The pandemic has shown that America has a lot of problems with its healthcare system. There’s a political component to that, but there’s also a lot of private efforts underway to disrupt the current system. Maxx Chatsko and Dana Abramowitz join Dan Kline for 7investing Now to look at what’s happening in this space and what it means for investors.

Transcript

Sam Bailey  0:14

Welcome to 7investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.

Dan Kline  0:24

Good afternoon 7investors and welcome to the Wednesday edition of 7investing Now my name of course is Daniel Brooks Klein I’m the host of the program. I’m being joined today live from Pittsburgh, Pennsylvania, by Maxx Chatsko and from Houston, Texas or the at least the Greater Houston area by Dana Abramovitz. Dana, is it possible your power goes out at any minute what is going on with power usage and rolling blackouts in Texas?

Dana Abramovitz  0:51

Well, you know, so it actually rained last night. So the temperatures cooled down quite a bit. So I think that that’s that’s good. But um, yeah,

Dan Kline  1:00

It rained here in West Palm Beach yesterday, so I decided that’d be a good time to take a walk. It was not, it was like taking a walk, like you know, in the sauna. When you throw the water and all the steam comes up. I felt like I was on like Dagobah, like that is a Star Wars reference for those of you who don’t know this. It was unbelievably uncomfortable. Maxx, are you going to try to avoid sneezing on this show? Is there their story you want to tell there?

Maxx Chatsko  1:25

Yeah, so I had some temporary crowns put in last week. And over the weekend, I sneezed and my tooth shot across my living room. So hopefully I don’t sneeze on the show, Dan.

Dan Kline  1:34

And for those of you who don’t know, Maxx hasn’t brushed his teeth in 23 years, no Maxx got punched in the face, that is why, through no fault of his own, and that is why he has crowns and is dealing with this stuff.

But we aren’t going to talk about dental work all that much. Today we’re going to talk about health care. We are going to answer a lot of your questions. You shared a lot of questions about health care with us on Twitter. But we’d also like to see your live questions about health care. So if there’s anything you’re thinking, we will try to answer that.

But before we do that our top story is going to be what I’m calling “Four Big Questions on Healthcare”. I don’t know why, I think it’s the Jewish upbringing. It’s always four questions we are you’re sort of taught that four is the correct number of questions. That is a little bit of an inside baseball joke for those of you who are not Jewish, look it up, look up Four Questions. Not a big deal. But let’s start with Dana, and Maxx you could chime in as well here on this one. “Has the pandemic changed anything about how Americans view healthcare?”

Dana Abramovitz  2:31

So, I think so. Right. So telehealth and telemedicine has definitely taken off as a result of the pandemic. Um, you know, it was it was in place, right. So there had been a lot of policy changes to kind of deal with all of that. But, um, you know, I think that that, you know, it was easy to do and now, you know, I think people like it, it’s convenient, right. So, you know, healthcare is becoming more, much more consumer focused, and hopefully the regulators will let us keep it and and just make sure that it gets reimbursed.

Dan Kline  3:11

I have to say, I’ll never go back and I don’t mean obviously for some things, you have to go to the doctor. But if I’m having an allergic reaction to something I know I’m allergic to and know what the treatment has been in the past. I’m absolutely jumping on telemedicine. If my wife has strep throat and I come down with strep-like symptoms, I am going to go to a Teladoc (NYSE: TDOC) appointment. It is unbelievably convenient. And I don’t know anyone who said you know what, I wish I could do spend more time in a waiting room, spend more time in traffic.

Maxx, there’s no teledental. But let me ask kind of a follow up question here to you. From an investing point of view. Do you think platform is going to matter? Because I question quite a bit whether anyone knows that they’re on Teladoc  or any other specific platform, my wife’s insurance, uses some other platform and it seems fine. I’ve gone direct through Teladoc , I liked it, but I don’t actually know that there’s anything proprietary about any of this for the most part. Am I missing something?

Maxx Chatsko  4:10

Yeah, that might be true. I’ve never used telemedicine and this isn’t really like an area cover. But I live in Pittsburgh and here we have the University of Pittsburgh Medical Center, UPMC, with this giant regional, actually all across the state now, Medical Center, right so all the hospitals here like UPMC for the most part, you can have insurance through UPMC. They have their own telemedicine apps. So like you never have to leave the UPMC ecosystem and I’m sure that’s very true in other major metropolitan areas. Pittsburgh is not a major metropolitan area let’s not joke around but um so yeah, maybe it seems more like a almost a commodity really right like it comes down to like relationships and connections to doctors and things.

Dan Kline  4:49

Yeah, and there’s obviously, some technology can be better than others, but even when it’s not great, like I just went to some random one when my son needed allergy medicine when we’re in Florida. It worked fine. It asked a little more probing sort of dumb questions that maybe if I’d gone through our health insurance, maybe that information would have been pre-populated, but I did it by first finding a 24 hour drugstore rather than going directly through, which is not a thing most places, but in the Orlando area, and maybe Las Vegas, 24-hour drugstores are a thing.

We’re gonna go to the second question here, we would love to see your questions, your comments, say hello, tell us a joke, whatever it is, in the comments section live. Dana, we’re going to talk in a second about the special report you wrote, for people who love to share their email address with 7investing. But before we do that, let’s touch on the subject matter. What role will big tech be playing in healthcare? I know they’re all trying. I’m wearing an Apple Watch, but it’s it’s limited. I know you’re pretty skeptical about this compared to most people.

Dana Abramovitz  5:51

Yeah. So you know, coming from the healthcare industry, right? I would love for technology to help the healthcare industry. It’s just that a lot of technology tries to apply itself to the industry without really understanding, you know how things work. And that just makes things really complicated. And so, you know, a lot of tech giants have tried and failed, because they don’t really understand the healthcare system and working from within the system.

Dan Kline  6:25

Dana, do you think it’s more likely that they can disrupt the health insurance model, so we’re seeing a couple of big tech companies, and I won’t name them to not favor any one over the other, that are essentially using a model that mixes telehealth and in-person nurses where they’re not so much upsetting the health apple cart as they are changing how they’re paying for care for their workers? Is that type of model sort of more likely, because it kind of works adjacent to the existing system?

Dana Abramovitz  6:56

It all it all has to work together, right? I mean, it really does, right? Because, you know, I mean, a hospital has hundreds of workers, and their job is just to negotiate insurance contracts, like hundreds of people in their finance department, just to negotiate those contracts. So until all of that changes, right, so insurance has to change, the healthcare system has to change, everybody needs to work together. And that’s why it’s not just one hammer to, you know, hammer on this particular nail, you really need to understand the system and and work through the the whole web, intricate web that it is.

Dan Kline  7:37

Yeah, I actually think we’re seeing this a number of different ways. I actually have a friend who, not a friend, but someone I went to high school with that I know a little bit, who started his own, I don’t know what you call it, like Health Care Club. He’s a doctor, you pay a monthly fee to him, and he’ll provide all the services he can provide, but only up to a point. So that works in this model, where a lot of people have very high deductibles, and their standard for being willing to go to a hospital is pretty high. So joining something like that, and that’s sort of where I see the big tech disruption. Maxx, don’t feel you have to have an opinion here. But is there anything you want to add here?

Maxx Chatsko  8:12

No, I think Dana’s report hits it on the head.

Why don’t you promote Dana’s report and explain how it works, and how people can get it.

I actually don’t know how it works. To be honest, I don’t want to give people bad information. But her report is on, you know, can big tech, or can tech disrupt healthcare and change healthcare. And basically, you know what she just said, but she lays out all the details and has some anecdotes as well in the report. So I definitely recommend reading it. Dan, you explain how people can go and find it.

Dan Kline  8:40

Oh, I should know that answer. Sam Bailey, if if you want to turn on your audio and explain how this works. So basically, Dana wrote a massive report that digs into all this. How many how many words did you come out with Dana?

Dana Abramovitz  8:52

So it’s not massive, massive it’s like enjoyable reading, and informative. It’s not like you know, a thesis, it’s not you know, several volumes. It’s manageable.

Dan Kline  9:04

We are very excited to share this, we will try to get the info as to where you can give us your email address where this is available for members probably should have had that, and here’s Sam Bailey. same audio

Sam Bailey  9:15

I couldn’t get on from the audio so I’m here

Dan Kline  9:17

So how do you get our new special report?

Sam Bailey  9:20

So if you are not a subscriber, just go to www.7investing.com and there is a grey box right on the homepage that says, “Can Technology Fix Healthcare”, you click that button, you give us your email address, and it will be in your email within a couple minutes. Very easy. And it’s an excellent report. Dana you did a great job.

Dan Kline  9:37

I will point out that we don’t send you a ton of email if you’re not a member. If you’re a member, we send very select emails and we’re working on some tools that allow you to really sign up for exactly what emails you want. But we are not a company where if you give us your email, you’re gonna wake up every day to like three emails from us. I’m looking at you Musician’s Friend, I bought something 12 years ago, I’ve hit unsubscribe, take me off your mailing list.

We see some Questions and Comments, we would happily get to those later in the show. But let’s move to question three on our “Four Big Questions about Healthcare”. “Has anything changed about how you view investing in drug developers, biotech, healthcare with so much speculative money pushing up valuations?” Yes, Maxx, this question was written for you.

Maxx Chatsko  10:21

Yeah, I’ve been talking about this, you know, so just in the last 18 months, obviously, the stock market’s been doing very well. And you know, it’s just different when you’re investing in a drug developer, compared to say, a tech company, you know, tech company has revenue, sometimes it even has earnings and cash flow. And even if it has a premium associated with the stock or the valuation, you can kind of like squint your eyes until your head and look at instead of next year, you can look into two years or three years out in the future. And you can kind of justify investing in that.

When it comes to biotech or drug developers. You know, they don’t have revenue, they don’t have earnings, they don’t have cash flow, if it’s a development stage, drug developer. So the way that we evaluate drug developer is we take, you know, the assets in the pipeline. And we can assign certain probabilities of success to each stage of development, and you have to multiply those together, there’s a lot of weird math here, when you’re doing the risk adjusted net present value calculations for a drug developer, so I won’t get into all that. But the probability of success that an asset moves from Phase 1 clinical trials, and eventually gets approved, across the entire industry is less than 10%. It’s 9.6%.

So when I see a lot of these development stage drug companies, and their value in the billions of dollars, which is highly unusual, in a pre-pandemic world, or stock market, it does kind of concern me. You know, there’s some, like a lot of the CRISPR companies, there’s a lot of excitement there. But some of these don’t have any data at all, some aren’t even in clinical trials yet. And they’re valued at like $6 billion or more, that’s, we’re assigning a very high probability of success, probably an unrealistic probability of success. And that’s going to set some of these companies up for disappointment, you know, when maybe there’s mixed results, which happen all the time. Some endpoints can be successful, some cannot, there’s gonna be better things than first generation CRISPR gene editing. And that’s not just CRISPR, I see this really broadly across the industry. So it does concern me and I would say you need to be more cautious around valuation risks, if you’re investing in this space right now.

Dan Kline  12:25

I think you also want to avoid getting caught up in the hype. This is sort of one of those markets where it’s the old pitch line of, “Oh, we can be the Chipotle (NYSE: CMG) for Chinese food”. And if we only capture 2% of the market we’ll be billionaires. Well, yeah, it’s hard to capture 2% of the market. And even if your drug works, and this is something Maxx has drilled into me, even if your drug works, doesn’t mean it’s going to be the best drug, doesn’t mean insurance is going to cover it, doesn’t mean the pricing is going to make sense, doesn’t mean doctors will prescribe it.

I have a cousin who is a drug rep, and he has what he would argue is a better drug in the field that he works in then the industry standard. The problem is insurance companies have to agree with that, and maybe they don’t quite as much. And that’s not always based on efficacy. That’s that’s often based on on political reasons and and other things. So there are a lot of roadblocks that could impact this.

We’re going to get to your questions and comments. But we’ve got one more question here. “Do you think it’s possible that there will be major disruption in the US healthcare?” What would that even look like? Dana, you’re up first on this one?

Dana Abramovitz  13:33

And, yeah, no, it’s it’s it’s a, that’s a tough one. And you know, you’d you’d like to see that disruption. But you know, a lot of things play a part in that. So yeah, and you know, and it’s not just, it’s not just one thing.

Dan Kline  13:53

Yeah, there, there are a ton of things that go into this. The biggest obvious. Well, someone asked the question, so I’ll raise the question right now. If you want to pull up Sam, the the top comment we have there that sort of speaks to this is can the system really be disrupted without an act of Congress?

Dana Abramovitz  14:12

Yeah. Go ahead.

Dan Kline  14:16

Sorry, I stepped in there. I was just gonna say, I do think there are parts of it that can be disrupted, that there is, you know, technology to you know, we were going to talk about Apple (NASDAQ: AAPL) later, but technology to monitor various important things that right now are difficult to monitor could disrupt some aspect of healthcare. You may not have to go in to say get a blood pressure check, because we might get incredibly accurate blood pressure that comes from your watch or a very affordable device. There are home devices, they’re not particularly great. So there there’s absolutely some disruption that could happen. But the overall system of health insurance has been dictated by government and why you see things like, I don’t know, faith based healthcare coalitions, and doctors starting up, you know, sort of co-ops and collectives, there are, those are going to be minor disruptions, we really would need some sort of massive government intervention. Dana? Yeah, it’s not going to happen right now. But I’m sorry, I stepped in, you can jump in here.

Dana Abramovitz  15:14

No, no, and I kind of touch on it in that special report. And, you know, you know, part of the problem is a lot of the reimbursement, you know, like all the FDA, you know, CMS, so, the Center for Medicare and Medicaid Services, right, so they do all the reimbursement, and a lot of the things that they do are dictated, or, you know, carried out by all the private insurers. Um, and, you know, we can’t have, you know, like, one administer, you know, every four years, we can’t cycle through, you know, something else, because we have a different administration. And, you know, we have different people in Congress that are setting the standards. So it does, it needs to, you know, become this long term thing, because the hospital systems are not going to change their practice every four years. I mean, that’s, you know, we had that, right, they refuse to make changes, because they knew that it was gonna change, right, and it’s too much work for them to, you know, re-steer the ship into something else, only to change it back. I mean, they can’t, they can’t do that healthcare is not that agile. They, they just don’t take risk, and they don’t change quickly. So we need some thing that’s going to be steady, so that that change can be adopted.

Dan Kline  16:32

Maxx I’ll give you the last word here.

Maxx Chatsko  16:35

Yeah, it’s very complex, right? It’s like one of these problems that we didn’t do anything about for too long. And now it’s this big, hairy, complicated thing. And there’s no really easy solution. And I think there’s gonna have to be multiple solutions to different problems within, you know, this big giant black box that is American healthcare. But there’s a lot of things that could change. You know, there’s too many, too much abstraction, whether it’s insurance or payments, or I go to the hospital, and then I go to another one, three blocks away, and that costs 3x difference for some reason, it’s the same procedure. It just, a lot of it doesn’t make sense. It’s unnecessarily complicated.

Dan Kline  17:11

I, I don’t even know, no, I’m not gonna comment. There’s no way to comment on this without being political. I’ll just say that I think the biggest issue is there has to be a will, there has to be an actual desire to do things differently. And I think that that starts with the notion of, “does everyone deserve health care”, and that’s something we whatever your politics are, we have not been able to agree on as a country. And that’s where disruption would come from, I am coming close to a line. So Dana, if you wanted to weigh in.

Dana Abramovitz  17:38

I just wanted to add that, you know, I think that a lot of the new medical, or some of the new medical schools, or a lot of the doctors that are coming through the the the medical school pipeline now are starting to incorporate, you know, technology, this disruptive thinking. And so I think that, you know, the next, you know, the new generations of physicians are going to to make these changes.

Maxx Chatsko  18:07

And if I could add more, like, you know, this was a big part of Dan’s report was like, if we just thought of healthcare as value based care. You know, like, what is the actual outcome, and is that is that resulting in value for the patient or the healthcare system? Like, that’s what you should get paid based on that, not just because insurance will cover it. And maybe additionally, you know, we should focus more on our lifestyles and little changes we can all make. We have this like drug-first mentality here in the United States. So like type two diabetes, for instance, you can reverse type two diabetes, with diet and exercise changes. It’s a lifestyle disease, it doesn’t exist otherwise. But we want to give you insulin or now there’s companies developing all these crazy complicated antibodies that are going to cost tens of thousands of dollars a year. And like you could, you could fix that problem yourself. But we don’t have a health care system that encourages that

Dan Kline  18:56

You can make meaningful changes, and I’ll lean on Maxx and Dana join us later. But the pandemic made me somewhat sedentary. I was still seeing my trainer outside, but the workouts weren’t as useful. So that was just maintaining at best on a strength basis. And after a while, I wasn’t walking to Starbucks (NASDAQ: SBUX) and getting my 10,000 steps in and I sort of plateaued on walking anyway, because I wasn’t pushing myself. So you know about I don’t know what it is six, seven months ago, I started making a very concerted effort to do things like monitor my heart rate, and make sure I’m getting enough movement every day at a high rate. And I’ll say we’re going to talk about the Apple Watch later. My Apple Watch as I’ve gotten more fit has raised the standards of what it considers exercise. So yes, I might get a minute of exercise. If I walk up two flights of stairs, I have two 18-step staircases in my house. That is absolutely you know, exercise, your heart rate goes way up.

But when I go take a walk until I’ve pushed my heart rate to a certain level, which now takes longer, maybe the first 10-12 minutes of my walk isn’t going to actually be exercise. It’s movement, that’s great, but it doesn’t count. So it’s a raising bar. And I put in a real solid effort to like what what food choices can I make that are not that disruptive, but are subtly different. And we’ve talked about this Maxx that I’m only eating red meat once a week, I’m trying to eat, you know, more fish and more things that I like that are just frankly, a little harder to cook. You know, and a little more more true, you know, yet, you can buy a steak and have it sit around for two or three days. You don’t want to do that with shrimp or salmon. So, you know, I’ve been spending more money on that sort of thing, but sort of looking at myself as an investment. And there have been absolutely tangible benefits in things that even I can measure. You know, in terms of blood pressure, and heart rate and all that type of thing.

We would love your questions and comments. There’s one in there from from Gareth Simon’s. Gareth, if you want to provide a little more explanation, or send us an email info@7investing.com, I’m not sure we understand what you’re looking for there. And we would appreciate any questions you have. You can also ask some general investing ones. We’ll get to those if you like.

But before we hit our vast array of questions you shared with us on Twitter, and thank you for doing that. Let’s share a little bit about what happens on Friday. If you’re a member of 7investing. First of all, if you’re a new member at 10:00am, we host our new member call during the new member call, we walk you through how the service works, we walk you through even how to buy a stock sort of some basic philosophy points. And I’m going to share share recipes… No, we’re not going to do that. But we are going to tell you everything you need to know about the service.

Then at 11:00 o’clock, we are going to do our members call. This is a free for all, we’re going to update our most recent pics, we’re going to update some pics we really want to talk about and then we’re going to take your questions. And that’s a forum where you can ask us about things that are 7investing recommendations. We don’t actively talk about that kind of thing here on 7investing Now. Then at 12:30pm, we will have a special 7investing Now with most, if not all, members of the team, probably all of us except Anirban, and sometimes Dana has to come in and out for other reasons, but we will get as many people on as we can.

After that in the afternoon, we record our our videos for for the pitches you see when our new pics come out. So it is a very busy Friday. And if you want to be able to access all of that, the new member call, the subscriber call. If you want to access those things, you have to be a member. And the added benefit if you go to www.7investing.com/subscribe of joining now is right now through July 7th, our price is $49 a month, or $399 a year. On July 8th, our price goes to $49 a month or $399 a year. But if you sign up before July 7th, you get the old pricing the original pricing locked in forever. So when Maxx Chatsko’s head in a jar is doing the show in 2135, you will still be paying $49 a month which, with inflation, that would probably be a really, really good deal, even if the Fed keeps inflation in check for the next hundred and whatever years that would be.

Let’s pivot into taking a bunch of your questions. I’m excited for this segment. I was surprised at how much Twitter reaction we got yesterday, this summer has been a little bit weird and flow in terms of some of the interactive parts here. But let’s take the first question from [unknown name]. If you want to share that one Sam Bailey. “I can’t get myself to invest in any of the biotech stocks because I don’t understand them as well as high growth tech stocks. I do see the need to diversify into high growth biotech. Would an ETF serve better?” Maxx Chatsko, I know you want to answer this one.

Maxx Chatsko  23:41

Yeah. So I think the answer is simple [unknown name]. You don’t need to diversify into areas that you don’t know and understand. Right? Just stick to what you know, it’s kind of what investing is all about. So I have the opposite “problem” as you? I don’t actually understand tech. I don’t know what metrics matter. I don’t know what the valuations mean, I don’t understand the competitive landscape. So I don’t own any tech stocks. I’m pretty much, I’m very heavily invested in drug developers and I own some energy stocks as well. So you don’t have to, you said “the need” to diversify. There’s no need to diversify into other areas. You could diversify within the areas, you know, I mean, we say tech stocks, that’s pretty broad, right? There’s cloud, there’s software as a service. There’s all kinds of crazy things like little industries, if you want to get into all the nuances of it, and drug development the same way. So it can be, you can get into more trouble if you feel the need to diversify into areas you don’t understand.

Dan Kline  24:30

So Max, I’ll jump in that I don’t think there’s a need to diversify. But if you are a 7investing member, which I believe [unknown name] is, I would look at, if you want to have exposure to other spaces. I trust Maxx, I buy all of Maxx’s recommendations. I bought some of Dana’s recommendations. Dana hasn’t been here that long, so there aren’t that many recommendations. You know, so I think if you want exposure to other things, taking the word of someone you trust and putting a little investment across their their two or three highest conviction stocks, which we talked about in the member calls. I don’t think that’s a bad idea.

I’ve purchased some things that I don’t fully understand, simply because I watched Steve Symington or Simon Erickson be so passionate about it. And that doesn’t come up as much with Matt Cochrane because our interests overlap. But if there’s something that like, I just sort of liked, and he really likes it, I might take a deeper look, I’ve kind of stopped having a number on my portfolio, like my own personal picks, I might limit that to whatever the number is I consider I can actively track and manage, even that’s easier to do for me, because it’s my job to track and manage stocks. So I could put more time in than other people.

But I own a bunch of things I like, you know, Maxx, you know, asked me a question about a stock and I had to look to see if I owned it? And the answer is I did because because at some point it was it was something he picked, you don’t have to understand why you own every stock. Now, you could understand it by reading Maxx’s report. Or you could just say, this is a person who knows this space, I’d like 5% of my portfolio to have exposure to that space. Because I think in a broad sense, there’s upside there, you can understand that there’s going to be big growth in biotech without understanding which companies are the best ones.

Let us continue and move on here. We will take the next one from [unknown name]. If you want to throw that one up, Sam. “What’s the outlook like for other Alzheimer’s drugs in development? Biogen was a was a good long, but given the backlash and high ranking FDA officials resigning, what’s the view on the other companies?” Yeah, the Biogen (NASDAQ: BIIB) was very confusing. This feels to me like, maybe they shouldn’t have approved it. And I know the actual language was was stricter. But, Maxx, I’ll go to you. And I promise, Dana, we’ll get back to you soon.

Maxx Chatsko  26:49

Um, yeah, so just with the Biogen stuff, you know, so the FDA gave it a conditional approval. So the company still has to run a confirmatory trial. Some people criticize the timeline and has until like, 2090, to run that trial or whatever. Then they came out and price their drug at $56,000 a year, when, you know, an independent agency said, Hey, this probably is a fair value at like, $8,000 maximum. And then we don’t actually have evidence that it works. I think that’s the important part. And the hypothesis, that beta-amyloid hypothesis that those plaques build up in the brain, actually cause Alzheimer’s is not proven. We don’t actually have any good evidence that removing those plaques improves cognitive abilities. I mean, in fact, those plaques build up in areas of the brain that are not associated with memory. So it’s kind of an interesting point.

So the FDA should be criticized, I almost hope it does kind of revoke this approval. The FDA actually doesn’t have a permanent Commissioner right now. And most of the independent advisory committee that voted against it, It was like 10 of the 11 in the the independent advisory committee members voted against approving this. The other person abstained, or was uncertain, I think was their vote. So like, overwhelmingly, they said, don’t approve this, the FDA said, no, we’re gonna approve it. And now they’re in this, you know, you know what, storm here? So, but Dana, I mean, what is, uh, you know, where are we with Alzheimer’s and the FDA? And, give us a little bit of background?

Dana Abramovitz  28:13

Yeah, as well. So Alzheimer’s is a really difficult disease to, you know, to understand and you’re right, you know, so targeting the, those amyloid plaques, you know, it’s just a hypothesis that that’s actually going to, you know, fix it. So, you know, it’s really hard to know, and it’s hard to, you know, test and really understand the disease. So that’s kind of problematic as well, right? Because

Dan Kline  28:43

Dana is fading in and out

I think it’s your internet connection, which we’ve all we’ve all fallen victim to at different points. Finally, I now have fiber here. So when I’m at home, my internet connection is good. But as you all know, I’m gonna be on the road quite a bit. So this is something that’s going to happen to all of us.

So let me explain this and Maxx jump in if I’m wrong. Basically, what this drug does, is it’s shown that it can reverse some of the plaques on the brain, which might be what causes Alzheimer’s, but it is also possible that, yes, it can do that. But the end result isn’t fixing Alzheimer’s. So just because what these things might be related, getting rid of it doesn’t necessarily lead to an improvement. Is that an accurate way to describe this?

Oh, and Maxx appears to be having audio trouble

Maxx Chatsko  29:39

The most important thing is that the company Biogen doesn’t actually have data that the drug works, and it was still approved, like the trials that were conducted, was in a phase three clinical trial. They don’t have very robust data sets and the FDA still approved it. So that’s also like the very controversial aspect of this because it lessens the standards of the FDA. It suggests that it’s not actually safeguarding patients or citizens of United States. So there’s this, behind the scenes, there was this, you know, nonprofit for Alzheimer’s care that kind of like strongarmed the FDA to approving it. And we don’t want that to happen, right? Because a lot of those are funded by companies like Biogen. So, you know, we can see the need that like, there’s patients out there that have nothing, there’s no treatments, right. So we want to help them but we also don’t want them to pay crazy amounts of money for something that doesn’t actually work. Right. That’s the most important part. So with the price that Biogen set, most patients, all patients, will have to spend over $10,000 every year out of pocket. And it might not even work. I mean, that’s unacceptable. I think that’s not the healthcare system that I want to live within.

Dan Kline  30:47

Maxx, could this have been this has been handled with a compassionate care exception? Like aren’t they allowed to if your prognosis is bleak, let you try things that might not work. I know I have an uncle in a in a prostate cancer treatment like that, where it’s worked really effectively for him, but has not worked for most people in the trial.

Maxx Chatsko  31:07

I don’t I don’t know. Maybe Dana can weigh in there. But Alzheimer’s affects 6 million individuals. So it’s so much larger than like, usually we do that for like rare diseases where there’s really nothing you can do and we can at least manage Alzheimers, not like cancers, or things that are maybe more fatal. Right. Dana, I don’t know how that works with compassionate use.

Dana Abramovitz  31:27

Yeah. Well, so I think you’re right, that it is. And can you hear me? It is more, you know, just like a lot last effort, you know, and it’s possible that that’s why they went ahead and proved it that there was a lot of advocacy by patient groups to you know, give them something. But you know, that, you know, the something is still not known. Right. So, and expecting people to pay that price point for it. I agree with Maxx it’s just kind of crazy.

Dan Kline  32:04

Yeah, at that price that should come with a two bedroom apartment in Manhattan, like what is what is going on there?

We’re going to take Rob’s question next, we appreciate the questions you’re asking in the queue. If we ignore something, it’s either because we don’t know the company, or we don’t have, like really a direct way to answer. Of course, the ones we got from Twitter, we have a little bit more time to research and figure it out. So we appreciate those of you watching at home and playing along. We often share questions through the @7investing Twitter handle that we’re going to talk about on the show. I’ll give you a heads up now. We’re going to do that for Friday’s show. So any questions you want to ask any member of the team, watch the @7investing Twitter handle, and I will share a call for questions. But if you want to throw up Rob’s comment, Sam, we would appreciate that. “Would love to hear a Nano-X (NASDAQ: NNOX) update? What to look for in the coming quarters?”. Wow. There’s there’s no update here, right Maxx? Like nothing has happened?

Maxx Chatsko  32:57

Yeah, so the company, I don’t know a few months ago announced that the FDA had cleared its single source imaging device. So that’s gonna be used in tomosynthesis. So things like maybe detecting tumors and like, you know, for breast cancer or something, right, those types of applications. However, the company software is still not cleared by the FDA. And the single source device isn’t actually what the company is going to use as its commercial device, it’s going to license that out if it uses it all. Also important, everyone’s excited about Nano-X imaging because of the medical-screening-as-a-service business model, which means it needs to have its software cleared by the FDA, which hasn’t happened yet. So right now it has like one clearance out of three that it needs. The other two are, according to the company expected it to be announced before the end of calendar 2021. But the company you know, needs those clearances and needs to have software approved it needs to manufacturer its devices, which it hasn’t signed yet. It needs to distribute them. Still a pretty big uphill climb here. This was like a favorite on FinTwit, and lots of excitement and hype. So far, though, you know, a lot that needs to be proven here before we get too excited about.

Dan Kline  34:07

Yeah, I have a napkin sketch of a reusable space car that can take you to Mars in 45 minutes. Throw me some investing money. I don’t want to. I don’t want to be too facetious here. This is obviously a company a lot of people are excited about. But please realize how long the road is and how when you’re buying something speculative. You’re not going to get daily news on it. We’ve talked a lot about this when when some of the riskier picks we’ve made that, I’ll have people on some pics I’ve made congratulate me. Wow, it’s up 30% and I’ll say to them well, but yeah, it’s up 30% for no reason. None of the milestones have happened.

And we’ve seen you know in the stock market we talked Virgin Galactic (NYSE: SPCE) a few days ago and Virgin Galactic has cleared some milestones. So if you’re an investor in that company, and it can put a rocket into space without it blowing up and and everything works well that that is a really good checklist. So it might make and you know, Maxx has talked a lot about this, when you hit these different milestones, they’re de-risking event, it starts to make the stock better. But if you’re going to get in really early, it is going to be an absolute long road.

We’re going to take a question from me, I wanted to make sure this got in. So I asked it on Twitter. So Dana and Maxx had time to think about it. “I’d actually like to know how you feel about Apple saying that the next Apple Watch will be able to measure temperature and blood sugar. Is that a breakthrough for diabetics? Does it disrupt other tech that’s just for that?”

So before I let you guys answer it, I just want to say I’m excited about the temperature part of it. Because we’ve obviously been with temperature theatre with those incredibly ineffective temperature checks, like when you walk into get your haircut or, or different places, I would love for my watch to be able to figure out my body norms and say, Hey, Dan, I think you’re running a fever, that would be useful information, even if it was just somewhat anecdotal, like the heartbeat information and other things. But Dana it is a very big leap to go from that, to being doing something like like testing blood sugar, right?

Dana Abramovitz  36:06

Yes, absolutely. And, you know, it’s not new technology, right? There are many companies that have been trying to to measure blood sugar without a finger stick. It’s really hard. Right? And, you know, it’s, it’s interesting, you know, if Apple does this, right, is it a novelty, right? Is it just, you know, interesting piece of information? Or does it become a medical device, and if it becomes a medical device, then it actually needs to be regulated like a medical device. And I’m not sure if that’s something that Apple is, you know, really thinking about and and stepping into?

Dan Kline  36:46

I think they’re thinking about it, I don’t think the first iteration of this is going to have it. And there might be, and i don’t know i, I’m not a doctor, I have zero training in this space. But there might be some beneficial reasons to know my blood sugar heading into a workout. There, there might be some some things like the way I track my heart rate, for you know, being in the right exercise zone. There might be some things that are way a step below, using it to track but I do think, five years from now, 10 years from now, whatever it is, Apple does want this to be a medical device, and they will probably figure out how to go through those clearances. Maxx, do you have any thoughts on this one? Do you wear a smartwatch? Or a watch or? Or one of those clocks around your neck like Flavor Flav? How do you tell time Maxx?

Maxx Chatsko  37:31

I have a sundial in my backyard. And so that’s that works pretty well, most of the time. No, for Apple Watch, I mean, what Dana said, right, if this is regulated as a medical device needs a lot more data, and a lot more people, and I think there’s going to be higher levels of scrutiny, because how many people have an Apple Watch, or would buy one, and the FDA doesn’t want, you know, 10’s of millions of people walking around getting bad data on their heart rate, or temperature, or glucose levels, and then taking health into their own hands or something, you know, injecting sugar cubes into their, their veins or I don’t know.

Dan Kline  38:04

So, don’t do that, even if you have accurate information, that’s something a doctor should handle.

Maxx Chatsko  38:10

So yeah, this is a good example. I mean, I can see maybe it’s coming, eventually, like wearables will get better. But I think we also have to be skeptical of the data that can be collected, right, there’s a reason that the standard of care is taking a blood sample, right? We can’t really do that with like, sweat, right now, or other things. So it’s going to be more difficult to get the same level of data that we can trust, that isn’t going to vary based on you know, the time of the day, or where you’re living in the world or whatever, right, there’s all these different things that come into play.

Dana Abramovitz  38:42

Or, or even, you know, how tightly you adjust the wristbands, right? I mean, you know, you know, I mean, it could be all sorts of different things. And in order for them to, you know, get that clearance, you know, so I would assume they’d go through a 510(k) process. So basically, showing that their device works as well or better than that standard, which is, you know, like getting that, you know, that drop of blood and testing it. And until they can do that, you know, and like I said, there have been other technologies, other companies that have tried, you know, the contact lens, different skin tabs, you know, just all sorts of different things. It’s it’s hard to do, it’s hard to beat the standard.

Maxx Chatsko  39:29

And I actually still like this is still far off, but I saw an academic paper earlier this year where they had a microneedle patch, sound scary Dan, but you actually don’t really feel it. It’s feels kinda like Velcro.

Dan Kline  39:40

Ya wasn’t, wasn’t that in the Saw movie. Like do they put it on your eye like that sounds terrifying. But okay, I’ll take your word for it.

Maxx Chatsko  39:45

It feels more like a Velcro patch on your skin, but they can design it kind of punctures into the right layers of skin. And it it samples different, sounds gross but like, liquids in like certain layers of fat and skin and that actually does have important biomarkers. I don’t know if we can do like blood sugar necessarily, but it could be used to diagnose other diseases, skin conditions, maybe other things that we don’t think and associate with skin conditions. So I could see that maybe being very well positioned for the form factor of a wearable. But again, that’s an academic paper. So right now, it’s more like a lab trick. Even if the headlines make it seem like it’s coming, you know, next month, it’s probably many years away, if it works at all. But something like that, like we might see some newer technologies evolve. And then that works well with wearables. Maybe Apple could invest in that with all of its money, I don’t know.

Dan Kline  40:33

It’s also a giant leap to go from actionable helpful information on let’s call it athletic performance or, or functioning. So I wore a Fitbit for years, and the Fitbit tracks your sleep. And I found it very useful to see, you know, was it was I getting the different stages of sleep, and mentally and again, this could be a placebo effect. If it said I had a good night’s sleep was generally a day I felt better. And it seemed to me like it was doing a pretty accurate job. There were a couple of three day weekend cruise trips Maxx, where I wore it, were like, you’d wake up and you’d like I got 98 minutes of sleep, and none of it was good. Like, yeah, that’s about how I feel this morning.

So I think you’re going to see increased things. We’ve already talked about that there’s patches that can measure whether you’re hydrated, again, put up by Gatorade, so I’m not sure that’s the one I would I would count on. But I think that technology from a baseline, even like high school or amateur athlete level, is going to be good because you don’t need intense information like to, you know, there are sort of easy ways to do that to go to an actual medical device. Again, I think there’ll be acquisitions. I think Apple wants to do it. But I don’t think they’re promising that any time soon.

We appreciate how many of you weighed in, jumped in, there’s a couple of questions and comments here that we appreciate. We’re not going to grab them the person who would give money for my napkin sketch. That is Robert [unknown name] I appreciate that. I’ve already gone public via SPAC, it only takes like a couple of hours now. No that is a joke. But I will say that when you’re investing in some of these SPACs, make sure it’s not a joke, because some of these companies are. There’s a lot of really bad ideas like I’m a lifelong media person. And the idea of rolling up a bunch of barely profitable if not unprofitable media companies and buying them time by putting them in a SPAC that’s a terrible idea as an investor.

That is a great idea if you’re say BuzzFeed, that is not or The Athletic or other places where they’re gonna have very high expenses and very slim margins. And yes, maybe they could use that money to to automate back ends and do some things that make them somewhat profitable. But there’s certain fields that you’re just never going to turn into cash cows, be very wary when you’re buying these companies that are taking shortcuts to go public, not saying that a SPAC is inherently bad. But as someone who knows the media industry when you’d be very lucky to make an 8% to 10% profit in a year, given that creating content is expensive. I would be super duper.

Maxx Chatsko  43:07

Well there’s even like well known companies that are going public with SPACs that I would still be questioning, that I would question because you can project different things in a SPAC filing than a traditional IPO filing with the SEC. So a lot of times companies going public through SPAC even if they’re well known, like 23andMe, or Ginkgo Bioworks, they just issued this really awesome investor presentation and it makes them look amazing. And then maybe a year from now they’re like, hey, none of that actually came true when they have to actually file you know, SEC filings and things. So I personally do not invest in any SPACs, I wait for them to have, you know, proper 10-Q filings and 10-K filings. I want to see the actual numbers and see them discuss their business before jumping in.

Dan Kline  43:50

I have exactly the same philosophy, it is important to point out that that is not true of every member of the 7investing team. I would also say it wouldn’t be true in my case, if it was a company I knew really well on a private basis. So there are some companies that are private that that that have a lot of disclosures that tell you a lot of information, or maybe you worked there or whatever it is. So I’m not saying I would never make an exception, but it is very easy for and I hate to pick on DraftKings (NASDAQ: DKNG). But I think this is one that a lot of people bought sight unseen as a SPAC and say, well, the total addressable market is this, if if gambling was fully legalized, all of this illegal gambling would enter this market and I think that ignores the competition. It actually ignores that, we’ve seen in cannabis just because cannabis is legal a lot of places doesn’t mean illegal cannabis has gone away because in a lot of places, it’s decriminalized. So it’s sort of quasi legal. So I don’t think that all these billions of dollars like being bedded like office pools, and it’s not bookies, for the most part, it’s people doing like, you know, you know, March Madness pools with their friends and co workers. That’s not all of a sudden going to go to Caesars (NASDAQ: CZR) or Wynn (NASDAQ: WYNN) or DraftKings or whatever else it is. It’s really easy to make the size of a market sound great.

But we’ve gone totally off the rails. I appreciate Maxx and Dana being here to talk about healthcare and so many of you weighing in, I’m pretty sure Dana has to teach a class. So I’m gonna say Sam Bailey, let’s bring up our finisher. “Which industry do you think is in the most need of disruption?” Maxx, I’m gonna sneeze, so I’m gonna let you go first [big Dan sneeze sound effect]… Sorry about that I couldn’t get to the mute button before that happened. Apologies Maxx, weigh in here.

Maxx Chatsko  45:30

Alright, so the answers were banking, healthcare, insurance and mortgages and healthcare ran away with it with 48.7%, followed closely, not closely banking 19.3%, insurance 18%, mortgages 13.9%. I’ve never taken out a mortgage Dan so I don’t know if that’s in need of disruption or not. Somebody on Twitter said, Hey, what are you guys, nobody’s taking out a mortgage? You guys don’t know how crazy this process is?

Dan Kline  45:55

No, it’s awful. And I will say having been self employed at many times during my life. It’s not set up to reflect your actual income or your actual finances. I would argue that all of these industries need disruption. Banking, I think is getting it a little more, at least for people who are digital savvy. So you are starting to see higher percentage of the country with a bank account, you see commercials for things that have much better overdraft protections. One of the issues with banking has been people that are, you know, living paycheck to paycheck, one overdraft can send them into this spiral of multiple charges. I think you’re seeing a lot of disruption in that space. On the other hand, you’ve seen people like TMobile (NASDAQ: TMUS), try to bring banking, you know, to people who are unbanked, and it hasn’t worked all that well.

Mortgages, I’d argue nobody has has disrupted it in any way that that, you know, say like Rocket Mortgage (NYSE: RKT), yes, if you work for like a big employer, it might automate some of the document process of pulling in, you know, your pay stubs and things like that. But nobody has said, Dan has paid a mortgage since he was 22. We have given him that mortgage, nothing has changed. He’s never missed a payment. We are funding that mortgage. So we’re not selling it to a government agency, which which triggers all sorts of regulation. You know, what if Dan wants to buy a similar size house to what he just had, maybe we’ll just give him that money. Based on his track record. I think that is the disruption that needs to happen.

I could very easily borrow $100,000 at credit card like rates, but certainly I couldn’t borrow $300,000 for a mortgage, without going through hoops that are impossible to go through. I don’t know that I’ll ever deal with a mortgage, again, is how unpleasant it is. I would find alternate sources of funding, which is of course, not something most people would you know, most people don’t have wealthy family members that can write them a mortgage, which is actually something I’ve done at least once.

Maxx, health insurance. Health itself, I actually think works mostly okay. Like the hospital system, it’s really the payment and the the, the access to healthcare. That’s the bigger problem. Do you see that being disrupted?

Maxx Chatsko  48:07

Yeah, that’s one of those things that’s like a multi-faceted problem. And needs multiple solutions. I would say dental insurance, Dan, while we’re well as we open the show, Terrible, you pay like $40 bucks a month, it doesn’t cover anything. I just spent like two grand on my crowns, like what do I pay insurance for then, you know,

Dan Kline  48:23

Dental insurance is an absolute problem. It’s not real insurance.

Maxx Chatsko  48:26

It’s a scam.

Dan Kline  48:27

It’s a discount card. And I’d argue that for the most part, if my dentist said to me, hey, for $69 a month, I will cover all of these things, your routine treatments, filling a cavity, and maybe you have to pay for materials on certain things. I think we will see with dental care, some of the disruption that we’re seeing with primary care physicians. I mentioned knowing someone that that started sort of a health co-op, I think we’re gonna see a lot more of that, we’ve talked about how big tech is doing that, you are not going to be able to massively disrupt the hospital industry. Google is not going to go out and set up operating rooms to do you know, organ transplants, but you might absolutely see, and we’re seeing it with COVID, lab testing and other things out there. They’re being spun up at, you know, giant distribution centers for some of these huge companies, and they might be able to outsource this.

So all of these industries are being in the process of being disrupted, but who knows how it’s going to happen, because there’s just so many layers, there’s regulation for all of them. Look, a lot of people are gonna make money we’ve seen payment get disrupted in a lot of different ways. On the other hand, an awful lot of payments still goes through old channels. And you know, it’s not like Square (NYSE: SQ) is doing, you know, the volume that say, you know, a typical point of sale company does like like an Intuit (NASDAQ: INTU). I don’t actually know the numbers. So that being said, I think we’re gonna see a lot more of this.

We appreciate all of you being along for our healthcare show. We’re gonna be back Friday with a full team, or most of the team show, Anirban probably won’t be up yet but you never know he could be he sleeps very strange hours, we get messages from him at all times of the night. That being said, if you want to get in touch with us, it is info@7investing.com. That has questions about our service, questions about your membership and really anything related to 7investing. If you’d like to interact with us, that’s @7investing on Twitter. And of course, if you would like to get Dana’s special report on technology and healthcare, if you’re a member that’s available to you, if you are not a member, either way, go to www.7investing.com and follow the grey box, follow the prompts there and download this absoltely informative report. We’d love to have you do that. Maxx am I forgetting anything. Is there anything I’m missing?

Maxx Chatsko  50:49

No, fabulous job, Dan, as always

Dan Kline  50:52

That is all, we will see you Friday. Thank you, Sam Bailey. Thank you, Maxx Chatsko Thank you Dana Abramovitz