in the red with their Q1 earnings results, and those are also two of the three S&P sectors expected to have falling revenue, too. Typically, analysts get too conservative with their estimates ahead of earnings season, so FactSet factors that in and says it’s more likely actual earnings will rise 28% when all is said and done. That would be the highest earnings growth in more than 10 years. At the high end, FactSet estimated earnings could grow as much as 37.6% in Q1. Margin Call? Not Yet Some people wonder if margins might start eroding, possibly due to rising costs like we saw in the producer price index (PPI) last week. So far, no sign of that. S&P Global expects margins to rise this year and next. Of course, the Fed keeps telling everyone that any price growth we see here is probably temporary, and easy comparisons with soft year-ago inflation could over-dramatize how much things are actually going up. By later in 2021, it might be easier to get a sense not only of how transient or non-transient this inflationary pressure is, but also whether the Biden administration has the ability to push through a corporate tax increase, which is another thing that could potentially hurt margins. CHART OF THE DAY: CAN THE U.S. DOLLAR HANG ON? The U.S. Dollar Index ($DXY—candlestick) has generally remained within its upward channel (yellow lines) since the beginning of the year. Can it maintain this move as it skirts its support level once again? Although $DXY is moving up today, it doesn’t mean it can’t break below the lower channel. It could still go either way—retest the 90 level (blue line), which was the Feb low or break above 92.5 (purple line), the early March high, and resume its move within the channel. Data source: ICE Data Services. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. The Dollar’s Dilemma: While the U.S. Dollar Index ($DXY) is still trading within its uptrend channel (see chart above) since Jan. of this year, it’s hard to ignore that it is trading close to a critical support level. If it does break below the lower channel, which at the moment sits at around 92.10, we could see $DXY test the 90 level, the low it hit at the end of Feb, or it could continue moving within its upward channel. When it comes to the U.S. dollar, a lot also depends on economic fundamentals such as actions taken by the Fed and other central banks. Are they going to be more dovish or hawkish, relatively speaking? Since the U.S. dollar trades against other currencies, it’s a good idea to know where other central banks stand with respect to interest rate decisions. It can shed some light on global economic growth outlook. Another piece of economic data to keep an eye on this week: retail sales and inflation. Both could have an impact on the U.S. dollar. Bank Earnings, Net Margin, and the Rate Watch: As big banks prepare to open their Q1 books this week, it’s important to focus on recent moves in interest rates. On the face of it, the rise in long rates—particularly when accompanied by dovish talk from the Fed about leaving short rates at the zero bound—is the optimal setup for the banks. And sure enough, over the past three months the yield spread between the 3-month Treasury and the 10-year Treasury widened by over 80 basis points to its highest level in four years—a positive development for an industry that’s business model is centered on borrowing (and paying deposits on) the short end and lending on the long end. But like most things economic, there’s always “the other hand.” A nominal rise in mortgage rates, all else equal, should pad the bottom line of lenders. But when you consider the amount of exuberance in the housing market—think Lennar Corporation (NYSE: LEN), KB Home (NYSE: KBH) and other home builders that have seen shares blow through all-time highs in the middle of a pandemic—it’s possible that rising mortgage rates could eventually eat into the balance sheets of homeowners and small businesses, and to the housing market in general. Anyone who was around for the last recession knows what can happen to banks when a frothy housing market turns south. It’s another reminder to keep a close eye on bank earnings, as banks tend to be tied into the rest of the economy. For now, however, banks head into earnings season with the sun shining brightly. When Things Look Good, People Worry: A couple things to consider here as the market finishes up its “breather” ahead of earnings: First, there’s concern among some analysts that a couple of economic indicators like manufacturing growth and consumer confidence may be at “toppy” levels. Manufacturing, for instance, is at multi-decade highs. While that may be true, you can’t say for sure that there’s anything magical about current numbers just because they match, say, a level not seen since 1984. The numbers don’t know or care what happened back in the first Reagan term. They just do what they do. A fresh University of Michigan sentiment report Friday could give more insight into any perceived “toppiness.” Also, volatility has gotten so low recently, with the VIX finishing below 17 again yesterday, that people are starting to worry it might go up again. This sounds like traditional “wall of worry” talk and another sign that this rally just doesn’t get much respect. TD Ameritrade® commentary for educational purposes only. Member SIPC. Photo by Lukas Krasa on Unsplash See more from BenzingaClick here for options trades from BenzingaBeyond The Banks: Other Major Firms Reporting This Week Include PepsiCo, DeltaInvestors Appear To Be Treading Lightly Ahead Of Bank Earnings Next Week© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  • Bitcoin Analysts Set Sights on $70K (Even $80K) After All-Time High

