Speaker 1: Bloomberg Audio Studios. Podcasts. Radio.
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Speaker 1: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. Crude
Speaker 1: oil prices are lower at this hour on some indications
Speaker 1: that the U.S. and Iran may be closer to a
Speaker 1: solution regarding the Strait of Hormuz. Axios had reported earlier
Speaker 1: Secretary of State Rubio told allies the U.S. will not
Speaker 1: initiate strikes against Iran for now. Rubio saying the focus
Speaker 1: will instead be on using sanctions. And at the same time,
Speaker 1: we learned that Iran and Oman discussed an interim framework
Speaker 1: aimed at resuming shipping through the Strait of Hormuz. Joining
Speaker 1: us now for a closer look at what's happening in
Speaker 1: markets is Bloomberg's Paul Dobson. Paul is executive editor for
Speaker 1: Asia Markets, and he joins from our studios in Singapore.
Speaker 1: I want to talk in a moment about the inflation
Speaker 1: story vis-a-vis the PCE, which we are expecting tomorrow morning
Speaker 1: in the States. Can you give me a sense right
Speaker 1: now of where the inflation debate is, particularly in the
Speaker 1: context of continued declines in the price of crude oil?
Speaker 3: Yeah.
Speaker 4: Hi, Doug. So definitely the crude oil is shaping a
Speaker 4: lot the inflation outlook. I think there's a secondary factor
Speaker 4: in the back of people's minds now, again, about the
Speaker 4: tariffs rising again against various nations, including Canada. But Let's
Speaker 4: focus on oil for a moment. So we have Brent
Speaker 4: going back below 90 this week with some reasonably sharp moves.
Speaker 4: And the situation in the Middle East still seems to
Speaker 4: be very nebulous, but there do seem to be more
Speaker 4: efforts to try to get more crude out of the
Speaker 4: Gulf area with or without the US. So I think
Speaker 4: that the economic sanctions are announcement that we heard from
Speaker 4: Bessent kind of told the market two things. One, the
Speaker 4: possibility of military threats is reduced, is minimal. And two,
Speaker 4: that the efforts to try to get the supply going
Speaker 4: again will continue in the meantime. So I suppose there's
Speaker 4: some hope in the market that we will get more
Speaker 4: or continuation of more flows coming out and going in.
Speaker 4: We have this conversation going on between Iran and Oman, again,
Speaker 4: a little bit foggy, but again, sort of pointing to
Speaker 4: the idea that there may be more energy flows coming
Speaker 4: out into the global market. And so all things being equal,
Speaker 4: lower crude oil prices would help to bring down a
Speaker 4: little bit of that inflation risk, which is one of
Speaker 4: the big things that we've seen weighing on long-term government
Speaker 4: bonds recently.
Speaker 1: Yeah, no doubt about that. And as I mentioned a
Speaker 1: moment ago, we'll get the Fed's preferred measure of inflation
Speaker 1: Wednesday morning in the States. That is the personal consumption
Speaker 1: expenditures price index. And it comes just a few days
Speaker 1: before we'll hear from Fed Chair Kevin Warsh at the
Speaker 1: Jackson Hole Symposium. Now, Warsh, as you well know, Paul,
Speaker 1: has faced some criticism recently for not being forthright in
Speaker 1: his views on the economy, particularly with regard to where
Speaker 1: inflation is in the Fed's eyes. Give me your best
Speaker 1: sense of what the market is telling us right now
Speaker 1: about the concern over inflation and what we may hear
Speaker 1: from Warsh.
Speaker 4: Yeah, so it's going to be crucial what we do
Speaker 4: hear from him, although I think the expectations for what
Speaker 4: we actually get may be relatively low. He's got all
Speaker 4: of these different panels and work for or task forces
Speaker 4: looking into, you know, sort of the future shape of
Speaker 4: the Fed. And it may be that a lot of
Speaker 4: what he says is we'll wait to see what the
Speaker 4: outcome of that those reports is before taking more action.
