Month: June 2021

Kamala Harris’s enormous ego and disturbing lack of self-awareness had quite the weekend.

For starters, while en route to Guatemala she walked to the back of Air Force 2 and handed out cookies of herself, donning a distinctive pearl necklace and frosted face which prompted condemnation and ridicule from Twitter users far and wide.

@vp made an OTR visit to the back of the plane and delivered cookies decorated with the shape of her likeness as well as AF2. pic.twitter.com/TQrUR47Vgc

— Courtney Subramanian (@cmsub) June 7, 2021

As a former Military Aide during the Clinton administration, I never even imagined this level of narcissism. And, all on YOUR tax dollars America!

Democrats, even you can’t be cool with this.@KamalaHarris

— Buzz Patterson (@BuzzPatterson) June 7, 2021

pic.twitter.com/dThJ3H1DwD

— CornPop ☭ (@RealC0rnP0p) June 7, 2021

Then, upon touching down in Guatemala to meet with foreign leaders about what can be done to stem the influx of illegal immigrants into the United States, the Vice President was greeted by protesters bearing signs.

“Trump Won” , “Stop Funding Criminals” , and “Kamala Go Home” were among them, according to the Floridian Press.

pic.twitter.com/mS9M8Vo4nZ

— Mujeres Conservadoras Guatemala (@MujeresConserv1) June 6, 2021

“Trade not USAID, Work not charity” read another sign, which continued: “We reject your $860 million dollar bribe to our corrupt politicians!!! No BLM Marxism in Guatemala!”

MIS RESPETOS PARA ESTE OFICIAL Y KAIBIL VETERANO DE COMBATE GUATEMALTECO !!! ELLOS ME REPRESENTAN !!! kamala harris we dont want you in Guatemala !!! GO HOME !!! NO MORE UD MONEY FOR CRIMINALS AND NGOS !!! #KamalaGoHome !!! #WeDontWantYourMoney !!! #KamalaSTOPfundingCriminals !!! pic.twitter.com/35IptKLv0v

— giovanni fratti (@frattigiovanni) June 6, 2021

More via the Floridian Press:

Now, Harris has to meet with Guatemalan President Alejandro Giammattei, who says that the Biden administration’s soft stance on illegal immigration has emboldened human traffickers known as “coyotes,” who ferry thousands of children into the United States through the southern border.

“We are not on the same side of the coin. It is obvious,” said Giammattei of their previous Zoom calls, though added “”we are in agreement on the ‘what'” of the immigration crisis, “which is something. We are in not agreement on the ‘how.’“

We can only imagine what ‘border czar’ Kamala has planned…

Authored by Robert Wheeler via The Organic Prepper blog,

California and Nevada are 100% in drought.

Direct from Drought.gov:

After two water years of dry conditions, both California and Nevada are now 100% in drought. And with dire drought conditions, rapidly decreasing snowpack, and low reservoir levels, concern for wildfire season is growing.

This is a dry spell not seen since the Great Depression and the Dust Bowl days. Because of the drought, Americans very likely will experience a shocking food shortage very soon.

As explained in my previous article, drought is also affecting Arizona, and Colorado and the prairie states like Kansas, Nebraska, and the Dakotas. However, other states such as those in the Midwest and areas considered the nations’ “corn belt” also suffer from the drought. 

Midwest states suffering the most

Here are the states in the Midwest currently experiencing drought conditions:

• Iowa – Iowa has been in a state of drought for some time. About 8% of the state is considered “severe drought,” an area spanning about 12 counties in the northwestern part of the state. About 64% of Iowa currently suffers from “abnormally dry conditions, or worse.”

• Illinois – Drought in Illinois, particularly the northeastern portion, has intensified to severe is now covering about 6% of the state. Abnormally dry conditions are present across the northern region and east side of the state. About 27% of the state is suffering from “abnormally dry conditions, or worse.”

