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Not Much Strategic Sense To An AstraZeneca-Gilead Deal · Bloomberg Intelligence

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  Speaker 1: You're listening to Bloomberg Markets with Bonny Quinn and Paul
• 0:04
  Speaker 1: Sweeney on Bloomberg Radio. All Over the last twenty four hours,
• 0:08
  Speaker 1: Bloomberg News has been reporting about potential talks between astra
• 0:12
  Speaker 1: Zenica and Gile Lead, two huge pharmaceutical companies, Uh, maybe
• 0:18
  Speaker 1: getting together in what would be another healthcare m and
• 0:21
  Speaker 1: a trade. To dig a little bit deeper into that story,
• 0:24
  Speaker 1: we welcome Max Neeson, biotech, farm and healthcare columnists for
• 0:27
  Speaker 1: Bloomberg Opinion, as well as Chris Hughes. Chris Hughes, he's
• 0:30
  Speaker 1: a deal's columnist for Bloomberg Opinion. Guys, thanks so much
• 0:34
  Speaker 1: for joining us. UM, let's start with you, Chris. Just
• 0:38
  Speaker 1: get a sense of is this a deal that makes
• 0:42
  Speaker 1: sense strategically or is this more of a financially driven
• 0:45
  Speaker 1: deal should something occur. Yeah, it's not obvious. It makes
• 0:50
  Speaker 1: a lot of strategic sense. Uh, astrosenitor in the and
• 0:53
  Speaker 1: that's the conventional way you think about deals. Um that
• 0:57
  Speaker 1: both companies have got quite different um sort of emphases
• 1:03
  Speaker 1: in terms of the medicines say they make. And also
• 1:07
  Speaker 1: Astridenaka has got a really enviable pipeline of drugs already
• 1:12
  Speaker 1: it's got one of the most attractive drug pipelines in
• 1:15
  Speaker 1: the industry. You know, it's questionable why I would want
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  Speaker 1: to do a deal that might actually dilute the quality
• 1:22
  Speaker 1: of that pipeline and upcoming drugs. But as you say,
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  Speaker 1: from US financial perspectives, um, it starts to look more interesting.
• 1:30
  Speaker 1: Astrozennaca's had a really good run on its share price lately,
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  Speaker 1: and that gives it a good strong currency to you know,
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  Speaker 1: to pay for a deal like this. And actually, even
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  Speaker 1: though it's got strong share price that an attractive pipeline
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  Speaker 1: of drugs, Astrosennaka's cash generation at this point in time
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  Speaker 1: actually isn't that great. Contrast that with Gilly. Gilly has
• 1:53
  Speaker 1: actually got some pretty good cash generations. So you can
• 1:55
  Speaker 1: put the two together, you actually have a business with
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  Speaker 1: financially has a much more formid profile. Max. Would either
• 2:05
  Speaker 1: of the companies have been looking to team up and
• 2:07
  Speaker 1: is there a chance that this might turn hostile at
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  Speaker 1: some point? Um? You know, I I would feel a
• 2:15
  Speaker 1: little bit surprised about that. Well, the likelihood of this
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  Speaker 1: actually happening still seems relatively slim to me. Um. You know,
• 2:24
  Speaker 1: gill Yad in its own right has had something of
• 2:27
  Speaker 1: a pump up to its evaluation based on its work
• 2:30
  Speaker 1: term Desiviere. It might want to capitalize on that by
• 2:35
  Speaker 1: by you know, getting a return by by solidifying that increase. Um.
