Weekend Update #161
Thank you for your continued support and engagement. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
As we pushed further into the new year and approached Dr. Martin Luther King Jr. Day, markets experienced another tepid week characterized by mixed economic data readouts, varying earnings results from major financial institutions, and continued geo-political strife around the globe. Consumer and producer pricing data, published on Thursday and Friday, respectively, furthered market discussions regarding the Federal Reserve's rate trajectory, while amplifying questions surrounding embedded expectations of rate cutting velocity in 2024. Further, the SEC's approval decision around proposed Bitcoin ETFs generated significant buzz surrounding the future of cryptocurrencies in both retail and institutional settings.
The Consumer Price Index published this week saw both headline and core readouts come in above street expectations, with headline and core inflation coming in at 3.4% and 3.9% on year-over-year bases, respectively. Month-over-month increases in housing, apparel, and new and used vehicles helped promote the stickiness of heightened inflation, leading to further debate on the viability of a "higher-for-longer" regime. Prior to the week's economic data readouts, multiple Federal Reserve officials publicized their personal views on the rate go-forward. On Monday, Fed Governor Michelle Bowman and Atlanta Fed President Raphael Bostic each expressed their beliefs that holding interest rates at the current levels for some time could bring inflation back down to the Fed's target level, with Governor Bowman stating that, while it is necessary to prevent the policy rate from becoming overly restrictive, "we are not yet at that point."
Beginning a new earnings season, JPMorgan, Bank of America, Wells Fargo, and Citigroup all reported 2023 fourth-quarter and full-year results this week. Collectively, the four institutions saw strong earnings growth from the previous year, yet distinct cracks prevailed. Specifically, Citigroup alone noted that they plan to lay off 20,000 employees by the end of 2026, representing roughly 10% of the company's total headcount, in the follow-up to posting a near $2 billion loss in the fourth quarter.
In the crypto world on Wednesday, the Securities and Exchange Commission enacted the landmark decision to approve 11 Bitcoin exchange-traded funds, leading the currency at more than $49,000 before retracing. Coinbase, who serves the custodian for the majority of the ETFs now available on the market, saw shares fall over 16% since the announcement.
Finally, international conflict – and its toll on human life that cannot be understated – continues to muddy future outlook. Following weeks of global supply chain disruptions caused by attacks from Iran-backed Yemeni Houthi rebels, a coalition led by the United States layed strikes on missile storage and launch sites in the region. The strikes followed the Iranian seizure of an oil tanker making passage through the Gulf of Oman. Oil prices subsequently rose on the final trading day of the week.
Weekly Performance
S&P 500 4,783.83 +1.47%
Nasdaq 14,972.76 +2.15%
Dow Jones 37,592.98 +0.81%
Thank you Blue Room Analyst AIDAN FETTERLY
OVERVIEW
United States Producer Price Index YoY and MoM
PPI is a family of data that gauges the costs of production. There are three areas of PPI classification that use the same pool of data from the BLS: industry, commodity and commodity-based final and intermediate demand (FD-ID).
Finished Goods YoY~ Finished goods are goods that have completed the manufacturing process but have not yet been sold or distributed to the end user.
Final Demand ~ PPI for final demand measures the average change in prices received by domestic producers of goods, services and construction sold for personal consumption, capital, investment, government and export.
Exact Sciences at 2024 J.P. Morgan Healthcare Conference Key Takeaways:
All remarks in the presentation and Q&A remarks pointed to the strong growth engine underlying Cologuard and Oncotype continuing to grow for many years on top of efficient infrastructure and with many tailwinds
Screening revenue has grown at a 33% CAGR over the 5 years from 2018 to 2023, and the presentation did a nice job of breaking out physician ordering cohorts that continue to grow at about the same rate — demonstrating how there are years to come of organic growth just from physicians ordering more over time
This is a very different picture than what guidance would imply at just 13% YoY growth in 2024
Currently, providers are ordering 10.8 Cologuard tests per year on average, which is far below the 100% penetration at 100-200 tests per year Exact has highlighted
Specifically, Exact management re-emphasized that they believe they will get to $7 billion in Cologuard revenue alone at 14 million annual tests, with over 50% from rescreens
Similarly, management highlighted the long-term outlook of building to over 40% adjusted EBITDA margins
From management’s commentary, it sounds like they are internally projecting a more bullish trajectory for financials than is appreciated by the market but continue to guide conservatively to minimize volatility in share prices
Jeff Elliott received a large round of applause from all of the audience as his contributions to Exact’s trajectory are visible and certainly appreciated and some tears were shed by the management team in his farewell comments
John Evans – Chief Executive Officer
So welcome, everybody. My name is John Evans. I'm very excited to be here to tell you a little bit about Beam Therapeutics and our effort to create new precision genetic medicines in the field of base editing. As a reminder, I will be making forward-looking statements today.
