# Microsoft’s Xbox to Cut 3200 Jobs, Divest Studios in Overhaul

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 6 Jul 2026, 25 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/9d3b389e-b2c9-4b20-b0ca-b47f01124f8c/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu - Brody Ford, Bloomberg Technology Reporter, discusses Microsoft Corp.'s Xbox plans to eliminate 3,200 jobs, or around 20% of its staff over the next year, as part of a massive reorganization to spur growth in the struggling gaming division. Xbox will divest four of its video-game development studios and is beginning the process to part ways with a fifth, with the goal of streamlining the business and reinvesting in bigger projects. - Bailey Lipschultz, Bloomberg News Senior Equities Reporter, discusses SK Hynix kicking off the formal marketing process for its US listing, seeking to sell American depositary receipts representing about 17.79 million common shares. The company is looking to capitalize on surging investor demand for the high-flying memory-chip sector, with the offering of ADRs coming after the firm’s Seoul-traded stock rallied about 260% this year. - Tim Craighead, Bloomberg Intelligence Global Chief Content Officer, discusses 10 companies to watch in Q3. Bloomberg Intelligence analysts have identified interesting companies from their roster of high-confidence Focus Ideas. Spanning sectors and regions, each scenario outlines a catalyst in the next few months that supports our case. - Sam Fazeli, Bloomberg Intelligence Director of Research: Healthcare, Defence, Industrials & Autos, discusses Novartis AG agreeing to buy Myricx Bio for as much as $1.5 billion, adding an experimental cancer drug designed to deliver more potent treatments directly to tumors while limiting damage to healthy cells. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio, Studios, podcasts, radio news. You're listening to the
[0:10] Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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[0:17] Speaker 1: Business App. Listen on demand wherever you get your podcasts,
[0:21] Speaker 1: or watch us live on YouTube.
[0:24] Speaker 2: Pieces of news coming across the tape here this morning
[0:27] Speaker 2: on the tech side is Microsoft's Xbox unit plans to
[0:31] Speaker 2: cut thirty two hundred jobs and invest studios in another
[0:35] Speaker 2: overall here, Brody Ford, Bloomberg Technology reporter, joined us here. Brody,
[0:39] Speaker 2: what's going on at Microsoft here?
[0:41] Speaker 3: Today?
[0:43] Speaker 4: Pretty much across the industry of technology, you see companies
[0:47] Speaker 4: trying to rethink where they're spending money. A lot of
[0:51] Speaker 4: this is fuel because they're spending so much on AI
[0:54] Speaker 4: and building our data centers and infrastructures that they're taking
[0:57] Speaker 4: a closer look across all divisions. So today Xbox is
[1:01] Speaker 4: the one that we see really kind of getting that hammer.
[1:04] Speaker 4: They laid out a plan to cut about twenty percent
[1:07] Speaker 4: of staff over the next year, and broader at Microsoft,
[1:11] Speaker 4: it's a plan to cut about sixty four hundred people. Again,
[1:14] Speaker 4: just kind of trimming both an Xbox and sales trying
[1:18] Speaker 4: to reorient for what they say will help you know,
[1:21] Speaker 4: them grow in this next era.
[1:23] Speaker 5: Brody, what is the rationale for Microsoft keeping Xbox? The
[1:27] Speaker 5: CEO of the Xbox division wrote in a note to
[1:31] Speaker 5: staff this morning, And this is based on your reporting
[1:34] Speaker 5: that Xbox is operating at margins three to ten times
[1:37] Speaker 5: lower than comparable businesses. I mean, financially, it's not keeping up.
[1:40] Speaker 5: So why does Microsoft want to keep it?
[1:43] Speaker 4: It's a good question. Microsoft really has traditionally struggled with
[1:47] Speaker 4: consumer businesses. You know, every time they've kind of tried
[1:51] Speaker 4: to spin up, say like a smartphone or things of
[1:53] Speaker 4: this nature over history, it hasn't always gone super well.
