WEBVTT - S&P 500 Closes Near Record as Tech Keeps Rallying 0:00:02.480 --> 0:00:10.480 Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg business 0:00:10.480 --> 0:00:14.400 Week Daily reporting from the magazine that helps global leaders 0:00:14.400 --> 0:00:18.280 stay ahead with insight on the people, companies, and trends 0:00:18.360 --> 0:00:23.360 shaping today's complex economy. Plus global business finance and tech 0:00:23.440 --> 0:00:27.320 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.640 --> 0:00:31.720 with Carol Masser and Tim Stenebeck on Bloomberg Radio. 0:00:32.320 --> 0:00:35.160 Official dirge banks to limit purchases of US government bonds 0:00:35.159 --> 0:00:38.120 and instructed those with high exposure to pare down their positions. 0:00:38.120 --> 0:00:41.159 The directive, though, does not apply to China stateholdings of 0:00:41.400 --> 0:00:44.360 US treasuries, and this move, Carol framed around diversifying market 0:00:44.440 --> 0:00:47.360 risk rather than anything to do with geopolitical maneuvering or 0:00:47.400 --> 0:00:50.239 a fundamental loss of confidence in US credit worthiness. 0:00:50.320 --> 0:00:52.120 Yeah, it makes me think about this idea in this 0:00:52.320 --> 0:00:55.560 argument that the US is increasingly becoming uninvestable. But let's 0:00:55.560 --> 0:00:57.280 see what Stuart Kaiser has to say about all this. 0:00:57.320 --> 0:01:00.120 He's head of equity trading strategy over at City. He 0:01:00.200 --> 0:01:02.640 joins us here in studio. Stuart, good to have you here, 0:01:02.840 --> 0:01:05.120 welcome back, thank you, good to be here. Hey, we 0:01:05.120 --> 0:01:07.640 were just talking with our Stuart Paul about Kevin Walsh's 0:01:07.680 --> 0:01:09.640 past support of a new accord between the Treasury and 0:01:09.640 --> 0:01:13.039 the Fed. This has to do with the balance sheet, 0:01:13.040 --> 0:01:16.400 which sounds like increased cooperation. We know in the past 0:01:16.680 --> 0:01:19.880 that Kevin Walsh has wanted the FED to shrink its 0:01:19.920 --> 0:01:20.400 balance sheet. 0:01:20.440 --> 0:01:22.120 So we're trying to make sense of what it is. 0:01:22.160 --> 0:01:24.839 And then we just talked about the Chinese regulators advising 0:01:24.840 --> 0:01:27.800 their financial institutions to rein in the holding of US 0:01:27.880 --> 0:01:32.479 government bonds. Are treasuries undergoing a reboot in your view 0:01:32.480 --> 0:01:35.679 on the world stage when it comes to you know, 0:01:35.840 --> 0:01:39.320 the United States being kind of a sure thing, if 0:01:39.319 --> 0:01:41.640 you will, in the financial world, And if so, what 0:01:41.680 --> 0:01:42.959 are the implications of that? 0:01:43.520 --> 0:01:45.040 I mean, look, I don't know if there's any real 0:01:45.080 --> 0:01:47.760 alternative for a lot of these countries to invest their. 0:01:47.680 --> 0:01:51.640 Reserves and size and the liquidity right hands down. 0:01:52.080 --> 0:01:54.920 And look, there is a risk out there in the 0:01:54.920 --> 0:01:57.000 long end of the government bond curves. 0:01:57.000 --> 0:01:57.920 I think that that's globally. 0:01:57.960 --> 0:01:59.720 We've seen that happen in the UK gilts, we've seen 0:01:59.720 --> 0:02:02.880 the German bones, We've seen it happen in Japanese JGB. 0:02:03.080 --> 0:02:05.160 So I don't think really concerned about the impact of 0:02:05.200 --> 0:02:07.120 fiscal spending on the long end of the YEO curve 0:02:07.200 --> 0:02:09.560 is unique to the US, nor is it something that's 0:02:09.639 --> 0:02:10.880 kind of snuck up on people. 