Ladies and gentlemen, welcome to the Business Bureau.
I'm your host, Bill Brewster. This episode features Peter
Mantis. Peter is the Co founder and Co
general partner at Logos LP. Peter stopped by in October of
2023. I believe.
We talked about a number of things, some of which have
worked out pretty well. The most notable is Clear Point.
The reason Clear Point has worked is one of their partner
programs is a company called the Uni Cure.
Well one of the partners is a company called the Uni Cure.
One of the programs that Uni Cure has was called the AMT 130,
AMT 130 release data. I guess now roughly 10 days ago,
maybe they, I don't know. Whatever, look at the chart.
When it goes straight up, that's when the data came out.
Anyway, They basically, for lack of a better term through my
lens, have figured out how to substantially slow the
progression of Huntington's disease, which is an absolutely
horrible disease. And if you catch it early
enough, one could argue that maybe we've cured Huntington's
if the data holds and. It's a really.
Exciting time for the Huntington's community.
Huntington's is one of the five horsemen that that Peter sort
of, he calls it one of the five horsemen.
It's one of the five big diseases that is just absolutely
terrible that we as a society should solve, right?
When you think about the way the world should be, these people
should not have to suffer through this disease.
And we're working on others. There was just some pretty
positive readouts, obviously very early, but from Regeneron
with with some genetic deafness and they appear to be able to do
something that I think they said that people can now hear like 1
and 2 syllables and some have actually like gotten a
reasonable level of hearing back.
Look that study up for yourself. I'm going off memory here.
But anyway, it's an exciting time to be live.
Clear Point was at 4 bucks or well, no, not 4475 or whatever.
When we when Peter and I first recorded the first podcast, it
recently hit 30. We're in a group chat together.
The group chat has gone to optimistic to say the least.
And they said, hey, we really want you to do a follow up.
And I really like them and I really like Peter.
So here's the follow up. As always, none of this is
financial advice. Everything in this program is
for entertainment purposes only. Do your own due diligence and
consult your financial advisor before making an investment
decision. Also as always, this episode is
sponsored by Fiscal AI. Fiscal AI is the complete modern
day terminal for global equities.
Braden and his team are awesome. I have enjoyed working with them
very much. I have enjoyed people pinging me
and being like, hey Brewster, that's dope that you recommended
fiscal AI 'cause now I use it and that's it's like actually a
value add in my life. I've enjoyed getting some emails
that are like, hey Bill, you earned a Commission for
recommending these people. Which is dope too.
Money coming in is always better than not.
So I appreciate that the people that I have asked to support
fiscal AI are doing so. I appreciate that they're happy
they're doing so. It reminds me a little when I
sold Cutco knives, they were like the best knives ever.
I still have them. I'd still sell them to you if
you need them. Hit me up.
I still can do that. But you know, it's like, it's
nice to be behind products that you're proud of telling people.
Hey, check it out. So going way back to.
When Braden was stratosphere. Alrighty folks.
We are joined again by Peter Mantis.
This this has been, we've wanted to do a follow up, but some of
some of this podcast is at the behest of the Clear Point Group.
Do you think that that's a fair statement?
Yeah, probably. They said we need a pod.
So I will say at the risk of we called the well we called that
is fake news, but you thought that it was probably not a
frothy time in biotech and likely the bottom.
Since then, returns have been OK Hopefully we're not marking the
top with this one. It's funny you say that.
I I went back and looked at our first pod, which is October
10th, 2023, and that was the low and clear point.
It's $4.70. Pretty wild.
Two years later. Touched. 30 I really hope this
is not the top. Yeah, well, it does make you
wonder, but it's the the group has gone from.
I would not, I would not say despair because people were
always sort of excited at the prospects.
But we've gone from when will the stock go down to can't trim
because we might miss the upside, which is always a fun
place to be. It's an interesting group of
investors where it's far the temperament and the the ability
to take a stomach punch is pretty high in that and other
versus other chats that I'm a part of.
So it's it's really wild to see, you know, and you know, this
stock, this this stock has had days where you are down every
single day for months and months and months and months and
months. And it's to have that dark
comedy and self defecating humor.
Still, it's really it's a really fun chat, so.
Yeah. But you know, what's nice about
it is it's a it's a bunch of people that actually own the the
business and you know, everybody has different approaches, but
there we've certainly gone from keeping each other company in
the dark days to celebrating a win a little bit.
Yeah, yeah, exactly. And it's the kind of equity
where for 360 days of the year, you're getting your nuts kicked
in, but there's five days where the whole return is there, so.
For people that don't know you want to, you want to give some
background on on what sort of if, if they were to pull up a
clear point chart, they would see it's it's gone pretty
parabolic. You want to set the stage as to
why. Yeah.
So for those who don't know what Clear Point does, it's a it's in
the sort of tool space of life science.
So they, they have a bunch of businesses, I guess they have a
neurosurgery business, which is for things like Parkinson's
disease, if you need a deep brain simulator implant or if
you have, let's say epilepsy, meaning you need a surgery or,
you know, some kind of other procedure that might need real
time MRI guided solution. There's their drug delivery
business, which is effectively a candy.
I think of it like a really large plastic straw or syringe
that goes to your head using drug trials.
They also have a, the clinical, you know, CRO kind of business
where you call them up and say, Hey, help me discover abrasion,
the amygdala. Is there any cell and gene
therapies there? Can you help me discover
something there? Can you help me discover
something in cell and gene therapy for epilepsy?
And, and recently they also launched a laser product for
their epilepsy business, the surgery.
So think of it as all all things necessary or focused in their
own, but it's very heavily tied to the bio processing factor
because it's their solutions. Their cannula solutions are
effectively a tax on drug on drugs drug delivery.
So. You know, it's the, it's the
reusable equipment that is able to that, that facilitates the
delivery of a gene therapy, right?
Yeah, it's. A razor, razor blade kind of
business. So you install the capital
equipment and then as procedures go up, because people are taking
more cell and gene therapies, you, you have these single use
cannulas which you have to reorder all the time to fulfill
demand and demand we first. Talked about this, it was kind
of AI, don't want to say a science project because the
company used to be MRI solutions.
They went public in the 90s, right?
Oh yeah, it was a while ago. Yeah, I think it was like 9798,
I could be wrong on that, but it, it had had a ton of R&D put
into it as an entity. But the the fundamental use case
was still sort of out there, right.
It was a bunch of trials and we were hoping that one of the
trials would go well and a a larger trial would go well and
sort of prove the business model.
Is that a fair assessment of when we recorded?
When we recorded they were, it was, I would say realer business
out of real is a wrong word, but it was, it was a more real
business than let's say 2017. Yeah, you know, they had 50-60,
maybe 50 partners at the time. The customers, there was a real
neurosurgery business between real revenue doing real
procedures in real hospitals and at major hospitals.
So it wasn't a zero revenue quote UN quote Chitco.
It was a real business. It just didn't have that
multiple that you would attribute to a bioprocessing
stock because the drugs were either in the middle of a
clinical trial and there hasn't been anything approved.
So since we've spoken, there's been wow, soon to be 3 drugs
approved. So it's starting to ramp up
pretty rapidly and on top of that procedures have ramped up
because they've expanded equipment sale.
So that's sort of like what has happened in the last two years
and has led to the stock re rating specifically uni cure
that's been the big catalyst because that's going to be huge
game changing procedure demand inducing events for the company.
You also have to add to the fact that this stock is incredibly
tightly held. It is very cult life, you know,
fanatical. And you will have to RIP shares
from people's cold, bare hands. And when you only have 28
million shares outstanding, it gets pretty violent if you want
to, if, you know, if a fund wants to buy shares.
Yeah. So that's another reason for the
the violence. So if you if you haven't seen
the headlines, Uniquer released the data on a phase three study
that showed essentially a the ability to substantially slow
Huntington's, the progression of Huntington's disease.
And they are, they are as of now not able to reverse the bad
impacts of Huntington's, but it appears as though there's a a
high probability that they can slow the development
substantially using Clearpoint's technology, right?
Yeah, that's a phase two, phase two study.
Yeah, this is exactly right. Like there's no cure.
Like as despite the name there, it's not a cure for the disease.
That's a maybe, maybe, maybe we get that one day, but that's in
the two hard pile for now. This is can we slow it down and
add extra years of quality living to patients who might
have it. And the second piece to this is
the symptoms of Huntington's are very similar to Parkinson's.
And so there might be people who might not be afraid to get
tested for Huntington's now that they know there is a some kind
of solution out there to slow it down.
Yeah, yeah, you get like a Tam expansion, right?
Because on one hand, you're a little bit worried about even
finding out if you have Huntington's, given the fact
that it's more or less a terrible way to die, right?
So now if people think that there's a way to slow the the
progression, you may encourage people to get tested because if
they get this therapy, hopefully the data that has been released
is accurate and reflective of reality and they should be able
to live a fairly normal life, hopefully.
Yeah, it's devastating in a mental capacity.
The group Hunting's patients have a 12 times higher rate of
suicide, so that's a big way of why people die is they kill
themselves. So it's absolutely devastating
and it is a large ish patient population.
It's got a vocal lobby group. A lot of money's been spent
trying to solve this problem. So it's a good day for that
population and for American science.
I would say even though it was created by Dutch company, it's a
it's a good day for science. I saw, I think I told you this,
somebody was commenting in the when the when the news came out,
she said, I hope that it doesn't have side effects like the COVID
jab to which I was like, do you have any clue what you're
talking about with Huntington's? I think we can deal with some
side effects here. Yeah, by the big side effects
related, you know, that's another piece to this is it's
just really safe. There haven't been that many at
all. Adverse events.
It's very localized, right? It's a very you're you're
bypassing a large part of the body to deliver this into a very
particular area of the brain. And that large part of the body
is the liver, right? Yeah, Yeah.
The liver, kidneys, pancreas, heart.
So you're not, you're not toxifying the body.
So it's very difficult to have side effects from the drug from
that perspective. The bigger question is, OK,
let's say 10 years down the line, how will these vectors
transform being in the brain, right?
Like is there some kind of degradation or a call
depreciation that happens when it's staying in the brain?
That's that we I just don't know the answer to that.
But from a side effect perspective, from the immediate
level, there isn't much. I mean, there might be some
inflammation due to the surgery, you know, but it's surgery is
minimally invasive. It's not like you crack an open
someone's skull. It's kind of like a glorified
syringe. So, you know, there might be
some pain from the surgery, but it's it's fairly safe.
Yeah, you got to drill some of the skull out, don't you?
You do, but it's very minimal. Like it's not open brain
surgery. What would I mean the ten years
down the road, Like what, what what could really derail uni
cure here and not I don't mean the stock, but I mean like what
could derail this study? I know before the results came
out, there was sort of some questions around whether or not
the science was going to be sound.
What are we looking at it? Let's just say from humanity
standpoint, we want to be hopeful.
What could go wrong here? I mean, maybe you find out seven
years from the first injection that there is some kind of
adverse event from the gene therapy that, you know, it's
creating some serious illnesses and maybe patient dies that they
wouldn't have from the Huntington's and that might
cause like a halt in production or, you know, hold on the drug.
Yeah, that's the thing with gene therapy is you don't really know
exactly what the what what the effects are long term you.
Feel like if you said to me you have a 35 year old child, seven
years, 10 years down the road you might have some adverse
effects from this. But it looks like 3 years out
it's going to be really the the results will substantially slow
the Huntington's progression. I would I would sign up.
Oh, yeah, yeah, yeah, yeah. Obviously.
Like that's, that's yeah. That's not a question.
So, all right, so we we've gotten some of of the positive
news with uniqure and then right around the same time Pfizer and
Trump come together and they have a a press conference and it
seems like the bioprocessing tool segments explodes higher.
Is that a fair commentary or am I being hyperbolic?
Yeah, I think some of that was that was part of the reason.
I think you also had a bit of short covering as well.
Like a lot of these moves lately, not even clairvoyant
just across the spectrum have been a bit squeezy, so to speak.
And I think people got a little greedy on the short side and
maybe complacent on the short side because it is a, you know,
even a five year bear market. It's probably the longest,
deepest, most painful biotech life science fair market.
I've I've definitely seen. But you know, I wasn't alive in
the 80s. I mean, I was alive in the 80s.
I was born in 87. But you know, it's, it's very,
very deep. This one, it's definitely the,
the most significant of the 2000s.
So, you know, there might there might have been some complacency
and some squeeziness to it. And if you have the other piece
to this that I think people forget is a lot of these
companies found religion, they cut costs a lot.
They didn't dilute that much. They kept their share flows
pretty stable, but the short interest still got up to 20
percent, 15% on depressed valuations.
And that's on that's besides the fact there's real science going
on. Like you went from science
projects in 2021 to things that are not science projects, like
here's not a science project. And here's just one of other
things that have happened as well.
But I think there was just been a lot of, in my opinion, there
seemed a lot of complacency in the space.
And if you have that long of a bear market with low ish share
floats. That are producing a real
catalyst, real science, real, you know, markets, real
revenues, you, you get the big moves up and then sustained
moves for a longer period of time.
Yeah. So one of the you write the sub
stack back of the napkin BIOS, right.
And if I look at some of the things that you've written up,
they they have done very nicely since you've written them up on
average. Why, why was why either was the
market, I mean you just articulated why the market may
have been that offsides. But when you see moves of 30 to
200% in, in most normal stocks, that kind of a move is like, OK,
the move is over, move on. Are are we coming out of a
period where these business evaluations were so depressed
that even moves like that are not indicative of this move is
over, but rather maybe the start of a move?
Yeah, exactly. So the, the, the key difference
in biotech versus any other sector is it's often more
lucrative to buy after stocks rally 300% because, or I might
say lucrative, I mean more, better risk adjusted because you
have de risked that equity a substantial amount.
And you have, you can project with more confidence the
revenues that are going to have like the better going to come
for that drug or therapy as word gets spread out, right.
So uni cure is an example. I think Martin Shkreli said this
is a 510X from here and I was at $35 a share.
So you're thinking $350.00 a share give or take, right?
You could see this at 15 billion market cap.
Or 100, right? But either way, higher than 50.
Higher than 50, right. So and the reason for that is
you had unbelievable data, like I did not have that data in my
models. And you also have very large ish
patient population at a very high price.
It's going to be a 3,000,000 plus dollar drug on the backs of
a fairly quick procedure a couple hours when you're out.
It's not like has GEVI where you're in the hospital for a few
days or a week. It's really intense.
This is kind of a good glorified injection, right?
And then, you know, you, you couple all that with no, it
wasn't didn't have that big of a share count.
So you put that all together. Oh, and by the way, this was
trading below cash like you could have bought Unicure a year
ago. Below cash.
Yes, shout out to Li Shrub. So it just did.
This is where the the violence really starts to to go because
the key with biotech is these moves get violent on the
combination of income state reflection and share float
constraint supply. And so often times it's better
to buy when they're post post the move.
There's sometimes where a biotech has a very high
probability of the therapy being approved.
It's phase 3, so it acts more like a compounder stock, so to
speak. There's some biotechs out there
that are more compoundary, I would say less binary.
And so those also got to depressed levels.
That was sort of why I started the blog was it was around May,
April, May. I just noticed just so many
biotech stocks getting absolutely hammered for no
reason. They were still at the same
levels of like 2324. I'm like, this is absolutely
ridiculous. There's so much free money being
given today at the market and like the the bear market, the
bear case for all these or for a lot of biotech in general was
like, well, sure they have. There's so many stocks trading
below cash, but they're burning through cash.
I'm like, yeah, but if you go through the science and the
progression and the timelines, these will rebate because the
the probabilities of success change rapidly and the time to
market change rapidly. And that's kind of your job as a
biotech investor. So what I was aiming to do with
blog was majority of what I was writing was more about low
downside. I'm not looking for that 1000%
gainer in a day kind of stock. I don't, although I almost wrote
about Spruce Bio with a month ago, but it was, it's really
just this is here. I don't see how you lose here
kind of equity writing. So that's how that was my
precipice for it. And I do sometimes write about
life science companies which are more compounder risk.
Think of like a Danaher like the revenues go up every year, like
Crip point revenues go up every year.
Twist is a bit of a compounder goes up every year, but the the
BIOS that I write about are more just low downside like doesn't
have to. I'll sometimes take a shot at
more early stage stuff, more risky stuff like Caribou
Biosciences, like very early stage crispy gene genetting kind
of stuff. But the majority are either late
stage, you've got fairly beaten down or they have real drugs on
the market today, they are generating real revenue or stuff
that just they're completely mispriced.
And it's effectively, I don't have some free money, but you're
picking $10 bills off the street kind of thing.
So in in a period where where it's, it's, it's it's it's go
time like it's about to hit. Yeah, and a time where there are
at least frothy parts of the markets I've noted.
I mean, industrials seem to be trading like they're in a
recession like biotech was, but maybe not quite as depressed.
But but you know, there's bubbly, certainly bubbly parts
of the market it appears. So kind of interesting that a
sector that historically has done fairly well in risk seeking
times is coming out of a depressed part of the cycle.
Yeah. And you know, I always said you
cannot have a bubble without biotech participating and you
definitely can have a bubble without IP OS coming back.
And you haven't had a biotech IPO and quarters like I think
last quarter there was 0 biotech idea 0.
So just wait until the science project start going public
again. You know, that's when you're
that's when it gets hot. You're not even there yet,
right? And the other thing too is the
tools, the large tools haven't boot.
They're still in super depressed mode, like the enter her
thermal, like Repligen's kind of waking up a little bit.
But those are usually late later to the party and they're still
in the value of death. So I think this is going to have
legs for a while. Much of how much of those valley
of death is sort of one big COVID bullwhip, right?
I mean, they, they sort of appear to have traded on a
pretty steep multiples on obviously a little bit inflated
earnings and then you get sort of the downswing.
I mean, how much of this is just like the multiple burning off?
How much of this is fundamentals?
I I realize those questions are somewhat related at this point,
but just curious for your take on that.
I think from a biotech and tools you had the COVID bullwhip.
So you had from a from tools perspective, a lot of inventory
laid up that just did not repeat.
Then you on top of that had high interest rate environment under
by under late Biden administration.
You can already still today, but it's still the path's going down
and that chokes funding. It's hard to exit on biotech BC
big, you know, B CS that whole biotech equity to unload the
market. The third thing was the pricing,
the drug pricing. It really kept a clamp on
discovery, possibly M&A. And the other piece was China.
You had in China, you can go discover a drug in like 6 months
and take it to clinical trials. It was just the speed was
faster. And so a lot of companies like
Merck, let's say, would do some kind of arbitrage or not Merck
specifically. But there's companies out there
that would try to discover drug out in China and bring it to the
US and then do a trial here. So it really drives down
discovery costs. And then on top of that, you had
just wait and see moments like the pharma gets it wrong a lot.
I think they I think they got it wrong this period.
And I think we should have been way more aggressive.
I think they got greedy. They had too much cash in the
balance sheet. They're trying to squeeze the
extra, you know, quarterly US interest payment in their T bill
in the T bill investments. But if they'd done the work,
like cure should not have been like in my opinion, here should
have been an obvious buy for pharma, right?
Like they should not have been allowed to have that kind of
return. And in in in look at I think it
was Novartis plot, PTC therapeutics clinic and disease,
which is a pill. Like why, why do you do that?
Like it doesn't work the science suite to begin with.
What here here at least has to your data.
It's decent, right? Even if it degrades a little
bit, it's still worth a shot. So I don't, I think a lot of big
pharma got it wrong too. I think they're going to relate
to the party. I think they're going to
overpay. I mean, it should.
History repeats in that framework.
The final thing is blockbusters like you have not a blockbuster
like now you have blockbuster with Unicare.
Like Unicare will be the largest gene therapy drug in the world,
arguably the largest gene therapy drug, but possibly the
largest biologic drug ever. So you needed those those things
that were missing. And I think that's why the, the
bear market got so deep. You had so much, so many
companies trading below cash. There's so many companies that
went bankrupt. You also had a cleansing moment.
A lot of companies did go bankrupt.
A lot of biotechs, a lot of service companies went bankrupt.
So it was just just a culmination combination of those
factors that led to really ridiculous valuation.
I've never seen anything like it.
So it was pretty violent on the way down.
And I think it'll be violence coming out and also last a
while. So that's sort of my view back
in 23 and early 24. So you've been, you've been
fairly emphatic about people should do a little bit of work
on Twist. What what about that sort of
setup has you interested? Like not only you're, you're
looking at so many opportunities right now.
Why does this one jump off the page at you?
It's a similar sort of how do I say this is similar rhymes, like
clear point in terms of, OK, we have a company here that got to
very cheap, multiple like 3.8 times next 12 months, enterprise
valued sales, companies found religion on cutting costs,
significant amount of pressure from large shareholders to
really reduce OpEx, like like got rid of 30% of the employee
base. They offloaded this part of the
business is this sort of science project DNA computing, I'll talk
more about that. But they kind of spawned that
off. There's still a minority stake
in it, but they effectively liquidated it.
Gross margins are about to deflect, similar to clear point.
Cost cutting is here, similar to clear point.
Cash burns about to go to 0, similar to clear point.
EBITDA positive next year, similar to clear point.
And you're getting it at a very cheap valuation with with with
low share float 60 million shares of which 25% is short, So
23 is. So if you Add all this up for a
company that's also might I add effectively a pureplay, there's
really nothing else in the public market like it.
Their competitor I think went under the only other comp.
So it's just and there's some tailwinds to it that I can talk
about later in a bit. But you add those together and
you're like, OK, this is going to this is going to rebate
pretty violently, right. You know the eight-year average
of the equity and I think this average is accurate because
you've had two extremes. You've got the highest high,
lowest low within that eight years up to 14 times enterprise
value to sales like a three 3.8 times is trading lower than it
did at the 2023 bottom. I mean, it's gone up a little
bit since I weeded about it, but effectively you're paying for a
very, very low valuation for this on a relative basis or an
income statement that's about to inflect and for some tailwinds
that are pretty easy that are going to come into market.
So why do you mind going through a little bit like first of all
what they do and then why this is timely from a business
standpoint, right? Like why is the income statement
about to inflect? So I'll just high level, I don't
want to get two side sequence. They do DNA synthesis.
So if you look at a tools company like let's say take a
COVID test or a liquid biopsy test or a cancer test, in order
for that, for that, most tests that are coming to market is
next genome sequencing and minimal, minimal residual tests.
For them to be accurate, they need something called reagents,
almost like a chemical reaction that happens in the test to see
whether or not you have COVID, whether I have cancer, whether I
you might have something like a genetic disease, OK.
Those reagents require DNA and that DNA is manufactured by
Twist Biosciences. Twist Biosets is a unique way of
doing it where it's effectively DNA on a chip.
It was invented by Co founder brilliant woman in 2013 where
think of like a NVIDIA style chip but has DNA on it.
And it they have a very proprietary method of
synthesizing DNA in the cheapest, fastest, low cost
method with scale. And so if you believe that
there's going to be a proliferation of these next
genome sequencing and MRD tests, which I do think there will be
for not only clinicians, not only to, to say, Hey, hey, you,
you have cancer or you have, you know, genetic disease or you
have whatever. But for research and
particularly AI drug discovery, because that's data they can
collect and discover drugs, then that's going to be a that's tail
one, number one, right. And that's kind of on the back
to Personalis where Personalis has a pretty important catalyst
coming up this quarter with the reimbursement of the number of
tests, if those if that gets reimbursed by Medicare and that
creates a significant incentive for larger players to really
proliferate these tests for partitions and drug discovery,
etcetera. It's also good for the US and,
and the, you know, the healthcare system, the thing, if
you did get more data and you detected earlier, you can solve
problems faster, quicker, discover drugs faster, quicker,
you know, at least for a healthy population.
So it is a worthwhile investment for the US to do that.
So that's, that's piece #1 like that's one tail one that's
coming. That's, that's like that's
hitting now. But then there's a second piece,
which is, well, it's on the backs of that.
That's what I would say 3040% of the business.
There's also drug discovery, which you need DNA to do that.
But because of AI, and I think people are missing this piece,
which is AI is not going to simulate a clinical trial.
I mean, it might, but it's you still have to test on humans.
You just never know what could happen in biology.
I think it'd be very hard for it to discover a drug.
Again, I think you need a lot of experimenting there.
But what it could do is assist scientists to synthesize certain
chemical reactions that will be very useful.
And so one of those is called a antibody binder.
So there is now a proliferation as we speak today of AI
generated antibody binder generation, which if you want to
discover any kind of drug or anything for finger in biology,
particularly in in, in in drugs, though, you might want to see
where this antibody, which is like a protein attaches to some
other antibody or something else.
And for us to discover that manually takes a very, very,
very long time. But AI now can sort of predict
this antibody you might find with this or that.
And if you see that you're going to pick up the phone, say, hey,
AI, that we this model that we created just discovered this.
Maybe we should try it out this experiment, right?
And you're going to pick up the phone, you're going to call
twist like I need these, I need clone genes right now.
So they'll send you now if you order those express clonal
genes, because these AIS discovered it, they marked those
up to 100% at 100% gross margin. Like it, There's no added
capacity to it, there's just price.
And so similar to Clear Point where they had, they went
wherever Clear Point had this laser where they were charging
$6000 per procedure and now they created their own at $18,000, a
procedure that's 200% markup. Twist is going through the same
thing right now that hasn't appeared on the income statement
just yet. And so this is where the gross
margins, if you look at gross margin in the last couple years,
it went from 39% to 53, that's about to go to 70.
Why are they able to charge so much more?
Is it? Is it a demand issue?
Like is it a supply demand issue or is it that they have
proprietary technology that people are now willing to pay
for? I mean.
Those could be related suggests. Speed because if you were to
order regular regularly, it would take you quite a while to
get those genes. But you say I need it in three
days on top of the fact that it's using a prop tech, it's
using it's a high quality DNA reagents, etcetera, synthesis
and the speed. They can charge a little extra.
It's like you pay extra for express shipping, but this time
it's for synthetic DNA. And then the final thing that I
also think those are the two big tail ones that I think are
coming. And again, a personnel
reimbursement will re rate the stock.
I think that the more fair evaluation.
But then there's also just the cure news I think is being
underestimated. I think you can have an arms
race for these big rare diseases and they're going to go into a
late stage and they're going to try to one up each other all of
pharma or biotech and do that. You need DNA.
It's it's similar to the AI story, like if you need GPU's to
create strong LLM's over time. And I think Twist is kind of
like the NVIDIA or maybe I don't know what the great comparison
of a theme is, but maybe the ASML or TSMC of this whole
massive genomic revolution. The difference is that maybe not
the difference, but maybe the similarity is that their income
statement is about to reflect you're not paying anything for
it. So that's sort of like the high
level thesis of the of what's going on.
It's not to mention to you, you have a company that is a real
business, they're going to do 500 million in revenue, right?
In my opinion, you traded a more fair multiple.
You got 60 million shares. I was saying that's double clear
points, 23 percent is short. So you have double the shares of
clear .10 times the revenue at like 115th evaluation and just
similar kind of story where the income statement is about to
reflect. The reason why clear point
rocketed is because the income statement is about to reflect in
a violent way, right? You don't need a lot of CapEx
and you have your, your pricing power just went up.
You went from a clinical trial to Huntington's to commercial
and Huntington's. So candlelights are much more,
your services are much more, your software is much more
right. You have price taking in that
ecosystem. So I think Twist not only will
see price go up, but also volumes based on those two
previously mentioned tailwinds. Now who?
Who else can satisfy an order like Twist can?
And if there is anyone? I mean, that's that's the other
beauty, which is they're coming to tried.
I think Zyme was one of them. They went bust.
Ginkgo Bioworks try to, but they're a customer of twist,
just a couple private companies that can also do synthetic DNA,
but they're more expensive, arguably less quality, less
scale. You know, there's some parts of
thermal being heard that kind of are in there, But again, no
one's buying from them. They don't have the tech.
They don't have the same investments made.
So it's kind of a clear play. And that's my fear is the
takeout. They might be a takeout by Dan
or her or Thermo. That's sort of the what I kind
of, I mean, I hope I'd, I'd be shocked they would sell here at
this low evaluation. But that is that is the the
fear. But that's the beauty of it.
I think until you prove out these tailwinds just I, you
know, I don't think you'll see any big MNA happen until then.
So. If I wanted to like recreate
twist, like if if we were to look at this from a Tobin's
queue or whatever, what like what do you think it would cost?
How, how long would it take to replicate this business and how
long and how much do you think it would cost?
I I'm just trying to figure out like that was it gets, it gets
easier for me to think about when, when we start talking
about that way. One of the things that make your
point so easy is it's like, well, this thing took 20 years
or 17 years to get here, plus however much was invested, like
it's either worth replacing or not.
But at some of these valuations, you're just kind of betting that
the business is worth replacing. And by the way, to your point,
you end up with, you know, potential re rating when people
realize what it is. Yeah.
I mean, look there, it's a again, this is a real business,
500 million revenue business, right?
DNA synthesis not only applies to drug discovery, but applies
to industrial applications, it applies to agriculture,
everything, right. So you'd have to somehow figure
out a way to circumvent their key patents, which are pretty
strong, right. How do you create DNA on an in
silico chip that performs better, is cheaper than anything
else in the market? So good luck with that.
That's .1. The second is you'd have to
create some kind of factory, I think they call it factory of
the future to meet demand and scale.
Again, good luck with that. You'd also have to, and they
have something called a library of libraries that Twist has.
So when they, when they sort of sell reagents and to to, you
know, IGS and MRDMRD, they collect a lot of data on where
the DNA goes and how the DNA react and how the trip to
perform, etcetera. And they created like a massive
database. And if you want to use any of
that database to discover a drug, you have to pay them
almost kind of like a milestone. Think of it.
So you have to somehow recreate all that data again.
Good luck with that. And then the final piece is
these guys are in 70 to 80%, I think of like liquid biopsy
tests or they are they Grail Lumina, the Terra.
And so if you have a NGS or MRD or any, any tests like that
where you need to get an FDA application approved, like
you're going to need to get a 510K, you're not going to you're
not going to risk it with some upstart.
You're going to want the one that is hasn't had a problem
with the FDA before. Now I'm not saying you need
Twist specifically their DNA synthesis to get your device
approved, but why would you risk it?
That's what I don't understand. So you probably need a good, you
need a lot of money. I don't know what the number
would be, but it would be many billions and 20 years, maybe 15
years. I hope you're enjoying this
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Enjoy the rest of the program. So maybe like, what's how could
you replicate TCMC in the USI mean, Intel's trying to do that,
I guess. Like how much money would you
need to create another foundry in America?
A lot, maybe, maybe some government backing.
And then you have to convince all of their customers to
switch, right? But this time, like, you know,
the customers aren't people dying or people sick or people
having an accurate read of their disease.
It's computing power, right? So that's sort of the how I
would frame it for those without getting too deep in the weed of
science is how how easy would it, how much money would you
need to start up somewhere like kind of like a foundry?
And even if you did do that, to get to their scientific
expertise and their technology, again takes a really long time
to do that. And then if you do, you also
have to convince their customers to switch and you've got to
produce it at a cheaper price. Cheaper and faster.
Yeah. Oh, so and you, as you know in
healthcare, I mean, good luck switching, right?
Like, good luck. So yeah, that's that's probably
the way I think about it. How did they figure this
technology out that you said they they like basically print
DNA on chips? Like what?
How? How did this?
Do you have any idea how this thing even started it?
Was Jennifer? I don't remember her last name,
but she was. She's discovered in San
Francisco, Berkeley, I think it was there's a novel way to
synthesize DNA and, you know, create DNA for the most advanced
applications. And so, you know, again, it's
not just, it's not just drugs, it's think of bio security,
think of think of agriculture, think of energy like you can,
you can now synthesize these. And again, it's the, the
technology's so advanced, you have to pull up your deck to
show you the comparison of exactly like how advanced it is
and how cheap it is. But it's so advanced and cheap
and scalable. What's the other thing like they
have a factory of the future, they call it FOTF that has at
700 million of revenue capacity that is now not being utilized
because again, you were in a biotech fair market, right?
So there isn't a lot of capacity either of these, these
factories. So you'd have to somehow invest
in that too. It's not just your technology
and trust, but like the trust part of that trust in the
ecosystem is can you, can you deliver what you promised to you
with deliver? And I think that's a difficult
piece too. How did you come up with it?
I, I don't know, like this is that's above my pay grade.
It's a novel idea. It was exciting technology when
it came out, right? This was a one of one kind of
asset. That's why this thing rebated to
85 times sale or 55 times sale in 2021, right?
It was these D reagent of DNA synthesis in a low and straight
environment. Plus you had a bunch of COVID
tests going around. So I mean, this thing got up to
just insane evaluation. So yeah, no, this is one of
those companies where if you thought NVIDIA or ASML was, if
you didn't know anything about AI, and he said I want to play
AI through a stock exposure. He said, God, maybe I want
NVIDIA, maybe about ASML. They buy TSMC, right?
I don't know much about semi's. I'm not an electrical engineer.
I don't know anything about like advanced computing, but I just
know these guys are really valuable in the ecosystem.
That's the same thing with twits here.
It's more like an ETF for that that space, that sector and you
got yourself, how difficult would it be to compete against
the video? How difficult would it be for
Intel or AMD or Micron or and these guys have against the
video. Apparently it's pretty
difficult. So not only do you have so take
that analogy, take away any other public comp and then put
it to healthcare where people die.
That's Twist. So the the interesting piece of
this business is you have this inflection coming effectively a
pureplay that has 23% of shares flow short.
Yes. So what do?
What do I mean? What do the shorts say?
Right? Like when you see short interest
like that, short sellers on average are not dumb.
There's plenty of studies that show like heavily shorted stocks
aren't really where you want to play.
So is it? Are people pressing decremental
numbers or like like what's going on on the short side?
Scorpion. Scorpion had a good a report on
the business like a couple years ago, maybe a year ago on on
everything. But it was, in my opinion, was
more macro than than anything real.
And so the other piece to this is this is, I think, an arc G
Kathy Wood oldest. So I think she'd be selling in
the 20s. But it's it's a combination of
those two factors. My opinion that had the shorts
get a little greedy here and look, they were right for a
while. Like this was in the doldrums in
terms of their expense budgets. And they had, they had this DNA
computing business where literally you could put store
information on DNA, the computing information on DNA,
like really sci-fi stuff that wasn't making any money.
It was effectively a science project and it was sucking up so
much cash. But all those pieces are now in
the rearview mirror. And so I, I don't think there's
any downside either. The other thing I would also say
is in 2021, you had initiations from a number of big banks like
Barclays and Baird, William Blair, blah, blah.
And if you read those reports, they had projections like what
they think revenue was going to go in 223456.
And if you look at how what the projections were in 21 at a
froth evaluation versus what they actually performed, they
surpassed them all. So like Barclays for example had
like 180 million, I think it was 178 in revenue in 2223 and they
had like 220 like they beat every single year of those
projections. But the stock just kept getting
rebated down and down and down and down and down.
And so if you have a money losing biotech funding, tied
discovery, tied equity that as yet the founder religion is part
of a large ETF that you know, is it's controversial.
Yeah, I do. Negative momentum gets smaller
and smaller. Right.
Yeah, that's you're on the wrong side of a good amount of
factors. Right, right.
A lot, a lot of the spaces these companies, the other thing that
benefited these guys is the elimination of the competition.
It's capital being sucked out if capacity going out of of this
sector, no new insurance coming in, right.
So when there is going to be a requirement for exposure, this
is probably the only way that you really can play this.
Yeah. Well to your point, I mean what
it in the deck they say that they are currently using less
than 50% of their existing capacity.
If you're if you're best of breed and that's what you're
doing or even sort of close to best of breed, you would imagine
that some of your competition is utilizing even less unless you
just like way overbuilt, which is also possible.
I know that you alluded to they they did overbuild a little bit,
but tough time to. So you might compete with them
right now. You might get a situation where
I don't think long term you'll get this, but you might get a
short term capacity constraint market.
And if that's the case, then pricing isn't 200%.
It's going to be way more. I, I don't, I, I can see it
happen if you get a real proliferation of AI on this
antibody generation thing. But yeah, like 700 million
capacity, it's a lot, but it's not that much.
So that's another thing to keep an eye on is how much capacity
is out there. And there isn't a lot.
Well, because there the man wasn't there at the time, so.
And then what's, what's the deal with Personalis?
So these guys help you. They can test for cancer much
more. That was a bit more than any
other test out there. Yeah, that one's a bit more
risky. It's Catalyst driven.
It's, you know, text diagnostic. So they, they're Tempest AI,
which is, yeah, Antiglosa Special owns 19.99999% of the
company. Merck, I think put in 50 or 80
million bucks into it too. And so it's a way for clinicians
and even drug companies to discover drugs.
If I take Bill's blood and I want to say, hey, you know, this
is the the probability that you have this kind of genetic
disease or cancer or whatever. That data is useful for me to
discover personalized medicine, some drugs just for Bill and
people like Bill or Bill's family, but also doctors as
well. But the catalyst or personalis
it's up for Medicare approval any day now.
And I know we go through this for the Uni cure website change,
but they recently hired up on a posting a job posting of a
billing specialist October 3rd. So I'm assuming that it's coming
soon Ish, right. And again, Personalis another
gap who would special with high short interest, I think higher
short interest than twist. So yeah, that one will also
rebate violently and that will rebate as violent as clear
point. We rated, I would say because
they again, the income statement is about to reflect and that
that, but both twist and Personalis move like twist will
move a little less violent than personalized, but we'll move in
the same factor or same direction, same pattern.
Because if you have that proliferation of those tests
and, and wow, AI is maybe being used for drug discovery, there's
a lot of skeptics out there right now and that will benefit
the DNA synthesis market substantially.
It's wild that personalists traded as low as $1.35 a share.
Now it's 855 and it what? In COVID times it almost touched
50. That's not.
Yeah, Twist was it like 10 bucks, 11 bucks and 20 similar
around similar time and it's about as cheap as it was then.
So yeah, they kind of move the same similar factors because
they are part of the same exposure in their business.
You know, it's funny, like you look at something like Sound
Hound, which I don't know enough about, but I think I might know
enough about. And you look at the valuation
that something like that is trading at because it's got AI
exposure. And then you look at the
valuation that these are trading at.
And it's as if the AI story has not even found its way to life
sciences, healthcare, like whatever.
Broadly, however you want to define these companies, it's
interesting that you there's at least a credible argument to be
made that you've got an AI option for free somewhere in the
market that is so frothy, Everything AI.
Yeah. I mean, the benefit of some of
these life science companies and even the biotech community and
life science community is the group of investors in the
sciences are very smart. It's probably the smartest group
of investors that I've encountered across any sector in
the financial markets because you need to have obviously
scientific background, but you also, they're also very smart
equity investors and a lot of them are skeptical on AI and it
they're, it's value to drug discovery for a number of
reasons, right? The the most simple reason is
it's biology. Anything can happen, right?
The machine is going to make if you think the machine makes
mistakes making your resume with AI like imagine with a human
being like a biology with a real real world molecules and so that
AI wind has not captured the aura or the scent of the of that
group that this group is very much focused on.
OK. Is the income statement going to
inflect? And that's really what biotech
investing is. If the drug, if a company has a
drug with good data, then income is going to reflect at a higher
probability at a faster rate than what we thought it was.
And that's why it needs to be re rated immediately.
So this AI stuff hasn't really caught wind of this group yet
and generalists haven't caught wind of this yet.
And I think also having such a long and deep and painful bear
market has scared a lot of people, right?
They never, ever want to experience that ever again.
And there might be some investors who like maybe caught
Twist or Personalis earlier on and you know, they just started
making money or maybe just got back to break even and maybe
they're still underwater. It's such a painful sector.
So it takes a while for this group to get frothy because it's
so it's got such smart eyes on it, right?
And such catalyst driven and it's it's a very good area for
long short, which again, like the level of investor is a bit
smarter, right? So it's a little less retail
exposed. I'm starting to see a little
more retail come into the Med tech life side stuff, starting
to see valuations go up. Now they're starting to see Irrs
go down. But at the same time,
fundamentals are also kind of moving in that's direction as
well. Like there's not hot air as much
as any other sectors like I sound out, let's say.
So that those are the biggest differences with the life
science sector. And and like biotech, you're
going to have smart people question capacity, question
inventory, question data. And that is usually the press
this for bubble deflation. Now, if you start seeing science
projects like literally Bill and Peter Ventures Inc, Bioscience
Inc, come on the public market with nothing but water in a can,
OK, then it's getting really frothy.
But we're nowhere near those phones.
Yeah, just yet. So yeah, it's just a different
sector that just hasn't caught wind of that momentum trade.
I mean, it's slowly starting. That usually takes a while.
It's interesting. I I have heard the same out of a
couple, you know, I don't know, you and you and Elliot Turner
are the two that I talked about about this stuff and your your
theses rhyme and it's interesting.
It's OK. It's a smart guy like he.
He knows the space very well. So and he's, he's been around,
he's been around the sector and and he talks a lot of these
companies, small companies too. And there's a reason, there's a
reason why it kind of rhymes. We're, we're just messengers
here telling you, hey, this is where the opportunity knocks and
this is where this is where you can get this.
You look at sectors across the across the markets, where else
can we get very good businesses like 70 plus percent gross
margin with pricing that have been beaten down to tremendous
levels and actually rise on fundamentals, right Or even you
know they they actually move on good data or catalyst or things
that are stock should move on. So if, if you're looking for
the, for, for an area to invest in, I mean, I think people
should look at life science and I mean, biotech is tough.
It's a very tough sector and life science is a very tough
sector. But no, I'm not I, I, I'm scared
to get into software. I don't know anything about
software. I don't know why anyone.
I don't know if AI is going to switch out work day, probably
not, but I don't, I don't know anything about that.
So, you know, it's there's a, why are you get the return on
brain damage and whether or not a is going to take over Adobe
when you have beautiful businesses here with regulatory
capture and pricing power and are, you know, are not bits on
the screen, they're molecules and atoms, real, real stuff.
So I've I've been pounding the the table on the sector for for
some time. Probably my favorite sector
market right now. What inning are we in?
People love innings. I mean, I would say second,
third, second, third in maybe second.
You haven't had the, you haven't had the IPO, you haven't had no
funding come back, you've had no IP OS come back, you've had
nothing. So you've had one blockbuster
readout, which is pure and a couple other like decent data of
drugs. Like what, what froth are we
talking about here? Like do we have valuations at
levels that are that might create a little bit of a
drawdown? Yeah, yes, yeah, their IRRS have
changed for sure. But there's also companies that
have that are still trading very cheap, right?
There's still catalysts to be had.
So I think it's pretty pretty early here still and that and
the function for that is because science takes so long takes such
a long time to discover a drug right like it.
Besides it took a decade plus over 1520 years a blue rock.
OK. That's another partner of their
point that is going to probably go up for approval in 20/28/27
and that started in 2012. So talk about 15-16 years and to
get for that, to get a commercial that would take maybe
18 years. So it takes a very long time for
these things to actually come to market.
So that there's another reason for that is just the time, and
hence why it'd be a little earlier.
No, you went mute there at the at the end.
I don't know if your your mic may have caught it, but you went
out for me. Can you hear me now?
Yeah. Yeah, OK.
Now you have Verizon again, Interesting, man.
I don't know, It's it's wild. I mean, I know nothing about,
you know, these, these companies for real.
But I do pay attention when you talk, and I like What do you
think something like Personalis would trade for in the private
markets? Oh, like a couple billion.
Right. Yeah.
Like some of these things I have famous last words, but I look at
the valuations that they trade at and I'm just like, man, if
this is private, it would be quite a bit higher.
Now. I asked myself, OK, well, why
doesn't somebody buy it out? That I don't have a great answer
for, but maybe the answer is the shareholders aren't willing to
sell. I don't know.
What would you say to that? Like why aren't these just
getting taken over at these valuations?
Like, I always get asked this question, right?
It's like, oh, you know, clear point at 7 bucks or 5 bucks.
Oh, it's take out candidate, 06 bucks, take out candidate, 7
bucks take out candidate, 9 bucks take out candidate.
Everything's a take out candidate, right?
You'd be like this this this fallacy, this mindset has to
leave people, OK, and for a number of reasons.
One, nobody is going to stick their neck on the line to buy
any of these optical shit codes at low valuations at a Corp dev
of a Fortune 500 or S&P 500 company 00 appetite, OK?
Like let's put that out there right now, OK?
Medtronic could have bought Intuit of Surgical in 2002 at a
$50 million valuation and they didn't.
They miss it all the time and they're not going to go put the
neck of the line, right? That's number one.
Number 2 is a lot of these stories get complicated, right?
Twist has got a bunch of businesses in there.
You know, Clear Point isn't a neurosurgery business, is a drug
delivery business. I don't know what this thing is,
so I'm not going to touch it. Point .3.
But point 2.3, they're not profitable, right?
You and I see them as they will be profitable.
You and I might say the income statement will reflect, but no
one's touching it before then. If they were to consider it and
if they wanted to consider it at a time when they are profitable,
they're not selling until a pig is fat.
They're not going to sell until they fill a gap today, right.
And so for, for, for, let's say, you know, like a, like A twist
or a clear point or whoever personalized, unless you have
needy revenues of like a couple billion dollars and you're
shielding a gap for thermal, they're not going to bother with
you. Like they got their own
problems. They got big businesses, big
bureaucracies in there where they have to solve their own
problems. They don't have the appetite to
digest an M&A. And the other piece is, you
know, these guys are generating cash and especially big pharma,
let's say, and this is where I think we got greedy.
They're parked with trillions of cash into 5% or not maybe 4 1/2%
yielding T-bills risk free. Squeeze the juice a little more
until it goes a little until it goes dry.
And by then maybe we'll look at it because we can always buy
Personalis at 3-4, five, $6 billion.
But this is where the opportunity is for smaller
investors or funds. Is this inflecting re rate of
these companies during a period of time in the capital cycle
where you can make, you know, 20-30 forty extra money and then
they'll that might sell, but not before.
But this policy has to go. You have pure place out there
like a Max site or Mirvaq pure place, meaning bolt on today
that are not going to be bought out.
You have Med tech companies not getting bought out.
You have biotechs out there that are barely getting bought out.
So, you know, this is not, you know, the Valley investor always
thinks, well, this how could the market offer something so cheap
in this sector and it's offered in any sector it's take up
candidate. That's not how it works here.
These things don't get bought out cheap, they get bought out
of expenses. So yeah, that's sort of my my
view on that on that whole piece, like clear point is too
messy. It'll go to 10 billion before it
gets bought out and then maybe someone will take a look at it.
So yeah, maybe it feels a cap here and it'll overpay.
So that's my view on buyouts and emanate in all space.
I think that makes sense. The only, the only part that
doesn't square to me is why if I ran like a private equity or a
late stage VC, why I wouldn't consider maybe taking these out.
But certainly from the from the bigger players to your point,
like I think the risk to career is probably lower if you overpay
for an established technology as opposed to buying unproven
things and then not having them work out.
It it's it seems to me you're putting your career more at risk
by buying a science product project because that's not
really why people own that stock, right?
People own the big stocks because they don't want the
science projects. Yeah.
And your point like you end up you got M&A, it takes a bunch of
takes a bunch of your time and it's not even going to move the
income statement in the next three years.
So like, what are you doing? Yeah, right.
And the other thing is a lot of these companies at a smaller
level, there's a lot of control insider and I would say very
high end retail funds and they would just vote no anyway.
But to your point on the private equity VC side, VCs are so they
have such a food coma, I call it, oh, their portfolio, they're
just waiting to unload bags. There is no appetite to buy
cheap stuff right now. Zero, because they got their own
investment that they've made that they want to get rid of.
And that's, that's that's a set with part of the bubble forming
that you need. That hasn't happened yet.
You need VCs to exit to then recycle their cash.
That's not happening right now. They're not exiting.
And the only way that they can really exit is again, you need
lower interest rates or blockbuster drugs approved to
say, hey, there's a winner here, we have a win.
Now we can start unloading, unloading, unloading.
And you send them to change. That's slowly starting, but you
still you haven't seen it. So that's the other piece in
terms of private equity, man, this is not this isn't private
equity Forte. It is, you know, think of it
like a railway. You're built a railway.
It's it's not there's no cash to take out of it's inflection of
an income statement, right? It's it's you need to build out
the business or you need to wait for a catalyst to hit.
And like, what does some guy KKR know anything about this shit?
Sorry for my language, but like they don't And so like they're
going to look at it from a. Financial perspective, I would
think some healthcare private equity fund would know
something. It would, but but my point is
that it's business building and cash needing versus cash
extracting. And you know sometimes you're
going to have to do a race that's smart.
You're going to have to build out the business and maybe
switch facilities or spend a bunch of CapEx and that appetite
in a higher interest rate environment wasn't there for
private equity. Now, you might get some
companies get bought that are distressed.
That's different. You might get private equity,
get into the distress mode, you know, maybe a device company
that's trading for less than a dollar share on the NASDAQ and
it's tired of being public and they've cut as much as they
could and they're still not inflecting.
And there needs to be some pressure there that private
equity might get into something like that.
But the business builders, like Clearpoint's a business builder,
you know, they had to invest in a facility.
They had to switch, expand their manufacturing and invest in
salespeople. Then you know, they they build
the rails to then get the cures. And yeah, these other companies
approve. I think those are very difficult
for private equity to get involved.
But private equity is never going to get involved in someone
Personalis before it catalyst. Now Personalis gets a
reimbursement and then maybe you have a cycle turn again and they
have real revenues. They're profitable and it's it's
a really cheap valuation. It's the stress maybe maybe
probably gets involved, but it's just not an area that they
usually gravitate towards on tool side especially so.
I would be remiss if I didn't bring up Max site and Maravai,
even if they are a bit like Voldemort.
What it you know, if people go back and listen to our first
conversation, they're they're going to hear those names thrown
in with clear point one. I I would suggest that this is a
bit of a slugging percentage game.
So even if you equal weighted the three, the baskets still
doing OK. But what what happened there
that that might have people scratching their heads?
I so for Mac site is if they spend too much money, so they
spend a lot on expanding their facility and expanding their
services and doing M&A. And even though they have this
very lucrative royalty for their first drug ever that was
approved on the Max site equipment and solution, they
need to cut CapEx and OpEx because the way they're growing
coming out of this drop cycle isn't enough to give any
business value given the considering the burn.
And so Maxon has a cost, the cost problem.
So if they get their costs in order, yeah, this thing will
reread violently as well, right? Because again, income statement
inflection, I suspect they've heard that and they will find
religion soon, but they just haven't found the religion yet.
Mervite. And the other thing piece of
Maxite is it's a very specific modality within this bio bio
life science ecosystem. It is, you know, electroporation
solutions for ex vivo cell and gene therapy.
Like it is the front. That's like an esoteric area,
right? And a lot of their a lot of
their customers are early stage. Now, I might be early on that,
but I don't think I'm going to be wrong on it.
Like I think that's going to inflect violently as well
because if they don't cut their costs, someone else will.
So I, I think that's more of a take out candidate than than a
lot of other companies because it is a pureplay and there's,
there's a valuable business there.
In theory there should be Mara by similar, similar story,
right, But they're very specific to mRNA solutions.
So again, esoteric OpEx overhang capacity, underutilized
management that has some significant missteps.
You had private equity overhang just annihilates the equity.
Again, it's been a little bit of a run and I think it will end up
creating value. It just takes time like those
two need more time, clear point. On the other hand, it's a bit
more diversified. You had drugs that were later
stage on the clinical trial spectrum, like they were just
about to be approved or have been approved.
You have the diversification of a neurosurgery business.
If you have brain cancer today, you're going to go get surgery
for it. You're not going to stop, right?
And so you had a staple like diversifier that's that
backstopped a lot of any other issues that could have gone on
with just being a clinical service business.
And by the way, all those clinical services you're
providing were from much later stage companies, companies that
are about to get approved like unique Cure, right?
So those are the two major differences between the two,
between the three companies. I think Maravite can get
incredibly torque like I think it can absolutely RIP, can be
multiples of what it is today. I think it's up the other day,
isn't it? Maybe not.
I mean, I think I think it's right to Rock'n'roll, same with
Maxite, but they're again, they're usually the later ones
to move because of those factors I mentioned on finding religion
plus esoteric space plus earlier stage sectors.
That makes sense. Yeah, it's it's up a bunch in
the past six months, but still down 56% year to date.
They got it, but it ran right or I guess down 40% year to date,
down 56 on a one year. That's interesting, man.
These are interesting times. It's all duration.
It's you know, you might be people say, well, there's stuff
you might be early, but it's the same as being wrong.
Well, I was really unclear point.
I don't think I was wrong there. So I thought, what's your
duration right? Like if you have a better
duration this they will, they're ready to go, right?
And and their solutions are valuable.
So I think they're, they're the 2 ones that I bet or have bet,
but I think they're the highest exposure to M&A are those two.
Well, there you have it Did So what else?
What? What have I missed as an
interviewer? What have what have I done wrong
here? Or have we covered things?
I mean, look, we, we did a good postmortem on our preview on our
first episode and talked about the names that we talked about
there. I, I, like I said, like I, I
still think it's pretty early despite the violence that we've
seen. Can we take a breather?
Yeah. But, and could we retest some of
the lows that some of these companies have seen?
Unlikely for Clearpoint. I think they've changed the
game, but maybe you might get a draw down with if the market
sells just generally across the life science sector.
But I think people are going to be shocked with the the science
that's coming out. A cure is one thing, but I think
you'll get more more blockbuster level game changing drugs this
biotech bowl than previous. And I think it's going to last
longer than people realize. So that's one of those of my
closing thoughts on the macro. You know, I, I would say that
it's a, it's a tough space to be in.
Be very careful like any obviously like any sector, but
it's not a bad time to start looking at the space if you
haven't as a generalist like my my closing thoughts.
Yeah. Well, this is also a sector that
could make sense to hire out because as I understand that the
XBI is a pretty poorly constructed index by by sort of
definition and the the opportunities are likely there.
There's almost certainly opportunities here.
Yes, that's right. And I don't think the XBI has
equal crossed its highs like all time highs like it's still I
think the all time highs is what 170 bucks, 200 bucks, 175 bucks.
So you still got ways to go, but I wouldn't be surprised if we
took a breather here. I think we need a breather.
I think everybody needs a breather.
Yeah, well, yeah, the whole market could use a breather
band. Yeah, yeah, yeah.
I'll tell you it was wild on Clear Point.
I sold. Now it's April and it's not the
whole the whole position, but for a portion of my position, I
sold the April 30 fives for 4:50 a call.
And I mean, when we talked about it, it traded for 5:50.
That's kind of wild to think about.
Yeah, yeah. 80% of your basis back on sell on a call for six
months and worst case scenario happens you get taken out of
3939 fifty. Like that's not the end of the
world. Yeah, it's kind of wild.
Yeah. It's not tax efficient, right?
You got to pay ordinary on that. But there there are bigger
problems. There are bigger problems, you
know, I feel like we're entering a phase of first world problems.
Yeah. Well, yeah, hopeful.
Hopefully you're correct. Some of my concern about where
America's going is third world problems, but perhaps I have.
I see the situation incorrectly and I am hopeful that I do.
Yeah, look, I, I'm a little worried about gold and like
these, you know, a guy, a really smart trader who's been doing
this for 35 years once told me once you start seeing gold and
silver, start puking upwards, like get out.
Right, Right. That's what I'm seeing now.
Yeah, but I don't know what you go to unless you go to gold and
silver. And gold looks so extended that
it's like tough to get in here, even if it's the right move.
No, I think you got to get out. He's like, if you see them
puking, get out, get out of the market, get out of gold, get out
silver, get out everything. But when I look at some other
areas that have been absolutely crushed, you know, I'm slowly
looking at the energy markets or like energy services companies,
but again, those don't perform as well on a recession.
Biotic performs well on a recession or some, you know,
Black Swan event because they're so idiosyncratic.
So I just, I don't, I don't know where you go either.
Safety has been selling off. Like if you look at companies
like United Health and Constellation Software and
Dollar General in the staples, yadda, yadda.
Like they all have been selling like crazy, right?
That's usually a sign of OK, like safety's getting cheaper
and risk on its year. And at the same time we have
gold and silver mooning. Something doesn't feel right
here, right? It feels like you're, there's
something that's going to happen.
I again, I don't play those games.
I don't know for sure. That's why I think it's always
important to be in things that you're comfortable in or you
think the downside is low. And we're like, you know, you
might not be dead money for a real long time.
And that's why valuation valuation matters.
That's why I like twist. There's an example where for me,
I think the worst is like flat to up, like versus, you know, if
you're parked in something that's 50 times sales, it's you
got a high downside. Yeah, well, if you do flat to up
for your entire life that that works out that that's kind of
the game, right. Right, but it needs patience
too. So yeah, no doubt.
And you can't. I mean, if every if anybody knew
the path then, then, then you'd be retired on the beach.
That's right. That's right.
Well. We'll see.
I look forward to doing another follow up.
May may it be another two years of you know, may the next to be
like the last two. Hey, who knows, maybe it's not
biotech, maybe it's maybe at this point in three years we're
talking about AI and how it's a new capital cycle.
Well, the, the thing that I, I mean, this is an emotional
statement and not one that should impact investments at
all. But the thing that I kind of
like about the life sciences idea combined with AI is it does
make sense, sense, whatever that word means to have like a more
personalized medicine. And, and the idea that we're
going to be able to analyze so much data and, and still treat
everyone as we do now makes like no sense to me, right?
The, the, it, it feels to me that something must change.
And, and it already is. I mean, GLP ones have been a
massive improvement in people's lives.
Some may not be, but I think on average, they're probably a good
thing. And the, the personalized
medicine and, and the ability to sort through data is one of
those things that I, I can see why it makes you know, why it's
logical that that's where the world would go.
Yeah, yeah. It just, it just takes time,
right? It's going to take a lot of
time. That's the issue.
And so if you have exposure and you have the duration, you'll be
OK. We just need Sam Altman to have
$13 trillion to spend on an AI spaceship to watch us all.
Oh. Shit dude, these guys scare me
man. They're like I I watch him talk
and I'm like this dude is a psychopath.
But I mean, I'm on his train so might as well ride it.
Yeah, I mean, you haven't been wrong.
I, I, you know, for me, I struggle again if I can't get
deep into the weeds. Like I'm not.
I don't know anything about Cindy's like the technology,
the, the, the like, I don't know anything about that ecosystem.
So it's hard for me to size. And I guess it is they'll be the
same for any one in life science.
If you don't have a deep knowledge of it, how can you
size it? I feel very comfortable sizing
up big time in life science, but I struggle with something like
AI or the AI ecosystem. And especially if something gets
commoditized over time, which there's a higher risk because
you don't have much of the regulatory capture here, you're
not really killing anyone, right?
So let's create like some terminated robot.
But you know, it's, it's a different kind of ecosystem
where growth can happen at drop of a dime versus drugs take a
long time to develop, take a very long time.
There's a lot of research that goes into it.
It's a lot of rules, regulations.
So it's a it's harder for me to wrap my hand around the EIA
stuff. So I think it's useful.
Yes. I think you'll have AI replacing
doctors. No, I know.
I like, do I think they'll supplement?
Yeah, but it's we'll see where it froze.
I, I, I can, I can. It's hard to predict exactly
where where the stuff is. And the skeptics to those people
who think that AI won't do that much in, I mean, maybe, maybe
again, supplement is the best, the best case.
Scenario talked to somebody recently who just made an
investment. It's AVC investment in a company
that they claim that the AI technology can help a primary
practitioner see up to 20,000 patients a year.
Now it's mostly the AI spitting out recommendations and then the
practitioner just signing. You know, yes, this works.
I don't know that I love the idea of that being my primary
healthcare professional, but that was kind of wild to hear.
That's a lot of patience. Yeah, Yeah, I think something
like that could happen. I think giving AI too much rope
is something that you want us to be cautious of.
Like, will AII itself discover a drug?
Probably not. But can you do it?
AI trial? Probably not.
Like it's too risky. Well, This is why prompting I
mean I I have no idea if it if it matters and drug discovery,
but I suspect it does. Like having a human look at the
result prompted differently and be able to iterate quickly is
where the marriage seems to make the most sense.
Yeah, exactly, Exactly so. Just trusting the Terminator
didn't work out in the movie. No, no, that's right.
And I did. We need, we need.
What is it? John Connor and and Sarah?
What were their names? I think that was them.
That's what we need. That's right.
We're going to need them soon. Right.
Oy vey. Hopefully, hopefully biotech
goes higher in the interim. Yeah, I think it'll be OK.
I mean, you're going to have hits and stops like you're going
to have ups and downs. That's great, you know, And
like, if you're not used to getting your nuts kicked in or
punched in the stomach, then it's not a space for you, but it
can get quite uncomfortable. Yeah, well, you know, if you're
not used to getting your nuts kicked in, you can also invest
in telecom or or media for a little while.
Although media has kind of caught a bit lace lately.
It has, yeah. I don't know.
The more the longer I pay attention, the longer I think
every, every sector will eventually kick your your nuts
and it's just a matter of whether or not you're in the
right time or the wrong. Yeah.
Yeah, yeah. All right dude.
Well, thank you for giving the update and take care of
yourself. I look forward to seeing you.
I always enjoy tablets. Have a good one.
None. Music.