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Microsoft’s Xbox to Cut 3200 Jobs, Divest Studios in Overhaul · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio, Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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• 0:24
  Speaker 2: Pieces of news coming across the tape here this morning
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  Speaker 2: on the tech side is Microsoft's Xbox unit plans to
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  Speaker 2: cut thirty two hundred jobs and invest studios in another
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  Speaker 2: overall here, Brody Ford, Bloomberg Technology reporter, joined us here. Brody,
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  Speaker 2: what's going on at Microsoft here?
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  Speaker 3: Today?
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  Speaker 4: Pretty much across the industry of technology, you see companies
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  Speaker 4: trying to rethink where they're spending money. A lot of
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  Speaker 4: this is fuel because they're spending so much on AI
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  Speaker 4: and building our data centers and infrastructures that they're taking
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  Speaker 4: a closer look across all divisions. So today Xbox is
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  Speaker 4: the one that we see really kind of getting that hammer.
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  Speaker 4: They laid out a plan to cut about twenty percent
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  Speaker 4: of staff over the next year, and broader at Microsoft,
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  Speaker 4: it's a plan to cut about sixty four hundred people. Again,
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  Speaker 4: just kind of trimming both an Xbox and sales trying
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  Speaker 4: to reorient for what they say will help you know,
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  Speaker 4: them grow in this next era.
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  Speaker 5: Brody, what is the rationale for Microsoft keeping Xbox? The
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  Speaker 5: CEO of the Xbox division wrote in a note to
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  Speaker 5: staff this morning, And this is based on your reporting
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  Speaker 5: that Xbox is operating at margins three to ten times
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  Speaker 5: lower than comparable businesses. I mean, financially, it's not keeping up.
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  Speaker 5: So why does Microsoft want to keep it?
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  Speaker 4: It's a good question. Microsoft really has traditionally struggled with
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  Speaker 4: consumer businesses. You know, every time they've kind of tried
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  Speaker 4: to spin up, say like a smartphone or things of
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  Speaker 4: this nature over history, it hasn't always gone super well.
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  Speaker 4: Xbox they've been traditionally committed to because it was a
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  Speaker 4: unique blend of hardware and software and they found a
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  Speaker 4: niche in it. And yeah, today is them trying to
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  Speaker 4: reorient that business into something that they can keep and
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  Speaker 4: grow for the long term. So you see them spinning
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  Speaker 4: off a lot of studios talking about how owning content
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  Speaker 4: makers maybe isn't the business they want to be in,
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  Speaker 4: but owning the platform is something they're still interested in doing.
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  Speaker 2: How much is Xbox do we know of their total revenue?
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  Speaker 2: Like how material is it for the financials of this company.
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  Speaker 4: It's a decent chunk of revenue, right, I mean the
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  Speaker 4: issue is the profit. A lot of people buy video games,
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  Speaker 4: a lot of people buy consoles, but you know, Microsoft
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  Speaker 4: has really struggled to make it super profitable. I think
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  Speaker 4: a lot of people forget about the Activision acquisition a
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  Speaker 4: couple of years ago. I mean, I think I was saying,
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  Speaker 4: like sixty nine billion dollars, it was one of the
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  Speaker 4: biggest tech acquisitions of all time. And yet a couple
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  Speaker 4: of years later we find that the margins haven't kept up,
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  Speaker 4: the growth isn't quite what they hoped it would be.
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  Speaker 4: Of course, we have the component crunch, right. A lot
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  Speaker 4: of things like chips and memory have increased in price,
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  Speaker 4: which kind of accelerate all of these issues. So it
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  Speaker 4: is a material business for Microsoft. It's something they're ready
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  Speaker 4: to throw away, but it's something that they feel they
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  Speaker 4: need to really kind of take a closer look at.
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  Speaker 5: I know you don't cover Sony per se, but how
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  Speaker 5: do Xbox's fortunes compare with say, the Sony PlayStation.
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  Speaker 4: A lot of console makers are struggling right now because
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  Speaker 4: of that memory crunch, Because AI has essentially messed with
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  Speaker 4: the supply chains for a lot of different components that
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  Speaker 4: go into computers and infrastructures. And so if you're a
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  Speaker 4: console maker that's already running at pretty slim margins and
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  Speaker 4: then all of a sudden your memory chips double in price,
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  Speaker 4: that's going to make everything tough. And more broadly, content
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  Speaker 4: makers are needing to compete against, you know, a wider
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  Speaker 4: variety of content that's going to be created with AI.
