Transcript: Nightly Business Report – May 11, 2018



launching the most sweeping action in history, to lower the price of
prescription drugs to the American people.


plan to lower the cost of medicines and the health care sector alike. What
it heard.

win streak to its longest in six months. Just as small caps close in on
all-time highs.

GRIFFETH: The rise of the robots. How mechanical arms are transforming
industries from agriculture to warehousing.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for this Friday,
May the 11th.

HERERA: Finally.

Good evening, everybody. And welcome.

The president today pledged to lower the price of drugs, unveiling a plan
that he describes as drastic change for the industry. He called the rising
prices a threat to Americans. He called out pharmaceutical lobbyists, took
aim at the drug distributors and vowed to put patients first.

That`s when the health care sector fell, just after 2:00 Eastern. But the
decline was short-lived and the sector quickly rallied back and helped lift
the broader market.

Meg Tirrell has more on the president`s initiative and the whipsaw reaction
in the market.


today laid out what he called the most sweeping action in history to lower
the price of prescription drugs in the U.S.

TRUMP: We will have tougher negotiation, more competition and much lower
prices at the pharmacy counter. And it will start to take effect very

TIRRELL: The plan stopped short of what Democrats see as the government`s
strongest tool in reining in drug prices, giving Medicare the power to
negotiate prices directly. That was something Trump himself supported in
the past.

TRUMP: They say, like, $300 billion could be saved if we bid them out. We
don`t do it. Why? We don`t bid properly. And we`re going to start
bidding and we`re going to save billions of dollars over a period of time.

TIRRELL: Nor does the plan suggest allowing reimportation of drugs from
other countries, where they`re cheaper. Another measure endorsed by

Instead, it focuses on lowering out-of-pocket costs for patients,
particularly seniors, through certain changes to Medicare Part D. It also
seeks to remove incentives for higher-priced drugs in Medicare Part B,
which covers medicines administered in the doctor`s office or hospital.
The president also took aim at the system`s middle men, who he said
contribute to driving drug prices higher.

TRUMP: We`re very much eliminating the middlemen. The middlemen became
very, very rich right?

TIRRELL: Middlemen might include pharmacy benefits managers like Express
(NYSE:EXPR) Scripts and CVS (NYSE:CVS) Caremark which negotiate drug prices
on behalf of insurers and employers. But their stocks rallied after the
president`s speech despite his strong language. So too did stocks of drug
makers, Regeneron, in particular. As Wall Street anticipated, the plan
will hold more bark than bite.



GRIFFETH: Jack Hoadley joins us right now to talk more about the
president`s initiative on drug pricing. Jack is a health policy analyst at
Georgetown University`s Health Policy Institute.

Thanks for joining us tonight.

INSTITUTE: Glad to be here.

GRIFFETH: Things that jumped out at me as the president`s announcement,
increased competition in drug markets and provide new incentives for drug
manufacturers to reduce list prices. What do you think of those? Is that

HOADLEY: It is doable, but I`m not sure that there`s anything in this
proposal that really gets us there. I think the proposal is disappointing
in the sense that it`s a lot of ideas on the table, but not a lot of
specifics that will have an effect in the short-term.

HERERA: If you were to advise the president or the people who are going to
be working on this package, because further negotiations are going to take
place, is there one single thing that you think would be a game-changer,
and would advise them to pursue?

HOADLEY: I mean, the potential game-changer would be for the government to
have a more active role in looking at the prices of drugs directly, of
negotiating, particularly on those drugs that are single-source drugs,
where there is really no competition and the market forces don`t work very
well in the absence of a competitor.

GRIFFETH: Today — I mean, there`s a lot of finger-pointing that`s been
going on. The insurance companies, the drug manufacturers and the PBMs.
Today, the PBMs were singled out as the bad guys. Are they?

HOADLEY: Not necessarily. The PBMs are part of the system that negotiates
prices with the manufacturers. They work on behalf of a health plan to try
to get prices down. But what we`ve really got to do is get everybody
involved at the table, including consumers, to try to think about what`s
the way to get these prices down.

HERERA: You know, there`s a lot of lobbying interest, as well, in this
particular sector in the health care sector and drug sector in particular.
You say the government needs to take a stronger role. There are those who
say that government basically might kind of make things worse, because they
are not going to be as exact as they should be. And others say, no, they
do have a stronger role.

Can you elaborate a little bit on how you would achieve that through
government intervention?

