March 10, 2025 • 43 mins
You’ve heard about Chinese EVs. You’ve heard about Chinese batteries and solar panels. And recently you learned that China is near the cutting edge of AI research. Here’s another category: biotech. In 2019, the Chinese share of molecules licensed to Big Pharma companies was 0%. In 2024, it’s now 31%. On this episode we speak with Tim Opler, a biotech industry investment banker at Stifel. He explains how this industry has taken off in such a short period of time. Among the factors he cites: a generation of Chinese research scientists working in the US who hit a ceiling in terms of promotion and thus went back home to start companies. It’s also far cheaper to run clinical trials in China, due to the structure of the healthcare system. We also talk about the broad history of the pharmaceutical industry, how it’s evolved, and what impact, if any, AI will have on drug discovery.
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Episode Transcript
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Speaker 1 (00:00):
Hey, Odd Loots listeners, We're coming to DC.
Speaker 2 (00:02):
We're finally doing it, Joe. It's going to be our
first live show in Washington, DC, our nation's capital. It's
also finally going to be the time where we actually
talk about the Jones Act.
Speaker 1 (00:13):
Listen talk about doing the Jones Act episode of Odd
Lots for a long time, and it's become this recurring
joke that we've never done on But we're going to
do it in grand style because we're going to be
doing it live in DC and it's actually going to
be a debate.
Speaker 3 (00:28):
Yeah.
Speaker 2 (00:28):
So we have Sarah Fuentes from the Transportation Institute. She's
going to be taking the pro side, and we also
have Colin graybou of the Cato Institute. He'll be taking
the against side. It's going to be really interesting to
see how all of that shakes out.
Speaker 1 (00:43):
In addition to that, we're going to be speaking with
Blair Levin, who was around during the telecom bubble, and
we have Andrew Ferguson, the new head of the FTC,
the one who's replaced Lina Kong. We're going to be
talking about mergers and acquisitions and all that stuff. So
it should be a really fun night.
Speaker 2 (00:59):
If you want to come and join us for that evening,
it's going to be on March twelfth at the Miracle Theater.
Go to Bloomberg dot com forward slash odd Lots and
you can find the link to purchase tickets. We hope
to see you there.
Speaker 4 (01:14):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 1 (01:29):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 2 (01:33):
I'm Jio Wisenthal and I'm Tracy Alloway.
Speaker 1 (01:36):
Tracy, you know, we talk a lot about China, talk
about cars and batteries. It's time for a Chinese biotech.
It's time for the Chinese pharma episode.
Speaker 4 (01:47):
Joe.
Speaker 2 (01:47):
It's just what I always wanted. Thank you so much. No,
I am genuinely excited to talk about this. One reason
is because this is a sector that I don't really
know that much about. Another reason is it has it's
actually been in the news quite a bit recently with
the cuts to NIH funding, which we've discussed and things
like that, and then more generally, it sort of sits
(02:09):
in that nexus of policy aimed at boosting specific sectors
and also competition between the US and China.
Speaker 1 (02:19):
That's exactly right, and it's like you know, we've just
gotten used to the fact that in many areas of
sort of physical manufacturing, there are very there are many
industries in which China can compete and produce things either
cheaper and higher quality. It seems like many areas relate
to batteries and automobiles and all kinds of stuff like that.
(02:40):
We know that. And then of course we had like
the deep seek moment and a bunch of people like, oh,
it's not just physical things, it's not just gigantic plants.
Also a lot of competition in areas like software, particularly
artificial intelligence. That raised all sorts of questions. And then
lately the drum is beating that we have to take
very very seriously pharma and biotech, And this is one
(03:03):
of those areas that I think most people, certainly me
would say like in the year twenty twenty five. Still
my conception my head is that the cutting edge is
in the US and Europe still, which I can't say
that for a lot of industries.
Speaker 2 (03:18):
At this point, I want to know how medicines are
actually made manufactured. I've read a long time ago. I
read a book about the Twinkie, and it broke down
every ingredient that went into a twinkie and where it
came from. And it was really interesting because it turns
out a lot of those ingredients came from China. I
didn't know that.
Speaker 1 (03:38):
I didn't know that either, but you know what I did,
were didn't know because we briefly touched on it in
our recent episode with the two fellows from Goldman Sax
about China's role in the pharmaceutical supply chain providing key
ingredients to India, which then plays a key role. Anyway,
there's a lot I want to know. I don't think
I know anything, and I just want to jump into
(04:00):
this episode because I want to learn more. In that spirit,
we really do have the perfect guest. He's someone who
recently put together a slide deck and I kind of
think that slide deck catalyzed some articles. The deep sea
moment in biotech got a lot of attention on social media.
Drowing straight to the source, we're speaking with Tim Oppler.
He's a managing director in the healthcare investment banking group
(04:21):
at Stefel. Tim, thank you so much for coming on
odd Locks.
Speaker 3 (04:25):
Thank you and Joe and Tracy. I really appreciate you
having me. I'm very excited to be here today.
Speaker 1 (04:31):
What is a managing director in the healthcare investment banking
group at Stevefoild.
Speaker 3 (04:35):
I don't actually manage a lot of people, so managing
directors just the title. But basically, I'm a senior banker,
and investment bankers are in the business of putting people together,
people that need money with people that have money, people
that want to license something out, with people that want
to license something in. So I'm a middleman basically and
get paid commissions for doing it.
Speaker 2 (04:53):
With your middleman position, could you maybe describe the ecosystem
of getting new drugs to market, like where does it
tend to start, what corporate entities does it go through,
and then what's the process from there to getting into
an actual physical medicine.
Speaker 3 (05:11):
So great question. So you know, back in the old days,
if you rolled back the clock fifty years ago, large
pharmaceutical companies Merck, Pfizer, Eli Lilly had these research and
development groups and they would sit around and read up
articles and do their own basic science and say, you know,
I think we should do something to go after such
(05:31):
and such type of virus. They would work on it
for five or six years. They would come up with
a drug candidate, they would go test it in people,
it would work hopefully, and then they would get it
approved and then they go out and market it. Things
started to change, you may remember, you know, as back
as the late nineteen seventies, companies like genen Tech and
Biogen came on the scene. And so today we have
(05:53):
a huge biotech industry. These are kind of like the
you might call them the farm league, a big pharma
are the ones that come up with the new drugs.
Of course, the farmers are still doing their own work too,
and so biotech's become a huge part of our ecosystem.
It's also become a big part of the capital market.
So there's whole groups of people that you know, god
(06:14):
mds and PhDs that went to work for funds and
they sit there, you know, does this drug candidate look
like it's gonna make it? I'm going to bet for
it or I'm going to bet against it.
Speaker 1 (06:23):
What does biotech mean?
Speaker 2 (06:25):
Hey?
Speaker 1 (06:25):
Sometimes ask Tracy what fintech means, and I still don't
know the answer to that.
Speaker 2 (06:29):
But what is biotech touch banking?
Speaker 3 (06:32):
So I'd like to give three different answers. First of all,
when people say biotech in general, what they mean is
kind of the more high tech part of the pharmaceutical industry,
the cool part.
Speaker 1 (06:41):
Yeah, that's always I just figure it's a cool.
Speaker 3 (06:44):
What I mean by biotech is the when you have
a company whose sole asset is a drug candidate that
has not yet been approved by the FD so pre commercial.
When I say biotech, that's what I mean. Other people
think it refers to biologic, and it's true. The original
biotechs like Genetech were focused on biologic so it's understandable
(07:05):
that some people would associate biotech.
Speaker 1 (07:07):
It's a distinct type of therapy from the traditional type
of medicine that would have been developed at America.
Speaker 3 (07:13):
That's correct. So traditionally there are two types of medicines.
There's small molecules, those little white pills some people take
every day, and then there are injectable biologics. Those are
products that are much more complex, much larger molecules, and
are made in very different ways.
Speaker 2 (07:30):
Can you talk about that, going right to my question
about how medicine is actually made, how Yeah.
Speaker 3 (07:36):
So for a small molecule, it's actually a chemical. So
the pharmaceutical industry actually came out of the chemical industry.
So if you go back to the history of pharmaceuticals, say,
like what was going on in sixteen fifty, Well, people
were literally chemists. In fact, still in England today you
can walk into what we would call it pharmacy, they
call it a chemist and they would literally, you know,
(07:58):
put together your antimony or whatever it was and serve
it up to you. So that still goes on. But
of course those small molecule pills are made in giant
factories of what's called API, which is really just fine chemical.
The other side of the industry, though, these biologics are
made typically in bugs. So you would take, for example, yeasts,
(08:19):
or you might take E. Coli, or you might take
what are called Chose cells. Those are Chinese hamster ovary cells.
Why do they use them because they're really good at
growing biologics. And you insert a piece of DNA into
the DNA of that species and then that causes that
species to manufacture the protein of interest, and that's a
(08:40):
whole other industry. And then those say Chose cells or E.
Coli cells or whatever they are, they're grown in these
giant tanks, and so you might have like a forty
thousand liter tank full of growth medium and those cells
are just swimming around and making their proteins. Then they're
harvested and you pull out the protein of interest.
Speaker 2 (08:57):
I'm sorry, did you say Chinese have overy cells?
Speaker 3 (09:01):
I know, and we're talking about China. See, China is everywhere, Tracey.
Speaker 1 (09:05):
I already feel like we're gonna have to have Tim
back already, right, because like this is already one of
those topics where like we probably could just talk about
one niche aspect of the supply chain for some ingredient
because we're not even actually close to getting to it.