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  Speaker 4: I mean, as it relates to Triple A game, they're not,
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  Speaker 4: you know, being created with AI. But there's just so
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  Speaker 4: many more places for eyeballs to be focused on these
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  Speaker 4: days that if you're selling content, it's a more competitive market.
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  Speaker 2: Microsoft stocks down year to dat. It's rare that you
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  Speaker 2: see that kind of performance out of Microsoft. What's the
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  Speaker 2: feeling within the office is that they're Redmond Washington? I mean,
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  Speaker 2: did they talk about their stock? Did they ignore their stock?
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  Speaker 2: How did they kind of just talk about it? Think
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  Speaker 2: about it?
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  Speaker 4: When you ask an executive, they say, oh, I don't
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  Speaker 4: care about the stock price. I focus on executing. You
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  Speaker 4: ask an employee and they say, what the heck is
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  Speaker 4: going on with our stock price? Right? And that's consistent
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  Speaker 4: across all companies. The big thing for Microsoft, and you
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  Speaker 4: can see with other hyper skills, you can see with
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  Speaker 4: Oracle very well, is that, on one hand, Wall Street
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  Speaker 4: is worried about all this spending, is it going to
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  Speaker 4: pay off all the data centers. On the other end,
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  Speaker 4: there are traditional software businesses that have really created the
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  Speaker 4: cash cow that is Microsoft. Does that last in the
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  Speaker 4: age of AI? So they kind of have these two
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  Speaker 4: concurrent fears which are leading to, yeah, some weakness for
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  Speaker 4: a stock that has been just a pretty consistent safe
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  Speaker 4: harbor and so much choppiness over the market recent years.
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  Speaker 5: Brody, I know you cover Microsoft. That company is going
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  Speaker 5: to be reporting its quarterly results at the end of
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  Speaker 5: this month. Will this Xbox closure do you think result
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  Speaker 5: in some surprising financials on earnings day?
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  Speaker 4: What I would expect to hear them talk about is
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  Speaker 4: ongoing focus on margins, which you know is corporate speak
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  Speaker 4: for we're planning to fire twenty percent of people at Xbox.
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  Speaker 4: You know, I think we'll hear them talk about how, look,
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  Speaker 4: we're spending a ton of money on our data centers,
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  Speaker 4: on our chips, Our capex is in the past hundreds
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  Speaker 4: of billions of dollars a year. But we're doing what
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  Speaker 4: we can to trim costs everywhere, and we're going to
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  Speaker 4: make sure that we're really getting an ROI out of
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  Speaker 4: every dollar. I think that will be the high level message,
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  Speaker 4: and if you poke underneath that, you see phenomena like
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  Speaker 4: the cost cuts today.
• 6:02
  Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
• 6:08
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 6:15
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• 6:19
  Speaker 1: you get your podcasts, or watch us live on YouTube.
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  Speaker 2: Believe it or not. Kind of flying under the radar
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  Speaker 2: screen here, we're kind of getting a quasi IPO coming soon.
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  Speaker 2: Sk Heinex, the Korean company they make all the memory
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  Speaker 2: chip stocks up like a jillion percent. They're going to
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  Speaker 2: list seventeen point seven nine million shares ADRs in the US,
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  Speaker 2: and I think that's if I'm my math is correct,
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  Speaker 2: that's like a twenty eight billion dollar offering. I mean,
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  Speaker 2: we're kind of getting numbed to these huge numbers with Goldman,
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  Speaker 2: I mean, Google doing their secondary earlier this year, and
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  Speaker 2: all the big IPOs we've seen with SpaceX. But let's
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  Speaker 2: put it in context here. We can do that with
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  Speaker 2: the Bailey Lipschaltz, senior equities reporter for Bloomberg News. Bailey
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  Speaker 2: talked to us about what sk heinez is doing. Yeah,
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  Speaker 2: so this is a company.
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  Speaker 7: To your point, nominally a twenty eight billion would be
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  Speaker 7: the third largest IPO ever on any exchange, so behind SpaceX,
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  Speaker 7: behind Saudi Aramco, which is pretty mind boggling, to be
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  Speaker 7: completely honest. The thing to keep in mind is so
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  Speaker 7: this is an adr adr IPO, So basically they're selling
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  Speaker 7: shares for the first time here in the US. They
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  Speaker 7: will maintain a home listing on the other side of
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  Speaker 7: the world in South Korea. Each ADR represents one tenth
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  Speaker 7: of one common share. Why does that all matter? A.
