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Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you along with my co host Lisa Brahmawitz. Each day we bring you the most noteworthy and useful interviews for you and your money. Whether at the grocery store or the trading floor. Find a Bloomberg penl podcast on Apple podcast or wherever you listen to podcasts, as well as at Bloomberg dot com. I'm joined by Alex Steele here today, sitting in for Lisa Brahmowitz. Boy, I'll tell you it is good thing to be a healthcare m n a banker. There's always a deal in that space. Today Fires are announcing that it is acquiring Array bio Farmer for ten point six billion dollars. To get the latest, we welcome a good friends, Sam Fizzelli. Sam is the director of European Research for Bloomberg Intelligence, but his day job is he's one of the best pharmaceutical and healthcare analysts on the street. He joins us from our London studio. Sam, thanks so much for joining us. Um boy, this price tag is just monstrous. Does this make sense to you this deal that Fires is doing. Thank you, Paul, Yes, and good morning to both of you. UM. So you know, the visors balance sheets pretty strong. UM. The growth profile of the company going past the current patent experty for Lyrica is um. You know, they like it to be stronger than perhaps some of us think it is. We always thought they would do M A and A. What the price tag is a billion here, a billion there? What's what's that amongst friends? Right? But they're they're buying what I would consider to be one of the pre eminent UM drug developers amongst the biotechs. If you think about the number of drugs that this company is responsible for in terms of what's going out there and deals they've done, so we calculate about eight point four times twenty three sales. There's no profits to talk about just yet. Three sales. But but those are those are sales that are not the you know, they have reasonable probability of actually happening. The products have already on the market, and they're they've got some good data in hand. And then end um it is at the top end of the range that we've looked at, but it's not the most expensive UM. But you know, that is what it is. My very exam so to that point, though, I feel like getting on drugs that will were getting in the pattern for drugs that will wind up cutting chemotherapy is gonna be super super hot in the market. Do we expect in the company to come in and try and shot full of fires are out? Yeah? I don't think so. This doesn't This kind of thing doesn't usually happen when you have two managements that have agreed and there's a big price tag out there already, it just doesn't happen. You know, I've never really seen it in biotech, So I expect not so say what what is so special about Array that would cause fires? Or to step up and pay this price. So they describe three pillars of value and we basically responded to that already, you know, react, which is the kind of thing that we've seen. UM. The there's a product on the market, or two products on the market, and there's ample opportunity for expanding that each other's products UM and those revenues, you know, it could easily be a billion or plus if they keep expanding it and fight as I can, because they have very deep pockets. UM. The company has several products that have been licensed to other companies where the potential for royalties are are meaningful. And then of course they have a bunch of scientists who have been creating these drugs and and we don't know exactly what they've got in the preclinical hands in Boulder, Colorado, but there was some hints that Fiser gave us over the call. We just listened to um which makes it sounds as if there's other products obviously expected to come along. But they've been a very productive team, so they would not split that several times they were asked this question. They would not split the value that they've ascribed to each other. Those three pillars have just told you. So, how does explain to me how in the biotech world this works? Because normally, in a different industry, if you make an acquisition, there's going to be some synergy costs you can get out of it that's gonna be a big thing. And then sort of when it's gonna be creative to earnings, and then how you sort of meld the operations and what the cultures at, et cetera. Is it like a different scenario in a biotech world. Yeah, I mean, Alex, that's a very good question. At the end of the day, here, what you're buying is knowledge and the ability and the long history of these people developing these sort of drugs. Not that Fiser hasn't got them themselves, but here's here's a bunch of scientists, they said, about a hundred scientists R and D people based in Colorado. They've said they're going to keep the current structure of a RAY in place to continue allowing it to be innovative and and and you know, pump up, pump out these drugs, and and they're go into pipers Finders pipeline as opposed to having to be licensed out because the company is too small develop everything. So in these cases, it's really not about cast savings. So say, if I'm a Fiser shareholder, UM, am I concern? What do I read into a transaction like this that g Fiser doesn't have its own pipeline. Maybe it's R and D. Isn't that good or that successful that it forces them to go out and buy um, you know products. Yeah, No, I don't think that's fair. Um, I think I think it's more about um. You know, in the pharmaceutical business, it's all about shots on goal because once you take that shot, you don't actually know whether it's going to go in or not. So you've got to have a number of opportunities running at the same time to see which one actually comes to fruition. They have a number of drugs that are that are looking interesting and exciting, and you know, it's two steps forward, one step back with pharma. So you've got to expand the range that you've got access to and then make sure that you have the wherewithal to do it. Which fires it does? I just asked the dumb question here, so like, literally, is it possible that there's a drug that could reduce the need for chemo? Like is that real? Because that's amazing. Yeah. No, absolutely, And you know what I was told years ago, there's no dumb questions, So there are there totally a but and certainly this is not dumb at all because there's that's exactly where pharmaceutical industry wants to go and cancer patients want to go. I mean, it's important to realize that there's a little bit of a slogan slogan that's going on there too, because these aren't drugs that are that are side effect free. It's just a different to chemo. They may not include, know the usual things that chemo has got going with it is the hair loss and the vomiting, and you know none of these things are nice, right uh? And you know a blood blood accounts