Lilly Falls as Weight-Loss Pill Data Overshadows Sales Beat

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1:20Geetha Ranganathan:Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. Or watch us live on YouTube. Eli Lilly. It had a sales peak, but shares are taking a hit. Yeah, Lilly's shares are down about 14%. There is something overshadowing that. For that, we're going to bring in Damian Gardais, Bloomberg News health reporter.

2:01Damian, thanks for joining us here in the studio. So it looks like this experiment, this drug, experimental weight loss pill, and that's the thing here, it didn't do as well in the study as Wall Street had expected. Exactly. So it met its goals, and it helped people lose weight, which was the whole point of it. This was enrolling people with obesity. but that weight loss was about 11 % of body weight. And Wall Street was hoping to see something more akin to 14 % to 15%, which would match what's seen with the injectable GLP-1 weight loss medicines, like Wagovi from rival Novo Nordisk. So despite the trial being a success, and despite this pill seemingly on the path to winning FDA approval and hitting the market as early as next year, the reaction, as you mentioned, was dramatically negative for Eli Lilly because these single-digit percentage differences are perceived to be massively important to the ultimate financial future of this medicine.

2:55Geetha Ranganathan:Here's the thing for me, knowing someone that does this GLP-1 thing, whatever it is, you've got to reduce the side effects of the nausea, and this one didn't. And that was the—I know people that use it and use the injection are saying, boy when the oral one comes out i'm told that the side effects will be dramatically less which is a huge selling point and i guess that's not what they saw here basically in this study they saw gastrointestinal side effects that were comparable to the injectable one which to your point could be viewed as a negative there was a i think there was a home run scenario where lily's pill would both lead to a greater percentage of body weight loss and as you mentioned have fewer of the nausea vomiting unpleasant things.

3:38Geetha Ranganathan:It feels like we're, we being the pharmaceutical biotechnics, we're in the early innings of this GLP type obesity thing. I can't imagine why it's not going to get better and better and better and better. Or, I don't know the science, maybe we're already at that limit. We are at the limit of this, whatever this thing is. I don't think so. I mean, and granted, you know, clinical trials need to play out science, biology, famously unpredictable. But I would say the space is moving in two directions. One, combination medicines that add GLP-1 to other things that can lead to more dramatic weight loss.

4:07And then two, more convenient things like pills that you can take that maybe don't have the same effect on body weight, but that would be cheaper to manufacture, presumably cheaper to acquire for patients because these injectables have list prices in excess of$1 ,000 a month. So in the best case scenario, let's say five years from now, there will be an armamentarium of weight loss medicines. An armamentarium, which I think I stumbled over. A whole bunch of them, like an armory, let's say. So a physician, yes, a physician could, you know, diagnose a patient and say, for some people, you will need an injectable that you can lose 25 % of your body weight on.

4:42For some people, you may be good with an oral medicine where you lose a single digit or even 10 % of your body weight or mixing and matching using one for maintenance. And the upside being, theoretically, this will one, become a massive$100 billion market for the pharmaceutical industry, but two, have knock-on beneficial effects for people's health. So where do we stand with the pills? I mean, what other competition is out there? Who else is working on one that we should keep an eye on as well? So Novo Nordisk has an oral version of the injectable Wegovi. It is not as convenient, or I would say innovative, frankly, as Lily's pill, because it's basically just a bunch of Wegovi shoved into a tablet that you eat, and it sits in your gut and administers the drug there.

5:24And that, it comes with restrictions. You can't take it with food. You have to do it in the morning. It's not really as attractive a commercial product, I think it's fair to say, as Lily's. But there are other oral options from smaller biotech companies that we may see them progress to the market. There's also a lot of M &A speculation around these firms that a company like Pfizer, for example, which kind of crashed and burned with its first attempt to make a GLP-1 pill, might acquire them. So this is very much a space to watch. I would say a year from now, it's quite likely that it will look demonstrably different than it looks right now.

