WEBVTT - Apple Ditches IPhone Production 0:00:01.800 --> 0:00:04.400 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanivk. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all partnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.000 analyst in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.239 Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:33.280 YouTube search Bloomberg Global News. We are certainly seeing stocks 0:00:33.320 --> 0:00:36.680 really across the board trade hired today in a significant way. 0:00:36.880 --> 0:00:39.680 Not participating as much though in that rally is shares 0:00:39.720 --> 0:00:41.720 of Apple. They were down as much as four point 0:00:41.720 --> 0:00:44.800 six percent at their lows today, still off those lows, 0:00:44.800 --> 0:00:47.239 but still down about one point four And this has 0:00:47.240 --> 0:00:50.600 to do with the Bloomberg exclusive, a story about Apple 0:00:50.600 --> 0:00:53.400 backing off plans to increase production of its new iPhones 0:00:53.720 --> 0:00:56.040 UH this year. This is according to folks in the nose. 0:00:56.080 --> 0:00:58.320 So let's get to it with our Bloomberg News West 0:00:58.320 --> 0:01:01.480 Coast correspondent Ludlow normally on the West coast, like for us, 0:01:01.520 --> 0:01:03.080 he's on the East coast and is here in our 0:01:03.160 --> 0:01:06.160 sto here's another one. I don't think we'll let go 0:01:06.160 --> 0:01:09.720 back your stack, baby, what a treat. So what's going 0:01:09.760 --> 0:01:13.000 on here? What do we know? And it's complicated in nuance, 0:01:13.120 --> 0:01:16.160 but you know, sources tell us that just before the 0:01:16.160 --> 0:01:19.360 iPhone four teen was announced, they went to supplies and said, 0:01:19.440 --> 0:01:22.200 let's boost production by around six million units. We were 0:01:22.240 --> 0:01:24.720 thinking it would be ninety million this year for the iPhone, 0:01:24.920 --> 0:01:27.800 which was in line with last year. They requested the 0:01:27.920 --> 0:01:30.920 supplies braced for an additional six million, and according to 0:01:30.959 --> 0:01:34.120 our reporting, overnight they walked that back. And the concern 0:01:34.280 --> 0:01:36.720 is that that great demand for this new handset that 0:01:36.760 --> 0:01:39.600 they thought would be there actually didn't materialize. And we've 0:01:39.600 --> 0:01:41.720 already had some evidence of that in the pre ordered numbers. 0:01:41.760 --> 0:01:44.399 Two So when I look at Apple shares, they fell 0:01:44.440 --> 0:01:46.520 as much as four point six percent, but they've been 0:01:46.520 --> 0:01:49.760 steadily pairing their losses. And this doesn't sound like a 0:01:49.760 --> 0:01:53.480 good story for Apple right, less demand for its highest 0:01:53.520 --> 0:01:56.360 priced iPhones or for those super expensive high marking phones. 0:01:56.800 --> 0:01:59.559 Yet it's not as bad as you might think either. 0:01:59.720 --> 0:02:02.840 So the Cell side in particular is sanguine because most 0:02:02.920 --> 0:02:05.400 of them were modeling for ninety million units anyway, So 0:02:05.440 --> 0:02:07.200 they look at this report and they go, well, it 0:02:07.240 --> 0:02:10.280 hasn't really changed anything for us. It's still ninety million. 0:02:10.720 --> 0:02:13.200 There there are some specific pieces of reporting that's so 0:02:13.240 --> 0:02:17.360 important that there's evidence that the consumer, particularly in China, 0:02:17.480 --> 0:02:19.919 is going for that higher end model that the fourteen 0:02:20.040 --> 0:02:24.560 pro Okay, So while there might be concerned about overall volume, 0:02:24.800 --> 0:02:26.920 they are selling the more expensive hand set, and so 0:02:26.960 --> 0:02:29.200 if they stick to that original ninety million goal, which 0:02:29.240 --> 0:02:31.799 was modeled by the Street, then maybe those higher A 0:02:31.960 --> 0:02:34.640 sps can boost the top line, even if just a little, 0:02:34.760 --> 0:02:37.080 because they're selling more of them are more expensive. What 0:02:37.120 --> 0:02:38.800 I thought was interesting, and I bet you picked up 0:02:38.800 --> 0:02:41.640 on this our Bloomberg intelligence team, Ana Grana, you know, 0:02:41.680 --> 0:02:45.760 reminding us um because this was about, oh, I guess 0:02:45.760 --> 0:02:47.960 the belief that there was, as you said, China demand, 0:02:48.320 --> 0:02:51.000 European demand weak. And he reminded us that those two 0:02:51.040 --> 0:02:55.400 regions are about Apple's total sales eat. I mean that's massive, right, 0:02:55.400 --> 0:02:58.680 So we need to think about macro stories here, right, Yeah, 0:02:58.720 --> 0:03:00.960 this is the why do we care about this? And 0:03:01.000 --> 0:03:04.200 it's the rich people buy iPhones, and even in a recession, 0:03:04.480 --> 0:03:07.160 they still buy iPhones. What we're looking for is the 0:03:07.240 --> 0:03:09.720 kind of bigger picture effect. We know that the smartphone 0:03:09.720 --> 0:03:13.760 market is soft, particularly in China. The preorder data report 0:03:13.760 --> 0:03:16.960 from Jeffreys this Monday showed wasn't great in China, but 0:03:17.040 --> 0:03:19.840 good for the higher price models. We need some lens 0:03:19.960 --> 0:03:21.960 with We know what the FED is doing, we know 0:03:22.040 --> 0:03:24.840 about the outlook for recessions around the world and inflation. 0:03:25.280 --> 0:03:27.360 What we do is we look to the company movement 0:03:27.400 --> 0:03:29.680 and action to try and get another kind of read 0:03:29.720 --> 0:03:31.560 on the consumer. And I think a lot of what 0:03:31.600 --> 0:03:34.440 this story did would say things are pretty bad and 0:03:34.560 --> 0:03:36.720 key key markets still they're going to sell a lot. 0:03:36.840 --> 0:03:38.640 I always feel like, I know when you tempered back 0:03:38.680 --> 0:03:41.360 the Apple numbers, but they still kind of blow me away. Yes, 0:03:41.400 --> 0:03:43.640 even the expectations. If if it's a lower number, it's 0:03:43.640 --> 0:03:45.800 still a lot of stuff. I like what Global Equities 0:03:45.800 --> 0:03:48.920 Research said. They called Apple the first casualty of recession 0:03:49.200 --> 0:03:51.760 and said that the collapse demand for these iPhones is 0:03:51.800 --> 0:03:54.240 just a tip of the iceberg. You could see a 0:03:54.280 --> 0:03:57.520 lot of layoffs across and through the Apple supply chain. 0:03:57.560 --> 0:04:00.120 In the months to come yes and take this is 0:04:00.160 --> 0:04:02.440 one part of a whole. The next piece of evidence 0:04:02.480 --> 0:04:05.800 we looked to his Micron earnings Thursday. Why biggest maker 0:04:05.840 --> 0:04:08.720 of memory chips d RAM also a huge supply to 0:04:08.760 --> 0:04:11.280 Apple If their earnings are soft, more evidence that the 0:04:11.320 --> 0:04:14.520 broader market for electronics slowing down. The one thing then 0:04:14.560 --> 0:04:16.680 also intrigued by two when it comes to Apple is 0:04:16.680 --> 0:04:18.240 that they have the ability to just call it. Their 0:04:18.240 --> 0:04:20.520 suppliers say we want six million more and then a 0:04:20.520 --> 0:04:22.240 couple of days or months later say you know what, 0:04:22.480 --> 0:04:25.120 no scrap that we're not doing that anymore. And the 0:04:25.120 --> 0:04:28.080 suppliers just have no not going to say, you're not 0:04:28.080 --> 0:04:30.360 going to say that's fine. Whatever we plan to all 0:04:30.360 --> 0:04:32.440 those people were going to bring in, we're not bring 0:04:32.440 --> 0:04:34.800 them in now. And the equity pain was felt in Asia, 0:04:34.880 --> 0:04:37.440 for those suppliers in Europe, for st micro in here 0:04:37.480 --> 0:04:40.160 in the United States, and they all scrambled. We heard 0:04:40.200 --> 0:04:43.520 from sources one supply completely shifted production to just the 0:04:43.520 --> 0:04:45.920 pro the higher end. Well, what if that doesn't stick 0:04:45.960 --> 0:04:48.840 and people end up wanting the cheaper models. Well, as 0:04:48.880 --> 0:04:51.000 we reach out to Apple and look for some commentary 0:04:51.040 --> 0:04:52.920 