November 17, 2025 • 23 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
- Michael Shah, Bloomberg Intelligence Senior Pharma-Biotech Analyst, discusses Novo Nordisk undercutting Eli Lilly & Co. on obesity drugs for cash-pay patients, with introductory doses of Wegovy and Ozempic available for $199 a month. After the first two months, Novo will offer the drugs for $349 a month, 30% less than the current self-pay price, matching Lilly’s price for a low dose of Zepbound.
-- Liana Baker, Bloomberg News Managing Editor for Deals, discusses Clayton Dubilier & Rice agreeing to buy Sealed Air Corp. in a deal valuing the packaging company that invented Bubble Wrap at $6.2 billion. The private equity firm will pay $42.15 a share for Charlotte, North Carolina-based Sealed Air, according to a statement Monday. That’s slightly below Friday’s closing price of $43.28 a share, after reports that CD&R was weighing a takeover.
-Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst, Covering Retail, discusses why Ralph Lauren, Gap, Macy's and Dillard's are set to post stronger full-price sales in 2026 as fresh styles, collaborations and limited editions gain traction on social media, while new store openings can lift Aritzia, Burlington and Urban Outfitters. According to Bloomberg Intelligence: Tariff pressures should ease by 2H26, with selective price hikes and other measures poised to boost margins across most retailers.
-Michael Halen, Bloomberg Intelligence Senior Restaurant and Foodservice Analyst discusses his outlook for U.S restaurant sales in the fourth quarter. According to Bloomberg Intelligence: US restaurant same-store sales rose 0.7% in October, but could drop in November due to the government shutdown and a tough comparison. Time is running out on casual dining's edge over quick service as it faces steep base effects this month and in 2026. Quick-service chains like McDonald's and Domino's should outperform on easier comparisons, value and a bigger benefit from tax reform.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Apple, Cocklay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
I feel like we have to talk about what's going
on in biotech. It's the m and a Monday, Paul,
and there's been this trend of course of the big
pharma company is desperate to refill their pipeline.
Speaker 3 (00:32):
It's getting competitive now and they're going competing on price.
That's what I'm kind of noticing here went from b
like a rare to find it now it's everywhere. Yeah,
and now they're competing on price.
Speaker 2 (00:42):
So it's a good thing if you are looking to
get in on the antiobest drugs and you're looking for
a more affordable price, because the companies are doing what
they can to appeal to consumers. Michael shat Is, Bloomberg
Intelligence Senior Farmer, Senior pharm of Biotech analyst, joining us
now and Michael Novo Nordoice is now undercutting Eli Lilly's
obesity drug price. Tell us exactly what they're doing here
(01:04):
because my understanding is that both these companies recently worked
out a deal with the White House to reduce prices overall.
Speaker 4 (01:11):
Yeah, thanks, so absolutely, this is I mean, this is
obviously ahead of the White House deal. So you're seeing
starting doses being reduced two hundred dollars per month, and
then doses thereafter being charged at an average of three
hundred and fifty dollars per month compared to five hundred
dollars previously. So I mean, you know, those prices kind
of aligned to you know, the pricing in the in
the White House statement coming from trump RX, but compared
(01:35):
to Lily, I mean, they're undercutting them by about you know,
one hundred dollars at each dose. And this is basically
a ployed to basically compete for new patients starts. As
we know, Lee's got the more effective product in terms
of weight loss profile, and they're also you know, executing
better on the launchers. And I think that's clear from
three key results where we saw contrasting fortunes between those
(01:58):
two particular drug makers.
Speaker 3 (02:00):
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.
Speaker 4 (02:15):
Yeah. Absolutely, I mean it's a highly priced sensitive market.
