1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,880 Speaker 1: Eastern on Apple Coarclay, and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:24,120 --> 00:00:27,800 Speaker 2: Carnival Cruise Lines reported some numbers a little bit disappointing. 7 00:00:28,000 --> 00:00:31,280 Speaker 2: Stock trading down about five percent here today. I think 8 00:00:31,360 --> 00:00:34,280 Speaker 2: Michael Barr, Bloomberg's Michael Barr, was on a Carnival Cruise 9 00:00:34,320 --> 00:00:37,120 Speaker 2: Line trip last week and he goes crazy there. We 10 00:00:37,159 --> 00:00:40,960 Speaker 2: know Charlie Pellett, big cruise guy himself. So there's a 11 00:00:41,000 --> 00:00:44,360 Speaker 2: lot of cruises around here in Bloomberg. Brian egger Juns 12 00:00:44,440 --> 00:00:46,720 Speaker 2: is here, senior gaming and launching analysts for Bloomberg Intelligence, 13 00:00:46,760 --> 00:00:50,760 Speaker 2: talked us about Carnival Cruise Lines. What did you learn 14 00:00:50,840 --> 00:00:51,600 Speaker 2: on the Ernie report? 15 00:00:52,000 --> 00:00:54,560 Speaker 3: So, I mean they're still looking for some yield growth, 16 00:00:54,600 --> 00:00:57,720 Speaker 3: positive yield growth this year. I think the change perhaps 17 00:00:57,960 --> 00:01:01,280 Speaker 3: was the war in Iran really had an effect affect 18 00:01:01,400 --> 00:01:04,399 Speaker 3: gas prices, affected air travel and the perception of the 19 00:01:04,400 --> 00:01:08,480 Speaker 3: ease of air travel, and some terineraries in the Eastern 20 00:01:08,520 --> 00:01:11,840 Speaker 3: med Mediterranean I think the big change for their perspective 21 00:01:11,880 --> 00:01:13,920 Speaker 3: is how long it lasted. You know, it comes down 22 00:01:13,959 --> 00:01:16,440 Speaker 3: to I think when they last gave guidance the marks, 23 00:01:16,480 --> 00:01:19,280 Speaker 3: they were not expecting we'd still be talking about this 24 00:01:19,319 --> 00:01:21,760 Speaker 3: into May and June. So things have gotten better in June, 25 00:01:22,080 --> 00:01:24,000 Speaker 3: but I think, like you know, May was a bit 26 00:01:24,040 --> 00:01:26,680 Speaker 3: of a setback in terms of the duration of a conflict. 27 00:01:26,840 --> 00:01:27,440 Speaker 4: Yeah, yep. 28 00:01:27,480 --> 00:01:30,920 Speaker 2: So what are they finding about. I guess just you know, 29 00:01:30,959 --> 00:01:33,200 Speaker 2: the typical bookings I think in the Caribbean and all 30 00:01:33,200 --> 00:01:35,640 Speaker 2: that kind of stuff. How did they hold How are 31 00:01:35,640 --> 00:01:37,360 Speaker 2: they holding up because I kind of think when I 32 00:01:37,360 --> 00:01:38,959 Speaker 2: think cruising, that's a big part of it. 33 00:01:39,040 --> 00:01:41,959 Speaker 3: Yeah, I mean overall quite well. I mean, with the 34 00:01:42,000 --> 00:01:45,160 Speaker 3: exception of the disruptions I talked about, we're still seeing 35 00:01:45,680 --> 00:01:48,480 Speaker 3: positive ield growth, which in an uncertain economy is I 36 00:01:48,480 --> 00:01:51,280 Speaker 3: think a good thing. They are. I believe they said 37 00:01:51,360 --> 00:01:54,040 Speaker 3: ninety three percent booked for this year, and they've got 38 00:01:54,080 --> 00:01:59,560 Speaker 3: some positive early indications for next year. So the industry 39 00:01:59,600 --> 00:02:02,240 Speaker 3: is still to be quite resilient, notwithstanding the fact that 40 00:02:02,280 --> 00:02:05,480 Speaker 3: you've got the disruption from this war itself, which was. 41 00:02:05,480 --> 00:02:09,519 Speaker 2: A factor on the fuel side. I know, the airlines 42 00:02:09,880 --> 00:02:13,040 Speaker 2: buying large do not hedge. Do the cruise companies. 43 00:02:12,639 --> 00:02:16,520 Speaker 3: Hedge something that do. Carnival strokely is not hedged. Some 44 00:02:16,560 --> 00:02:19,000 Speaker 3: of them do have hedges, they have collars in places 45 00:02:19,000 --> 00:02:22,440 Speaker 3: in the case of Carnival, you know. And when we 46 00:02:22,560 --> 00:02:26,280 Speaker 3: last heard their guidance, they were providing guidance based on 47 00:02:26,320 --> 00:02:29,839 Speaker 3: certain expectations about Brent fuel. At the time they last 48 00:02:29,840 --> 00:02:32,320 Speaker 3: spoke a couple of months ago, fuel prices were above that. 49 00:02:32,360 --> 00:02:37,160 Speaker 3: Now it's below that. So it's very much tied to 50 00:02:37,240 --> 00:02:39,040 Speaker 3: the trajectory of this conflict. 51 00:02:39,200 --> 00:02:41,400 Speaker 2: What's fuel as a part of their cost structure of 52 00:02:41,440 --> 00:02:42,280 Speaker 2: a typical cruise. 53 00:02:42,680 --> 00:02:45,679 Speaker 3: Remember what the exact percentage, it's pretty big. It's a 54 00:02:45,720 --> 00:02:46,800 Speaker 3: pretty philly oarge. 55 00:02:47,120 --> 00:02:48,920 Speaker 2: So this is something. I mean, they've been dealing with 56 00:02:48,960 --> 00:02:51,760 Speaker 2: a headwind for the last several months. May become a 57 00:02:51,760 --> 00:02:54,560 Speaker 2: little bit of a tailwin it on the downside, could be. 58 00:02:54,639 --> 00:02:57,200 Speaker 3: I mean, I think they went into with some assumptions 59 00:02:57,240 --> 00:03:02,120 Speaker 3: about forward contracts where Brent prices that we're eighty ninety dollars, 60 00:03:02,120 --> 00:03:06,920 Speaker 3: and now as Crewe oil eases, it could be it 61 00:03:06,960 --> 00:03:09,880 Speaker 3: could work the other way. So, certainly the relaxation or 62 00:03:09,919 --> 00:03:13,720 Speaker 3: the easing of rent fuel, even though they use bunk 63 00:03:13,760 --> 00:03:16,480 Speaker 3: or fuel a certain grade of it is a positive 64 00:03:16,520 --> 00:03:16,839 Speaker 3: for them. 65 00:03:17,320 --> 00:03:20,800 Speaker 2: One I noticed sitting on the beach of Aruba is 66 00:03:21,080 --> 00:03:24,120 Speaker 2: the ship's engine, even when they're docked, it's running because 67 00:03:24,160 --> 00:03:26,840 Speaker 2: I see the smoke coming out of the smokestack twenty 68 00:03:26,840 --> 00:03:29,280 Speaker 2: four to seven, I guess just to run the thing. 