Novo Undercuts Lilly’s Obesity Drug Price for Cash-Pay in US

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1:20Bloomberg 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. I feel like we have to talk about what's going on in biotech. It's M &A Monday, Paul, and there's been this trend, of course, of the big pharma companies desperate to refill their pipeline. It's getting competitive now, and they're competing on price. That's what I'm kind of noticing here. It went from being like a rare to find it.

1:57Now it's everywhere. Yeah. And now they're competing on price. So it's a good thing if you are looking to get in on the anti-obesity drugs and you're looking for a more affordable price because the companies are doing what they can to appeal to consumers. Michael Shah is Bloomberg Intelligence Senior Pharma Biotech Analyst joining us now. And Michael, Novo Nordisk is now undercutting Eli Lilly's obesity drug price. Tell us exactly what they're doing here, because my understanding is that both these companies recently worked out a deal with the White House to reduce prices overall. Yeah, thanks.

2:30So absolutely. This is obviously ahead of the White House deal. So you're seeing starting doses being reduced to$200 per month and then doses thereafter being charged an average of $350 per month compared to$500 previously. So those prices kind of align to the pricing in the White House statement coming from Trump-Rx. But compared to Lilly, they're undercutting them by about$100 at each dose. And this is basically a ploy to basically compete for new patient starts. As we know, Lilly's got the more effective product in terms of weight loss profile. And they're also executing better on the launches.

3:12And I think that's clear from 3Q results where we saw contrasting fortunes between those two particular drug makers. Mikey, give us a sense of this marketplace here. What percentage of the addressable market is actually taking these obesity drugs versus, because it seems like as the price comes down, more and more people will be able to get access to them. Yeah, absolutely. I mean, it's a highly price sensitive market. When we look at penetration rates in the US, low single digits, that's obviously going to accelerate as these drugs become cheaper. Looking outside the US, penetration rates are even lower.

3:49So there's still significant kind of patient runway out there. In terms of U.S. penetration, I mean, you know, the deal, the White House pricing deal on GLP-1 drugs, you know, supports kind of use of these GLP-1 drugs in Medicare. You know, there we think that it can unlock, you know, seven to eight million patients. According to the White House statement, I think they said 10 % of Medicare beneficiaries would become eligible for GLP-1 drugs based on the pilot program that's going to be introduced in 26. And I think it's going to become mandatory in 27. And then they've also lowered the price in Medicaid too.

4:29I think the uplift in terms of patients there is a bit harder to deduce or to kind of model given that coverage is going to be on a state-by-state basis. And there's also kind of different qualifying criteria, which again is state dependent. What does this mean, Michael, for the companies like hims and hers, the companies that make compounded copycat versions of these anti-obesity drugs. They've done very well. And I know the stock for hims and hers has been kind of all over the place, but it is modestly higher from where it was at the start of the year. Yeah, I mean, I think that whole, you know, the compounding situation, I believe that, you know, 1.2 million patients are on compounding GLP-1 at the moment.

5:11That's based on kind of comments and no they made during their three key results um obviously lowering down the price would kind of um of the branded um treatments um would basically um well i mean it would it would you know lessen the delta between you know copycats um and branded treatments so i i guess it's a negative for for for these you know compounded glp1 drug makers mikey when i look at the big cap pharma names, is it as simple as I want to own the ones with exposure to obesity market and not own the ones that don't? Because I'm looking at your slate of stocks and you're either up 30 % or you're down.

5:51Yeah, I mean, I think, you know, there's a few large pharma names which have entered the space, you know, in the recent years. You've seen kind of deals with Rosh and Zealand for an amuline drug. Most recently, you've obviously got the Pfizer-Metzerra M &A deal. I mean, I think obesity is obviously appealing given, you know, the size of the target population, how under-penetrated it currently is. And, you know, if you're looking to, you know, offset patent expirations later in the decade, you know, there's an abundance of kind of GLP1 products out there. as well as other assets, too. So I think that's the appeal of the space.