When we look at penetration rates in the US, you know,
low single digits, that's obviously going to accelerate as these
as these drugs become cheaper. Looking outside the US, penetration
rates are even lower. So there's you know, still significant
kind of you know, patient runway out there in terms
(02:37):
of US penetration. I mean, you know, the deal, the
White House pricing deal on GLP one drugs, you know,
supports kind of use of these these GLP one drugs
in Medicare, you know there we think that it can
unlock you know, seven to eight million patients. According to
a White House statement, I think they said ten percent
of Medicare beneficiaries would become eligible for GLP one drugs
(03:00):
based on the pilot program, and that's going to be
introduced in twenty six, and I think it's going to
become mandatory in twenty seven. And then they've also you know,
loaded the price in Medicaid too. I think the uplift
in terms of patients there is a bit harder to
deduce or or to kind of model, given that you know,
coverage is going to be on a state by state basis,
(03:20):
and there's also kind of different qualifying criteria, which again
is state dependent.
Speaker 2 (03:27):
What does this mean, Michael? For the companies like Hymns
and Hers, the companies that make compounded copycat versions of
these antiobesity drugs, they've done very well. And I know
those stock for Hymns 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.
Speaker 4 (03:44):
Yeah, I mean I think that whole you know, the
compounding situation. I believe that you know, one point two
million patients are on compounding GLP one at the moment.
That's based on kind of comments and Novo made during
their three key results. Obviously, loaning down the price would
kind of of the branded treatments would basically well, I
(04:05):
mean it would it would you know, lessen the delta
between you know, coffeecats and branded treatment. So I guess
it's a negative for for for these you know, compounded
jylpy one drug makers.
Speaker 3 (04:17):
Mikey. When I look at the big cap farm of 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 your slate
of stocks and you're either up thirty percent or you're down.
Speaker 4 (04:33):
Yeah, I mean, I think you know there's a there's
a few large farmer names which which has entered the space.
You know, in the in the recent years, you've seen
kind of deals with russ and Zealand for an Amlin drug.
Most recently you've obviously got the fires and Metsarah m
and A deal. I mean, I think OBESTI is obviously
(04:56):
appealing given you know the size of the target population,
how underpenetrated 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 jill point
on products out there, as well as other assets too.
So I think that's the appeal of the space. It's
(05:16):
a large market, it's underpenetrated, and there's high demand for
these treatments too.
Speaker 2 (05:21):
I mentioned em and A, and of course we know
that JANJ is making a purchase to increase its pipeline
to get away from relying on these older drugs that
have lost patent protection. Is every farmer company doing the
same things that you know they're 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
(05:42):
need to make a deal.
Speaker 4 (05:44):
I mean, I think that's always been part of the
large farmer model. They supplement kind of in house innovation
with extern of innovation, particularly if they want to get
into areas perhaps outside of their core competency. But I mean,
I think that's just the model in general. Biotechs always
been the pipeline for large farmer companies or release help
(06:06):
bell caut that pipeline.
Speaker 3 (06:09):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:16):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (06:30):
It is Merger Monday, and today we've got a financial
buyer making some headlines here. Clayton du Billier and Rice
now known as CDR. They agreed to buy Sealed Air
Corporation in a deal value in the packaging company that
invented the bubble brap six point two billion dollars. To
break this deal down, Leanna Baker, managing editor of the
(06:50):
deal's team, joins us live here in our Bloomberg and
Directive Broker studio so CDR Sealed Air six point two
billion dollars. Pretty interesting deal? Was this expected in the marketplace?
Speaker 5 (07:00):
Sure? So CD and R 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 ten 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,
(07:22):
no premium. It's sort of a take under. And if
you see where shares are trading, you know, investors aren't
super thrilled, but it is you know, still a good
sign for this to get to the finish line. We
are seeing a lot of take privates in this m
and a boom private equities putting their dry powder to work.
This is the latest example.
Speaker 2 (07:43):
Was this an obvious candidate for takeout.
Speaker 5 (07:45):
It's funny that you asked, 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
(08:05):
was a little surprising to see a big deal in
this space. But you know there could be more because
it's sort of a predictable area, you know, to to
invest in.