• Nebraska – One of the lucky ones, Nebraska received some much-needed rain. Unfortunately, that wasn’t enough to end the drought. Moderate drought is at 16%, while 45% of the state suffers from “abnormally dry conditions, or worse.”

• Indiana – Probably the least dry state of the drought-stricken Midwest. Less than 1% of the state in drought conditions though about 21% reporting “abnormally dry conditions.”

• Minnesota – The drought is getting worse in Minnesota. Two counties in the northwest of the state are in “severe drought” while “moderate drought” has spread to 21% of the state. Overall, about 55% of the state suffers from “abnormally dry conditions, or worse.”

• Michigan – Michigan hasn’t been spared either. 78% of the state is experiencing “abnormally dry conditions,” 64% “moderate drought, and 6% “severe drought.”

Southeast U.S. is not as bad, but still not looking good

The Southeast United States is faring better. However:

• Virginia, North Carolina, and South Carolina are experiencing drought conditions as well.

• Texas, not mentioned as much: 52% experiencing “abnormally dry conditions,” 32% “moderate drought,” 20% “severe drought,” and 12% “extreme drought.” Nearly 6% of the state is experiencing “exceptional drought.”

• Though typically a dry state, New Mexico is 100% experiencing “abnormally dry conditions,” 99% “moderate drought,” 96% “severe drought,” 77% “extreme drought,” and 47% “exceptional drought.”

Still don’t believe the U.S. is suffering a severe dry spell?

The issue went before the U.S. Congress. From the AZ Mirror: 

A drought crisis unfolding across the West will require short-term relief and massive, long-term federal funding to help states weather the effects of climate change, state water managers and lawmakers said at a U.S. House hearing on Tuesday.

Nearly 90 percent of the West is now experiencing drought conditions, according to the federal U.S. Drought Monitor. The problem is particularly acute in the Southwest.

Many states suffer from the driest water year on record

According to the AZ Mirror: 

Arizona, New Mexico, Nevada, and Utah just had their driest year in 126 years. Colorado had its fourth-driest year, according to the National Oceanic and Atmospheric Administration.

Snowpack is well below average this year, and early snowmelt is raising serious concerns for this summer.

“Droughts are not new, but many are experiencing the impact of one of the driest water years on record,” Elizabeth Klein, a senior counselor at the Interior Department who is overseeing drought response, said at the hearing before a panel of the House Natural Resources Committee. “Competing demands for water can lead to more conflict.”

Water wars heat up as the dry spell worsens

The AZ Mirror also reported: 

Among those conflicts are who gets priority for limited water resources: upstream users, farmers, endangered fish, tribes, or municipal water systems.

In some cases, states are in conflict over who has rights to the water. The U.S. Supreme Court has several interstate water disputes on its docket, including cases between Mississippi and Tennessee and Texas, New Mexico and Colorado.

None of these issues are unforeseen consequences

They are the natural consequences of drought brought on, not by mythical CO2-based climate change. But a combination of natural phenomena, human action, and lack of preparation, problem-solving, and adaptation by governments and industry.

We shouldn’t look to Congress to solve the repercussions of the drought. (Unless the solution is giving themselves a raise.) Instead, all we can do is prepare ourselves and our families as best we can.

In other words, hope for the best, prepare for the worst.

I will say it again…

We’re facing famine conditions.

The drought isn’t coming. It’s HERE.

And whatever you think might be the causes, there are no signs that any reasonable solutions will be discovered or implemented any time soon. The best course of action is to prepare and plan. Now. Famine conditions are next on the list of things to worry about.

US Capitol Police (USCP) are busy preparing for the “next” Capitol Hill ‘riot’ apparently. Since the events of Jan. 6 over 440 individuals have been arrested on federal charges related to the breach of the building. This includes more than 125 who were charged with assaulting or else “impeding” law enforcement. 

Early Monday morning the official social media accounts for the Capitol Police issued an alert, telling residents “do not be alarmed” at the influx of emergency and law enforcement vehicles and low flying helicopters as an active training exercise swarms the Capitol area. “Please do not be alarmed if you see emergency vehicles and low flying helicopters,” USCP had first announced Saturday in preparation for the drill.

