# Carnival Leads Cruise Stocks Lower on Weak 3Q Outlook

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 23 Jun 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/7071fee6-fefe-4aea-98ae-b4720110cd52/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 -Brian Egger, Bloomberg Intelligence Senior Gaming and Lodging Analyst, discusses Carnival earnings. According to Bloomberg Intelligence: Carnival's outlook for 1.75% constant-currency full-year revenue-yield growth (2.25% excluding deployment and loyalty-program changes) reflects a 100-bp guidance reduction since March, due to higher airfare and gas prices amid disruption from conflict in the Middle East. -Robert Schiffman, Senior Tech Credit Analyst for Bloomberg Intelligence, discusses SpaceX’s historic bond debut. According to Bloomberg Intelligence: SpaceX's inaugural high grade bond offering could draw heavy demand, aided by first-time issuer scarcity and demand for diversified AI-linked credit exposure. Key-person risk, large funding needs and execution challenges tied to space and AI expansion may raise questions about balance-sheet strength and cash-flow generation over time. -Mandeep Singh, Global Tech Research Head at Bloomberg Intelligence, discusses SpaceX. After pulling off a record $86 billion IPO in mid-June and riding an initial surge, enthusiasm waned for the stock that’s been at the forefront of a retail frenzy in speculative space and AI trades. -Madison Muller, Bloomberg News Health Reporter, discusses the Bloomberg Big Take: “How Eli Lilly's CEO Plans to Keep the GLP-1 Boom Going.” When Dave Ricks became chief executive officer of Eli Lilly & Co. in 2017, he was facing an industry under siege. Americans held drug companies in lower esteem than airlines, law firms and even the federal government. President Donald Trump, then starting his first term, was excoriating them for their high prices. A mounting number of reports showed that soaring costs were even forcing some diabetics to ration insulin. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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[0:21] Speaker 1: or watch us live on YouTube.
[0:24] Speaker 2: Carnival Cruise Lines reported some numbers a little bit disappointing.
[0:28] Speaker 2: Stock trading down about five percent here today. I think
[0:31] Speaker 2: Michael Barr, Bloomberg's Michael Barr, was on a Carnival Cruise
[0:34] Speaker 2: Line trip last week and he goes crazy there. We
[0:37] Speaker 2: know Charlie Pellett, big cruise guy himself. So there's a
[0:41] Speaker 2: lot of cruises around here in Bloomberg. Brian egger Juns
[0:44] Speaker 2: is here, senior gaming and launching analysts for Bloomberg Intelligence,
[0:46] Speaker 2: talked us about Carnival Cruise Lines. What did you learn
[0:50] Speaker 2: on the Ernie report?
[0:52] Speaker 3: So, I mean they're still looking for some yield growth,
[0:54] Speaker 3: positive yield growth this year. I think the change perhaps
[0:57] Speaker 3: was the war in Iran really had an effect affect
[1:01] Speaker 3: gas prices, affected air travel and the perception of the
[1:04] Speaker 3: ease of air travel, and some terineraries in the Eastern
[1:08] Speaker 3: med Mediterranean I think the big change for their perspective
[1:11] Speaker 3: is how long it lasted. You know, it comes down
[1:13] Speaker 3: to I think when they last gave guidance the marks,
[1:16] Speaker 3: they were not expecting we'd still be talking about this
[1:19] Speaker 3: into May and June. So things have gotten better in June,
[1:22] Speaker 3: but I think, like you know, May was a bit
[1:24] Speaker 3: of a setback in terms of the duration of a conflict.
[1:26] Speaker 4: Yeah, yep.
[1:27] Speaker 2: So what are they finding about. I guess just you know,
[1:30] Speaker 2: the typical bookings I think in the Caribbean and all
[1:33] Speaker 2: that kind of stuff. How did they hold How are
[1:35] Speaker 2: they holding up because I kind of think when I
[1:37] Speaker 2: think cruising, that's a big part of it.
[1:39] Speaker 3: Yeah, I mean overall quite well. I mean, with the
[1:42] Speaker 3: exception of the disruptions I talked about, we're still seeing
[1:45] Speaker 3: positive ield growth, which in an uncertain economy is I
[1:48] Speaker 3: think a good thing. They are. I believe they said
[1:51] Speaker 3: ninety three percent booked for this year, and they've got
[1:54] Speaker 3: some positive early indications for next year. So the industry
[1:59] Speaker 3: is still to be quite resilient, notwithstanding the fact that
[2:02] Speaker 3: you've got the disruption from this war itself, which was.