• 2:40
  Speaker 1: You know, the fact that the currency would be so
• 2:42
  Speaker 1: heavily made up of astro'slenic shares is something that would
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  Speaker 1: make them quite resistant. And you know, given the fact
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  Speaker 1: that both both companies are separately working on on different
• 2:52
  Speaker 1: pharmaceutical efforts against the pandemic, I think they might want
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  Speaker 1: to avoid um, you know, making this into hostile fight. Yeah,
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  Speaker 1: Max is following up on that. Is there a the
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  Speaker 1: timing seems odd obviously given that we're in the middle
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  Speaker 1: of a pandemic here, is any of this deal or
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  Speaker 1: you know, centered around the science of somebody's got a
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  Speaker 1: drug or maybe if we put a couple of drugs
• 3:16
  Speaker 1: together between these two companies, or if we put our
• 3:18
  Speaker 1: resources behind is anything driven by the COVID vaccine potential
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  Speaker 1: or treatment potential. I don't think that's the case, because
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  Speaker 1: these are two very different approaches. You have gil leads,
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  Speaker 1: which is a treatment um you know, something for a
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  Speaker 1: quel people, and an astros Nica working on on a
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  Speaker 1: vaccine a prophylactic um, you know, scientifically, and and from
• 3:41
  Speaker 1: an manufacturing perspective to two kind of entirely different things,
• 3:45
  Speaker 1: and and one where there's not really likely to be
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  Speaker 1: an additive effect. Um if anything trying to complete it
• 3:51
  Speaker 1: would be a very large and complicated transaction, might might
• 3:56
  Speaker 1: actually distract from those efforts. If Gilliard no, thanks, and
• 4:00
  Speaker 1: let's be clear, we're hearing that. You know, there's absolutely
• 4:03
  Speaker 1: not going to be a deal, of course, and you
• 4:05
  Speaker 1: always hear these kinds of rumors around deal, so everything
• 4:08
  Speaker 1: needs to be taken with a little bit of a
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  Speaker 1: grain of salt. But if Gilliad says absolutely no, we
• 4:12
  Speaker 1: do not want a partner with a larger company at
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  Speaker 1: the moment, is there another company that Astrison again might
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  Speaker 1: be interested in. Chris Well, that's an interesting Christian because
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  Speaker 1: the very fact that astroson Are is sort of knocking
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  Speaker 1: on doors. Um uh. You know, even though it has
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  Speaker 1: this extensively strong pipeline, does brave questions about kind of
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  Speaker 1: how it sees its future at the moment, you know,
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  Speaker 1: as a on a stand alone basis. Um. I mean,
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  Speaker 1: it has got this strong, strong share price which does
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  Speaker 1: provide this take out currency. If it if it could
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  Speaker 1: persuade another company to accept that UM. But the real
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  Speaker 1: question is kind of why does it Why would it
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  Speaker 1: want to to direct other than finding another company I
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  Speaker 1: guess which has similar a similar sort of cash generating
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  Speaker 1: profile to Guilliad and also is sort of in the
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  Speaker 1: zone to do a deal and also is willing to
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  Speaker 1: take on UM, you know, as a risk of integration
• 5:19
  Speaker 1: discorl integration, and negotiates it in a very discount environment.
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  Speaker 1: I mean, it's quite hard to that list of potential candidates.
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  Speaker 1: It's probably not very high. It's very hard environment to
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  Speaker 1: do deals in. Yeah, that's kind of where I wanted
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  Speaker 1: to go, Chris, it seems like this is a really
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  Speaker 1: odd time to do a deal again in the middle
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  Speaker 1: of a pandemic. But I'm looking at the share prices
• 5:40
  Speaker 1: and neither companies moving that much. Does that kind of
• 5:43
  Speaker 1: suggest to you as a deal's reporter that you know,
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  Speaker 1: the odds of this really being in the works are
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  Speaker 1: pretty low. Well, Astrogenically was sort down a bit at
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  Speaker 1: the open um in Europe this morning, which suggested that
• 5:57
  Speaker 1: investors were a bit concerned the out possibly the company
• 6:01
  Speaker 1: doing something that would take it in a different direction. Uh,
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  Speaker 1: and involved by the stock issueance. And I think Gill
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  Speaker 1: thead was called up to haven't seen merit is at
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  Speaker 1: the moment, but UM investors are taking you know, they're
• 6:13
  Speaker 1: not they are taking seriously as a possibility that there's
• 6:17
  Speaker 1: something could happen. Now as you say, this is a
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  Speaker 1: strange moment to be doing something like this. I mean
• 6:23
  Speaker 1: any deal that involves combining your company with another one
• 6:27
  Speaker 1: of selling it, you know, that's a critical moment in
• 6:30
  Speaker 1: your career history as a as a CEO, and it's
• 6:33
  Speaker 1: very it involves delicate negotiations. It's quite hard to do
• 6:38
  Speaker 1: all that over you over over over zoom or some
• 6:42
  Speaker 1: other video conference. It's it's it's a tricky one also
• 6:46
  Speaker 1: doing all the all the due diligence. So UM, I
• 6:49
  Speaker 1: think it's one thing to have the idea and make
• 6:52
  Speaker 1: the approach, but it actually nail down a deal and
• 6:57
  Speaker 1: virtually shake hands on it. M's difficult. Now, Christ is
• 7:02
  Speaker 1: what happens if the pandemic hopefully eases and conditions for
• 7:09
  Speaker 1: actually having face to face tours UM and doing more
• 7:12
  Speaker 1: substantial dutigence and it become much easier. And then then
• 7:17
  Speaker 1: at that point does this become much more real. All right,
• 7:21
  Speaker 1: we will continue to watch this space with acute interest
• 7:24
  Speaker 1: in our thanks to both of you, that is, Chris
• 7:26
  Speaker 1: Hughes and Max Nissan, both internally here at Bloomberg reporting
• 7:30
  Speaker 1: on pharma, and of course Max has being a phenomenal
• 7:34
  Speaker 1: job throughout the pandemic as well, just on the virology
• 7:36
  Speaker 1: and everything else. Paul, how's your first day, Vonnie on
• 7:39
  Speaker 1: Bloomberg Markets? Oh my gosh, I felt like I've never
• 7:41
  Speaker 1: jumped off the bicycle in the first place. Exactly. It's
• 7:43
  Speaker 1: great to have you on board. Well, do join us
• 7:46
  Speaker 1: tomorrow of another full slate and looking forward to being
• 7:49
  Speaker 1: back in the chair. From Paul Sweeney and myself, Bonny
• 7:51
  Speaker 1: Quinn and everybody else here. This is Bloomberg, delighted to
• 7:55
  Speaker 1: bring in our next guest, now a regular on the show.