0:02:11.160 --> 0:02:12.560 But it is a risk, and. 0:02:12.520 --> 0:02:15.120 If you look at what has triggered those kind of 0:02:15.200 --> 0:02:17.840 events in other countries, it's generally been things related to 0:02:17.840 --> 0:02:21.079 fiscal policy, tax cuts, things of that nature. So it's 0:02:21.080 --> 0:02:23.000 something that's on our radar, has probably been our radar 0:02:23.080 --> 0:02:25.520 since about last July when all of those thirty year 0:02:25.560 --> 0:02:28.640 bonds globally got above three percent. You know, as an 0:02:28.639 --> 0:02:30.720 equity guy, I'm going to let the bond markets tell me. 0:02:30.760 --> 0:02:33.000 You know, when and if this becomes a risk. 0:02:33.360 --> 0:02:35.480 But for now, the equity guys keep a watch on 0:02:35.520 --> 0:02:36.080 the bond marsh. 0:02:36.560 --> 0:02:38.160 We do, but I would say if an equity guy 0:02:38.200 --> 0:02:41.119 knows when the bond auction is, you're in trouble. But 0:02:41.120 --> 0:02:43.440 big picture, in this case, I think, you know, we 0:02:43.560 --> 0:02:46.320 have not seen the long end of the curve move significantly. 0:02:46.360 --> 0:02:49.840 We haven't seen bond volatility increased materially either, So for 0:02:49.960 --> 0:02:51.720 now people seem pretty comfortable with things. 0:02:51.840 --> 0:02:53.600 Well, speaking of the equity side of things, you were 0:02:53.639 --> 0:02:56.000 plenty busy last week with the rotation that we saw 0:02:56.040 --> 0:02:58.440 the volatility that we saw the moves down, then the 0:02:58.480 --> 0:03:01.200 moves up. A week that's sort of ended really close 0:03:01.240 --> 0:03:05.120 to where it started, but a lot happened in between, 0:03:05.280 --> 0:03:07.200 with some big moves lower. When it comes to companies 0:03:07.240 --> 0:03:11.120 like software. What is your view on where where to 0:03:11.120 --> 0:03:13.240 be optimistic right now and where to stay away from? 0:03:13.480 --> 0:03:15.720 Yeah, I mean so we're still pretty positive US equity 0:03:15.800 --> 0:03:18.560 risks in general. We've been pretty bullish on the cyclical 0:03:18.600 --> 0:03:20.800 parts of the of the equity market since the beginning 0:03:20.800 --> 0:03:22.440 of the year. I think if you took a little 0:03:22.480 --> 0:03:24.040 bit of a step back, though, you'd see that this 0:03:24.120 --> 0:03:26.960 quote unquote rotation sort of add of tech and growth 0:03:26.960 --> 0:03:29.720 and into value and cyclicals actually started back in November. 0:03:30.080 --> 0:03:32.720 It's not a new phenomenon. What happened last week is 0:03:33.000 --> 0:03:35.600 the moves accelerated and it got quite volatile, and I 0:03:35.600 --> 0:03:38.560 think that impacted the way that folks matage risk. And 0:03:38.600 --> 0:03:41.240 it's also, to be honest with you, a pretty simple 0:03:41.240 --> 0:03:42.960 math question, right. You know, if you take the mag 0:03:43.040 --> 0:03:45.920 seven plus broadcomm and a few others, you pretty quickly 0:03:46.200 --> 0:03:47.840 get close to you about fifty percent of S and 0:03:47.880 --> 0:03:50.440 P market cap. So when you're selling those stocks, you 0:03:50.480 --> 0:03:52.640 have to find a home for them, and I think 0:03:52.760 --> 0:03:55.800 just the absolute size of the moves is really what 0:03:55.880 --> 0:03:58.760 concerned people last week rather than a change to like 0:03:58.840 --> 0:04:01.480 the underlying US ex The outlook, I mean, US GDP 0:04:01.640 --> 0:04:04.520 according to the Fed is tracking kind of mid four 0:04:04.520 --> 0:04:07.400 percent range. Our Economic Surprise Index is kind of off 0:04:07.440 --> 0:04:10.760 the chart. Earnings were solid, You're expecting some good tax 0:04:10.800 --> 0:04:13.720 refunds coming up. So the sort of fundamental underpaintings of 0:04:13.760 --> 0:04:15.840 the market look pretty good. What you're going through with 0:04:15.880 --> 0:04:19.560 some indigestion after two years of buying tech and growth stocks, 0:04:19.920 --> 0:04:22.240 you're now kind of repositioning not whether you want to 0:04:22.240 --> 0:04:25.120 own US equities, but how and that process has been 0:04:25.160 --> 0:04:26.800 a little bumpy at least. 