5:55Geetha Ranganathan:So as I look at the PGEO table, which kind of breaks down where the revenue comes from, lily where is the cardiometabolic health is that the sector yeah all right that's that sector is 65 of total revenue so that's a big deal yeah for lily and that's not inclusive of this oral drug which isn't even approved yet so i mean as you mentioned the these data overshadowing lily had like a blowout quarter they're approved medicine for uh for obesity and the same thing is sold for diabetes both of them beat estimates they raised revenue guidance and profit guidance they're doing very, very well. But I think the stock reaction today is sort of an illustration of just how much is baked into the potential of these medicines.

6:34Lily has flirted with being a trillion dollar valuation company. They're not there anymore. But that's strictly a reflection of what people believe will come of this class of medicine. So speaking of the potential then, so why is the science behind these pills? Why is it such a challenge? I mean, getting what you can do in an injectable medicine, getting that down into a pill has been, has bedeviled the drug industry for many, many years because there are safety concerns. There are dosing concerns. The ideal product is like a super pill that prolongs your life and et cetera. But there's a reason we have so few of those.

7:09And it's basically just the trial and error and the unpredictability of biology. And I think these companies are always trying to bend the curves of failures. But like it remains true that roughly one in 10 medicines actually makes it from the lab to the pharmacy.

7:23Geetha Ranganathan:My freshman year college chemistry lab partner went on to become like this crazy smart dude, played a wide receiver in the NFL, then became a astronaut, space shuttle. Crazy. And I was like, dude, can you carry me in this chemistry class? Because I'm not really into it. And he was super smart. And then he didn't peak there. He didn't peak in the NFL. I guess he peaked in flying around in space. So good there. What's the next thing that you're looking for in the pharma space here? What's the next big mover here on a company level that you're looking at? For weight loss specifically or just more broadly?

8:05I think actually Merck is working on, speaking of pills, they're working on a pill version that would be basically a super statin. It would lower bad cholesterol to a level that cannot be done with oral medicines that exist right now. And that it kind of follows this same trajectory that I think we're seeing big pharma companies years ago after statins went generic kind of moved away from primary care medicines because it's difficult. You have to run big trials. It's expensive. If they fail, you lose a lot of money and move toward oncology and rare diseases. I feel like we're seeing and I think GLP one was sort of the Trojan horse in some ways of this.

8:40We're seeing the major drug companies move back toward primary care, trying to invent medicines that would be taken by millions of people and that would actually address the number one killer of Americans, which is heart disease. So I think that's a trend that I'm following. And we'll get data from that Merck pill, I believe, by the end of the year.

8:53Geetha Ranganathan:All right. I mean, you and Sam Fezzelli, you guys do whatever you do in that health care thing. Just tell us when something important is happening. Damien Garday, health care reporter for Bloomberg News, joining us live here in our Bloomberg Interactive Broker Studio. You know, back in my trading days, man, I'd go to my health care guy and say, hey, can I buy Lilly today? It's down 15%. I mean, it feels like an entry point to me. And hopefully my analysts will have a good idea of what's going on. It's such a competitive space. I mean, you hear the GLP ones are supposed to lower cholesterol, but then you have other, he was just talking about another cholesterol medicine coming out.

9:23Geetha Ranganathan:But I mean, these GLP things have been, I see a news story every day, how they help this, they cure this, they lower the risk of this. It's not just, so I don't know what's going on. I tell you that healthcare space is a tough one to invest in, I think. That's why there's MDs and PhDs all over the place in investment firms investing in that space. you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube when was the last time you went to a movie at a movie theater oh it was a tough we were supposed to go the other weekend and see like superman but that didn't happen um i i watch a lot of them like i stream them like for example minecraft like I saw at home and then I didn't go to the theater to see it.