• 7:59
  Speaker 1: Bill see joins us from Seattle. Bill. Great to have
• 8:02
  Speaker 1: you to discuss these markets. Thanks for having us so.
• 8:06
  Speaker 1: When the market hit lows back in March, your son
• 8:09
  Speaker 1: Cole was on he said it was one of the
• 8:11
  Speaker 1: great stock buying opportunities in history. It's clear that he
• 8:14
  Speaker 1: wasn't wrong. When you have the likes of Stanley Doucin
• 8:16
  Speaker 1: Miller saying he didn't take enough risk at the lows,
• 8:19
  Speaker 1: What did you do exactly and how has the trade
• 8:21
  Speaker 1: worked out? Well? We tacked towards the opportunities that were
• 8:27
  Speaker 1: created by the complete destruction of economic optimism, and we
• 8:33
  Speaker 1: operated under the theory that at major historical change points,
• 8:38
  Speaker 1: the existing trend gets exacerbated, the positive part of it
• 8:43
  Speaker 1: to the upside, and the existing trend gets exacerbated to
• 8:47
  Speaker 1: the downside. So what you had was a complete and
• 8:50
  Speaker 1: total capitulation on value and a complete Uh. You've you've
• 8:56
  Speaker 1: had the biggest growth orgy maybe ever in the last
• 9:00
  Speaker 1: uh four or five years, So that was exacerbated in March.
• 9:06
  Speaker 1: We could see that even though we were practically nauseous,
• 9:11
  Speaker 1: every time we put in a by order, we tacked
• 9:13
  Speaker 1: towards the deepest, most out of favorite things that people
• 9:17
  Speaker 1: thought wouldn't come back anytime soon. They thought it was
• 9:22
  Speaker 1: gonna be years before anybody wanted to go shopping. And
• 9:25
  Speaker 1: then now we found out that even looters nowhere to shop.
• 9:29
  Speaker 1: M So, Bill, give us some sectors where you think
• 9:33
  Speaker 1: there's there's some value, there's still some value. Again, we've
• 9:36
  Speaker 1: had this big, strong move off of the bottom. Here
• 9:41
  Speaker 1: has the low hanging fruit been had or where are
• 9:43
  Speaker 1: you guys still looking here? Well, certainly the most extreme
• 9:47
  Speaker 1: bargains have had a big mount, but this is a
• 9:51
  Speaker 1: historical change point, so where there's still lots of value. Uh.
• 9:57
  Speaker 1: You know, the banks were she as deep as they
• 10:01
  Speaker 1: were at the bottom in O nine, but yet on
• 10:05
  Speaker 1: a relative basis, Just think how cheap they were then
• 10:08
  Speaker 1: if if they matched price to book values similar to
• 10:12
  Speaker 1: back then. Uh So, Wells Fargo was all the way
• 10:15
  Speaker 1: up to thirty three down from what sixty or fifty five?
• 10:21
  Speaker 1: Right there, there's loads of room in the banks, There's
• 10:25
  Speaker 1: loads of room in the owners of the malls. Uh.
• 10:30
  Speaker 1: We have been doing a lot of channel checks. We
• 10:32
  Speaker 1: we are in Arizona, so we've been going to a
• 10:35
  Speaker 1: lot of of malls and outlet malls, and we're seeing Macy's,
• 10:40
  Speaker 1: which we don't own the stock, but we own the
• 10:42
  Speaker 1: malls where their stores are located. The parking lot on
• 10:45
  Speaker 1: both sides at Arrowhead Town Center was packed. So I
• 10:50
  Speaker 1: find it so fascinating. Everyone is thinking about how our
• 10:54
  Speaker 1: behavior is is changed by being imprisoned for two and
• 10:57
  Speaker 1: a half months, and I think they're are getting that
• 11:01
  Speaker 1: once we're not in prison We're not going to be
• 11:03
  Speaker 1: super attracted to things that we had to do when
• 11:06
  Speaker 1: we were in prison. They're going to be attractive to
• 11:08
  Speaker 1: things they weren't able to do while they were in prison. So, Bill,
• 11:14
  Speaker 1: it's interesting when I think about it. You know, some
• 11:17
  Speaker 1: of the the market bounce here and I'm not sure
• 11:22
  Speaker 1: the market or let's put it this way, how do
• 11:24
  Speaker 1: you feel about a potential second wave and how that
• 11:27
  Speaker 1: might impact the economy in the markets. It seems like
• 11:30
  Speaker 1: most people feel like there will be a second wave
• 11:32
  Speaker 1: of this virus. Is that something that you are thinking
• 11:35
  Speaker 1: about as you think about putting trades on. The biggest
• 11:40
  Speaker 1: risk in the stock market is that the market massively
• 11:45
  Speaker 1: over capitalized growth stocks. That's the biggest risk in the market.