going down and really feeling fatigued, and who wants to be fatigued when you're trying to get treated? Right? So, but these drugs do have their own side effects, let's not let's not forget that. And this is a triple combination they're using for colorectal cancer going forward, right, Sam fas Ali, thank you so much for breaking down this deal for us. Sam as the director of Research European Research for Bloomberg Intelligence, joining us from the London studio, we'll trade tensions between China and the U. S cant need a summer, putting even more focus on the G twenty meeting coming up later this month. To get the latest on the trade discussions between US and China. We welcome Leland Miller's CEO of the China Basebook International, joining us here in our Bloomberg Interactive Broker studio. Len and thanks so much for being with us. From your perspective, what is the latest with the US and China? Are things kind of off again on again? Where are we I think that nothing has fundamentally changed since President Trump uh levied the last set of tariffs a number of weeks ago. Now, if you read the headlines, it looks like we're descending into true gloom. The Chinese are preparing for the long fight. President Trump is getting excited about the idea of going big on tariffs into it's a political winner. Uh. Nobody can get along. We're attacking their technology companies. So there's a lot of reasons why people think that this is disintegrating and that the deal is being taken off the table has already taken I don't think that's the case. As a matter of fact. I think that if President she re engages at G twenty, which we expect him to do, then the press it and is prepared to punt full tariffs and restart the talks. And I think that that's actually where we're heading right now. Why would you do that? In that Trump said, if you don't do this, I'm gonna love you tariffs on you. So why would you then look like he's caving. Well, none of this is optimal for Shi jun Ping, but you have to look at the downside on this. So right now, Uh, they're looking at the potential of their being tariffs on all five dred billion of Chinese imports. In addition to the fact that Huawei, which is arguably the most if not one of the most important SSO's in China, is on deathwatch because of what the Commerce Department has been doing to it and what the White House has been doing to it. So right now, none of this is optimal. But it was also not optimal to send Leo hu uh the night that Trump was was announcing tariffs. It was a body blow to the Chinese. It looked bad. But at the same time they're measuring the circumstances as being you know, what is the best we can get out of this, and the best they can get out of this is get a deal with Trump on trade so that they're not worrying about this for the for a twenty So does the what's going on in Hong Kong? Does that impact President she and and how he might be perceiving these negotiations. That's kind of a body blow again or a black guy to President She with what happened in Hong Kong. Is that is that cann influence the trade discussions. You know, it might Um, all of this has to come down to the fact whether she can look strong while engaging with President Trump. Now, President Trump could have put out the olive branch to President She. Instead, he he basically said, if you don't come and meet with me, I'm gonna be really mean to you, and we're gonna we're gonna crush you. That doesn't make things easy for the Chinese. At the same time, there's a lot of a lot of hysterics going on right now, and she jumping has to look at this. You know, how do I not look weak but at the same time engage enough to get all these irons off the fire so that I can concentrate on the domestic economy. Uh, the Chinese economy under the type of tariff pressure we're talking about, will have a much harder time later this year. And I think President She is balancing the pros and cons making sure he has a consensus in the leadership. But I think that that they are inclined to go forward. See, that's what I don't understand is that I feel like a lot of the rhetoric is, uh, it's both. It's so important for both of them. Therefore, they're going to have to do that. Um in essence, if g accepts the fact that they're gonna be tariffs un China no matter what, and then President Trump's gonna ramp up the tariffs no matter what. He neutralizes Trump. Well, I think that in President She's mine if he can get signals on the U. S side that the tariffs are going to come off in a deal. So, first of all, in order to continue the talks, President She would have to get some pledges from President Trump. First, is Huawei is part of the deal. Second, that we're gonna be start peeling these tariffs off and you're not gonna put more tariffs on while we continue to talk. So they create a new timeline. This is agonizing for for for trade and China watchers, but this is the way the things work. And if he can get an understanding that you know, they were very close before they were nineties seven percent of the way there. This idea that they had they didn't get most of it finalized is wrong. They're very close. They have to back to where they were before, and if they do that, then they're very close for President She getting a deal that will pull off most probably not all, but most of the of the terrorists. They have now no more tariffs, a respite for for Huawei, a reprieve for Huawei. These are big things. So these are things that they cannot underestimate. Uh and and and walk away from out of mere pride. So Leland just talking about President she how strong is his position in China today? It's it has been remarkable that there has been pushback against she in the state media, among dissidents. I don't think his his position is in any way threatened, but it is remarkable that he is getting flak for for his handling of the trade, ward handling of the economy. Now this makes it even more important he doesn't look weak going forward. But I don't think there's a question. While while this is not a one person to solitary and dictatorship of any kind, he is the leader of China. He guides policy. And while he needs to make sure that he is not deeply offending the this Paulpiro Standing Committee, he still runs the show. So this is his this is his show to run in terms of trade. And if he thinks he can he can negotiate with President Trump, you know they're best friends after all, uh, then then he'll move forward on this so Um John author's Boomberg Opinion Columnists writes a lot about Dorek magnus book Red Flags. I don't know if you've if you've read that yet, but he talks about why She's China is in jeopardy and a lot of the conversations surrounding the book is really interesting in that Maw and Deng both had their own models for communist China, but that g has a totally different one