[1:57] Speaker 4: Xbox they've been traditionally committed to because it was a
[2:00] Speaker 4: unique blend of hardware and software and they found a
[2:03] Speaker 4: niche in it. And yeah, today is them trying to
[2:06] Speaker 4: reorient that business into something that they can keep and
[2:09] Speaker 4: grow for the long term. So you see them spinning
[2:12] Speaker 4: off a lot of studios talking about how owning content
[2:17] Speaker 4: makers maybe isn't the business they want to be in,
[2:20] Speaker 4: but owning the platform is something they're still interested in doing.
[2:24] Speaker 2: How much is Xbox do we know of their total revenue?
[2:27] Speaker 2: Like how material is it for the financials of this company.
[2:31] Speaker 4: It's a decent chunk of revenue, right, I mean the
[2:34] Speaker 4: issue is the profit. A lot of people buy video games,
[2:37] Speaker 4: a lot of people buy consoles, but you know, Microsoft
[2:41] Speaker 4: has really struggled to make it super profitable. I think
[2:44] Speaker 4: a lot of people forget about the Activision acquisition a
[2:47] Speaker 4: couple of years ago. I mean, I think I was saying,
[2:49] Speaker 4: like sixty nine billion dollars, it was one of the
[2:51] Speaker 4: biggest tech acquisitions of all time. And yet a couple
[2:54] Speaker 4: of years later we find that the margins haven't kept up,
[2:58] Speaker 4: the growth isn't quite what they hoped it would be.
[3:01] Speaker 4: Of course, we have the component crunch, right. A lot
[3:04] Speaker 4: of things like chips and memory have increased in price,
[3:07] Speaker 4: which kind of accelerate all of these issues. So it
[3:10] Speaker 4: is a material business for Microsoft. It's something they're ready
[3:13] Speaker 4: to throw away, but it's something that they feel they
[3:15] Speaker 4: need to really kind of take a closer look at.
[3:19] Speaker 5: I know you don't cover Sony per se, but how
[3:21] Speaker 5: do Xbox's fortunes compare with say, the Sony PlayStation.
[3:26] Speaker 4: A lot of console makers are struggling right now because
[3:29] Speaker 4: of that memory crunch, Because AI has essentially messed with
[3:33] Speaker 4: the supply chains for a lot of different components that
[3:36] Speaker 4: go into computers and infrastructures. And so if you're a
[3:40] Speaker 4: console maker that's already running at pretty slim margins and
[3:43] Speaker 4: then all of a sudden your memory chips double in price,
[3:47] Speaker 4: that's going to make everything tough. And more broadly, content
[3:51] Speaker 4: makers are needing to compete against, you know, a wider
[3:54] Speaker 4: variety of content that's going to be created with AI.
[3:57] Speaker 4: I mean, as it relates to Triple A game, they're not,
[4:00] Speaker 4: you know, being created with AI. But there's just so
[4:03] Speaker 4: many more places for eyeballs to be focused on these
[4:06] Speaker 4: days that if you're selling content, it's a more competitive market.
[4:11] Speaker 2: Microsoft stocks down year to dat. It's rare that you
[4:15] Speaker 2: see that kind of performance out of Microsoft. What's the
[4:19] Speaker 2: feeling within the office is that they're Redmond Washington? I mean,
[4:23] Speaker 2: did they talk about their stock? Did they ignore their stock?
[4:27] Speaker 2: How did they kind of just talk about it? Think
[4:29] Speaker 2: about it?