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  Speaker 7: As you mentioned, a twenty eight billion dollar offering is
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  Speaker 7: very large. B this is a company worth more than
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  Speaker 7: a trillion dollars. And see this opens up everyone on
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  Speaker 7: Wall Street, everyone in the US to now actually trade
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  Speaker 7: sk Heinex on New York hours, on US hours and
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  Speaker 7: be able to cater to not only retail investors but
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  Speaker 7: institutional investors. We already saw Bailey, Gifford Cochu and Situational
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  Speaker 7: Awareness partners indicating they want to buy as much as
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  Speaker 7: seven billion dollars of this deal. So big numbers, but
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  Speaker 7: it's also a right time for the company.
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  Speaker 2: Timing. I've heard people talk about maybe this feels a
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  Speaker 2: little top of the market kind of thing. Are you
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  Speaker 2: hearing that out in the marketplace?
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  Speaker 4: Yeah.
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  Speaker 7: When we talk to people, the main question is can
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  Speaker 7: we structurally say this time is different and why does
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  Speaker 7: that matter? For semiconductors. Semiconductors are the most cyclical business
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  Speaker 7: on Wall Street, So this is an industry that booms
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  Speaker 7: and busts. Is kind of the PC and smartphone eras evolve,
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  Speaker 7: and is sales kind of mature. From there, the big
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  Speaker 7: question is will we continue to see demand for building
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  Speaker 7: out data centers? Will we continue to see that here
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  Speaker 7: on Earth and potentially as SpaceX wants to do in space?
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  Speaker 7: And the big question from there goes, these are companies
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  Speaker 7: that want to spend hundreds of billion dollars to build
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  Speaker 7: out manufacturing capacity right now there's a bottleneck to get
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  Speaker 7: compute and get access to these chips.
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  Speaker 2: Well, what happens if it's not that easy? And that's
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  Speaker 2: the big risk. So just from a US listing, perspective,
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  Speaker 2: do is this going to go in various indices? The
• 9:03
  Speaker 2: is ske heinis in the various indexes around the world.
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  Speaker 7: It's in some when you just kind of look using
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  Speaker 7: the WGT function, which will pull up which indexes the
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  Speaker 7: company is in. Obviously, again it's one of the bigger,
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  Speaker 7: bigger companies in the world, so it's in obviously a
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  Speaker 7: big driver behind the costpy the Korean Exchange. It's also
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  Speaker 7: in a number of those Emerging Market et emerging market indexes.
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  Speaker 7: The big thing to keep an eye on. The big
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  Speaker 7: thing that does matter is it's not eligible for fast
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  Speaker 7: tracked Nasdaq one hundred inclusion, but in the long run
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  Speaker 7: it will likely be included in the Nasdaq and one
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  Speaker 7: hundred and everything that that brings. Obviously, we talked about
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  Speaker 7: that with SpaceX. That is a fundamental shift for a
• 9:42
  Speaker 7: company again that has been very difficult to trade for
• 9:45
  Speaker 7: US investors. And then the question from there goes, Okay,
• 9:48
  Speaker 7: do we get to see double and triple leverty tfs
• 9:51
  Speaker 7: and kind of what happens with that entire explosion from there?
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  Speaker 2: So will this open up new buyers, I guess potential
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  Speaker 2: new owners for this stock.
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  Speaker 7: Yeah, when we've spoke with a number of institutional investors,
• 10:05
  Speaker 7: whether they couldn't trade companies that are listed in an
• 10:08
  Speaker 7: emerging market, whether they just don't want the headache of
• 10:11
  Speaker 7: worrying about foreign exchange and hedging some of those risks.
• 10:15
  Speaker 7: Those have been top of mind. We do know a
• 10:17
  Speaker 7: few investors that we spoke to for our story that
• 10:19
  Speaker 7: went out Sunday morning. There also are investors who just
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  Speaker 7: aren't comfortable with an ADR. They want to own companies
• 10:25
  Speaker 7: that are domiciled here. They want to own companies that
• 10:27
  Speaker 7: they're primary listing is in the US as opposed to this.