    Bitcoin is seen rising towards $70K by May according to several analysts interviewed by CoinDesk.

  • Bitcoin hits record before landmark Coinbase listing on Nasdaq

    LONDON (Reuters) -Bitcoin hit a record of $62,741 on Tuesday, extending its 2021 rally to new heights a day before the listing of Coinbase shares in the United States. The largest U.S. cryptocurrency exchange's listing on the Nasdaq on Wednesday is considered a landmark victory for cryptocurrency advocates. Bitcoin is the world's biggest cryptocurrency, with growing mainstream acceptance as an investment and a means of payment.

  • Learn from Alibaba penalty, China warns internet firms

    China's market regulator, fresh from fining e-commerce giant Alibaba $2.75 billion, said on Tuesday it warned nearly three dozen internet companies to stop using any banned practices such as forcing vendors to use their platform exclusively. The State Administration for Market Regulation (SAMR) said it summoned 34 companies including Tencent, ByteDance and JD.com for a meeting, where it ordered them to conduct self-inspections within one month, warning of "severe punishment" for any that still violated the rules. In February, China issued new anti-monopoly guidelines targeting internet platforms.

  • Gold Price Prediction – Gold Rebounds as Yields Fall and Dollar Drops

    The decline in the 10-year yield came despite a larger than the expected headline and core CPI report announced on Tuesday by the Department of Labor. Treasury yields appear to be topping out which could lead to a rally in the yellow metal. Gold prices moved higher but failed to capture resistance near the 50-day moving average at 1,756.

  • Canaccord Prepared to Raise Offer for Rival RF Capital, CEO Says

    (Bloomberg) -- Canaccord Genuity Group Inc. is willing to raise its takeover price for RF Capital Group Inc. “substantially” but can’t get its rival to discuss a deal, Chief Executive Officer Dan Daviau said.A merger would unite two of Canada’s largest independent firms in wealth management, which together have more than C$110 billion ($87.7 billion) in client assets. Canaccord said last month it offered C$2.30 a share for RF and was rejected by the board.“We’re prepared to increase our price substantially, but we don’t know what price they’re looking for because they won’t talk to us,” Daviau said in an interview.The updated proposal would include improved terms for RF Capital’s investment advisers, Daviau said in an interview. He declined to say what price Canaccord would be willing to pay for RF Capital. The current proposal values the firm at C$367 million.RF Capital shares are up 22% since Canaccord’s interest became public and closed at C$2.14 in Toronto on Tuesday.Richardson ControlCanaccord has little prospect of taking control of RF without winning the support of the Richardson family, whose closely-held conglomerate, James Richardson & Sons Ltd., owns 44% of RF Capital, according to data compiled by Bloomberg.Canaccord has said that combining the firms would provide RF Capital’s investors with better value for their shares and open opportunities for RF’s wealth advisers. By publicly disclosing the proposal, Daviau is making an open appeal to those advisers, who form an influential bloc within RF because they collectively own 31% of the shares, according to numbers disclosed by RF last month.Until last year, RF Capital operated under the name GMP Capital. It used to be a major player in investment banking and trading in Canada’s junior energy and mining markets, but sold its capital markets business to Stifel Financial Corp. in 2019 to focus on wealth management and investment advice.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Credit Suisse identifies $2.3 billion of exposed assets in Greensill-linked funds

    Credit Suisse has identified $2.3 billion worth of loans exposed to financial and litigation uncertainties in its Greensill-linked supply chain finance funds, it told investors on Tuesday. Switzerland's second-biggest bank has been reeling from its exposure to the collapse first of Greensill Capital and then Archegos Capital Management within a month. Its asset management unit was forced last month to shut $10 billion of supply chain finance funds that invested in bonds issued by Greensill after the UK firm lost credit insurance coverage shortly before filing for insolvency.