69 00:03:29,800 --> 00:03:32,079 Speaker 2: So they've burned in fuel twenty four to seven here, 70 00:03:32,120 --> 00:03:35,200 Speaker 2: So that's a big issue. Talk to us about capacity 71 00:03:35,280 --> 00:03:38,480 Speaker 2: in the industry, are we adding capacity taking it out? 72 00:03:38,720 --> 00:03:41,680 Speaker 3: So the industry overall, we're looking at something like four 73 00:03:41,800 --> 00:03:45,040 Speaker 3: ish percent mid single digit supply growth. Carnival is an 74 00:03:45,040 --> 00:03:48,040 Speaker 3: exception and as much as they're growing capacity in twenty 75 00:03:48,200 --> 00:03:51,200 Speaker 3: twenty six by only one percent, so they've taken a 76 00:03:51,240 --> 00:03:53,440 Speaker 3: much more measured approach, which I think in this environment 77 00:03:53,520 --> 00:03:57,280 Speaker 3: seems quite prudent. They will be adding maybe one or 78 00:03:57,280 --> 00:04:00,160 Speaker 3: two ships a year balance between the Caribbean and the 79 00:04:00,200 --> 00:04:03,200 Speaker 3: rest of the world, but zero point nine percent supply 80 00:04:03,280 --> 00:04:06,000 Speaker 3: growth for them for this year is obviously quite measured. 81 00:04:06,520 --> 00:04:09,800 Speaker 2: We're seeing in lots of parts of the economy the 82 00:04:09,880 --> 00:04:14,280 Speaker 2: higher end doing well, the lower end not so much. 83 00:04:14,840 --> 00:04:17,320 Speaker 2: And I know that the cruise lines they have different 84 00:04:17,360 --> 00:04:19,680 Speaker 2: brands that just like the hotels have different brands that 85 00:04:19,760 --> 00:04:23,200 Speaker 2: catered to different I guess rivals. Are you guys seeing 86 00:04:23,200 --> 00:04:24,400 Speaker 2: that that dynamic in the CR I. 87 00:04:24,400 --> 00:04:26,719 Speaker 3: Don't know we're seeing that much of a parsing between 88 00:04:26,720 --> 00:04:29,279 Speaker 3: the upper and we'll warn with respect to cruising specifically, 89 00:04:29,360 --> 00:04:32,000 Speaker 3: you're absolute right. For hotels for a while we refer 90 00:04:32,080 --> 00:04:34,479 Speaker 3: to the K shaped economy where the and now it's 91 00:04:34,480 --> 00:04:36,640 Speaker 3: more like the C shaped economy where the you know, 92 00:04:36,680 --> 00:04:40,479 Speaker 3: the as Hilton Ceo ear marked that with the lower 93 00:04:40,560 --> 00:04:43,160 Speaker 3: end now coming back. I think for cruises that strength 94 00:04:43,160 --> 00:04:45,680 Speaker 3: has been fairly broad based. What's really driving it? If 95 00:04:45,680 --> 00:04:49,080 Speaker 3: you're in the Caribbean, it's these island destinations that help 96 00:04:49,200 --> 00:04:49,919 Speaker 3: drive pricing. 97 00:04:50,680 --> 00:04:54,240 Speaker 2: Interesting. Yeah, I'm going on my first cruise in October, 98 00:04:54,600 --> 00:04:57,440 Speaker 2: a biking bikingship. It's not to forty percent this year, 99 00:04:57,440 --> 00:05:00,200 Speaker 2: it's doubled over the last twelve months. What's going on there? 100 00:05:00,920 --> 00:05:04,200 Speaker 2: That is they're having my deposit impact that definitely helps. 101 00:05:04,240 --> 00:05:06,440 Speaker 3: Yes, right, I think that the niche they're in, which 102 00:05:06,480 --> 00:05:08,479 Speaker 3: is that luxury segment, and it is a niche market. 103 00:05:08,480 --> 00:05:12,200 Speaker 3: The river cruise market and the somewhat smaller ocean cruise 104 00:05:12,200 --> 00:05:14,720 Speaker 3: presence has done quite well, so that may be example 105 00:05:14,760 --> 00:05:16,520 Speaker 3: of what you're talking about where the high end is 106 00:05:16,520 --> 00:05:19,480 Speaker 3: doing quite well, and that's a high end consumer clearly 107 00:05:19,520 --> 00:05:22,839 Speaker 3: more luxury focus. So while we don't see those patterns 108 00:05:22,880 --> 00:05:25,960 Speaker 3: necessarily broad raced across the sector, they are a high 109 00:05:26,080 --> 00:05:30,719 Speaker 3: end kind of river cruise oriented luxury niche. 110 00:05:30,800 --> 00:05:32,719 Speaker 2: For what I'm paying, this thing better be all inclusive. 111 00:05:32,760 --> 00:05:34,039 Speaker 2: We got to go back and check. I'm not going 112 00:05:34,080 --> 00:05:37,400 Speaker 2: to sit there and pay for every cocktail A class 113 00:05:37,400 --> 00:05:41,400 Speaker 2: of rose. Vegas real quick, thirty seconds, Hew's Vegas, do 114 00:05:41,400 --> 00:05:42,040 Speaker 2: them now? 115 00:05:42,120 --> 00:05:44,640 Speaker 3: Vegas is better than last year, I think, is one 116 00:05:44,640 --> 00:05:47,039 Speaker 3: way to look at it. So only we have still 117 00:05:47,040 --> 00:05:48,719 Speaker 3: see on the lower end of the market where you 118 00:05:48,760 --> 00:05:51,080 Speaker 3: do see that kind of bifurcation between high and low 119 00:05:51,160 --> 00:05:55,320 Speaker 3: end in Vegas. A bit more stability there where visitation 120 00:05:55,480 --> 00:05:57,760 Speaker 3: is kind of flattened out, Pricing is a bit better. 