US, China Agree to Continue Talks on Tariff Truce Extension

20:22Carol Massar:Are they stimulative? They are certainly sold as being good for the U.S. economy. So if they are, then my concern is, or I think many would say, their concern is that the Fed's got to be really careful. So the assumption is that the horse that we lead to water is going to drink, right? Because the thrust of the bill is preventing a negative income shock such that the tax cuts do not expire at the end of this year. So you're preventing a negative income shot. You're certainly not sending money out into the economy in the sense that it was in the post-pandemic era, the CARES Act. That's not happening.

20:55So, I mean, maybe Uber and Lyft drivers are going to get a Lyft, right? Because they're not going to get taxed on the tips that they make. But again, we are seeing consistent and persistent declines in capital expenditure plans.

21:09Carol Massar:and so you can lead the horse to water, but can you make that horse drink? So just 15 seconds. So the valuations, the record after record that we've seen the S &P 500, do you think that's not warranted considering it sounds like... Is hope a strategy? So you would say, no, we're overvalued and it's... I would certainly think so. All right, going to leave it there. Fun to have you here. Danielle DiMartino Booth, she's CEO and Chief Strategist of QI Research, joining us here. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app.

21:44You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130. Carol summed it up well on our editorial call this morning when she said, let's get Brooke Sutherland on to talk planes, trains, and automobiles. I love Brooke. We all love Brooke. She knows this space so well. That's why she's here with us. I just want to give everyone an idea of the planes part of this. Boeing almost halted its cash burn in the second quarter and it reported a smaller than expected loss. The trains portion of this is Union Pacific agreeing to acquire Norfolk Southern in a$72 billion cash and stock transaction.

22:19And automobiles, we have to stretch this one a little bit. I know. It's okay. UPS shares tumbled after the company said economic volatility continues to roil its operations. But hey, they got a lot of trucks, Carol. So I think it's fair to say it counts as automobiles.

22:31Carol Massar:All right. So let's get to it. Let's get to Brooke Sutherland. She is Bloomberg News Boston Bureau chief, writer of the Bloomberg Industrial Strength newsletter. And she joins us from the Boston Bureau. Brooke, we do want to start with trains, mega merger. Why is this the right time for a deal, especially in a day when Norfolk, their shares are down, they lowered their outlook for full year revenue growth. I mean, is this combination going to make it better? That's certainly the hope. And, you know, frankly, I really think the railroad industry is out of better ideas to grow at this point. You know, we've really seen stagnating or even declining volumes in the rail industry in recent years, just given the competition from the trucking industry in particular.

23:13If you think about it, trucks can go pretty much wherever they want. There's your automobile reference there. Thank you. Thank you. Versus trains are really limited to the tracks that they have. And that does put them at a bit of a competitive disadvantage, even though there are advantages in other respects for trains. You know, they tend to be more energy efficient. They tend to be less costly. And so, you know, I think the railroads are thinking to really chip away at that market sharehold that the trucking industry has. They have to make things more efficient for their customers. And the idea would be that if you could set up a network that's truly coast to coast, from California to New York, that that would take out some of those pain points that turn customers off from the railroad industry.

23:53I was struck on Friday when we spoke to Kyle Porter, and I read his piece on this, Brooke, that this would be the only U.S. transcontinental railroad. It would. It would. And that's a result of, you know, the past, what, 150 plus years of antitrust action? Is that why? You know, there's really been a lot of consolidation in the railroad industry. We've just more recently sort of been in this period of pause, partly just because it had consolidated so much. But you did see a little bit of a step forward with Canadian Pacific ultimately buying Kansas City Southern. And that, I guess, sort of has started the wheels grinding again in terms of could even more consolidation be possible in this industry?

24:36I do still think that that's a bit of an open question of how regulators will respond to this deal. That Kansas City Southern deal was approved under sort of a loophole to these tougher 2001 merger rules that the rail industry's primary regulator has adopted that requires any merger to benefit the public interest. So it's not enough just to show that you are preserving competition. You have to actually enhance competition and provide proof that you're actually benefiting communities and the greater public interest. And so that's a very high bar that hasn't yet not actually been met. And so Union Pacific and Northern Southern are betting on a more welcoming regulatory landscape that might finally allow a deal like this to come to fruition.

25:20But we really don't know.

25:23Carol Massar:It ain't done till it's done, right? Exactly. All right. Let's go to UPS just because shares have been tumbling after the company said economic volatility continues to roil its operations. UPS is another great indicator on the U.S. economy. So I'm trying to make sense of economy versus company specific. You know, I think it's a mix of both. I think if you look at UPS's business in particular, they are uniquely affected by some of the trade dynamics that we've seen, particularly, you know, the alterations have been made to that de minimis exemption. And on the other hand, they really are struggling in their business.