But we need to build up to we need to
build up to Chinese.
Speaker 3 (09:22):
Well, let's let's just jump right into it. I want
to make sure, I want I want to make a
comment here. Okay, So China is all of a sudden
starting to be very competitive with the US biotech ecosystem.
I personally don't think that's a surprise. I don't think
that's the bad thing. And here here's what's going on.
We developed the first biologics in the United States in
the nineteen seventies. Well it's twenty twenty five, right, that
(09:44):
was fifty years ago. Yeah, I mean you would think
that the know how of how to make those things
is spread around, and it has. And so what happened was,
you know, in the nineteen nineties, two thousands armies of China,
these people came to the United States for jobs inside
all those companies, and they learned, not surprisingly, how to
(10:06):
make what was being made then, which was biologics. You know,
I don't want to call it racism. I think that's
probably unfair. But for whatever reason, a lot of these
Chinese personnel weren't promoted. They didn't become the SVP at
some big shot US biotech company. You know, they were
stuck in a director job, and they got frustrated and
(10:26):
left and went home to China. Now here we are
twenty twenty five, and they're crawling all over us like
they know how to do exactly what we know how
to do, and guess what, just like in batteries, just
like in telephones and these other sectors, they're pretty good
at it. And so all of a sudden, US biotech
I think has really woken up just in the last
year or two and said, WHOA, we've got competition. Like
(10:49):
these guys are as good as US. I'd say they're
probably better in a lot of ways.
Speaker 1 (10:54):
So I definitely want to get to where they are
and why they might be better and what are the
conditions that perhaps allow them to be better. One less
sort of like precursor. Oh yes, und question is for
these chemicals, I imagine that. Okay, we're going to talk
about breakthroughs that are happening that are in China, that
are you know, in terms of therapies or biologics, et cetera.
(11:16):
But if we wind back a few years to where
people's brains were stuck at in terms of what is
the sort of global supply chain of I mean the
Chinese hamster over is, what is the sort of sort
of incumbent global supply chain of key materials, ingredients, equipment
for biotech and what is China's role in that.
Speaker 3 (11:39):
So if you're making a small molecule which comes down
to that basic fine chemical, let's say it's libatare, Okay,
you could probably make it for less than a place
like India or Indonesia or China. So that's called API,
active pharmaceutical ingredient. And in fact, China has become a
huge source of API because in many ways, you know,
(11:59):
China's really good in the chemical industry. So why wouldn't
they be good in the API industry?
Speaker 2 (12:20):
Can you contextualize some of China's I guess growth in
this area with some specific numbers, because we see all
these headlines coming out, like thirty percent of major pharma
licensing deals now involve Chinese companies. I think that's up
from like almost zero five years ago. There are some
interesting data to look at.
Speaker 3 (12:42):
Yeah, So just to give you a couple stats the
API that source into the US, I don't have the
exact numbers on my fingertips, but I would say at
least twenty five to fifty percent of API that's being
used in the US generic pharmaceutical industry today is sourced
from China. India is another big piece of that. So
Indian China are both really big. What's interesting is India
(13:05):
has not kind of had this phenomenon of their nationals
coming home and opening up local biotech companies. So China
created this policy, you know, very intentionally five ten years ago,
saying hey, we want to be really good in biotech.
It is strategic for US as a country. It's not
that they're trying to beat the United States so that
(13:26):
they need access to these medicines domestically. You know, why
pay the giant global price that some US pharma company
wants a charge? Like, why don't you just learn how
to make it at home? So they very deliberately attracted
back what are called sea turtles. These are people that
crossed the sea from the US or Europe back home
to China. They were then encouraged to start their own
(13:48):
biotech companies and apply whatever they had learned, you know,
in their jobs in Bristol Meyers squib or An Artists
or what have you, and Boyd learned they had and
support they got, and all of a sudden they're churning
out really interesting molecules. And so Tracy, just like you said,
last year, thirty percent of all molecules that were licensed
(14:08):
in by big Pharma came from China, not from the
United States, not from Europe, not from Japan. They came
from China. And I do think that statistic, which was
generated by our good friends at deal Forma, was really
kind of a wake up call for a lot of
folks in our industry.
Speaker 1 (14:24):
And what five years ago that would have been basically.
Speaker 3 (14:27):
Zero, yeah, five percent, zero to five percent?
Speaker 1 (14:29):
How much is it?
Speaker 4 (14:30):
Is?
Speaker 1 (14:30):
It genuinely novel therapies. How much is it? There's sort
of an existing therapy, but they can make it a
better version of it, a cheaper version of it. I understand,
like cheaper it must be sort of a weird concept
in an area where there's I know, a lot of
intellectual property. But talk about what is driving that competitiveness
and market share game.
Speaker 3 (14:52):
There's two or three different things going on. So the
first thing is we're seeing what are called fast follower molecules.
Let's just say for the sake of argument, that Daichi
Senkio comes up with something called a B seven H
three anti body drug conjugate B seven H three ADC. Well,
the Chinese guys see that pop up, they see the
(15:13):
patent filing, they look at it, and they're like, Okay,
we're gonna make a B seven H three, but instead
of using this toxin on the ADC, we're gonna use
that toxin are instead of using this link or we're
gonna use that one. So those are kind of doing
small twists around existing constructs. So we call those fast followers.
China's really good at past followers. The second thing that
you're seeing are first in class molecules and So the
(15:38):
hottest biotech in the United States right now is a
company called Summit Therapeutics. They have a seventeen billion dollar
market cap as we speak. Remember I define a biotech
a company that doesn't yet have an approved drug. So
that's the highest valuation in the world of any company
in the world today that doesn't have an approved drug.
That molecule, which is a combination of a PD one
(16:00):
antibody with the VeVe jef modi PD one by Vegef
it's called is an excellent molecule. It's working really well
in mun cancer. And guess what it was invented in China.
Mert didn't come up with it, Advisor didn't come up
with it. Habit didn't come up with it. It was
come up with in China. And it's the most interesting
biotech molecule in the world today.
Speaker 1 (16:21):
But this is an American company, Summer, right, They went
and licensed China got it, just like we're seeing the
big pharmaus US biotechs licensing stuff from China all day long.
Speaker 2 (16:30):
How much does the difference in regulatory regimes play into here,
because one thing we often hear when it comes to
outsourcing manufacturing to China whether it's something basic like I
don't know, clothing or something more advanced like medicines. Is
that it's cheaper to make stuff in China because you
(16:51):
don't have as many rules and regulations to either slow
you down or add on to costs. Is that a
factor here as well.
Speaker 3 (16:59):
That's a comp located question and a complicated answer. So yeah.
So for most biologics, the Chinese will allow you to
get those into patients more quickly. They have what we
call phase zero studies where you can just go to
a doctor and say, okay, hey, doc, you've got people
(17:20):
coming in that are dying of ovarian cancer, use this drug.
The FDA will not let you do that, right, So,
the FDA won't let that ovarian cancer drug go into
a patient until it's gone through typically a Phase one study. Interestingly,
China's not the only country that does that. Australia does
that too, and you know, we have kind of new
sheriff in town at the FDA. It might be an
(17:41):
interesting thing to explore kind of accelerating that time to
get to the first patient. So that that's one place
where China is a head. But in general, their rules
are just as tough as our rules. It's not like
they have a you know, a low hurdle and we
have a high hurdle to jump over to get a
drug approved. Their vantage is more speed to invent, speed
(18:05):
to get into the clinic. They're just performing really well
on a lot of those key performance indicators.
Speaker 1 (18:11):
What about there's the cost of conducting a phase one trial.
I mean, these are really expensive endeavors in the United States,
and you can spend millions and it goes nowhere past
phase one. How does the cost compared to run the
equivalent in China?
Speaker 3 (18:28):
I mean we should pause for moments. So the US
has capitalistic medicine system, right, So doctors are for profits.
So if you're a physician, of course you're trying to
care for your patients. But let's be honest, a lot
of those dermatologists and endochronologists that you see, they're running
a business. The other day I was talking to a cardiologist.
I said, like, how many patients do you see the year?
(18:49):
He's like eight thousand, and I was out like asking
the lady at the front, like, how much like does
the average patient visit bill? She's like a four or
five hundred bucks. So you can do the math that
guy pulling down like five to ten million dollars, right,
So running a physician practice in the United States can
be very lucrative. I'm not saying every doc's doing it,
just to be clear. But now you're a cancer doc
(19:11):
and you're an MD Anderson or Dane Farber someplace, and
some company shows up GSK and they want you to
test this drug. How much are you going to charge
GSK for each patient? It turns out that the average
price to enroll a patient and a cancer drial in
the United States is between two hundred thousand and four
hundred thousand dollars per pat per patient.
Speaker 1 (19:33):
How much of that goes to the doctor.
Speaker 3 (19:36):
A lot and a lot to the hospital. I mean,
this is a big issue that's just possed up.
Speaker 1 (19:40):
A big source of hospital and doctor profits that they're
essentially selling access to their patients.
Speaker 3 (19:46):
You bet, especially at the big places. So developing drugs,
especially in cancer in the United States is very expensive.
The other thing I'd note is there's a lot of
competition for talent in our country. Again, it's a capitalist
talent market. So you know, let's say you're a doctor
working in m D Anderson and then GSK comes along
(20:08):
and says, hey, we'd like you to be our chief
medical officer. We'd like you to run this cancer program. Like,
is that a one hundred and fifty thousand dollars job.
