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Third member of prestigious FDA panel resigns over approval of Biogen’s Alzheimer’s drug

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A sign for the Food and Drug Administration is seen outside of the headquarters on July 20, 2020 in White Oak, Maryland.

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A third member of a key Food and Drug Administration advisory panel has resigned over the agency’s controversial decision to approve Biogen‘s new Alzheimer’s drug, Aduhelm, CNBC has learned.

Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School, said the agency’s decision on Biogen “was probably the worst drug approval decision in recent U.S. history,” according to his resignation letter obtained by CNBC.

“At the last minute, the agency switched its review to the Accelerated Approval pathway based on the debatable premise that the drug’s effect on brain amyloid was likely to help patients with Alzheimer’s disease,” he wrote in resigning from the FDA’s Peripheral and Central Nervous System Advisory Committee.

He wrote it was “clear” to him that the agency is not “presently capable of adequately integrating the Committee’s scientific recommendations into its approval decisions.”

“This will undermine the care of these patients, public trust in the FDA, the pursuit of useful therapeutic innovation, and the affordability of the health care system,” he said.

Shares of Biogen surged 38% Monday after the FDA approved the biotech company’s drug, the first medication cleared by U.S. regulators to slow cognitive decline in people living with Alzheimer’s and the first new medicine for the disease in nearly two decades.

Biogen’s drug targets a “sticky” compound in the brain known as beta-amyloid, which scientists expect plays a role in the devastating disease. 

The FDA approved the drug under a program called accelerated approval, which is usually used for cancer medications, expecting the drug would slow the cognitive decline in Alzheimer’s patients. The agency granted approval on the condition that Biogen conducts another clinical trial.

The agency’s decision was a departure from the advice of its independent panel of outside experts, who unexpectedly declined to endorse the drug last fall, citing unconvincing data. At the time, the panel also criticized agency staff for what it called an overly positive review of the data.

At least two other FDA panel members have resigned as a result of the agency’s decision on the drug. Mayo Clinic neurologist Dr. David Knopman and Washington University neurologist Dr. Joel Perlmutter have also submitted resignation letters.

“I was very disappointed at how the advisory committee input was treated by the FDA,” Dr. Knopman told Reuters. “I don’t wish to be put in a position like this again.”

–Reuters contributed to this report.

This is a developing story. Please check back for updates.

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Apple hires BMW veteran in latest sign of electric car push

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This photo, taken in March 2019, shows Apple’s headquarters in Cupertino, California.

felixmizioznikov | iStock Editorial | Getty Images

Apple has hired Ulrich Kranz, a former senior executive at BMW who focused on electric cars, Apple confirmed to CNBC’s Phil LeBeau on Thursday.

The hire is the latest sign that Apple is serious about building an electric car to compete with automakers such as Tesla.

Hyundai said earlier this year it was in talks with Apple to manufacture its car before walking its comments back and confirming it was no longer in discussions.

Apple has never confirmed it is building a car but has hired talent from the automotive industry and tested self-driving software in California. In 2018, Apple hired Doug Field from Tesla, who worked on Tesla’s Model 3. With its expertise in supply chains, battery technology, and user experience, Apple would represent a major competitor to existing automakers if it ever releases a car. Apple’s car project has been restructured several times, most recently in early 2019.

Apple did not say whether Kranz will work on Apple’s car project, which is called Special Projects Group or SPG. But Kranz has extensive experience building teams focused on electric cars.

Before joining Apple, Kranz was a co-founder of Canoo, which is working on a self-driving electric car. At BMW, he led the company’s electric car development program, which resulted in the electric i3 vehicle and a hybrid sports car called the i8, according to Bloomberg, which first reported the hire.

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Didi Chuxing files for IPO, booked $6.4 billion revenue in Q1

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A logo of ride-hailing giant Didi Chuxing displayed on a building in Hangzhou in China’s eastern Zhejiang province.

STR | AFP | Getty Images

Chinese ride-hailing giant Didi Chuxing on Thursday filed to go public in what could be one of the largest tech IPOs of this year.

The company reported $21.6 billion in revenue last year. It also posted a profit this past quarter on $6.4 billion in revenue. Specifically, the company reported net income of $837 million before certain payouts to shareholders, and comprehensive net income of $95 million for the quarter.

Between 2019 and 2020, revenue shrunk almost 10% as the Covid pandemic struck China hard last year. However, prior to the pandemic, revenue grew 11% between 2018 and 2019. Additionally, revenue has bounced back in the first quarter as the pandemic recovery is in full swing, with 107% growth in Q1 from the previous year’s quarter.

Some of the company’s profitability in Q1 can be credited to gains on investments of $1.9 billion related to spin-offs and divestments.

Didi was most recently valued at $62 billion following an August fundraising round, according to PitchBook data. Bloomberg reported the company could have a $100 billion valuation at the time of its IPO.

Founded in 2012, Didi said it has 493 million annual active riders, and 15 million annual active drivers. Didi has been named to the CNBC Disruptor 50 list four times.

(The precise name of the company as registered on the F-1 is Xiaoju Kuaizhi.)

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Inflation hotter than expected, but temporary, won’t affect Fed policy

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Alex Tovstanovsky, owner of used-car dealer Prestige Motor Works, checks on inventory with his general manager Ryan Caton in Naperville, Illinois, May 28, 2020.

Nick Carey | Reuters

Consumer prices jumped more than expected in May, but the surge in inflation looks to be temporary and should not push the Federal Reserve to tighten policy for now.