[2:05] Speaker 2: A factor on the fuel side. I know, the airlines
[2:09] Speaker 2: buying large do not hedge. Do the cruise companies.
[2:12] Speaker 3: Hedge something that do. Carnival strokely is not hedged. Some
[2:16] Speaker 3: of them do have hedges, they have collars in places
[2:19] Speaker 3: in the case of Carnival, you know. And when we
[2:22] Speaker 3: last heard their guidance, they were providing guidance based on
[2:26] Speaker 3: certain expectations about Brent fuel. At the time they last
[2:29] Speaker 3: spoke a couple of months ago, fuel prices were above that.
[2:32] Speaker 3: Now it's below that. So it's very much tied to
[2:37] Speaker 3: the trajectory of this conflict.
[2:39] Speaker 2: What's fuel as a part of their cost structure of
[2:41] Speaker 2: a typical cruise.
[2:42] Speaker 3: Remember what the exact percentage, it's pretty big. It's a
[2:45] Speaker 3: pretty philly oarge.
[2:47] Speaker 2: So this is something. I mean, they've been dealing with
[2:48] Speaker 2: a headwind for the last several months. May become a
[2:51] Speaker 2: little bit of a tailwin it on the downside, could be.
[2:54] Speaker 3: I mean, I think they went into with some assumptions
[2:57] Speaker 3: about forward contracts where Brent prices that we're eighty ninety dollars,
[3:02] Speaker 3: and now as Crewe oil eases, it could be it
[3:06] Speaker 3: could work the other way. So, certainly the relaxation or
[3:09] Speaker 3: the easing of rent fuel, even though they use bunk
[3:13] Speaker 3: or fuel a certain grade of it is a positive
[3:16] Speaker 3: for them.
[3:17] Speaker 2: One I noticed sitting on the beach of Aruba is
[3:21] Speaker 2: the ship's engine, even when they're docked, it's running because
[3:24] Speaker 2: I see the smoke coming out of the smokestack twenty
[3:26] Speaker 2: four to seven, I guess just to run the thing.
[3:29] Speaker 2: So they've burned in fuel twenty four to seven here,
[3:32] Speaker 2: So that's a big issue. Talk to us about capacity
[3:35] Speaker 2: in the industry, are we adding capacity taking it out?
[3:38] Speaker 3: So the industry overall, we're looking at something like four
[3:41] Speaker 3: ish percent mid single digit supply growth. Carnival is an
[3:45] Speaker 3: exception and as much as they're growing capacity in twenty
[3:48] Speaker 3: twenty six by only one percent, so they've taken a
[3:51] Speaker 3: much more measured approach, which I think in this environment
[3:53] Speaker 3: seems quite prudent. They will be adding maybe one or
[3:57] Speaker 3: two ships a year balance between the Caribbean and the
[4:00] Speaker 3: rest of the world, but zero point nine percent supply
[4:03] Speaker 3: growth for them for this year is obviously quite measured.
[4:06] Speaker 2: We're seeing in lots of parts of the economy the
[4:09] Speaker 2: higher end doing well, the lower end not so much.
[4:14] Speaker 2: And I know that the cruise lines they have different
[4:17] Speaker 2: brands that just like the hotels have different brands that
[4:19] Speaker 2: catered to different I guess rivals. Are you guys seeing
[4:23] Speaker 2: that that dynamic in the CR I.
[4:24] Speaker 3: Don't know we're seeing that much of a parsing between
[4:26] Speaker 3: the upper and we'll warn with respect to cruising specifically,
[4:29] Speaker 3: you're absolute right. For hotels for a while we refer
[4:32] Speaker 3: to the K shaped economy where the and now it's
[4:34] Speaker 3: more like the C shaped economy where the you know,
[4:36] Speaker 3: the as Hilton Ceo ear marked that with the lower
[4:40] Speaker 3: end now coming back. I think for cruises that strength
[4:43] Speaker 3: has been fairly broad based. What's really driving it? If
[4:45] Speaker 3: you're in the Caribbean, it's these island destinations that help
[4:49] Speaker 3: drive pricing.
[4:50] Speaker 2: Interesting. Yeah, I'm going on my first cruise in October,
[4:54] Speaker 2: a biking bikingship. It's not to forty percent this year,
[4:57] Speaker 2: it's doubled over the last twelve months. What's going on there?
[5:00] Speaker 2: That is they're having my deposit impact that definitely helps.
[5:04] Speaker 3: Yes, right, I think that the niche they're in, which
[5:06] Speaker 3: is that luxury segment, and it is a niche market.