Speaker 3 (08:16):
Having been adjacent to the private equity world most of
my career, I think I learned a few things, which
is 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.
Speaker 5 (08:31):
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 public public traded companies
for you guys to report on because there's just so
many of these take privates and the IPO market, which
is one way that these PE firm sponsors could get
(08:55):
some monetization, that's been like shut the past few years.
I know things are coming back a little bit by
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
drum beat of private equities firms just trading assets to
(09:16):
each other, and then the occasional big tape private like
this morning.
Speaker 2 (09:19):
So you mentioned that it's a little harder to fundraise
now than it was a few years ago. Presumably that's
because of where interest rates are. If interest rates do
decline in twenty twenty six, what does that mean for
fundraising efforts by PE.
Speaker 5 (09:32):
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 is
the time to raise money. I do think that there's
also so many newer private equity firms emerging, and then
(09:55):
with private credit, like there's just a lot of things
competing for investors mention. But yeah, this is this is
one for cdn R, you know, probably their largest deal
in a while, but there's probably more take privates in
the market for some of their competitors.
Speaker 3 (10:14):
M A go on this deal. You see where the
advisors are, who's getting paid, which one of my buddies
are getting paid.
Speaker 5 (10:18):
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 clear there was a poorly cut secret. A
(10:39):
lot of people knew we just they were you know,
mom's the word on the price.
Speaker 3 (10:44):
Well, there are ten investment banks getting paid, not part
of it 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 with you, you
got to pay all of them. Whereas the advisor, the
seller was represented by evercore One.
Speaker 5 (11:05):
Which used to be sort of a bootique name, but
now you know, they're pretty big and public and they're
you know, trying to eat the bulge brackets Launch for example.
So yeah, not many people left off that deal.
Speaker 3 (11:17):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (11:24):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (11:38):
It is holiday shopping season. I think it's really hard
to be a retail analyst. And you've got to be
right on the stock and valuation and earnings and all
that kind of stuff like every other animals. But then
you also have to kind of be right on fashion.
Speaker 1 (11:51):
How do you do that?
Speaker 2 (11:51):
How do you do that?
Speaker 3 (11:52):
I have no idea. Married Ross Gilbert, that's her job
Bloomberg Intelligence Senior Echo Annals covering the retailers. Mary, talk
to us about a pair of 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.
Speaker 6 (12:10):
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, so we're seeing tremendous strength and style,
their viral campaigns that they have there, and also with
(12:33):
their namesake brand, Gap, which is their second largest brand
for that company. So that's like seventy percent of sales
right there for those two brands, and we're seeing a
lot of strength and momentum and we think that continues
into twenty twenty six. For Gap Aritzia, which is expanding
in the US and is entering new markets, opening news
(12:55):
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 US, so it's still very
small here. You know, they have under seventy stores in
the US and most apparel brands have over two hundred,
So that's one that's faring well. And then of course
in the value segment and obviously Old Navy touches that.
(13:17):
But off price, we see strength and 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
(13:38):
and they're third quarter comp sales rows three percent. 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.
They do have clearance sales and they're typically two times
(13:59):
a year, but they're showing their models working. But we
think that Macy's is showing some signs of improvement right
that we could see their comp sales also come in
higher when they go to report in early December. But
Coles they're still struggling. They you know, they still need
to get assortments right. We did notice their online traffic
(14:21):
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 absolute customers.
Speaker 2 (14:32):
So Mary, I got to ask you about abercrom Fitch
because you did not mention that stock that company at all,
and that was like the star retail performer in twenty
twenty three when it's stock jumped almost three hundred percent.
In twenty twenty four, it gained about seventy percent. So
far this year it's down about fifty four percent. What
does abercrom mean not getting right or did it just
(14:54):
peak already? And you know now everyone else is, you know,
playing catch up.