HOADLEY: Well, I think it is complicated to do. And I think you have to
think about it very carefully. But when you have a case of a single-source
drug, you know, there`s no role right now really for market competition to
play out there. And so, if the government designs a way to negotiate, to
really use its authority to try to say we need to get a better price,
there`s potential ways to get there.

But, you know, like any of these things, the devil is in the details, and
we`ve really got to figure out how to do it right.

GRIFFETH: Well, for example, the Democrats have made much today of the
fact that the president is not going to want Medicare to negotiate its own
drug pricing, which he had talked about in the past. Would that be an
answer, necessarily?

HOADLEY: You know, it`s a potential part of the answer, and I think it
needs to be on the table. Again, you know, we`ve seen a lot of these new
very expensive biological drugs, and there`s a lot of steps that could be
taken to try to have an impact on the prices of those drugs. And the
government has got to play a part in that.

HERERA: What about re-importing drugs from countries where those drugs are
cheaper? How much would that help? Because that is on the table.

HOADLEY: You know, reimporting drugs can make a difference, but it`s
probably not the real game-changer. I think what you need to do is really
address the high price of drugs fundamentally, and do something that sort
of gets at the launch prices of new drugs. Importation allows us to sort
of leverage some of the power that other countries have done to keep prices
down. But it probably doesn`t solve the problem by itself.

GRIFFETH: A lot of hope for what is a very complicated issue.

Jack, thanks for joining us again tonight.

HOADLEY: You`re welcome.

GRIFFETH: Jack Hoadley with Georgetown University`s Health Policy

HERERA: And as we mentioned, health care stocks helped lift the Dow,
extending its win streak to seven straight sessions as stocks capped their
best week in two months. The Dow Jones Industrial Average added 91 points
to 24,831, the Nasdaq fell 2, and the S&P 500 rose 4.

For the week, the major averages were all up 2 percent or more. And part
of that was due to the rise in oil prices this week, which were up about
1.5 percent.

GRIFFETH: By the way, the president today also met with automakers at the
White House, and he made it clear, he wants more vehicles built here in the
United States. And he also discussed his administration`s push to relax
fuel efficiency standards.

Eamon Javers is in Washington for us tonight.


gathered some of the nation`s most powerful automotive CEOs at the White
House today for a discussion on CAFE standards, the degree to which cars in
the future will be allowed to emit pollutants. California, a big market
and a big powerful political state, wants to keep those standards as strict
as possible. The Trump administration, though, would like to cap them at
2020 levels going forward into the future years.

So, all of that was the backdrop for this meeting with the president in
which he singled out one of the CEOs for doing something he really liked,
Sergio Marchionne of Fiat Chrysler.

TRUMP: By the way, thank you. You`re moving to Michigan from Mexico.
That`s what we like. That`s right. He`s my favorite man in the room.


A big announcement. I`ll tell you, the people in Michigan very much
appreciate it. It`s a big deal. Leaving Mexico, going to Michigan, that
was a very well-received — I appreciate it. Thank you.

JAVERS: I caught up with Marchionne as he was leaving the White House this
afternoon. He said the meeting was constructive. He said it was less
tense than some of the reporting had suggested it might be. But he laid
out what the fundamental dispute here is all about.

SERGIO MARCHIONNE, FIAT CHRYSLER CEO: We deal with multiple standards in a
global scale, none of which is pleasant to deal with, because it requires a
phenomenal effort, both in terms of engineering and manufacturing to make
sure you comply. And so, a uniform world would make it much easier for us
to operate.

JAVERS: One White House official told me today that the president wanted
to ask the CEOs behind closed doors what they think the mile per gallon
standard ought to be nationwide in this country. So, we`ll see whether
those CEOs were able to get what was on their wish list today.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers at the White House.


HERERA: American, Canadian and Mexican officials ended a week of talks
without a deal on the North American Trade Agreement. Instead, the
representatives agreed to resume negotiations soon after acknowledging that
major differences do remain.

But pressure to reach a deal is intensifying after House Speaker Paul Ryan
said he needed to be notified of a new NAFTA deal by Thursday, May 17th, to
give the current Congress a chance to pass it.

GRIFFETH: And along those lines, American soybean farmers are finding
themselves caught in the middle of the ongoing trade dispute between the
United States and China. Chinese buyers of American-grown soybeans have
been cancelling their orders, and now the Chinese government is encouraging
its farmers to plant more soy to help make up for any shortfall.

Eunice Yoon sorts it out for us tonight.