[5:08] Speaker 3: The river cruise market and the somewhat smaller ocean cruise
[5:12] Speaker 3: presence has done quite well, so that may be example
[5:14] Speaker 3: of what you're talking about where the high end is
[5:16] Speaker 3: doing quite well, and that's a high end consumer clearly
[5:19] Speaker 3: more luxury focus. So while we don't see those patterns
[5:22] Speaker 3: necessarily broad raced across the sector, they are a high
[5:26] Speaker 3: end kind of river cruise oriented luxury niche.
[5:30] Speaker 2: For what I'm paying, this thing better be all inclusive.
[5:32] Speaker 2: We got to go back and check. I'm not going
[5:34] Speaker 2: to sit there and pay for every cocktail A class
[5:37] Speaker 2: of rose. Vegas real quick, thirty seconds, Hew's Vegas, do
[5:41] Speaker 2: them now?
[5:42] Speaker 3: Vegas is better than last year, I think, is one
[5:44] Speaker 3: way to look at it. So only we have still
[5:47] Speaker 3: see on the lower end of the market where you
[5:48] Speaker 3: do see that kind of bifurcation between high and low
[5:51] Speaker 3: end in Vegas. A bit more stability there where visitation
[5:55] Speaker 3: is kind of flattened out, Pricing is a bit better.
[5:58] Speaker 3: Twenty twenty five was a rougher year, had tougher event
[6:01] Speaker 3: comparisons and pressure on midweek leasure stays. So it's a
[6:05] Speaker 3: bit more stabilized and better this year.
[6:08] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[6:14] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
[6:18] Speaker 1: weekdays at ten am he's done on Apple Cocklay and
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[6:24] Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
[6:28] Speaker 5: We've been talking all morning and really for the last
[6:31] Speaker 5: few days Paul about SpaceX and where this stock has
[6:34] Speaker 5: been moving. It's currently up, so that fort day decline
[6:37] Speaker 5: did not come to pass. It has stopped at three
[6:39] Speaker 5: days for now. But it was a painful three day
[6:41] Speaker 5: slump down about twenty two percent if I recall correctly,
[6:45] Speaker 5: So you know, definitely a repricing of the initial euphoria
[6:50] Speaker 5: following the IPO.
[6:51] Speaker 2: Yeah, having done a bunch of these equity deals, it
[6:53] Speaker 2: just felt like the stock was trying to find a
[6:55] Speaker 2: home here and that's maybe worth like who really wants
[6:58] Speaker 2: to own this sing long term? And this playing the
[7:00] Speaker 2: deal a little bit? So here we are, all right, and.
[7:02] Speaker 5: Of course we know that at the same time SpaceX
[7:04] Speaker 5: the company has announced a big, big bond sale as well,
[7:08] Speaker 5: getting ready to sell investment grade bonds for the first
[7:11] Speaker 5: time to refinance a bridge loan, but also, let's face it,
[7:15] Speaker 5: to fund this AI build out as well. So for that,
[7:18] Speaker 5: of course, we need to bring in our in house
[7:20] Speaker 5: expert on tech and bonds, and that is Robert Schiffman.
[7:23] Speaker 5: He's our senior tech credit analyst here for Bloomberg Intelligence,
[7:27] Speaker 5: rob what will you be watching for and listening for
[7:29] Speaker 5: the next couple of hours here when it comes to
[7:31] Speaker 5: this SpaceX bond debut.
[7:33] Speaker 6: I think I already know the story. Bondholders are going
[7:36] Speaker 6: to welcome SpaceX with arms wide open. You know, nobody
[7:40] Speaker 6: owns this deal, right. There's hundreds of billions of AI
[7:45] Speaker 6: related tech bonds that have been issued this year. There's
[7:47] Speaker 6: hundreds of billions of tech bonds outstanding, but this is
[7:53] Speaker 6: an inaugural offering, so everyone's going to want a little piece.
[7:56] Speaker 6: And quite frankly, the difference between how SpaceX is going
[7:59] Speaker 6: to show right in the bond market versus the equity
[8:02] Speaker 6: market couldn't be much different. The valuations from the equity
[8:05] Speaker 6: side may seem really, really lofty. I think it's the
[8:09] Speaker 6: reverse for the credit markets. These bonds are going to
[8:12] Speaker 6: come wildly wide to where comparably rated investment grade names trade,
[8:18] Speaker 6: and I think that's going to track a lot of attention.