Speaker 6 (14:59):
We're just we're not seeing the strength and 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. You know, that customer that
(15:21):
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 are we're just
not seeing the strength that we had been seeing on
a comp sales basis. And then also we'll have to
(15:43):
see how they're faring with margins because they did have
a fair amount of exposure with India, and India is
now at fifty percent, but we think they'll be able
to shift yeah sourcing, you know, into those lower cost
Asian countries. Most of Asia is kind of near that
twenty percent range now, including China. So we think most
(16:04):
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 erosions such as Ralph Lauren. They're
really doing a great job generating strong sales at higher
(16:25):
price points and 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 so
you're not seeing the margin expansion you would typically see
with Ralph Law.
Speaker 1 (16:44):
Stay with us.
Speaker 3 (16:45):
More from Bloomberg Intelligence coming up after this.
Speaker 1 (16:51):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarcklay and Android Auto
with the Bloomberg Business Out. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 3 (17:05):
Taking some folks out the fear renews My favorite Italian
restaurant place is going to be packed. I mean, it
just seems like the restaurant business remains pretty darn strong.
Speaker 2 (17:13):
But what do I know?
Speaker 3 (17:15):
Michael Halen, Senior restaurant and food service analyst from Bloomberg Intelligence,
he joins us here. Hey, Mike, give us a CeNSE 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?
Speaker 7 (17:31):
Yeah, that's definitely part of it. We saw that in
last month's data find dining had a really nice rebound,
and I think part of it is because they're catering
to hire income consumers who own assets and are feeling
pretty good about things moving forward. You know right now,
(17:52):
you know, November is going to be a tough month.
There's no doubt about it. The government shut down 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. Also, last
November restaurant sales had a nice boost from the election,
(18:15):
and so we're going to be lapping tough, tough comps.
So November is not looking great, but the 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.
Speaker 3 (18:32):
So how about quick Let's start with quick Quick Service
a dining talk to us about that marketplace. I think
back to McDonald's of the world and so on. How's
that varing?
Speaker 7 (18:43):
Yeah, so Quick Service had a really difficult first half.
Speaker 3 (18:46):
Of the year.
Speaker 7 (18:46):
They were lapping strong comps and they and they kind
of lost their way when it came to value, right.
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
(19:09):
was difficult, but here in the second half of the year,
things have gotten better, largely because they've re established their
value propositions. You know, McDonald's has revamped its dollar menu
this year. They also reintroduced snap wraps at a three
dollars price point, which have boosted checks by you know,
people adding them on to their orders, as well as
(19:32):
bringing in some low income consumer traffic. But 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, all right, McDonald's,
(19:56):
McDonald's especially, I mean McDonald's is going to be lapping
the E coli or right now is lapping the E
Coli outgate about them from last year, and so you know,
they're the eight hundred pound gorilla, and I think good
results out of McDonald's over the next few quarters should
boost the entire category.
Speaker 3 (20:12):
How 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 twenty twenty eight. So how does that factor into
the profit margins of all these restaurants.
Speaker 7 (20:27):
Yeah, and so the restaurants that are impacted the most
are you know, burger chains like Shake Shack or steakhouses
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, yeah, very high. So definitely a
(20:50):
lot of margin pressure for those chains. If you know. Luckily,
those two chains you know, have have driven traffic as
of late into the stores which you know, and driven
higher sales and been able to pass along price increases
and that has kind of helped their operating leverage, which
has helped offset the higher costs for the burger chains.
(21:12):
They there's less impact for the chains that we cover
for McDonald's, Wendy's, Jack in the Box because they're largely franchised,
so that the franchisees are the ones putting the bill
for the higher beef costs.
Speaker 3 (21:22):
Why, like, why do not all change. Do like the
McDonald's franchise e model. What's the benefits of franchising or
what's the benefit of owning versus a franchise. I think
I thought I would. I saw the movie. I think
I understand the economics of franchising. It seems pretty good.