I don't think so. The average chief medical officer in
the United States city is pulling down between a half
million and one point five million dollars a year, depending
on your level of experience and how good you are.
So all of a sudden, you see biotech companies that
(20:30):
are going out to raise one hundred million dollars. Well,
that's how much you need to raise to enroll the
trial and pay all those people. And you know they
have lots of posh offices as well, and expensive places,
and so US biotech is not so efficient. In contrast,
in China, there are no seven hundred thousand dollars chief
medical officers. There are no two hundred thousand dollar patients.
(20:50):
It's a communist country, right. Doctors, you know, make thirty
thousand dollars a year. You don't get to go make
hundreds of thousands dollars a year for being a doctor,
and you definitely don't rent out your patience.
Speaker 1 (21:06):
Tracy, I have to say this is something I sort
of became aware of in this phenomenon of doctors and
hospitals renting out their patients, and for this episode, I
had no idea that that's how it worked, and I
had no idea of the scale of these numbers. Like,
if there's one fact that's sort of like expanding my mind,
(21:27):
this is the one.
Speaker 2 (21:28):
I didn't know it either. We should probably do an
episode just on the market for renting out cancer patients.
That sounds very It.
Speaker 1 (21:36):
Sounds bad when you put it that way, like they're gating, right,
they're profiting from the fact that they You're the sort
of the channel, right, They're they're the channel through which
the drug company must find patients.
Speaker 3 (21:50):
I mean, let's just talk reality of a medicine in
America right now. There are certain specialties that make money.
Cancer treatment is one, cardiology, surgeries is another. In contrast
seeing people in the emergency room, seeing people in a
primary care sense, you lose money doing those activities. Payments
(22:14):
from insurance companies are poor, and so hospital systems, by
necessity have become for profit. They have no choice.
Speaker 2 (22:21):
So one of the reasons we wanted to speak to
you is because, in the course of your work, You've
talked to a lot of CEOs and executives on I
guess both sides of the ocean here in China and
in the US give us a sort of temperature check
of what people are saying right now when it comes
to the US VERSUS China pharmaceutical biotech industries.
Speaker 3 (22:45):
So, first of all, the pharma companies, the big pharma companies,
they're thrilled at China's there. It gives them more options, right,
you know, there's new molecules, they might be innovative molecules.
The Chinese companies generally don't globalize on their own. One
of the interesting things is there's you know, Chinese big
pharma companies. Name the largest pharma company from China you've
ever heard of. You can't do it. There isn't one, right,
(23:07):
It might be an obscure company like King Ray or CSPC.
They're relatively small compared to our pharmaceutical companies. So it's
great hunting for those guys. For the Chinese companies, access
to the US pharmaceutical market is a god send capitalist
tight prices are low for the US biotech company China
can be worrisome, But honestly, when I speak to my
(23:30):
friends in the US biotech ecosystem. There are some concern
but most of them aren't in direct line of fire
with Chinese competition. It's the US investor, the US biotech
investor this kind of worried. So all those stories that
you were referring to, a lot of them are sort
of freaked out, saying, hey, like thirty percent of molecules
are coming from China, what about our biotech companies?
Speaker 1 (23:53):
Wait, so why wouldn't your friends in the industry be
ang I mean, presumably their leverage their own stocks. If
the investors weren't, they aren't your friends in the industry more.
Speaker 3 (24:02):
Anxious because the Chinese, by and large are taking older
technologies and biologics and putting twists and turns on those technologies.
Most US biotech companies are not in that business right now,
so by and large they have understood long ago that
they need to differentiate. But that's not all of them.
I mean, there are certainly some companies out there that
(24:22):
are in direct competition. And by the way, you know,
the other day I was looking at these antibody drug conjugates,
So China's gotten really good and antibody drug conjugates are
very popular. I think there's four or five major public
antibody drug conjugate development companies in the US.
Speaker 1 (24:41):
They all have type of cancer treatment that combines the
monoclonal antibody with a cytotoxic cancer killing drug. Okay, keep going,
that's right.
Speaker 3 (24:50):
So an ady C is basically chemotherapy that's directed specifically
to this cell. So you don't have to worry about
losing all your hair or whatever if you take an ADC.
So the average enterprise value that's your market cap, ple's
your cash of a US ADC biotech today has gone negative.
(25:12):
Two years ago was quite positive, and I do think
that those folks have you taken some heat from Chinese college.
Speaker 2 (25:34):
I just want to go back to the anxiety or
lack of it in the US and just focus on
the investors for a moment. So the worry is that
the people who actually fund some of these things, I
guess venture capital, maybe private equity, things like that, that
they are going to be intermediated by pharma that's going
(25:56):
directly to the Chinese companies.
Speaker 3 (25:59):
That's right. So let's imagine you're a venture capitalists out
in San Francisco. You've got this nice life, you know,
on sand Hill Road, you come up with some ideas
for some new biotech companies, you found them, and then
you're waiting, you know, for merk to come along or
genetech to come along, almost almost like you know, setting
a trap for the groundhog in your backyard or something
(26:21):
like that, and the groundhog never shows up because they
don't go to your backyard anymore. They've found some other
place to go. And so what's happening is that pharma
have learned that they can find really interesting molecules in China,
you know, one of.
Speaker 1 (26:35):
The themes that comes up in a lot of our
conversations about Chinese industry in general. So you see these
stories about sort of incredible growth and manufacturing of whatever
with pretty slim profits, and famously, like the Chinese stock market,
it's actually, i think the last few weeks, it's uh,
this year is kind of doing okay. But like famously,
(26:56):
the Chinese stock market, for all the growth that they've had,
for all the success various industries, it's kind of been
a dog for a long time. And part of the
story is like, well, there's just so much capital intensity
and you actually only stay at the cutting edge of
all these capital intensive businesses. If you're spending all of
your money that you take in on more research and
so there isn't a lot left over for the end
(27:18):
equity investor. It kind of sounds like something similar here
where it's like, it's not great if you're a US
equity investor in certain areas that are directly in the
line of fire. But it doesn't sound like Chinese companies
themselves are swimming in profits.
Speaker 3 (27:36):
Right. There's no fat cats in China, even though there
might be nice to think that could be true. So
I was on a trip recently to China. I was
in this one building, like you know, just one of
many buildings that had biotechs in Beijing, and like every floor,
like it was like an apartment building, every floor had
another biotech. And I asked one of the guys, I
SAIDs like, how many biotechs are in this building? Said
(27:58):
as sixty seventy? How many biotechs are in Beijing? He said,
nobody knows exactly. So, you know, the US places like
Bloomberg have phenomenal databases and stuff that they don't have
that over there. Maybe that's a business for Bloomberg. I
don't know.
Speaker 2 (28:12):
Well, thank you for the suggestion.
Speaker 3 (28:14):
So yes, he said, I think there's three thousand biotechs
in Beijing. In other words, there's fifty buildings like that one.
And I said, well, what about the country? He said,
nobody knows, but like five to ten thousand biotech companies.
So they've got a lot of people making molecules that
are competing for the attention and of a relatively few
(28:35):
large pharma companies.
Speaker 2 (28:36):
So one of the things you've been emphasizing is this
idea of China just moving faster than the US on
this and it does seem like they've come out of
almost nowhere in recent years. How sustainable is that particular pace,
Because if China got a leg up because it had
a generation of researchers who came to US universities and
(28:59):
maybe worked in the US and then took that knowledge
back home. Eventually, does that mean that, you know, that
sort of wave of talent ebbs away and it becomes
harder or is it a permanent shift that they're going
to hold on to for a long time.
Speaker 3 (29:15):
I would say that you have to look at where
their advantage is coming from. So they have a really
good ecosystem for going from an idea for a new
biologic to an actual drug that can be tested in patience.
I don't know, Tracy, if you saw this news last
year about the Biosecure Act. The US Congress for some
(29:35):
reason decided that they wanted to Like ban Wushie I
spoke to the CEO of Wooshi, I said, like they're
saying that you're communists. He said, yeah, we have members
of the Communist Party and our company we're actually required to.
Speaker 2 (29:49):
By law, as do many Chinese companies.
Speaker 3 (29:51):
And he said, by the way, have you noticed how
many Teslas are in China? Has anyone called up Elon
Musk asked him, does he have anyone the Communist Party
in this company? How did Tesla get to have one
third market share of the electric vehicles in China? He said,
of course, every company China's allied with the Communist Party.
(30:12):
He said, We're no different than anybody else. So Wouh
interestingly came up with this concept called idea to I
and D in six months, That is, you give me
an idea for a new biologic, and I will give
you a drug in six months. That seems insane right
in the US, it's like two three years. So if
(30:35):
you ask the folks of wooh She, how did you
get your molecule to go through the system so fast,
He'll say it's all volume. He said, you need to
have the people that know what they're doing at each step.
He said, when you're slow, it's because you're fumbling around.
You don't have volumes. So like, oh, yeah, we don't
have the right cell line, let's go make that to
(30:57):
the customer. They think, well, just take a year to
get the selling going, But in fact, he said, you know,
if you already have five good choices of a sell line,
well you know you ought to be able to get
that done in two weeks. So wou Shi is behind
many of those Chinese molecules, and so they're able to
access a really good industrial partner. And I'm just still
befuddled by, like, why does US Congress want to deprive
(31:20):
US biotech of access to woo she. It's kind of
crazy when you think about it.