0:04:26.880 --> 0:04:27.000 Well. 0:04:27.040 --> 0:04:32.320 We talked too about the overperformance or performance of small 0:04:32.320 --> 0:04:34.320 caps last week. They're up about two point two percent, 0:04:34.760 --> 0:04:39.520 certainly outperforming the large cap in disease. The other thing is, 0:04:39.880 --> 0:04:41.800 you know, if you look at the equal weight, S 0:04:41.839 --> 0:04:44.360 and P is easily outperforming the S and P five 0:04:44.400 --> 0:04:46.000 hundred and five and a half percent year to date 0:04:46.040 --> 0:04:48.720 for the equal weight to just under two percent for 0:04:48.760 --> 0:04:50.920 the widely quoted S and P five hundred. So again 0:04:50.960 --> 0:04:52.919 that plays into what you're saying that we're seeing money 0:04:52.920 --> 0:04:56.479 go elsewhere, but what's to stop the money going back 0:04:56.560 --> 0:05:00.479 to big cap tech or those hyperscalers, because it feels 0:05:00.520 --> 0:05:03.200 like the last two or three years, everyone's like no, no, no, 0:05:03.440 --> 0:05:07.200 time to diversify, and yet that's where the overperformance has 0:05:07.240 --> 0:05:08.440 been for outperformance. 0:05:08.440 --> 0:05:10.919 I mean, I think back in sort of October and 0:05:10.960 --> 0:05:13.080 November earning season, you started to see a little bit 0:05:13.120 --> 0:05:15.560 of a change in this reaction function. Meta back then 0:05:15.920 --> 0:05:17.839 was the key one where they announced this very large 0:05:17.839 --> 0:05:20.719 capex spending program and the stock sold off, and that 0:05:20.760 --> 0:05:22.160 was probably the first time in the last couple of 0:05:22.200 --> 0:05:24.720 years where a company had been punished for spending more 0:05:24.760 --> 0:05:25.919 on AI and look. 0:05:25.760 --> 0:05:28.080 Low and behold. This quarter we saw that repeat with 0:05:28.160 --> 0:05:29.039 a number of companies. 0:05:29.080 --> 0:05:31.800 So Meta did well right off of their earnings because 0:05:31.800 --> 0:05:33.880 they're showing the you know, the ROI on on this 0:05:33.960 --> 0:05:34.919 AI spend. 0:05:34.800 --> 0:05:37.280 They are, And that's that's the key, right This capex 0:05:37.320 --> 0:05:40.080 spending is undergoing an auditor or some other form of 0:05:40.200 --> 0:05:44.440 very invasive invasive examination. And but you know Microsoft and Amazon, 0:05:44.480 --> 0:05:46.880 we're both kind of punished for more capex spending this quarter. 0:05:46.960 --> 0:05:49.080 So I think what you're really seeing is within the 0:05:49.120 --> 0:05:51.960 tech trade the shift is moved kind of away from 0:05:51.960 --> 0:05:54.960 the spenders and to the beneficiarias of that spending. We 0:05:55.080 --> 0:05:57.640 like power generation and the AI data center build out 0:05:57.640 --> 0:05:59.760 as the way to express that. And then more broadly, 0:05:59.760 --> 0:06:01.240 to your point, you're also getting a little bit of 0:06:01.279 --> 0:06:04.239 a rotation out of growth into these cyclicals. So again, 0:06:04.279 --> 0:06:07.800 these things aren't necessarily negative for the market collectively, but 0:06:07.920 --> 0:06:10.360 they do cause a lot of pain in some positions 0:06:10.360 --> 0:06:12.520 that people have had in their portfolios for twenty four 0:06:12.560 --> 0:06:13.440 months minimum. 0:06:13.560 --> 0:06:17.000 Alphabet embarks on a global bond spree to fund records spending, 0:06:17.120 --> 0:06:20.000 borrowing far and wide to finance unprecedented spending plan on 0:06:20.040 --> 0:06:23.599 its AI ambitions. Twenty billion dollars a US dollar bond 0:06:23.640 --> 0:06:28.000 offering on Monday, more than fifteen billion dollars than initially expected. 0:06:28.680 --> 0:06:30.839 Is this a signal of something? I mean, it's the 0:06:30.839 --> 0:06:32.039 same thing you're just talking about. 