121 00:05:58,000 --> 00:06:01,160 Speaker 3: Twenty twenty five was a rougher year, had tougher event 122 00:06:01,200 --> 00:06:05,279 Speaker 3: comparisons and pressure on midweek leasure stays. So it's a 123 00:06:05,279 --> 00:06:07,479 Speaker 3: bit more stabilized and better this year. 124 00:06:08,040 --> 00:06:10,960 Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this. 125 00:06:14,760 --> 00:06:18,440 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 126 00:06:18,520 --> 00:06:21,240 Speaker 1: weekdays at ten am he's done on Apple Cocklay and 127 00:06:21,240 --> 00:06:24,520 Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand 128 00:06:24,560 --> 00:06:28,640 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 129 00:06:28,839 --> 00:06:31,039 Speaker 5: We've been talking all morning and really for the last 130 00:06:31,080 --> 00:06:34,160 Speaker 5: few days Paul about SpaceX and where this stock has 131 00:06:34,200 --> 00:06:37,000 Speaker 5: been moving. It's currently up, so that fort day decline 132 00:06:37,040 --> 00:06:39,200 Speaker 5: did not come to pass. It has stopped at three 133 00:06:39,279 --> 00:06:41,440 Speaker 5: days for now. But it was a painful three day 134 00:06:41,480 --> 00:06:45,040 Speaker 5: slump down about twenty two percent if I recall correctly, 135 00:06:45,120 --> 00:06:50,400 Speaker 5: So you know, definitely a repricing of the initial euphoria 136 00:06:50,600 --> 00:06:51,360 Speaker 5: following the IPO. 137 00:06:51,480 --> 00:06:53,440 Speaker 2: Yeah, having done a bunch of these equity deals, it 138 00:06:53,480 --> 00:06:55,640 Speaker 2: just felt like the stock was trying to find a 139 00:06:55,680 --> 00:06:58,039 Speaker 2: home here and that's maybe worth like who really wants 140 00:06:58,040 --> 00:07:00,360 Speaker 2: to own this sing long term? And this playing the 141 00:07:00,400 --> 00:07:02,440 Speaker 2: deal a little bit? So here we are, all right, and. 142 00:07:02,360 --> 00:07:04,760 Speaker 5: Of course we know that at the same time SpaceX 143 00:07:04,800 --> 00:07:08,719 Speaker 5: the company has announced a big, big bond sale as well, 144 00:07:08,839 --> 00:07:11,400 Speaker 5: getting ready to sell investment grade bonds for the first 145 00:07:11,400 --> 00:07:15,080 Speaker 5: time to refinance a bridge loan, but also, let's face it, 146 00:07:15,120 --> 00:07:18,280 Speaker 5: to fund this AI build out as well. So for that, 147 00:07:18,440 --> 00:07:20,239 Speaker 5: of course, we need to bring in our in house 148 00:07:20,280 --> 00:07:23,720 Speaker 5: expert on tech and bonds, and that is Robert Schiffman. 149 00:07:23,760 --> 00:07:27,040 Speaker 5: He's our senior tech credit analyst here for Bloomberg Intelligence, 150 00:07:27,840 --> 00:07:29,640 Speaker 5: rob what will you be watching for and listening for 151 00:07:29,720 --> 00:07:31,400 Speaker 5: the next couple of hours here when it comes to 152 00:07:31,440 --> 00:07:33,520 Speaker 5: this SpaceX bond debut. 153 00:07:33,880 --> 00:07:36,320 Speaker 6: I think I already know the story. Bondholders are going 154 00:07:36,360 --> 00:07:40,360 Speaker 6: to welcome SpaceX with arms wide open. You know, nobody 155 00:07:40,560 --> 00:07:45,480 Speaker 6: owns this deal, right. There's hundreds of billions of AI 156 00:07:45,560 --> 00:07:47,760 Speaker 6: related tech bonds that have been issued this year. There's 157 00:07:47,920 --> 00:07:53,000 Speaker 6: hundreds of billions of tech bonds outstanding, but this is 158 00:07:53,040 --> 00:07:56,480 Speaker 6: an inaugural offering, so everyone's going to want a little piece. 159 00:07:56,920 --> 00:07:59,720 Speaker 6: And quite frankly, the difference between how SpaceX is going 160 00:07:59,760 --> 00:08:02,200 Speaker 6: to show right in the bond market versus the equity 161 00:08:02,240 --> 00:08:05,680 Speaker 6: market couldn't be much different. The valuations from the equity 162 00:08:05,720 --> 00:08:09,520 Speaker 6: side may seem really, really lofty. I think it's the 163 00:08:09,560 --> 00:08:12,200 Speaker 6: reverse for the credit markets. These bonds are going to 164 00:08:12,240 --> 00:08:17,920 Speaker 6: come wildly wide to where comparably rated investment grade names trade, 165 00:08:18,000 --> 00:08:19,560 Speaker 6: and I think that's going to track a lot of attention. 166 00:08:20,560 --> 00:08:23,800 Speaker 5: Did it surprise you that it got investment grade ratings 167 00:08:23,840 --> 00:08:26,600 Speaker 5: even though it doesn't have much of a track record 168 00:08:26,640 --> 00:08:28,960 Speaker 5: almost no track record as a publicly traded company. I 169 00:08:29,000 --> 00:08:32,800 Speaker 5: mean one of our Bloomberg News stories or other reporters 170 00:08:32,800 --> 00:08:35,360 Speaker 5: have pointed out that in Video was given the same rating, 171 00:08:35,440 --> 00:08:37,920 Speaker 5: and in Video had a much longer track record as 172 00:08:37,920 --> 00:08:41,640 Speaker 5: a publicly trade traded company than SpaceX does at the moment. 173 00:08:42,240 --> 00:08:46,079 Speaker 6: No, I wasn't surprised. Quite frankly, I think the plans 174 00:08:46,280 --> 00:08:49,880 Speaker 6: for the buildout have been reasonably well known, so for 175 00:08:49,920 --> 00:08:53,520 Speaker 6: people who are looking at the SpaceX equity IPO, they 176 00:08:53,559 --> 00:08:55,640 Speaker 6: had a really good understanding of how much money was 177 00:08:55,679 --> 00:08:57,600 Speaker 6: going to be spent over the next handful of years. 178 00:08:58,000 --> 00:09:01,600 Speaker 6: And quite frankly, you can't have of negative free cash 179 00:09:01,640 --> 00:09:06,480 Speaker 6: flow that's twenty thirty forty billion dollars annually without access 180 00:09:06,800 --> 00:09:10,160 Speaker 6: to low cost, cheap capital a big pool that was equities. 