• 11:51
  Speaker 1: When let me just give you one example, and not
• 11:53
  Speaker 1: to pick on them because they're a great company that
• 11:56
  Speaker 1: has nothing to do the things I'm going to say
• 11:57
  Speaker 1: now I have nothing to do with the quality of
• 11:59
  Speaker 1: the under company. But let's just take Costco for example.
• 12:03
  Speaker 1: Will business every be better for you than when the
• 12:07
  Speaker 1: government closes most of your competitors and forces people to
• 12:10
  Speaker 1: only come to your store. Does it ever get better
• 12:13
  Speaker 1: than that? Well, the answer is no. So Costco is
• 12:17
  Speaker 1: a relatively mature, large growth company and it's trading at
• 12:23
  Speaker 1: thirty five times and earnings. If you go back and
• 12:25
  Speaker 1: look at history, a mature, highly thought of growth company
• 12:30
  Speaker 1: would trade at twenty times earnings. So if the S
• 12:35
  Speaker 1: and P five topped out early this year, which by
• 12:39
  Speaker 1: the way, we're not convinced that the S and P
• 12:43
  Speaker 1: is not topping out here, uh, then those glamour growth
• 12:48
  Speaker 1: stocks have got huge pe reductions to go through. It's
• 12:52
  Speaker 1: like a weight loss program. Oh I need to lose
• 12:55
  Speaker 1: I need to lose of my price earnings ratio. Well
• 12:59
  Speaker 1: to do that, you more than likely have to lose
• 13:02
  Speaker 1: your stock market value. So that's where the risk is.
• 13:06
  Speaker 1: The risk is not that there's a correction in the
• 13:09
  Speaker 1: deeply oversold stuff that has bounced. The risk is, I mean,
• 13:13
  Speaker 1: look at today, somebody coming on puts a third three
• 13:16
  Speaker 1: thousand some odd price target on Amazon. Is there any
• 13:20
  Speaker 1: institutional investor on the planet that hasn't stocked up on Amazon?
• 13:26
  Speaker 1: Who's the who's the buyer? At the margin gonna be?
• 13:28
  Speaker 1: Where is the money going to come from? The the
• 13:31
  Speaker 1: the soul The situation is, it looks very attractive for
• 13:37
  Speaker 1: value investors. If they can, if they can keep from
• 13:40
  Speaker 1: getting hurt too much on holding winners from the growth
• 13:43
  Speaker 1: sectors that have performed so well. Oh right, Bill, we
• 13:46
  Speaker 1: have to leave it there, but thank you so much,
• 13:49
  Speaker 1: and it's always a pleasure to speak to you. That
• 13:51
  Speaker 1: is Bill Snead there of Sad Capital. Yeah, they were
• 13:54
  Speaker 1: going in, uh you know, buying some things at the
• 13:57
  Speaker 1: bottom there. So he's obviously had some nice trades there there.
• 13:59
  Speaker 1: The value stocks are even more value back in March.
• 14:03
  Speaker 1: But the value stocks, as you know, Vanni, have kind
• 14:05
  Speaker 1: of you know, always been a tough trade for investors. Well.
• 14:10
  Speaker 1: As the pandemic finds its way through to some of
• 14:13
  Speaker 1: the emerging markets, the impact on not just the humanitarian
• 14:18
  Speaker 1: impact on the populace, but also the economic impact is
• 14:21
  Speaker 1: going to be pronounced. To get a sense of kind
• 14:23
  Speaker 1: of how this might play out. Glad to welcome back
• 14:26
  Speaker 1: Bill Rhodes, Bill joining us once again President CEO William R. Rhodes,
• 14:30
  Speaker 1: Global Advisor's former City Bank chairman. Bill, thanks so much
• 14:33
  Speaker 1: for staying with us here this morning. You know, we
• 14:36
  Speaker 1: think about China here. Give us a sense of how
• 14:39
  Speaker 1: China is gonna play here because China, as I think
• 14:42
  Speaker 1: about the financial crisis, they were actually one of the economies,
• 14:44
  Speaker 1: as you mentioned earlier, that actually lifted up the global
• 14:48
  Speaker 1: economy out of kind of the recession. Right now, that
• 14:52
  Speaker 1: doesn't appear to be the case. Plus, they're also a
• 14:55
  Speaker 1: big creditor here. What role do you expect China to
• 14:58
  Speaker 1: play here over the next several months and perhaps years.