[4:30] Speaker 4: When you ask an executive, they say, oh, I don't
[4:32] Speaker 4: care about the stock price. I focus on executing. You
[4:35] Speaker 4: ask an employee and they say, what the heck is
[4:37] Speaker 4: going on with our stock price? Right? And that's consistent
[4:41] Speaker 4: across all companies. The big thing for Microsoft, and you
[4:44] Speaker 4: can see with other hyper skills, you can see with
[4:46] Speaker 4: Oracle very well, is that, on one hand, Wall Street
[4:49] Speaker 4: is worried about all this spending, is it going to
[4:52] Speaker 4: pay off all the data centers. On the other end,
[4:54] Speaker 4: there are traditional software businesses that have really created the
[4:58] Speaker 4: cash cow that is Microsoft. Does that last in the
[5:01] Speaker 4: age of AI? So they kind of have these two
[5:03] Speaker 4: concurrent fears which are leading to, yeah, some weakness for
[5:06] Speaker 4: a stock that has been just a pretty consistent safe
[5:09] Speaker 4: harbor and so much choppiness over the market recent years.
[5:13] Speaker 5: Brody, I know you cover Microsoft. That company is going
[5:16] Speaker 5: to be reporting its quarterly results at the end of
[5:19] Speaker 5: this month. Will this Xbox closure do you think result
[5:22] Speaker 5: in some surprising financials on earnings day?
[5:26] Speaker 4: What I would expect to hear them talk about is
[5:28] Speaker 4: ongoing focus on margins, which you know is corporate speak
[5:33] Speaker 4: for we're planning to fire twenty percent of people at Xbox.
[5:37] Speaker 4: You know, I think we'll hear them talk about how, look,
[5:41] Speaker 4: we're spending a ton of money on our data centers,
[5:43] Speaker 4: on our chips, Our capex is in the past hundreds
[5:46] Speaker 4: of billions of dollars a year. But we're doing what
[5:49] Speaker 4: we can to trim costs everywhere, and we're going to
[5:51] Speaker 4: make sure that we're really getting an ROI out of
[5:54] Speaker 4: every dollar. I think that will be the high level message,
[5:57] Speaker 4: and if you poke underneath that, you see phenomena like
[6:00] 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
[6:12] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[6:15] Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
[6:19] Speaker 1: you get your podcasts, or watch us live on YouTube.
[6:23] Speaker 2: Believe it or not. Kind of flying under the radar
[6:25] Speaker 2: screen here, we're kind of getting a quasi IPO coming soon.
[6:29] Speaker 2: Sk Heinex, the Korean company they make all the memory
[6:31] Speaker 2: chip stocks up like a jillion percent. They're going to
[6:34] Speaker 2: list seventeen point seven nine million shares ADRs in the US,
[6:40] Speaker 2: and I think that's if I'm my math is correct,
[6:42] Speaker 2: that's like a twenty eight billion dollar offering. I mean,
[6:45] Speaker 2: we're kind of getting numbed to these huge numbers with Goldman,
[6:47] Speaker 2: I mean, Google doing their secondary earlier this year, and
[6:50] Speaker 2: all the big IPOs we've seen with SpaceX. But let's
[6:53] Speaker 2: put it in context here. We can do that with
[6:54] Speaker 2: the Bailey Lipschaltz, senior equities reporter for Bloomberg News. Bailey
[6:57] Speaker 2: talked to us about what sk heinez is doing. Yeah,
[7:00] Speaker 2: so this is a company.
[7:01] Speaker 7: To your point, nominally a twenty eight billion would be
[7:04] Speaker 7: the third largest IPO ever on any exchange, so behind SpaceX,
[7:08] Speaker 7: behind Saudi Aramco, which is pretty mind boggling, to be
[7:12] Speaker 7: completely honest. The thing to keep in mind is so
[7:15] Speaker 7: this is an adr adr IPO, So basically they're selling
[7:19] Speaker 7: shares for the first time here in the US. They
[7:21] Speaker 7: will maintain a home listing on the other side of
[7:23] Speaker 7: the world in South Korea. Each ADR represents one tenth
[7:26] Speaker 7: of one common share. Why does that all matter? A.