Speaker 1 (31:24):
The talent pool in the US and the incredible salaries
that you could make in normal traditional tech, and I
have to imagine smart, quantitatively minded people that probably have
multiple options. They could go to work in a high
speed trading firm. They could go to work at Google,
they could go to work at open Ai, they could
probably apply a lot of their skills in pharma. Have
(31:47):
what's happened in the US to the supply of talent
and has the huge salaries that have emerged over the
last fifteen years in traditional tech, has that been drain
on the sort of has that pulled people away who
might have otherwise gone into pharma or biotech?
Speaker 3 (32:06):
I don't think so so much. I mean, you know,
there are always the folks in a culture that have
let's say that immigrant mentality, maybe Indian heritage, something like that,
where you know, you're really motivated to be a lawyer
or doctor whatever. I do think a lot of those
folks have gone into the medical profession, and that's certainly
more and more they're attracted, I think, to the tech profession.
(32:27):
But your classic sort of biotech scientists is someone who
got a PhD. You know, they they got interested in
biology and college, they went off and got a PhD
from some you know, nice place, and then they got
a job at industry. Those people would in general not
be you know, thinking about a programming jobs.
Speaker 1 (32:49):
Got it, Okay?
Speaker 2 (32:50):
I know we're talking mainly about US and China. But
I have to ask, is Europe in the picture at
all here? I mean the only this is partly because
I don't follow pharma that intensely, but it feels like
the only European name I hear nowadays is Novo Nordisk
and it's golp Ones.
Speaker 3 (33:10):
I mean, Europe historically was the dominant place in the
world for the pharmaceutical industry, so it's only I would say,
in the last thirty years that the US has taken over. Unfortunately,
Europe started putting in very draconian price controls and so
that really hurt their domestic pharma industry. But nonetheless, Europe's
got great universities, you know, whether talking about Gottingen, Erlangen, Lighten, Cambridge, Oxford.
(33:35):
I mean, these are really good places, and so you
can imagine the talent and ideas that are flowing out
of those have really created a very vital and successful
biotech ecosystem in Europe.
Speaker 1 (33:47):
So right now, as you mentioned, the really big US
pharma companies are thrilled because they have new options from
which they can source or license biologics. And you mentioned
there's really even know at all big Chinese pharmaceutical companies.
Do you think that could change like right now, like
(34:07):
still like the J and js and the Pfizers and
the other big one, Like they're pretty Eli Lillie like
these are like pretty big chunks of the US market,
and it seems like they you know, for an investor,
an in diverse fyed investor, it's a decent chunk of
their holdings. You know, we've seen, for example, China is
going taking a shot to break into the aviation duopoly
(34:30):
of Boeing and Airbus, go up the next level and
actually compete at the highest level. Would you anticipate that
at some point in the next few years some company
or some initiative is like, let's take it to the
next level, or we're not just licensing, but we want
to be a behemoth. We want to sell into markets
around the world that US multinationals are also selling into.
Speaker 3 (34:51):
You know, kind of comes back to like the core
ideological conversation that we're having about China. Not only are
there not Chinese global pharma companies in general, there are
very few global Chinese competitors. Right There's not a Chinese
version of Coca Cola, not a Chinese version of Procter gamble.
(35:12):
So you know, the question quickly becomes why, and the
answer is simple. The country is controlled by the Communist Party.
Of course, the Communist Party has one goal survive and thrive. Well,
you don't survive by going and conquering the US soft
drink market. You survive by keeping the people in your
country happy and supportive. Right they have had their political instability,
(35:36):
and so that is the over writing goal. And it's
for that reason that you don't see global commercial ambitions
from China. Car. Yeah, on cars, but you know that's
only because they had to like competing against Tesla, because
Tesla has taken over their car market. I would say this,
(35:58):
I do think it could change. I do think that
China could easily have a large, globally successful pharmaceutical company.
They have the people, they have the innovation, they have
the domestic market. All of the pieces are there, but
for whatever reason, it has not been prioritized.
Speaker 2 (36:19):
I want to go back to the deep seek idea
and ask if you could talk maybe about the connection
between AI and biotech here, because we hear people say
like AI can do these amazing things. It can generate
formulas for potential new medicines, it can tell you how
to manufacture them easier, streamline the manufacturing. How is that
(36:41):
playing out in China?
Speaker 3 (36:43):
I mean, Tracy, that is such a great question. So
I'll tell you. So last November, I was in China,
and you know, I'm a banker, like I said, you know,
just brokering these deals and stuff. So you go around
and you meet all the Chinese vcs. So we're seeing
this one VC, but unlike all the other ones, Like
the guy I was talking to you, like twenty eight
years old and he's like the head of this VC.
So he's attracted capital at a very young age. And
(37:05):
I asked him, just point blank, I'm like, so, why
are all your companies just making sort of like, you know,
slightly better molecules than the Western molecules. You're essentially doing
the fast follower model. He said, Tim, you haven't been
to going down province. He said, down there, guys my age,
they've never worked in the United States before. It Eli Lilly,
(37:28):
he said, the folks there they learned AI, like they
grew up with AI. They know all about AI. And
he said, you're gonna see a whole generation of biotech
coming out of China. It's gonna be first in class
AI driven innovation. You quickly get into the next conversation,
which is AI any good at developing drugs? And you know,
I would say, like a lot of things, maybe the
(37:51):
first couple generations aren't so good, but AI is getting
really good at developing drugs.
Speaker 1 (37:56):
Because I can never tell. I was like, if you
always say, oh, hey, it's gonna be so great a
little big drugs, I can't tell if that's just one
of those things people say, but you think it's real.
Speaker 3 (38:04):
I mean, here's my theory of AI. If you go
to London twenty years ago, you get in a taxi
and you'd say, take me to Paddington Station. No matter
where you were in London, the guy would know exactly
where to go because he'd memorize the street system knowledge. Well,
then one day came along this thing called a sat NAF,
and all of a sudden, you didn't need that guy anymore.
(38:25):
He was obsolete. Overnight Uber moved in, like they're like,
you know, saying, hey, Uber's going to crash you in
the Thames River. Of course that was false, and pretty
soon the market changed fundamentally. That's a medium dimensional problem.
In other words, a human being can figure out how
to navigate London with you know, four years of training,
but a computer can do it in four microseconds. Well,
(38:47):
coming up with all the drug possibilities against a potential target,
that's a high dimensional problem. That's too hard. The computer
actually can't do it. At least today. You can have
all the unbidio chips in the world. You can't do it.
But in contrast, these biologics that we're talking about, even
though they're more complex molecules, it's their complexity that lowers
(39:09):
the dimensionality of the problem because biologics have to fold
and fit in a very specific way, so all of
a sudden it starts to look like the London street map.
And so what we're seeing are these new companies coming
out of places like Google that are focused on making
biologics with AI, and they're really good. So we're going
to see some excellent AI based molecules.
Speaker 1 (39:31):
Tim, when you get out of here, we're going to
just like rebook you for the next time we have
you on, because there's so much stuff here I want
to ask you about. But you're so great to have
you on. Tim Oppler, fantastic discussion, Truly the perfect guest
thank you so much for coming on.
Speaker 3 (39:44):
Odlin, Joe, thank you so much, and Faci, thank.
Speaker 1 (39:47):
You, Tracy. That was obviously a great episode. There's so
many different interesting things there. We're definitely gonna have to
have Tim back. I like, actually, like I'd love to
(40:10):
just talk about that last point he made about complexity.
And but the point about a major profit center for
the entire US healthcare system is the cost is borne
by the pharmaceutical companies to get access to the patients
is just like to me, that reveals so much, Like
(40:31):
that says so much right there about the sort of
tension between the profit motive and frankly speed of innovation.
Speaker 2 (40:39):
Absolutely. The other thing I was thinking about is this
sort of gets to the idea that US protectionism of
strategic industries can sometimes backfire. This is like the line
that a lot of China has been taking this idea
that well, if you cut China off from key technologies,
key developments, it's just going to accelerate its own progress.
(41:01):
It's gonna, I guess, kick its research and development into
high gear. And I mean it kind of kind of
seems to be the case. I guess. I'm wondering also
what happens with the Biosecurity Act with the Trump administration,
because it's still in a legal limbo.
Speaker 1 (41:19):
It would be interesting. There's so many more angles, you know,
it would be interesting to learn more about the sort
of generation of Chinese research scientists in the US that
felt they had hit a ceiling on how far they
were allowed to progress within the US companies, and then
they formed the basis of this booming industry. There's interesting
(41:39):
parallels in just this idea of like sheer scale, right,
and sheer scale of the number. You know, China is
a gigantic country with thousands and thousands of companies and
the advantage that affords you both in terms of cutting
edge research but also doing lagging edge production of various
things at size and at low cost. There's a lot
(42:01):
of interesting angles there.
Speaker 2 (42:02):
There is a lot, and I expect we're gonna record
a few more episodes at least on this. We're going
to fast follow yeah, all of this. Shall we leave
it there?
Speaker 1 (42:11):
Let's leave it there.
Speaker 2 (42:12):
This has been another episode of the Authoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1 (42:18):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow Tim Oppler at Tim Oppler. Follow our producers Carman
Rodriguez at Carman armand dash Ol Bennett at Dashbot and
kel Brooks at Kelbrooks. More odd Lots content, go to
Bloomberg dot com slash odd Lots. We have all of
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about all of these topics twenty four to seven in
(42:38):
our discord Discord dot gg slash off lots.