  • Investors Dump Commodities as Supercycle Call Meets Skepticism

    (Bloomberg) -- Net bullish wagers on rising commodity prices fell to the lowest since December last week, raising questions about the commodity supercycle.Money managers are trimming what had been the largest wager for rising commodity prices in at least a decade as stumbling economic reopening efforts force a reconsideration of the popular recovery trade. A recent bond rout raised worries over inflation and surging bulk shipping rates are seen capping any further upswing.There’s a sense that “we have yet to get rid of the coronavirus, with rising cases and extended lockdowns delaying the expected growth sprint,” said Ole Hansen, head of commodities research at Saxo Bank. “The surge in Treasury yields, a stronger dollar and worries that China may tighten liquidity in order to curb inflation are also contributing factors.”Hedge funds’ net bullish positions on a basket of 20 commodities have decreased for six weeks in a row, according to the latest Commodities Futures Trade Commission and ICE data compiled by Bloomberg. That comes after money managers boosted the figure to the highest in data going back to 2011, while prices in the Bloomberg Commodity Spot Index rose to nearly the highest in eight years in February.Commodities had seen a resurgence in interest early this year as major investment banks flagged the start of a new structural bull cycle -- with some even calling for a supercycle comparable to ones that peaked in the 1970s and early 2000s.The idea was that raw materials would benefit as the world emerged from the pandemic and fiscal stimulus programs would sustain a downtrend in the U.S. dollar, thereby making commodities priced in the greenback more attractive. While a return to normal is anticipated, hiccups in recent months surrounding economic reopening plans are clouding the near-term outlook. Meanwhile, the dollar came back from its lows this year alongside rising bond yields.In the last week, investor outflows were most pronounced for oil, with funds weighing whether demand will be strong enough to absorb returning supply in coming months. OPEC and its allies decided earlier this month to gradually ease unprecedented output curbs from May to July, while further out, the market may see more Iranian supply come back if it returns to a nuclear deal.Adding further pressure, volatility-targeted funds like commodity trading advisers underwent “widespread deleveraging” after global benchmark Brent futures’ briefly jumped above $71 a barrel following an attack on Saudi oil facilities in March, Ryan Fitzmaurice, commodities strategist at Rabobank, said in a note Friday.Now, a squeeze on vessels to carry some commodities around the world is adding another risk for investors to consider. The cost of shipping unpacked commodities like grains and iron ore, known as dry bulk, is up more than 50% this year.The move up in shipping costs “makes it more expensive to move things around, which goes contrary to the idea of a supercycle,” Eddie Tofpik, head of technical analysis and senior markets analyst at ADM Investor Services International Ltd., said at an online event last month.Still, calls remain for commodities to continue their price rebound this year after this period of consolidation.“Commodities remain the best performing asset class of 2021,” Goldman Sachs Group Inc. analysts wrote in a report Friday. “We view this consolidation as nothing more than a fleeting speed bump created by logistical bottlenecks in vaccine roll-outs.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • TikTok Founder's $60 Billion Fortune Places Him Among The World's Richest People