or some clarity on this, I mean, what is it, 0:04:53.160 --> 0:04:54.760 you know, top of mind for you, if you're sitting 0:04:54.800 --> 0:04:57.000 down with the CEO of Apple, what would you want 0:04:57.040 --> 0:04:58.839 to be asking them right now other than to confirm 0:04:58.880 --> 0:05:01.719 pla is this true? An Apple spokesperson declined to comment 0:05:01.720 --> 0:05:05.080 for the story. You know, Apple is a company that's 0:05:05.080 --> 0:05:08.200 had tremendous growth, and what we're talking about here is 0:05:08.240 --> 0:05:12.120 flat unit growth ninety million last year this year. That's 0:05:12.120 --> 0:05:14.960 a lot of iPhones. But at the top line, I 0:05:15.000 --> 0:05:18.720 think that the consensus is for two revenue growth. That's 0:05:18.720 --> 0:05:20.680 not what Apple does. You know, we've been through the 0:05:20.720 --> 0:05:23.840 pandemic era cycle, we've been through the five G supercycle. 0:05:24.680 --> 0:05:26.599 What's going to lift them up into that next phase 0:05:26.640 --> 0:05:29.719 of growth? And there's a lot resting on people buying 0:05:29.839 --> 0:05:32.000 the expensive Pro hand set. And that's why there's a 0:05:32.040 --> 0:05:33.960 lot of questions about Tim Cook as well, because he's 0:05:34.000 --> 0:05:36.760 not the visionary that Steve Jobs was. He's an incrementalist, right. 0:05:36.880 --> 0:05:40.039 He makes the iPhones better and improves the guts, but 0:05:40.120 --> 0:05:43.000 maybe not the actual aesthetic of the phone that people 0:05:43.000 --> 0:05:45.680 get excited about. So the iPhone fourteen and the Pro, 0:05:45.800 --> 0:05:48.520 the Pro had fancy camera features, very high speck but 0:05:48.600 --> 0:05:51.479 what was the update. It was satellite enabled capabilities. If 0:05:51.520 --> 0:05:53.719 you're stuck up a mountain or you're in the ocean, 0:05:54.080 --> 0:05:57.160 you can connect via your iPhone. Very rich people. Right, 0:05:57.240 --> 0:05:59.599 there's the thing. Who's that helping? Like? Is that going 0:05:59.680 --> 0:06:03.479 to hiking up? It doesn't matter whether I will I 0:06:03.520 --> 0:06:05.560 will say, like I'm looking to upgrade my phone again, 0:06:05.600 --> 0:06:08.240 but I keep looking for something that's an incremental or 0:06:08.360 --> 0:06:11.880 bigger boost a change. Um, and that that better camera 0:06:11.920 --> 0:06:14.320 in the satellite capability doesn't do it for you. Camera 0:06:14.360 --> 0:06:17.120 that does dishes is a laundry like that kind of thing. No, 0:06:17.240 --> 0:06:19.320 but it's like it's an important stock to watch. But 0:06:19.360 --> 0:06:21.200 I do think you guys are right. You pointed out 0:06:21.160 --> 0:06:23.560 it was down four point six percent. It's lows. It's 0:06:23.560 --> 0:06:25.760 come off of that with the overall rally. But um, 0:06:25.880 --> 0:06:28.640 Redmont gun and stuff. He has all the details very early. 0:06:28.720 --> 0:06:30.760 So yeah, yeah, to see him like a big scoop 0:06:30.760 --> 0:06:32.720 by Bloomberg News, does seem a bit at the company 0:06:32.800 --> 0:06:35.440 or something like he has lots of friends at Apple. 0:06:35.560 --> 0:06:38.679 Oh my god, alright, folks, we gotta run low. Bloomberg 0:06:38.720 --> 0:06:41.280 News West Coast correspondent. He is here on the East 0:06:41.320 --> 0:06:43.440 Coast for a bit, joining us here in our interactive 0:06:43.440 --> 0:06:48.720 broker studio. This is Bloomberg. This is Bloomberg Business Week 0:06:48.880 --> 0:06:52.880 with Carol Masser and Bloomberg Quick Takes Tim Stinovic on 0:06:53.000 --> 0:06:56.039 Bloomberg Radio. It's a story we covered big time yesterday 0:06:56.080 --> 0:06:58.680 about what was up with using what's app that led 0:06:58.680 --> 0:07:01.239 to surveillance failures across Wall Street. More than two billion 0:07:01.279 --> 0:07:04.719 in fines already levied to a roster of firms including 0:07:04.720 --> 0:07:08.080 b of A City, Goldman, Morgan Stanley, eleven Wall Street 0:07:08.080 --> 0:07:11.600 banks in total prevailing to stop staff from using unauthorized 0:07:11.600 --> 0:07:14.040 messaging platforms. Scarlett, this is one of our most read 0:07:14.080 --> 0:07:15.880 stories on the Bloomberg today. I'm just looking at some 0:07:15.920 --> 0:07:17.480 of the bank's named. It's hard to find a bank 0:07:17.600 --> 0:07:20.360 that we know that's not included in this list. Hannah 0:07:20.400 --> 0:07:23.240 Lovett has been following this story from the beginning and 0:07:23.360 --> 0:07:25.560 she joins us. Now, Hannah, there's been more than two 0:07:25.560 --> 0:07:27.680 billion dollars and finds levied so far, as Carol was 0:07:27.760 --> 0:07:30.600 just saying, but the banks are now taking action in 0:07:30.640 --> 0:07:33.240 a different way as well. They just opened the vault 0:07:33.240 --> 0:07:37.760 to let her in and welcome um. What kind of 0:07:37.760 --> 0:07:42.000 compliance steps of regulatory measures? Regulatory solutions are these banks 0:07:42.000 --> 0:07:44.960 coming up with. Yeah, So beyond the fines that came 0:07:44.960 --> 0:07:48.640 out in the orders yesterday, they agreed to um hire 0:07:49.200 --> 0:07:53.160 compliance consultants to make sure that they're you know, monitoring 0:07:53.760 --> 0:07:57.200 and preserving these messages lay, Yeah, to the extent that 0:07:57.200 --> 0:08:00.360 they're supposed to be. And you know that the these 0:08:00.400 --> 0:08:03.280 firms are required by law to do this. And that 0:08:03.360 --> 0:08:07.000 was already um you know, becoming an issue just because 0:08:07.000 --> 0:08:09.680 of the proliferation of these messaging apps UM you know 0:08:09.720 --> 0:08:12.600 what's up signal you name it UM. So that was 0:08:12.600 --> 0:08:15.400 already a thing pre COVID. And then if you think about, 0:08:15.440 --> 0:08:18.960 you know, what happened in early when everyone was working 0:08:18.960 --> 0:08:22.040 from home and like you know, you you went from 0:08:22.040 --> 0:08:24.080 saying something to your colleague next to you to maybe 0:08:24.080 --> 0:08:26.640 like tapping out a message. So that wasn't what started this, 0:08:26.680 --> 0:08:29.520 but that definitely made it a bigger deal. I do 0:08:29.560 --> 0:08:31.120 feel like it's part of our world, right, we were 0:08:31.120 --> 0:08:32.920 talking before we got going. I mean, how often do 0:08:33.040 --> 0:08:36.200 I like send myself to my Gmail or something something 0:08:36.240 --> 0:08:37.920 I want to do for work or just a memory. 0:08:37.960 --> 0:08:41.000 It's kind of what's fun about We're not fun? What's 0:08:41.000 --> 0:08:43.000 interesting about the stories? We get more and more details. 0:08:43.160 --> 0:08:45.200 Is we're finding out about the worst offenders. So what 0:08:45.240 --> 0:08:47.880 do we know about them and what level and what 0:08:47.960 --> 0:08:49.280 kinds of things they were doing? And do we know 0:08:49.440 --> 0:08:52.360 names totally? Um, well, we don't know names. We don't 0:08:52.400 --> 0:08:55.200 know names. Why not because they did not name them 0:08:55.240 --> 0:08:57.960 in the orders. Okay. My suspicion is if they start 0:08:58.000 --> 0:09:00.400 to name people, you'd get people the high at the 0:09:00.440 --> 0:09:02.600 highest level, as you get all kinds of people like 0:09:02.640 --> 0:09:04.640 who would not be ensnared in this right? I mean, 0:09:04.720 --> 0:09:07.200 I think, you know, as demonstrated by like you said, 0:09:07.240 --> 0:09:10.320 it was like virtually every major bank yesterday. And you know, 0:09:10.360 --> 0:09:13.080 they said that the investigations on going, so there could 0:09:13.120 --> 0:09:18.160 be more, but like you know, it was everywhere. I 0:09:18.200 --> 0:09:21.000 think that was a general conclusion, um, And they did 0:09:21.000 --> 0:09:22.440 this whole thing. You know, we had a story earlier 0:09:22.480 --> 0:09:25.680 this year about how the US was mandating this look 0:09:25.800 --> 0:09:30.400 this like strategic look across the board into you know, 0:09:30.520 --> 0:09:35.320 thirty thirty five phones at each firm, um, and that 0:09:35.360 --> 0:09:37.000 was mandated to kind of get a sense of the 0:09:37.040 --> 0:09:40.000 magnitude of this and how much was happening. And clearly, 0:09:40.280 --> 0:09:42.520 you know, they all ended up getting fined around the 0:09:42.559 --> 0:09:44.440 same thing, like that's it's like, oh, you're all doing 0:09:44.440 --> 0:09:46.440 it drilled down though, Like there's like tell us about 0:09:46.480 --> 0:09:48.280 be of A and what we found out for you 0:09:48.400 --> 0:09:50.760 because because the specifics to me are kind of interesting, 0:09:50.800 --> 0:09:52.839 so we have an idea. Right. Also, they disclosed to 0:09:52.920 --> 0:09:55.640 most and penalties as well. Right, they definitely the most 0:09:55.840 --> 0:09:58.040 um they did, but they did by the CFCC, so 0:09:58.080 --> 0:10:00.480 they their sec fine was the same everyone else and 0:10:00.480 --> 0:10:03.240 the gosh a little more CFCC. But there's so so 0:10:03.280 --> 0:10:05.800 basically the way that these things were structured was that 0:10:05.840 --> 0:10:07.480 it was in order for each firm and there was 0:10:07.520 --> 0:10:09.880 an area of like a couple of paragraphs where it 0:10:09.920 --> 0:10:12.040 was the specifics for each firm. So be avail I'll 0:10:12.080 --> 0:10:14.880 just look at it. Um a managing director at the 0:10:14.920 --> 0:10:17.600 investment bank with the US wide role sent and received 0:10:17.640 --> 0:10:22.120 thousands of messages including the colleagues, clients and personnelity other firms, 0:10:22.240 --> 0:10:25.400 and then the head of an equity's trading desk texted 0:10:25.400 --> 0:10:27.520 with more than fifty colleagues and numerous people outside the 0:10:27.520 --> 0:10:29.600 firm and like so that was what be eviated. You 0:10:29.640 --> 0:10:32.280 can go down the list and truly it was like 0:10:32.320 --> 0:10:34.240 you know, this m D and this part of the 0:10:34.240 --> 0:10:37.680 bank did you know send this many thousand messages to 0:10:37.880 --> 0:10:40.920 these people and and it really was just every Yeah, 0:10:40.920 --> 0:10:44.200 it was like copy and paste, you know. And you 0:10:44.280 --> 0:10:46.079 guys reporting because you say when you're talking about be 0:10:46.320 --> 0:10:47.880 and forgive me for singling it out, because if you 0:10:47.920 --> 0:10:52.560 could pick a Scarlett said, uh Stanley, no, mora Ubs 0:10:52.880 --> 0:10:56.120 City credit suite, it covers No, She's right, she covers 0:10:56.160 --> 0:11:00.199 all ahead of a trading desk told brokers at others 0:11:00.240 --> 0:11:03.160 to delete message they messages they had exchanged on personal 0:11:03.160 --> 0:11:05.560 devices and to switch to signal, which, as we know, 0:11:05.679 --> 0:11:08.720 is encrypted according to the CFTC. So is it just 0:11:08.800 --> 0:11:10.720 a case of we were just kind of talking to 0:11:10.760 --> 0:11:13.400 each other, we weren't trying to hide anything, or is 0:11:13.440 --> 0:11:15.959 it something deeper? And that's why it's worries. I think 0:11:15.960 --> 0:11:17.920 that's one of the things that TVD about this whole 0:11:17.960 --> 0:11:20.640 investigation is like, you know, at this stage they're not 0:11:20.720 --> 0:11:24.160 calling out wrongdoing, they're like found within the messages. They're 0:11:24.200 --> 0:11:26.880 calling out the wrongdoing that is that these messages were 0:11:26.880 --> 0:11:29.319 happening in the first place. But you know, when the 0:11:29.400 --> 0:11:31.800 JPM order came out in December and again yesterday when 0:11:31.800 --> 0:11:34.839 these came out, like it clearly states that the investigation 0:11:34.880 --> 0:11:36.520 is ongoing, So I think that will be you know, 0:11:36.600 --> 0:11:39.680 something that I will certainly be paying attention to going 0:11:39.720 --> 0:11:41.960 forward is is what else might come out of this? 0:11:42.240 --> 0:11:44.560 So when we say that the investigation is ongoing, do 0:11:44.640 --> 0:11:46.640 we think do we suspect that there will be more 0:11:46.720 --> 0:11:49.840 fines levied or will it be a case of the 0:11:49.880 --> 0:11:51.920 banks will say yeah, yeah, yeah, we get that there's 0:11:51.960 --> 0:11:54.560 a lot of wrongdoing. Let us figure out what we 0:11:54.600 --> 0:11:56.200 need to do and come up with our own solutions. 0:11:56.440 --> 0:11:57.920 That's a good question. You feel like what else? That 0:11:57.960 --> 0:12:01.280 is a good question. I mean, I wouldn't necessarily rule 0:12:01.320 --> 0:12:04.280 out any of that. I think that you know, a 0:12:04.320 --> 0:12:08.600 lot of banks were named yesterday, some weren't, So we could, 0:12:08.679 --> 0:12:11.600 you know, if if it's indeed ubiquitous a quad across 0:12:11.679 --> 0:12:13.880 the industry as it as it seems, we might be 0:12:13.920 --> 0:12:16.720 able to look there um and then beyond that. Yet 0:12:16.760 --> 0:12:19.920 anything in the underlying messages that they would find, uh, 0:12:20.080 --> 0:12:21.720 that would be a case of wrongdoing. But we haven't 0:12:21.720 --> 0:12:23.280 gotten there that. I have a quick question, how can 0:12:23.320 --> 0:12:26.520 you communicate with clients or colleagues then if you need 0:12:26.559 --> 0:12:29.720 to use your device and just kind of about twenty seconds, Yeah, um, 0:12:29.760 --> 0:12:32.160 I mean email. I think they have like an app 0:12:32.200 --> 0:12:34.760 installed now that does the tracking so they can use that, 0:12:34.960 --> 0:12:38.199 or like a company issued phone. Yes, so much just 0:12:38.240 --> 0:12:40.520 put in place after the financial crisis. Will people be fired? 0:12:40.640 --> 0:12:42.480 Do you think after this they were at drap Morgan 0:12:43.320 --> 0:12:45.800 TBD or to come kind of levet you and the 0:12:45.800 --> 0:12:47.560 team and the reporting has been really great on this 0:12:47.600 --> 0:12:50.439 and we really appreciate getting an update. Or Hannah Levit, 0:12:50.440 --> 0:12:53.440 she is financial reporter at Bloomberg News, joining us in 0:12:53.480 --> 0:12:59.000 our interactive Broker studio. You're listening to Bloomberg Business Week 0:12:59.200 --> 0:13:02.600 with Carol mass Her and Bloomberg Quick Takes Tim Stinovic 0:13:03.040 --> 0:13:05.880 on Bloomberg Radio. Well, on a day where we are 0:13:05.920 --> 0:13:09.160 focusing so much on Biogen and the very promising results 0:13:09.200 --> 0:13:12.280 of that company's Alzheimer's drug, we are reminded once again 0:13:12.760 --> 0:13:15.640 about those big biotech and big farmer names that continue 0:13:15.640 --> 0:13:17.960 to work on better treatments, are new ones to tap 0:13:18.000 --> 0:13:20.720 some of our major medical ailments. So that brings us 0:13:20.720 --> 0:13:22.280 to a story in the upcoming a new issue of 0:13:22.360 --> 0:13:25.679 Bloomberg Business Week. That's story already online at Bloomberg dot 0:13:25.720 --> 0:13:28.400 com Slash business Week, and of course on the Bloomberg Terminal. 0:13:28.600 --> 0:13:30.480 So let's get to it. It's about how big Pharma 0:13:30.640 --> 0:13:33.679 is chasing a fifty five billion dollar prize of safer 0:13:33.720 --> 0:13:37.280 blood thinners. The story from Bloomberg News healthcare reporter Angelica 0:13:37.480 --> 0:13:41.520 Angelica Peebles. She's on the phone in San Diego. Hey, Angelica, 0:13:41.800 --> 0:13:44.000 nice to have you here with Scarlet Food and myself. 0:13:44.040 --> 0:13:47.320 So tell us about your story and what you set 0:13:47.320 --> 0:13:52.160 out to do. Big Pharma is really searching for new 0:13:52.160 --> 0:13:54.880 treatments for blood clots, and that's because we have some 0:13:55.000 --> 0:13:58.720 really good treatments right now, namely Eloquence and z Arelto. 0:13:58.840 --> 0:14:01.080 They are some of the best selling drugs in the world, 0:14:01.440 --> 0:14:05.199 but they also carry some pretty big risks um namely bleeding. 0:14:05.320 --> 0:14:07.840 It can take a variety of forms, whether that's just 0:14:08.000 --> 0:14:11.520 bruising a little bit more easily, or in rare cases, 0:14:11.840 --> 0:14:14.920 turning into brain bleeding, which can of course be lethal. 0:14:15.360 --> 0:14:18.280 So it's just a really big prize out there for 0:14:18.320 --> 0:14:21.680 these companies to create something that's just as effective as 0:14:21.680 --> 0:14:25.160 the treatments we have now, but safer. And that's how 0:14:25.200 --> 0:14:28.960 the companies landed on a different enzyme. It's called factor 0:14:29.000 --> 0:14:33.320 eleven A, and basically there's this whole chain plotting system 0:14:33.360 --> 0:14:35.640 in your body. We won't have We don't get into 0:14:35.640 --> 0:14:39.160 all the details. But right now the main drugs target 0:14:39.200 --> 0:14:42.360 one enzyme and now they're going after another, and it's 0:14:42.360 --> 0:14:47.800 still relatively early. We just have um more recent data 0:14:48.080 --> 0:14:50.960 and the companies still have to do these really big 0:14:51.000 --> 0:14:53.440 trials to prove that they work. But if they do 0:14:53.920 --> 0:14:56.200 UM it could mean a lot of companies and of 0:14:56.200 --> 0:14:59.040 course for patients. So when we say big farmah, which 0:14:59.040 --> 0:15:02.000 companies are doing the chasing hair, Which ones are investing 0:15:02.040 --> 0:15:04.880 a lot of time and money into this. There are 0:15:04.880 --> 0:15:07.360 a lot of companies in this game, but the biggest 0:15:07.400 --> 0:15:10.360 ones that we're focusing on right now are Bristol Myers, 0:15:10.400 --> 0:15:13.400 squib Johnson and Johnson and those two of our partners. 0:15:13.760 --> 0:15:16.640 And then there which is of course the German company 0:15:16.680 --> 0:15:20.680 behind Asprin, and those are the ones that are going 0:15:20.720 --> 0:15:24.440 into these big trials UM and are. They're both working 0:15:24.440 --> 0:15:27.560 on pills that you can take. There's another company called 0:15:27.600 --> 0:15:31.480 Antos and they are spin out from nov Artists and 0:15:31.720 --> 0:15:35.440 they are using UM biologic drugs, so it would be 0:15:35.720 --> 0:15:38.720 infused or injected. I mean some of these names A 0:15:38.800 --> 0:15:41.240 Delica are already bringing in some money for these big 0:15:41.240 --> 0:15:45.160 farmer names, aren't they yeah, eloquence and are relative or 0:15:45.360 --> 0:15:49.280 huge money makers, And they will lose their patent exclusivity 0:15:49.680 --> 0:15:51.960 um within the next few years, and that means that 0:15:52.160 --> 0:15:54.760 generic treatments will be able to come onto the market, 0:15:55.160 --> 0:15:59.480 presumably undercutting the price, and that poses a big question 0:15:59.600 --> 0:16:02.880 for those companies on how they'll replace that money, and 0:16:02.960 --> 0:16:06.200 so they see these new drugs as a way to 0:16:06.240 --> 0:16:09.720 fill that whole. Of course, um they'll have to compete 0:16:09.800 --> 0:16:13.000 against the now the cheaper drugs that are already on 0:16:13.040 --> 0:16:15.760 the market. But that's why it's so important to show 0:16:16.120 --> 0:16:19.400 that these drugs are much safer, because if that's the case, 0:16:19.880 --> 0:16:23.120 then they can treat far more patients people who right 0:16:23.160 --> 0:16:25.880 now either can't or don't want to take a drug 0:16:26.000 --> 0:16:28.560 that might um cause them to bleed out. God's a 0:16:28.640 --> 0:16:31.680 bit if they cut themselves, cut themselves shaving, or something 0:16:31.720 --> 0:16:35.440 along those lines, so it could expand the market for them. 0:16:35.480 --> 0:16:38.040 It's interesting that big farms chasing this because we know 0:16:38.160 --> 0:16:40.560 that in a lot of ailments UM it's often the 0:16:40.640 --> 0:16:43.040 smaller biotech companies that are doing a lot of the 0:16:43.240 --> 0:16:47.920 investing in some kind of new medical solution or some 0:16:48.000 --> 0:16:52.720 kind of farmers pharmacist pharmacological solution to ems. Yeah, but 0:16:52.920 --> 0:16:55.240 the fact that big farmers in here shows that the 0:16:55.240 --> 0:16:58.160 potential to make money here is massive. Are there smaller 0:16:58.160 --> 0:17:01.200 companies