EXERCISE: This morning we are working with our federal, state, and local partners on a routine training exercise on the grounds of the U.S. Capitol.

Please do not be alarmed if you see emergency vehicles and low flying helicopters. pic.twitter.com/bOaqUXJudn

— U.S. Capitol Police (@CapitolPolice) June 7, 2021

However, the “routine” exercise was described as also involving state, federal and local agencies and appeared to be relatively brief in duration, wrapping up before 8:30am eastern, according to the notification. 

The drill came just as the extreme security measures which included a sprawling chain-link perimeter fence and many checkpoints surrounding the area put in place in the wake of the Jan.6 unrest finally appear to have been relaxed. 

As the New York Times commented of the situation of the past number of months, the additionally fortified capital sent a message of By the people, for the people, but not necessarily open to the people…

Eyewitnesses to Monday’s “routine exercise” described seeing military-style helicopters, which to most of the American public might seem anything but “routine”.

I’m at the US Capitol this morning where Capitol Police are conducting a training exercise. I’ve observed 4 military-style helicopters landing on the West Capitol lawn then taking off a few minutes later in pairs and flying westward over the National Mall at least twice so far. pic.twitter.com/Vq70d9NGlj

— TJ Jones (@T_Jones_Media) June 7, 2021

It’s only been within the past days and weeks that much of the extra fencing and security have been rolled back: “Gone are the State Patrol checkpoints and National Guard troops that were in place for the start of the session in January. A temporary chain-link fence surrounding the domed Legislative Building has also been removed,” one report observes.

But it’s likely we will now witness more massive military-style “drills” in preparation for some kind of future “scare” or event. 

Authored by Lance Roberts via RealInvestmentAdvice.com,

The media is buzzing with claims of an “Economic Boom” in 2021. While the economy will most certainly grow in 2021, the question is how much is already “baked in?”

“The economy has entered a period of supercharged growth. Instead of fizzling, it could potentially remain stronger than it was during the pre-pandemic era into 2023.

Economists now expect the second quarter to grow at a pace of 10%, and they expect growth for 2021 to be north of 6.5%. In the past decade, only a few quarters gross domestic product growing at even 3%.”

The premise is that strong “pent up” demand will sustain the economic recovery over the next few years.

However, since market lows in 2020, the market surge has not only recouped all of those losses but has rocketed to all-time highs on expectations of surging earnings growth.

The question: How much has gotten priced in?

A Return To Normalcy

Just recently, Liz Ann Sonders wrote a piece for Advisor Perspectives. To wit:

“Vaccines and herd immunity continue to bring COVID cases down, and the economic reopening continues to kick into a higher gear. Such is what the data is starting to show. Across economic metrics, from the gross domestic product (GDP) to retail sales and job growth, boom conditions are evident.”

She is correct in her statement. However, there is a difference between an “economic boom” and a “recovery.” As shown in the chart of GDP growth below, the U.S. has already experienced a very sharp “economic recovery” from the recessionary lows. (I have included estimates for the rest of 2020, which shows a return to trend growth.)

The following chart shows the economic recovery against the massive dumps of liquidity pumped into the economy. (Estimates run through the end of 2021 using economist’s assumptions.)

Can’t Recoup Losses

Certain areas of the economy, like airlines, hotels, and cruise ships, have yet to recover to pre-pandemic levels. However, those industries only make up a relatively small amount of overall economic activity. Furthermore, these industries will continue to struggle for some time as individuals will not take “two vacations” this year since they missed last year. That activity is now forever lost.

Yes, the economy will recover most likely to pre-pandemic levels this year due to stimulus injections, but as discussed previously, what then?

“The biggest problem with more stimulus is the increase in the debt required to fund it. There is no historical precedent, anywhere globally, that shows increased debt levels lead to more robust economic growth rates or prosperity. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the change in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.”

Just as it is with investing, getting “back to even” is not the same thing as “organic growth.”