[8:20] Speaker 5: Did it surprise you that it got investment grade ratings
[8:23] Speaker 5: even though it doesn't have much of a track record
[8:26] Speaker 5: almost no track record as a publicly traded company. I
[8:29] Speaker 5: mean one of our Bloomberg News stories or other reporters
[8:32] Speaker 5: have pointed out that in Video was given the same rating,
[8:35] Speaker 5: and in Video had a much longer track record as
[8:37] Speaker 5: a publicly trade traded company than SpaceX does at the moment.
[8:42] Speaker 6: No, I wasn't surprised. Quite frankly, I think the plans
[8:46] Speaker 6: for the buildout have been reasonably well known, so for
[8:49] Speaker 6: people who are looking at the SpaceX equity IPO, they
[8:53] Speaker 6: had a really good understanding of how much money was
[8:55] Speaker 6: going to be spent over the next handful of years.
[8:58] Speaker 6: And quite frankly, you can't have of negative free cash
[9:01] Speaker 6: flow that's twenty thirty forty billion dollars annually without access
[9:06] Speaker 6: to low cost, cheap capital a big pool that was equities.
[9:10] Speaker 6: They raised eighty five billion dollars of equity, but they're
[9:12] Speaker 6: probably going to need another one hundred billion dollars of debt.
[9:16] Speaker 6: So if you had plans to borrow that much and
[9:19] Speaker 6: thought you can do it in the junk markets, you'd
[9:22] Speaker 6: be thought of as crazy. So I think this is
[9:24] Speaker 6: pretty well understood. I do get it why people say,
[9:28] Speaker 6: how are these ratings so high, and I think you
[9:30] Speaker 6: just need to look into the future a little bit
[9:33] Speaker 6: and look at the past. One is they're sitting on
[9:35] Speaker 6: one hundred billion dollars of cash. Two as they're committed
[9:37] Speaker 6: to IG ratings and reasonably low leverage. Three is their
[9:40] Speaker 6: liquidity profile looks fantastic. They have access to huge pools
[9:44] Speaker 6: of both equity and debt capital, and their burn rate
[9:47] Speaker 6: it's going to take them three or four years to
[9:48] Speaker 6: even get through the amount of capital that they have today.
[9:52] Speaker 6: So do you want a question where this company might
[9:55] Speaker 6: be in five years and what leverage is going to
[9:57] Speaker 6: look like, and are they going to be successful? I
[10:00] Speaker 6: think it's a good debate. And I think when you're
[10:02] Speaker 6: comping or are they in aerospace and defense company or
[10:04] Speaker 6: they communications company? Are they an AI tech company? That
[10:07] Speaker 6: that all of that creates I think more opportunity for
[10:10] Speaker 6: bond holders because the bond deal gets priced probably wider
[10:13] Speaker 6: than inherently it should.
[10:14] Speaker 2: There's definitely an elon factor, a positive elon factor in
[10:18] Speaker 2: the equity markets. Is this such a thing with you
[10:21] Speaker 2: credit guys who are a little bit more sober.
[10:22] Speaker 6: Well, I hear so much about how everyone you know
[10:26] Speaker 6: in the AI world rather just invest in equity because
[10:29] Speaker 6: if they're right, there's huge upside. And with bonds, if
[10:32] Speaker 6: you're right, you get paid back par and if you're wrong,
[10:35] Speaker 6: you get crushed. That's actually silly. You know, every basis
[10:38] Speaker 6: point in the fixed income markets make a huge difference,
[10:42] Speaker 6: and if you're coming at it spreads at our one
[10:44] Speaker 6: hundred basis points wide to peers that pays for the
[10:47] Speaker 6: Elon Musk risk. I would actually argue, there's Elon Musk reward.
[10:51] Speaker 4: I know this.
[10:51] Speaker 6: You know some people have cringed at this, but I
[10:53] Speaker 6: think you know, Elon Musk is to today's generation what
[10:57] Speaker 6: Warren Buffett was to the prior generation in terms of
[11:00] Speaker 6: value creation. He I think the future that he sees
[11:04] Speaker 6: is a lot different than what a lot of other
[11:06] Speaker 6: people see. I think his ability to execute is much
[11:09] Speaker 6: higher than what people are giving credit for. Quite frankly,
[11:11] Speaker 6: he does get a lot of credit. And it's a
[11:12] Speaker 6: two trillion dollar equity market cap. So you know, for
[11:16] Speaker 6: everyone who wants to pooh pooh all the risk, you know,
[11:19] Speaker 6: people are riding the Elon wave.