So at Beam, our vision is to provide lifelong cures for patients who are suffering from serious diseases. We see real potential for one-time curative therapies, which could be truly disruptive in medicine. We believe gene editing is going to be a treatment for both rare but ultimately also more common diseases. And we believe that because these technologies are programmable, they can be true platforms, not just creating one program but creating multiple medicines rapidly over time.
So, to give you a quick tutorial on gene editing, the state-of-the-art to-date in gene editing have been what we call nucleases, most famously CRISPR. So what these tools have done is solve one very important problem, which is how do you target within the genome precisely? There are 3 billion letters in all of your genomes, A, G, C, and T, we want to find one address for editing. And they do it very well. The challenge is once they get there, there's only one thing that they can do, and that's to cut. It's like having the scissors for the genome. When you make that cut, it's a genotoxic event for the cell. But more importantly, you can't control what happens next. The cell puts the pieces back together again, but with damage. You have literally random insertions and deletions at the target site. So this means that you basically lack control over what's going to happen to the gene sequence.
So base editing was designed to fix that problem. So with base editing, we keep that same precision targeting that you get with CRISPR, but now we're going to do an enzymatic base conversion when we get to that target site. Simple chemical change, turning one letter into another, either A to G or C to T. This is very efficient, but more importantly, it's predictable. So now we know exactly what sequence will result when we've made the edit. And that really opens the aperture for thinking therapeutically about reprogramming genes to do a wide variety of different things.
David Ricks — Chair & Chief Executive Officer
Super. Thanks, Chris. Good to be back. Okay, great. Thank you all for being here and thanks for that introduction, Chris. I thought I'd give a little bit of a slide presentation, because it's been a while since I did that, 2018. So I'll use that as my reference point backwards. That's also the year that Chris Schott put a buy on Lilly. It turned out to work pretty well. So, really the theme of this is like, how can we drive continued R&D and innovation excellence at scale.
And if, of course, if we look at, there is a beautiful safe harbor, by the way, if you want to read it.
If you look at the last six years, it's been a pretty sensational run for the company. And during this period of time, revenue has increased like 50% operating income about doubled. And those things don't explain the 653%. We also had a lot of margin expansion and, of course, that's driven by the promise of future growth, driven by the pipeline. So I want to talk a little bit about that last issue. The first two are pretty straightforward.
Jamey Mock – Chief Financial Officer
Good afternoon, and it's a pleasure to be here with you today. On behalf of the entire global Moderna team, we thank you for your interest. Thank you for being here in person or live via our webcast.
So, before I begin I will make – in this presentation, I will make forward-looking statements. Those are to the best of our estimates right now and it's subject to risks and uncertainties. For a full list of our risks registered, please review our SEC filings.
So today, I'd like to walk through the Moderna story and I'll do it in a timeline fashion. So, I'll start with our platform, why did we want to invest in it, what were the benefits that we saw, how have we invested in over time, and then I'll move to what took us up to COVID and the pandemic. And where – how are we prepared for it, what did we do for COVID, what do we need from a health perspective? And then we transitioned to the endemic over the last two years. And so that required a lot of resizing of the business. And then as we look forward, I'll give you how we're thinking about it both financially and from a late-stage clinical pipeline perspective. So, I'll give you our financial framework and why we're so excited about the organic growth driver that we have at Moderna.
So, first-off Moderna is obviously founded on mRNA which is nature's information molecule and mRNA instructs the cell how to make proteins and those proteins either prevent or treat diseases. And it was that belief that if we could maximize the platform that could optimize mRNA we could treat or prevent many different diseases and it had many different benefits.
Gaurav Shah — Co-Founder & Chief Executive Officer
Thank you, Eric. Thank you, J.P. Morgan, for having us. It's always great to be here. And San Francisco is ever-changing and never changing at the same time. Good to experience together.
So, the key message today, is that a one-time therapy that potentially cures a fatal and devastating disease of childhood, because it addresses the disease as at the most fundamental level possible, the DNA. This is such a profound change in the way we've thought about medicine in the history of our species and it could change the future of our species as well. And I'm going to show you this in several different disease types that Rocket has been working on and it applies to many, many future disease states as well.
Our mission at Rocket Pharma, we're a gene therapy company, is to develop first-in-class and best-in-class curative gene therapies for patients with devastating diseases. We start with rare, but we can expand beyond rare at the right time.
2024 01 11
BLUE ROOM Global Meeting
#138
Dear Blue Room,
Happy Thursday! Please join for our weekly all hands meeting at 12 PM.
Agenda
I. Blue Room LLC Updates
II-a. Blue Room Investing Updates
II-b. Economic Updates
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Omar Guzman:
CPI
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Nick Peart:
Initial Jobless Claims,
Real Weekly Wages & Small Business
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Jared Fenley:
Macro
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