26:03I mean, this is an area that really boomed during the pandemic as people were at home and were ordering so much stuff. And you had UPS and FedEx really trying to add capacity to meet that demand. And then now we're on the other side of that. As consumers have shifted their spending back to services, UPS is trying to cut costs to be competitive after that labor deal that it struck earlier. And I think you're really seeing sort of a confluence of events that's really pressuring UPS from multiple angles.

26:30Carol Massar:So no forecast for the year. I mean, that's a massive lack of visibility. It is unusual. Although we have heard similar comments from other companies talking about just how hard it is to get your hands around what that demand picture looks like in the back of the year. A lot of reticence in terms of committing to that growth outlook. We have seen companies go ahead and put guidance out there. But I do think, to UPS's credit, there are a number of unknowns remaining in the back half of the year. And they're taking more of a wait-and-see approach. Yeah, I was particularly surprised about this one, Brooke, because we did have the airlines come out about a quarter ago.

27:06We talked about Delta and then, of course, United as well. And then three months later, they've essentially turned a corner and they're talking about how great things are. Yet we're not seeing that or hearing that from Carol Tomei over at UPS. Look, these are apples and oranges when we talk about the businesses here. But what is unique about UPS's business that they don't have visibility that other companies do? Well, I don't know. I don't think everything is great for the airlines either. You know, they've been willing to put guidance back out there, but the guidance that they have moved forward with is lower than what they were expecting before tariffs came into the picture.

27:41And, you know, of course, we did see that demand pull back in the immediate aftermath of the tariffs. And some of the airlines, particularly those with businesses that cater more to premium flyers or business travelers, are expecting more of a rebound in the back half of the year. But that uncertainty is still there and is still impacting the airlines just in different ways. And so, you know, I think to UPS's point, there are a number of different factors here. And their business is uniquely affected by tariffs because it's much more direct. With airlines, what you're looking at is sort of more indirect consequences as consumers feel the pain from inflation and goods and maybe rethink that trip that they were planning to take.

28:19All right. Well, speaking of airlines, let's talk about one company that provides those narrow and wide-bodied jets, and that is Boeing. Shares down 4 % today. Julie Johnson reporting that Boeing almost halted its cash burn in the second quarter, indicating a turnaround initiated by Kelly Ortberg a year ago is paying off as the company delivers more aircraft. One thing that I've noticed about Boeing over the last few months is the way that they're being used as this bargaining chip when it comes to trade negotiations. And I'm wondering, Brooke, in your view, how much of a boon could that be for the company that's trying to turn itself around?

28:54It's definitely a benefit. And what's interesting is that, you know, in Trump's last trade war, Boeing frequently complained about being used as a pawn. We saw China, you know, more or less halt new orders of Boeing planes as a way of exerting leverage in those trade negotiations. And now, you know, the shoe is somewhat on the other foot. And we see countries more or less tripping over themselves to, you know, trumpet their purchases of Boeing planes. This is one of the highest value exports that the U.S. has. And so as a means of sort of chipping away at that trade deficit, a big Boeing airplane purchase can really go a long ways.

29:29Carol Massar:So Boeing, I mean, every time I feel like, I mean, the stock's down 4 % today. Thoughts in terms of the outlook and what we kind of need to continue to focus on with this one? Is it all just about orders? It's also about making sure no other issues with their planes. Your thoughts on this? I mean, I think that might be a little bit of profit-taking here. We have seen, you know, a pretty good rally in Boeing shares heading into earnings. I mean, this was a very good quarter for them, especially just given all of the cash flow challenges that they had. And I think now, you know, the question is they've got to keep doing this, they've got to keep chugging along, but is this the best stock to own in aerospace right now, or are there potentially other opportunities out there?

30:08And I think that's some of what's playing out in investors' minds right now.

30:11Carol Massar:Yeah, definitely a good point. I mean, the stock is up nearly 30 % year-to-date, so it really has had quite a bounce back after having a really tough time for a while. Brooke, thank you so much. We did it around the world when it comes to transportation. And then some. Brooke Sutherland, of course, Bloomberg News Boston Bureau Chief, joining us there from our Boston Bureau. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT Work. I'm Carol Masser. Walmart has become a major player in the burgeoning business of quickly fueling electric vehicles, speeding past Costco as well as more established charging companies.

30:48Carol Massar:Bloomberg's Kyle Stock writes, as of June, Walmart has opened about 46 high-speed public charging stations with 380 cords. There are now EV chargers at about 326 of its U.S. stores, including adding, this year, four high-speed charging stations in Bentonville, Arkansas, even though the state has been a laggard in transitioning to electric vehicles. Walmart has hosted chargers from other companies since 2018. The big difference now? Walmart is building its own network, and quickly. As of March of last year, every EV station at a Walmart is under the company brand. Now, Walmart is still a blip on the U.S.