The consumer price index rose 5% in May on a year-over-year basis, the highest since the summer of 2008, when oil prices were skyrocketing. Excluding food and energy, core CPI rose 3.8% year over year, the highest pace since 1992. A third of the increase was attributed to a sharp 7.3% increase in used car and truck prices.

Fed officials have described the current period of high inflation as transitory, meaning it should be brief or short-lived. They have expected several months of elevated price increases because of pent-up demand and supply chain lags. The comparison to last year’s weak levels — at a time when the economy was mostly shut down — is also a factor.

“The pick-up in inflation is stronger than expected, but it still looks like it is in transitory categories,” said John Briggs of NatWest Markets. “[Fed officials] can probably get away with talking about transitory.”

The Federal Reserve meets June 15 and 16. There was some market speculation that if inflation looked very hot, the central bank might move up the time frame in which it would discuss moving away from its easy policies.

Economists expect the first step toward easing would be when the Fed publicly discusses its decision to cut back on the $120 billion in Treasury and mortgage securities it buys each month.

The bond buying, or so-called “quantitative easing” program, was designed to create liquidity and keep interest rates low.

After starting the discussion about its bond program, the central bank is then expected to wait several months before beginning a gradual whittling away of purchases until it gets to zero. The Fed would then consider raising its target federal fund rate from zero, but that is not expected until 2023.

Many economists have been expecting the Fed to first talk about tapering bond buying at its Jackson Hole Economic Symposium in late August, before actually cutting the size of purchases in late 2021 or next year.

Mark Zandi, chief economist at Moody’s Analytics, said there’s evidence the price pressures could be fleeting, as the Fed expects.

“A lot of the surge in prices are for things that are just normalizing. … Hotels and rental cars and used vehicles, sporting events, restaurants. Everyone is just getting back to normal, so pricing is just returning to what it was pre-pandemic,” Zandi said.

However, he added that it’s too soon to say inflation won’t be more persistent than the Fed expects. “It’s premature to conclude all of this is transitory and where underlying inflation is ultimately going to land when we get through the price normalizations,” Zandi said. He expects when the surge is over, inflation will be at a higher level than it was pre-pandemic.

The Fed has said it would tolerate inflation running above its 2% target, and it would consider an average range for those price increases. That means it has committed to hold off on raising interest rates as soon as it sees inflation risks rising, as it has done in the past.

Financial markets took the surge in CPI in stride, and stocks jumped after the 8:30 a.m. ET report. The Dow gained more than 200 points but gave up its best gains. The 10-year Treasury was slightly higher at 1.49%, after initially rising as high as 1.53%. Yields move opposite price. Fears the inflation number would push the Fed to shift policy sooner would have driven yields much higher.

The components of higher prices

Economists said some of the price increases were surprising, but the price gains in the bigger contributors to CPI remained relatively subdued.

“The used car component is just stunning,” said Grant Thornton chief economist Diane Swonk. “What’s kind of surprising is how low the shelter component has remained. It’s coming up from where it decelerated. There’s now the question of it picking up. We have to watch that, but I would have expected more of a hotel room increase in shelter.”

Shelter accounts for more than 30% of CPI. The shelter index rose 0.3% in May, and 2.2% over the last 12 months. The rent portion rose 0.2%, and the index for owners’ equivalent rent — or the hypothetical amount a homeowner would charge someone to rent their dwelling — rose 0.3%. Lodging away from home rose just 0.4%, after jumping 7.6% in April.

Another big component, medical care, fell 0.1% after rising in the four previous months. Medical care prices rose just 0.9% over the past 12 months, the smallest increase since the period ending March 1941.

“Medical care and housing are two very large components of inflation. They’re both very sticky and a reason to think inflation will settle at a higher level but not at a level that is uncomfortable,” said Zandi. “The reason for being so sanguine is around medical care and housing.” He said the expansion of the Affordable Care Act has helped hold down medical costs.

The pick-up in inflation is stronger than expected, but it still looks like it is in transitory categories.

John Briggs

NatWest Markets

Grant Thornton’s Swonk said she does not expect much from the Fed next week and the inflation report does not change that.

“The remarkable resilience of the long bond — it gives the Fed the opportunity to think about tapering, because financial markets are buying it as a transitory surge in inflation,” Swonk said, referring to the 30-year Treasury.

Investors have been buying the 10-year and 30-year Treasury bonds since last week’s weaker-than-expected May jobs report. The 30-year yield has fallen to 2.16%. Bond yields move opposite prices.

For now, investors are not fearful the Fed will move sooner, but Swonk says there could still be a few more hot inflation reports.

“It’s higher than [Fed officials] would like. It surprised to the upside. My guess is it lasts longer than they expect. I expect it to last longer and be hotter but still go away,” she said.

But she still expects the Fed to wait until the end of the summer to talk about changing its bond purchases.

“I always expected tapering talk to begin more openly at the Jackson Hole meeting. It hasn’t changed my view. Some people thought the Fed would get closer to full employment before they did liftoff on tapering,” Swonk said.

She said some data in the CPI report dovetails with the jobs data. The economy created 559,000 jobs in May, about 100,000 less than expected.

“If you look at the combination of events — used car prices, insurance costs on vehicles, all of these things accelerated and now they’re rebounding. Prices at the pump, they’re up over 50% from a year ago,” Swonk said. “All of this is making it harder for workers to get to low-wage jobs.”

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