Speaker 2 (42:42):
And if you enjoy odd Lots, if you like it
when we talk about Chinese hamster ovarian cells, then please
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And remember, if you are a Bloomberg subscriber, you can
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you need to do is find the Bloomberg channel on
Apple Podcast and follow the instructions there. Thanks for listening.
Hey, Odd Loots listeners, We're coming to DC.
Speaker 2 (00:02):
We're finally doing it, Joe. It's going to be our
first live show in Washington, DC, our nation's capital. It's
also finally going to be the time where we actually
talk about the Jones Act.
Speaker 1 (00:13):
Listen talk about doing the Jones Act episode of Odd
Lots for a long time, and it's become this recurring
joke that we've never done on But we're going to
do it in grand style because we're going to be
doing it live in DC and it's actually going to
be a debate.
Speaker 3 (00:28):
Yeah.
Speaker 2 (00:28):
So we have Sarah Fuentes from the Transportation Institute. She's
going to be taking the pro side, and we also
have Colin graybou of the Cato Institute. He'll be taking
the against side. It's going to be really interesting to
see how all of that shakes out.
Speaker 1 (00:43):
In addition to that, we're going to be speaking with
Blair Levin, who was around during the telecom bubble, and
we have Andrew Ferguson, the new head of the FTC,
the one who's replaced Lina Kong. We're going to be
talking about mergers and acquisitions and all that stuff. So
it should be a really fun night.
Speaker 2 (00:59):
If you want to come and join us for that evening,
it's going to be on March twelfth at the Miracle Theater.
Go to Bloomberg dot com forward slash odd Lots and
you can find the link to purchase tickets. We hope
to see you there.
Speaker 4 (01:14):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 1 (01:29):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 2 (01:33):
I'm Jio Wisenthal and I'm Tracy Alloway.
Speaker 1 (01:36):
Tracy, you know, we talk a lot about China, talk
about cars and batteries. It's time for a Chinese biotech.
It's time for the Chinese pharma episode.
Speaker 4 (01:47):
Joe.
Speaker 2 (01:47):
It's just what I always wanted. Thank you so much. No,
I am genuinely excited to talk about this. One reason
is because this is a sector that I don't really
know that much about. Another reason is it has it's
actually been in the news quite a bit recently with
the cuts to NIH funding, which we've discussed and things
like that, and then more generally, it sort of sits
(02:09):
in that nexus of policy aimed at boosting specific sectors
and also competition between the US and China.
Speaker 1 (02:19):
That's exactly right, and it's like you know, we've just
gotten used to the fact that in many areas of
sort of physical manufacturing, there are very there are many
industries in which China can compete and produce things either
cheaper and higher quality. It seems like many areas relate
to batteries and automobiles and all kinds of stuff like that.
(02:40):
We know that. And then of course we had like
the deep seek moment and a bunch of people like, oh,
it's not just physical things, it's not just gigantic plants.
Also a lot of competition in areas like software, particularly
artificial intelligence. That raised all sorts of questions. And then
lately the drum is beating that we have to take
very very seriously pharma and biotech, And this is one
(03:03):
of those areas that I think most people, certainly me
would say like in the year twenty twenty five. Still
my conception my head is that the cutting edge is
in the US and Europe still, which I can't say
that for a lot of industries.
Speaker 2 (03:18):
At this point, I want to know how medicines are
actually made manufactured. I've read a long time ago. I
read a book about the Twinkie, and it broke down
every ingredient that went into a twinkie and where it
came from. And it was really interesting because it turns
out a lot of those ingredients came from China. I
didn't know that.
Speaker 1 (03:38):
I didn't know that either, but you know what I did,
were didn't know because we briefly touched on it in
our recent episode with the two fellows from Goldman Sax
about China's role in the pharmaceutical supply chain providing key
ingredients to India, which then plays a key role. Anyway,
there's a lot I want to know. I don't think
I know anything, and I just want to jump into
(04:00):
this episode because I want to learn more. In that spirit,
we really do have the perfect guest. He's someone who
recently put together a slide deck and I kind of
think that slide deck catalyzed some articles. The deep sea
moment in biotech got a lot of attention on social media.
Drowing straight to the source, we're speaking with Tim Oppler.
He's a managing director in the healthcare investment banking group
(04:21):
at Stefel. Tim, thank you so much for coming on
odd Locks.
Speaker 3 (04:25):
Thank you and Joe and Tracy. I really appreciate you
having me. I'm very excited to be here today.
Speaker 1 (04:31):
What is a managing director in the healthcare investment banking
group at Stevefoild.
Speaker 3 (04:35):
I don't actually manage a lot of people, so managing
directors just the title. But basically, I'm a senior banker,
and investment bankers are in the business of putting people together,
people that need money with people that have money, people
that want to license something out, with people that want
to license something in. So I'm a middleman basically and
get paid commissions for doing it.
Speaker 2 (04:53):
With your middleman position, could you maybe describe the ecosystem
of getting new drugs to market, like where does it
tend to start, what corporate entities does it go through,
and then what's the process from there to getting into
an actual physical medicine.
Speaker 3 (05:11):
So great question. So you know, back in the old days,
if you rolled back the clock fifty years ago, large
pharmaceutical companies Merck, Pfizer, Eli Lilly had these research and
development groups and they would sit around and read up
articles and do their own basic science and say, you know,
I think we should do something to go after such
(05:31):
and such type of virus. They would work on it
for five or six years. They would come up with
a drug candidate, they would go test it in people,
it would work hopefully, and then they would get it
approved and then they go out and market it. Things
started to change, you may remember, you know, as back
as the late nineteen seventies, companies like genen Tech and
Biogen came on the scene. And so today we have
(05:53):
a huge biotech industry. These are kind of like the
you might call them the farm league, a big pharma
are the ones that come up with the new drugs.
Of course, the farmers are still doing their own work too,
and so biotech's become a huge part of our ecosystem.
It's also become a big part of the capital market.
So there's whole groups of people that you know, god
(06:14):
mds and PhDs that went to work for funds and
they sit there, you know, does this drug candidate look
like it's gonna make it? I'm going to bet for
it or I'm going to bet against it.
Speaker 1 (06:23):
What does biotech mean?
Speaker 2 (06:25):
Hey?
Speaker 1 (06:25):
Sometimes ask Tracy what fintech means, and I still don't
know the answer to that.
Speaker 2 (06:29):
But what is biotech touch banking?
Speaker 3 (06:32):
So I'd like to give three different answers. First of all,
when people say biotech in general, what they mean is
kind of the more high tech part of the pharmaceutical industry,
the cool part.
Speaker 1 (06:41):
Yeah, that's always I just figure it's a cool.
Speaker 3 (06:44):
What I mean by biotech is the when you have
a company whose sole asset is a drug candidate that
has not yet been approved by the FD so pre commercial.
When I say biotech, that's what I mean. Other people
think it refers to biologic, and it's true. The original
biotechs like Genetech were focused on biologic so it's understandable
(07:05):
that some people would associate biotech.
Speaker 1 (07:07):
It's a distinct type of therapy from the traditional type
of medicine that would have been developed at America.
Speaker 3 (07:13):
That's correct. So traditionally there are two types of medicines.
There's small molecules, those little white pills some people take
every day, and then there are injectable biologics. Those are
products that are much more complex, much larger molecules, and
are made in very different ways.
Speaker 2 (07:30):
Can you talk about that, going right to my question
about how medicine is actually made, how Yeah.
Speaker 3 (07:36):
So for a small molecule, it's actually a chemical. So
the pharmaceutical industry actually came out of the chemical industry.
So if you go back to the history of pharmaceuticals, say,
like what was going on in sixteen fifty, Well, people
were literally chemists. In fact, still in England today you
can walk into what we would call it pharmacy, they
call it a chemist and they would literally, you know,
(07:58):
put together your antimony or whatever it was and serve
it up to you. So that still goes on. But
of course those small molecule pills are made in giant
factories of what's called API, which is really just fine chemical.
The other side of the industry, though, these biologics are
made typically in bugs. So you would take, for example, yeasts,
(08:19):
or you might take E. Coli, or you might take
what are called Chose cells. Those are Chinese hamster ovary cells.
Why do they use them because they're really good at
growing biologics. And you insert a piece of DNA into
the DNA of that species and then that causes that
species to manufacture the protein of interest, and that's a
(08:40):
whole other industry. And then those say Chose cells or E.
Coli cells or whatever they are, they're grown in these
giant tanks, and so you might have like a forty
thousand liter tank full of growth medium and those cells
are just swimming around and making their proteins. Then they're
harvested and you pull out the protein of interest.
Speaker 2 (08:57):
I'm sorry, did you say Chinese have overy cells?
Speaker 3 (09:01):
I know, and we're talking about China. See, China is everywhere, Tracey.
Speaker 1 (09:05):
I already feel like we're gonna have to have Tim
back already, right, because like this is already one of
those topics where like we probably could just talk about
one niche aspect of the supply chain for some ingredient
because we're not even actually close to getting to it.
But we need to build up to we need to
build up to Chinese.
Speaker 3 (09:22):
Well, let's let's just jump right into it. I want
to make sure, I want I want to make a
comment here. Okay, So China is all of a sudden
starting to be very competitive with the US biotech ecosystem.
I personally don't think that's a surprise. I don't think
that's the bad thing. And here here's what's going on.