• 15:02
  Speaker 1: I think that's a really important question, Paul, and I
• 15:05
  Speaker 1: think that when we take a look at the One Belt,
• 15:07
  Speaker 1: One Road, which is a program that China began a
• 15:11
  Speaker 1: few years ago to lend money to emerging market countries
• 15:14
  Speaker 1: to improve infrastructure, UH and other supposedly health systems. They
• 15:20
  Speaker 1: have outstanding, according to the Key Institute of World Economy
• 15:24
  Speaker 1: in Germany, over five billion dollars. Some people think it
• 15:28
  Speaker 1: could even be higher than that, seven or eight hundred billion.
• 15:31
  Speaker 1: And it's not clear that the Chinese are prepared to
• 15:36
  Speaker 1: write off or extend restructure these loans, and this is key.
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  Speaker 1: They are also not a member of the Paris Club,
• 15:44
  Speaker 1: which is the is the entity which manages and coordinates
• 15:49
  Speaker 1: the restructuring of sovereign debt by the developed countries. They
• 15:53
  Speaker 1: are only an observer, and so their attitude I think
• 15:58
  Speaker 1: unwilling to look at things like debt forgiveness and restructuring. UH.
• 16:02
  Speaker 1: These loans are really key. This is why I think
• 16:05
  Speaker 1: all of this has come together to make it the
• 16:08
  Speaker 1: worst emerging market debt crisis in the in the last
• 16:12
  Speaker 1: half century, certainly since World War Two. You'd have to
• 16:15
  Speaker 1: go back to a situation to the Great Depression to
• 16:18
  Speaker 1: find anything as serious as we're facing today in the
• 16:22
  Speaker 1: emerging market. So China is really the unknown quantity here
• 16:27
  Speaker 1: as to what they will do and how they'll cooperate. Yeah,
• 16:30
  Speaker 1: and it's not just that, it's that capital is also
• 16:32
  Speaker 1: getting sucked out of these market spill as investors decided
• 16:35
  Speaker 1: to head for the hills and go somewhere a bit
• 16:37
  Speaker 1: more favorable. What can these emerging markets do to attract
• 16:41
  Speaker 1: capital back. Well, I think one of the things they
• 16:44
  Speaker 1: have to do is they have to go to international
• 16:48
  Speaker 1: financial institutions like the I m F, the World Bank
• 16:51
  Speaker 1: and try and gets as much as possible get aid
• 16:54
  Speaker 1: in this particular moment. Also, the G twenty is key here.
• 16:58
  Speaker 1: On the last G twenty meeting, they agree UH to
• 17:00
  Speaker 1: postpone debt UH sort of a form of temporary tetric
• 17:05
  Speaker 1: giveness to a debt forgiveness to the end of the year.
• 17:08
  Speaker 1: The question is what are they going to do afterwards?
• 17:11
  Speaker 1: And UH, I think getting control of COVID is very
• 17:14
  Speaker 1: very important. One country that goes unnoticed here in the
• 17:18
  Speaker 1: emerging markets that actually has the best record of of
• 17:22
  Speaker 1: all of them, uh, perhaps equal to Taiwan, but Taiwan
• 17:27
  Speaker 1: is not really an emerging market country is Vietnam. It's
• 17:31
  Speaker 1: amazing they have had no deaths and they have done
• 17:35
  Speaker 1: the best work in this area. UH. And it's it's
• 17:39
  Speaker 1: really almost unknown. UH. And so what it shows is
• 17:43
  Speaker 1: a country can take the proper steps if it recognizes
• 17:47
  Speaker 1: that it has this problem with the pandemic UH, and
• 17:50
  Speaker 1: then try and reopen once they see that they have
• 17:54
  Speaker 1: it under control. So the question here is you have
• 17:57
  Speaker 1: to get it under control and then open up in
• 17:59
  Speaker 1: an orderly fashion. UH. So I think then capital could
• 18:04
  Speaker 1: eventually flow back, But right now it's what they can
• 18:08
  Speaker 1: do on restructuring their debt UH and getting support from
• 18:11
  Speaker 1: international financial institutions. And very importantly, the private sector is
• 18:16
  Speaker 1: deeper in the debt UH than we've seen, as I said,
• 18:19
  Speaker 1: in the last half century, and that's going to be
• 18:21
  Speaker 1: even more difficult to deal with than the sovereign all
• 18:25
  Speaker 1: right bill. So you know, back in the day in
• 18:28
  Speaker 1: the Latin American debt crisis, the various countries would come
• 18:31
  Speaker 1: to you at City Bank or the good folks that
• 18:34
  Speaker 1: even you know, the old Chemical Bank or the Chase
• 18:37
  Speaker 1: Manhattan Bank and say, listen, we need to kind of