[7:30] Speaker 7: As you mentioned, a twenty eight billion dollar offering is
[7:33] Speaker 7: very large. B this is a company worth more than
[7:36] Speaker 7: a trillion dollars. And see this opens up everyone on
[7:40] Speaker 7: Wall Street, everyone in the US to now actually trade
[7:44] Speaker 7: sk Heinex on New York hours, on US hours and
[7:47] Speaker 7: be able to cater to not only retail investors but
[7:50] Speaker 7: institutional investors. We already saw Bailey, Gifford Cochu and Situational
[7:53] Speaker 7: Awareness partners indicating they want to buy as much as
[7:56] Speaker 7: seven billion dollars of this deal. So big numbers, but
[7:59] Speaker 7: it's also a right time for the company.
[8:02] Speaker 2: Timing. I've heard people talk about maybe this feels a
[8:07] Speaker 2: little top of the market kind of thing. Are you
[8:09] Speaker 2: hearing that out in the marketplace?
[8:10] Speaker 4: Yeah.
[8:11] Speaker 7: When we talk to people, the main question is can
[8:14] Speaker 7: we structurally say this time is different and why does
[8:18] Speaker 7: that matter? For semiconductors. Semiconductors are the most cyclical business
[8:21] Speaker 7: on Wall Street, So this is an industry that booms
[8:24] Speaker 7: and busts. Is kind of the PC and smartphone eras evolve,
[8:27] Speaker 7: and is sales kind of mature. From there, the big
[8:30] Speaker 7: question is will we continue to see demand for building
[8:33] Speaker 7: out data centers? Will we continue to see that here
[8:35] Speaker 7: on Earth and potentially as SpaceX wants to do in space?
[8:39] Speaker 7: And the big question from there goes, these are companies
[8:42] Speaker 7: that want to spend hundreds of billion dollars to build
[8:44] Speaker 7: out manufacturing capacity right now there's a bottleneck to get
[8:48] Speaker 7: compute and get access to these chips.
[8:50] Speaker 2: Well, what happens if it's not that easy? And that's
[8:53] Speaker 2: the big risk. So just from a US listing, perspective,
[8:59] 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.
[9:06] Speaker 7: It's in some when you just kind of look using
[9:09] Speaker 7: the WGT function, which will pull up which indexes the
[9:13] Speaker 7: company is in. Obviously, again it's one of the bigger,
[9:15] Speaker 7: bigger companies in the world, so it's in obviously a
[9:19] Speaker 7: big driver behind the costpy the Korean Exchange. It's also
[9:22] Speaker 7: in a number of those Emerging Market et emerging market indexes.
[9:25] Speaker 7: The big thing to keep an eye on. The big
[9:26] Speaker 7: thing that does matter is it's not eligible for fast
[9:30] Speaker 7: tracked Nasdaq one hundred inclusion, but in the long run
[9:33] Speaker 7: it will likely be included in the Nasdaq and one
[9:36] Speaker 7: hundred and everything that that brings. Obviously, we talked about
[9:39] 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?
[9:55] Speaker 2: So will this open up new buyers, I guess potential
[9:59] Speaker 2: new owners for this stock.
[10:01] 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
[10:22] 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
[10:58] 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.
[11:22] Speaker 2: Another great day to be an IPEEL banker.
[11:26] 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] Speaker 1: Auto with the Bloomberg Business app, Listen on demand wherever
[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
[12:30] Speaker 5: ten companies to watch for in the third quarter of
[12:32] Speaker 5: twenty twenty six. There are companies that dabble in Chips,
[12:35] 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
[12:42] 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?
[12:48] 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.
[16:00] 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
[18:10] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[18:13] Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
[18:16] Speaker 1: you get your podcasts, or watch us live on YouTube.
[18:21] Speaker 2: No Vartis agreed to buy British biotech Myrix Bio for
[18:25] Speaker 2: as much as one point five billion dollars, adding an
[18:28] Speaker 2: experimental cancer drug designed to deliver more potent treatments directly
[18:33] Speaker 2: to tumors while limiting damage to healthy sales. Let's break
[18:36] Speaker 2: it down plus all the healthcare news. We can do
[18:38] Speaker 2: that with Sam Fazzelli. He's a director of research and
[18:40] Speaker 2: he's a pharmaceutical analyst for Bloomberg Intelligence. He's based in London.