31:28Carol Massar:charging map, and yet it was second only to Tesla among charging networks expanding in the second quarter. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode. Available on Plus and Pro Plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock.

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32:50This product is not intended to diagnose, treat, cure, or prevent any disease. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

33:07Carol Massar:U.S. Health and Human Services Secretary Robert F. Kennedy Jr., he has suggested that psychedelic therapy for depression and trauma has the Trump administration's support. This actually was in a report by the Associated Press earlier this month that the secretary recently talked to members of Congress about. And we're guessing that it may have caught the attention of the team over at the publicly traded small cap company Compass Pathways. We wanted to know more. And let's get to Kabir Nath. He's chief executive officer of Compass Pathways, and he joins us here in studio. Kabir, welcome, welcome.

33:40Carol Massar:Remind our audience about the work you are doing and your synthetic psilocybin experimental drug for treatment-resistant depression. Tell us about where you are, what this drug is, and what it has shown to do so far. Thanks very much, Carolyn, Tim. And it's great to join you here. So yes, Compass Pathways, we're a company in the final stages of developing developing synthetic psilocybin as a potential treatment for treatment-resistant depression, or what we call patients living with persistent depression. That's a big problem affecting some 3 million people in the U.S., and it's debilitating. Many of them are unable to work.

34:19The majority will have had some sort of suicidal thoughts in the course of their depressive illness. So we're a leading psychedelic company and potentially the closest to regulatory approval. You've used the word potential twice. You said it's a potential treatment, and you said potentially you're a leading company there when it comes to FDA approval. Is it unproven? We have generated robust evidence now from two studies. The first was published a couple of years ago, and then just last month, we released more data from the first of our final stage studies. So what can I tell you about that? First, safety.

34:54This, we didn't see any unexpected safety signals in this treatment of patients living with persistent depression. And secondly, after just a single treatment, after six weeks, we saw a significant reduction in depressive symptoms. And just to emphasize that, because you'll be aware of the kind of the typical paradigm of antidepressants, something you take daily. This was a single treatment and with the effect measured after six weeks. Now, we already are two for two in terms of these trials, clinical trials that we've conducted. but we're continuing to see more evidence generated first in one of these late stage trials.

35:35And second, we have another study ongoing where we're also looking at the impact potentially of another treatment.

35:41Carol Massar:We should point out that about a month ago when that study came out, the stock, your shares tumbled almost 50 percent, hitting a record low. What I guess I want to understand, so it was below what Wall Street expected. It did meet your goal, from what I understand, your company goal, but Wall Street was very disappointed. Tell us how this works. How does one psilocybin treatment kind of cure depression, persistent depression? Psilocybin you can think of as, if you like, a key. A key that unlocks a door or a set of doors in the brain. And while those doors are open, that enables the patient to work through some of their fixed negative thinking and potentially have relief from their depressive symptoms.

36:29To do that, there is a profound subjective experience. So there is a psychedelic experience that lasts six to eight hours. And as I say, during the course of that, the drug is working in such a way that it unlocks these doors and allows the patient to engage with some of those negative thoughts and potentially, as I say, get relief from those depressive symptoms. The fact is, as I say, we've seen, and what's amazing, that one single treatment can show sustained effects at least through to six weeks and potentially longer. In our earlier trial, our earlier clinical study that we did, we saw that for many patients that was sustained out to 12 weeks.

37:10What's many? How many? Forgive me, Tim.

37:13Carol Massar:Like, I'm just curious, how many? So that was a study of around 230 patients, of whom a significant number were on what we call the active dose of the medication. And what we saw was a quarter of them had from that single dose, they were actually sustained free of depression out to 12 weeks. And in this population of people who have typically tried multiple treatments and for whom very little is any longer working, that was a remarkable response. When patients do take this single dose, what is the environment that they're in during that six to eight hours? And are they guided in some way by a therapist of sorts?

37:48It's a, physically, it's a calm, comfortable setting. They have the option of eye shades, there's music playing, and there are appropriate safety safeguards in place. Psilocybin is a very inner directed mechanism. So what actually happens is the patient has this profound influence, but while there is somebody in the room, it's largely silent. There is not directed therapy in the course of that intervention. How do you run an effective clinical trial for a drug that the experience is such that the person knows they've taken this drug rather than a placebo? Somebody who takes a placebo is not going to have a psychedelic reaction to the placebo.

38:31At Compass, we thought about this before we even started our studies. So our prior big study, the one I referenced with 230 patients, we designed that in such a way that there was the choice of three different doses of psilocybin. One was a low dose. A second was an intermediate dose. and in patients who've never had this experience before, that's truly confounding in terms that they cannot tell whether they got a medium dose or a high dose of that drug. This is important because, as you say, otherwise it will be very obvious. But that design was very effective for that earlier stage study we did, and we've replicated that design in one of our late stage studies.