10:13Geetha Ranganathan:Right. And that's what like Warner Brothers is dealing with. Yeah, exactly right. So, but I'm Warner Brothers Discovery. They put out results. I don't know. I mean, my expectations are really low for this company, but they, I thought they were pretty decent. The stock's trading off a little bit here, but let's get the latest on what's happening at Warner Brothers Discovery and even maybe a little bit on our friends at Peloton. Jen Sherman's my buddy there. She's a person I train with. Of course. Either wrong or not than you. I'm not going to do it with some dude. I mean, you know, why would you do that?

10:40She's your friend in your head.

10:41Geetha Ranganathan:Exactly. Exactly. We're friends in it. So Geetha Raghunathan, she actually is the analyst on all this media stuff. She's down there in our Princeton University sprawling campus. Hey, Geetha, talk to us about Warner Brothers Discovery, because there are like a lot of traditional media companies trying to make that transition from the good old days of linear television, cable television, all that kind of stuff, to the streaming world. What did you learn from Warner Brothers Discovery? Yeah, so, Paul, what we really saw was, you know, a continuation of the same. So the streaming business is doing really well.

11:12The studio business is doing extremely well. But TV networks, which is really 80 % of their EBITDA, is still struggling. And we saw a 25 % slump in their TV networks EBITDA. So, you know, that continues to be a pain point. And while there was initially some, you know, obviously some excitement about the turnaround in both the streaming and the studio businesses, the fact that there is absolutely no respite inside for TV is extremely distressing. And that's why their shares are down like 7%. Okay, so talk to me about the companies in the process of splitting itself into two separate entities, right?

11:48So where do we stand with that? What are the pros and cons that go along with that? Yeah, so this is, you know, one of the best ways for them, or at least, you know, the fact that they've kind of decided to do this really follows a pattern in most of the media landscape where they're kind of separating the low growth assets from the slightly higher growth assets, the low growth or the no growth assets being the TV business, for Warner Brothers that split will happen in the middle of next year. And really the strategy here is to unlock shareholder value because you know that they combine their Warner Brothers business with the discovery networks, of course, that really hasn't gone anywhere.

12:30And so finally everybody in the media world is doing this where they're kind of separating out the secularly challenged TV networks. The only problem here is that we still really don't have a very clear strategy, so they have to really outline that. And I think that is part of the reason why we're also kind of seeing this, the decline in shares this morning. All right.

12:52Geetha Ranganathan:The studio had a good quarter here. A couple, some hits like Sinners, a Minecraft movie, Final Destination, Bloodlines, and things like that. Talk to us about the studio and maybe it's kind of its forward slate. How's that look for the company? The forward state actually looks really good, Paul. You know, they just had their major DC reboot with Superman. And what they're really trying to do now going forward, I mean, they didn't have a Superman movie for years. Their DC strategy was a mess. They had so many movies out there. It was all confusing storylines. But I think finally they're going to right that ship.

13:29So they've committed to a pretty strong slate of about 12 to 14 movies going forward. The big thing for them is to really get Studio EBITDA to about$3 billion, and they seem to be well on their way. I mean, last year was a complete mess. This year, definitely much, much better. They're actually, if you just look at box office performance overall, they already have about a 25%, 26 % share of the domestic box office, so they're only very slightly behind Disney. So they're definitely doing well, and their strategy is working. They have a pretty good content pipeline. All right, let's switch over to Peloton.

14:03How is this company doing? I mean, is there subscribers? Are they continuing to come in? Are people still using this equipment as much as they used to? So for Peloton, really, and the story has not been so much on subscribers. Unfortunately, it has really been more about trimming the fat literally at the company and kind of getting profits into full focus. And if you just saw this quarter's results and what they reported for the full year for fiscal 2025, I mean, the progress that they've made in terms of profitability has been absolutely outstanding. So they reported adjusted EBITDA that came in about 19, 20 percent higher than guidance and consensus.

14:44Their forward guidance, so fiscal 2026 adjusted EBITDA guidance was also way above consensus. So the way that they're kind of optimizing their operating expenses has been absolutely stellar. You know, just everything in terms of workforce reduction, in terms of inventory management, you know, OPEX costs, marketing expenses, everything has been absolutely top notch. The only problem for them is reinvigorating demand. And that's where, you know, we're kind of really kind of seeing this disconnect because the financial metrics are really good, but the subscriber metrics, unfortunately, are not.