The Second Derivative

What is shown above is the “second derivative” effect of growth.

“In calculus, the second derivative, or the second-order derivative, of a function f is the derivative of the derivative of f.” – Wikipedia.

In English, the “second derivative” measures how the rate of change of a quantity is itself changing. Since we measure GDP growth on an annual rate of change basis, the larger the economy grows, the lower the rate of change will be. Here is a simplistic example go GDP growth:

In year 1, GDP = $1. In the second year, GDP grows to $2. The annual rate of change is 100%. However, in year 3, even though the economy grows to $3, the annual rate of change falls to just 50%.

Given the long-term historical correlation between economic growth, corporate earnings, and annualized returns, the reversion to trend growth has implications for investors. As Liz notes:

“Using three broad ranges for GDP growth historically, the lowest range (when the economy is barely growing or in recession) is accompanied by the highest annualized stock market performance. GDP is only slightly back into positive territory on an annualized basis. However, the strong growth expected in the second quarter will push GDP into the highest zone. At that level, stocks have historically posted a negative annualized return.”

The reason is that once economic growth reaches higher levels, stocks have climbed to levels incorporating those expectations. In other words, when things are as “good as they can get,” stocks begin to reprice for slower future growth rates.

That is the phase we are at currently.

How Much Pent Up Demand Is There Anyway

The main driver of the expected recovery from a “recessionary” low stems from the question of how much “pent up” demand currently exists?

If we look at durable goods as an example, such would suggest that much of the demand for long-lasting products got pulled forward by consumers over the last 12-months.

Of course, if we broaden that measure to retails sales which make up ~40% of the personal consumption expenditures (PCE) index, we see much the same.

Given PCE, which comprises nearly 70% of GDP, has already recovered much of pandemic-related decline, how much “pent up” demand remains.

However, wage growth outside of personal transfer payments (i.e., stimulus) hasn’t recovered. It is impossible to sustain higher rates of economic growth without wage growth.

Importantly, as we saw in January and February following the $900 billion stimulus bill passage, there was a short-lived surge of activity. However, once individuals spent the money, activity quickly faded. We saw the same with retail sales in April following the American Rescue Plan, which sent out $1400 checks.

After the $1400 checks get spent, what will be the driver for continued consumption at previous rates? Further, given the impact of a larger economy (as it recovers), the rate of change will decline markedly in the months to come.

Earnings Growth Inflection

“Earnings growth has a high correlation to stock market performance, but with time lags that are less well-understood. We are about halfway through the first quarter S&P 500 earnings season and so far, the results are exceptionally strong.” – Liz Ann Sonders

That is correct, and given the high correlation between earnings and market returns, we come back to the same question. Has the advance in the market accounted for the rebound in earnings? More importantly, what happens when that growth reverses?

“Relative to last year’s second-quarter plunge of nearly -31% year-over-year, expectations are that S&P 500 earnings will be up more than 46% in this year’s first quarter. The second quarter will boast a whopping 60% increase. Such should be the inflection point in terms of the year-over-year growth rate.” – Liz Ann Sonders

The problem is the S&P rose to levels that earnings growth will have difficulty supporting, particularly as the stimulus fades from the system. As with economic growth, the 2nd derivative of earnings growth is now a headwind for the markets.

Such is also the problem of “pulling forward sales.”

Conclusion

Notably, the outsized growth of the market reflects repetitive interventions into the financial markets by the Fed. Those interventions detached financial asset growth from their long-term correlation to GDP growth, where corporate revenue comes from. Historically, when the S&P 500 becomes separated from economic growth, a reversion occurred.

Currently, analysts are expecting earnings to surge well above economic growth rates. However, the flaw in the analysis is the assumption earnings growth will continue its current trend.

While there will be an economic recovery to pre-pandemic levels, a recovery is very different from an expansion.

As Liz concludes:

“Optimism is extremely elevated. Such is certainly justified by stock market behavior over the past year and recent economic releases. But some curbing of enthusiasm may be warranted given the history of the stock market as an uncanny ‘sniffer-outer’ of economic inflection points.”