39:11Carol Massar:We're talking with Kabir Nath. He's chief executive officer of Compass Pathways here in studio. You keep saying synthetic. What's the difference between synthetic and naturally occurring? So we are manufacturing a pill to the highest standards of purity, no contamination. We know exactly what is in the pill. This is a manufactured pill that we are treating with. So that you know exactly in terms of dosage. Is that what I'm saying? So if naturally occurring is different? Potentially. It is naturally occurring. Whereas well as it's synthetic, so we know exactly what's in it. We know the exact pill.

39:43What will it cost? It's premature to speculate on that at the moment. We're still conducting these final stages of our studies.

39:50Carol Massar:But expensive? And would it be something, I mean if you get FDA approval, is it safe to make the assumption that it would be covered? The whole premise for founding Compass Pathways was to enable that form of broad access. So the reason that the company has gone through doing these rigorous robust clinical studies so that we, is exactly so that we can discuss that with the FDA, potential for regulatory approval. And then, if we're fortunate enough to get there, the chance to negotiate with both commercial insurers and government payers. Let's remind ourselves that these three million people that I referred to, they are relying on insurers, commercial insurers and government payers to actually cover their drugs.

40:33I believe we will be able to demonstrate significant value given how different this is from other treatments available today in depression. Kabir, Carol mentioned that the Associated Press reported earlier this month that RFK Jr. recently talked to members of Congress about psychedelic therapy for depression and trauma. Apart from that, have you seen any real signs of support for the administration for this new class of drugs or type of treatment? We have had support from the FDA throughout our development process. We have breakthrough designation. So even before Robert F. Kennedy Jr. took over as HHS?

41:09And we have had a motivated and engaged agency. We're excited to see the voices from HHS, from Veterans Affairs today, suggesting that they also see the potential for this class. And we're very happy to work to see how we could potentially accelerate access, while at the same time ensuring that we continue to generate really good, robust, good evidence that these are safe and effective.

41:32Carol Massar:Talk to us about timeline, though. I feel like we've been, I know Bloomberg's been reporting on this class of drugs and treatments, and I think we've all seen pieces that. For years. Right, for a long time, that for people who were other treatments don't seem to be making a change for them. So, I don't know. Is it another few years? Is it the end of this year? Is it the end of next year? And is it, yeah, that the Trump administration could somehow shuttle this through much more quickly? I think there are clearly people in the current administration who, as I say, see the potential of this, but we want to make sure we do this right as well.

42:11So we want to make sure we do that in the right way with the right rigor and so on. We are conducting, as I say, the final stages of studies. We have two ongoing, of which the second will wrap up in the second half of next year. The data we released last month, though it hasn't yet been reviewed by the FDA, we have a meeting planned with them where we'll discuss with them and we'll discuss the potential for any acceleration of the filing and a regulatory process.

42:35Carol Massar:Do you also think about other usages, whether it's PTSD and other applications? And I'm just curious what you might be exploring in that world. Our next priority beyond persistent depression is indeed PTSD. That is something with very high prevalence, some 13 million in the U.S., for which there are only two very old drugs approved. And unfortunately, recently, there have been two advisory committees recommending against new drugs in that space. So yes, we see PTSD as a key area. We generated some data last year, and we will be announcing the design of another late-stage trial for PTSD imminently.

43:11I know the US FDA is the gold standard for going through the regulatory process to be viewed by the world as a credible treatment for something. But these days, is it worth going after approval in another country to try to do this on a smaller scale to prove that, yes, it indeed works? We will be exploring approval in a range of countries. So our studies have been international, US, Canada, Europe as well. We have taken advice over the years from the European regulatory authorities. We're a UK-based company as well. So we've been speaking to the MHRA, the regulatory authority in the UK. So yes, this is a problem, sadly, for patients across the world.

43:53And we would look to exploit it where we can.

43:55Carol Massar:Kabir, just got about 30, 40 seconds. We're actually going to be talking with the CEO of AstraZeneca right after this. I'm just curious in terms of big pharma, have you had any preliminary discussions with larger pharmaceutical partners interested in commercialization, co-commercialization or distribution? What I know is the big pharma is tracking this space closely. And what's been great is to see the reentry of some big pharma back into psychiatry over the last couple of years. So I know they watch this space, but we at Compass are determined that we can do this ourselves and are excited about the opportunity to bring this potential new treatment to patients who so clearly need it.

44:33Carol Massar:So no strategic alignment that you would consider? You plan on doing this alone? That's our plan. Okay, great stuff. Stay in touch and let us know how things are going. Really appreciate it. Kabir, be well. Kabir Nath, he's Chief Executive Officer of Compass Pathways, joining us right here in studio. hour. This is the Bloomberg Business Week daily podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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