Heilongjiang province have gotten caught up in the trade war between the
U.S. and China. The Chinese government is attempting to boost domestic
production of soybeans. The authorities here in the country`s northeast
have been encouraging their farmers to replace their corn crops with

Corn farmer Li Shiguo is being offered a subsidy of $162 per acre to make
the switch. He hasn`t taken it.

Soybeans are so cheap, he says. You don`t earn much growing them.

Many of the farmers we spoke to here said the same thing. Corn brings in
double the profit of soybeans. And they don`t have the right seeds and
equipment to get good enough yields to compete with U.S. imports.

But if China increased the pay out, farmers like Li said they would be keen
to take up the trade fight.

Of course, if we don`t import U.S. soybeans, our beans in China can be sold
at a higher price, he says. We have fertile land here. How nice it would
be if we could grow soybeans ourselves.

A dream that could be seen as a nightmare for soybean farmers back in the

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Heilongjiang province.


HERERA: To the economy now, where the head of the St. Louis Fed said
further interest rate increases may not be needed.

James Bullard noted that rates have already reached a neutral level, and if
that`s the case, then they are no longer stimulating the economy. Bullard
is not a voting member of the central bank this year, but he has been
urging colleagues to be cautious about further rate increases.

GRIFFETH: Time to take a look now at some of today`s upgrades and
downgrades. Dow component Verizon (NYSE:VZ) was upgraded to overweight
from neutral by J.P. Morgan. The analyst there cites a healthy dividend
yield and clarity about its plans for 5G. Price target: $58. Shares of
Verizon (NYSE:VZ) rose 3 percent today to $48.62, making it the best-
performing Dow component in today`s trade.

And shares of Kohl`s (NYSE:KSS) were downgraded to neutral from
outperformed by Credit Suisse. The analyst predicts that the retailer will
report lower than expected sales growth for its first quarter. That report
will be out on May 22nd. Price target: $64. The stock closed down a
fraction to $60.23.

HERERA: Tyson Foods (NYSE:TSN) is rated an outperform in new coverage at
Bernstein. The analyst expects Tyson to hold up better than other U.S.
food companies, given the strong demand for protein. The price target is
$81 a share. Shares of Tyson were higher today to $68.25.

Symantic was downgraded by a number of firms today following the disclosure
of an internal investigation which we told you about last night. One of
the down grades came from Oppenheimer, which cut its rating from hold to
buy. The analyst said the internal probe is a concern because the scope
and potential length are unknown. The stock lost a third of its value
today, closing at $19.52.

Still ahead, more packages are being delivered these days, but why is the
post office losing so much money?


GRIFFETH: Good news for Ford shareholders and factory workers. The
automaker reportedly is going to resume production of its F-150 pickup
trucks one week from today at its Dearborn and Kansas City plants. This
according to “Reuters”.

As we have been reporting, the automaker halted production of its F-series
after a fire at a supplier plant caused shortages of necessary parts.

HERERA: AT&T`s CEO calls the hiring of President Trump`s personal attorney
Michael Cohen a, quote, big mistake, end quote. In a memo to employees,
Randall Stephenson said the company`s reputation has been damaged, and that
the executive who oversaw the contract with Michael Cohen is leaving the
company. AT&T (NYSE:T) paid Cohen $600,000 last year. Yesterday, Novartis
also called its payments to Cohen a mistake.

GRIFFETH: Barclay`s CEO has been fined more than $850,000 for trying to
identify a whistleblower inside his bank. The fine was levied against Jes
Staley by British regulators. He`s the first sitting CEO to face such a
penalty. The fine was 10 percent of Staley`s overall pay package, and it
included a 30 percent discount for his agreeing to an early stage of

HERERA: Well, you might think that as more people shop online and have
packages delivered that the postal service`s business would be booming.
But that is not the case. In fact, the agency`s loss has more than doubled
in the first three months of the year.

Morgan Brennan explains why.


Postal Service ballooned to more $1 billion last quarter. But if it
weren`t for package deliveries, it might have been even worse. Whereas
first class mail continues to decline and retiree costs mount, package
volumes and revenue grew.

On a conference call to discuss the results, postmaster general Megan
Brennan expressed the importance of the package business, to the future of
the USPS and mail delivery as a whole.

MEGAN BRENNAN, POSTMASTER GENERAL: The package business is vitally
important to our financial health, because the revenue and the contribution
provided by our package business plays a significant role in providing
critical funding to help pay for the infrastructure, which enables us to
maintain that universal service obligation.