• 18:39
  Speaker 1: sit down and rework this. Now the debt is not
• 18:43
  Speaker 1: necessarily owned by big financial institutions per se in New York,
• 18:46
  Speaker 1: the big banks, but by hedge funds and others. How
• 18:50
  Speaker 1: can this play out in any timely fashion. Well, I
• 18:53
  Speaker 1: think that's a key question because when we did the
• 18:56
  Speaker 1: restructurings UH at the time of Latin American crisis, and
• 19:00
  Speaker 1: even in the beginning of the Asian financial crisis, most
• 19:04
  Speaker 1: of the UH, most of the indebtedness was was on
• 19:07
  Speaker 1: the paper was held by banks. But since the Brady
• 19:10
  Speaker 1: Plan UH, it's been securitized and as you say, it's
• 19:14
  Speaker 1: hedge funds, money market funds, you name it hold most
• 19:18
  Speaker 1: of this paper. So it's not like getting banks around
• 19:22
  Speaker 1: the table and cutting a deal. It's much more difficult
• 19:26
  Speaker 1: to do. So this is why you need a more
• 19:29
  Speaker 1: orderly process working with the I m F, the World Bank,
• 19:34
  Speaker 1: and the Paris Club as soon as you can. And
• 19:38
  Speaker 1: Africa particularly has a very difficult situation, and UH you
• 19:44
  Speaker 1: have so many countries that are highly indebted there and
• 19:48
  Speaker 1: when you take a look at the outstanding there's no
• 19:50
  Speaker 1: way that they can pay back this debt anytime soon.
• 19:53
  Speaker 1: So you need a major effort by the G twenty,
• 19:56
  Speaker 1: which includes China UH to put a program forth to
• 20:00
  Speaker 1: help these countries regain market access, and the financial sector
• 20:05
  Speaker 1: on the private sector side has got to be able
• 20:08
  Speaker 1: to participate in this. Also, Yeah, bill doesn't matter if
• 20:12
  Speaker 1: the US doesn't recognize some of these institutions. I mean,
• 20:14
  Speaker 1: right now that's not the case, but you just never know.
• 20:17
  Speaker 1: And you know, I'm just looking at w c rs
• 20:19
  Speaker 1: on the Bloomberg. The rand is down seventeen versus the
• 20:22
  Speaker 1: dollar year today, the lira down twelve and a half percent,
• 20:25
  Speaker 1: the ruble down ten percent. I mean, there's a serious
• 20:27
  Speaker 1: deficit here. Well, I think one of the problems is
• 20:30
  Speaker 1: that when you take a look at the currency markets,
• 20:33
  Speaker 1: although the dollar has been under under attack recently, basically
• 20:37
  Speaker 1: these countries borrowed UH in foreign currency, mostly in dollars
• 20:41
  Speaker 1: but also euros, and they're gonna have a real difficult
• 20:44
  Speaker 1: time in UH in in paying back, which exacerbates the
• 20:47
  Speaker 1: situation even more. So what you have to do is
• 20:51
  Speaker 1: to is to basically get the international financial institutions working
• 20:55
  Speaker 1: with UH these bondholders and by time so these countries
• 21:00
  Speaker 1: can get over this pandemic and start, you know, getting
• 21:04
  Speaker 1: people back to work. It's a tough process and I
• 21:07
  Speaker 1: really think the most difficult economic problem that we will
• 21:12
  Speaker 1: face getting the world back to growth is in the
• 21:16
  Speaker 1: emerging markets. It's not in Europe, it's not in the
• 21:19
  Speaker 1: United States or China, it's not in the developed world.
• 21:22
  Speaker 1: It's in the developing world. And we've never seen anything
• 21:25
  Speaker 1: quite like this UH since all the bond defaults of
• 21:29
  Speaker 1: the emerging market countries in a great depression. Bill, it
• 21:33
  Speaker 1: is always great to get your perspective, particularly on topics
• 21:36
  Speaker 1: like this, and it seems, unfortunately like there is never
• 21:39
  Speaker 1: any shortage. So Bill, thanks for joining us today. That
• 21:42
  Speaker 1: is William R. Roads of William or Roads Global Advisors,
• 21:46
  Speaker 1: And I'm just getting an email from one of our
• 21:48
  Speaker 1: e M experts in house, Paul Damiens. We're talking about right,
• 21:52
  Speaker 1: it's a good timing talking about how actually it's shifting
• 21:56
  Speaker 1: the sentiment across major E M E. T F s
• 21:58
  Speaker 1: seems to be getting better flows or accelerating sharply. So
• 22:02
  Speaker 1: that's something I suppose some kind of a signal anyway,
• 22:05
  Speaker 1: because it's the way back in March it was just,
• 22:07
  Speaker 1: you know, nobody had any appetite for anything emerging market. Yeah, exactly.
