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    Norfolk Southern reports $387 million charge for the first quarter after East Palestine derailment

    Norfolk Southern on Wednesday reported an initial $387 million charge associated with the company’s East Palestine, Ohio, derailment in February.
    The charge resulted in a year-over-year decline in first-quarter profits, the rail company said.
    The earnings release reaffirmed Norfolk Southern CEO Alan Shaw’s commitment to supporting cleanup efforts in Ohio, pledging roughly $24 million in reimbursements and investments.

    General view of the site of the derailment of a train carrying hazardous waste, in East Palestine, Ohio, U.S., March 2, 2023. 
    Alan Freed | Reuters

    Norfolk Southern on Wednesday reported an initial $387 million charge associated with the company’s East Palestine, Ohio, derailment in February, which spilled toxic chemicals into the environment.
    The charge resulted in a year-over-year decline in first-quarter profits, the rail company said.

    Norfolk Southern said income from railway operations for the quarter was $711 million, down 34% from the same period in 2022. Excluding the East Palestine derailment, income from railway operations was $1.1 billion, up 1% compared to the same period the year prior.
    Net income for the period fell to $466 million, or $2.04 a share, down from $703 million, or $2.93, a year earlier. That comes despite a year-over-year jump in revenue of roughly 7% to $3.13 billion.
    Here’s how Norfolk Southern performed in the first quarter, compared with Refinitiv consensus estimates:

    EPS: $3.32, adjusted to exclude the impact of East Palestine, vs. $3.12 expected
    Revenue: $3.13 billion, vs. $3.11 billion expected

    The stock gained nearly 2% in premarket trading, but has dropped 16% year to date through Tuesday.
    The earnings release reaffirmed Norfolk Southern CEO Alan Shaw’s commitment to supporting cleanup efforts in Ohio, pledging roughly $24 million in reimbursements and investments. The National Transportation Safety Board is examining the company’s organization and safety culture through a special probe into the company.

    Shaw during the company’s earnings call Wednesday reiterated plans to install additional sensors, accelerate the deployment of advanced early detection technology, and increase safety training for first responders.
    Norfolk Southern did not announce estimates for further charges related to the East Palestine derailment.
    On Feb. 3, a Norfolk Southern freight train with 11 tank cars carrying hazardous materials derailed near Ohio’s border with Pennsylvania. The train subsequently ignited, sparking concerns surrounding environmental and health impacts for the community.
    In March, both the Justice Department and the state of Ohio sued Norfolk Southern. Democratic Sens. John Fetterman and Bob Casey of Pennsylvania and Sherrod Brown of Ohio introduced the new Railway Accountability Act at the end of last month, parts of which Shaw endorsed. More

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    Boeing plans to boost 737 Max production to 38 planes per month despite manufacturing snag

    Boeing said Wednesday it will increase output of 737 Max planes to 38 a month later this year, up from 31 a month.
    Revenue jumped 28% year over year, and the company narrowed its net loss.
    Boeing on Wednesday reiterated it expects to achieve free cash flow for the year of between $3 billion and $5 billion.

    A Boeing 737 Max is displayed during the Farnborough Airshow, in Farnborough, on July 18, 2022. (Photo by JUSTIN TALLIS / AFP) (Photo by JUSTIN TALLIS/AFP via Getty Images)
    Justin Tallis | AFP | Getty Images

    Boeing said Wednesday it plans to increase output of 737 Max planes to 38 a month from 31 later this year, despite a manufacturing issue affecting some aircraft.
    That production rate would be the highest in years for the best-selling aircraft and comes as Boeing seeks to get planes to airlines faster as those customers capitalize on a rebound in air travel. The company expects to deliver between 400 and 450 737 planes this year.

    “This is an important year for us,” Boeing CEO Dave Calhoun said in a staff memo on Wednesday. “As demand surges across our markets, we must focus together on execution and meeting our customer commitments.”
    Boeing is also planning to raise output of the 787 Dreamliner to five planes a month late this year from a current rate of three.
    Aircraft demand and stronger deliveries boosted Boeing’s revenue in the quarter with sales up 28% year-over-year. The company narrowed its net loss to $425 million, or 69 cents per share, from a year-ago net loss of $1.24 billion, or $2.06 per share.
    Revenue in Boeing’s commercial airplane unit rose 60% in the first quarter to $6.7 billion as deliveries of new aircraft picked up, but the company said it was partially offset by 787 Dreamliner customer compensation for delivery delays. It said a negative operating margin of 9.2% in the unit was tied to abnormal costs and research and development expenses.
    Boeing shares were up more than 3% in premarket trading after reporting results.