As she goes on to point out, this is not a time for FOMO-driven investment decision-making. The reality is that the supports that drove the economic recovery will not support an ongoing economic expansion. One is self-sustaining organic growth from productive activity, and the other is not.

The risk of disappointment is high. And so are the costs of being “wilfully blind” to the dangers.

Trillions of cicadas have finally emerged from the ground in Maryland for the first time in 17 years. There appear to be so many of them across the Baltimore–Washington metropolitan area that local radar has detected a giant ‘cicada cloud’. 

According to NBC4 Washington’s Lauryn Ricketts, weather radar images around 1141 ET detected the cloud of cicadas. “THIS is not rain, not ground clutter (the radar beam picking up objects close the radar site –which is in Loudoun County)…. the Hydrometeor Classification algorithm identifies this as biological in nature..so likely CICADAS being picked up by the radar beam…” she tweeted. 

The United States Forest Service shows the Brood X cicadas are mostly found in Maryland, Deleware, and South/Central Pennsylvania. 

Local news WJZ 13 said “high numbers'” of the insects are throughout the Baltimore metro area. 

The mass re-emergence of Brood X will only last a month or so as they produce a deafening sound, well over 100 decibels, searching for a mate, making babies, then dying. This only occurs every 17 years. 

Reuters reports money managers boosted their net long position in Chicago Board of Trade (CBOT) corn futures and options last week after slumping to a five-month low. New weather models forecast hot and dry conditions in the Corn Belt to persist through mid-month. 

The western half of the US is facing a megadrought while a heat wave last week swept across the West Coast to East Coast by the weekend.

Weather conditions across the Corn Belt, a region of the Midwestern US, are forecasted to remain hot and dry through next week. 

 As a result, money managers increased their net long position in CBOT corn futures and options in the week ended June 1 to 289,936 contracts. The increase comes as bullish bets on grain slumped since early April after a meteoric rise since last summer. 

Last week was money managers’ first net buying week in corn in seven weeks. Most-active July futures rose 11%, and December contracts rose increased by 12%. The surge was somewhat hampered by rumors China’s purchases of US farm goods would lapse. However, on Monday morning, corn futures are up more than 2%. 

Money managers are also betting on the ethanol industry as the Biden administration’s climate plan calls for renewable fuels to play a much more significant role in reducing emissions. The industry has produced over 1 million barrels per day of corn-based biofuel in the last three weeks, nearing levels not seen since pre-pandemic days.

S&P GSCI Grains Index has been on a tear since last summer, hitting levels last month not seen since 2013 on increasing China demand for corn. 

The bad news is that food inflation is rising to a decade high. 

Back in December, SocGen’s resident market skeptic Albert Edwards shared with the world why he is starting to panic about soaring food prices. And since that was before food prices erupted amid broken supply chains, trillions in fiscal stimulus, and exploding commodity costs, all we can imagine today is more and more disposable income by working-poor is being used to feed their families. Somehow, the Federal Reserve doesn’t see a problem here… 

A United Nations index of world food costs climbed for a 12th straight month in May, its longest stretch in a decade, rising to the highest in almost a decade, heightening concerns over bulging grocery bills.

With speculators boosting bullish bets on corn amid arid weather conditions in the Corn Belt, prices may continue to trend higher, worsening the food inflation crisis. 

Via SchiffGold.com,

Gold and silver whipsawed to end last week. Gold fell over $30 on Thursday when weekly jobless claims and the ADP private payroll numbers came in better than expected. But the yellow metal gained back much of the loss on Friday after a less than overwhelming Labor Department May jobs report. In his podcast, Peter breaks down the job numbers and comes to the conclusion that the economy is far weaker than anybody is admitting. Meanwhile, the Fed is still printing money. This is a double-whammy on the economy and a lot of people still don’t get it.

As Peter noted, the ADP and the Labor Department jobs report were diametrically opposed.