Speaker 7 (21:38):
Listen the franchise business. That's a great business, you know,
and from where I sit as an analyst, you know,
we love it. It's easier to predict the earnings and
the free cash flow. It's it's a much more steady
business model. Franchising eliminates a lot of the operating leverage
and thus the risk to your margins out of the business. Right.
(21:59):
But if you are running a full service restaurant chain
where operations is very core to your business, think Darden,
think Texas Roadhouse, you want to own and operate your
source because you want to have control over those operations.
You want to make sure people are getting a good experience,
and they're just much harder to run than a McDonald's
(22:21):
or a Wendy's. And then I'd say, on the last
case would be somebody like shake Shack or wink Stop
or Kava. You know, when your cash on cash returns
are forty fifty sixty percent. We don't think it's a
bad thing to be greedy and you want to open
up as many stores as possible.
Speaker 1 (22:40):
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Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Apple, Cocklay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
I feel like we have to talk about what's going
on in biotech. It's the m and a Monday, Paul,
and there's been this trend of course of the big
pharma company is desperate to refill their pipeline.
Speaker 3 (00:32):
It's getting competitive now and they're going competing on price.
That's what I'm kind of noticing here went from b
like a rare to find it now it's everywhere. Yeah,
and now they're competing on price.
Speaker 2 (00:42):
So it's a good thing if you are looking to
get in on the antiobest drugs and you're looking for
a more affordable price, because the companies are doing what
they can to appeal to consumers. Michael shat Is, Bloomberg
Intelligence Senior Farmer, Senior pharm of Biotech analyst, joining us
now and Michael Novo Nordoice is now undercutting Eli Lilly's
obesity drug price. Tell us exactly what they're doing here
(01:04):
because my understanding is that both these companies recently worked
out a deal with the White House to reduce prices overall.
Speaker 4 (01:11):
Yeah, thanks, so absolutely, this is I mean, this is
obviously ahead of the White House deal. So you're seeing
starting doses being reduced two hundred dollars per month, and
then doses thereafter being charged at an average of three
hundred and fifty dollars per month compared to five hundred
dollars previously. So I mean, you know, those prices kind
of aligned to you know, the pricing in the in
the White House statement coming from trump RX, but compared
(01:35):
to Lily, I mean, they're undercutting them by about you know,
one hundred dollars at each dose. And this is basically
a ployed to basically compete for new patients starts. As
we know, Lee's got the more effective product in terms
of weight loss profile, and they're also you know, executing
better on the launchers. And I think that's clear from
three key results where we saw contrasting fortunes between those
(01:58):
two particular drug makers.
Speaker 3 (02:00):
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.
Speaker 4 (02:15):
Yeah. Absolutely, I mean it's a highly priced sensitive market.
When we look at penetration rates in the US, you know,
low single digits, that's obviously going to accelerate as these
as these drugs become cheaper. Looking outside the US, penetration
rates are even lower. So there's you know, still significant
kind of you know, patient runway out there in terms
(02:37):
of US penetration. I mean, you know, the deal, the
White House pricing deal on GLP one drugs, you know,
supports kind of use of these these GLP one drugs
in Medicare, you know there we think that it can
unlock you know, seven to eight million patients. According to
a White House statement, I think they said ten percent
of Medicare beneficiaries would become eligible for GLP one drugs
(03:00):
based on the pilot program, and that's going to be
introduced in twenty six, and I think it's going to
become mandatory in twenty seven. And then they've also you know,
loaded the price in Medicaid too. I think the uplift
in terms of patients there is a bit harder to
deduce or or to kind of model, given that you know,
coverage is going to be on a state by state basis,
(03:20):
and there's also kind of different qualifying criteria, which again
is state dependent.
Speaker 2 (03:27):
What does this mean, Michael? For the companies like Hymns
and Hers, the companies that make compounded copycat versions of
these antiobesity drugs, they've done very well. And I know
those stock for Hymns 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.