We developed the first biologics in the United States in
the nineteen seventies. Well it's twenty twenty five, right, that
(09:44):
was fifty years ago. Yeah, I mean you would think
that the know how of how to make those things
is spread around, and it has. And so what happened was,
you know, in the nineteen nineties, two thousands armies of China,
these people came to the United States for jobs inside
all those companies, and they learned, not surprisingly, how to
(10:06):
make what was being made then, which was biologics. You know,
I don't want to call it racism. I think that's
probably unfair. But for whatever reason, a lot of these
Chinese personnel weren't promoted. They didn't become the SVP at
some big shot US biotech company. You know, they were
stuck in a director job, and they got frustrated and
(10:26):
left and went home to China. Now here we are
twenty twenty five, and they're crawling all over us like
they know how to do exactly what we know how
to do, and guess what, just like in batteries, just
like in telephones and these other sectors, they're pretty good
at it. And so all of a sudden, US biotech
I think has really woken up just in the last
year or two and said, WHOA, we've got competition. Like
(10:49):
these guys are as good as US. I'd say they're
probably better in a lot of ways.
Speaker 1 (10:54):
So I definitely want to get to where they are
and why they might be better and what are the
conditions that perhaps allow them to be better. One less
sort of like precursor. Oh yes, und question is for
these chemicals, I imagine that. Okay, we're going to talk
about breakthroughs that are happening that are in China, that
are you know, in terms of therapies or biologics, et cetera.
(11:16):
But if we wind back a few years to where
people's brains were stuck at in terms of what is
the sort of global supply chain of I mean the
Chinese hamster over is, what is the sort of sort
of incumbent global supply chain of key materials, ingredients, equipment
for biotech and what is China's role in that.
Speaker 3 (11:39):
So if you're making a small molecule which comes down
to that basic fine chemical, let's say it's libatare, Okay,
you could probably make it for less than a place
like India or Indonesia or China. So that's called API,
active pharmaceutical ingredient. And in fact, China has become a
huge source of API because in many ways, you know,
(11:59):
China's really good in the chemical industry. So why wouldn't
they be good in the API industry?
Speaker 2 (12:20):
Can you contextualize some of China's I guess growth in
this area with some specific numbers, because we see all
these headlines coming out, like thirty percent of major pharma
licensing deals now involve Chinese companies. I think that's up
from like almost zero five years ago. There are some
interesting data to look at.
Speaker 3 (12:42):
Yeah, So just to give you a couple stats the
API that source into the US, I don't have the
exact numbers on my fingertips, but I would say at
least twenty five to fifty percent of API that's being
used in the US generic pharmaceutical industry today is sourced
from China. India is another big piece of that. So
Indian China are both really big. What's interesting is India
(13:05):
has not kind of had this phenomenon of their nationals
coming home and opening up local biotech companies. So China
created this policy, you know, very intentionally five ten years ago,
saying hey, we want to be really good in biotech.
It is strategic for US as a country. It's not
that they're trying to beat the United States so that
(13:26):
they need access to these medicines domestically. You know, why
pay the giant global price that some US pharma company
wants a charge? Like, why don't you just learn how
to make it at home? So they very deliberately attracted
back what are called sea turtles. These are people that
crossed the sea from the US or Europe back home
to China. They were then encouraged to start their own
(13:48):
biotech companies and apply whatever they had learned, you know,
in their jobs in Bristol Meyers squib or An Artists
or what have you, and Boyd learned they had and
support they got, and all of a sudden they're churning
out really interesting molecules. And so Tracy, just like you said,
last year, thirty percent of all molecules that were licensed
(14:08):
in by big Pharma came from China, not from the
United States, not from Europe, not from Japan. They came
from China. And I do think that statistic, which was
generated by our good friends at deal Forma, was really
kind of a wake up call for a lot of
folks in our industry.
Speaker 1 (14:24):
And what five years ago that would have been basically.
Speaker 3 (14:27):
Zero, yeah, five percent, zero to five percent?
Speaker 1 (14:29):
How much is it?
Speaker 4 (14:30):
Is?
Speaker 1 (14:30):
It genuinely novel therapies. How much is it? There's sort
of an existing therapy, but they can make it a
better version of it, a cheaper version of it. I understand,
like cheaper it must be sort of a weird concept
in an area where there's I know, a lot of
intellectual property. But talk about what is driving that competitiveness
and market share game.
Speaker 3 (14:52):
There's two or three different things going on. So the
first thing is we're seeing what are called fast follower molecules.
Let's just say for the sake of argument, that Daichi
Senkio comes up with something called a B seven H
three anti body drug conjugate B seven H three ADC. Well,
the Chinese guys see that pop up, they see the
(15:13):
patent filing, they look at it, and they're like, Okay,
we're gonna make a B seven H three, but instead
of using this toxin on the ADC, we're gonna use
that toxin are instead of using this link or we're
gonna use that one. So those are kind of doing
small twists around existing constructs. So we call those fast followers.
China's really good at past followers. The second thing that
you're seeing are first in class molecules and So the
(15:38):
hottest biotech in the United States right now is a
company called Summit Therapeutics. They have a seventeen billion dollar
market cap as we speak. Remember I define a biotech
a company that doesn't yet have an approved drug. So
that's the highest valuation in the world of any company
in the world today that doesn't have an approved drug.
That molecule, which is a combination of a PD one
(16:00):
antibody with the VeVe jef modi PD one by Vegef
it's called is an excellent molecule. It's working really well
in mun cancer. And guess what it was invented in China.
Mert didn't come up with it, Advisor didn't come up
with it. Habit didn't come up with it. It was
come up with in China. And it's the most interesting
biotech molecule in the world today.
Speaker 1 (16:21):
But this is an American company, Summer, right, They went
and licensed China got it, just like we're seeing the
big pharmaus US biotechs licensing stuff from China all day long.
Speaker 2 (16:30):
How much does the difference in regulatory regimes play into here,
because one thing we often hear when it comes to
outsourcing manufacturing to China whether it's something basic like I
don't know, clothing or something more advanced like medicines. Is
that it's cheaper to make stuff in China because you
(16:51):
don't have as many rules and regulations to either slow
you down or add on to costs. Is that a
factor here as well.
Speaker 3 (16:59):
That's a comp located question and a complicated answer. So yeah.
So for most biologics, the Chinese will allow you to
get those into patients more quickly. They have what we
call phase zero studies where you can just go to
a doctor and say, okay, hey, doc, you've got people
(17:20):
coming in that are dying of ovarian cancer, use this drug.
The FDA will not let you do that, right, So,
the FDA won't let that ovarian cancer drug go into
a patient until it's gone through typically a Phase one study. Interestingly,
China's not the only country that does that. Australia does
that too, and you know, we have kind of new
sheriff in town at the FDA. It might be an
(17:41):
interesting thing to explore kind of accelerating that time to
get to the first patient. So that that's one place
where China is a head. But in general, their rules
are just as tough as our rules. It's not like
they have a you know, a low hurdle and we
have a high hurdle to jump over to get a
drug approved. Their vantage is more speed to invent, speed
(18:05):
to get into the clinic. They're just performing really well
on a lot of those key performance indicators.
Speaker 1 (18:11):
What about there's the cost of conducting a phase one trial.
I mean, these are really expensive endeavors in the United States,
and you can spend millions and it goes nowhere past
phase one. How does the cost compared to run the
equivalent in China?
Speaker 3 (18:28):
I mean we should pause for moments. So the US
has capitalistic medicine system, right, So doctors are for profits.
So if you're a physician, of course you're trying to
care for your patients. But let's be honest, a lot
of those dermatologists and endochronologists that you see, they're running
a business. The other day I was talking to a cardiologist.
I said, like, how many patients do you see the year?
(18:49):
He's like eight thousand, and I was out like asking
the lady at the front, like, how much like does
the average patient visit bill? She's like a four or
five hundred bucks. So you can do the math that
guy pulling down like five to ten million dollars, right,
So running a physician practice in the United States can
be very lucrative. I'm not saying every doc's doing it,
just to be clear. But now you're a cancer doc
(19:11):
and you're an MD Anderson or Dane Farber someplace, and
some company shows up GSK and they want you to
test this drug. How much are you going to charge
GSK for each patient? It turns out that the average
price to enroll a patient and a cancer drial in
the United States is between two hundred thousand and four
hundred thousand dollars per pat per patient.
Speaker 1 (19:33):
How much of that goes to the doctor.
Speaker 3 (19:36):
A lot and a lot to the hospital. I mean,
this is a big issue that's just possed up.
Speaker 1 (19:40):
A big source of hospital and doctor profits that they're
essentially selling access to their patients.
Speaker 3 (19:46):
You bet, especially at the big places. So developing drugs,
especially in cancer in the United States is very expensive.
The other thing I'd note is there's a lot of
competition for talent in our country. Again, it's a capitalist
talent market. So you know, let's say you're a doctor
working in m D Anderson and then GSK comes along
(20:08):
and says, hey, we'd like you to be our chief
medical officer. We'd like you to run this cancer program. Like,
is that a one hundred and fifty thousand dollars job.
I don't think so. The average chief medical officer in
the United States city is pulling down between a half
million and one point five million dollars a year, depending
on your level of experience and how good you are.
So all of a sudden, you see biotech companies that
(20:30):
are going out to raise one hundred million dollars. Well,
that's how much you need to raise to enroll the
trial and pay all those people. And you know they
have lots of posh offices as well, and expensive places,
and so US biotech is not so efficient. In contrast,
in China, there are no seven hundred thousand dollars chief
medical officers. There are no two hundred thousand dollar patients.