and that that's going to affect all these kind of trade decisions and arguments. Um, would you agree in that you can't look back at the last hundred years of China growth and extrapolate that to the next hundred. Is that we're in a whole new growth kind of paradigm. Is that true? I think She's challenges are enormous, and he made it much more difficult for himself when he not only named himself president for life, but then he ensconced it formally like this could have been the back background of everything. Everyone knows she's not going anywhere, but he made sure to make a public public issue of it. When he did that, he tied his fortunes in very closely with out of the Chinese economy and that of China generally, so that anything bad that apps the Chinese economy, who do you have to blame Chi Jinping? Who do you if if China undergoes problems, who do you have to blame? Chi Jinping? So he has made his life much more difficult. I don't think he's going anywhere. I do think that the pressures on him are going to be immense in the next few years, with the with the with the economy, even under the best set of circumstances. Uh So, this will be tough, and we could emerge from this a few years from now with more of a consensus based leadership, which she's still there, but not with as much control depending on things how things end up in the next eighteen months. How how would you characterize the Chinese economy right now? Is it a six at six and percent grower or something less than that? It's not growing at six percent? You know, the GDP numbers are always uh political narratives put but put into a number. Uh that said, you know, we have we have data coming in right now, and we're we're we're gonna be announcing next week. But what I would say is watch very closely to what the Chinese are saying. There's a lot of talk this week from Beijing about how they have all these options in terms of stimulus if they need them. And one of the things that we've made very clear in the past is that when the Chinese are talking a lot about all the options they have, they typically have already started utilizing. Okay, So I think that that's that's where we're going, and we'll be able to talk a little bit more of this a few days. Good. We'll have you back for that, because I think that's one of the underpinnings of the negotiations and the assumptions is how strong is China's economy. Uh the stronger dis presumably the tough to tougher stance they can take with the U S. Well. What I find really interesting though, and it's going to go to ubs uh and to have them using a bond deal over the Chinese pig. Statement from Paul Donovan either Chief Economists is that we talk different languages, like the West end China are just they talk different languages, they have different priorities and like that to me is like a whole big rainbow, uh in or not rainbow, but like big cloud as to how the conversation must be going when it comes to trade exactly. Leland Miller, CEO of the China Bag Book International, thank you some much for joining us and breaking down the ongoing trade discussions. Well, this week is Central bank week. We've got the FED, We've got the Bank of Japan, the Bank of England all meeting and of course the f O m c uh Well, FED Chairman Pal speaking on Wednesday, so clearly the markets are focusing on that. To get a sense of what we might expect, we welcome our next guest, Matt Mailey, Managing director and equity strategist at Miller Tebec based in Newton, Massachusetts. Matt, thanks so much for joining us. What do you expect to hear from FED Chairman Pal this week? Well, to be honest with you, I think the market is gonna be a little disappointed. I think the FED chairman will be a little less devish than people are expecting. Um no, no, no, less dovish and it has been. There's no question they've made a a change to a more tubbish tone, but their actions I just think in the past, especially in the past ten years, where you know central bank acuidity has been so important to the markets. Uh, they have they haven't acted until we've seen a more significant move both in the UH in the economy and UH in the economic data and in the in the markets. Uh. The Fed's a little bit more market dependent than they than they admit to. They are very data dependent, but they're also market dependent. So how is the market actually position for this because a huge run up and utilities evaluation is super high, Yet their utilities and defensives for a reason. So like what's the positioning resk here? Well, you know, if if they do uh uh signal a definitive uh change in their in their actions by actually saying that they're going to raise cuts pretty much no matter what uh in July. Uh, that's gonna have a lot of people uh caught offsides. Not only the utility stocks very strong, but you know, consumer staples another defensive group has been very strong, and I think that the people will start to shift out of that and go into some of them uh more growthy names. Obviously a technology et cetera. When we've seen the semiconductor stock kind of roll over recently, they could bounce back. UM, I don't necessarily think that's going to happen again. I'm more cautious than I think a lot of people are. But the thing that really concerns mean most is that the stock market is definitely pricing in the a FED move to a much more doublish stance because it's not moving higher due to a better economy or better earnings. As we've seen that a lot of estimates for both economic growth and estimates for the SMP have come down in the last two weeks. Not move up. Wouldn't be amazing if if the JJ Powell came out and he's like, Okay, guys, we're gonna cut this many times at this date and that's what we're gonna do. Take care of see you later, And was like, so, no question, he won't make it that quite that definitive. But if he you know, they usually tell you, you know, really telegraphic well in advance. So how he portrays, uh, how the July meeting is gonna go, it's gonna be very important. So Matt, if in fact they FED is not quite as dublish as maybe the market is currently discounting, how do you play it right here? Well, Uh, you know, it's it's hard to number one. I do think like I said that that the with earnings estimates coming down, the consensus earning as earnings estimates, the economy is slowing a little bit. I think raising a little bit of cash and and and by and if you want to put more more money to work by those defensive groups with buy them on weakness. You look at the overbought condition of the consumer staples which have been very obviously very strong. They've made new all time highs. Same with the utilities. But of the consumer staples names, I think and it would be the good ones. But most importantly, if we do get another leg lower, which would not be the worst thing in the world. I mean, you