MORGAN BRENNAN: The Postal Service says the package business funded almost
a quarter of institutional costs last year, helping enable it to maintain a
network compromised of roughly $650 million U.S. addresses for which
delivery is required. But the results coming after a flurry of criticism
from the Oval Office, as President Trump has as recently as last month
slammed the postal service`s top customer, Amazon (NASDAQ:AMZN).

TRUMP: The post office is losing billions of dollars, and the taxpayers
are paying for that money, because it delivers packages for Amazon
(NASDAQ:AMZN) at a very below cost. And that`s not fair to the United
States. It`s not fair to our taxpayers.

BRENNAN: But today, the quasi-governmental agency, which by law isn`t
funded by taxpayer dollars did call package pricing, quote, a
hypercompetitive environment, one in which the USPS works with consultants
on pricing that ultimately is approved by regulators.

The postmaster general also said she welcomes a review ordered by the
president, that the postal service finances deserve to be studied and
larger public policy issues addressed. Lastly, she once again called on
lawmakers for legislative reform so the USPS can, quote, return to
financial stability and finally operate profitably.



GRIFFETH: Call center operator Convergys (NYSE:CVG) may sell itself, and
that is where we begin tonight`s “Market Focus.”

“The Wall Street Journal” said the company is in talks with several
potential buyers, which include industry rivals and private equity firms.
The report added that the sales process was triggered when the CEO
announced she was stepping down last January. Shares of Convergys
(NYSE:CVG) climbed by 12 percent on the news to $25.30.

GameStop`s new CEO has resigned after only three months on the job. The
video game retailer said that Michael Mauler was leaving for personal
reasons, and added that an interim CEO has been named. GameStop, which has
struggled to raise sales, has seen its stock drop by nearly 30 percent just
this year. And today`s news did not help. Shares were off another 2
percent at $12.71.

But higher steel prices and an increase in iron ore shipments helped
ArcelorMittal (NYSE:MT) beat earnings estimates. The world`s largest steel
maker also said it expects results to improve this year, thanks to
strengthening demand from the U.S. and from Europe. Shares rose 1 percent
to $35.72.

HERERA: After the bell, the pharmaceutical company Perrago said it does
not expect the FDA to improve one of its inhaler treatments and is cutting
its earnings outlook. Shares initially fell following the after-hours
news, but finished the regular day up more than 2 percent to $77.52.

And shares of Yelp continue to come under pressure today after the review
site reported a smaller than expected loss after the bell yesterday. The
company also saw sales beat and hiked its revenue forecast for the year.
But still investors sent the shares nearly 8 percent lower to finish the
day at $44.02.

GRIFFETH: Companies are buying back their own shares now at a record pace.
S&P 500 firms bought more than $150 billion of their own stock in the first
quarter of this year. That move is partly due to the new tax law, which
encourages companies to bring back cash that`s been held overseas.

HERERA: It is time to talk to our market monitor, who is finding
opportunity in small cap stocks, which as we mentioned earlier, are closing
in on record highs on the Russell 2000 Index.

Joining us is Sandy Villere, co-portfolio manager of the Villere Balanced

Welcome back, Sandy. Good to see you.

having me. You, too, nice.

HERERA: Let`s start with your first pick, Cypress Semiconductor
(NASDAQ:CY). You say it`s flying under the radar for a variety of reasons.
Why do you like it?

VILLERE: Yes. And this is kind of a theme you`ll see in all of my stocks.
I like to buy things that are just underloved, underfollowed, diamonds in
the rough type of companies.

So, Cypress is one that trades at about 12 times earnings. Its peers trade
at 19 times earnings and these guys have some exciting stuff. They`re a
leader in the Internet of things so they`re supplying products like the
Amazon (NASDAQ:AMZN) Echo and they`re also in electric vehicles so things
like Tesla.

So, I think there is a bright future. And they pay a 3 percent dividend
yield while you wait.

GRIFFETH: Another one, 3D systems in the latter part of the turn-around
stage right now, huh?

VILLERE: Yes, I think we`re probably in the eighth or ninth inning of
this. And 3D, I probably haven`t spoken about this one in a long time,
because they`re really just finishing up this turn-around. But they`ve got
about six different printers they`re going to come out second half of 2018.
In fact, a couple coming out in May. And I don`t think people have any of
this stuff in their numbers. And so I think it`s one that could, you know,
really surprise people on the upside.

This 5100 they`ve got is four times as fast as its closest competitor and
saves their customers about 90 percent. So they`ve got some exciting
things going on, and people just don`t know much about the company, which
is why I really like it.