• 10:30
  Speaker 7: It'll be interesting to see what kind of premium it
• 10:33
  Speaker 7: trades at. This is kind of ripping off the playbook
• 10:35
  Speaker 7: that we saw with Taiwan Semi, but again that was
• 10:37
  Speaker 7: a company that raised a few hundred million, not closer
• 10:40
  Speaker 7: to thirty billion.
• 10:41
  Speaker 2: What's the timing of this deal.
• 10:43
  Speaker 7: It'll price, It'll trade on Friday. We expect pricing to
• 10:47
  Speaker 7: happen sometime Thursday morning here, so that it would open
• 10:50
  Speaker 7: up kind of making sure that people are able to
• 10:52
  Speaker 7: trade accordingly in South Korea their Friday morning. It's a
• 10:56
  Speaker 7: truncated process, it's a quicker process. But even talking to
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  Speaker 7: the bankers on the deal. If you want to invest
• 11:01
  Speaker 7: in Eski Hiinix, you probably know who the company is
• 11:03
  Speaker 7: and you're not selling a new entire pitch. The one
• 11:06
  Speaker 7: thing that we've been pointing out is their main roadshow
• 11:08
  Speaker 7: at one thirty pm New York time will be the
• 11:11
  Speaker 7: only real interaction with management on a webcast for potential
• 11:16
  Speaker 7: just a webcast, kind of a webcast, very quick process. Again,
• 11:19
  Speaker 7: it's tied to it. Ye over complicated, Just.
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  Speaker 2: Another great day to be an IPEEL banker.
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  Speaker 7: Right, Yeah, they're making I think it was fifty biffs
• 11:28
  Speaker 7: on this deal, So okay. We had a few bankers
• 11:31
  Speaker 7: who said, you know this is this isn't easy. But
• 11:33
  Speaker 7: when you compare to being at the beck and Call
• 11:36
  Speaker 7: of elon Musk night and day between the spacexipo exactly.
• 11:39
  Speaker 2: And then how about Anthropics that's still thinking maybe fall,
• 11:44
  Speaker 2: late fall something like that.
• 11:45
  Speaker 7: We've heard nothing to change expectations around that September October timeframe. Obviously,
• 11:51
  Speaker 7: potential delay of open AI into next year becomes a
• 11:53
  Speaker 7: question of if you're Anthropic, do you need to race
• 11:56
  Speaker 7: and get out in September or do you want to
• 11:58
  Speaker 7: have a better kind of a visibility business maybe in
• 12:01
  Speaker 7: that October November timeframe.
• 12:03
  Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:09
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 12:13
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:16
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• 12:20
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:23
  Speaker 5: We want to go now to our colleague in London, who,
• 12:26
  Speaker 5: along with his colleagues, have put together a list of
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  Speaker 5: ten companies to watch for in the third quarter of
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  Speaker 5: twenty twenty six. There are companies that dabble in Chips,
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  Speaker 5: chocolate and Barbie. So let's check in with Tim Craighead,
• 12:39
  Speaker 5: he is our global Chief Content Officer, on the ten
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  Speaker 5: companies that you want to watch for right now? Good morning, Tim.
• 12:45
  Speaker 5: What's the first one you would want to highlight?
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  Speaker 8: Well, if you don't mind, I'll give you just a
• 12:50
  Speaker 8: little bit of context on this, just to put it
• 12:53
  Speaker 8: into some perspective. I think you set it up quite well,
• 12:56
  Speaker 8: but I would just simply add that these ten are
• 13:00
  Speaker 8: part of a broader group of what we call focus ideas,
• 13:03
  Speaker 8: which are high conviction, fundamental views that our analysts have
• 13:07
  Speaker 8: across sectors across the globe. There's about one hundred and
• 13:09
  Speaker 8: sixty of them, and the reason why we got to
• 13:12
  Speaker 8: these ten is that they all have timely catalysts coming
• 13:17
  Speaker 8: up in the third quarter that we think can change
• 13:20
  Speaker 8: the market perception company by company. And look, you know,
• 13:24
  Speaker 8: the biggest when it's in AI, it's very much it
• 13:29
  Speaker 8: seems like out of favor is Microsoft. You know, this
• 13:33
  Speaker 8: is a this is a stock that has been under
• 13:37
  Speaker 8: pressure since last autumn, even while other hyperscalers like Amazon
• 13:43
  Speaker 8: and Google have been have been trading better. In the
• 13:46
  Speaker 8: semiconductor companies clearly that are all AI driven have been
• 13:50
  Speaker 8: have been on fire. And you know, bottom line, it
• 13:54
  Speaker 8: seems like the perception is that Microsoft is going to
• 13:57
  Speaker 8: be disrupted, you know, to use the buzzword. But in
• 14:02
  Speaker 8: our perspective, you know, they've got one of the biggest,
• 14:05
  Speaker 8: if not the biggest LLLM cloud platforms that are being used,
• 14:12
  Speaker 8: and they've got a new Microsoft three sixty five suite
• 14:16
  Speaker 8: that comes out in the second half. We think both
• 14:18
  Speaker 8: of those can continue to drive revenue that's going to
• 14:21
  Speaker 8: positively surprise.