    (Bloomberg) -- Just last year, the world’s most valuable startup, ByteDance Ltd., was being squeezed from all sides.The Trump administration wanted the Chinese firm, which owns the ubiquitous TikTok video-sharing platform, to get rid of assets. Beijing was cracking down on tech businesses, and India blacklisted some of its social-media apps.For all the obstacles, ByteDance kept growing. Now its founder, 38-year-old Zhang Yiming, is among the world’s richest people -- a distinction that lately has carried increased risks in China.Shares of the company trade in the private market at a valuation of more than $250 billion, people familiar with the dealings have said. At that level, Zhang, who owns about a quarter of ByteDance, could be worth more than $60 billion, placing him alongside Tencent Holdings Ltd.’s Pony Ma, bottled-water king Zhong Shanshan and members of the Walton and Koch families in the U.S., according to the Bloomberg Billionaires Index.ByteDance, famous for its short-video apps and news aggregator Toutiao, more than doubled revenue last year after expanding beyond its core advertising business into areas such as e-commerce and online gaming. It’s now weighing options for the initial public offering of some businesses.“Zhang is someone who’s known for thinking long-term and not easily dissuaded by short-term setbacks,” said Ma Rui, partner at venture-capital firm Synaptic Ventures. “He is set on building an enduring, global business.”Surging ValuationDuring its last fundraising round, ByteDance reached a $180 billion valuation, a person with knowledge of the matter said. That’s up from $20 billion about three years ago, according to CB Insights. But in the private market, some investors recently were asking for the equivalent of a $350 billion valuation to part with their shares, people familiar have said. The company’s value for private-equity investors is approaching $400 billion, the South China Morning Post reported. That would mean an even bigger fortune for Zhang.ByteDance representatives didn’t respond to requests for comment.It’s a tough time to be wealthy in China as the government seeks to rein in the country’s most powerful corporations and their billionaire founders. Just ask Jack Ma: After opening an antitrust probe, regulators fined Alibaba a record $2.8 billion and the central bank ordered an overhaul of his Ant Group Co. fintech empire so it’d be supervised more like a bank. On Tuesday, China ordered 34 internet companies to rectify their anti-competitive practices in the coming month. While ByteDance hasn’t been singled out as a target, its dominance in social media and war chest for deal-making are sensitive areas the government is looking into.“There are no more silly games in the U.S. with Trump and potential bans or forced asset sales,” said Kirk Boodry, founder of investment research firm Redex Holdings. “But the pressure on tech-share prices and China in particular might make $250 billion a tough sell,” he added, referring to ByteDance’s value in private transactions.Born in the southern Chinese city of Longyan, Zhang, the only son of civil servants, studied programming at Tianjin’s Nankai University, where he built a following on the school’s online forum by fixing classmates’ computers. He joined Microsoft Corp. for a brief stint after graduating, later calling the job so boring he often “worked half of the day and read books in the other half,” according to an interview with Chinese media. He went on to develop several ventures, including a real estate search portal.His breakthrough came in 2012, when working in a four-bedroom apartment in Beijing he created ByteDance’s first hit -- a joke-sharing app later shut down by censors. It then turned to news aggregation before winning over more than 1 billion global users with its short-video platforms TikTok and Chinese twin app, Douyin. In the process, it attracted big-name investors such as SoftBank Group Corp., Sequoia Capital and proprietary-trading firm Susquehanna International Group, making it a rarity among Chinese internet startups that usually get absorbed into the wider ecosystems of Tencent and Alibaba Group Holding Ltd.Novel ConceptOne of Zhang’s earliest supporters, Susquehanna has become ByteDance’s largest outside backer with a 15% stake, according to a Wall Street Journal story in October. The initial bet was made at the start of 2012, when ByteDance’s news app Toutiao was just a concept that Zhang had drawn up on napkins, according to a 2016 blog post by Joan Wang, who led that investment for Susquehanna’s Chinese venture-capital unit.With TikTok facing scrutiny in the U.S. and India, Zhang has put more effort into ByteDance’s nascent and fast-growing Chinese businesses, which range from gaming to education to e-commerce. That helped it increase sales to about $35 billion last year and operating profit to $7 billion, a person familiar with the results said.Investors are eyeing the IPO of some of ByteDance’s businesses after Chinese competitor Kuaishou Technology raised $5.4 billion in February in the biggest internet listing since Uber Technologies Inc., with its market value now nearing $140 billion. Last month, ByteDance hired former Xiaomi Corp. executive Chew Shou Zi as its chief financial officer, filling a long vacant position that will be crucial for its eventual market offering.But for Zhang, it’s not all about immediate payoffs. The affable founder is known for his business philosophy of “delaying satisfactions” as he puts the focus on long-term growth -- a message he stressed again during his spiel to employees at the company’s ninth anniversary celebration last month.“Keep an ordinary mind, that’s something that sounds easy but important to do,” he said. “Put in the plainest words, when hungry, eat, when tired, sleep.”(Adds latest on China crackdown in ninth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Biden's chip dreams face reality check of supply chain complexity