know, we're only down seven percent. That's a normal and healthy move in any market, much less one that's being evolved in a trade war. Uh. When you get that kind of down much like we got in December, and I'm not calling for decline like we got in the fourth quarter of last year. But you get something down in the correction terry of ten or twelve, and you've got some money on the sidelines. You can put that to work in your favorite names at really good prices. But if you're prepared in advance, you can take advantage of it. If you don't have that cash on the sidelines, you won't be able to. How else are you gonna hedge looking for derivatives or anything along those lines too, Well, people can certainly do that. Uh. The one thing I you know, that I worry about that is that the VIX is a little high given how much the market is rallying, So that makes the hedging a little bit more expensive than it was, you know, say a couple of weeks, you know, in April um. But you can certainly play, you know by especially in the spy the SMP five, d uh et F. The options in that market are are are very very liquid, and you can get in and out of them very quickly. Matt Milly, thank you so much. Matt is managing director and equity strategist for Miller Tebec based up in Massachusetts. Yeah. Well, the troubles continue at Deutsche Bank. The stock is down over over the past twelve months. Bloomberg News reported this morning that the bank is considering exiting the US equity trading business. To get the latest on all things, Deutsche Bank returned to y'ellman own Ian y'aman is a senior financial writer for Bloomberg News, joining us on the phone. Y'alman, thanks so much for joining us. My first question is when I saw that news about exiting the US equities trading businesses, how can an investment bank be a global bank without trading US equities? So what's going on there? It cannot us ask the right question. I mean, um, this is this is very unusual. And you know, they keep coming up with new restructuring plans and at the end and none of them work, and they keep coming back to new another plan. But um, it's very radical. Yet it's it's very it's it's kind of harmful because you know, if you are in Messing bank, as you said, you have to be in equities, and you have to be in the US in equities because you know, the most I POS happened here. You know, other kind of stuck related in messing banking deals. Even M and A is really connected to the ability to sort of connect with these companies um in in every way. So it's it's very unusual. You know, even after the big financial crisis, the European banks that you know a lot of them that collapse only Royal Bank of Scotland and and Credit act Cole sort of got out of equities business altogether. Um. I mean German says, uh, Dogia Bank is going to continue maybe in Europe, but still not being in the US. That's really gonna hurt their mess banking even further. So it doesn't it doesn't look like a very great, amazing way out. Nano's reaction was really unimpressed. Also, Endroyte Bank h so so such and said that Georgia banks plan is not aggressive enough. You also have CMC Markets saying that they're well behind the curve, RBC saying that bad Bank is not going to do anything to rewrite the company. I mean, if doing what they need to do isn't good enough, but then doing something that's good enough to destroy the company, Like, what is the answer? I mean, you know we can talk about bad Bank, but first the answer of what why is it not aggressive enough? Because every analyst report that I've ever read in the last you know, for god two years now, it's basically they need to they need to cut costs they have they have too much cost and and it's not only really getting out of businesses, it's really they have they have too many people in the back office, they have too many people doing things. Their technologies is out of them, so they can do the businesses with fewer people. And and the bank has constantly announced job cuts which they cannot deliver. I mean, and I've written this many many, many many times over the last two or three years, is that they keep getting targets for reduction of staff levels and they can never hit those targets. Um. Every other bank in the world, you know, in their their peers, everybody cut a long time ago, and pretty quick, even if it's if it took a little longer for some of the European banks because they have tougher you know, um labor laws. Still they've done it. I mean, Dortge Bank has really been bad reducing staff and and thus they cannot make a profit. Um so getting rid of a business like equities, but you're also cutting the revenue instead. If you managed to cut the cost of that business and continue to to get the revenue, then you would actually start making profit on it. But that's where they have really lacked. And that's what the analysts keeps constantly saying that they need to cut the slack um in their in their employee levels. Also reported this morning that Dortchem would consider putting a lot of their troubled assets into a bad bank. What are those assets? I mean, it's really interesting at this stage because you know, we had bad banks after the two thousand eight crisis, UM, and then you know Dotcha Bank and a couple other Europeans also did them after the European sovereign death crisis. UM. These were legacy things that you know, we're really no longer good. They sort of you know, they were all written down, but to just sort of separate them from the the main core business and show that the investors, you know, what really was the core business was making as profit and revenue. UM. But at this stage banks don't have them. So I'm not sure what is gonna put in there. Level three assets, which is sort of hard to value, UM, things that that they sort of have to use their internal models to value. That means they're not liquid. That's one place. But even there, they only had twenty five billion euros of level three assets the last time I looked that was the first quarter of this year. UM. Their tongue fifty billion. I don't know where they're going to come up with you know, derivatives, more derivatives that need to be put there. The issue is and I was reading an animal, so just before you call it is um. You know, if they if these things are not losing money, then it doesn't matter whether they're on a bad bank, good bank, it doesn't matter what it's called. If they're actually losing money and there's still more right down to be made, then that's tough because ROACHA doesn't have extra capital to take those right so I don't know what they mean how they're going to really do the bad bank work. Interesting. Y'amen on Iran, Thank you so much for joining us. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney, Lisa Bramo. It's I'm on Twitter at Lisa Bramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio
Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you along with my co host Lisa Brahmawitz. Each day we bring you the most noteworthy and useful interviews for you and your money. Whether at the grocery store or the trading floor. Find a Bloomberg penl podcast on Apple podcast or wherever you listen to podcasts, as well as at Bloomberg dot com. I'm joined by Alex Steele here today, sitting in for Lisa Brahmowitz. Boy, I'll tell you it is good thing to be a healthcare m n a banker. There's always a deal in that space. Today Fires are announcing that it is acquiring Array bio Farmer for ten point six billion dollars. To get the latest, we welcome a good friends, Sam Fizzelli. Sam is the director of European Research for Bloomberg Intelligence, but his day job is he's one of the best pharmaceutical and healthcare analysts on the street. He joins us from our London studio. Sam, thanks so much for joining us. Um boy, this price tag is just monstrous. Does this make sense to you this deal that Fires is doing. Thank you, Paul, Yes, and good morning to both of you. UM. So you know, the visors balance sheets pretty strong. UM. The growth profile of the company going past the current patent experty for Lyrica is um. You know, they like it to be stronger than perhaps some of us think it is. We always thought they would do M A and A. What the price tag is a billion here, a billion there? What's what's that amongst friends? Right? But they're they're buying what I would consider to be one of the pre eminent UM drug developers amongst the biotechs. If you think about the number of drugs that this company is responsible for in terms of what's going out there and deals they've done, so we calculate about eight point four times twenty three sales. There's no profits to talk about just yet. Three sales. But but those are those are sales that are not the you know, they have reasonable probability of actually happening. The products have already on the market, and they're they've got some good data in hand. And then end um it is at the top end of the range that we've looked at, but it's not the most expensive UM. But you know, that is what it is. My very exam so to that point, though, I feel like getting on drugs that will were getting in the pattern for drugs that will wind up cutting chemotherapy is gonna be super super hot in the market. Do we expect in the company to come in and try and shot full of fires are out? Yeah? I don't think so. This doesn't This kind of thing doesn't usually happen when you have two managements that have agreed and there's a big price tag out there already, it just doesn't happen. You know, I've never really seen it in biotech, So I expect not so say what what is so special about Array that would cause fires? Or to step up and pay this price. So they describe three pillars of value and we basically responded to that already, you know, react, which is the kind of thing that we've seen. UM. The there's a product on the market, or two products on the market, and there's ample opportunity for expanding that each other's products UM and those revenues, you know, it could easily be a billion or plus if they keep expanding it and fight as I can, because they have very deep pockets. UM. The company has several products that have been licensed to other companies where the potential for royalties are are meaningful. And then of course they have a bunch of scientists who have been creating these drugs and and we don't know exactly what they've got in the preclinical hands in Boulder, Colorado, but there was some hints that Fiser gave us over the call. We just listened to um which makes it sounds as if there's other products obviously expected to come along. But they've been a very productive team, so they would not split that several times they were asked this question. They would not split the value that they've ascribed to each other. Those three pillars have just told you. So, how does explain to me how in the biotech world this works? Because normally, in a different industry, if you make an acquisition, there's going to be some synergy costs you can get out of it that's gonna be a big thing. And then sort of when it's gonna be creative to earnings, and then how you sort of meld the operations and what the cultures at, et cetera. Is it like a different scenario in a biotech world. Yeah, I mean, Alex, that's a very good question. At the end of the day, here, what you're buying is knowledge and the ability and the long history of these people developing these sort of drugs. Not that Fiser hasn't got them themselves, but here's here's a bunch of scientists, they said, about a hundred scientists R and D people based in Colorado. They've said they're going to keep the current structure of a RAY in place to continue allowing it to be innovative and and and you know, pump up, pump out these drugs, and and they're go into pipers Finders pipeline as opposed to having to be licensed out because the company is too small develop everything. So in these cases, it's really not about cast savings. So say, if I'm a Fiser shareholder, UM, am I concern? What do I read into a transaction like this that g Fiser doesn't have its own pipeline. Maybe it's R and D. Isn't that good or that successful that it forces them to go out and buy um, you know products. Yeah, No, I don't think that's fair. Um, I think I think it's more about um. You know, in the pharmaceutical business, it's all about shots on goal because once you take that shot, you don't actually know whether it's going to go in or not. So you've got to have a number of opportunities running at the same time to see which one actually comes to fruition. They have a number of drugs that are that are looking interesting and exciting, and you know, it's two steps forward, one step back with pharma. So you've got to expand the range that you've got access to and then make sure that you have the wherewithal to do it. Which fires it does? I just asked the dumb question here, so like, literally, is it possible that there's a drug that could reduce the need for chemo? Like is that real? Because that's amazing. Yeah. No, absolutely, And you know what I was told years ago, there's no dumb questions, So there are there totally a but and certainly this is not dumb at all because there's that's exactly where pharmaceutical industry wants to go and cancer patients want to go. I mean, it's important to realize that there's a little bit of a slogan slogan that's going on there too, because these aren't drugs that are that are side effect free. It's just a different to chemo. They may not include, know the usual things that chemo has got going with it is the hair loss and the vomiting, and you know none of these things are nice, right uh? And you know a blood blood accounts going down and really