    Here’s how Boeing performed during the period ended March 31, compared with Refinitiv consensus estimates

    Adjusted loss per share: $1.27 vs. $1.07
    Revenue: $17.92 billion vs. $17.57 billion

    Adjusting for special items, Boeing lost $440 million, or $1.27 per share, compared with a year-ago net loss of $1.44 billion, or $2.75 per share. The company reported a $245 million pre-tax charge on the company’s KC-46A Tanker program tied to supplier issues.
    On Tuesday, major aircraft suppliers General Electric and Raytheon Technologies reported higher revenue in their engine units and an increase in repair shop visits and spare parts businesses.
    Boeing executives have said they would only increase output when they were confident in their supply chain, which has faced several snags after a host of layoffs and production declines during the pandemic.
    Earlier this month, the company disclosed a problem with two of eight fittings in a section of fuselage on certain 737 Max planes, its best-seller. Boeing had warned that the issue would slow deliveries of some aircraft.
    The pace of deliveries is key to its cash flow goals since customers pay for the bulk of the planes upon delivery. Boeing on Wednesday reiterated it expects to reach adjusted free cash flow for the year of between $3 billion and $5 billion.
    Boeing executives are scheduled to discuss results on a 10:30 a.m. ET call Wednesday. More

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    Big money donors rally behind Biden as he launches his reelection bid

    Big money Democratic donors are lining up to support President Joe Biden now that he confirmed he’s running for reelection.
    Reid Hoffman, the billionaire LinkedIn co-founder, has offered to host fundraising events for Biden.
    Haim Saban, media mogul and the creator of the Power Rangers, said he “will do all I can to have President Biden reelected for a well deserved second term.”
    Alexander Soros, the son of billionaire George Soros, said in a tweet he’s “ridin with Biden.”

    US President Joe Biden acknowledges the crowd during an event on the creation of new manufacturing jobs at the Washington Hilton in Washington, DC, April 25, 2023.
    Jim Watson | AFP | Getty Images

    Big donors in the business world started rallying around President Joe Biden soon after he announced Tuesday that he’s running for reelection next year.
    Executives spanning from tech to media to finance made it clear publicly and behind the scenes that they’re ready to help Biden overcome his soft approval ratings and fend off a heated Republican challenge – potentially in a rematch with former President Donald Trump.

    Several big Republican donors, meanwhile, have been scrambling to find an alternative to Trump, while some pinned their hopes on that potential candidate being Florida Gov. Ron DeSantis, who has yet to announce whether he’s running. Some of those same donors have quietly started to look at other options beyond DeSantis as he continues his battle with Disney. Former Vice President Mike Pence could enter the GOP primary field, too.
    Regardless of the Republican nominee, Biden will likely have a formidable war chest for the 2024 campaign.
    Reid Hoffman, the billionaire LinkedIn co-founder, has offered to Biden’s allies to host fundraising events for the president once he announced he would run for reelection, according to one of the businessman’s close advisors.
    Hoffman has been allied with Biden for years. He co-hosted a virtual fundraiser in 2021 for the Democratic National Committee, which featured the president. The advisor noted that Hoffman was invited to attend a Biden donor meeting set to take place in Washington this week, although he cannot go due to personal reasons. Hoffman visted the White House a few weeks ago, this person noted.
    “They know they can rely on us,” this advisor said.

