Breakingviews - Corona Capital: Drugs, Gold miner, Japan food M&A
LONDON/HONG KONG (Reuters Breakingviews) - Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
- Gold miner
- Japanese restaurant chain deal
PREVENTATIVE ACTION. Many medicines have unfortunate side effects. Drug companies advertising in America often have to list ailments such as chronic diarrhoea and vivid nightmares when selling cholesterol medication. But the makers of any new Covid-19 vaccinations have no such list and may not for many years. That is prompting the European pharmaceutical industry’s vaccines lobby to push for legal protection from lawsuits if there are any problems, according to the Financial Times.
Safeguards may be necessary. Vaccines typically take years to develop, which usually gives enough time for any unforeseen side effects to surface. But the rapid spread of Covid-19 and its impact on the global economy means companies like AstraZeneca and Sanofi have begun making vaccines even before receiving regulatory approval. Any push for legal protection may strengthen the fear of vaccines. That would undermine the fight against Covid-19 from the outset. (By Aimee Donnellan)
JOLLY METAL. The pandemic is burnishing Russian gold miner Polymetal International’s allure. The 9 billion pound company on Wednesday reported first-half net profit of $381 million, a 149% increase from a year earlier. Surging global demand for the yellow metal has been a boon. Polymetal’s average gold price rose 25% during the period. Having costs in Russian roubles and Kazakh tenges, which have both weakened, drove costs lower. The launch of a lower cost mine also helped.
Extra glitter comes from increased transparency of the company’s dividend policy, which now commits to payouts of half of net income. That’s what the Russian government required of state-controlled enterprises to line its coffers, but will come with less political risk. Shares in the FTSE 100 company, which has a 67% free float, have risen 62% so far this year. Even if investors’ appetite for safe-haven assets ebbs, Polymetal’s dividend will be a draw. (By Dasha Afanasieva)
CHEQUE, PLEASE. Japan’s comfort-food restaurant chain Ootoya is delaying its hunger pangs. Larger rival Colowide, which operates fast-food “izakaya” chains and other restaurants, has extended its hostile bid for Ootoya after failing to get enough shares by Tuesday’s deadline. Colowide, which already owns 19% of the target, now says it will only proceed with the purchase if it can increase its ownership to 40%, down from a previous threshold of at least 45%. Investors have until Sept. 8 to tender their shares.
Ootoya’s dogged resistance is noteworthy, given the attractive 46% premium Colowide was offering to the undistributed share price in July. Covid-19 may be one factor: restaurant chains across Japan have been battered by stay-at-home measures, so joining one now may seem unappetising. Even so, Ootoya’s revenue in the quarter ending June plunged 48% year-on-year, while a recent tie-up with online grocer Oisix Ra Daichi will take time to pay off. The company may struggle to keep holding out. (By Sharon Lam)
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