0:06:32.120 --> 0:06:33.320 You know, it's a signal that they have a lot 0:06:33.360 --> 0:06:34.880 of spending to do. I think, you know, you must 0:06:35.000 --> 0:06:36.880 send a lot of money. They do. 0:06:36.960 --> 0:06:40.320 But you know, Amazon though, looks like free, negative free 0:06:40.360 --> 0:06:42.599 cash full after their announcement, So I think what folks 0:06:42.600 --> 0:06:44.920 are doing is you can generally carve out the mag 0:06:45.000 --> 0:06:47.000 seven and say their balance sheets are so big and 0:06:47.000 --> 0:06:48.720 strong that they can sustain their spending. 0:06:49.200 --> 0:06:50.640 They're all double A rated or better. 0:06:50.960 --> 0:06:53.320 You take a step, even a slight step down in 0:06:53.360 --> 0:06:55.400 credit rating to let's say an oracle that trip will 0:06:55.400 --> 0:06:59.080 be and that examination is a little more harsh. 0:06:59.320 --> 0:07:00.600 So I think what you're from Google. 0:07:00.600 --> 0:07:03.279 Frankly, Look, they're viewed us the current winner in the 0:07:03.279 --> 0:07:06.560 AI trade. Now clearly those winners are changing quarter to quarter, 0:07:06.760 --> 0:07:08.640 So I think folks are maybe a little more comfortable 0:07:08.680 --> 0:07:11.040 with them spending. Just to your point, they have the ROI, 0:07:11.120 --> 0:07:14.280 they currently have the best AI model. If you can 0:07:14.400 --> 0:07:18.600 demonstrate acceptable return on the investment, the markets are okay 0:07:18.680 --> 0:07:18.880 with this. 0:07:19.000 --> 0:07:21.320 If it looks like it's going to be roe. 0:07:20.800 --> 0:07:23.920 Destructive, then right now you're getting punished for that a 0:07:23.920 --> 0:07:25.840 little bit. And I wouldn't expect that to change as 0:07:25.880 --> 0:07:27.640 this year goes on. I mean there's a higher bar 0:07:27.760 --> 0:07:29.560 right now for what you're going to spend this money on. 0:07:30.720 --> 0:07:33.480 Stay with us more from Bloomberg Business Week Daily coming 0:07:33.600 --> 0:07:34.520 up after this. 0:07:38.440 --> 0:07:42.320 You're listening to the Bloomberg Business Week Daily podcast. Catch 0:07:42.360 --> 0:07:45.040 us live weekday afternoons from two to five eas during 0:07:45.240 --> 0:07:48.480 Listen on Apple karplay and Android auto with the Bloomberg 0:07:48.520 --> 0:07:53.200 Business app, or watch us live on YouTube. 0:07:52.240 --> 0:07:54.600 With the rundown on the latest headlines and sizing up 0:07:54.840 --> 0:07:58.400 the competitive landscape on GLP one's our guru, Bloomberg News 0:07:58.400 --> 0:08:01.720 Health reporter Madison large Fazacy in the studio. I just 0:08:01.720 --> 0:08:03.440 want to start with the lawsuit because I was pretty 0:08:03.440 --> 0:08:05.080 surprised last week when we got the news that they 0:08:05.120 --> 0:08:06.520 were going to do this, because I thought there was 0:08:06.600 --> 0:08:10.480 no more It wasn't legally allowed by the FDA to compound, 0:08:10.520 --> 0:08:15.080 for companies to compound medicine anymore, well, not any medicine, 0:08:15.080 --> 0:08:17.080 but GLP one is because there's no longer a shortage. 0:08:17.120 --> 0:08:20.000 Wasn't that the loophole that these companies were using exactly? 0:08:20.320 --> 0:08:22.160 So it was a big, I mean, kind of a 0:08:22.240 --> 0:08:24.680 risky bet that Hyms was taking that the FDA just 0:08:24.720 --> 0:08:27.120 wouldn't do anything about it. But that is sort of 0:08:27.120 --> 0:08:29.320 what we've seen happen the last couple of years since 0:08:29.360 --> 0:08:32.880 the shortage ended. There's been really very little action from 0:08:32.920 --> 0:08:37.000 the FDA in terms of cracking down on this proliferation 0:08:37.280 --> 0:08:40.840 of compounded GLP one drugs, and so Hyms has continued 0:08:40.880 --> 0:08:41.160 doing it. 0:08:41.160 --> 0:08:42.600 A lot of other companies have continued. 0:08:42.600 --> 0:08:44.680 So they're breaking the law by doing it, that is 0:08:44.800 --> 0:08:45.800 the assumption. 