• 14:24
  Speaker 2: Barbie Mattel. What's your story there, Tim.
• 14:28
  Speaker 8: Yeah, Well, the interesting thing with this is not all
• 14:32
  Speaker 8: of these focus ideas, Not all of these ten companies
• 14:35
  Speaker 8: are constructive positive calls. There's also ones where we're cautious
• 14:40
  Speaker 8: or concerned, and that's the case with Mattel. You know,
• 14:46
  Speaker 8: there was a nice big surge in doll demand, Barbie
• 14:50
  Speaker 8: demand in and around the Barbie Movie a couple of
• 14:54
  Speaker 8: years ago, going back to your stomping around Paul in media,
• 14:58
  Speaker 8: and we've seen since then is a progressive shift more
• 15:03
  Speaker 8: towards building sets and trading cards. In terms of what's
• 15:08
  Speaker 8: cool in the world of toys, dolls are not, and
• 15:12
  Speaker 8: we think that there's continued disappointment from the standpoint of
• 15:15
  Speaker 8: doll sales, specifically Barbie, as we look through the second
• 15:18
  Speaker 8: half of the year.
• 15:20
  Speaker 5: I did see Toy Story and I feel like, you know,
• 15:22
  Speaker 5: maybe that gives a little.
• 15:24
  Speaker 2: Bit of a jumpstart to Toy Story five.
• 15:26
  Speaker 6: Toy Story five and what do you think. I liked it?
• 15:28
  Speaker 2: Oh, yeah, it was good.
• 15:29
  Speaker 5: I liked you know, the face off against tech and
• 15:32
  Speaker 5: screens and all that.
• 15:33
  Speaker 8: But I digress, tim I wanted to do we will hear, yeah,
• 15:37
  Speaker 8: we will hear more about that in their earning to release.
• 15:40
  Speaker 5: So okay, so that is something we can update as
• 15:43
  Speaker 5: we get closer to that, I want to get to
• 15:45
  Speaker 5: a European company as well, because you have a solar
• 15:48
  Speaker 5: edge as a company to watch for in Europe, and
• 15:51
  Speaker 5: I think about what's going on with the heat wave
• 15:54
  Speaker 5: there and how energy security continues to be an issue
• 15:57
  Speaker 5: for the continent.
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  Speaker 8: Yeah, it is all about energy security, and you know
• 16:05
  Speaker 8: it's it's been lit up obviously yet again in the
• 16:09
  Speaker 8: wake of the crisis or the conflict in the Middle East.
• 16:13
  Speaker 8: You know, it started to begin with with Russia, Ukraine
• 16:17
  Speaker 8: and Europe is in the is in Thenazi and no
• 16:22
  Speaker 8: pun intended. And the ramp up that we're seeing in
• 16:28
  Speaker 8: terms of solar equipment related orders we think will continue
• 16:33
  Speaker 8: to surprise. It's been recovering for a for a couple
• 16:37
  Speaker 8: of quarters and we think that there is more to
• 16:39
  Speaker 8: come and not fully yet appreciated. But it is all
• 16:43
  Speaker 8: about it's European business, even though I think it's actually
• 16:46
  Speaker 8: based in Illinois, but the European opportunity is what's driving revenue. Surprise.
• 16:53
  Speaker 2: Hong Kong Land, What is this company and why should
• 16:56
  Speaker 2: we be paying attention?