    Some of the people cited in this story declined to be named in order to speak freely about private deliberations. A Biden campaign spokesperson didn’t return a request for comment before publication.
    Haim Saban, the media mogul behind properties including the Power Rangers, told CNBC in an email he “will do all I can to have President Biden reelected for a well deserved second term.” He said he will be hosting events for Biden. Saban raised millions for Biden during the 2020 campaign, and he plans to “improve on that” in 2024.
    Jeffrey Katzenberg, a co-founder of DreamWorks and a veteran Democratic donor, is one of the co-chairs of Biden’s campaign for president. Katzenberg was among Biden’s 2020 fundraisers who attended a state dinner at the White House last year.
    Katzenberg told CNBC in an exclusive interview Tuesday night that he believes the Biden campaign will raise more this time around than in 2020. Then, Biden raised a bit more than $1 billion, while Trump brought in over $740 million, according to Federal Election Commission filings.
    Katzenberg has been in touch with Biden and his team of longtime advisors over the past year about the president’s 2024 run.
    “I’ve emphasized what he has accomplished and his leadership, and how essential it is in this moment in time for him to, one more time, saddle up and go do this,” Katzenberg said. “I have been as active and ambitious as possible in encouraging and supporting Biden to run again. I’ve been at it pretty consistently now for the last year.”
    He added that his expects his role as co-chair of the campaign to develop. He also emphasized how small dollar donors are going to play a key role for Biden’s 2024 reelection campaign, as they did in 2020.
    Biden’s campaign raised over $400 million from donors that gave under $200 during his last run for president, according to OpenSecrets. Katzenberg said that donors large and small have already reached out to him about how they can help.
    Katzenberg said he was “inundated” with messages of support from donors for the president Tuesday after Biden’s announcement.
    “It will take me days to get out from underneath the outpouring of support that has occurred in 12 hours after the launch,” he said.
    Charles Myers, a former vice chairman at Evercore and the founder of Signum Global Advisors, told CNBC that he plans to give and raise millions of dollars toward Biden’s 2024 candidacy.
    “Stakes are higher than ever. Trump 2.0 would be devastating for the country and arguably the world,” he said, noting that he plans to raise and contribute more than he ever has before.
    A different Biden fundraiser said there are already two New York City fundraising events in the works. The events are being organized, at least in part, by businessman Dennis Mehiel, who backed Biden in 2020, according to this person. Chicago businessman John Atkinson is also planning fundraising events in support of the president, this person said.
    Trump is the favorite in the GOP primary. An NBC News poll shows 46% of the Republican primary voters that took part in the survey support Trump over other contenders and potential candidates, including DeSantis. The majority of those surveyed said they would prefer that neither Biden nor Trump run for president.
    Fifty-four percent of the people polled said they disapprove of the job Biden’s doing. Other public surveys show Biden would be favored against Trump, albeit in a tight race.
    Trump’s dominance in the GOP field has pushed other big Democratic donors to start gearing up to back Biden. Venture capitalist Ron Conway has told friends he will help the president’s campaign, according to a person close to him.
    Conway did not return repeated requests for comment.
    Alexander Soros, the son of billionaire George Soros, said in a tweet he’s “ridin with Biden.” His spokesman did not have further details to provide on how either the elder Soros or his son plan to help the president.
    The younger Soros, who has publicly criticized Trump, has visited the White House at least 14 times since Biden became president, according to the New York Post. George Soros donated over $178 million during the 2022 midterm elections toward Democrats running up and down the ballot, according to OpenSecrets.
    Tom Steyer, a billionaire who has railed against Trump for years and supported Biden after running for president himself in 2020, tweeted his support for the president’s stance on climate change.
    “We need a leader who understands the urgency of this moment and will work with our allies to strengthen our global response – that’s @JoeBiden,” Steyer said.
    Steyer’s team did not respond to requests for comment. More

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    Target rolls out curbside returns as retailers hope convenience will boost sales

    Target has started to offer curbside returns at roughly a quarter of its stores.
    Drive Up, its curbside pickup service, has been a major driver of the company’s online sales.
    The big-box retailer is sweetening the service, as it tries to hang on to pandemic-fueled gains.

    A worker delivers an order to a drive up customer at a Target store on August 19, 2020 in Miami, Florida.
    Joe Raedle | Getty Images

    Target is dangling a new perk to get shoppers to swing by its stores: customers can make returns without leaving their car.
    The curbside-returns service, which began last week at roughly a quarter of Target’s nearly 2,000 stores nationwide, will be available across the chain by the end of summer. 

    Target is sweetening its curbside-pickup service, Drive Up, to attract and retain customers as the retailer braces for a potential sales slowdown and tries to hang on to pandemic-fueled gains. Total annual revenue grew by about $31 billion – or nearly 40% – from fiscal 2019 to 2022.
    Now, as shoppers become more budget conscious and buy fewer discretionary items, Target said it expects comparable sales to range from a low single-digit decline to a low single-digit increase this fiscal year. At an investor day in February, it projected full-year earnings per share of between $7.75 and $8.75, below Wall Street’s expectations of $9.23 per share, according to StreetAccount estimates.
    The company hopes convenient perks like curbside returns will boost customer loyalty and jolt sales.
    “Any time we remove friction from our guest experience it benefits the guests and benefits Target because they deepen their relationship with us,” Chief Stores Officer Mark Schindele said. “We’ve shown that with Drive Up overall. Guests try that service, they love it and then they shop our stores more often.”
    Curbside pickup became a bigger sales driver for retailers’ e-commerce businesses, especially as shoppers tried to avoid crowds during the Covid pandemic. For some shoppers, the habit has stuck as work and home schedules are fuller and commutes are back — and retailers including Target and rival Walmart now aim to capitalize on that.