6:34It's a large market, it's underpenetrated, and there's high demand for these treatments, too. I mentioned M &A, and of course, we know that J &J is making a purchase to increase its pipeline to get away from relying on these older drugs that have lost patent protection. Is every pharma company doing the same thing? Is that, you know, their not only strategy, but is that the way they move forward, is there anyone who's kind of like in a good position and doesn't need to make a deal? I mean, I think that's always been part of the large pharma model. They supplement kind of in-house innovation with external innovation, particularly if they want to get into areas perhaps outside of their core competency.

7:16But I mean, I think that's just the model in general. Biotech has always been the pipeline for large pharma companies or at least help bulk up that that pipeline. Stay with us. More from Bloomberg Intelligence coming up after this.

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9:22You'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. It is Merger Monday, and today we've got a financial buyer making some headlines here. Clayton DuBellier and Rice, now known as CDR, They agreed to buy Sealed Air Corporation in a deal valuing the packaging company and invented the bubble wrap at$6.2 billion. Let's break this deal down. Liana Baker, managing editor of the deals team, joins us live here in our Bloomberg Interactive Broker Studio.

10:00So CDR, Sealed Air,$6.2 billion. Pretty interesting deal. Was this expected in the marketplace? Sure. So CDNR, we had picked up last week, had been in talks to buy Sealed Air and the biggest packaging deal in a long time. and today we see it get to the finish line on this merger Monday. And what's interesting here is that while the enterprise value is over$10 billion, which is pretty big, the share price is sort of below where it's trading on the margin. So not a huge premium here. In fact, no premium. It's sort of a take under. And if you see where shares are trading, investors aren't super thrilled.

10:35But it is still a good sign for this to get to the finish line. We are seeing a lot of take privates in this M &A boom. private equities putting their dry powder to work. This is the latest example. Was this an obvious candidate for takeout? It's funny that you ask because packaging has been sort of a predictable area of revenue. And we were sort of expecting a time of economic uncertainty that we would see more packaging deals. But if you look at the data, packaging deals have been down compared to last year where other sectors, even in industrials, had been busy. So it was a little surprising to see a big deal in this space, but there could be more because it's sort of a predictable area to invest in.

11:22Having been adjacent to the private equity world most of my career, I think I learned a few things, which is it's easy to raise money. It's easy to put money to work. It's really hard to monetize those investments. Where are we in that monetization? Because it's been kind of a fallow market for the last four or five, six years. So I'm surprised you said it's easy to raise money because I've seen my colleagues who focus on private equity have been writing about some issues in the fundraising market that it's not as easy as it used to be. But definitely there's fewer and fewer publicly traded companies for you guys to report on because there's just so many of these take privates.

11:55And the IPO market, which is one way that these PE firm sponsors could get some monetization, that's been shut the past few years. I know things are coming back a little bit, but these sponsors love to trade assets to each other. And there were some other private equity deals today. Bain bought a golf company from Clear Lake for like a billion or so dollars. So we do see like the steady drumbeat of private equities, firms just trading assets to each other and then the occasional big tape private like this morning. So you mentioned that it's a little harder to fundraise now than it was a few years ago.

12:30Presumably that's because of where interest rates are. If interest rates do decline in 2026, what does that mean for fundraising efforts by PE? So I would say that it's going to be easier for firms to borrow for leverage buyouts. So we could see more deal making and that could lead to monetization, which could then lead to saying to investors, hey, we have these great returns from these sales. Maybe now's the time to raise money. I do think that there's also so many newer private equity firms emerging and then with private credit, like there's just a lot of things competing for investors attention.

