A New Frontier for Telemedicine, the Future of mRNA Vaccines, and More
September 13, 2021
It’s a health-focused Monday show as we examine the growing trend of at-home testing for everything from COVID to other contagious diseases. We’ll also look at hybrid telemedicine where a nurse visits your home as part of your telemedicine appointment. In addition we will take a look at what might be next for MRNA vaccines, Moderna, Pfizer, and whether any other companies have shown promise in that space. Maxx Chatsko joins Dan Kline who’s live from somewhere in Miami as take on these topics and more on the Monday edition of “7investing Now” live at 1 p.m. ET.
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 0:25 Good afternoon 7Investors and welcome to the Monday edition of you can’t tell I’m in a beige box, but I am coming from beautiful. Well, I’m coming to you from downtown Miami. My name, of course, is Daniel Brooks Kline. I’m the host of the program. I’m going to be joined today by Maxx Chatsko, we’re going to try to talk about three different things. I’ll explain why use the word try in a second.
Dan Kline 0:47 First, we’re going to talk about what I consider the next frontier in telemedicine – at home testing. We’re going to follow that by talking about what’s next for mRNA, and then we’re going to talk about AbbVie (NYSE: ABBV). There is some news there today. Why do I say try because I parked in two hour parking, which expires at 1:39PM. So we’re going to try to go 30 minutes today. So my car doesn’t get booted I am on my way to four days at sea on a cruise. So we’re gonna get right to it, we will try to work in your questions and comments.
So Maxx, let’s talk a little bit about at-home testing because I had my first experience with it. And here’s how I see it, it’s have three different ways one, you get a kit and you log in. Someone had to proctor someone had to see me stick the thing in my nose and get a negative COVID test. So that’s number one. Two is where you either self-administer or mail away for results, or three, where a nurse comes to your house as part of a telemedicine appointment. Maxx, my test was easy took about 20 minutes, it was a little nerve-wracking, but I of course, got a negative result. But um, is this the next step and telemedicine and making healthcare more convenient?
So this is called distributed diagnostics. And it’s kind of an upcoming field, it’s only really made possible now we’ve had some, you know, advances in chemistry, so we can have different things power those kits and those tests, we can actually ship them to you at your home and you can get somewhat reliable results. However, there is always that tradeoff between convenience and reliability, especially here for diagnostics. It’s kind of similar to like in tech, right? There’s a trade-off between convenience and security.
Maxx Chatsko 2:26 Ideally everybody would be using like two-factor authentication and logging out of their bank account, or whatever it is, every time they weren’t on that web page. In practice, they don’t do that, because it’s not as convenient to type in your password every couple hours or whatever it might be. Same thing here, there’s always that trade off. So for things like you know, a COVID test, that’s a pretty simple detection. So that makes sense. Obviously, we have things like pregnancy tests are pretty widespread, right?
But yeah, there’s there’s always going to be that limitation of how reliable, how accurate can it be, there’s always some amount of error. And of course, you know, as in the last few years, we’ve learned how many dumb people in there are in the United States. So you have to make your tests work for millions and millions of mouth breathing morons out there, and you have to kind of simplify and dumb it down for them.
Dan Kline 3:09 None of you of course qualify as that because you’re here watching us on 7Investing Now. Yeah, it felt a bit like a pregnancy test. Albeit I’ve never taken a pregnancy test, you put a little solution in, you swab your nose, you sit for 15 minutes, there’s a control line looks like a minus. And then if another line comes up, you have it. If it’s faint, you have to go get another test. If it’s strong, your your positive mind didn’t come up at all.
Dan Kline 3:32 But I took my test on Saturday, because if there was a positive, I would have had the option of going the next day or that afternoon of taking the more invasive test, which would tell if it was a false positive. But Maxx, is this something that pharmacy chains like CVS might move even further into? And what would that look like? Because obviously they have a big physical footprint?
Yeah, 100%. I think that’s really the next step in distributed diagnostics. Maybe it’s not so much at home as much but more in community settings, right. Rather than you go into the hospital or maybe some specialty care center. Maybe you could do this at a pharmacy or your PCP office, right, your doctor’s office. And that’s really, again, it’s something that’s made possible through advances in chemistry advances in diagnostic kits, maybe even some hardware that might be coming. Your local doctor’s office might eventually get a sequencing machine or something like that, right. So then we can run even more advanced diagnostics that can be possible at Walmart or CVS.
Dan Kline 4:35 Yeah, I could see a lot of ways for people to screw up the proctored part of this. Like I have a webcam or I have a I did it from my studio where we tape 7Investing Now. The average person trying to do this on an iPhone, you have to make sure you keep the thing in sight, because it invalidates the test if they think you’re sticking the nasal swab and someone else’s nose and we’ve obviously seen with COVID that that there’s people you know who might try to do that. So there are some potential holes in this.
Dan Kline 4:59 Maxx I know you’re not familiar with the Amazon program, but what Amazon is doing and they’ve extended this to some other companies is they have telemedicine and if the doctor decides, hey, we need to take your blood pressure, we need a blood sample, or we need to hear whatever sample it might be, there are all sorts of horrifying samples you can be asked as to give, they will dispatch a nurse, do you think that’s something we’re gonna see this more hybrid model become more common?