0:08:46.000 --> 0:08:48.560 Yes, they but the problem is that the FDA really 0:08:48.600 --> 0:08:51.160 hasn't said much of anything, so it was kind of 0:08:51.240 --> 0:08:53.960 up to these companies to interpret the law themselves. So 0:08:54.040 --> 0:08:57.000 in this gray area they've continued doing it. And that's 0:08:57.120 --> 0:08:58.800 part of the problem is that it was a little 0:08:58.800 --> 0:09:02.240 bit unclear, at least to maybe the general public or 0:09:02.960 --> 0:09:05.240 to some people like what the FDA was really going 0:09:05.280 --> 0:09:07.720 to do, and so they've just continued to do it. 0:09:07.800 --> 0:09:10.640 Some companies have pulled back, like Row for example, stopped 0:09:10.640 --> 0:09:14.200 compounding after the shortage has ended, and Hyms has kept 0:09:14.240 --> 0:09:17.640 doing it. And so far, I mean until now, there 0:09:17.720 --> 0:09:21.920 has been really little action either from Novo from the FDA, 0:09:22.040 --> 0:09:24.600 And finally, I think both of them said enough is enough, 0:09:24.840 --> 0:09:25.320 all right. 0:09:25.200 --> 0:09:28.120 So NOVA files this lawsuit. All right, So I guess 0:09:28.120 --> 0:09:29.439 it's going to play out in the court. So there's 0:09:29.480 --> 0:09:30.560 going to be negotiating or what. 0:09:30.920 --> 0:09:31.520 We don't really know. 0:09:31.760 --> 0:09:33.440 The FDA have to come in here and make a 0:09:33.480 --> 0:09:36.600 ruling to like figure out what the real ruler law is. 0:09:36.760 --> 0:09:36.960 Right. 0:09:37.000 --> 0:09:40.120 So the NOVA is suing on the grounds of patent infringement, 0:09:40.160 --> 0:09:42.760 which is something we haven't seen before. Nova and Lily 0:09:42.800 --> 0:09:47.319 have both filed lawsuits against compounding pharmacies, telehealth companies, medspots 0:09:47.360 --> 0:09:49.839 that are selling these knockoff versions of the drugs, but 0:09:49.880 --> 0:09:52.840 they haven't gone after anyone for patent infringement yet. So 0:09:52.920 --> 0:09:56.160 this is actually the drug semaglue tide, which is the 0:09:56.360 --> 0:10:00.480 active ingredient in both Ozembic and wagov Nova saying that 0:10:00.520 --> 0:10:03.520 Hams is violating that patent in the United States. 0:10:03.720 --> 0:10:05.160 So that's a big deal. That's a big. 0:10:05.080 --> 0:10:09.000 Escalation, and it sort of shows the more aggressive strategy 0:10:09.040 --> 0:10:12.600 that Novo's taking because they really are under a lot 0:10:12.640 --> 0:10:13.560 of pressure right now. 0:10:13.679 --> 0:10:15.520 Why are they under pressure? And Eli Lilly is not 0:10:15.520 --> 0:10:16.920 as under much pressure. 0:10:16.600 --> 0:10:18.160 As much pressure, I mean Novo. 0:10:18.280 --> 0:10:20.200 So we're gonna talk about some deal news a little later, 0:10:20.240 --> 0:10:20.920 but yeah. 0:10:20.840 --> 0:10:24.240 Yeah, Novo, they've had different problems even though the market, 0:10:24.320 --> 0:10:27.000 you know, they're the only two players really in this market. 0:10:27.880 --> 0:10:30.960 Novo has had more difficulty because one, their drugs are 0:10:30.960 --> 0:10:32.920 a little bit older, meaning that they do come off 0:10:32.920 --> 0:10:35.880 of patent outside of the US sooner, whereas Lily has 0:10:35.920 --> 0:10:39.920 another decade of patent life on its drugs. Nova also 0:10:40.080 --> 0:10:43.360 has had more difficulties with these compounders because it did 0:10:43.400 --> 0:10:45.800 not get a handle on this supply shortage as soon 0:10:45.840 --> 0:10:49.280 as Lily did. So both companies drugs were in short supply. 