    Click-and-collect, a term used to describe buying online and picking up purchases curbside or in store, grew from 6% of overall e-commerce sales in the U.S. in 2019 to 11% in 2022, according to data from Euromonitor, a market research firm.
    Delivery still accounts for the majority of online sales, but click-and-collect drove about $114 billion of sales in 2022 — a jump from $36 billion in 2019, according to Euromonitor.
    In the U.S., the vast majority of click-and-collect comes from curbside pickups, said Bob Hoyler, industry manager for retail research at Euromonitor. 
    The market research firm anticipates click-and-collect sales in dollars will grow by 8% this year, compared with 2% for delivery. The growth will be fueled by consumers who opt for curbside pickup to avoid delivery fees or shipping minimums at a time of heightened price sensitivity, Hoyler said.
    Target debuted Drive Up in 2017 as a test in Minneapolis, where the company is based. It expanded the service to stores across all 50 states in 2019. It added fresh and frozen groceries in 2020, and tacked on wine and beer the following year. 
    Last year, the retailer expanded the service to allow shoppers to order a Starbucks drink to retrieve when they pick up their curbside order. The service is available at about 240 stores.
    Sales fulfilled through Drive Up grew more than 70% in the fiscal year that ended in late January 2022, on top of a more than 600% boom during the prior fiscal year, the company said. Drive Up sales grew more than 10% in the most recent fiscal year.
    Target’s same-day services, which include Drive Up, accounted for more than half of digital sales as of late January as consumers embrace convenience. Same-day services also include Target-owned delivery service Shipt and Order Pickup, which allows shoppers to retrieve an online purchase inside of a store.
    The retailer’s average fulfillment cost per unit has fallen by 40% over the past four years as those services grow, Chief Operating Officer John Mulligan said at an investor day in February. More than 95% of Target’s total sales, including digital, are fulfilled in stores.
    Other retailers have added to curbside pickup. Walmart rolled out curbside returns at all of its stores ahead of the 2022 holiday season. Dick’s Sporting Goods added curbside returns to its services in 2020 and offers it across all of its stores.
    Neither company would quantify the use of curbside pickup or returns, but Walmart said it has seen nearly double the volume of customers using curbside returns from its launch across the chain last fall compared with this month.
    At an investor event earlier this month, Walmart CEO Doug McMillon said the retailer is competing on convenience, too. He credited pickup and delivery for driving growth in recent years, and said the company’s recent survey results show customers are choosing the big-box retail giant to save time along with money.
    Yet other retailers such as Kohl’s have eliminated curbside pickup. It ended the service last summer, swapping it out for a self-pickup service inside of stores.
    The company’s shift to self pickup is part of efforts to cut costs, including by reducing its payroll, Chief Financial Officer Jill Timm said in September at a Goldman Sachs conference. She said Kohl’s is also testing self checkout and self returns.
    For some retailers, the time and labor of curbside pickup can be hard to justify — especially since it encourages shoppers to stay in their cars rather than step into stores where they may fill up their carts with more purchases, Euromonitor’s Hoyler said.
    Those concerns fueled skepticism of curbside returns within Target, too.
    Most Target returns are made at the store, according to the company. Inside of a store, a shopper may swap out a returned product for another or grab an impulse item.
    At Target’s investor day in late February, Citibank analyst Paul Lejuez asked if the retailer would ultimately miss out on purchases by adding curbside returns.
    Schindele, the chief stores officer, said Target is focused on the lifetime value of a customer, not just the economics of a single transaction. He said allowing curbside returns also helps the retailer get unwanted items back on the sales floor faster and lowers the cost of mail-in returns.
    He added that curbside pickup still inspires browsing and other purchases. On average, about 20% of customers who pick up Drive Up orders also make an in-store purchase on the same day, he said.
    “What we find is when a guest uses Drive Up — and it could be Drive Up returns, it could be Drive Up purchase — we find that they spend more money in store over the course of the year.”
    During tests of curbside returns, some shoppers have stopped by just to return an item, Schindele said. Others have picked up purchases while making a return. Still others have retrieved items they bought, made a return and gotten a Starbucks drink.
    For Target, curbside returns could serve as a differentiator and a complement to the merchandise mix it sells, Hoyler said. Target’s sales focus is on general merchandise, such as apparel and beauty products, with only roughly 20% of its annual sales coming from grocery items. That’s much less than Walmart, which draws nearly 60% of its annual U.S. sales from grocery.
    That general merchandise tends to be returned much more often than items like milk and bananas, he said. More

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    Chipotle Mexican Grill’s restaurant traffic grows as the chain proves its pricing power

    Chipotle shares jumped after the company’s earnings and revenue topped Wall Street’s estimates.
    Same-store sales rose 10.9%, topping StreetAccount estimates of 8.6%.  
    Menu prices are up roughly 10% from a year earlier.

    Chipotle Mexican Grill on Tuesday reported quarterly earnings and revenue that topped analysts’ expectations, fueled by better than expected same-store sales growth.
    Like McDonald’s, Chipotle said traffic to its restaurants grew during the first quarter despite higher menu items. Chipotle’s menu prices are up roughly 10% from a year earlier. CEO Brian Niccol said the chain has demonstrated that it has pricing power.

    “We don’t want to be in front of the inflationary environment, but we also don’t want to fall behind,” he said on the company’s conference call.

    Pedestrians wearing protective masks walk in front of a Chipotle restaurant in San Francisco, California, April 19, 2021.
    David Paul Morris | Bloomberg | Getty Images

    For now, Chipotle is pausing price increases, Niccol said on CNBC’s “Closing Bell.”
    Shares of the company rose more than 7% in extended trading.
    Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

    Earnings per share: $10.50 vs. $8.92 expected
    Revenue: $2.37 billion vs. $2.34 billion expected

    Chipotle reported first-quarter net income of $291.6 million, or $10.50 per share, up from $158.3 million, or $5.59 per share, a year earlier. The company’s menu price hikes and lower avocado prices helped improve profit margins compared with the year-ago period.

    Revenue climbed 17.2%, to $2.37 billion, from $2 billion during the year-earlier period. Same-store sales rose 10.9%, topping StreetAccount estimates of 8.6%. 
    Niccol said that higher-income consumers are returning to restaurants more frequently. Even lower-income diners are visiting more often than they were in the prior six months, although their traffic remains down from a year ago. Overall, traffic rose roughly 4% in the quarter, reversing last quarter’s decline.
    In February, executives said January’s same-store sales grew by double digits. A year earlier, the company saw sluggish sales as the omicron Covid outbreak put pressure on staffing and caused some temporary store closures.
    Chipotle’s chicken al pastor is on track to be the chain’s most popular limited-time protein option ever, Niccol said on the company’s conference call. The company launched it in mid-March.
    Digital orders accounted for nearly 40% of sales during the quarter. Chipotle customers have been ordering their burritos and tacos more in person compared with the year-ago period.
    Executives also outlined changes coming to restaurants to improve speed of service and accuracy. The chain has been testing new grills that cook faster and more consistently. It has also been experimenting with how to staff its two make lines to keep up with demand from both in-person diners and digital orders.
    The company opened 41 new locations during the quarter, 34 of which included its drive-thru lanes reserved for digital order pickup.
    Looking to the rest of the year, Chipotle is anticipating same-store sales growth in the mid-to-high single digits. It’s expecting the same range for its second-quarter same-store sales growth, roughly in line with StreetAccount estimates of 5.8%.
    The company reiterated its plans to open between 255 to 285 new restaurants during 2023. More

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    Illumina unveils plans to cut costs as it faces shrinking margins

    Illumina unveiled plans to cut costs as it faces shrinking margins
    The plans aim to reduce Illumina’s annualized run rate expenses by more than $100 million starting later this year, according to the company’s first-quarter earnings release.
    The company reported gross margins of 60.3% for the first quarter, down from 66.6% during the year-earlier period.

    A building on the campus at the world headquarters of Illumina is shown in San Diego, California, September 1, 2021.
    Mike Blake | Reuters

    Illumina on Tuesday unveiled plans to cut costs in a bid to improve the DNA sequencing company’s shrinking margins.
    The plans aim to reduce Illumina’s annualized run rate expenses by more than $100 million starting later this year, according to the company’s first-quarter earnings release.

    The company reported gross margins of 60.3% for the period, down from 66.6% during the year-earlier period.
    “These cost savings will accelerate progress toward higher margins as well as free up capital to increase investment in high-growth areas,” Illumina said in the release.
    Among Illumina’s plans is to use its NovaSeq X sequencing system to accelerate genomic discoveries. The system, which launched in September 2022, sequences DNA twice as fast and three times as accurately as previous Illumina products.
    The San Diego-based company said it also plans to save by “enabling activities” in more cost-effective areas around the world. Illumina did not reveal any specifics about those activities.
    The company is battling criticism and a falling market cap in the wake of its controversial $7.1 billion acquisition of Grail, a cancer test developer.

    Illumina’s market value has fallen to roughly $34.5 billion from around $75 billion in August 2021, the month it closed its acquisition of Grail. 
    Antitrust regulators have repeatedly pushed back on that deal. 
    The Federal Trade Commission earlier this month ordered Illumina to divest the acquisition, saying it would stifle competition and innovation. 
    Last year, the European Commission, the executive body of the European Union, blocked the deal over similar concerns.   
    Illumina is appealing both orders and expects final decisions in late 2023 or early 2024. 
    The Grail deal is also the focus of a proxy fight between activist investor Carl Icahn and Illumina. They have been trading jabs for more than a month.
    Icahn, who owns a 1.4% stake in the company, is seeking seats on Illumina’s board of directors and pushing it to unwind the Grail deal. He is also calling for Illumina to oust its CEO Francis deSouza “immediately.” 
    The company is urging shareholders to reject Icahn’s three board nominees during its annual shareholder meeting on May 25. 
    Illumina has repeatedly claimed that Grail has “tremendous long-term value creation potential.” 
    Grail claims to offer the only commercially available early screening test that can detect more than 50 types of cancers through a single blood draw. 
    The cancer test generated around $55 million in revenue in 2022 and is expected to rake in up to $110 million this year, Illumina said. More

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    Mpox outbreak was wake-up call for smallpox preparation, vaccine maker Bavarian Nordic says

    Bavarian Nordic is planning to dramatically scale up production capacity for its Jynneos vaccine in the event of a smallpox emergency, CEO Paul Chaplin said.
    Chaplin said the sudden and rapid spread of mpox in 2022 was a wake-up call for his company about the need to prepare for smallpox.
    Mpox, which was previously known as monkeypox, and smallpox are related viruses.
    The Jynneos vaccine is approved by the Food and Drug Administration to protect against both pathogens.

    A health care worker prepares a dose of the JYNNEOS Monkeypox vaccine at a pop-up vaccination clinic in Los Angeles, California, on August 9, 2022.
    Patrick T. Fallon | AFP | Getty Images

    The maker of the mpox vaccine is looking at ways to dramatically scale up its production capacity to prepare for a potential threat from smallpox.
    Bavarian Nordic CEO Paul Chaplin said the rapid spread of mpox last year was a wake-up call for the company, which is based in Denmark.

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    “If it wasn’t mpox but it was smallpox, we are completely at the wrong scale,” Chaplin told CNBC in an interview.
    “We’re looking at ways we can dramatically change the way we manufacture to increase our scale,” he said.
    Mpox is in the same virus family as smallpox. Bavarian Nordic’s Jynneos vaccine is approved by the U.S. Food and Drug Administration to protect against both pathogens.
    Previously known as monkeypox, the World Health Organization changed the name to mpox last year to reduce stigma.
    Bavarian Nordic plans to simplify its production process so it can easily partner with other manufacturers and scale up production capacity to hundreds of millions of doses in the event of an emergency.

    The company’s current production capacity is tens of millions of doses.
    Smallpox was eradicated from the world in 1980 after a successful global vaccination campaign. Though the risk of the virus returning is low, some governments don’t want to take any chances.
    “There are concerns either through reengineering or accidental outbreaks from containment, or other terrorist activities that it could be reintroduced,” Chaplin said of smallpox. 
    Smallpox was one of the most deadly diseases known to humankind. It had a mortality rate of up to 30% depending on the strain, according to the WHO.
    In the wake of the mpox epidemic, the European Union’s Health Emergency Preparedness and Response Authority and at least two European national governments have shown interest in stockpiling the Jynneos vaccine for use against smallpox, Chaplin said. 
    “Last year it was all about mpox. And now it’s a mixture of mpox, but also more strategic stockpiling, including the smallpox indication,” Chaplin said of discussions about future orders.
    “The discussions have definitely intensified and increased,” he said.
    The U.S. has a long-standing stockpile of more than 100 million doses of an older smallpox vaccine, called ACAM2000.
    Bavarian Nordic will finish delivering an order of 5 million Jynneos doses for the U.S government in the first half of this year. That contract was signed during the mpox outbreak.

    Mpox as a warning

    Once limited mostly to Africa, mpox spread suddenly and rapidly around the world last summer, taking public health authorities and Bavarian Nordic by surprise.
    Unlike smallpox, mpox is rarely lethal, but the virus can be deadly for people with severely compromised immune systems. And the skin lesions associated with the disease can cause excruciating pain.
    Bavarian Nordic only had several thousand finished doses of Jynneos on hand when the United Kingdom reported the first known case of the epidemic to the WHO last May. 
    “We sold the entire stock to the U.K. government, thinking that this was, as usual, an isolated case,” Chaplin said. 
    Sporadic cases of mpox had occurred in countries outside Africa by travelers in the past. In 2003, there was a small outbreak in the U.S. that came from imported animals.
    But when other countries in Europe started reporting cases of the virus last year, it became clear something unusual was happening, Chaplin said.
    “The phone started ringing and we realized we were in a situation that we hadn’t seen before,” Chaplin said.

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    The virus has since exploded to more than 87,000 cases, with 120 deaths, across 110 countries, according to WHO data.
    The global epidemic is the largest in the observed history of the virus. The U.S. had the worst outbreak with more than 30% of reported cases worldwide.
    At that time, “We had no plans to manufacture Jynneos,” Chaplin said. “We manufacture other vaccines and our order book was full, but we had to make the decision there and then, we need to change all our manufacturing plants and just manufacture Jynneos.”
    Bavarian Nordic distributed more than 4 million doses of Jynneos to over 70 countries from May to December of last year, Chaplin said.

    More production capacity needed

    Mpox since last year has spread primarily through sexual contact among gay and bisexual men.
    But the rate of new cases of the virus has declined dramatically as vaccine distribution ramped up and communities at risk had better information about what precautions to take. 
    Bavarian Nordic estimates that the potential demand for the mpox vaccine could reach tens of millions of doses.
    The company’s current annual production capacity is between 15 and 20 million doses, Chaplin said.
    “It was contained in that risk population, it didn’t spread,” the CEO said of last year’s outbreak. “If that’s the way it manifests itself again, I think we can manage.” 
    While mpox spreads mostly through close physical contact, smallpox infects people primarily through respiratory droplets, which means the virus has greater potential to spread widely. 
    And Bavarian Nordic’s annual production capacity for Jynneos wouldn’t be sufficient to deal with a wide-spread outbreak of smallpox, Chaplin said.
    “We will need many, many more doses. We need to think about how we are better prepared,” the CEO said. 
    Bavarian Nordic’s current production capacity is constrained by the fact that the weakened virus used in the vaccine is produced from chicken cells that come from special hen eggs.
    Bavarian Nordic has developed a permanent avian cell line that will simplify production and make it easier to bring in other manufacturers in an emergency, Chaplin said.
    The company plans to introduce the new cell line in the next 18 months, he said.

    Smallpox risks

    Though smallpox was eradicated more than 40 years ago, there are still two known stockpiles of the virus. 
    The U.S. Centers for Disease Control and Prevention and the Russian State Centre for Research on Virology and Biotechnology each have smallpox samples for research purposes. They are the only two labs in the world approved to hold the virus.
    The World Health Assembly, a United Nations entity, has repeatedly passed resolutions calling for the eventual destruction of the remaining smallpox samples.
    The U.S. in 2011 pushed back against that effort, contending that the samples needed to be preserved for the time being to develop countermeasures in the event someone deliberately reintroduced smallpox, or the virus escaped from an undisclosed stockpile somewhere in the world.
    The U.S. has 360 samples stored by the CDC in Atlanta. And Russia has 120 samples stored at its research facility in a small town called Koltsovo in Siberia, according to a WHO report from 2021.
    They are used to research the development of diagnostics, antivirals and vaccines.
    In 2019, a gas cylinder exploded at the Russian facility and caused a fire. No biological material was stored in the room where the blast happened, according to a statement from Russian authorities at the time.
    The Soviet Union had a biological weapons program until the early 1990s, which included storing dozens of tons of smallpox, according to congressional testimony from Ken Alibek, that program’s former deputy director, who had defected to the U.S.
    And in 2018, scientists in Canada constructed a horsepox virus in the lab, raising concern that the same method could be used to synthesize smallpox.
    Chaplin said, “It’s known that Russia weaponized smallpox and grew up large quantities, so there’s concerns that maybe that has gotten into the hands of other people.”
    “If you can reengineer a related virus like horsepox, you can engineer variola, which is the smallpox virus that infects humans,” he said. 