[11:21] Speaker 5: Okay, so the bond market is giving Elon Musk the
[11:23] Speaker 5: benefit of the doubt. It sounds like does the bond
[11:25] Speaker 5: market give any other CEO founder company that same level
[11:31] Speaker 5: of benefit.
[11:32] Speaker 6: Well, the difference between SpaceX and the rest of these
[11:37] Speaker 6: other AI companies, you know, we've said this so many
[11:39] Speaker 6: times before, is the other names are basically the mount
[11:41] Speaker 6: rushmore credits. You know, they're double as and triple a's,
[11:43] Speaker 6: So they inherently have built in credibility because they have
[11:47] Speaker 6: so much financial flexibility. So what if Amazon borrows another
[11:50] Speaker 6: one hundred billion, or if Alphabet borrows you know, one
[11:53] Speaker 6: hundred and fifty billion, the bounce sheet is going to
[11:56] Speaker 6: be fine.
[11:56] Speaker 3: Here.
[11:57] Speaker 6: You know, you're starting with a company, it doesn't have
[11:59] Speaker 6: a lot of EBITD it's big negative free cash flow,
[12:01] Speaker 6: doesn't have this long long track record of success. So
[12:05] Speaker 6: ultimately what happens Listen, spreads are at historically tight levels.
[12:10] Speaker 6: Everyone is looking for the next basis point to help perform.
[12:14] Speaker 6: If you price something right, it's going to sell. These
[12:18] Speaker 6: bonds look like they're going to be priced dramatically wide
[12:21] Speaker 6: to triple be alternatives. So even if the long term
[12:26] Speaker 6: you think there's real question marks, in the short term,
[12:28] Speaker 6: you're going to try to get bonds. You're going to
[12:31] Speaker 6: buy bonds now and ask questions later, and I think
[12:34] Speaker 6: that's going to support this steal.
[12:36] Speaker 2: Stay with us.
[12:36] Speaker 5: More from Bloomberg Intelligence coming up after this.
[12:42] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[12:46] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[12:49] Speaker 1: Auto with the Bloomberg Business App, Listen on demand wherever
[12:53] Speaker 1: you get your podcasts, or watch us live on YouTube.
[12:56] Speaker 5: All right, well, we talked a little bit about SpaceX,
[12:59] Speaker 5: and it's a company that we kind of can't ignore
[13:02] Speaker 5: given the market debut what had over the last couple
[13:05] Speaker 5: of days. And man Deep Singh is here with us.
[13:07] Speaker 5: He is our go to guy and all things tech.
[13:10] Speaker 5: He is our global tech research head here at Bloomberg Intelligence. Mandeep,
[13:13] Speaker 5: you look at what is happening with SpaceX, and Paul
[13:17] Speaker 5: put it really well in that it's just kind of
[13:19] Speaker 5: trying to find its place. People are trying to figure
[13:22] Speaker 5: out what the right price looks like for a company
[13:25] Speaker 5: like this after all the fanfare and then you know
[13:28] Speaker 5: the flushing out maybe of some of the early investors.
[13:31] Speaker 5: What do you see as the most enduring narrative for
[13:34] Speaker 5: this company now that it's just over a week into
[13:37] Speaker 5: its life as a publicly traded company.
[13:39] Speaker 7: Well, I think clearly during the road show, people got
[13:44] Speaker 7: really excited about the orbital data centers and you know,
[13:48] Speaker 7: the space launches, but we know they don't generate any
[13:51] Speaker 7: revenue right now. And I think people are coming to
[13:55] Speaker 7: the realization that this requires a lot more upfront capital,
[13:59] Speaker 7: which is why they are doing that bond issuance. And
[14:02] Speaker 7: then there will be some equity issuance to close out
[14:05] Speaker 7: the Cursor acquisition, so they will be adding you know,
[14:08] Speaker 7: three percent more stock to close out that deal. And look,
[14:12] Speaker 7: if you are an investor in this company who is
[14:17] Speaker 7: getting diluted right now, it's reasonable to say some people,
[14:22] Speaker 7: you know, aren't it there for the long term, and
[14:26] Speaker 7: there's a shakeout that's going on, and we'll figure out
[14:29] Speaker 7: who wants to believe in the company long term, because
[14:32] Speaker 7: this is not a free cash flow or a stock
[14:34] Speaker 7: buybackstory anytime soon.
[14:37] Speaker 2: All right, switching here's to Google here it's some AI
[14:39] Speaker 2: dudes are departing Google. I mean, should Google be worried
[14:43] Speaker 2: about this? Some of their talent leaving?