0:10:49.800 --> 0:10:52.680 Novo had more issues, couldn't get a handle on it. 0:10:52.720 --> 0:10:54.720 Lily got a handle on it more quickly and was 0:10:54.720 --> 0:10:58.920 more aggressive really right off the bat, going after these compounders, 0:10:59.559 --> 0:11:02.640 whereas sort of I mean they're Danish, they're a little 0:11:02.679 --> 0:11:06.640 bit more less aggressive I think than an American pharmaceutical company, 0:11:06.679 --> 0:11:09.520 but they've had to change that recently. And then in 0:11:09.600 --> 0:11:13.000 terms of next generation drugs, their pipeline is not quite 0:11:13.040 --> 0:11:15.679 as exciting as Lily's, and so that doesn't set them 0:11:15.760 --> 0:11:17.040 up for the future quite as well. 0:11:17.240 --> 0:11:20.120 I am stuck that we're already talking about, like maybe 0:11:20.160 --> 0:11:22.800 a move towards generics or their patents coming up. When 0:11:22.800 --> 0:11:24.760 did they start, I'm like, I feel like it was 0:11:24.800 --> 0:11:25.640 just a few years. 0:11:25.480 --> 0:11:26.839 Ago, right, I mean, that's the thing. 0:11:26.920 --> 0:11:30.079 So Novo's drug Ozempic was approved I think in twenty 0:11:30.120 --> 0:11:33.320 seventeen twenty launched in twenty eighteen, and so that's the 0:11:33.400 --> 0:11:37.439 same drug technically as wov Wigov's, just a higher dose 0:11:37.520 --> 0:11:40.360 version of that. So it's that was the thing. It 0:11:40.400 --> 0:11:42.520 didn't really come onto the scene. People didn't start talking 0:11:42.520 --> 0:11:44.400 about it until a couple of years ago. But really 0:11:44.400 --> 0:11:46.400 the drug has been around for a while, and so 0:11:46.559 --> 0:11:48.640 the clock has been ticking in that time. 0:11:49.400 --> 0:11:51.920 So we talk about the Eli Lilly deal. Yeah, okay, 0:11:52.000 --> 0:11:53.920 so this is not a non GLP one deal, which 0:11:54.000 --> 0:11:56.640 kind of speaks to the idea of these companies diversifying. 0:11:56.840 --> 0:11:59.200 The company agreed to buy the closely held US biotech 0:11:59.280 --> 0:12:02.760 Orna Therapeutic up to two point four billion dollars in cash, 0:12:02.880 --> 0:12:05.280 second deal in as many days, as the country looked 0:12:05.280 --> 0:12:08.760 to expand its pipeline beyond zet bound. What does this do? 0:12:09.520 --> 0:12:12.360 I mean, this drug that found no like this. 0:12:12.800 --> 0:12:15.319 Like it kind of speaks to this idea of going beyond, 0:12:15.960 --> 0:12:18.000 of going beyond this industry because I kind of. 0:12:17.920 --> 0:12:20.560 Thought they were going to be living off this a 0:12:20.600 --> 0:12:21.160 long time. 0:12:21.280 --> 0:12:23.480 But I guess that's why we're not running a drug company. 0:12:23.480 --> 0:12:24.560 That's exactly why we're not. 0:12:25.080 --> 0:12:27.760 Because I had the same reaction as you did. I thought, like, Okay, 0:12:27.840 --> 0:12:28.640 there they got it. 0:12:28.679 --> 0:12:30.440 They're going to tweak it, they're going to make a pill, 0:12:30.440 --> 0:12:31.800 they're going to just kind of keep going. 0:12:31.960 --> 0:12:35.360 Well, Lily has learned the hard way that resting on 0:12:35.400 --> 0:12:37.679 your laurels, which is sort of the problem that Novo's 0:12:37.720 --> 0:12:40.480 facing right now, doesn't work. I mean, drug companies are 0:12:40.480 --> 0:12:43.959 always should always be looking toward the next big thing 0:12:43.960 --> 0:12:46.480 because patents expire, and that's the problem with you know, 0:12:46.600 --> 0:12:48.840 the drug industries. You always have to be thinking about 0:12:48.880 --> 0:12:51.439 the next thing. Lily is the one that brought Prozac 0:12:51.480 --> 0:12:53.520 to the market back in the nineteen nineties. That was 0:12:53.559 --> 0:12:56.080 a massive drug and for a while Lily was in 0:12:56.120 --> 0:12:58.199 a similar position where it was riding high on the 0:12:58.240 --> 0:13:01.880 Prozac fortune. And then after that they really were so 0:13:02.120 --> 0:13:04.640 ultra focused on like, we're going to be a company 0:13:04.640 --> 0:13:08.640 that develops neuropsychiatric drugs and for psychiatric conditions, whatever we're 0:13:08.640 --> 0:13:11.760 going this is what we're going to do. And then 0:13:11.800 --> 0:13:14.160 they didn't have a second act to follow it up. 0:13:14.200 --> 0:13:16.280 And so I've talked to