feeling fatigued, and who wants to be fatigued when you're trying to get treated? Right? So, but these drugs do have their own side effects, let's not let's not forget that. And this is a triple combination they're using for colorectal cancer going forward, right, Sam fas Ali, thank you so much for breaking down this deal for us. Sam as the director of Research European Research for Bloomberg Intelligence, joining us from the London studio, we'll trade tensions between China and the U. S cant need a summer, putting even more focus on the G twenty meeting coming up later this month. To get the latest on the trade discussions between US and China. We welcome Leland Miller's CEO of the China Basebook International, joining us here in our Bloomberg Interactive Broker studio. Len and thanks so much for being with us. From your perspective, what is the latest with the US and China? Are things kind of off again on again? Where are we I think that nothing has fundamentally changed since President Trump uh levied the last set of tariffs a number of weeks ago. Now, if you read the headlines, it looks like we're descending into true gloom. The Chinese are preparing for the long fight. President Trump is getting excited about the idea of going big on tariffs into it's a political winner. Uh. Nobody can get along. We're attacking their technology companies. So there's a lot of reasons why people think that this is disintegrating and that the deal is being taken off the table has already taken I don't think that's the case. As a matter of fact. I think that if President she re engages at G twenty, which we expect him to do, then the press it and is prepared to punt full tariffs and restart the talks. And I think that that's actually where we're heading right now. Why would you do that? In that Trump said, if you don't do this, I'm gonna love you tariffs on you. So why would you then look like he's caving. Well, none of this is optimal for Shi jun Ping, but you have to look at the downside on this. So right now, Uh, they're looking at the potential of their being tariffs on all five dred billion of Chinese imports. In addition to the fact that Huawei, which is arguably the most if not one of the most important SSO's in China, is on deathwatch because of what the Commerce Department has been doing to it and what the White House has been doing to it. So right now, none of this is optimal. But it was also not optimal to send Leo hu uh the night that Trump was was announcing tariffs. It was a body blow to the Chinese. It looked bad. But at the same time they're measuring the circumstances as being you know, what is the best we can get out of this, and the best they can get out of this is get a deal with Trump on trade so that they're not worrying about this for the for a twenty So does the what's going on in Hong Kong? Does that impact President she and and how he might be perceiving these negotiations. That's kind of a body blow again or a black guy to President She with what happened in Hong Kong. Is that is that cann influence the trade discussions. You know, it might Um, all of this has to come down to the fact whether she can look strong while engaging with President Trump. Now, President Trump could have put out the olive branch to President She. Instead, he he basically said, if you don't come and meet with me, I'm gonna be really mean to you, and we're gonna we're gonna crush you. That doesn't make things easy for the Chinese. At the same time, there's a lot of a lot of hysterics going on right now, and she jumping has to look at this. You know, how do I not look weak but at the same time engage enough to get all these irons off the fire so that I can concentrate on the domestic economy. Uh, the Chinese economy under the type of tariff pressure we're talking about, will have a much harder time later this year. And I think President She is balancing the pros and cons making sure he has a consensus in the leadership. But I think that that they are inclined to go forward. See, that's what I don't understand is that I feel like a lot of the rhetoric is, uh, it's both. It's so important for both of them. Therefore, they're going to have to do that. Um in essence, if g accepts the fact that they're gonna be tariffs un China no matter what, and then President Trump's gonna ramp up the tariffs no matter what. He neutralizes Trump. Well, I think that in President She's mine if he can get signals on the U. S side that the tariffs are going to come off in a deal. So, first of all, in order to continue the talks, President She would have to get some pledges from President Trump. First, is Huawei is part of the deal. Second, that we're gonna be start peeling these tariffs off and you're not gonna put more tariffs on while we continue to talk. So they create a new timeline. This is agonizing for for for trade and China watchers, but this is the way the things work. And if he can get an understanding that you know, they were very close before they were nineties seven percent of the way there. This idea that they had they didn't get most of it finalized is wrong. They're very close. They have to back to where they were before, and if they do that, then they're very close for President She getting a deal that will pull off most probably not all, but most of the of the terrorists. They have now no more tariffs, a respite for for Huawei, a reprieve for Huawei. These are big things. So these are things that they cannot underestimate. Uh and and and walk away from out of mere pride. So Leland just talking about President she how strong is his position in China today? It's it has been remarkable that there has been pushback against she in the state media, among dissidents. I don't think his his position is in any way threatened, but it is remarkable that he is getting flak for for his handling of the trade, ward handling of the economy. Now this makes it even more important he doesn't look weak going forward. But I don't think there's a question. While while this is not a one person to solitary and dictatorship of any kind, he is the leader of China. He guides policy. And while he needs to make sure that he is not deeply offending the this Paulpiro Standing Committee, he still runs the show. So this is his this is his show to run in terms of trade. And if he thinks he can he can negotiate with President Trump, you know they're best friends after all, uh, then then he'll move forward on this so Um John author's Boomberg Opinion Columnists writes a lot about Dorek magnus book Red Flags. I don't know if you've if you've read that yet, but he talks about why She's China is in jeopardy and a lot of the conversations surrounding the book is really interesting in that Maw and Deng both had their own models for communist China, but that g has a totally different one and that that's going to