[14:46] Speaker 7: I think so. I mean the fact that the market
[14:49] Speaker 7: cap dropped by two hundred and fifty billion probably is
[14:51] Speaker 7: an exaggeration. So It just goes to show they probably
[14:54] Speaker 7: should have paid these guys anything to retain them. But look,
[14:59] Speaker 7: when it comes to frontier models, there is no doubt
[15:03] Speaker 7: that Entropic is ahead. Even open Ai has been releasing
[15:07] Speaker 7: their models at a faster pace. And this space is
[15:11] Speaker 7: all about leap frogging your competitors when it comes to
[15:15] Speaker 7: the model intelligence layer. I mean Entropics Mythos release, everyone
[15:20] Speaker 7: is freaking out in terms of the capabilities of the model,
[15:24] Speaker 7: to the extent that the government has blocked access. Why
[15:27] Speaker 7: because they are at the frontier of intelligence. So does
[15:31] Speaker 7: Google have an equivalent model? No, the answer is no.
[15:34] Speaker 7: And when will they be releasing it? We don't know,
[15:37] Speaker 7: which is why they will end up losing talent because
[15:41] Speaker 7: everyone now believes Entropic is at the frontier, and Entropics
[15:45] Speaker 7: seems to be gaining a lot of talent.
[15:48] Speaker 2: It's always been a talent driven technology, you know.
[15:52] Speaker 5: But it feels more blood bloody than it ever has, right.
[15:55] Speaker 5: I mean, in terms of the pecking order of companies
[15:59] Speaker 5: that have their pick for talent, Anthropic you point out
[16:02] Speaker 5: is at the top.
[16:03] Speaker 2: Is open Ai still up there?
[16:04] Speaker 5: I mean open Ai has lost a little bit of
[16:06] Speaker 5: its momentum to anthropic. Where does SpaceX rank. Where does
[16:10] Speaker 5: you know the hyperscalers, where do they land?
[16:12] Speaker 7: And that's a great question. So which is why that
[16:15] Speaker 7: acquisition of Cursor was so timely. I know this stock
[16:18] Speaker 7: is dropping last three days, but had it not been
[16:21] Speaker 7: for the Cursor acquisition, I bet you the stock would
[16:24] Speaker 7: be under hundred dollars. So Cursor really did make a
[16:27] Speaker 7: difference in terms of one getting that coding agent use
[16:31] Speaker 7: case and you know, giving a narrative that they can
[16:34] Speaker 7: scale this. And also the talent. I mean, Cursor co
[16:37] Speaker 7: founders are probably the smartest guys and AI and highly
[16:40] Speaker 7: sought after. So I hope they're able to retain that
[16:43] Speaker 7: talent that they got from Cursor. But clearly a great acquisition.
[16:47] Speaker 7: And to your point about open Ai, yes they have
[16:49] Speaker 7: lost momentum. Remember open Ai ended up bringing on the
[16:53] Speaker 7: co founder or the founder of open Claw.
[16:57] Speaker 2: Open Claw was like the next big.
[16:59] Speaker 7: Thing at the start of the year. Everyone was talking
[17:02] Speaker 7: about what is going to be that agenty platform on
[17:05] Speaker 7: your smartphones and edge devices. Open Claw co founder went
[17:10] Speaker 7: to open Ai. And you know that's where it makes
[17:14] Speaker 7: a huge difference where these guys end up because they
[17:17] Speaker 7: have the vision and if they find Anthropic to be
[17:21] Speaker 7: the place or open AI, that makes a huge difference.
[17:24] Speaker 2: Stay with us.
[17:25] Speaker 5: More from Bloomberg Intelligence coming up after this.
[17:31] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[17:35] Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
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[17:46] Speaker 2: You know, we love the big take stories that come
[17:47] Speaker 2: out every day on the Bloomberg Terminal and a Bloomberg
[17:49] Speaker 2: dot com. They're really fascinating stories, deeply resource, deeply soort
[17:54] Speaker 2: lots of cool stuff. This is a good one today.
[17:57] Speaker 2: How Eli Lilly got huge by making us did and
[18:01] Speaker 2: remember Lily, they're the maker of zep bound. I think
[18:03] Speaker 2: that's one of the big, big, big GLP one drugs
[18:07] Speaker 2: out there and it's just been a massive market for
[18:10] Speaker 2: now surel now when Charlie yep, it's just awesome. Madison
[18:13] Speaker 2: Buller joints this here healthcare reporter for a Bloomberg News.