[18:45] Speaker 2: Sam talk to us about no vartis kind of what
[18:47] Speaker 2: are their strengths, where do they need to get better
[18:50] Speaker 2: and what are they doing with this particular deal.
[18:54] Speaker 3: So Paul first, happy post source of July.
[18:57] Speaker 9: Thank you guys all before you're readependent from the British
[19:03] Speaker 9: all those year two hundred and fifty years ago and
[19:06] Speaker 9: to the audience obviously. So here here we have no
[19:09] Speaker 9: artist buying a cancer drug company. Novarts is already quite
[19:13] Speaker 9: active in cancer. In fact, one of the areas that
[19:16] Speaker 9: they are quite active in is getting radio radioactive material
[19:23] Speaker 9: to your tumor. Rather than you going to get radiation
[19:26] Speaker 9: from an external beam or a machine, this is things
[19:29] Speaker 9: that are kind of trying to target the tumor, particularly
[19:33] Speaker 9: prostate cancer in this case that they've got a marker
[19:36] Speaker 9: on prostate cancer cells get radioactivity in there. But one
[19:39] Speaker 9: of the other things that has been evolving very rapidly
[19:42] Speaker 9: recently is getting chemotherapy directly to the tumor rather than
[19:46] Speaker 9: ejecting it all over the body. The hope being that
[19:48] Speaker 9: you can reduce the side effect profile and increase the efficacy.
[19:52] Speaker 9: That's what this new deal is, and this is something
[19:54] Speaker 9: relatively new for them. They had deals like this before
[19:57] Speaker 9: when you look back in twenty thirteen and twenty sixteen,
[19:59] Speaker 9: they had on some of these antibody drug contrigate type deals,
[20:03] Speaker 9: but obviously that's over ten years ago for the later deal,
[20:06] Speaker 9: so nothing seemed to have come out of that. So
[20:08] Speaker 9: this is there back into that space, and I think
[20:11] Speaker 9: it's quite an interesting, clever deal. Big upfront number though,
[20:14] Speaker 9: that's quite interesting. One point one billion dollars cash upfront.
[20:19] Speaker 5: So I'm glad you bring up that point. That idea
[20:21] Speaker 5: of big upfront payments is that.
[20:23] Speaker 6: The new norm now in these kinds of deals.
[20:26] Speaker 9: So I don't know how competitive this deal was. I'm
[20:32] Speaker 9: hoping to talk to some of the founders who I
[20:35] Speaker 9: know because they're in our backyard right to try and understand,
[20:39] Speaker 9: you know, what was it that attracted the artists so
[20:42] Speaker 9: strongly to this. I mean you know, this is a
[20:43] Speaker 9: British biotech company, so that means automatically that they're not
[20:48] Speaker 9: necessarily able to go and raise hundreds of millions from
[20:51] Speaker 9: the local market. They are in pre clinical stage, or
[20:54] Speaker 9: very close to at least what publicly information.
[20:57] Speaker 3: The publicly available information we have is pret clinical.
[21:01] Speaker 9: So this is a rich number for in such an
[21:04] Speaker 9: early company, and there's very little chance that they would
[21:07] Speaker 9: have been able to go public. So whin of artists
[21:09] Speaker 9: paid so much upfront rather than do what usually happens,
[21:12] Speaker 9: I pay a smaller amount and leave the rest of
[21:15] Speaker 9: it for milestone in the year two three years time.
[21:19] Speaker 9: It's going to be interesting to find out they do
[21:21] Speaker 9: have some very clever chemistry in here. And this is
[21:25] Speaker 9: not just an ordinary for want of a better phrase,
[21:28] Speaker 9: not that any of these drugs are ordinary antibody drug
[21:31] Speaker 9: contrigate they have they have new drugs that they're trying.
[21:34] Speaker 3: To get into the tumors. So that's that's interesting.