affect all these kind of trade decisions and arguments. Um, would you agree in that you can't look back at the last hundred years of China growth and extrapolate that to the next hundred. Is that we're in a whole new growth kind of paradigm. Is that true? I think She's challenges are enormous, and he made it much more difficult for himself when he not only named himself president for life, but then he ensconced it formally like this could have been the back background of everything. Everyone knows she's not going anywhere, but he made sure to make a public public issue of it. When he did that, he tied his fortunes in very closely with out of the Chinese economy and that of China generally, so that anything bad that apps the Chinese economy, who do you have to blame Chi Jinping? Who do you if if China undergoes problems, who do you have to blame? Chi Jinping? So he has made his life much more difficult. I don't think he's going anywhere. I do think that the pressures on him are going to be immense in the next few years, with the with the with the economy, even under the best set of circumstances. Uh So, this will be tough, and we could emerge from this a few years from now with more of a consensus based leadership, which she's still there, but not with as much control depending on things how things end up in the next eighteen months. How how would you characterize the Chinese economy right now? Is it a six at six and percent grower or something less than that? It's not growing at six percent? You know, the GDP numbers are always uh political narratives put but put into a number. Uh that said, you know, we have we have data coming in right now, and we're we're we're gonna be announcing next week. But what I would say is watch very closely to what the Chinese are saying. There's a lot of talk this week from Beijing about how they have all these options in terms of stimulus if they need them. And one of the things that we've made very clear in the past is that when the Chinese are talking a lot about all the options they have, they typically have already started utilizing. Okay, So I think that that's that's where we're going, and we'll be able to talk a little bit more of this a few days. Good. We'll have you back for that, because I think that's one of the underpinnings of the negotiations and the assumptions is how strong is China's economy. Uh the stronger dis presumably the tough to tougher stance they can take with the U S. Well. What I find really interesting though, and it's going to go to ubs uh and to have them using a bond deal over the Chinese pig. Statement from Paul Donovan either Chief Economists is that we talk different languages, like the West end China are just they talk different languages, they have different priorities and like that to me is like a whole big rainbow, uh in or not rainbow, but like big cloud as to how the conversation must be going when it comes to trade exactly. Leland Miller, CEO of the China Bag Book International, thank you some much for joining us and breaking down the ongoing trade discussions. Well, this week is Central bank week. We've got the FED, We've got the Bank of Japan, the Bank of England all meeting and of course the f O m c uh Well, FED Chairman Pal speaking on Wednesday, so clearly the markets are focusing on that. To get a sense of what we might expect, we welcome our next guest, Matt Mailey, Managing director and equity strategist at Miller Tebec based in Newton, Massachusetts. Matt, thanks so much for joining us. What do you expect to hear from FED Chairman Pal this week? Well, to be honest with you, I think the market is gonna be a little disappointed. I think the FED chairman will be a little less devish than people are expecting. Um no, no, no, less dovish and it has been. There's no question they've made a a change to a more tubbish tone, but their actions I just think in the past, especially in the past ten years, where you know central bank acuidity has been so important to the markets. Uh, they have they haven't acted until we've seen a more significant move both in the UH in the economy and UH in the economic data and in the in the markets. Uh. The Fed's a little bit more market dependent than they than they admit to. They are very data dependent, but they're also market dependent. So how is the market actually position for this because a huge run up and utilities evaluation is super high, Yet their utilities and defensives for a reason. So like what's the positioning resk here? Well, you know, if if they do uh uh signal a definitive uh change in their in their actions by actually saying that they're going to raise cuts pretty much no matter what uh in July. Uh, that's gonna have a lot of people uh caught offsides. Not only the utility stocks very strong, but you know, consumer staples another defensive group has been very strong, and I think that the people will start to shift out of that and go into some of them uh more growthy names. Obviously a technology et cetera. When we've seen the semiconductor stock kind of roll over recently, they could bounce back. UM, I don't necessarily think that's going to happen again. I'm more cautious than I think a lot of people are. But the thing that really concerns mean most is that the stock market is definitely pricing in the a FED move to a much more doublish stance because it's not moving higher due to a better economy or better earnings. As we've seen that a lot of estimates for both economic growth and estimates for the SMP have come down in the last two weeks. Not move up. Wouldn't be amazing if if the JJ Powell came out and he's like, Okay, guys, we're gonna cut this many times at this date and that's what we're gonna do. Take care of see you later, And was like, so, no question, he won't make it that quite that definitive. But if he you know, they usually tell you, you know, really telegraphic well in advance. So how he portrays, uh, how the July meeting is gonna go, it's gonna be very important. So Matt, if in fact they FED is not quite as dublish as maybe the market is currently discounting, how do you play it right here? Well, Uh, you know, it's it's hard to number one. I do think like I said that that the with earnings estimates coming down, the consensus earning as earnings estimates, the economy is slowing a little bit. I think raising a little bit of cash and and and by and if you want to put more more money to work by those defensive groups with buy them on weakness. You look at the overbought condition of the consumer staples which have been very obviously very strong. They've made new all time highs. Same with the utilities. But of the consumer staples names, I think and it would be the good ones. But most importantly, if we do get another leg lower, which would not be the worst thing in the world. I mean, you know, we're only down