• 22:13
  Speaker 1: This is Bloomberg Markets with Paul Sweeney and Bunny Quinn
• 22:17
  Speaker 1: on Bloomberg Radio. Welcome to Bloomberg Markets, as the man said,
• 22:22
  Speaker 1: so let's get to our next conversation now with virologists
• 22:26
  Speaker 1: from Harvard University. Dr Peter Kolchinsky, actually extremely excited to
• 22:30
  Speaker 1: speak with you. You're the author of the Great American
• 22:32
  Speaker 1: Drug deal in new prescription for innovative and Affordable medicines.
• 22:36
  Speaker 1: So Dr Kolchinsky, will it be the great American drug
• 22:40
  Speaker 1: that provides us with our vaccinations or will it be
• 22:42
  Speaker 1: the great Chinese drug? I thank you very much for
• 22:47
  Speaker 1: having me on the show. I should point out I
• 22:49
  Speaker 1: am a scientist by training. I did my biology training
• 22:53
  Speaker 1: at Harvard, but for my whole career I've been a
• 22:56
  Speaker 1: biotechnology investor of venture capitalists. So I look at this
• 23:00
  Speaker 1: industry from the standpoint of an investor evaluating a lot
• 23:03
  Speaker 1: of different companies, and I think that, um, while China
• 23:08
  Speaker 1: has been a larger player in the drug development UM
• 23:12
  Speaker 1: industry over the last ten fifteen years, UM, I think that, uh,
• 23:16
  Speaker 1: the COVID response globally has been somewhat nationalistic. And my
• 23:20
  Speaker 1: guess is that China is gonna conserve its vaccine doses
• 23:24
  Speaker 1: for its own people, and you know, Europe is looking
• 23:27
  Speaker 1: to lock down doses, and so the US is going
• 23:30
  Speaker 1: to be getting doses from companies that it's contracted with.
• 23:34
  Speaker 1: So Peter, I mean, you know, some people have been
• 23:37
  Speaker 1: talking about, you know, whoever gets it first maybe should
• 23:40
  Speaker 1: just license it to everybody else for the common good?
• 23:44
  Speaker 1: Is that a is that something you think could happen
• 23:47
  Speaker 1: here or is this something that maybe some of these
• 23:49
  Speaker 1: companies are going to look to profit off of. You know,
• 23:53
  Speaker 1: if only it worked that way. But you know, the
• 23:55
  Speaker 1: getting there first, it's not like writing a book and
• 23:58
  Speaker 1: being able to just hit published and then there's infinite downloads. Uh,
• 24:02
  Speaker 1: you know, you can get there first and then you
• 24:03
  Speaker 1: have to actually scale up manufacturing. And so the first
• 24:07
  Speaker 1: vaccines that are likely to prove out maybe later this fall, UM,
• 24:12
  Speaker 1: they're still going to be constrained by the fact that
• 24:14
  Speaker 1: you know, companies are going to be uh scaling up
• 24:17
  Speaker 1: manufacturing and maybe getting to the point of tens of
• 24:20
  Speaker 1: millions of doses. You know, if we get to a
• 24:22
  Speaker 1: hundred million doses by the end of this year collectively
• 24:24
  Speaker 1: across the few vaccines, that will be amazing. But that's
• 24:27
  Speaker 1: not enough to vaccinate you know, even the US, let
• 24:30
  Speaker 1: alone US and Europe and you know all the other
• 24:32
  Speaker 1: countries that are out there. So as an investor who
• 24:36
  Speaker 1: is very familiar with how these drugs are developed and
• 24:39
  Speaker 1: these vaccines are developed, where have you been investing? Dr
• 24:42
  Speaker 1: clsn Ski you can call me Peter, uh and uh,
• 24:48
  Speaker 1: we don't we don't talk about where we specifically have
• 24:50
  Speaker 1: been invested with regulated entity, but you know people can
• 24:52
  Speaker 1: look up our public filings, UM, but we we've been
• 24:56
  Speaker 1: uh certainly looking and to support companies that are working
• 24:59
  Speaker 1: on a range of products from vaccines to small molecule drugs,
• 25:04
  Speaker 1: Like wouldn't it be great to have an oral version
• 25:07
  Speaker 1: of remdessevere so that a person can just show up
• 25:10
  Speaker 1: at the hospital, be diagnosed, to be sent home with
• 25:11
  Speaker 1: the prescription um and not have to stay in the
• 25:14
  Speaker 1: hospital getting I D infusions. So, Peter, what do you
• 25:18
  Speaker 1: make of the uh Blueberg News has been reporting over
• 25:22
  Speaker 1: the last day or so about a potential deal between
• 25:24
  Speaker 1: Astra Zeneca and Gilead. Is that something that you think
• 25:27
  Speaker 1: if there is some talks going on, would that be
• 25:29
  Speaker 1: something driven by the coronavirus maybe a need to get
• 25:33
  Speaker 1: scale in production or what do you make of that?
