🍏 Apple rents instead of buying

Drug sales, driven by blockbuster weight-loss and diabetes drugs, continued to impress Wall Street this earnings season as the pharmaceutical industry’s tariff fears start to fade.

Most major drugmakers reported earnings that beat the Street’s estimates, while tariffs seemed to be an afterthought. All the while, a bitter bid-off between two major players escalated as the reports rolled in.

• This quarter solidified Eli Lilly’s dominance in the GLP-1 market. The company’s blockbuster diabetes and weight-loss medication, tirzepatide, which is sold under the brand names Mounjaro and Zepbound, was the most sold drug in the world this quarter — by a lot.

• Novo Nordisk, which was first to the GLP-1 game, appears to have lost its thunder. Sales of the company’s diabetes and weight-loss shot — semaglutide, which is sold under the brand names Ozempic and Wegovy — were flat quarter over quarter and about $2 billion less than Lilly’s competing shot. 

• Pfizer launched a legal battle this week against Novo for seeking to intercept its acquisition bid for Metsera, an obesity biotech working on a next-generation GLP-1 drug. 

Metsera said on Monday that both Novo and Pfizer had sweetened their bids for the company, but Novo’s was still superior to Pfizer’s. Novo’s bid is worth up to $10 billion, while Pfizer’s is worth up to $8.1 billion.

The Takeaway

Tariffs on pharmaceuticals, which have rattled drugmakers’ stocks this year, have now taken a back seat as the administration’s policy stance takes shape. In September, Pfizer secured a three-year grace period from tariffs by committing to investing in US manufacturing and agreeing to sell its drugs at a discount to the government and through direct-to-consumer channels. Considering most Big Pharma companies have announced US investments this year and offer a DTC option on some drugs, it gave a clear pathway for other drugmakers to strike similar deals.

The word “tariff” has gone largely unmentioned on drug companies’ earnings calls, especially compared to the last two quarters.

Apple plans to pay Google about $1 billion a year to use the search giant’s AI model for Siri, Bloomberg reported yesterday. Google’s model — at 1.2 trillion parameters — is way bigger than Apple’s current models.

• The deal aims to help the iPhone maker improve its lagging AI efforts, powering a new Siri slated to come out this spring.

• Apple had previously been considering using OpenAI’s ChatGPT and Anthropic’s Claude, but decided in the end to go with Google as it works toward improving its own internal models. 

• Google, which makes a much less widely sold phone, the Pixel, has succeeded in bringing consumer AI to smartphone users where Apple has failed.

Google’s antitrust ruling in September helped safeguard the two companies’ partnerships — including the more than $20 billion Google pays Apple each year to be the default search engine on its devices — as long as they aren’t exclusive.

The Takeaway

Apple’s lackluster AI efforts have been a bit embarrassing for a company that is more accustomed to utterly dominating in customer-facing consumer products. Its internal teams have been reliably raided by rivals, and given it’s got a massive cash pile, many were wondering at what point the iPhone maker would throw in the towel on its internal attempts to kickstart an AI business and just do the more logical avenue: namely, buying or renting one. It seems like for the time being, it’s going with the latter option, at least until something better comes along.

Why Yum! Brands may sell off Pizza Hut

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• 🏈 TNF: Tonight the Las Vegas Raiders are heading to Denver for Thursday Night Football, and markets are placing the home team Broncos as the favorite with an 80% chance of winning.

• 🏛️ Tariffs: Yesterday, lawyers argued before the Supreme Court in the case V.O.S. Selections, Inc. v. Trump, which relates to the legality of Trump’s tariffs, and prediction markets think it went badly for the government. The implied probability of a Trump administration win in the case fell sharply from about 44% heading into the arguments to 29% by the early evening, according to Kalshi.

• 💃 DWTS: Right now markets are giving Robert Irwin the best shot at winning “Dancing With The Stars” this season, pricing in a 50% chance of the zookeeping and conservation scion winning this season of what has become the biggest show on television, followed by Alix Earle at 28% and Whitney Leavitt at 8%. 

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

• Will they or won’t they… approve Tesla CEO Elon Musk’s $1 trillion pay package? Tesla bull Dan Ives thinks the case is clear

• US airlines soared as Trump shifted his tone about the urgency of ending the shutdown

• Wall Street hated Super Micro Computer’s trade-off of profitability for sales

• China’s XPeng mimics Tesla, selling EVs, robotaxis, robots, and AI chips

• The median age of a first-time homebuyer in America just hit the oldest point on record