181 00:09:10,200 --> 00:09:12,920 Speaker 6: They raised eighty five billion dollars of equity, but they're 182 00:09:12,920 --> 00:09:15,880 Speaker 6: probably going to need another one hundred billion dollars of debt. 183 00:09:16,240 --> 00:09:19,880 Speaker 6: So if you had plans to borrow that much and 184 00:09:19,920 --> 00:09:22,319 Speaker 6: thought you can do it in the junk markets, you'd 185 00:09:22,320 --> 00:09:24,320 Speaker 6: be thought of as crazy. So I think this is 186 00:09:24,360 --> 00:09:27,760 Speaker 6: pretty well understood. I do get it why people say, 187 00:09:28,040 --> 00:09:30,480 Speaker 6: how are these ratings so high, and I think you 188 00:09:30,559 --> 00:09:32,520 Speaker 6: just need to look into the future a little bit 189 00:09:33,440 --> 00:09:35,320 Speaker 6: and look at the past. One is they're sitting on 190 00:09:35,320 --> 00:09:37,600 Speaker 6: one hundred billion dollars of cash. Two as they're committed 191 00:09:37,640 --> 00:09:40,480 Speaker 6: to IG ratings and reasonably low leverage. Three is their 192 00:09:40,520 --> 00:09:44,280 Speaker 6: liquidity profile looks fantastic. They have access to huge pools 193 00:09:44,280 --> 00:09:47,280 Speaker 6: of both equity and debt capital, and their burn rate 194 00:09:47,280 --> 00:09:48,880 Speaker 6: it's going to take them three or four years to 195 00:09:48,920 --> 00:09:52,559 Speaker 6: even get through the amount of capital that they have today. 196 00:09:52,640 --> 00:09:55,880 Speaker 6: So do you want a question where this company might 197 00:09:55,920 --> 00:09:57,720 Speaker 6: be in five years and what leverage is going to 198 00:09:57,720 --> 00:10:00,199 Speaker 6: look like, and are they going to be successful? I 199 00:10:00,280 --> 00:10:02,200 Speaker 6: think it's a good debate. And I think when you're 200 00:10:02,200 --> 00:10:04,240 Speaker 6: comping or are they in aerospace and defense company or 201 00:10:04,280 --> 00:10:07,840 Speaker 6: they communications company? Are they an AI tech company? That 202 00:10:07,840 --> 00:10:10,360 Speaker 6: that all of that creates I think more opportunity for 203 00:10:10,400 --> 00:10:13,160 Speaker 6: bond holders because the bond deal gets priced probably wider 204 00:10:13,200 --> 00:10:14,400 Speaker 6: than inherently it should. 205 00:10:14,640 --> 00:10:18,640 Speaker 2: There's definitely an elon factor, a positive elon factor in 206 00:10:18,679 --> 00:10:20,760 Speaker 2: the equity markets. Is this such a thing with you 207 00:10:21,160 --> 00:10:23,120 Speaker 2: credit guys who are a little bit more sober. 208 00:10:22,960 --> 00:10:26,400 Speaker 6: Well, I hear so much about how everyone you know 209 00:10:26,480 --> 00:10:29,520 Speaker 6: in the AI world rather just invest in equity because 210 00:10:29,559 --> 00:10:32,600 Speaker 6: if they're right, there's huge upside. And with bonds, if 211 00:10:32,600 --> 00:10:35,040 Speaker 6: you're right, you get paid back par and if you're wrong, 212 00:10:35,440 --> 00:10:38,680 Speaker 6: you get crushed. That's actually silly. You know, every basis 213 00:10:38,720 --> 00:10:41,800 Speaker 6: point in the fixed income markets make a huge difference, 214 00:10:42,320 --> 00:10:44,400 Speaker 6: and if you're coming at it spreads at our one 215 00:10:44,440 --> 00:10:47,200 Speaker 6: hundred basis points wide to peers that pays for the 216 00:10:47,240 --> 00:10:50,920 Speaker 6: Elon Musk risk. I would actually argue, there's Elon Musk reward. 217 00:10:51,000 --> 00:10:51,360 Speaker 4: I know this. 218 00:10:51,600 --> 00:10:53,079 Speaker 6: You know some people have cringed at this, but I 219 00:10:53,160 --> 00:10:57,160 Speaker 6: think you know, Elon Musk is to today's generation what 220 00:10:57,200 --> 00:10:59,920 Speaker 6: Warren Buffett was to the prior generation in terms of 221 00:11:00,360 --> 00:11:04,680 Speaker 6: value creation. He I think the future that he sees 222 00:11:04,760 --> 00:11:06,240 Speaker 6: is a lot different than what a lot of other 223 00:11:06,280 --> 00:11:09,080 Speaker 6: people see. I think his ability to execute is much 224 00:11:09,120 --> 00:11:11,600 Speaker 6: higher than what people are giving credit for. Quite frankly, 225 00:11:11,600 --> 00:11:12,920 Speaker 6: he does get a lot of credit. And it's a 226 00:11:12,960 --> 00:11:16,400 Speaker 6: two trillion dollar equity market cap. So you know, for 227 00:11:16,440 --> 00:11:18,960 Speaker 6: everyone who wants to pooh pooh all the risk, you know, 228 00:11:19,040 --> 00:11:20,800 Speaker 6: people are riding the Elon wave. 229 00:11:21,160 --> 00:11:23,520 Speaker 5: Okay, so the bond market is giving Elon Musk the 230 00:11:23,559 --> 00:11:25,800 Speaker 5: benefit of the doubt. It sounds like does the bond 231 00:11:25,840 --> 00:11:31,040 Speaker 5: market give any other CEO founder company that same level 232 00:11:31,120 --> 00:11:31,640 Speaker 5: of benefit. 233 00:11:32,240 --> 00:11:37,079 Speaker 6: Well, the difference between SpaceX and the rest of these 234 00:11:37,080 --> 00:11:39,120 Speaker 6: other AI companies, you know, we've said this so many 235 00:11:39,200 --> 00:11:41,400 Speaker 6: times before, is the other names are basically the mount 236 00:11:41,440 --> 00:11:43,679 Speaker 6: rushmore credits. You know, they're double as and triple a's, 237 00:11:43,760 --> 00:11:47,080 Speaker 6: So they inherently have built in credibility because they have 238 00:11:47,200 --> 00:11:50,920 Speaker 6: so much financial flexibility. So what if Amazon borrows another 239 00:11:50,920 --> 00:11:53,840 Speaker 6: one hundred billion, or if Alphabet borrows you know, one 240 00:11:53,920 --> 00:11:56,040 Speaker 6: hundred and fifty billion, the bounce sheet is going to 241 00:11:56,040 --> 00:11:56,520 Speaker 6: be fine. 242 00:11:56,840 --> 00:11:57,080 Speaker 3: Here. 243 00:11:57,400 --> 00:11:59,199 Speaker 6: You know, you're starting with a company, it doesn't have 244 00:11:59,280 --> 00:12:01,560 Speaker 6: a lot of EBITD it's big negative free cash flow, 245 00:12:01,960 --> 00:12:05,680 Speaker 6: doesn't have this long long track record of success. So 246 00:12:05,800 --> 00:12:10,000 Speaker 6: ultimately what happens Listen, spreads are at historically tight levels. 