    To understand President Joe Biden's challenge in taming a semiconductor shortage bedeviling automakers and other industries, consider a chip supplied by a U.S. firm for Hyundai Motor Co's new electric vehicle, the IONIQ 5. Production of the chip, a camera image sensor designed by On Semiconductor, begins at a factory in Italy, where raw silicon wafers are imprinted with complex circuitry. The wafers are then sent first to Taiwan for packaging and testing, then to Singapore for storage, then on to China for assembly into a camera unit, and finally to a Hyundai component supplier in Korea before reaching Hyundai's auto factories.

  • China Huarong’s Worsening Bond Rout Stokes Market Contagion

    (Bloomberg) -- Growing panic over the financial health of one of China’s largest bad-debt managers spilled into the broader market, as traders circulated a Caixin report that openly considered the worst-case scenario for the company.China Huarong Asset Management Co.’s $300 million 3.375% bond due May 2022 tumbled 13.1 cents on the dollar to 76.1 cents, while a 5% bond maturing in 2025 fell 12.1 cents to 77.3 cents, Bloomberg-compiled prices show. In a commentary dated Monday, Ling Huawei, managing editor of Caixin Media and Caixin Weekly, discussed the possibility of a China Huarong bankruptcy.The firm’s dollar bonds edged up from session lows after Bloomberg reported China’s finance ministry is mulling transferring its stake in China Huarong to a unit of the nation’s sovereign wealth fund that invests in financial companies. Some notes rose as much as 2 cents, though are still set for record closing lows.Moody’s Investors Service and Fitch Ratings said Tuesday they will review their ratings of China Huarong for a potential downgrade, following a similar announcement from rival S&P Global Ratings last week. The company is considered an investment-grade issuer by all three agencies.The selloff spread to other high-yield Chinese dollar notes on Tuesday, with some property bonds falling by a record. Asia’s investment-grade dollar debt spreads widened as much as 3 basis points, while a gauge of Asia credit risk widened for a seventh straight day, set for the longest rising streak since 2018.Chinese investment-grade dollar bond spreads widened by as much as 8 basis points, while prices on the nation’s high-yield notes fell as much as 3 cents on the dollar, according to credit traders. The CSI 300 Index of stocks fell 0.2%.“Huarong is a $22 billion curve and as a distressed situation it dwarfs anything that we have seen in the Asia credit market before,” said Owen Gallimore, head of trading strategy at Australia & New Zealand Banking Group. “This is a fatal event for a few trading desks and small funds.”Bonds linked to the company have plunged this month after China Huarong failed to publish its 2020 preliminary results by the March 31 deadline, with Caixin attributing the delay to plans for a significant financial restructuring. The stock has been suspended in Hong Kong since April 1. The company has until the end of the month to release its final earnings report. China Huarong’s biggest shareholder is the country’s Ministry of Finance.“Market speculation of a restructuring with haircuts for Huarong International bondholders is heavily damaging investor sentiment,” said Chang Wei Liang, a macro strategist at DBS Bank Ltd. in Singapore. “The continued silence of Chinese authorities on the predicament of a strategic state-owned institution as large as Huarong is also worrisome, as investors had anticipated at least a modicum of reassurance.”It’s unclear whether Chinese leaders have discussed the fate of China Huarong’s bondholders or outlined specific measures that the fund would take if it assumes control of the China Huarong stake.China Huarong has been under a shadow since its then-chairman Lai Xiaomin came under investigation in 2018. Under his watch, the company expanded into areas including securities trading, trusts and other investments, deviating from the original mandate of disposing bad debt. Lai was put to death earlier this year for bribery after a brief trial, an unusually harsh sentence for such a crime.The company is one of the four state-owned entities set up by China’s government in 1999 to help clean up a banking system riddled with bad debt. It listed in Hong Kong after a $2.5 billion initial public offering in 2015.China Huarong and its subsidiaries have some $42 billion worth of offshore and local bonds outstanding and 41% of that will come due by the end of next year, according to Bloomberg-compiled data. Dollar bonds make up about $22 billion of its outstanding notes.Because the debt load is so large and the company was previously seen as a safe bet, the securities are widely held by both local and international investors. Institutional investors such as BlackRock Inc. and Goldman Sachs Group Inc. previously disclosed they held Huarong bonds, had exposure to them via fund products or both, according to data compiled by Bloomberg.China Huarong has started trimming non-core assets amid regulatory pressure to return to its roots. Net income slumped 92% in the first half of 2020 from a year earlier as the value of some assets dropped in the wake of the Covid-19 pandemic. The company’s stock market value has tumbled to about $5 billion from $15 billion when it listed.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Chinese Hedge Fund Jumps 258% After Dumping Ray Dalio’s Strategy