13:07um but yeah this is this is one for cdnr uh you know probably their largest deal in a while but um there's probably more take privates in the market for some of their competitors uh ma go on this deal you see where the advisors are who's getting paid which one of my buddies are getting paid so it's funny i don't have enough time to mention how many banks are on the financing so everyone is on the financing and it's funny we reported late last night that this deal was going to happen. And we were trying to get the share price. And we were kind of kicking ourselves because we didn't get that in time when everyone clearly, clearly was a poorly kept secret.

13:45A lot of people knew we just, they were, you know, mom's the word on the price. Well, there are 10 investment banks getting paid for the private, because I mean, these investment banks, they have departments that their only job is to call on private equity. That's it. They don't call on, they don't care about industries. They just, so you got to pay these people because they've been calling on you all year. And when you finally do a deal, you've got to pay all of them. Whereas the advisor, the seller was represented by Evercore, one bank. Which used to be sort of a boutique name, but now, you know, they're pretty big and public and they're, you know, trying to eat the bulge brackets lunch, for example.

14:20So, yeah, not many people left off that deal. Stay with us. More from Bloomberg Intelligence coming up after this. This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m. About to start consensual telephone call with Dr. Daiwa Zhang. China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

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15:49You'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. It is holiday shopping season. I think it's really hard to be a retail analyst. A, you got to be right on the stock and valuation and earnings and all that kind of stuff like every other analyst. But then you also have to kind of be right on fashion. What's going to sell? How do you do that? How do you do that? I have no idea. Mary Ross Gilbert, that's her job.

16:20Bloomberg Intelligence Senior, your Echoliano's covering the retailers. Mary, talk to us about apparel and where are we in the world of apparel these days? What's selling? What's not selling? Are some companies getting it right? Because we're right smack in the middle of the holiday shopping season. Yes. So, Paul, you're absolutely right. Here we are in the holiday season. And yes, there are some companies that are getting it right. One of those companies includes Gap, which they'll be reporting their earnings on Thursday. And we see a lot of strength with their two largest brands being Old Navy.

16:52So we're seeing tremendous strength in style, their viral campaigns that they have there, and also with their namesake brand Gap, which is their second largest brand for that company. So that's like 70 % of sales right there for those two brands. And we're seeing a lot of strength and momentum. And we think that continues into 2026 for Gap. Aritzia, which is expanding in the U.S. and is entering new markets, opening new stores, and then they're gaining on a comp sales basis. So we're seeing a lot of strength with that brand really taking off in the U.S. So it's still very small here. They have under 70 stores in the U.S., and most apparel brands have over 200.

17:36So that's one that's faring well. And then, of course, in the value segment, and obviously Old Navy touches that, but off-price, we see strength in off-price because here you have the brands that consumers want, and it's pretty prevalent across all the companies, TJX, Ross Stores, and Burlington Stores. Now, on the department store side, we just had Dillard's numbers out for the third quarter last week, and their third quarter comp sales rose 3%. That's a really nice figure there, and their margins came in better than expected. And that's because they execute a full-price model. They're not promotional like Macy's or Kohl's at all.

18:20They do have clearance sales, and they're typically two times a year, but they're showing their models working. But we think that Macy's is showing some signs of improvement that we could see their comp sales also come in higher when they go to report in early December. But Kohl's, they're still struggling. They still need to get assortments right. We did notice their online traffic was better than in-store. And then, of course, when they reported their second quarter, they were still seeing lower sales for their credit card customers. And those are supposed to be their most loyal customers. So, Mary, I got to ask you about Abercrombie Fitch because you did not mention that stock, that company at all.

19:04And that was like the star retail performer in 2023 when its stock jumped almost 300 percent. In 2024, it gained about 70 percent. So far this year, it's down about 54 percent. What is Abercrombie not getting right? Or did it just peak already? And now everyone else is playing catch up. We're just not seeing the strength in the namesake brand, but in their Hollister brand, we are seeing strength. So really their Gen Z focus with Hollister, we're seeing strength and we're thinking they're going to report some strong numbers for the third quarter. But the namesake brand, maybe it's become a lot more competitive.