[18:17] Speaker 2: I know you guys did a big, big take story
[18:19] Speaker 2: on this medicine about Eli Lilly and how they plan
[18:23] Speaker 2: to keep the GLP one boom going talk to us
[18:25] Speaker 2: about what you found out.
[18:27] Speaker 4: Yeah, definitely, thank you for having me on to talk
[18:29] Speaker 4: about this. I mean, Lily is an amazing story. The
[18:32] Speaker 4: company is one hundred and fifty years old. There's only
[18:35] Speaker 4: a handful of American companies that are still still sort
[18:38] Speaker 4: of look the same as they did one hundred and
[18:40] Speaker 4: fifty years ago, and so Lily is one of them.
[18:43] Speaker 4: It's a pretty good American company story. But they've really
[18:46] Speaker 4: transformed over the last few decades. They had, you know,
[18:49] Speaker 4: they were one of the first to develop the pulk
[18:54] Speaker 4: the polio vaccine treatments for COVID. They've had antibiotics kind
[18:59] Speaker 4: of silling many many things over the years and have
[19:03] Speaker 4: been at the forefront of many different medical breakthroughs. But
[19:06] Speaker 4: they had sort of a dry spell in between that
[19:08] Speaker 4: a couple you know, couple decades ago that really made
[19:12] Speaker 4: it hard. I mean, their stock price was down, there
[19:14] Speaker 4: was CEO turnover. But now we've seen weight loss drugs
[19:18] Speaker 4: really pull them out of that and make them into
[19:21] Speaker 4: this trillion dollar company and the most valuable healthcare company
[19:24] Speaker 4: in the world. So it's a pretty amazing transformation and
[19:28] Speaker 4: story of what happens to a company when they have
[19:31] Speaker 4: and a huge blockbuster product like these weight loss drugs
[19:34] Speaker 4: have been.
[19:35] Speaker 5: Yeah, I'm just thinking about you know, as recently as
[19:38] Speaker 5: June of twenty twenty, we were looking at Pfizer as
[19:41] Speaker 5: kind of the shining star of the pharma world because
[19:43] Speaker 5: of its COVID vaccine, and Eli Lilly, you know, did
[19:47] Speaker 5: not come up in the same kinds of conversations. What
[19:51] Speaker 5: you've done in your story is really highlight how much
[19:53] Speaker 5: has changed between say, twenty seventeen to twenty twenty six.
[19:58] Speaker 2: Dave Rix became CEO.
[19:59] Speaker 5: Of E Lily back in twenty seventeen, and at the time,
[20:02] Speaker 5: the pharma industry was not held in high esteem by Americans.
[20:06] Speaker 5: There was a lot of mistrust directed at the pharma companies.
[20:10] Speaker 5: He has helped turn that around. I wonder how much
[20:12] Speaker 5: of the credit he deserves versus what was kind of
[20:15] Speaker 5: already in the pipeline at Eli Lilly, and he was
[20:18] Speaker 5: at the helm when it all came to fruition.
[20:21] Speaker 4: Yeah. No, that's a great question, Scarlet, because you know,
[20:24] Speaker 4: over time, these these drugs don't come out of thin air,
[20:27] Speaker 4: and I think that that's one of the things that
[20:29] Speaker 4: this GLP one boom really surprised people is like it
[20:32] Speaker 4: seemed like it was sort of an overnight sensation that
[20:35] Speaker 4: these weight loss drugs became popular, that people started talking
[20:38] Speaker 4: about them. But really, scientists that both Lily and Nova
[20:41] Speaker 4: Noordisk have been working on GLP one drugs for several
[20:44] Speaker 4: decades and so it's something that has been going on
[20:47] Speaker 4: behind the scenes for a while. But to Dave Rix's credit,
[20:50] Speaker 4: he was the one, you know, when he became CEO,
[20:52] Speaker 4: he was like, we need to move as fast as possible.
[20:55] Speaker 4: At the time, Lily was one of the slowest in
[20:57] Speaker 4: the industry when it came to drug development. Took them
[21:00] Speaker 4: thirteen to fourteen years to bring a drug from their
[21:03] Speaker 4: labs to an actual approved product, and there's lots of
[21:06] Speaker 4: trial and error in that too, you know, most drugs
[21:08] Speaker 4: don't actually make it to an approval. And so he said,
[21:11] Speaker 4: you know, to all of their scientists and all of
[21:13] Speaker 4: the executives at the time, like, we need to make
[21:16] Speaker 4: speed the number one priority, and we need to look
[21:18] Speaker 4: at everything we're doing, find the most promising science, and
[21:22] Speaker 4: then go as fast as we possibly can. So that's
[21:25] Speaker 4: what they did really with turzepetide, which is the molecule
[21:28] Speaker 4: that became Manjaro and zep bound that's the active ingredient,
[21:32] Speaker 4: and that was sort of like the pilot. That was
[21:34] Speaker 4: the first time that they really did this and gave
[21:36] Speaker 4: it the full speed treatment. And what we saw was
[21:38] Speaker 4: that they were able to bring this drug really to
[21:40] Speaker 4: the market in around five years, which is a huge
[21:43] Speaker 4: reduction in time from what we were seeing before with Lily.