• 25:37
  Speaker 1: I think I think it's totally unrelated. You've got a
• 25:39
  Speaker 1: hundred forty billion market cab company in nineties something billion
• 25:42
  Speaker 1: market cap company. Their valuations are not tied to, you know,
• 25:47
  Speaker 1: anything to do with coronavirus. Uh, And you know these
• 25:50
  Speaker 1: are if these discussions are even real, they're uh, you know,
• 25:54
  Speaker 1: related to other things more like oncology. Probably on that
• 25:59
  Speaker 1: the scaling problem. I mean obviously almost any company, probably
• 26:03
  Speaker 1: every company that does come up with a vaccine will
• 26:05
  Speaker 1: have this problem. It would seem to me like that
• 26:07
  Speaker 1: that might be the profit center. So if you're an
• 26:10
  Speaker 1: investor looking at various areas, do you avoid you know,
• 26:13
  Speaker 1: the drug companies that are engaging in research and development
• 26:16
  Speaker 1: and you just go straight for the smaller companies. Potentially
• 26:19
  Speaker 1: that will provide the ability to these winners to scale. Um. Well,
• 26:25
  Speaker 1: they they're quite a sizeable companies that are enabling others
• 26:28
  Speaker 1: to scale UH. And I think right now you're absolutely right.
• 26:32
  Speaker 1: It's actually unclear where the profits are going to be
• 26:35
  Speaker 1: in the drugs and vaccines. You know, there are some
• 26:38
  Speaker 1: well meaning people who say that all these products you
• 26:40
  Speaker 1: just be given away at cost. I think that's probably
• 26:43
  Speaker 1: a terrible way to inspire the private sector to risk
• 26:47
  Speaker 1: capital to help save the world. I think that it
• 26:50
  Speaker 1: makes sense for there to be some reward for that, UM.
• 26:53
  Speaker 1: But we already have a mechanism for that. We've got
• 26:55
  Speaker 1: bar to, for example, a government agency getting out massive
• 26:59
  Speaker 1: con tracks to companies that have promising vaccines UH in
• 27:04
  Speaker 1: order to help them scale up their manufacturing even before
• 27:07
  Speaker 1: they've proven that their vaccine works. You know, funding manufacturing
• 27:11
  Speaker 1: at risk, as they say, and in exchange UH securing
• 27:16
  Speaker 1: doses for Americans. And Bobard has given something now to
• 27:20
  Speaker 1: Jane j and metal Vas and then you know companies
• 27:24
  Speaker 1: UH that are taking all kinds of different approaches in
• 27:27
  Speaker 1: order to hedge our bets. Peter, thanks so much for
• 27:30
  Speaker 1: joining us. We really appreciate your thoughts and insight. Dr
• 27:34
  Speaker 1: Peter Kolchinski, Managing Director of r a capital management based
• 27:38
  Speaker 1: in Boston, also the author of the book entitled The
• 27:41
  Speaker 1: Great American Drug Deal, A New Prescription for Innovation and
• 27:44
  Speaker 1: Affordable Medicines. And Vanni, I think you know, Peter hit
• 27:48
  Speaker 1: on one of the big issues here. It's let's assume
• 27:50
  Speaker 1: that somebody comes up with the with the VA vaccine. Uh,
• 27:53
  Speaker 1: certainly people are working on it, but how do you
• 27:55
  Speaker 1: scale manufacturing and scale distribution exactly? And you definitely have
• 27:59
  Speaker 1: seen some some small deals and acknowledge said that, you know,
• 28:02
  Speaker 1: obviously it's the bigger companies that can help companies scale better,
• 28:05
  Speaker 1: but you have seen small deals go down with with
• 28:08
  Speaker 1: some of the companies that are looking to manufacture vaccines,
• 28:11
  Speaker 1: buying you know, other manufacturers so that they could potentially
• 28:14
  Speaker 1: scale up quickly. But it will be interesting to see
• 28:16
  Speaker 1: because you know, it isn't clear that these vaccines, if
• 28:20
  Speaker 1: they do indeed emerge, will make money for their for
• 28:23
  Speaker 1: their for their companies. And if they do, it will
• 28:26
  Speaker 1: be a long time. It will be and and then
• 28:28
  Speaker 1: obviously the question everybody wants answered right now is when
• 28:31
  Speaker 1: when will vaccines be ready so that we can presumably
• 28:35
  Speaker 1: get back to a more uh normal life. If you will,
• 28:38
  Speaker 1: so that's the big issue for big farmer