Speaker 4: What the market really wants to know is what is
Speaker 4: the Fed's reaction function? You know, what will it do
Speaker 4: if inflation does continue to accelerate rather than slow? When
Speaker 4: will be the trigger for the Fed to think about
Speaker 4: hiking more forcefully? But whether he goes into that or
Speaker 4: not remains to be seen. And it may be, given
Speaker 4: he doesn't like providing forward guidance, that he chooses not
Speaker 4: to go in that direction with the speech. So inflation
Speaker 4: expectations then, you know, and the Fed credibility then comes
Speaker 4: back into the debate. And I think it's more the latter, actually,
Speaker 4: that's the concern for the market than the former. The
Speaker 4: breakeven rate has widened a little bit, but it hasn't
Speaker 4: been the only factor that's been pushing up government bond
Speaker 4: yields recently. I do think you also have that concern
Speaker 4: that the Fed is, you know, just going to be
Speaker 4: behind the curve or happy to let inflation run a
Speaker 4: little bit hotter. And therefore, investors will demand more higher
Speaker 4: yields in order to own US government bonds. Again, that's
Speaker 4: not the only factor that's contributing to the higher yields.
Speaker 4: There are lots and lots of reasons for that and
Speaker 4: reasons that Treasury Secretary Besant has started to voice a
Speaker 4: little bit more concern about the rise in those yields.
Speaker 1: So when you talk about a number of factors involved
Speaker 1: in pushing US yields higher, to what extent do you
Speaker 1: think corporate supply coming to the market, a corporate supply
Speaker 1: that's related to the build-out of AI has been a
Speaker 1: factor as well.
Speaker 4: I think it's a significant factor given the amount of
Speaker 4: debt that's coming to market and going to come to
Speaker 4: market as well, which is a significant amount and all
Speaker 4: in quite a short space of time. And so for
Speaker 4: bond managers, if they're looking across the spectrum of options
Speaker 4: available to them, if you have highly rated debt offering
Speaker 4: a yield premium over U.S. Treasuries with a decent-looking payback horizon,
Speaker 4: then fund managers may choose those assets rather than the U.S.
Speaker 4: government debt. And so there is that little bit of
Speaker 4: competition for all of the fixed income that's coming into
Speaker 4: the market at the moment. So I think that that
Speaker 4: supply factor is an important one. I do think what
Speaker 4: we have seen is a slight increase suggestion from Besant
Speaker 4: that he will curtail a little bit of the supply
Speaker 4: at the back end of the yield curve by doing
Speaker 4: some more buybacks. And that has narrowed slightly the yield
Speaker 4: premium that investors demand to hold treasuries over swaps, so
Speaker 4: the swap spread. Therefore, it sort of points to the
Speaker 4: idea that treasury is a little bit more in favor
Speaker 4: relative to swaps. And so that has been a positive
Speaker 4: sign on the supply demand balance from Besant. But I
Speaker 4: also think when you're looking at the economy overall things
Speaker 4: things are all right right Doug things are looking pretty
Speaker 4: decent at the moment and I think that one of
Speaker 4: the other things the market is taking into consideration at
Speaker 4: the moment is that we're in a higher interest rate
Speaker 4: environment because the neutral rate is higher than it was
Speaker 4: in that sort of period uh through the 2010s to
Speaker 4: to post-covid kind of time factor and so um you know,
Speaker 4: the economy can run at a hotter clip, especially if
Speaker 4: all of these AI investments start to pay dividends, and
Speaker 4: therefore you will see interest rates higher for longer. It
Speaker 4: doesn't necessarily have to be a bad thing, but it
Speaker 4: does mean that investors will demand higher interest rates on
Speaker 4: those longer term bonds as well.
Speaker 1: So as long as we're talking about AI, we have
Speaker 1: to talk about NVIDIA. After the bell in the US tomorrow,
Speaker 1: we'll get earnings for the latest quarter The stock was
Speaker 1: up in the New York session on Tuesday by something
Speaker 1: greater than 2%, recovering just a small part of the
Speaker 1: losses that had been recorded over a seven-day losing streak.
Speaker 1: How much is the market still attached to positive results
Speaker 1: from NVIDIA if it's going to indeed push higher stilts?
Speaker 4: Yeah, I think that this is an interesting one because
Speaker 4: Nvidia obviously is the biggest company in the US market
Speaker 4: in the world and therefore has a pretty big bearing.
Speaker 4: And what it says in the deals that it does
Speaker 4: have the power to influence stocks beyond its own share price.
Speaker 4: But what I do think is that that influence is
Speaker 4: starting to wane a little bit. If you look at
Speaker 4: the overall index reaction after the Nvidia earnings, I was
Speaker 4: reading in macro man column overnight, the positive impact from
Speaker 4: the video earnings is lessened. And in fact, sometimes after
Speaker 4: the earnings, even if the stock has a good day,
Speaker 4: maybe the overall gauge can have a bad day. So
Speaker 4: it's less critical than it used to be. And that's
Speaker 4: because there's a lot more alternatives or competitors or other
Speaker 4: ways to look at it. But in terms of the
Speaker 4: messaging that it will give us about the outlook, for, uh,
Speaker 4: demand for chips and for data centers, uh, globally, you know,
Speaker 4: there there's very little that can give us as much
Speaker 4: information as they can. So it will be definitely all
Speaker 4: eyes on that. Um, as usual, Doug, you know, I
Speaker 4: think we say this every time that expectations for the
Speaker 4: earnings are extremely high already. So it's got a high
Speaker 4: bar in order to beat. Um, but I think that
Speaker 4: people will nonetheless, you know, uh, pay attention to the numbers.
Speaker 4: and also to what the outlook and the forecast that's
Speaker 4: provided by Jensen Huang will be.
Speaker 1: All right, Paul, we look forward to the NVIDIA earnings,
Speaker 1: at least covering it here. We'll have the latest for
Speaker 1: you on the Daybreak Asia podcast next edition. For the moment,
Speaker 1: I want to thank Paul Dobson for joining us. Paul
Speaker 1: is Executive Editor for Asia Markets, joining from Singapore here
Speaker 1: on the Daybreak Asia podcast. Welcome back to the Daybreak
Speaker 1: Asia podcast. I'm Doug Krisner. We go next to Hong Kong,
Speaker 1: where the Asia Innovation and Technology Enterprises Going Global Summit
Speaker 1: is underway. This gathering is designed to help Asian tech
Speaker 1: firms evolve from being regional champions. to global players. It
Speaker 1: was there we caught up with Neo Zhang Ming. Neo
Speaker 1: is founder and CEO of MindRank AI. He spoke with
Speaker 1: Bloomberg's Min Min Lo.
Speaker 3: For people who are not so familiar, tell us a
Speaker 3: little bit more about your proprietary AI drug discovery platform.
Speaker 3: How is it a game changer in the pharma sector?
Speaker 2: Yes, so traditionally the drug discovery and development has been
Speaker 2: a trend arrow process. So by leveraging the power of AI,
Speaker 2: now the process has shifted from a trend arrow towards
Speaker 2: more predictive and more capital efficiency and faster process.
Speaker 3: And you have mentioned that I think it reduces your
Speaker 3: cost by about 60% or so. Where exactly is the
Speaker 3: cost reduction coming from?
Speaker 2: The majority of the cost reduction from the preclinical stage,
Speaker 2: but now we see a lot of advances in the
Speaker 2: clinical stage as well. For example, from the target discovery,
Speaker 2: the biological understanding to move from the molecule design, which
Speaker 2: is the chemical-related design, So we utilize some multi-parameter optimization
Speaker 2: strategy and algorithms instead of treating the human in the loop.
Speaker 3: And I understand that it shortens the timeline of the
Speaker 3: drug development process.
Speaker 1: Quite a bit?
Speaker 2: Yes, indeed. So humbly speaking, we can reduce by half
Speaker 2: of the time and also probably 10 times for the
Speaker 2: preclinical capital efficiency.
Speaker 3: So one of your key assets right now, as far
Speaker 3: as I understand, is a weight loss drug that is
Speaker 3: in phase three clinical trials, aiming to launch in 2028, 2029.
Speaker 3: But there are so many well-established brands like Eli Lilly
Speaker 3: that already have existing weight loss drugs. How are you
Speaker 3: going to wrestle market share from them?
Speaker 2: Yes, indeed. So yeah, we do have a small molecule,
Speaker 2: GLP-1 antagonist. So basically, we see a very differentiated profile
Speaker 2: in the clinical trials. So we expect it to launch
Speaker 2: in the fourth or fifth. in the Chinese market. And
Speaker 2: we see a very obvious weight reduction, efficacy, and also
Speaker 2: safety profile. So our job operating face-to-face study was only
Speaker 2: less than 1%.
Speaker 3: So, very low drop-off rate. What is your pricing point
Speaker 3: going to be like? What is your distribution channel and
Speaker 3: your path to commercialization?
Speaker 2: Yes, so for the commercialization and also manufacturing, actually, we
Speaker 2: are relying on very experienced public partners. So, that's not
Speaker 2: the strength of MedRank at the current stage.
Speaker 3: So as far as I know, you're still a loss-making
Speaker 3: company at this point. Realistically, when can you reach profitability?
Speaker 1: How long would it take?
Speaker 2: Yeah, we are very focused on the capital efficiency, but
Speaker 2: we don't have a very clear goal to reach the profitable,
Speaker 2: because now we are still pre-revenue stage. And after the
Speaker 2: launch of the first blockbuster drug in 2028 to 2029,
Speaker 2: we can expect a huge revenue income per year. But yeah,
Speaker 2: probably after another few years, when we become a Bell
Speaker 2: Pharma company, we can have a clear milestone or timeline.
Speaker 3: What is your revenue projection for your blockbuster drug?
Speaker 2: In mainland China, we expect to reach several billion per
Speaker 2: year RMB.
Speaker 3: And again, there are a lot of existing drugs, not
Speaker 3: just from the international companies like Eli Lilly, but the
Speaker 3: local companies like Hong Rui, for example. I know they're
Speaker 3: also developing their weight loss drugs. How are you going
Speaker 3: to secure your market share?
Speaker 2: Basically we aim to produce the safe and efficacy profile
Speaker 2: and also since it's an oral small molecule so the
Speaker 2: major competitors they have injectables so means we are easy
Speaker 2: to carry and also from the safety wise profile yeah
Speaker 2: we have a very low GI adverse events happen. And
Speaker 2: also from the, for example, liver-related and metabolic advantages, we
Speaker 2: see a very clear differentiation. And that comes actually from
Speaker 2: the very differentiated biological design.
Speaker 3: And I know that you were part of the NVIDIA
Speaker 3: Startup Accelerator program many years ago before the US export
Speaker 3: controls come into place. And I believe you were using
Speaker 3: NVIDIA's chips and its architecture as well. But since the
Speaker 3: export controls came in, has that impacted your compute capacity
Speaker 3: or your ability to access their.
Speaker 2: Hardware, for example? Yeah, that gives us some influence, for sure. Traditionally,
Speaker 2: we have built a small cloud computing by ourselves. That's
Speaker 2: located in our Hangzhou office. After that, when we want
Speaker 2: to expand to a larger scale of computation powers, we're
Speaker 2: relying more on our partners such as Amazon or Alibaba,
Speaker 2: their cloud computing cluster, which means that's more expensive.
Speaker 3: So it's more expensive. Does it affect the capacity or
Speaker 3: the efficiency of the compute?
Speaker 2: Indeed. So because we're really a third party instead of
Speaker 2: our proprietary pipeline, so from the data security and also
Speaker 2: from the overall solution, we need to take more care
Speaker 2: of that process by ourselves.
Speaker 3: As part of that NVIDIA Startup Accelerator program, what was
Speaker 3: the relationship at the time? Was NVIDIA invested or supporting
Speaker 3: you in any other way besides offering the technology? And
Speaker 3: how has that relationship evolved given the broader geopolitical environment now?