    Declining population immunity

    Smallpox vaccines have not been routinely administered to the general population in decades. As a consequence, many people around the world do not have protection against the virus.
    “Collective immunity in the human population since that time is not what it was at the time of smallpox eradication,” Dr. Rosamund Lewis, head of the WHO’s smallpox secretariat, said last summer.
    Most people under the age of 40 aren’t protected because they were born after smallpox vaccination stopped, Lewis said.
    The U.S., the WHO and other countries keep stockpiles of smallpox vaccines in the event of an emergency, but many of these shots use older technology.
    The overwhelming majority of the U.S. smallpox vaccine stockpile is ACAM2000. Though effective at protecting against smallpox, ACAM2000 can cause serious side effects in pregnant women, people with skin conditions like eczema and those with weak immune systems.
    This is because ACAM2000 uses a mild virus strain related to smallpox that can still spread in the human body of the vaccinated patient and to others who are unvaccinated. The vaccine cannot cause smallpox.
    But the vaccine virus can spread to a pregnant women’s fetus and result in still birth. It can also grow uncontrollably and cause dangerous infections in people with compromised immune systems and those with skin conditions.
    People who receive ACAM2000 can also spread the virus in the vaccine for several weeks to others who are unvaccinated. This could result in severe side effects if someone in the vaccinated individual’s household is in any of the risk groups.
    The Jynneos vaccine uses a weakened virus strain that cannot spread and does that not cause the side effects associated with ACAM2000.
    Jynneos originally was developed with support from the National Institutes of Health for people who cannot take shots like ACAM2000.
    Jynneos is administered in two doses taken four weeks apart.
    The UK Health Security Agency estimated that a single dose of the vaccine was about 80% effective at preventing disease from mpox. Israeli scientists came to a similar conclusion.
    But the CDC found that the two doses provide 69% protection, while a single dose provides 37% protection. The CDC recommends everyone eligible for Jynneos receive both doses. More

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    Warner Bros. Discovery previews a stacked film slate, centered around this summer’s ‘Barbie’

    Warner Bros. Discovery put “Barbie” at the center of its CinemaCon studio presentation on Tuesday, with executives and Hollywood stars clad in various shades of pink.
    CEO David Zaslav told attendees at the annual cinema convention that the studio will release 16 films in 2023 and hopes to do more than 20 releases annually going forward.
    Warner Bros. also rolled trailers and clips of “Wonka,” “Meg 2: The Trench,” “The Nun 2” and “The Color Purple” as well as an early look at “Dune: Part Two.”

    Margot Robbie will star as Barbie in an upcoming movie from Mattel and Warner Bros.
    Mattel | Warner Bros.

    Let’s go, Barbie.
    Warner Bros. Discovery put the forthcoming film at the center of its CinemaCon studio presentation on Tuesday, with executives — including Jeff Goldstein, president of domestic distribution, and Andrew Cripps, president of international distribution — and Hollywood stars Greta Gerwig, Margot Robbie and Ryan Gosling all clad in various shades of pink.

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    And all to the tune of “Barbie Girl.”
    Warner Bros. is offering a wide slate of films in 2023 across drama, comedy, horror and action. CEO David Zaslav told attendees at the annual cinema convention that the studio will release 16 films in 2023 and hopes to do more than 20 releases annually going forward.
    But on Tuesday it was all about Barbie.
    The company showcased extended clips from the film, which elicited raucous laughter from the audience. Director Gerwig promised big laughs and big heart from the film, which arrives July 21.
    Warner Bros. also rolled trailers and clips of “Wonka,” “Meg 2: The Trench,” “The Nun 2” and “The Color Purple” as well as an early look at “Dune: Part Two,” which was shot entirely with IMAX cameras.

    Director Denis Villeneuve promised more action and political intrigue in the second installment. “Dune,” released in 2021, generated nearly $400 million at the global box office and snared six Academy Awards during the 2022 Oscars ceremony.
    Warner Bros. capped its presentation with words from Peter Safran, one half of its new duo of creative leaders at DC Studios.
    Safran shared footage from “Aquaman and the Lost Kingdom,” “Blue Beetle” and “The Flash.” The company is screening the Ezra Miller-led “The Flash” to CinemaCon attendees on Tuesday.
    Zaslav says he’s seen “The Flash” three times and told CinemaCon audiences “it’s the best superhero movie I’ve ever seen.”
    He also reassured media and insiders that Warner Bros. Discovery is committed to long-term theatrical releases, saying the company is in “no rush to bring movies to Max,” the company’s forthcoming flagship streaming service. More