(20:50):
It's a communist country, right. Doctors, you know, make thirty
thousand dollars a year. You don't get to go make
hundreds of thousands dollars a year for being a doctor,
and you definitely don't rent out your patience.
Speaker 1 (21:06):
Tracy, I have to say this is something I sort
of became aware of in this phenomenon of doctors and
hospitals renting out their patients, and for this episode, I
had no idea that that's how it worked, and I
had no idea of the scale of these numbers. Like,
if there's one fact that's sort of like expanding my mind,
(21:27):
this is the one.
Speaker 2 (21:28):
I didn't know it either. We should probably do an
episode just on the market for renting out cancer patients.
That sounds very It.
Speaker 1 (21:36):
Sounds bad when you put it that way, like they're gating, right,
they're profiting from the fact that they You're the sort
of the channel, right, They're they're the channel through which
the drug company must find patients.
Speaker 3 (21:50):
I mean, let's just talk reality of a medicine in
America right now. There are certain specialties that make money.
Cancer treatment is one, cardiology, surgeries is another. In contrast
seeing people in the emergency room, seeing people in a
primary care sense, you lose money doing those activities. Payments
(22:14):
from insurance companies are poor, and so hospital systems, by
necessity have become for profit. They have no choice.
Speaker 2 (22:21):
So one of the reasons we wanted to speak to
you is because, in the course of your work, You've
talked to a lot of CEOs and executives on I
guess both sides of the ocean here in China and
in the US give us a sort of temperature check
of what people are saying right now when it comes
to the US VERSUS China pharmaceutical biotech industries.
Speaker 3 (22:45):
So, first of all, the pharma companies, the big pharma companies,
they're thrilled at China's there. It gives them more options, right,
you know, there's new molecules, they might be innovative molecules.
The Chinese companies generally don't globalize on their own. One
of the interesting things is there's you know, Chinese big
pharma companies. Name the largest pharma company from China you've
ever heard of. You can't do it. There isn't one, right,
(23:07):
It might be an obscure company like King Ray or CSPC.
They're relatively small compared to our pharmaceutical companies. So it's
great hunting for those guys. For the Chinese companies, access
to the US pharmaceutical market is a god send capitalist
tight prices are low for the US biotech company China
can be worrisome, But honestly, when I speak to my
(23:30):
friends in the US biotech ecosystem. There are some concern
but most of them aren't in direct line of fire
with Chinese competition. It's the US investor, the US biotech
investor this kind of worried. So all those stories that
you were referring to, a lot of them are sort
of freaked out, saying, hey, like thirty percent of molecules
are coming from China, what about our biotech companies?
Speaker 1 (23:53):
Wait, so why wouldn't your friends in the industry be
ang I mean, presumably their leverage their own stocks. If
the investors weren't, they aren't your friends in the industry more.
Speaker 3 (24:02):
Anxious because the Chinese, by and large are taking older
technologies and biologics and putting twists and turns on those technologies.
Most US biotech companies are not in that business right now,
so by and large they have understood long ago that
they need to differentiate. But that's not all of them.
I mean, there are certainly some companies out there that
(24:22):
are in direct competition. And by the way, you know,
the other day I was looking at these antibody drug conjugates,
So China's gotten really good and antibody drug conjugates are
very popular. I think there's four or five major public
antibody drug conjugate development companies in the US.
Speaker 1 (24:41):
They all have type of cancer treatment that combines the
monoclonal antibody with a cytotoxic cancer killing drug. Okay, keep going,
that's right.
Speaker 3 (24:50):
So an ady C is basically chemotherapy that's directed specifically
to this cell. So you don't have to worry about
losing all your hair or whatever if you take an ADC.
So the average enterprise value that's your market cap, ple's
your cash of a US ADC biotech today has gone negative.
(25:12):
Two years ago was quite positive, and I do think
that those folks have you taken some heat from Chinese college.
Speaker 2 (25:34):
I just want to go back to the anxiety or
lack of it in the US and just focus on
the investors for a moment. So the worry is that
the people who actually fund some of these things, I
guess venture capital, maybe private equity, things like that, that
they are going to be intermediated by pharma that's going
(25:56):
directly to the Chinese companies.
Speaker 3 (25:59):
That's right. So let's imagine you're a venture capitalists out
in San Francisco. You've got this nice life, you know,
on sand Hill Road, you come up with some ideas
for some new biotech companies, you found them, and then
you're waiting, you know, for merk to come along or
genetech to come along, almost almost like you know, setting
a trap for the groundhog in your backyard or something
(26:21):
like that, and the groundhog never shows up because they
don't go to your backyard anymore. They've found some other
place to go. And so what's happening is that pharma
have learned that they can find really interesting molecules in China,
you know, one of.
Speaker 1 (26:35):
The themes that comes up in a lot of our
conversations about Chinese industry in general. So you see these
stories about sort of incredible growth and manufacturing of whatever
with pretty slim profits, and famously, like the Chinese stock market,
it's actually, i think the last few weeks, it's uh,
this year is kind of doing okay. But like famously,
(26:56):
the Chinese stock market, for all the growth that they've had,
for all the success various industries, it's kind of been
a dog for a long time. And part of the
story is like, well, there's just so much capital intensity
and you actually only stay at the cutting edge of
all these capital intensive businesses. If you're spending all of
your money that you take in on more research and
so there isn't a lot left over for the end
(27:18):
equity investor. It kind of sounds like something similar here
where it's like, it's not great if you're a US
equity investor in certain areas that are directly in the
line of fire. But it doesn't sound like Chinese companies
themselves are swimming in profits.
Speaker 3 (27:36):
Right. There's no fat cats in China, even though there
might be nice to think that could be true. So
I was on a trip recently to China. I was
in this one building, like you know, just one of
many buildings that had biotechs in Beijing, and like every floor,
like it was like an apartment building, every floor had
another biotech. And I asked one of the guys, I
SAIDs like, how many biotechs are in this building? Said
(27:58):
as sixty seventy? How many biotechs are in Beijing? He said,
nobody knows exactly. So, you know, the US places like
Bloomberg have phenomenal databases and stuff that they don't have
that over there. Maybe that's a business for Bloomberg. I
don't know.
Speaker 2 (28:12):
Well, thank you for the suggestion.
Speaker 3 (28:14):
So yes, he said, I think there's three thousand biotechs
in Beijing. In other words, there's fifty buildings like that one.
And I said, well, what about the country? He said,
nobody knows, but like five to ten thousand biotech companies.
So they've got a lot of people making molecules that
are competing for the attention and of a relatively few
(28:35):
large pharma companies.
Speaker 2 (28:36):
So one of the things you've been emphasizing is this
idea of China just moving faster than the US on
this and it does seem like they've come out of
almost nowhere in recent years. How sustainable is that particular pace,
Because if China got a leg up because it had
a generation of researchers who came to US universities and
(28:59):
maybe worked in the US and then took that knowledge
back home. Eventually, does that mean that, you know, that
sort of wave of talent ebbs away and it becomes
harder or is it a permanent shift that they're going
to hold on to for a long time.
Speaker 3 (29:15):
I would say that you have to look at where
their advantage is coming from. So they have a really
good ecosystem for going from an idea for a new
biologic to an actual drug that can be tested in patience.
I don't know, Tracy, if you saw this news last
year about the Biosecure Act. The US Congress for some
(29:35):
reason decided that they wanted to Like ban Wushie I
spoke to the CEO of Wooshi, I said, like they're
saying that you're communists. He said, yeah, we have members
of the Communist Party and our company we're actually required to.
Speaker 2 (29:49):
By law, as do many Chinese companies.
Speaker 3 (29:51):
And he said, by the way, have you noticed how
many Teslas are in China? Has anyone called up Elon
Musk asked him, does he have anyone the Communist Party
in this company? How did Tesla get to have one
third market share of the electric vehicles in China? He said,
of course, every company China's allied with the Communist Party.
(30:12):
He said, We're no different than anybody else. So Wouh
interestingly came up with this concept called idea to I
and D in six months, That is, you give me
an idea for a new biologic, and I will give
you a drug in six months. That seems insane right
in the US, it's like two three years. So if
(30:35):
you ask the folks of wooh She, how did you
get your molecule to go through the system so fast,
He'll say it's all volume. He said, you need to
have the people that know what they're doing at each step.
He said, when you're slow, it's because you're fumbling around.
You don't have volumes. So like, oh, yeah, we don't
have the right cell line, let's go make that to
(30:57):
the customer. They think, well, just take a year to
get the selling going, But in fact, he said, you know,
if you already have five good choices of a sell line,
well you know you ought to be able to get
that done in two weeks. So wou Shi is behind
many of those Chinese molecules, and so they're able to
access a really good industrial partner. And I'm just still
befuddled by, like, why does US Congress want to deprive
(31:20):
US biotech of access to woo she. It's kind of
crazy when you think about it.
Speaker 1 (31:24):
The talent pool in the US and the incredible salaries
that you could make in normal traditional tech, and I
have to imagine smart, quantitatively minded people that probably have
multiple options. They could go to work in a high
speed trading firm. They could go to work at Google,
they could go to work at open Ai, they could
probably apply a lot of their skills in pharma. Have
(31:47):
what's happened in the US to the supply of talent
and has the huge salaries that have emerged over the
last fifteen years in traditional tech, has that been drain
on the sort of has that pulled people away who
might have otherwise gone into pharma or biotech?