247 00:12:10,200 --> 00:12:13,800 Speaker 6: Everyone is looking for the next basis point to help perform. 248 00:12:14,400 --> 00:12:18,079 Speaker 6: If you price something right, it's going to sell. These 249 00:12:18,120 --> 00:12:21,560 Speaker 6: bonds look like they're going to be priced dramatically wide 250 00:12:21,880 --> 00:12:25,880 Speaker 6: to triple be alternatives. So even if the long term 251 00:12:26,000 --> 00:12:28,440 Speaker 6: you think there's real question marks, in the short term, 252 00:12:28,720 --> 00:12:31,599 Speaker 6: you're going to try to get bonds. You're going to 253 00:12:31,640 --> 00:12:34,240 Speaker 6: buy bonds now and ask questions later, and I think 254 00:12:34,240 --> 00:12:35,520 Speaker 6: that's going to support this steal. 255 00:12:36,160 --> 00:12:36,840 Speaker 2: Stay with us. 256 00:12:36,880 --> 00:12:39,079 Speaker 5: More from Bloomberg Intelligence coming up after this. 257 00:12:42,920 --> 00:12:46,560 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 258 00:12:46,640 --> 00:12:49,720 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 259 00:12:49,720 --> 00:12:53,000 Speaker 1: Auto with the Bloomberg Business App, Listen on demand wherever 260 00:12:53,040 --> 00:12:56,120 Speaker 1: you get your podcasts, or watch us live on YouTube. 261 00:12:56,679 --> 00:12:59,080 Speaker 5: All right, well, we talked a little bit about SpaceX, 262 00:12:59,120 --> 00:13:01,959 Speaker 5: and it's a company that we kind of can't ignore 263 00:13:02,040 --> 00:13:05,400 Speaker 5: given the market debut what had over the last couple 264 00:13:05,400 --> 00:13:07,800 Speaker 5: of days. And man Deep Singh is here with us. 265 00:13:07,880 --> 00:13:10,280 Speaker 5: He is our go to guy and all things tech. 266 00:13:10,480 --> 00:13:13,760 Speaker 5: He is our global tech research head here at Bloomberg Intelligence. Mandeep, 267 00:13:13,800 --> 00:13:17,800 Speaker 5: you look at what is happening with SpaceX, and Paul 268 00:13:17,840 --> 00:13:19,679 Speaker 5: put it really well in that it's just kind of 269 00:13:19,679 --> 00:13:22,840 Speaker 5: trying to find its place. People are trying to figure 270 00:13:22,840 --> 00:13:25,600 Speaker 5: out what the right price looks like for a company 271 00:13:25,640 --> 00:13:28,240 Speaker 5: like this after all the fanfare and then you know 272 00:13:28,320 --> 00:13:31,320 Speaker 5: the flushing out maybe of some of the early investors. 273 00:13:31,920 --> 00:13:34,320 Speaker 5: What do you see as the most enduring narrative for 274 00:13:34,400 --> 00:13:37,400 Speaker 5: this company now that it's just over a week into 275 00:13:37,400 --> 00:13:39,040 Speaker 5: its life as a publicly traded company. 276 00:13:39,679 --> 00:13:44,120 Speaker 7: Well, I think clearly during the road show, people got 277 00:13:44,160 --> 00:13:48,200 Speaker 7: really excited about the orbital data centers and you know, 278 00:13:48,280 --> 00:13:51,800 Speaker 7: the space launches, but we know they don't generate any 279 00:13:51,840 --> 00:13:55,680 Speaker 7: revenue right now. And I think people are coming to 280 00:13:55,720 --> 00:13:59,480 Speaker 7: the realization that this requires a lot more upfront capital, 281 00:13:59,640 --> 00:14:02,679 Speaker 7: which is why they are doing that bond issuance. And 282 00:14:02,720 --> 00:14:05,720 Speaker 7: then there will be some equity issuance to close out 283 00:14:05,760 --> 00:14:08,880 Speaker 7: the Cursor acquisition, so they will be adding you know, 284 00:14:08,960 --> 00:14:12,640 Speaker 7: three percent more stock to close out that deal. And look, 285 00:14:12,960 --> 00:14:17,240 Speaker 7: if you are an investor in this company who is 286 00:14:17,280 --> 00:14:22,160 Speaker 7: getting diluted right now, it's reasonable to say some people, 287 00:14:22,960 --> 00:14:25,760 Speaker 7: you know, aren't it there for the long term, and 288 00:14:26,640 --> 00:14:29,600 Speaker 7: there's a shakeout that's going on, and we'll figure out 289 00:14:29,640 --> 00:14:32,480 Speaker 7: who wants to believe in the company long term, because 290 00:14:32,520 --> 00:14:34,880 Speaker 7: this is not a free cash flow or a stock 291 00:14:34,920 --> 00:14:36,480 Speaker 7: buybackstory anytime soon. 292 00:14:37,000 --> 00:14:39,880 Speaker 2: All right, switching here's to Google here it's some AI 293 00:14:39,960 --> 00:14:43,960 Speaker 2: dudes are departing Google. I mean, should Google be worried 294 00:14:43,960 --> 00:14:45,800 Speaker 2: about this? Some of their talent leaving? 295 00:14:46,440 --> 00:14:49,280 Speaker 7: I think so. I mean the fact that the market 296 00:14:49,280 --> 00:14:51,920 Speaker 7: cap dropped by two hundred and fifty billion probably is 297 00:14:51,920 --> 00:14:54,880 Speaker 7: an exaggeration. So It just goes to show they probably 298 00:14:54,880 --> 00:14:59,000 Speaker 7: should have paid these guys anything to retain them. But look, 299 00:14:59,360 --> 00:15:02,960 Speaker 7: when it comes to frontier models, there is no doubt 300 00:15:03,000 --> 00:15:07,520 Speaker 7: that Entropic is ahead. Even open Ai has been releasing 301 00:15:07,560 --> 00:15:10,960 Speaker 7: their models at a faster pace. And this space is 302 00:15:11,240 --> 00:15:14,960 Speaker 7: all about leap frogging your competitors when it comes to 303 00:15:15,040 --> 00:15:20,520 Speaker 7: the model intelligence layer. I mean Entropics Mythos release, everyone 304 00:15:20,640 --> 00:15:24,080 Speaker 7: is freaking out in terms of the capabilities of the model, 305 00:15:24,120 --> 00:15:27,440 Speaker 7: to the extent that the government has blocked access. Why 306 00:15:27,760 --> 00:15:31,000 Speaker 7: because they are at the frontier of intelligence. So does 307 00:15:31,040 --> 00:15:34,080 Speaker 7: Google have an equivalent model? No, the answer is no. 308 00:15:34,560 --> 00:15:36,640 Speaker 7: And when will they be releasing it? We don't know, 309 00:15:37,200 --> 00:15:41,040 Speaker 7: which is why they will end up losing talent because 310 00:15:41,080 --> 00:15:45,280 Speaker 7: everyone now believes Entropic is at the frontier, and Entropics 311 00:15:45,320 --> 00:15:47,000 Speaker 7: seems to be gaining a lot of talent. 