The ADP number came in way above estimates. The consensus was for 640,000 jobs added. The number came in at 978,000. The dollar benefited from this data and gold sold off.

The idea being that, oh, all of this job creation means that the economy is stronger. It’s going to put more pressure on prices, so more pressure on inflation, therefore, the Fed is more likely as a result of this strong ADP number to tighten rates sooner, to start tapering its asset purchases sooner. And of course, that feeds into the ‘buy the dollar, sell the gold’ mentality. The algorithms kick in, and we immediately had this reaction in the currency market and in the gold market.”

Peter reminds us that this assumption that the Fed will actually pay attention to these numbers and take action continues to be wrong.

The Fed doesn’t care about these numbers because it can’t tighten monetary policy no matter how good these numbers appear, because the only reason they appear good is because the Fed has got the economy on artificial life support with all its QE and zero percent interest rates. And the fact of the matter is they have to maintain the zero percent interest rates and they have to continue to administer larger and larger doses of QE in order to keep the comatose patient alive.”

But the markets still don’t seem to get this reality. They still expect tightening and that was the catalyst for the big selloff in gold last Thursday.

As it turns out, the entire trade reversed on Friday with the official Labor Department jobs report for May. It was basically a mirror image of the ADP report. The expectation for May was an addition of 650,000 non-farm payroll jobs. That would have been a big improvement on April’s disappointing numbers. The actual number was 559,000.

The unemployment number declined to 5.8%. But one of the primary reasons for the decline was the fact that the labor force participation rate went down.

So, one of the reasons the unemployment rate dropped is because some of the people who used to be unemployed are no longer looking for work. They don’t have jobs, but now they’re not looking. And because they’re content to not have a job and they’re not looking; they’re not officially included in the ranks of the unemployed even though they are not out there working and contributing to the economy.”

And one of the reasons a lot of people are choosing not to work is because the government is making it very lucrative not to work.

Average hourly earnings shot up more than expected. They were up 0.5 in May. Year-over-year, the increase was 2.0%. Peter said this big rise in wages is likely due to the fact employers are competing with enhanced unemployment benefits.

Peter called this a “bad” jobs report. Some might argue that “creating” 559,000 jobs in a month isn’t too shabby. But these aren’t new jobs.

These are just jobs that are being restored. It’s not like we have this vibrant economy and we’re starting up all these new businesses. These are businesses that were ordered to close down, and now they’re reopening. So, that’s all we’re doing is getting back all these jobs that we lost. Nothing here is being created.”

You can’t just look at the headline number out of context. You have to look at it in relation to all the jobs that were lost during the government shutdowns.

And the jobs that aren’t being restored are the ones we need most – manufacturing jobs.

In April, the Labor Department said the US lost 18,000 manufacturing jobs. That was revised up to 32,000 manufacturing jobs lost. The expectation was for 37,000 manufacturing jobs added in May. That number disappointed at just 23,000. That’s less than 4% of the jobs “created” last month. And over the last two months, we have a net loss of 11,000 manufacturing jobs. Almost all of the new jobs are in the service sector.

The problem is all these employed workers in the service sector — they want to buy manufactured goods. But the problem is none of these people are actually aiding in the production of these goods. So, we’re putting paychecks in people’s pockets, which enables them to go into the market and buy goods, but nobody in America is helping to produce those goods.”

So, what happens? Prices go up.

The only reason they’re not going up more is due to the exploding trade deficit. Americans are buying goods hardworking people in other countries are producing. That means US trading partners have more and more dollars they will need to unload into the market. That will put even more downward pressure on the dollar. Bigger trade deficits lead to a weaker dollar.

If the world recycles dollars into US assets, then things are fine. But it looks increasingly like foreigners don’t want those either.

There is a glut of dollars on the market and so the value of those dollars is going to go down.”

The weakness of the economy will create even more inflationary pressure.

The weaker the economy is the more money the Federal Reserve prints to artificially stimulate it. That is inflation. So, the longer the Fed continues to print money, the more upward pressure is put on prices.”