Speaker 3 (32:06):
I don't think so so much. I mean, you know,
there are always the folks in a culture that have
let's say that immigrant mentality, maybe Indian heritage, something like that,
where you know, you're really motivated to be a lawyer
or doctor whatever. I do think a lot of those
folks have gone into the medical profession, and that's certainly
more and more they're attracted, I think, to the tech profession.
(32:27):
But your classic sort of biotech scientists is someone who
got a PhD. You know, they they got interested in
biology and college, they went off and got a PhD
from some you know, nice place, and then they got
a job at industry. Those people would in general not
be you know, thinking about a programming jobs.
Speaker 1 (32:49):
Got it, Okay?
Speaker 2 (32:50):
I know we're talking mainly about US and China. But
I have to ask, is Europe in the picture at
all here? I mean the only this is partly because
I don't follow pharma that intensely, but it feels like
the only European name I hear nowadays is Novo Nordisk
and it's golp Ones.
Speaker 3 (33:10):
I mean, Europe historically was the dominant place in the
world for the pharmaceutical industry, so it's only I would say,
in the last thirty years that the US has taken over. Unfortunately,
Europe started putting in very draconian price controls and so
that really hurt their domestic pharma industry. But nonetheless, Europe's
got great universities, you know, whether talking about Gottingen, Erlangen, Lighten, Cambridge, Oxford.
(33:35):
I mean, these are really good places, and so you
can imagine the talent and ideas that are flowing out
of those have really created a very vital and successful
biotech ecosystem in Europe.
Speaker 1 (33:47):
So right now, as you mentioned, the really big US
pharma companies are thrilled because they have new options from
which they can source or license biologics. And you mentioned
there's really even know at all big Chinese pharmaceutical companies.
Do you think that could change like right now, like
(34:07):
still like the J and js and the Pfizers and
the other big one, Like they're pretty Eli Lillie like
these are like pretty big chunks of the US market,
and it seems like they you know, for an investor,
an in diverse fyed investor, it's a decent chunk of
their holdings. You know, we've seen, for example, China is
going taking a shot to break into the aviation duopoly
(34:30):
of Boeing and Airbus, go up the next level and
actually compete at the highest level. Would you anticipate that
at some point in the next few years some company
or some initiative is like, let's take it to the
next level, or we're not just licensing, but we want
to be a behemoth. We want to sell into markets
around the world that US multinationals are also selling into.
Speaker 3 (34:51):
You know, kind of comes back to like the core
ideological conversation that we're having about China. Not only are
there not Chinese global pharma companies in general, there are
very few global Chinese competitors. Right There's not a Chinese
version of Coca Cola, not a Chinese version of Procter gamble.
(35:12):
So you know, the question quickly becomes why, and the
answer is simple. The country is controlled by the Communist Party.
Of course, the Communist Party has one goal survive and thrive. Well,
you don't survive by going and conquering the US soft
drink market. You survive by keeping the people in your
country happy and supportive. Right they have had their political instability,
(35:36):
and so that is the over writing goal. And it's
for that reason that you don't see global commercial ambitions
from China. Car. Yeah, on cars, but you know that's
only because they had to like competing against Tesla, because
Tesla has taken over their car market. I would say this,
(35:58):
I do think it could change. I do think that
China could easily have a large, globally successful pharmaceutical company.
They have the people, they have the innovation, they have
the domestic market. All of the pieces are there, but
for whatever reason, it has not been prioritized.
Speaker 2 (36:19):
I want to go back to the deep seek idea
and ask if you could talk maybe about the connection
between AI and biotech here, because we hear people say
like AI can do these amazing things. It can generate
formulas for potential new medicines, it can tell you how
to manufacture them easier, streamline the manufacturing. How is that
(36:41):
playing out in China?
Speaker 3 (36:43):
I mean, Tracy, that is such a great question. So
I'll tell you. So last November, I was in China,
and you know, I'm a banker, like I said, you know,
just brokering these deals and stuff. So you go around
and you meet all the Chinese vcs. So we're seeing
this one VC, but unlike all the other ones, Like
the guy I was talking to you, like twenty eight
years old and he's like the head of this VC.
So he's attracted capital at a very young age. And
(37:05):
I asked him, just point blank, I'm like, so, why
are all your companies just making sort of like, you know,
slightly better molecules than the Western molecules. You're essentially doing
the fast follower model. He said, Tim, you haven't been
to going down province. He said, down there, guys my age,
they've never worked in the United States before. It Eli Lilly,
(37:28):
he said, the folks there they learned AI, like they
grew up with AI. They know all about AI. And
he said, you're gonna see a whole generation of biotech
coming out of China. It's gonna be first in class
AI driven innovation. You quickly get into the next conversation,
which is AI any good at developing drugs? And you know,
I would say, like a lot of things, maybe the
(37:51):
first couple generations aren't so good, but AI is getting
really good at developing drugs.
Speaker 1 (37:56):
Because I can never tell. I was like, if you
always say, oh, hey, it's gonna be so great a
little big drugs, I can't tell if that's just one
of those things people say, but you think it's real.
Speaker 3 (38:04):
I mean, here's my theory of AI. If you go
to London twenty years ago, you get in a taxi
and you'd say, take me to Paddington Station. No matter
where you were in London, the guy would know exactly
where to go because he'd memorize the street system knowledge. Well,
then one day came along this thing called a sat NAF,
and all of a sudden, you didn't need that guy anymore.
(38:25):
He was obsolete. Overnight Uber moved in, like they're like,
you know, saying, hey, Uber's going to crash you in
the Thames River. Of course that was false, and pretty
soon the market changed fundamentally. That's a medium dimensional problem.
In other words, a human being can figure out how
to navigate London with you know, four years of training,
but a computer can do it in four microseconds. Well,
(38:47):
coming up with all the drug possibilities against a potential target,
that's a high dimensional problem. That's too hard. The computer
actually can't do it. At least today. You can have
all the unbidio chips in the world. You can't do it.
But in contrast, these biologics that we're talking about, even
though they're more complex molecules, it's their complexity that lowers
(39:09):
the dimensionality of the problem because biologics have to fold
and fit in a very specific way, so all of
a sudden it starts to look like the London street map.
And so what we're seeing are these new companies coming
out of places like Google that are focused on making
biologics with AI, and they're really good. So we're going
to see some excellent AI based molecules.
Speaker 1 (39:31):
Tim, when you get out of here, we're going to
just like rebook you for the next time we have
you on, because there's so much stuff here I want
to ask you about. But you're so great to have
you on. Tim Oppler, fantastic discussion, Truly the perfect guest
thank you so much for coming on.
Speaker 3 (39:44):
Odlin, Joe, thank you so much, and Faci, thank.
Speaker 1 (39:47):
You, Tracy. That was obviously a great episode. There's so
many different interesting things there. We're definitely gonna have to
have Tim back. I like, actually, like I'd love to
(40:10):
just talk about that last point he made about complexity.
And but the point about a major profit center for
the entire US healthcare system is the cost is borne
by the pharmaceutical companies to get access to the patients
is just like to me, that reveals so much, Like
(40:31):
that says so much right there about the sort of
tension between the profit motive and frankly speed of innovation.
Speaker 2 (40:39):
Absolutely. The other thing I was thinking about is this
sort of gets to the idea that US protectionism of
strategic industries can sometimes backfire. This is like the line
that a lot of China has been taking this idea
that well, if you cut China off from key technologies,
key developments, it's just going to accelerate its own progress.
(41:01):
It's gonna, I guess, kick its research and development into
high gear. And I mean it kind of kind of
seems to be the case. I guess. I'm wondering also
what happens with the Biosecurity Act with the Trump administration,
because it's still in a legal limbo.
Speaker 1 (41:19):
It would be interesting. There's so many more angles, you know,
it would be interesting to learn more about the sort
of generation of Chinese research scientists in the US that
felt they had hit a ceiling on how far they
were allowed to progress within the US companies, and then
they formed the basis of this booming industry. There's interesting
(41:39):
parallels in just this idea of like sheer scale, right,
and sheer scale of the number. You know, China is
a gigantic country with thousands and thousands of companies and
the advantage that affords you both in terms of cutting
edge research but also doing lagging edge production of various
things at size and at low cost. There's a lot
(42:01):
of interesting angles there.
Speaker 2 (42:02):
There is a lot, and I expect we're gonna record
a few more episodes at least on this. We're going
to fast follow yeah, all of this. Shall we leave
it there?
Speaker 1 (42:11):
Let's leave it there.
Speaker 2 (42:12):
This has been another episode of the Authoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1 (42:18):
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow Tim Oppler at Tim Oppler. Follow our producers Carman
Rodriguez at Carman armand dash Ol Bennett at Dashbot and
kel Brooks at Kelbrooks. More odd Lots content, go to
Bloomberg dot com slash odd Lots. We have all of
our episodes in a daily newsletter, and you can chet
about all of these topics twenty four to seven in
(42:38):
our discord Discord dot gg slash off lots.
Speaker 2 (42:42):
And if you enjoy odd Lots, if you like it
when we talk about Chinese hamster ovarian cells, then please
leave us a positive review on your favorite podcast platform.
And remember, if you are a Bloomberg subscriber, you can
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Hosts And Creators
Joe Weisenthal
Tracy Alloway
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