Speaker 4 (03:44):
Yeah, I mean I think that whole you know, the
compounding situation. I believe that you know, one point two
million patients are on compounding GLP one at the moment.
That's based on kind of comments and Novo made during
their three key results. Obviously, loaning down the price would
kind of of the branded treatments would basically well, I
(04:05):
mean it would it would you know, lessen the delta
between you know, coffeecats and branded treatment. So I guess
it's a negative for for for these you know, compounded
jylpy one drug makers.
Speaker 3 (04:17):
Mikey. When I look at the big cap farm of 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 your slate
of stocks and you're either up thirty percent or you're down.
Speaker 4 (04:33):
Yeah, I mean, I think you know there's a there's
a few large farmer names which which has entered the space.
You know, in the in the recent years, you've seen
kind of deals with russ and Zealand for an Amlin drug.
Most recently you've obviously got the fires and Metsarah m
and A deal. I mean, I think OBESTI is obviously
(04:56):
appealing given you know the size of the target population,
how underpenetrated 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 jill point
on products out there, as well as other assets too.
So I think that's the appeal of the space. It's
(05:16):
a large market, it's underpenetrated, and there's high demand for
these treatments too.
Speaker 2 (05:21):
I mentioned em and A, and of course we know
that JANJ is making a purchase to increase its pipeline
to get away from relying on these older drugs that
have lost patent protection. Is every farmer company doing the
same things that you know they're 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
(05:42):
need to make a deal.
Speaker 4 (05:44):
I mean, I think that's always been part of the
large farmer model. They supplement kind of in house innovation
with extern of innovation, particularly if they want to get
into areas perhaps outside of their core competency. But I mean,
I think that's just the model in general. Biotechs always
been the pipeline for large farmer companies or release help
(06:06):
bell caut that pipeline.
Speaker 3 (06:09):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:16):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (06:30):
It is Merger Monday, and today we've got a financial
buyer making some headlines here. Clayton du Billier and Rice
now known as CDR. They agreed to buy Sealed Air
Corporation in a deal value in the packaging company that
invented the bubble brap six point two billion dollars. To
break this deal down, Leanna Baker, managing editor of the
(06:50):
deal's team, joins us live here in our Bloomberg and
Directive Broker studio so CDR Sealed Air six point two
billion dollars. Pretty interesting deal? Was this expected in the marketplace?
Speaker 5 (07:00):
Sure? So CD and R 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 ten 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,
(07:22):
no premium. It's sort of a take under. And if
you see where shares are trading, you know, investors aren't
super thrilled, but it is you know, still a good
sign for this to get to the finish line. We
are seeing a lot of take privates in this m
and a boom private equities putting their dry powder to work.
This is the latest example.
Speaker 2 (07:43):
Was this an obvious candidate for takeout.
Speaker 5 (07:45):
It's funny that you asked, 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
(08:05):
was a little surprising to see a big deal in
this space. But you know there could be more because
it's sort of a predictable area, you know, to to
invest in.
Speaker 3 (08:16):
Having been adjacent to the private equity world most of
my career, I think I learned a few things, which
is 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.
Speaker 5 (08:31):
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 public public traded companies
for you guys to report on because there's just so
many of these take privates and the IPO market, which
is one way that these PE firm sponsors could get
(08:55):
some monetization, that's been like shut the past few years.
I know things are coming back a little bit by
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
drum beat of private equities firms just trading assets to
(09:16):
each other, and then the occasional big tape private like
this morning.
Speaker 2 (09:19):
So you mentioned that it's a little harder to fundraise
now than it was a few years ago. Presumably that's
because of where interest rates are. If interest rates do
decline in twenty twenty six, what does that mean for
fundraising efforts by PE.