19:46You know, that customer that shops at Abercrombie also shops at Aritzia. So they could be getting more competition. And with some of the department stores like a Macy's bringing in more relevant brands that might also be taking share. So we're just not seeing the strength that we had been seeing on a comp sales basis. And then also we'll have to see how they're faring with margins because they did have a fair amount of exposure with India. and India is now at 50%. But we think they'll be able to shift sourcing into those lower cost Asian countries. Most of Asia is kind of near that 20 % range now, including China.

20:27So we think most of these brands are doing a good job shifting sourcing. And we think that tariffs can be overcome. And we think in the second half, you will see margins improve across the board. But there are certain retailers that are not really experiencing the erosion, such as Ralph Lauren. They're really doing a great job generating strong sales at higher price points. And then so they're getting the benefit of the sales leverage and then also the full price selling and at higher price points. And those are offsetting tariffs. So you're just not seeing a negative effect. It's just you're not seeing the margin expansion you would typically see with Ralph Lauren.

21:09Stay with us. More from Bloomberg Intelligence coming up after this.

21:41Learn more at bloomberglive.com slash bloomberghousemiami. 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. Taking some folks out to Fiorino's, my favorite Italian restaurant. Place is going to be packed. I mean, it just seems like the restaurant business remains pretty darn strong. But what do I know? Michael Halen, senior restaurant and food service analyst from Bloomberg Intelligence. He joins us here.

22:15Hey, Mike, give us a sense here. I know you kind of you track this stuff really closely. How are the restaurants doing out there? Does it depend upon what segment of the market they're targeting? Yeah, that's that's definitely part of it. We saw that in last month's data. Fine dining had a really nice rebound. And I think part of it is because they're catering to higher income consumers who who own assets and are feeling pretty good about things moving forward. You know, right now, you know, November is going to be a tough month. There's no doubt about it. The government shutdown has definitely impacted sales and traffic for the chains we cover, especially in the DMV area, as well as in the south where there's a lot of government workers.

23:04Also, last November, restaurant sales had a nice boost from the election. And so we're going to be lapping tough comps. So November is not looking great. But things should bounce back a little bit here in December. And we're not crazy bullish, but we're more bullish about the first half of next year. So let's start with quick, quick service dining. Talk to us about that marketplace. I think back to McDonald's of the world and so on. How's that fairing? Yeah, so quick service had a really difficult first half of the year. They were lapping strong comps and they and they kind of lost their way when it came to value.

23:47Right. They just had implemented too big of price increases over the last few years. And customers started to push back, especially low income consumers who have been, you know, who are really impacted by inflation to a much greater degree than middle and higher income consumers. So the first half was difficult, but here in the second half of the year, things have gotten better largely because they've reestablished their value propositions. You know, McDonald's has revamped its dollar menu this year. They also reintroduced snack wraps at a$3 price point, which have boosted checks by, you know, people adding them on to their orders as well as bringing in some low income consumer traffic.

24:30But, you know, low-income consumers are pulling back at a pretty big rate. You know, we think part of that is the SNAP benefit pullback, right? And so, quick, but they've been able to bring in some higher-income consumers and middle-income consumers. So, things are starting to look better, right? McDonald's, McDonald's especially. I mean, McDonald's is going to be lapping the E. coli, or right now is lapping the E. coli outbreak from last year. And so, you know, they're the 800 pound gorilla. And I think good results out of McDonald's over the next few quarters should boost the entire category.

25:07How about the cost of beef, which, you know, consumers complain about across the board? I know companies are dealing with it. And what I understand is we're not going to see a material improvement in the cattle herd till maybe 2028. So how does that factor into the profit margins of all these restaurants? Yeah. And so the restaurants that are impacted the most are, you know, burger chains like Shake Shack or steak houses like Texas Roadhouse that own and operate all of their stores. You know, to your point, beef inflation for these chains is going to be in the mid teens in the fourth quarter. So, yeah, you have very high.