the executives at Lily who 0:13:16.280 --> 0:13:19.320 have said they're really being purposeful about we have to 0:13:19.320 --> 0:13:23.200 be thinking outside of just obesity. They're looking at immunology, cancer, 0:13:23.559 --> 0:13:26.960 genetic medicines, a third of their portfolio as gene therapies now, 0:13:27.559 --> 0:13:31.240 so they're trying to they're still extremely focused on obesity 0:13:31.240 --> 0:13:35.199 and they have. They're testing drugs for basically like everything 0:13:35.400 --> 0:13:38.880 in the obesity landscape, you know, from five percent weight 0:13:38.920 --> 0:13:41.760 loss to thirty percent weight loss. They want to have 0:13:41.800 --> 0:13:45.000 something for everyone. But they're also looking outside of obesity, 0:13:45.040 --> 0:13:46.959 and that's a really important part of their strategy. 0:13:47.280 --> 0:13:49.880 Can I ask you something going back to because Nova's 0:13:49.880 --> 0:13:52.800 going to come off patent sooner, so should we assume 0:13:53.040 --> 0:13:56.360 that so then there'll be all these copycats that folks 0:13:56.360 --> 0:13:58.720 that maybe were taking zep bound. 0:13:58.640 --> 0:13:59.959 Or something like we've talked with you, that they're not 0:14:00.160 --> 0:14:00.480 all the. 0:14:00.480 --> 0:14:04.720 Same, that they're just going to run to the generics 0:14:04.760 --> 0:14:06.520 because they'll be cheaper, or they're not going to be 0:14:06.520 --> 0:14:09.240 able to medically because things are. 0:14:09.160 --> 0:14:12.920 Different, and say they hypothetically would be able to I'm 0:14:13.360 --> 0:14:15.520 consulting with their doctor. If their doctors like, yeah, you 0:14:15.559 --> 0:14:18.320 know generic semaglue tide is fine for you. 0:14:18.440 --> 0:14:19.160 Sure that's great. 0:14:19.160 --> 0:14:22.160 If that's the most affordable option, that's what your insurance covers. 0:14:23.480 --> 0:14:25.760 But we also have this other side of. 0:14:25.680 --> 0:14:29.160 This industry where there's a huge cash pay component, and 0:14:29.240 --> 0:14:31.800 the drug makers Novae Lily have both worked with the 0:14:31.800 --> 0:14:35.160 Trump administration to bring down prices for patients in Medicare 0:14:35.400 --> 0:14:38.440 and also cash pay prices. I think it's something like 0:14:38.480 --> 0:14:41.160 a third of patients in this market in general right 0:14:41.200 --> 0:14:43.560 now in the US at least are cash pay patients, 0:14:43.840 --> 0:14:46.560 so they're not going through insurance and they're paying these 0:14:46.600 --> 0:14:50.280 lower discounted prices that the drug makers offer through direct 0:14:50.280 --> 0:14:54.800 to consumer websites, and so the prices have come down much, 0:14:54.880 --> 0:14:58.600 much faster than we would normally see in such an 0:14:58.640 --> 0:15:01.840 ultracompetitive market usually that it doesn't happen this way. 0:15:02.200 --> 0:15:04.160 So patients maybe are already. 0:15:03.960 --> 0:15:06.120 Used to paying two hundred dollars a month for their 0:15:06.200 --> 0:15:08.240 zep bound and they don't want to switch because that's 0:15:08.280 --> 0:15:10.840 what works for them. Even though there's a cheaper option 0:15:10.880 --> 0:15:13.080 on the market. It's sort of a question mark as 0:15:13.160 --> 0:15:14.280 to what happens next. 0:15:14.440 --> 0:15:16.320 So we're talking about this in the context of the 0:15:16.320 --> 0:15:23.480 way that Americans are looking for ways to lose weight. 