    (Bloomberg) -- Shanghai hedge fund manager Li Bei says she learned quickly that the low-volatility approach to investing behind the rise of Bridgewater Associates was doomed in China for a startup like hers.Steady returns did little to draw investors used to short-term rewards, so she put in her own money, cranked up leverage and produced an industry-leading 258% gain last year.Li is a pioneer in macro hedge fund management in China, where homegrown firms are taking on foreign giants that are struggling to adapt in an industry where even low-fee mutual funds generate sizable returns. While her Shanghai Banxia Investment Management Center only manages about 500 million yuan ($76 million), she says firms like hers are best placed to assess how China is driving the global economy.“We truly feel that Chinese funds have an obvious advantage judging corporate profits and commodity prices,” Li, 37, said in a phone interview from Shanghai. “For us, these are good times to make money.”Chinese macro hedge funds made an average 41% return in 2020, four times the global level, according to data from Shenzhen PaiPaiWang Investment & Management Co. and Eurekahedge. The more than triple gain of Li’s Banxia Stable Fund put her firm at the top of rankings for such funds in China.The stellar year promises to save Li from wounds inflicted by an exodus of investors in 2019 when her 9% return -- still beating an 8.9% global average of peers, according to Eurekahedge -- was dwarfed by local mutual funds during a bull market. The setback forced her to rethink her initial strategy of emulating Ray Dalio’s Bridgewater, an approach that she says included diversifying to limit volatility and providing free research to attract institutional clients.‘Doesn’t Work’“The Bridgewater route doesn’t work in China,” Li said. Offering two complimentary research reports a month didn’t help bring new money, and big institutions also balked at her fund’s small size.When clients were pulling cash from Banxia Stable, Li put in some of her own, and added leverage of between 250% and 300%. The product, managing less than 200 million yuan, replicates asset allocations in her larger Banxia Macro Fund but increases exposure through margin-financed trades in instruments such as stock index and commodities futures.Last year’s success didn’t come easily for Li. After managing money at Bocom Schroder Fund Management early in her career, she won multiple industry awards for her 25% annualized returns running China’s first macro hedge fund at Honghu Investment Management Co. Yet losses in 2016 caused differences with her then-husband Liang Wentao, the firm’s founder. After they parted ways, the mother of two set up Banxia at the end of 2017 and started building client relations from scratch.“She is a very unique China macro manager with the ability to do focused and very deep macro research in specific areas, such as steel,” said William Ma, who was until recently chief investment officer of wealth manager Noah Holdings, which invested in Banxia in January 2018.The level of leverage in the revamped Banxia Stable is closer to what legendary investor George Soros outlined in his autobiography, Li said. If the shift sounds bold and simple, making the right moves during last year’s turbulence to achieve a 63% gain in the underlying strategy required sharp judgment.In January 2020, Li was among the earliest to turn short on stocks and commodities, taking note of not only emerging reports on the new coronavirus but also signs of a weakening economy. “Super-cheap” put options allowed her to add leverage that helped bring a 61% jump in the leveraged Banxia Stable in the first quarter as markets tumbled, she said.Among BestLi’s use of options to construct contrarian macro trades means “her return profile is negatively correlated” to global and local peers, said Ma, who has followed her performance since she worked at Honghu. “She is really one of the best macro hedge fund managers I have ever met,” he said.Along with almost 9,000 local players, Li is competing with more than 30 global firms that are making inroads into China’s 4.5 trillion yuan hedge fund market. Dalio has said he saw the need to invest “a significant portion” of his portfolio in Chinese assets, and Bridgewater raised 900 million yuan in its second China private fund in September, doubling assets.Bridgewater’s All Weather China strategy has posted annualized returns of 22% through July since its 2018 inception. That’s less than Banxia Stable’s 85% in the same period, Li said, while noting the strategies aren’t directly comparable.In a reminder of risks macro hedge funds face when they bet in the wrong direction, Bridgewater’s flagship Pure Alpha II fell 12.6% last year.More than other strategies, the performance of macro funds “depends a lot on the manager’s own judgment,” said Li Minghong, head of fund-of-funds investments at Panyao Capital in Shanghai.Rocky QuarterBanxia Stable fell 13% in the first three months of this year, in part because of an increase in steel prices. Its short positions in ferrous metals were hurt by China’s unexpected move to lower crude steel output and cut capacity, according to its quarterly investor letter. The fund broke even on bonds, and made a small profit on stocks even as the Shanghai Shenzhen CSI 300 Index declined 3%.Banxia wasn’t alone. More than 40% of Chinese hedge funds made a loss in the first quarter, although macro funds managed an average 1% gain, according to PaiPaiWang.Li and her peers face a challenge attracting investors in a nation where macro funds account for just 2% of the 65,129 local private securities funds tracked by PaiPaiWang. She said she’s now meeting more potential customers following last year’s performance, but fund raising remains tough, in part because of Banxia’s short track record. She hasn’t felt any impact from the collapse of U.S. family office Archegos Capital Management, saying her leverage is much lower and portfolio more diversified.The difficulties aren’t shaking her confidence in outperforming the likes of Bridgewater.“They should just hire people like me,” she said. “But I won’t work for them.”(Updates with first-quarter performance of Chinese hedge funds in the fourth-to-last paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Coinbase reference price set at $250 per share ahead of Nasdaq debut

    Nasdaq on Tuesday set a reference price of $250 per share for Coinbase Global Inc, projecting a value for the largest U.S. cryptocurrency exchange at $49.19 billion ahead of its landmark stock market debut on Wednesday. The reference price is not an offering price for investors to purchase shares, but rather a benchmark for performance when the stock starts trading the exchange on Wednesday. Coinbase shares are set to start trading under the "COIN" symbol.

  • U.S. consumer prices post biggest gain in 8-1/2 years as economy reopens

    U.S. consumer prices rose by the most in more than 8-1/2 years in March as increased vaccinations and massive fiscal stimulus unleashed pent-up demand, kicking off what most economists expect will be a brief period of higher inflation. The report from the Labor Department on Tuesday also showed a firming in underlying prices last month as the broader reopening of the economy bumps against bottlenecks in the supply chain, capacity constraints and higher commodity prices. Federal Reserve Chair Jerome Powell and many economists view higher inflation as transitory, with supply chains expected to adapt and become more efficient.