15:19Geetha Ranganathan:Is there a credible plan there to reignite growth there? I just I kind of it feels like, you know, everybody who's got one's got one. How did they talk about that part of the story? Yeah, so it's really going to be a little bit hard. I mean, yeah, on the margin, I think they can do some things to kind of reignite a little bit of the hardware sales. But in terms of a sustainable go forward strategy, that is really still pretty unclear, Paul. So I think right now what they're really trying to do is, again, really get, you know, more costs out of the system. maybe increase subscription prices a little bit, so kind of pad that top line a little bit.

15:58But in terms of the overall subscription growth story, I'm not so sure that's really gonna be a volume story. I think it's gonna focus more on kind of rates and price and improving pricing. And Geeta, how much of that cutting costs includes cutting jobs? Yeah, they did actually announce a 6 % workforce reduction as well. So a lot of it is going to come down to cutting jobs.

16:23Geetha Ranganathan:All right. Hey, Geetha, just one quick thing on Warner Brothers Discovery. What's the timing of this separation? It's going to, so they announced the formal plan in June. It's going to happen by mid-2026, so by the middle of next year. Okay. All right. We'll keep an eye on that. Geetha Ranganathan, she covers all the media stuff for Bloomberg Intelligence. Is that a good move for them to split? I mean, you see Comcast do it, right? Yeah, I think it is, simply because you hope that the two parts have more total value than they do together. And so you're concerned that the high growth business is being pulled down by the slower growth cable networks.

17:01Geetha Ranganathan:So you split them out and see how far this, you know, the streaming business and the studio can fly, I guess, is kind of the thought there. So we see it all the time in lots of different industries. And there was a time, you know, when all these assets made sense to be together. But the fortunes, the economic fortunes of the cable network and broadcast network business have been permanently damaged and it gets worse every year. So, you know, you just got to cut those out and see how they trade on a standalone basis. Maybe ultimately they get acquired or maybe some of these networks maybe get together, the Comcast stuff.

17:36Geetha Ranganathan:Maybe it will get together with the Warner Brothers stuff and just become bigger and get some cost energy. So we'll see how that plays out. But we're seeing that across the media space here. When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products.

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20:05Listen on demand wherever you get your podcasts or watch us live on YouTube.

20:10Geetha Ranganathan:Intel coming into the crosshairs of President Trump today, particularly the CEO saying he's got to go. I mean, I have no idea where that came from. I'm guessing Mandeep Singh is read up on this, if nothing else. Mandeep Singh, senior tech analyst for Bloomberg Intelligence. Mandeep, President Trump calling for the CEO of Intel to quit. But he says he's conflicted. Can you give us the backstory of what's going on here, as far as you know? I mean, most likely it has to do with the minority investments that the Intel CEO has in companies within China. And they may have some ties to the Chinese government in some way.

20:51And look, he used to be a VC. So this guy has had multiple roles. He used to be the CEO of Cadence. Then he was a VC with, you know, multiple investments in startups across the globe. So I'm guessing the board, Intel board, before they appointed him as the CEO, did their due diligence in terms of looking at all these aspects. And to my mind, I mean, it obviously is a surprise that, you know, his credentials are being questioned here, given the reputation he has in the Valley. Is he an American citizen? I'm not sure. Probably he is. But, I mean, those are the type of things you would expect the board to do their due diligence on.

21:40For a company like Intel, which has had multiple CEOs and clearly is looking for a big turnaround, a lot of people felt this guy had the credentials, you know, in terms of having the experience to turn around a big ship like Intel. And I mean, so far, it's too early to call out how good of a job he was doing. still early days with his strategy, but clearly he has plans to keep the foundry business and turn around the core chip design business. And he has raised a lot of cash. So I would say still early days with his strategy, but this clearly puts a wrench in terms of his strategy.