HERERA: All right. Hughes Corp — Howard Hughes (NYSE:HHC) Corp, symbol
HHC, is your final pick here. And I — there is a lot about this company I
thought I knew. But I didn`t. And that part of it is their land holdings
that you say stretch all the way from New York to Hawaii.

VILLERE: Yes, that`s right. They`ve got, you know, about 28,000 acres
that is just north of Houston, in the woodlands which is a masterplan
community and is doing extremely well. They`ve got 22,000 acres in
Summerland, which is about nine miles from the Las Vegas strip, and they`re
continuing to build that out. They`ve got a village in Honolulu, which is
just phenomenal, if you look at those properties.

And then the newest thing is the south street seaport at Pier 17 in New
York, and ESPN is going to have that as their hub. They just took about
19,000 square feet and now when you see a major sporting event in New York,
it will be live from the seaport. So I think that will be neat, a 1.5 acre
rooftop that`s going to have music venues and that sort of thing.

So stay tuned. But I think it`s very undervalued and people aren`t giving
any credit. And it should work out well over the next several years.

HERERA: And it`s right, Bill, in my backyard. I think maybe Friday
cocktails off the rooftop.

Thanks so much, Sandy. Great to see you.

VILLERE: Thanks, Sue. Thanks for having me.

HERERA: Sandy Villere with Villere Balanced Fund.

Coming up, how robots are helping plant the seeds of the farm of the


HERERA: Manufacturing is becoming more high-tech, and now the agricultural
sector appears to be moving in the same direction. And given the labor
shortage in that field, it could help dig farmers out of a hole.

Aditi Roy is in Berkeley, California, for us tonight.


running circles around humans, causing their heads to spin.

JULIA CECCHETTI, PENN STATE UNIVERSITY: Robotics is just running away with

ROY: Boston Dynamics spot mini robot was the star attraction at the
TechCrunch`s robotic session`s conference at U.C. Berkeley.

The robotics company released this video, showing the four-legged machine
running up and downstairs and dodging objects. Its two-legged companion,
the Atlas, jogging around the neighborhood.

The increasing agility of robots is transforming industries like
agriculture. Cambridge-based Soft Robotics uses pliable robotic arms in
its machines, packing delicate items like eggs and picking tomatoes off
trees. While this automated harvester plucks strawberries, it`s being
tested by Driscoll`s, the largest berry distributor in the world.

John Deere is investing heavily, automating its tractors and combines,
which are outfitted with computer vision technology.

ALEX PURDY, JOHN DEERE LABS: Like facial recognition, it goes through the
field, and identifies weeds versus crops.

ROY: The head of John Deere Lab says it also addresses the labor shortage
among fieldworkers in agriculture.

PURDY: I`ve heard not only in Saskatchewan but all across North America,
getting the right labor is a challenge. We think that automation really
helps with that.

ROY: In the warehousing industry, startups like fetch are doing some heavy
lifting. Its robots move around autonomously, work alongside humans, and
can carry heavy cargo.

MELONEE WISE, FETCH ROBOTICS CEO: We can take something from assembly area
in the manufacturing plant and put it on to a conveyor. We have a part of
the robot that can connect to a cart and move a cart around, so when you
put a whole bunch of packages on to a cart, the robot can come pick up that

ROY: For some enthusiasts, the robots are headed for even greater things.

BHASKRA MARTH: Just as with phones over the last, you know, couple of
decades, they`ve, you know, gone from being a novelty to, you know, being
ubiquitous — and I think that`s going to gradually happen in the robot and
other areas of our lives.

ROY: This inevitably raises concerns about job displacement. A recent
McKinsey Study found that in nearly 60 percent of all occupations, one-
third of all job activities can be automated by 2030.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Berkeley, California.


GRIFFETH: And finally tonight, SpaceX successfully launched and landed its
newest Falcon 9 rocket today. As we have been reporting, a number of
companies are in a race to get commercial payloads and passengers into
space. And with today`s launch, this booster of the rocket detached and
guided itself back to earth. It is designed to fly frequent missions in
rapid succession. Of course, potentially ushering in an era of reusable

Pretty great stuff today.

HERERA: Amazing stuff.

All right. Before we go, here`s a look at the day and the week on Wall
Street for you. The Dow added 91 points to 24, 831. The Nasdaq fell two.
And the S&P rose four. For the week, the major averages were up 2 percent
or more.

So, a good with week for the bulls.


HERERA: That will do it for us tonight on NBR. I`m Sue Herera. Thanks
for joining us.

GRIFFETH: I`m Bill Griffeth. Have a great weekend. Happy Mother`s Day.
We`ll see you on Monday.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.


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