312 00:15:48,000 --> 00:15:51,720 Speaker 2: It's always been a talent driven technology, you know. 313 00:15:52,080 --> 00:15:55,080 Speaker 5: But it feels more blood bloody than it ever has, right. 314 00:15:55,400 --> 00:15:59,120 Speaker 5: I mean, in terms of the pecking order of companies 315 00:15:59,160 --> 00:16:02,120 Speaker 5: that have their pick for talent, Anthropic you point out 316 00:16:02,160 --> 00:16:02,760 Speaker 5: is at the top. 317 00:16:03,280 --> 00:16:04,520 Speaker 2: Is open Ai still up there? 318 00:16:04,520 --> 00:16:06,040 Speaker 5: I mean open Ai has lost a little bit of 319 00:16:06,040 --> 00:16:09,920 Speaker 5: its momentum to anthropic. Where does SpaceX rank. Where does 320 00:16:10,240 --> 00:16:11,960 Speaker 5: you know the hyperscalers, where do they land? 321 00:16:12,760 --> 00:16:14,840 Speaker 7: And that's a great question. So which is why that 322 00:16:15,040 --> 00:16:18,480 Speaker 7: acquisition of Cursor was so timely. I know this stock 323 00:16:18,600 --> 00:16:21,440 Speaker 7: is dropping last three days, but had it not been 324 00:16:21,520 --> 00:16:24,240 Speaker 7: for the Cursor acquisition, I bet you the stock would 325 00:16:24,240 --> 00:16:27,680 Speaker 7: be under hundred dollars. So Cursor really did make a 326 00:16:27,720 --> 00:16:31,080 Speaker 7: difference in terms of one getting that coding agent use 327 00:16:31,160 --> 00:16:33,960 Speaker 7: case and you know, giving a narrative that they can 328 00:16:34,040 --> 00:16:37,080 Speaker 7: scale this. And also the talent. I mean, Cursor co 329 00:16:37,200 --> 00:16:40,520 Speaker 7: founders are probably the smartest guys and AI and highly 330 00:16:40,560 --> 00:16:43,280 Speaker 7: sought after. So I hope they're able to retain that 331 00:16:43,400 --> 00:16:47,160 Speaker 7: talent that they got from Cursor. But clearly a great acquisition. 332 00:16:47,200 --> 00:16:49,160 Speaker 7: And to your point about open Ai, yes they have 333 00:16:49,280 --> 00:16:53,560 Speaker 7: lost momentum. Remember open Ai ended up bringing on the 334 00:16:53,640 --> 00:16:56,160 Speaker 7: co founder or the founder of open Claw. 335 00:16:57,520 --> 00:17:00,040 Speaker 2: Open Claw was like the next big. 336 00:16:59,880 --> 00:17:02,520 Speaker 7: Thing at the start of the year. Everyone was talking 337 00:17:02,520 --> 00:17:05,119 Speaker 7: about what is going to be that agenty platform on 338 00:17:05,160 --> 00:17:10,400 Speaker 7: your smartphones and edge devices. Open Claw co founder went 339 00:17:10,480 --> 00:17:14,480 Speaker 7: to open Ai. And you know that's where it makes 340 00:17:14,520 --> 00:17:17,760 Speaker 7: a huge difference where these guys end up because they 341 00:17:17,800 --> 00:17:21,040 Speaker 7: have the vision and if they find Anthropic to be 342 00:17:21,080 --> 00:17:23,600 Speaker 7: the place or open AI, that makes a huge difference. 343 00:17:24,680 --> 00:17:25,320 Speaker 2: Stay with us. 344 00:17:25,359 --> 00:17:27,600 Speaker 5: More from Bloomberg Intelligence coming up after this. 345 00:17:31,760 --> 00:17:35,480 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 346 00:17:35,560 --> 00:17:38,920 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 347 00:17:39,040 --> 00:17:42,119 Speaker 1: with the Bloomberg Business App, Listen on demand wherever you 348 00:17:42,160 --> 00:17:45,120 Speaker 1: get your podcasts, or watch us live on YouTube. 349 00:17:46,040 --> 00:17:47,760 Speaker 2: You know, we love the big take stories that come 350 00:17:47,800 --> 00:17:49,800 Speaker 2: out every day on the Bloomberg Terminal and a Bloomberg 351 00:17:49,840 --> 00:17:54,320 Speaker 2: dot com. They're really fascinating stories, deeply resource, deeply soort 352 00:17:54,960 --> 00:17:57,359 Speaker 2: lots of cool stuff. This is a good one today. 353 00:17:57,600 --> 00:18:00,960 Speaker 2: How Eli Lilly got huge by making us did and 354 00:18:01,040 --> 00:18:03,480 Speaker 2: remember Lily, they're the maker of zep bound. I think 355 00:18:03,480 --> 00:18:07,440 Speaker 2: that's one of the big, big, big GLP one drugs 356 00:18:07,480 --> 00:18:09,800 Speaker 2: out there and it's just been a massive market for 357 00:18:10,160 --> 00:18:13,320 Speaker 2: now surel now when Charlie yep, it's just awesome. Madison 358 00:18:13,359 --> 00:18:16,720 Speaker 2: Buller joints this here healthcare reporter for a Bloomberg News. 359 00:18:17,440 --> 00:18:19,440 Speaker 2: I know you guys did a big, big take story 360 00:18:19,480 --> 00:18:22,840 Speaker 2: on this medicine about Eli Lilly and how they plan 361 00:18:23,040 --> 00:18:25,600 Speaker 2: to keep the GLP one boom going talk to us 362 00:18:25,600 --> 00:18:26,400 Speaker 2: about what you found out. 363 00:18:27,400 --> 00:18:29,640 Speaker 4: Yeah, definitely, thank you for having me on to talk 364 00:18:29,640 --> 00:18:32,560 Speaker 4: about this. I mean, Lily is an amazing story. The 365 00:18:32,600 --> 00:18:35,000 Speaker 4: company is one hundred and fifty years old. There's only 366 00:18:35,000 --> 00:18:38,240 Speaker 4: a handful of American companies that are still still sort 367 00:18:38,240 --> 00:18:40,480 Speaker 4: of look the same as they did one hundred and 368 00:18:40,560 --> 00:18:43,440 Speaker 4: fifty years ago, and so Lily is one of them. 369 00:18:43,640 --> 00:18:46,440 Speaker 4: It's a pretty