Speaker 2: In 2023 and 2024, we have some close discussions with
Speaker 2: the Nvidia team in China and the States. We talk
Speaker 2: about certain opportunities, but since the tension between Chinese and
Speaker 2: US governments, I think that has shifted.
Speaker 3: So in that case, are you looking to pivot elsewhere?
Speaker 3: Are you looking for alternative investors? How are you dealing
Speaker 3: with this sort of fallout in the geopolitical front?
Speaker 2: For the funding perspective, our main investors are from the
Speaker 2: healthcare sector. We are planning to be in the pre-IPO
Speaker 2: stage recently, so we are going to meet a lot
Speaker 2: of internet or TMT investors.
Speaker 3: Are these mostly Chinese capital, or how much interest are
Speaker 3: you getting from international investors, and what is your timeline
Speaker 3: to the IPO?
Speaker 2: Yeah, we see the IPO is very natural when we
Speaker 2: reach the next milestones, which is the big deal for
Speaker 2: the GLP-1 small molecule and also other BDs when that happens.
Speaker 3: Do you have a guidance of a timeline that we
Speaker 3: can expect?
Speaker 2: Yeah, probably next year.
Speaker 4: Okay.
Speaker 3: You are actually still a very lean company. I believe
Speaker 3: you have 50 employees and yet you have already quite
Speaker 3: a large pipeline of drugs in development. Can you tell
Speaker 3: us about what else are you pouring research into? What
Speaker 3: else is closest to commercialization now?
Speaker 2: Yes, so apart from the metabolic disease space, we are
Speaker 2: very focused on the other, we are very interested in
Speaker 2: the CS space, which is longevity space. So in 2023,
Speaker 2: we are in the consortium, which is funded by TAMIS
Speaker 2: from Singapore and the US government. So we study anti-aging
Speaker 2: and discover the new biological findings. to try to intervene
Speaker 2: the CNS disease. And apart from that, we have developed
Speaker 2: the novel platform that's not only to target the protein targets,
Speaker 2: which is small molecules and also antibody and other modalities
Speaker 2: such as SRNA drugs.
Speaker 3: And aside from developing your own drugs, I wonder, are
Speaker 3: you getting interest from other drug companies to license your
Speaker 3: proprietary drug discovery software? It's called MAP, right? Are you
Speaker 3: getting interest to license and maybe co-develop drugs with you?
Speaker 2: Yes, for the medicine, we do have some interdisciplinary. under
Speaker 2: CDA discussions and we expect that to happen in 12 months.
Speaker 2: We will have some BD recently. But apart from the platform,
Speaker 2: traditionally we've been partnering with a few public companies including
Speaker 2: Merck from the States and also a lot of public
Speaker 2: companies in China and Hong Kong.
Speaker 3: So your key asset right now, the weight loss drug
Speaker 3: that you're about to launch in China in a few years' time,
Speaker 3: do you have plans to sell that overseas as well?
Speaker 3: And has there been challenges in getting the regulatory approval
Speaker 3: and the certifications?
Speaker 1: What's the progress?
Speaker 2: Yeah, the first generation of the drugs, the single target
Speaker 2: is GOP1. We are about to launch it in a
Speaker 2: few years. But we are also developing the franchise, the
Speaker 2: portfolio of the obesity and So we expect to have
Speaker 2: some novel new drugs to launch or to be licensed
Speaker 2: to partner with our partners in a few years.
Speaker 3: International partners as well.
Speaker 1: That was Neo Zhang Ming, CEO and founder of MindRank AI,
Speaker 1: speaking with Bloomberg's Min Min Lo from the sidelines of
Speaker 1: the Asia Innovation and Technology Enterprises Going Global Summit in
Speaker 1: Hong Kong. bringing you their conversation here on the Daybreak
Speaker 1: Asia podcast. Thanks for listening to today's episode of the
Speaker 1: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
Speaker 1: the stories shaping markets, finance, and geopolitics in the Asia-Pacific.
Speaker 1: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 1: YouTube channel, or anywhere else you listen. Join us again
Speaker 1: tomorrow for insight on the market moves from Hong Kong
Speaker 1: to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.