Speaker 5 (09:32):
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 is
the time to raise money. I do think that there's
also so many newer private equity firms emerging, and then
(09:55):
with private credit, like there's just a lot of things
competing for investors mention. But yeah, this is this is
one for cdn R, you know, probably their largest deal
in a while, but there's probably more take privates in
the market for some of their competitors.
Speaker 3 (10:14):
M A go on this deal. You see where the
advisors are, who's getting paid, which one of my buddies
are getting paid.
Speaker 5 (10:18):
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 clear there was a poorly cut secret. A
(10:39):
lot of people knew we just they were you know,
mom's the word on the price.
Speaker 3 (10:44):
Well, there are ten investment banks getting paid, not part
of it 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 with you, you
got to pay all of them. Whereas the advisor, the
seller was represented by evercore One.
Speaker 5 (11:05):
Which used to be sort of a bootique name, but
now you know, they're pretty big and public and they're
you know, trying to eat the bulge brackets Launch for example.
So yeah, not many people left off that deal.
Speaker 3 (11:17):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (11:24):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (11:38):
It is holiday shopping season. I think it's really hard
to be a retail analyst. And you've got to be
right on the stock and valuation and earnings and all
that kind of stuff like every other animals. But then
you also have to kind of be right on fashion.
Speaker 1 (11:51):
How do you do that?
Speaker 2 (11:51):
How do you do that?
Speaker 3 (11:52):
I have no idea. Married Ross Gilbert, that's her job
Bloomberg Intelligence Senior Echo Annals covering the retailers. Mary, talk
to us about a pair of 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.
Speaker 6 (12:10):
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, so we're seeing tremendous strength and style,
their viral campaigns that they have there, and also with
(12:33):
their namesake brand, Gap, which is their second largest brand
for that company. So that's like seventy percent of sales
right there for those two brands, and we're seeing a
lot of strength and momentum and we think that continues
into twenty twenty six. For Gap Aritzia, which is expanding
in the US and is entering new markets, opening news
(12:55):
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 US, so it's still very
small here. You know, they have under seventy stores in
the US and most apparel brands have over two hundred,
So that's one that's faring well. And then of course
in the value segment and obviously Old Navy touches that.
(13:17):
But off price, we see strength and 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
(13:38):
and they're third quarter comp sales rows three percent. 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.
They do have clearance sales and they're typically two times
(13:59):
a year, but they're showing their models working. But we
think that Macy's is showing some signs of improvement right
that we could see their comp sales also come in
higher when they go to report in early December. But
Coles they're still struggling. They you know, they still need
to get assortments right. We did notice their online traffic
(14:21):
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 absolute customers.
Speaker 2 (14:32):
So Mary, I got to ask you about abercrom Fitch
because you did not mention that stock that company at all,
and that was like the star retail performer in twenty
twenty three when it's stock jumped almost three hundred percent.
In twenty twenty four, it gained about seventy percent. So
far this year it's down about fifty four percent. What
does abercrom mean not getting right or did it just
(14:54):
peak already? And you know now everyone else is, you know,
playing catch up.
Speaker 6 (14:59):
We're just we're not seeing the strength and 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. You know, that customer that
(15:21):
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 are we're just
not seeing the strength that we had been seeing on
a comp sales basis. And then also we'll have to
(15:43):
see how they're faring with margins because they did have
a fair amount of exposure with India, and India is
now at fifty percent, but we think they'll be able
to shift yeah sourcing, you know, into those lower cost
Asian countries. Most of Asia is kind of near that
twenty percent range now, including China. So we think most
(16:04):
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 erosions such as Ralph Lauren. They're
really doing a great job generating strong sales at higher
(16:25):
price points and 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 so
you're not seeing the margin expansion you would typically see
with Ralph Law.
Speaker 1 (16:44):
Stay with us.
Speaker 3 (16:45):
More from Bloomberg Intelligence coming up after this.
Speaker 1 (16:51):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarcklay and Android Auto
with the Bloomberg Business Out. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 3 (17:05):
Taking some folks out the fear renews My favorite Italian
restaurant place is going to be packed. I mean, it
just seems like the restaurant business remains pretty darn strong.