seven percent. That's a normal and healthy move in any market, much less one that's being evolved in a trade war. Uh. When you get that kind of down much like we got in December, and I'm not calling for decline like we got in the fourth quarter of last year. But you get something down in the correction terry of ten or twelve, and you've got some money on the sidelines. You can put that to work in your favorite names at really good prices. But if you're prepared in advance, you can take advantage of it. If you don't have that cash on the sidelines, you won't be able to. How else are you gonna hedge looking for derivatives or anything along those lines too, Well, people can certainly do that. Uh. The one thing I you know, that I worry about that is that the VIX is a little high given how much the market is rallying, So that makes the hedging a little bit more expensive than it was, you know, say a couple of weeks, you know, in April um. But you can certainly play, you know by especially in the spy the SMP five, d uh et F. The options in that market are are are very very liquid, and you can get in and out of them very quickly. Matt Milly, thank you so much. Matt is managing director and equity strategist for Miller Tebec based up in Massachusetts. Yeah. Well, the troubles continue at Deutsche Bank. The stock is down over over the past twelve months. Bloomberg News reported this morning that the bank is considering exiting the US equity trading business. To get the latest on all things, Deutsche Bank returned to y'ellman own Ian y'aman is a senior financial writer for Bloomberg News, joining us on the phone. Y'alman, thanks so much for joining us. My first question is when I saw that news about exiting the US equities trading businesses, how can an investment bank be a global bank without trading US equities? So what's going on there? It cannot us ask the right question. I mean, um, this is this is very unusual. And you know, they keep coming up with new restructuring plans and at the end and none of them work, and they keep coming back to new another plan. But um, it's very radical. Yet it's it's very it's it's kind of harmful because you know, if you are in Messing bank, as you said, you have to be in equities, and you have to be in the US in equities because you know, the most I POS happened here. You know, other kind of stuck related in messing banking deals. Even M and A is really connected to the ability to sort of connect with these companies um in in every way. So it's it's very unusual. You know, even after the big financial crisis, the European banks that you know a lot of them that collapse only Royal Bank of Scotland and and Credit act Cole sort of got out of equities business altogether. Um. I mean German says, uh, Dogia Bank is going to continue maybe in Europe, but still not being in the US. That's really gonna hurt their mess banking even further. So it doesn't it doesn't look like a very great, amazing way out. Nano's reaction was really unimpressed. Also, Endroyte Bank h so so such and said that Georgia banks plan is not aggressive enough. You also have CMC Markets saying that they're well behind the curve, RBC saying that bad Bank is not going to do anything to rewrite the company. I mean, if doing what they need to do isn't good enough, but then doing something that's good enough to destroy the company, Like, what is the answer? I mean, you know we can talk about bad Bank, but first the answer of what why is it not aggressive enough? Because every analyst report that I've ever read in the last you know, for god two years now, it's basically they need to they need to cut costs they have they have too much cost and and it's not only really getting out of businesses, it's really they have they have too many people in the back office, they have too many people doing things. Their technologies is out of them, so they can do the businesses with fewer people. And and the bank has constantly announced job cuts which they cannot deliver. I mean, and I've written this many many, many many times over the last two or three years, is that they keep getting targets for reduction of staff levels and they can never hit those targets. Um. Every other bank in the world, you know, in their their peers, everybody cut a long time ago, and pretty quick, even if it's if it took a little longer for some of the European banks because they have tougher you know, um labor laws. Still they've done it. I mean, Dortge Bank has really been bad reducing staff and and thus they cannot make a profit. Um so getting rid of a business like equities, but you're also cutting the revenue instead. If you managed to cut the cost of that business and continue to to get the revenue, then you would actually start making profit on it. But that's where they have really lacked. And that's what the analysts keeps constantly saying that they need to cut the slack um in their in their employee levels. Also reported this morning that Dortchem would consider putting a lot of their troubled assets into a bad bank. What are those assets? I mean, it's really interesting at this stage because you know, we had bad banks after the two thousand eight crisis, UM, and then you know Dotcha Bank and a couple other Europeans also did them after the European sovereign death crisis. UM. These were legacy things that you know, we're really no longer good. They sort of you know, they were all written down, but to just sort of separate them from the the main core business and show that the investors, you know, what really was the core business was making as profit and revenue. UM. But at this stage banks don't have them. So I'm not sure what is gonna put in there. Level three assets, which is sort of hard to value, UM, things that that they sort of have to use their internal models to value. That means they're not liquid. That's one place. But even there, they only had twenty five billion euros of level three assets the last time I looked that was the first quarter of this year. UM. Their tongue fifty billion. I don't know where they're going to come up with you know, derivatives, more derivatives that need to be put there. The issue is and I was reading an animal, so just before you call it is um. You know, if they if these things are not losing money, then it doesn't matter whether they're on a bad bank, good bank, it doesn't matter what it's called. If they're actually losing money and there's still more right down to be made, then that's tough because ROACHA doesn't have extra capital to take those right so I don't know what they mean how they're going to really do the bad bank work. Interesting. Y'amen on Iran, Thank you so much for joining us. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney, Lisa Bramo. It's I'm on Twitter at Lisa Bramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio