I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like, how would you spend your time? I think that's a better way to think about the end-of-life stage versus, quote-unquote, retirement. This week on Leaders with me, Francine Lacqua, I speak to tennis legend Rafa Nadal about how he stayed competitive despite injury. I was able to enjoy the victories probably more than if I will not have this issue. One iconic match. In my mind was, I am almost dead. And whether he misses playing. I don't miss tennis because there was nothing else to offer. Listen and watch Leaders with me, Francine Lacqua, on Bloomberg Television or wherever you get your podcasts. Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's talk about what's going on in the healthcare space and pharmaceuticals in particular. A big deal here by Eli Lilly. It's made a lot of acquisitions, Paul. I feel like we're always talking about Eli Lilly making another purchase. Sam Fazelli is our Bloomberg Intelligence Director of Research covering healthcare, defense, industrials, and autos. He is our drug boss. That's what we like to call him. And he actually has a jacket that says that. And Sam joins us right now from London. Sam, I don't know if you were cheering for England, but if so, our condolences to you. I wanted to start with this Eli Lilly purchase, buying a Ty Beckley for up to $3.8 billion. That valuation strikes me as interesting. Why for up to $3.8 billion? Are there incentives along the way here? Absolutely right. So when you look at the numbers, we've got $2.8 billion upfront cash and a billion dollars in contingent value rights. So that's CVRs tied to the lead assets, which are in two forms, one in internasal, the other one is under the tongue buckle, getting through phase three and also getting EEA approval because these are psychedelics. They're drugs that are quite fashionable these days in terms of development because of the profound effects that we're seeing on treatment-resistant depression, on major depressive disorder, generalized anxiety disorder, that sort of thing. So there's a resurgence of interest in these psychedelics, which are synthetic. So that's where this extra billion dollar and conditional value rights come from, which is why the stock's trading above the $6.75 cash offer. So the psychedelics, talk to us about kind of just that part of the therapeutic space there, Sam. Is it a big part of it? It is. It is. There are quite a few companies. I wrote a few names down. GH Research, MindMend, compass um uh just naming a few altos i've been uh remada etc who are in this space uh which is a significant issue for for society in terms of uh depression um but also it's the fact that their psychedelics i think takes away or adds a little bit of i wonder what they're like you know magic mushroom that sort of stuff it's conjured up in fact this particular drug uh originates from a specific desert toad, which is one of the major sources of it. But this is synthetic. The fact is they work on something specific in the brain. And it's been shown that they can help you to a degree rewire your brain. Because the brain is a very plastic organ in terms of how it's learning, right? That's plasticity. We learn new stuff all the time. So unfortunately, in a depressive state or a PTSD state, that's a learned behavior to a degree. To put it very simply. So that's where I think there's a lot of interest to try and treat patients and help patients here. Sam, I also want to turn to Merck getting FDA approval for a new cholesterol pill. It's going to cost $3,800 a year, which sounds pretty expensive if it's not covered by insurance. How is this different, this new medication, Lipfendra, different from the world's most popular cholesterol-lowering drug, which is Lipitor? Yeah, so these are drugs that work via a different mechanism. It's an inhibitor of something within the system called PCSK9 that are involved in the metabolism uptake production of cholesterol. And there are other drugs that are on the market that work the same way which would be injectables or ones that interfere with RNA et cetera in terms of trying to... Here's the first oral drug that we've got. And that's where I actually don't think $3,800 is a lot. We're living in a world where drugs come to market at $10,000, $20,000, $30,000, $50,000 a year. And here you're having a very profound effect on LDL. hey switching gears a little bit abbott reported some good numbers stocks up the most in i don't know a million years here um what's going on on abbott yeah i mean look so paul that's not a space that i'm particularly familiar with but i'll tell you something what was interesting is yesterday we had johnson and johnson report and you know they have a medical devices business and that they're still ongoing with and that didn't do so well that was a bit of a drag on if you remember where the share price was behaving yesterday. Abbott's, of course, in more of a diagnostic and different area of focus. So it's quite nice to see that working. And there's a lot of interest in diagnostic and quality diagnostics, especially when they're married with therapeutics. Stay with us. More from Bloomberg Intelligence coming up after this. I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? And that's exactly what a lot of my clients talk about. And the term they'll use is a work optional lifestyle. I agree, like the next gen, millennials and below are not thinking about retirement. We're thinking about let's find something that we enjoy, that we can have financial independence. I think that's a better way to think about the end of life stage versus quote unquote retirement. www.blogspot.com Podcast on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Abbott Laboratories. Stock is soaring today, the most since 2002. I guess the street liked their earnings for the second quarter and probably more importantly, their guidance going forward. Let's check in with the analysts who covers ABT, Matt Hendrickson, senior equity analyst for Bloomberg Intelligence. Matt, talk to us about Abbott Laboratories and what they disclosed here when their earnings released. Yeah, this earnings was a huge sigh of relief for investors. They went into the call. Some headwinds were or some headwind risks were in the nutrition segment. and that was going to be dilutive to the overall growth. There was also questions about the CGM market, which is their core growth driver. Continuous glucose monitors. Oh, that's the, I see on people's arms. Yeah, exactly. It's a little like the size of a quarter on the arm. That's a $10 billion revenue run rate for the company. There were some concerns that it was decelerating growth from kind of the mid-teens, high-teens from last year to below high single digits this year. basically their results kind of calmed all those nerves. Nutrition is recovering nicely after they implemented new pricing mechanics into their business model. The CGM business, you know, growing at 9.5%, kind of slightly below the double digit expectations that management had. But overall, you know, it wasn't worse than what was expected. So we eliminated that worst case scenario. Okay, why was there so much concern? I think about healthcare and I think about UnitedHealth in particular and some of the issues it's had with Medicare reimbursement and government changes to reimbursement plans overall. Is that a concern for a company like Abbott? It's always going to be an overhang. And we saw that earlier this week when HCA reported, and they highlighted some headwinds from ACA-related insurance patients. We have not seen that yet in the med tech side so far in the second quarter. J&J talked about stable procedure volumes. Abbott talked about the same procedure volume stability. One of the reasons I think is that Abbott and J they focusing on those more high cases more you know these patients need to be treated regardless of what their insurance coverage is And so the hospitals almost have an obligation to treat those patients where some of those low acuity cases will be deferred longer term. I'm looking at the PGO function on the Bloomberg Terminal shows me kind of where they get their revenue. There's a lot of places where they get their revenue. It's highly diversified. It is a highly diversified medical device company. What is the street focus on? Are there two or three business lines that, yeah, because even with the stock up today, 11%, it's still down 20% year to date. So what's kind of the investment call here on this name? Yeah, so the first one goes back to the CGMs. That being that, you know, kind of 10 billion revenue run rate. If you're looking at it being back to that double digit revenue growth, that's going to be a promising growth driver for them. That nutrition recovery, because that is still almost 25% of their sales, if they can get that back to growth, that's going to be a good contributor for them. And then the newest growth driver actually is the exact science acquisition that they made. So when you think about, you see those TV commercials for Cologuard, that's exact sciences. So now Abbott has entered that cancer diagnostic segment. And that's a business that's, they were expecting it to be mid-teens growth this year for that cancer diagnostic segment. And so if they are able to deliver that throughout the full year, they've grown at 13% so far in the first half, that will be accretive to kind of their six and a half to seven and a half growth guidance. Is there any talk about M&A when it comes to Abbott, whether it's maybe going to divest some businesses so that can get a higher share price or, you know, maybe even add on because it has done a pretty good job with diversification. Yeah, let's let's I'll start with the add ons first. So that exact science deal closed early early in the first quarter. And so that was a twenty three billion dollar deal that they have to digest that deal. They have to integrate it. They raise 20 billion in debt. So they have they have the free cash flow to pay down that debt. That's the first step. Divestitures. I mean, there's always because they're so diverse. There are some, you know, probably differentiated features like nutrition that could be able to potentially divest in the future. Stay with us. More from Bloomberg Intelligence coming up after this. Subscribe to the Masters in Business podcast on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Right now, let's check out Mandib Singh. He joins us here in our Bloomberg Interactive Broker Studio. He covers all the technology stuff there for us. I want to start with TSMC, the chip maker. What did we learn with their earnings, Andy? I mean, again, very solid print. Raised their guidance by about 5 percentage points for the full year. So 40% top-line growth. If you had to find faults, the only thing that they didn't show, which you saw with the memory names, is pricing. So pricing growth for memory was off the charts. We were talking about, you know, 40% quarter over quarter pricing growth. That doesn't seem to be the case with TSMC, partly because of how they run their business. And I feel all these companies are still reluctant to expand their supply, even though TSMC raised their CapEx by 12% for the full year. But given the supply-demand mismatch, to my mind, they're leaving a lot of revenue on the table because they don't want to expand supply. Why do you think that is? Is it just they've been burned in the past when the cycle turned against them? It's the management teams are very conservative. They don't want to take a chance where they double their supply in a year. And guess what? Something happens. Glut. And they don't want to be in that situation. But to my mind, the reason why Intel has a shot now is because TSMC is conservative in expanding supply. Just clarify for us TSMC makes chips for NVIDIA So we talking the super high end AI chips Does it make memory chips No So all the memory guys have their own fabs and they make their own chips So TSMC does have a very broad set of clients it serves. So not just NVIDIA, but also your AMDs, Qualcomms, Apple. Apple used to be their biggest customer. So they have pivoted from smartphone chips to more data center chips. But at the end of the day, they have the best process nodes, the best manufacturing capabilities. If they wanted to do the memory chips, they could do potentially. But they've just been conservative when it comes to expanding their supply. And we know the concentration in Taiwan. They've talked about adding new factories here in the US. But when you are a company with literally a monopoly and the balance sheet to expand at the pace you want, why would you not be aggressive here? And I just don't get it. All right. So the very little I know about the semiconductor business I learned from Anish Srinivasan. He taught me everything. But the first thing he taught me is it's a cyclical business, dude. If you get it wrong, you're going to get crushed. So the question I've been asking you guys is, is it less cyclical and maybe materially less cyclical now with this whole AI transformation. And what I think the management team of TSMC is saying, we're not convinced of that. Yeah, and no one is convinced. But you get technology shifts like this in maybe two or three decades. And this is a very big technology shift. And it's evidenced by the fact that you have a big supply-demand mismatch that continues to carry through. And the biggest chip maker who's exposed to the trend, NVIDIA, is telling you they have visibility to a trillion dollars in revenue. So why would you not believe NVIDIA if you're a big supplier to NVIDIA, which TSMC is? Or you're in a really good position and you want to stay in a really good position, barring Intel coming in and taking some of that business. You mentioned that TSMC has been looking to build production capabilities in the U.S. I think it's Arizona where they've done that. How is that going? How's that effort going? Because for a while there was an issue with talent shortage, right? There is. And look, they've been actually adding to their CapEx for expansion here. So a lot of these fabs take up to two years just for that initial factory to start producing chips. And they may not be at the leading nodes like your three nanometers. So it will be more like five, six nanometer chips before they can get to three nanometers. partly because of the talent shortage. So they need those kind of people who can do things at the leading note. But all of this combines with the fact that the lead times are very long to set these up. The reason I ask about the talent issue is because we're not making it easy for companies to bring in engineers and folks with the capabilities from overseas if that talent is not available in the U.S. Absolutely. And look, I think even when it comes to getting permits, getting the resources, water and, you know, all the kind of supplies you need to set up a leading semiconductor fab, it takes a lot more time here than if it probably takes anywhere else. 30 seconds. Uber bought Delivery Hero for close to $15 billion. What does Delivery Hero want to do for Uber? I mean, the playbook with all marketplaces is consolidation. Uber CEO did that back in the day with Expedia. He's doing the same. And the big threat for a company like Uber is autonomous rides. So this for them is a way to diversify that kind of expand to now 100 countries. Autonomous is not going to be there in 100 countries. So from that perspective, there's a question here. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. We'll be right back. Today on Apple, Spotify, or anywhere else you listen.