Speaker 2 (17:13):
But what do I know?
Speaker 3 (17:15):
Michael Halen, Senior restaurant and food service analyst from Bloomberg Intelligence,
he joins us here. Hey, Mike, give us a CeNSE 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?
Speaker 7 (17:31):
Yeah, that's definitely part of it. We saw that in
last month's data find dining had a really nice rebound,
and I think part of it is because they're catering
to hire income consumers who own assets and are feeling
pretty good about things moving forward. You know right now,
(17:52):
you know, November is going to be a tough month.
There's no doubt about it. The government shut down 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. Also, last
November restaurant sales had a nice boost from the election,
(18:15):
and so we're going to be lapping tough, tough comps.
So November is not looking great, but the 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.
Speaker 3 (18:32):
So how about quick Let's start with quick Quick Service
a dining talk to us about that marketplace. I think
back to McDonald's of the world and so on. How's
that varing?
Speaker 7 (18:43):
Yeah, so Quick Service had a really difficult first half.
Speaker 3 (18:46):
Of the year.
Speaker 7 (18:46):
They were lapping strong comps and they and they kind
of lost their way when it came to value, right.
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
(19:09):
was difficult, but here in the second half of the year,
things have gotten better, largely because they've re established their
value propositions. You know, McDonald's has revamped its dollar menu
this year. They also reintroduced snap wraps at a three
dollars price point, which have boosted checks by you know,
people adding them on to their orders, as well as
(19:32):
bringing in some low income consumer traffic. But 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, all right, McDonald's,
(19:56):
McDonald's especially, I mean McDonald's is going to be lapping
the E coli or right now is lapping the E
Coli outgate about them from last year, and so you know,
they're the eight hundred pound gorilla, and I think good
results out of McDonald's over the next few quarters should
boost the entire category.
Speaker 3 (20:12):
How 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 twenty twenty eight. So how does that factor into
the profit margins of all these restaurants.
Speaker 7 (20:27):
Yeah, and so the restaurants that are impacted the most
are you know, burger chains like Shake Shack or steakhouses
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, yeah, very high. So definitely a
(20:50):
lot of margin pressure for those chains. If you know. Luckily,
those two chains you know, have have driven traffic as
of late into the stores which you know, and driven
higher sales and been able to pass along price increases
and that has kind of helped their operating leverage, which
has helped offset the higher costs for the burger chains.
(21:12):
They there's less impact for the chains that we cover
for McDonald's, Wendy's, Jack in the Box because they're largely franchised,
so that the franchisees are the ones putting the bill
for the higher beef costs.
Speaker 3 (21:22):
Why, like, why do not all change. Do like the
McDonald's franchise e model. What's the benefits of franchising or
what's the benefit of owning versus a franchise. I think
I thought I would. I saw the movie. I think
I understand the economics of franchising. It seems pretty good.
Speaker 7 (21:38):
Listen the franchise business. That's a great business, you know,
and from where I sit as an analyst, you know,
we love it. It's easier to predict the earnings and
the free cash flow. It's it's a much more steady
business model. Franchising eliminates a lot of the operating leverage
and thus the risk to your margins out of the business. Right.
(21:59):
But if you are running a full service restaurant chain
where operations is very core to your business, think Darden,
think Texas Roadhouse, you want to own and operate your
source because you want to have control over those operations.
You want to make sure people are getting a good experience,
and they're just much harder to run than a McDonald's
(22:21):
or a Wendy's. And then I'd say, on the last
case would be somebody like shake Shack or wink Stop
or Kava. You know, when your cash on cash returns
are forty fifty sixty percent. We don't think it's a
bad thing to be greedy and you want to open
up as many stores as possible.
Speaker 1 (22:40):
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weekday ten am to noon Eastern on Bloomberg dot com,
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