that are perhaps making headway doing anything interesting in 0:17:01.200 --> 0:17:05.760 this space? There are smaller companies, Anthos being one of them. 0:17:05.800 --> 0:17:07.840 Of course they came from a big barma company, but 0:17:07.880 --> 0:17:10.880 they're doing it alone now, and there are more. But 0:17:11.040 --> 0:17:14.399 really this is a perfect um perfect disease, a perfect 0:17:14.400 --> 0:17:18.560 indication if you will, for big pharma because so many 0:17:18.640 --> 0:17:22.359 people um experience blood clots. In fact, blood clots are 0:17:22.400 --> 0:17:26.320 responsible um for an estimated one in four deaths worldwide, 0:17:26.359 --> 0:17:29.399 which I was shocked to hear, And so that really 0:17:29.480 --> 0:17:32.880 suits itself well for a big company to go after 0:17:33.080 --> 0:17:36.720 running these trials will take thousands, if not you know, 0:17:36.800 --> 0:17:40.160 many more patients around the world, and it will take 0:17:40.160 --> 0:17:43.159 a lot of money to actually prove that these works. 0:17:43.200 --> 0:17:47.240 That this is a perfect opportunity for big farma to play. Hey, Angelica, 0:17:47.240 --> 0:17:49.520 is this part of kind of where finally reaping the 0:17:49.560 --> 0:17:52.680 benefits of that huge mapping of the genome and really 0:17:52.720 --> 0:17:55.840 just getting to understand on a much greater, deeper, smarter 0:17:56.000 --> 0:18:01.439 level genetics in terms of creating methodologies or pharma or 0:18:01.520 --> 0:18:05.320 treatments that really can target different individuals who maybe didn't 0:18:05.320 --> 0:18:09.280 respond so well to a previous treatment. Good question, Thank you. 0:18:10.200 --> 0:18:14.240 The way that UM scientists decided to factor or focus 0:18:14.280 --> 0:18:17.560 on factor eleven a, which is that enzyme, is because 0:18:17.560 --> 0:18:20.400 of genetic data, So that is UM. You know, this 0:18:20.440 --> 0:18:24.680 is one example of how genetics are marrying drug development 0:18:24.720 --> 0:18:28.160 and how we're using UM the information that our genetics 0:18:28.200 --> 0:18:32.399 provide to create better drugs. And the scientists found was 0:18:32.440 --> 0:18:35.719 that there were certain people who maybe they've led a 0:18:35.720 --> 0:18:37.959 little bit more than your average person, say if they 0:18:37.960 --> 0:18:41.159 were getting their teeth cleaned, but they didn't bleed as 0:18:41.240 --> 0:18:44.080 much as people with other forms of hemophilia. And at 0:18:44.080 --> 0:18:47.240 the same time, they appeared to be at less risk 0:18:47.280 --> 0:18:51.040 of stroke than the normal population. And so that gave 0:18:51.160 --> 0:18:55.159 scientists a clue that going after this particular enzyme and 0:18:55.160 --> 0:18:59.080 actually blocking it could give you the benefit of, you know, 0:18:59.119 --> 0:19:04.680 preventing blood without this unnecessary this added burden of potentially 0:19:05.480 --> 0:19:08.640 unwanted bleeding. And so that was really how this all 0:19:08.680 --> 0:19:10.760 came about, and we're just going to see more and 0:19:10.800 --> 0:19:14.200 more of this going forward. So Angelica big picture, when 0:19:14.200 --> 0:19:16.919 we talk about treatments for Alzheimer's, for instance, it very 0:19:17.000 --> 0:19:19.639 much feels like one step for two steps for one 0:19:19.680 --> 0:19:23.760 step back. What's the trajectory like for a new safer 0:19:23.800 --> 0:19:28.760 blood than or is it similarly staggered and frustrating? Drug 0:19:28.760 --> 0:19:32.600 development is never perfect, and companies will remind you oftentimes 0:19:32.680 --> 0:19:36.280 that they fail more than they succeed. And what's interesting 0:19:36.359 --> 0:19:41.400 about the Phase two data that Bear, as well as 0:19:41.480 --> 0:19:45.879 the Silmyer, squib and Johnson and Johnson presented last month, 0:19:46.200 --> 0:19:51.000 is that the drugs actually failed in their trial, and 0:19:51.680 --> 0:19:54.480 that caused a lot of concern that maybe these don't 0:19:54.560 --> 0:19:57.720