There is a double whammy.

As people are not productively employed, they are producing fewer goods or providing fewer services for people to buy. And then the Fed simply creates money for those people to spend. So, in a weak economy, you have two things happening at the same time. You have more money being created out of thin air and given to Americans to go out and buy stuff. But at the same time, fewer Americans are actually working to produce the stuff to buy.”

So, what does that mean?

It means we have more money chasing fewer goods. For now, the goods-gap is filled by imports, and that’s why we have these surging trade deficits and this big bottleneck of container ships off the coast that are queued up. But this put even more upward pressure on prices — so it’s stagflation. And these economists, these market strategists, they still don’t get this. And when they do, that’s when we’re really going to see the explosive move up in the price of gold and a real collapse in the value of the dollar.

In what could be a major coup for Biogen, the FDA on Monday approved Aduhelm (aducanumab), Biogen’s experimental drug for treating the physiological causes of Alzheimer’s, as the first treatment to address an underlying cause of the disease despite the remaining controversy over the drug’s decidedly mixed clinical trial results.

As Reuters explains, Aduhelm is one of a long list of drugs that have aimed to remove sticky deposits of a protein called amyloid beta from the brains of patients suffering from early-stage Alzheimer’s in order to stave off the worst ravages of the disease, which is characterized by severe memory loss and the loss of the ability to care for oneself.

The clinical trials for Aduhelm were the first to show that a reduction in these plaques (which are considered a hallmark symptom of the disease) can slow the clinical decline of a patient.

The drug has created a rift in the professional community that was mentioned in the FDA’s press release: the agency said that the data included in the Biogen’s submission – which were derived from two phase 3 clinical trials – were “highly complex and left residual uncertainties regarding clinical benefit. There has been considerable public debate on whether Aduhelm should be approved. As is often the case when it comes to interpreting scientific data, the expert community has offered differing perspectives.” Many scientists opposed the drug’s approval, saying it doesn’t work.

As a result, Biogen will be required to conduct another round of post-approval clinical studies (what the FDA is calling a “Phase 4” trial).

Biogen’s new drug is the first Alzheimer’s treatment approved since 2003. Existing treatment courses for the disease don’t do much to arrest the underlying causes, but rather are designed to make patients more comfortable.

FDA approved Aduhelm to treat patients with Alzheimer’s disease using the Accelerated Approval pathway, which allowed for the drug’s approval thanks to the success it showed in reducing the amyloid beta brain plaque.

Shares of Biogen climbed on the news, as did shares in other companies known to be working on alzheimer treatments, including Biogen rival Eli Lilly. The Nasdaq biotech index climbed to a session high.

Read the full press release below:

Today FDA approved Aduhelm (aducanumab) to treat patients with Alzheimer’s disease using the Accelerated Approval pathway, under which the FDA approves a drug for a serious or life-threatening illness that may provide meaningful therapeutic benefit over existing treatments when the drug is shown to have an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit to patients and there remains some uncertainty about the drug’s clinical benefit.

This approval is significant in many ways. Aduhelm is the first novel therapy approved for Alzheimer’s disease since 2003. Perhaps more significantly, Aduhelm is the first treatment directed at the underlying pathophysiology of Alzheimer’s disease, the presence of amyloid beta plaques in the brain.  The clinical trials for Aduhelm were the first to show that a reduction in these plaques—a hallmark finding in the brain of patients with Alzheimer’s—is expected to lead to a reduction in the clinical decline of this devastating form of dementia.

We are well-aware of the attention surrounding this approval. We understand that Aduhelm has garnered the attention of the press, the Alzheimer’s patient community, our elected officials, and other interested stakeholders. With a treatment for a serious, life-threatening disease in the balance, it makes sense that so many people were following the outcome of this review. Further, the data included in the applicant’s submission were highly complex and left residual uncertainties regarding clinical benefit. There has been considerable public debate on whether Aduhelm should be approved. As is often the case when it comes to interpreting scientific data, the expert community has offered differing perspectives.

At the end of the day, we followed our usual course of action when making regulatory decisions in situations where the data are not straightforward. We examined the clinical trial findings with a fine-tooth comb, we solicited input from the Peripheral and Central Nervous System Drugs Advisory Committee, we listened to the perspectives of the patient community, and we reviewed all relevant data. We ultimately decided to use the Accelerated Approval pathway—a pathway intended to provide earlier access to potentially valuable therapies for patients with serious diseases where there is an unmet need, and where there is an expectation of clinical benefit despite some residual uncertainty regarding that benefit. In determining that the application met the requirements for Accelerated Approval, the Agency concluded that the benefits of Aduhelm for patients with Alzheimer’s disease outweighed the risks of the therapy.

What the Data Show

The late-stage development program for Aduhelm consisted of two phase 3 clinical trials. One study met the primary endpoint, showing reduction in clinical decline. The second trial did not meet the primary endpoint.  In all studies in which it was evaluated, however, Aduhelm consistently and very convincingly reduced the level of amyloid plaques in the brain in a dose- and time-dependent fashion.  It is expected that the reduction in amyloid plaque will result in a reduction in clinical decline.

We know that the Peripheral and Central Nervous System Drugs Advisory Committee, which convened in November 2020 to review the clinical trial data and discuss the evidence supporting the Aduhelm application, did not agree that it was reasonable to consider the clinical benefit of the one successful trial as the primary evidence supporting approval. The option of Accelerated Approval was not discussed by the Advisory Committee. As mentioned above, treatment with Aduhelm was clearly shown in all trials to substantially reduce amyloid beta plaques. This reduction in plaques is reasonably likely to result in clinical benefit. After the Advisory Committee provided its feedback, our review and deliberations continued, and we decided that the evidence presented in the Aduhelm application met the standard for Accelerated Approval. We thank the Advisory Committee for its independent review of the data and valuable advice.

Accelerated Approval

The FDA instituted its Accelerated Approval Program to allow for earlier approval of drugs that treat serious conditions, and that fill an unmet medical need.  Approval is based on a surrogate or intermediate clinical endpoint (in this case reduction of amyloid plaque in the brain).  A surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. The use of a surrogate endpoint can considerably shorten the time required prior to receiving FDA approval.

Drug companies are required to conduct post-approval studies to verify the anticipated clinical benefit. These studies are known as phase 4 confirmatory trials. If the confirmatory trial does not verify the drug’s anticipated clinical benefit, FDA has regulatory procedures in place that could lead to removing the drug from the market.

The Devastation of Alzheimer’s Disease

With all this said, we are extremely aware of the gradual and cumulative devastation that Alzheimer’s disease causes, as patients lose their memory and cognitive functioning over time. In late-stage disease, people can no longer hold a conversation or respond to their environment. On average, a person with Alzheimer’s disease lives four to eight years after diagnosis, but some patients can live up to 20 years with the disease.

The need for treatments is urgent: right now, more than 6 million Americans are living with Alzheimer’s disease and this number is expected to grow as the population ages. Alzheimer’s is the sixth leading cause of death in the United States.

Although the Aduhelm data are complicated with respect to its clinical benefits, FDA has determined that there is substantial evidence that Aduhelm reduces amyloid beta plaques in the brain and that the reduction in these plaques is reasonably likely to predict important benefits to patients.  As a result of FDA’s approval of Aduhelm, patients with Alzheimer’s disease have an important and critical new treatment to help combat this disease.

FDA will continue to monitor Aduhelm as it reaches the market and ultimately the patient’s bedside. Additionally, FDA is requiring Biogen to conduct a post-approval clinical trial to verify the drug’s clinical benefit. If the drug does not work as intended, we can take steps to remove it from the market. But hopefully, we will see further evidence of benefit in the clinical trial and as greater numbers of people receive Aduhelm. As an agency, we will also continue to work to foster drug development for this catastrophic disease.