• 16:58
  Speaker 8: Yeah, So, if if either of you or any of
• 17:02
  Speaker 8: the listeners have been to Hong Kong. One of the
• 17:07
  Speaker 8: iconic buildings right on the Central Hong Kong Business District
• 17:14
  Speaker 8: waterfront as these famous circular circular windows. That's these guys
• 17:22
  Speaker 8: building along with many others. And the whole thing that's
• 17:24
  Speaker 8: going on with Hong Kong in terms of office is
• 17:27
  Speaker 8: it's coming back to life. You know, it was under
• 17:30
  Speaker 8: a significant amount of pressure post pandemic and the National
• 17:34
  Speaker 8: Security Law being implemented. People were leaving, businesses were leaving,
• 17:40
  Speaker 8: but they are now coming back. There's a surge in
• 17:42
  Speaker 8: the Hong Kong Stock Exchange. IPOs are alive, the financial
• 17:47
  Speaker 8: markets are alive, Professionals are coming back, and rents are rising,
• 17:53
  Speaker 8: and that asset value for Hong Kong Lands specifically, we
• 17:57
  Speaker 8: think is on the p swing.
• 18:00
  Speaker 6: Us More from Bloomberg Intelligence coming up after this.
• 18:06
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 2: No Vartis agreed to buy British biotech Myrix Bio for
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  Speaker 2: as much as one point five billion dollars, adding an
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  Speaker 2: experimental cancer drug designed to deliver more potent treatments directly
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  Speaker 2: to tumors while limiting damage to healthy sales. Let's break
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  Speaker 2: it down plus all the healthcare news. We can do
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  Speaker 2: that with Sam Fazzelli. He's a director of research and
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  Speaker 2: he's a pharmaceutical analyst for Bloomberg Intelligence. He's based in London.
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  Speaker 2: Sam talk to us about no vartis kind of what
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  Speaker 2: are their strengths, where do they need to get better
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  Speaker 2: and what are they doing with this particular deal.
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  Speaker 3: So Paul first, happy post source of July.
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  Speaker 9: Thank you guys all before you're readependent from the British
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  Speaker 9: all those year two hundred and fifty years ago and
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  Speaker 9: to the audience obviously. So here here we have no
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  Speaker 9: artist buying a cancer drug company. Novarts is already quite
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  Speaker 9: active in cancer. In fact, one of the areas that
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  Speaker 9: they are quite active in is getting radio radioactive material
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  Speaker 9: to your tumor. Rather than you going to get radiation
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  Speaker 9: from an external beam or a machine, this is things
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  Speaker 9: that are kind of trying to target the tumor, particularly
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  Speaker 9: prostate cancer in this case that they've got a marker
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  Speaker 9: on prostate cancer cells get radioactivity in there. But one
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  Speaker 9: of the other things that has been evolving very rapidly
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  Speaker 9: recently is getting chemotherapy directly to the tumor rather than
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  Speaker 9: ejecting it all over the body. The hope being that
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  Speaker 9: you can reduce the side effect profile and increase the efficacy.
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  Speaker 9: That's what this new deal is, and this is something
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  Speaker 9: relatively new for them. They had deals like this before
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  Speaker 9: when you look back in twenty thirteen and twenty sixteen,
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  Speaker 9: they had on some of these antibody drug contrigate type deals,
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  Speaker 9: but obviously that's over ten years ago for the later deal,
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  Speaker 9: so nothing seemed to have come out of that. So
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  Speaker 9: this is there back into that space, and I think
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  Speaker 9: it's quite an interesting, clever deal. Big upfront number though,
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  Speaker 9: that's quite interesting. One point one billion dollars cash upfront.
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  Speaker 5: So I'm glad you bring up that point. That idea
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  Speaker 5: of big upfront payments is that.
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  Speaker 6: The new norm now in these kinds of deals.
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  Speaker 9: So I don't know how competitive this deal was. I'm
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  Speaker 9: hoping to talk to some of the founders who I
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  Speaker 9: know because they're in our backyard right to try and understand,
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  Speaker 9: you know, what was it that attracted the artists so
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  Speaker 9: strongly to this. I mean you know, this is a
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  Speaker 9: British biotech company, so that means automatically that they're not
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  Speaker 9: necessarily able to go and raise hundreds of millions from
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  Speaker 9: the local market. They are in pre clinical stage, or
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  Speaker 9: very close to at least what publicly information.