[21:47] Speaker 4: And so they've applied that across the board now to everything.
[21:50] Speaker 4: And Dave Brooks has also taken steps to make the
[21:52] Speaker 4: company more consumer facing, to engage more directly with patients,
[21:56] Speaker 4: to cut prices. When you know, we're we been seeing
[22:00] Speaker 4: a lot of outcry and a lot of attention on
[22:03] Speaker 4: how expensive GLP one drugs are. They're still pretty expensive,
[22:08] Speaker 4: maybe not necessarily super affordable for all Americans, but to
[22:11] Speaker 4: Rix's credit, he's taken steps to cut the cash pay
[22:15] Speaker 4: price of these drugs so that more people can afford
[22:17] Speaker 4: them because we're still seeing a lot of patchy insurance
[22:20] Speaker 4: coverage with these obesity medications. So he's taken he has
[22:23] Speaker 4: been unafraid to take risks and to do things differently
[22:29] Speaker 4: than his predecessors and than his peers in the pharmaceutical industry.
[22:33] Speaker 4: So he does deserve a lot of the credit for.
[22:35] Speaker 2: That, Madison. One of the challenges I think for managing
[22:38] Speaker 2: these pharma companies and investing in these pharma companies is
[22:40] Speaker 2: once if you're lucky enough to get a really successful drug,
[22:44] Speaker 2: sooner or later patent's expiring, competition arrives here. How does
[22:49] Speaker 2: Eli Lily plan to deal with that with its weight
[22:52] Speaker 2: loss drugs.
[22:53] Speaker 4: Yeah, that's exactly right, and that's something Lily's still trying
[22:56] Speaker 4: to figure out. The strategy right now is to sort
[22:59] Speaker 4: of deploy this cash that they have this massive windfall
[23:03] Speaker 4: from the success of its obesity medications into everything. I mean,
[23:08] Speaker 4: they're infusing billions of dollars into their internal R and
[23:11] Speaker 4: D programs, so, you know, focusing on the science that
[23:15] Speaker 4: they have going on in their labs, but they're also
[23:17] Speaker 4: looking externally. They've been on a record spending spree this year.
[23:21] Speaker 4: Lily was a company that typically didn't do as big
[23:24] Speaker 4: of deals as its pharmaceutical rivals, but now we're seeing
[23:28] Speaker 4: Lily spend a lot more on other external science, acquiring
[23:32] Speaker 4: different companies, doing more deals, so that's part of it.
[23:35] Speaker 4: We're also seeing them spend a lot on AI, and
[23:38] Speaker 4: AI is interesting in drug development because there's a lot
[23:41] Speaker 4: of promise there, but so far we haven't seen a
[23:43] Speaker 4: lot of that come to fruition in terms of you know,
[23:46] Speaker 4: turning these you know AI finding new drugs and those
[23:50] Speaker 4: coming to market and being revolutionary cures for patients. Like
[23:53] Speaker 4: that's not really happening yet, but it could happen one day.
[23:56] Speaker 4: And so Lily is spending on AI as well. They
[23:59] Speaker 4: have a partnership with Nvidia, they have a supercomputer at
[24:03] Speaker 4: their headquarters in Indianapolis, and so they're also looking to
[24:06] Speaker 4: AI and saying, if this is something that's going to
[24:10] Speaker 4: revolutionize and change drug development, we want to be there.
[24:13] Speaker 4: And so they're really doing everything they possibly can. But
[24:17] Speaker 4: it'll be a fascinating story to watch because obviously, right
[24:20] Speaker 4: now we don't know what's going to happen. Lily doesn't
[24:22] Speaker 4: know what's going to happen, and it will be pretty
[24:25] Speaker 4: incredible if they are able to sort of break out
[24:28] Speaker 4: of this boom and bus cycle that every pharmaceutical company
[24:32] Speaker 4: in the history has sort of had to deal with.
[24:35] Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
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