good American company story. But they've really 370 00:18:46,440 --> 00:18:49,879 Speaker 4: transformed over the last few decades. They had, you know, 371 00:18:49,920 --> 00:18:52,959 Speaker 4: they were one of the first to develop the pulk 372 00:18:54,280 --> 00:18:59,600 Speaker 4: the polio vaccine treatments for COVID. They've had antibiotics kind 373 00:18:59,640 --> 00:19:03,080 Speaker 4: of silling many many things over the years and have 374 00:19:03,200 --> 00:19:06,119 Speaker 4: been at the forefront of many different medical breakthroughs. But 375 00:19:06,200 --> 00:19:08,399 Speaker 4: they had sort of a dry spell in between that 376 00:19:08,680 --> 00:19:12,040 Speaker 4: a couple you know, couple decades ago that really made 377 00:19:12,080 --> 00:19:14,520 Speaker 4: it hard. I mean, their stock price was down, there 378 00:19:14,640 --> 00:19:18,520 Speaker 4: was CEO turnover. But now we've seen weight loss drugs 379 00:19:18,560 --> 00:19:21,119 Speaker 4: really pull them out of that and make them into 380 00:19:21,160 --> 00:19:24,720 Speaker 4: this trillion dollar company and the most valuable healthcare company 381 00:19:24,720 --> 00:19:28,119 Speaker 4: in the world. So it's a pretty amazing transformation and 382 00:19:28,320 --> 00:19:31,040 Speaker 4: story of what happens to a company when they have 383 00:19:31,440 --> 00:19:34,600 Speaker 4: and a huge blockbuster product like these weight loss drugs 384 00:19:34,600 --> 00:19:34,880 Speaker 4: have been. 385 00:19:35,560 --> 00:19:37,920 Speaker 5: Yeah, I'm just thinking about you know, as recently as 386 00:19:38,200 --> 00:19:41,200 Speaker 5: June of twenty twenty, we were looking at Pfizer as 387 00:19:41,280 --> 00:19:43,639 Speaker 5: kind of the shining star of the pharma world because 388 00:19:43,640 --> 00:19:47,720 Speaker 5: of its COVID vaccine, and Eli Lilly, you know, did 389 00:19:47,720 --> 00:19:51,000 Speaker 5: not come up in the same kinds of conversations. What 390 00:19:51,080 --> 00:19:53,520 Speaker 5: you've done in your story is really highlight how much 391 00:19:53,520 --> 00:19:57,960 Speaker 5: has changed between say, twenty seventeen to twenty twenty six. 392 00:19:58,560 --> 00:20:00,000 Speaker 2: Dave Rix became CEO. 393 00:19:59,800 --> 00:20:02,200 Speaker 5: Of E Lily back in twenty seventeen, and at the time, 394 00:20:02,760 --> 00:20:06,280 Speaker 5: the pharma industry was not held in high esteem by Americans. 395 00:20:06,280 --> 00:20:09,560 Speaker 5: There was a lot of mistrust directed at the pharma companies. 396 00:20:10,320 --> 00:20:12,560 Speaker 5: He has helped turn that around. I wonder how much 397 00:20:12,760 --> 00:20:15,040 Speaker 5: of the credit he deserves versus what was kind of 398 00:20:15,080 --> 00:20:18,320 Speaker 5: already in the pipeline at Eli Lilly, and he was 399 00:20:18,359 --> 00:20:20,200 Speaker 5: at the helm when it all came to fruition. 400 00:20:21,400 --> 00:20:24,439 Speaker 4: Yeah. No, that's a great question, Scarlet, because you know, 401 00:20:24,520 --> 00:20:27,480 Speaker 4: over time, these these drugs don't come out of thin air, 402 00:20:27,520 --> 00:20:29,040 Speaker 4: and I think that that's one of the things that 403 00:20:29,359 --> 00:20:32,720 Speaker 4: this GLP one boom really surprised people is like it 404 00:20:32,800 --> 00:20:35,240 Speaker 4: seemed like it was sort of an overnight sensation that 405 00:20:35,280 --> 00:20:38,480 Speaker 4: these weight loss drugs became popular, that people started talking 406 00:20:38,480 --> 00:20:41,480 Speaker 4: about them. But really, scientists that both Lily and Nova 407 00:20:41,560 --> 00:20:44,479 Speaker 4: Noordisk have been working on GLP one drugs for several 408 00:20:44,520 --> 00:20:46,840 Speaker 4: decades and so it's something that has been going on 409 00:20:47,200 --> 00:20:50,119 Speaker 4: behind the scenes for a while. But to Dave Rix's credit, 410 00:20:50,480 --> 00:20:52,520 Speaker 4: he was the one, you know, when he became CEO, 411 00:20:52,720 --> 00:20:55,600 Speaker 4: he was like, we need to move as fast as possible. 412 00:20:55,640 --> 00:20:57,720 Speaker 4: At the time, Lily was one of the slowest in 413 00:20:57,720 --> 00:21:00,240 Speaker 4: the industry when it came to drug development. Took them 414 00:21:00,280 --> 00:21:03,000 Speaker 4: thirteen to fourteen years to bring a drug from their 415 00:21:03,080 --> 00:21:06,080 Speaker 4: labs to an actual approved product, and there's lots of 416 00:21:06,119 --> 00:21:08,320 Speaker 4: trial and error in that too, you know, most drugs 417 00:21:08,320 --> 00:21:11,680 Speaker 4: don't actually make it to an approval. And so he said, 418 00:21:11,720 --> 00:21:13,879 Speaker 4: you know, to all of their scientists and all of 419 00:21:13,920 --> 00:21:16,120 Speaker 4: the executives at the time, like, we need to make 420 00:21:16,160 --> 00:21:18,760 Speaker 4: speed the number one priority, and we need to look 421 00:21:18,800 --> 00:21:22,240 Speaker 4: at everything we're doing, find the most promising science, and 422 00:21:22,320 --> 00:21:24,960 Speaker 4: then go as fast as we possibly can. So that's 423 00:21:25,000 --> 00:21:27,920 Speaker 4: what they did really with turzepetide, which is the molecule 424 00:21:28,200 --> 00:21:31,720 Speaker 4: that became Manjaro and zep bound that's the active ingredient, 425 00:21:32,080 --> 00:21:34,159 Speaker 4: and that was sort of like the pilot. That was 426 00:21:34,200 --> 00:21:36,360 Speaker 4: the first time that they really did this and gave 427 00:21:36,359 --> 00:21:38,920 Speaker 4: it the full speed treatment. And what we saw was 428 00:21:38,960 --> 00:21:40,520 Speaker 4: that they were able to bring this drug really to 429 00:21:40,560 --> 00:21:43,720 Speaker 4: the market in around five years, which is a huge 430 00:21:43,760 --> 00:21:47,119 Speaker 4: reduction in time from what we were seeing before with Lily. 431 00:21:47,359 --> 00:21:49,920 Speaker 4: And so they've applied that across the board now to everything. 