0:15:24.200 --> 0:15:25.840 We'd be remiss if we didn't talk about some of 0:15:25.880 --> 0:15:28.120 the messaging in the Super Bowl last night. Mike Tyson 0:15:28.480 --> 0:15:31.520 ad from It was like a Maha ye ad out 0:15:31.560 --> 0:15:35.200 there talking about how processed food kills and he's eating 0:15:35.240 --> 0:15:36.920 an apple at the end, and he talks about his 0:15:36.960 --> 0:15:41.400 own struggle his sister's struggle. Is there any I mean, 0:15:41.440 --> 0:15:42.880 I know it's kind of a crazy question, but is 0:15:42.880 --> 0:15:46.120 there any chance that the messaging with that starts to 0:15:46.240 --> 0:15:50.880 work and it attacks the problem that some argue is 0:15:51.200 --> 0:15:53.640 where it starts, right, this idea that we're not necessarily 0:15:54.040 --> 0:15:57.120 eating healthy and therefore there won't be as much of 0:15:57.160 --> 0:15:59.080 a demand for these trucks moving forward. 0:15:59.360 --> 0:16:02.720 I mean, it would be great if I think, like 0:16:02.840 --> 0:16:06.200 everyone hopes, even Lilyanovo say that they hope that people 0:16:06.280 --> 0:16:09.360 will eat healthier or move more, like they say that 0:16:09.360 --> 0:16:12.600 that's an important part of these drugs too. But I 0:16:12.640 --> 0:16:16.960 think it's hard because it does their obesity is a disease. 0:16:17.120 --> 0:16:19.920 And that's the message that these drug makers are also 0:16:19.920 --> 0:16:22.440 putting out, is that, like, this is a thing that 0:16:22.480 --> 0:16:25.920 for some people, eating healthy doesn't fix. And even if 0:16:25.960 --> 0:16:30.280 you eat healthy, exercise whatever, for some people that just doesn't. 0:16:30.400 --> 0:16:33.600 They have a certain genetic makeup or it's whatever, like 0:16:33.840 --> 0:16:36.200 they can't lose weight or it's really really difficult for 0:16:36.240 --> 0:16:38.400 them to lose weight. So I think it's like not 0:16:38.480 --> 0:16:41.200 an either or situation. Both things should be happening, and 0:16:41.280 --> 0:16:44.320 hopefully both things will help bring down the obesity rates 0:16:44.320 --> 0:16:44.960 in this country. 0:16:45.000 --> 0:16:46.760 But I wanted to ask you because I feel like 0:16:46.760 --> 0:16:48.480 when we started talking with you that we you know, 0:16:48.520 --> 0:16:49.840 are like, this is the drug that's. 0:16:49.640 --> 0:16:53.040 Going to solve everything. Can these drug makers get indigital 0:16:53.280 --> 0:16:57.640 indications for the medications that expands their patents or something like? 0:16:58.160 --> 0:16:58.840 Does that help? 0:16:59.080 --> 0:17:02.680 I mean it helps with getting more insurance companies to 0:17:02.840 --> 0:17:05.119 cover it so to pay for it. There are some 0:17:05.200 --> 0:17:08.960 things like if you have a different formulation for the drug, 0:17:09.040 --> 0:17:12.000 like those types of things. Sometimes pediatric indications will help 0:17:12.000 --> 0:17:14.960 give you a couple more years of patent life. But 0:17:15.400 --> 0:17:17.680 at the same time, it's like it's always the clock 0:17:17.720 --> 0:17:20.640 is always ticking. It's not going to add much at 0:17:20.640 --> 0:17:23.600 this point, and you have patents at least for some 0:17:23.800 --> 0:17:26.240 glue tyde for azempic, and we'll go be falling sort 0:17:26.240 --> 0:17:28.639 of all over the world within the next year, and 0:17:28.720 --> 0:17:31.800 so you will have those generic generics out there in 0:17:31.840 --> 0:17:34.600 the world, even if the US patent hasn't expired yet. 0:17:34.760 --> 0:17:36.919 It's kind of only a matter of time before we 0:17:36.960 --> 0:17:37.360 get there. 0:17:37.520 --> 0:17:39.480 I almost feel sorry, like I know it like the 0:17:39.600 --> 0:17:41.320 R and D that goes into this stuff, Like you 0:17:41.400 --> 0:17:44.320 kind of understand that argument. Having a brother that used 0:17:44.320 --> 0:17:45.960 to be in formal, like we used to talk about 0:17:45.960 --> 0:17:47.000 this all the time, but you. 0:17:47.000 --> 0:17:48.640 Know, right, and that's what I think. 0:17:48.680 --> 0:17:50.919 They're also like they've really had a hard time with 0:17:50.960 --> 0:17:54.280 the compounding because it's sort of circumvented that a little bit. 0:17:54.840 --> 0:17:58.680 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:17:58.760 --> 0:18:01.440