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  Speaker 3: The publicly available information we have is pret clinical.
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  Speaker 9: So this is a rich number for in such an
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  Speaker 9: early company, and there's very little chance that they would
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  Speaker 9: have been able to go public. So whin of artists
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  Speaker 9: paid so much upfront rather than do what usually happens,
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  Speaker 9: I pay a smaller amount and leave the rest of
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  Speaker 9: it for milestone in the year two three years time.
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  Speaker 9: It's going to be interesting to find out they do
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  Speaker 9: have some very clever chemistry in here. And this is
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  Speaker 9: not just an ordinary for want of a better phrase,
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  Speaker 9: not that any of these drugs are ordinary antibody drug
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  Speaker 9: contrigate they have they have new drugs that they're trying.
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  Speaker 3: To get into the tumors. So that's that's interesting.
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  Speaker 2: How is what's what's the call out there on the
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  Speaker 2: VARDI stock these days?
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  Speaker 4: Sam?
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  Speaker 2: What do people have to kind of believe here to
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  Speaker 2: jump on this one?
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  Speaker 3: Yeah?
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  Speaker 9: So the shares, the shares have been doing reasonably well,
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  Speaker 9: the company's got a decent pipeline. They're one of their
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  Speaker 9: big drugs is Cocentics, which is not for oncology. It's
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  Speaker 9: for psoriasis and and that type of disease arthritis type
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  Speaker 9: diseases or t immune diseases, caut it that way, and
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  Speaker 9: that's a big drug, and some people are worried about
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  Speaker 9: it going off pattern.
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  Speaker 3: Like every former company, that's the rule of the game
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  Speaker 3: with them.
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  Speaker 9: We think in our group that Cocentics has got a
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  Speaker 9: longer life that people think.
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  Speaker 3: So you know, they have an.
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  Speaker 9: Active oncology business where there's some again same sort of story,
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  Speaker 9: but with those radio chemicals, if you remember, are highlighted,
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  Speaker 9: and a whole bunch of other drugs that are coming on.
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  Speaker 9: And here I think they're going into this. This is
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  Speaker 9: going to be a long way off in terms of
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  Speaker 9: paying back because it's a pretty clarical early phase, right,
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  Speaker 9: so it's going to be five, ten years, eight years,
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  Speaker 9: So it's not aimed at today's problems. A bit like
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  Speaker 9: the type of Lily deals we were talking about last week,
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  Speaker 9: which are some early deals that are being designed to
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  Speaker 9: make sure the company has got assets to keep thriving
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  Speaker 9: going forward.
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  Speaker 3: And this can pay off in many different ways.
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  Speaker 9: Remember, these chemicals can be attached to anybody to attack
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  Speaker 9: different types of tumors.
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  Speaker 3: So it's a platform.
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  Speaker 5: It's a platform, and everyone's trying to build one. Let
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  Speaker 5: me get your thoughts Sam overall on M and A
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  Speaker 5: in the space, you mentioned the Lily deals, and we
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  Speaker 5: know that Lily is operating from a position of strength,
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  Speaker 5: being able to go out and build up its pipeline
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  Speaker 5: in a way that perhaps other drug makers aren't able to.
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  Speaker 5: Who else is operating from that kind of position of
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  Speaker 5: strength in addition to Eli Lilly.
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  Speaker 9: Yeah, so Mark has got a pretty good cash flow position,
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  Speaker 9: astroslic has got strong cash flow. G skated a deal
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  Speaker 9: one of the deals we spoke about recently. So most
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  Speaker 9: of the farmer companies are in a pretty decent shape Abby.
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  Speaker 9: You know, they've got great, great growth and you can
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  Speaker 9: see analysts are upgrading the stock on almost a daily basis.
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  Speaker 3: So most companies do.
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  Speaker 9: Pfizer is the one that has done it's M and
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  Speaker 9: A to a degree, and now we're waiting for that
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  Speaker 9: to bear fruit. The latest one. They have done other
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  Speaker 9: deals that have been doing licensing, their partnership deals. So
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  Speaker 9: most farmer companies are in a position of strength from
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  Speaker 9: a cash brow perspective to be able to do these
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  Speaker 9: types of deals, and their balance sheets are relatively light
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  Speaker 9: across the sector as a whole, and so there's access
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  Speaker 9: to credit two if they want the to.
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