432 00:21:50,000 --> 00:21:52,919 Speaker 4: And Dave Brooks has also taken steps to make the 433 00:21:52,960 --> 00:21:56,600 Speaker 4: company more consumer facing, to engage more directly with patients, 434 00:21:56,920 --> 00:22:00,800 Speaker 4: to cut prices. When you know, we're we been seeing 435 00:22:00,840 --> 00:22:03,800 Speaker 4: a lot of outcry and a lot of attention on 436 00:22:03,880 --> 00:22:07,879 Speaker 4: how expensive GLP one drugs are. They're still pretty expensive, 437 00:22:08,080 --> 00:22:11,679 Speaker 4: maybe not necessarily super affordable for all Americans, but to 438 00:22:11,960 --> 00:22:15,280 Speaker 4: Rix's credit, he's taken steps to cut the cash pay 439 00:22:15,280 --> 00:22:17,840 Speaker 4: price of these drugs so that more people can afford 440 00:22:17,880 --> 00:22:20,240 Speaker 4: them because we're still seeing a lot of patchy insurance 441 00:22:20,280 --> 00:22:23,720 Speaker 4: coverage with these obesity medications. So he's taken he has 442 00:22:23,800 --> 00:22:29,040 Speaker 4: been unafraid to take risks and to do things differently 443 00:22:29,200 --> 00:22:33,280 Speaker 4: than his predecessors and than his peers in the pharmaceutical industry. 444 00:22:33,520 --> 00:22:35,280 Speaker 4: So he does deserve a lot of the credit for. 445 00:22:35,240 --> 00:22:38,280 Speaker 2: That, Madison. One of the challenges I think for managing 446 00:22:38,520 --> 00:22:40,879 Speaker 2: these pharma companies and investing in these pharma companies is 447 00:22:40,920 --> 00:22:44,439 Speaker 2: once if you're lucky enough to get a really successful drug, 448 00:22:44,680 --> 00:22:49,520 Speaker 2: sooner or later patent's expiring, competition arrives here. How does 449 00:22:49,600 --> 00:22:52,120 Speaker 2: Eli Lily plan to deal with that with its weight 450 00:22:52,160 --> 00:22:52,960 Speaker 2: loss drugs. 451 00:22:53,520 --> 00:22:56,880 Speaker 4: Yeah, that's exactly right, and that's something Lily's still trying 452 00:22:56,880 --> 00:22:59,680 Speaker 4: to figure out. The strategy right now is to sort 453 00:22:59,720 --> 00:23:03,840 Speaker 4: of deploy this cash that they have this massive windfall 454 00:23:03,920 --> 00:23:08,040 Speaker 4: from the success of its obesity medications into everything. I mean, 455 00:23:08,080 --> 00:23:11,560 Speaker 4: they're infusing billions of dollars into their internal R and 456 00:23:11,640 --> 00:23:15,159 Speaker 4: D programs, so, you know, focusing on the science that 457 00:23:15,200 --> 00:23:17,520 Speaker 4: they have going on in their labs, but they're also 458 00:23:17,560 --> 00:23:21,200 Speaker 4: looking externally. They've been on a record spending spree this year. 459 00:23:21,280 --> 00:23:24,359 Speaker 4: Lily was a company that typically didn't do as big 460 00:23:24,400 --> 00:23:28,639 Speaker 4: of deals as its pharmaceutical rivals, but now we're seeing 461 00:23:28,640 --> 00:23:32,640 Speaker 4: Lily spend a lot more on other external science, acquiring 462 00:23:32,640 --> 00:23:35,720 Speaker 4: different companies, doing more deals, so that's part of it. 463 00:23:35,720 --> 00:23:38,280 Speaker 4: We're also seeing them spend a lot on AI, and 464 00:23:38,400 --> 00:23:41,440 Speaker 4: AI is interesting in drug development because there's a lot 465 00:23:41,480 --> 00:23:43,600 Speaker 4: of promise there, but so far we haven't seen a 466 00:23:43,640 --> 00:23:46,240 Speaker 4: lot of that come to fruition in terms of you know, 467 00:23:46,320 --> 00:23:50,040 Speaker 4: turning these you know AI finding new drugs and those 468 00:23:50,080 --> 00:23:53,000 Speaker 4: coming to market and being revolutionary cures for patients. Like 469 00:23:53,200 --> 00:23:56,640 Speaker 4: that's not really happening yet, but it could happen one day. 470 00:23:56,640 --> 00:23:59,679 Speaker 4: And so Lily is spending on AI as well. They 471 00:23:59,680 --> 00:24:03,040 Speaker 4: have a partnership with Nvidia, they have a supercomputer at 472 00:24:03,040 --> 00:24:06,399 Speaker 4: their headquarters in Indianapolis, and so they're also looking to 473 00:24:06,520 --> 00:24:09,840 Speaker 4: AI and saying, if this is something that's going to 474 00:24:10,040 --> 00:24:13,200 Speaker 4: revolutionize and change drug development, we want to be there. 475 00:24:13,600 --> 00:24:16,960 Speaker 4: And so they're really doing everything they possibly can. But 476 00:24:17,040 --> 00:24:20,199 Speaker 4: it'll be a fascinating story to watch because obviously, right 477 00:24:20,240 --> 00:24:22,639 Speaker 4: now we don't know what's going to happen. Lily doesn't 478 00:24:22,640 --> 00:24:25,399 Speaker 4: know what's going to happen, and it will be pretty 479 00:24:25,400 --> 00:24:28,040 Speaker 4: incredible if they are able to sort of break out 480 00:24:28,040 --> 00:24:31,520 Speaker 4: of this boom and bus cycle that every pharmaceutical company 481 00:24:32,320 --> 00:24:34,520 Speaker 4: in the history has sort of had to deal with. 482 00:24:35,480 --> 00:24:40,199 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 483 00:24:40,400 --> 00:24:43,840 Speaker 1: and anywhere else you get your podcasts. Listen live each 484 00:24:43,880 --> 00:24:47,600 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 485 00:24:47,760 --> 00:24:51,320 Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app. 486 00:24:51,720 --> 00:24:54,640 Speaker 1: You can also watch us live every weekday on YouTube 487 00:24:55,040 --> 00:24:57,280 Speaker 1: and always on the Bloomberg terminal