[21:38] Speaker 2: How is what's what's the call out there on the
[21:40] Speaker 2: VARDI stock these days?
[21:42] Speaker 4: Sam?
[21:42] Speaker 2: What do people have to kind of believe here to
[21:45] Speaker 2: jump on this one?
[21:47] Speaker 3: Yeah?
[21:47] Speaker 9: So the shares, the shares have been doing reasonably well,
[21:50] Speaker 9: the company's got a decent pipeline. They're one of their
[21:53] Speaker 9: big drugs is Cocentics, which is not for oncology. It's
[21:57] Speaker 9: for psoriasis and and that type of disease arthritis type
[22:04] Speaker 9: diseases or t immune diseases, caut it that way, and
[22:08] Speaker 9: that's a big drug, and some people are worried about
[22:11] Speaker 9: it going off pattern.
[22:12] Speaker 3: Like every former company, that's the rule of the game
[22:14] Speaker 3: with them.
[22:15] Speaker 9: We think in our group that Cocentics has got a
[22:17] Speaker 9: longer life that people think.
[22:20] Speaker 3: So you know, they have an.
[22:21] Speaker 9: Active oncology business where there's some again same sort of story,
[22:26] Speaker 9: but with those radio chemicals, if you remember, are highlighted,
[22:29] Speaker 9: and a whole bunch of other drugs that are coming on.
[22:31] Speaker 9: And here I think they're going into this. This is
[22:34] Speaker 9: going to be a long way off in terms of
[22:36] Speaker 9: paying back because it's a pretty clarical early phase, right,
[22:39] Speaker 9: so it's going to be five, ten years, eight years,
[22:42] Speaker 9: So it's not aimed at today's problems. A bit like
[22:45] Speaker 9: the type of Lily deals we were talking about last week,
[22:48] Speaker 9: which are some early deals that are being designed to
[22:52] Speaker 9: make sure the company has got assets to keep thriving
[22:54] Speaker 9: going forward.
[22:55] Speaker 3: And this can pay off in many different ways.
[22:57] Speaker 9: Remember, these chemicals can be attached to anybody to attack
[23:00] Speaker 9: different types of tumors.
[23:02] Speaker 3: So it's a platform.
[23:04] Speaker 5: It's a platform, and everyone's trying to build one. Let
[23:07] Speaker 5: me get your thoughts Sam overall on M and A
[23:10] Speaker 5: in the space, you mentioned the Lily deals, and we
[23:12] Speaker 5: know that Lily is operating from a position of strength,
[23:14] Speaker 5: being able to go out and build up its pipeline
[23:17] Speaker 5: in a way that perhaps other drug makers aren't able to.
[23:20] Speaker 5: Who else is operating from that kind of position of
[23:22] Speaker 5: strength in addition to Eli Lilly.
[23:25] Speaker 9: Yeah, so Mark has got a pretty good cash flow position,
[23:29] Speaker 9: astroslic has got strong cash flow. G skated a deal
[23:32] Speaker 9: one of the deals we spoke about recently. So most
[23:35] Speaker 9: of the farmer companies are in a pretty decent shape Abby.
[23:38] Speaker 9: You know, they've got great, great growth and you can
[23:40] Speaker 9: see analysts are upgrading the stock on almost a daily basis.
[23:45] Speaker 3: So most companies do.
[23:47] Speaker 9: Pfizer is the one that has done it's M and
[23:50] Speaker 9: A to a degree, and now we're waiting for that
[23:53] Speaker 9: to bear fruit. The latest one. They have done other
[23:56] Speaker 9: deals that have been doing licensing, their partnership deals. So
[24:00] Speaker 9: most farmer companies are in a position of strength from
[24:03] Speaker 9: a cash brow perspective to be able to do these
[24:04] Speaker 9: types of deals, and their balance sheets are relatively light
[24:08] Speaker 9: across the sector as a whole, and so there's access
[24:12] Speaker 9: to credit two if they want the to.
[24:15] Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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