Yeah, I know, that kind of also is taking off a little bit in the pandemic, right? There’s certain areas of medicine like rare diseases, for example, you do need to get drugs, it doesn’t matter, there’s a pandemic, or zombies are attacking or whatever. So if you can’t make it to your doctor’s office, and in normal time, some people just can’t do that. So we have seen models like where nurses come to you, and that has, that’s more of a niche, I think, in healthcare. I’m not sure how widespread that can really be. Because there’s some practicality issues with the availability of nurses and going into people’s homes if that’s safe or not. And all those weird, wonky things you have to consider. But yeah, I mean, it could be more common going forward.
Dan Kline 5:58 Yeah, I will point out that the person who proctored my test was likely not a nurse, they were likely just a person who was trained to make sure I stuck the swab in my nose and threaded it through correctly on the test. Maxx, can this go too far? I talked a little bit about I had a minor let’s call it allergy that I thought I might need some medicine for and I went to a telemedicine thing. And it gave me a list of medicines that I could pick from. And in theory, a doctor looked at it, but to me that felt like a little wrong, like, you know, and my symptoms got better. It wasn’t a big deal. So I ended up not doing it. But that seemed to me like maybe as a patient, I shouldn’t get to pick which medicine I want.
Maxx Chatsko 6:36 Yeah, I mean, there’s always gaps in these processes, right? And how he’s working. That’s, again, one of the limitations of distributed diagnostics, and how is this going to work exactly like with going into your home, it’s probably going to be in some type of controlled setting somewhere, we can still take away some of the friction and pain points there. But you know, again, making it at a pharmacy or a Walmart or something like that.
But there’s this emerging field called bio simulation. And there’s a new tool within that called Virtual twin. There’s a couple different companies that are trying it, it’s already actually used in certain drug developer, or certain drug developers are using this to kind of optimize the design of certain clinical trials. So virtual twin makes a copy of you, Dan, on the computer-simulated virtual version of you.
Dan Kline 7:23 Nobody wants that Maxx.
Maxx Chatsko 7:25 No, no, that’s why we keep it on the computer. So we, we throw everything at it, we can say what happens to Dan, if we give him this dose of drug or that dose of drug? Or does he have any interaction to drug interactions are called with other medications he’s taking, that maybe we don’t, we don’t want to trip that up, right? So we can kind of predict these things ahead of time.
So that sounds reasonable to me that that can roll out to, again, your doctor’s office later this decade, and it’s just gonna optimize like, because right now, it’s kind of a one size fits all approach, you know, there’s some amount of drug that we give you at this frequency this often. But as you take it, that drug, you know, eventually your doctor might tune it to you a little bit so we could do that ahead of time. It could be safer, we could have better outcomes, maybe it could roll out again, this would be a perfect match for distributed diagnostics, as well.
Dan Kline 8:17 It also seems like an excellent video game we could play with like celebrities that maybe we don’t like. See what you can do to the situation by throwing different drugs at him like okay, that is a little bit silly. Feel free to get your questions and comments and I don’t know that we’re going to get to a ton of them because as I mentioned, we have a bit of a shorter window today.
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But Maxx, let’s move on to mRNA which I incorrectly spelled in all of our documents. It does a little m and then capital RNA not Mr. Na as I more or less wrote it in our documentation. So that would be a really good name for a mysterious wrestler who messes you up so much he changes your DNA. I’m working on this as we go. Are we going to see a lot more mRNA-based vaccines?
Yeah, absolutely. So I think as the pandemic showed, you know, mRNA as a technology platform is perfectly suited for making vaccines for infectious diseases. So absolutely, then we’re gonna see more but investors have to take into consideration a couple different things, right? Because, you know, in the news we’re talking about Moderna (NASDAQ: MRNA) is combining different vaccines into one right? So maybe you’d have a pan flu booster, meaning like can protect us against different strains of the flu, whatever is circulating that season.
Maxx Chatsko 10:21 Maybe that same injection would also include a booster for Coronavirus, whatever shrinking or variant might be around at the time, and actually included another vaccine. For RSV. It’s a different type of virus, something that older individuals need to be protected against. So it’s interesting, right? It opens up these new opportunities to combine things into one shot for for more convenience, all of your protection at once. Seems like a no-brainer there from an infectious diseases standpoint.
However there’s so much like people are really misinterpreting I think a lot of this right. We develop these vaccines for the pandemic was we had to, we also prioritize their development. They unveiled it that is going to now be in development, this, you know, flu-coronavirus vaccine combo, but it’s going to take years to develop but they’re not going to have this on the market in a year or two or anything like that.
By the time this eventually might be on the market Coronavirus might not even really be that big of a threat. I think most people would probably have protection for it by then. So investors do need to kind of keep their expectations in check. And historically, I mean vaccines are big business, but not anywhere on the order of what Moderna is going to pull in on an annual basis. In this year, maybe next year from the Coronavirus vaccine, that’s you know, $20 billion, maybe even $30 billion. But for things like the flu vaccine, there’s so many different companies like offering products for that it might peak at like $5 billion per year. So there’s going to be an issue with trying to replace the revenue from this year next year, as that kind of starts to fall off.
Dan Kline 11:55 And Maxx, there’s been some fool’s gold here for investors, right, like, so company has a hit drug, it gets up to a to a huge valuation. And then it sort of doesn’t always or almost never live up to that you actually created a chart if you want to launch into that.
Yeah, so JT, let me pull this up. So of all the drug developers that have ever reached a $100 billion valuation, if you track their returns from that day, that day they’ve crossed that $100 billion mark against the S&P 500, and you include a total return so dividends for each, almost none of them have actually gone on to outperform the s&p 500 from their total returns, only Johnson & Johnson (NYSE: JNJ) and now Moderna have done that, of course, Moderna has a very small sample size we’re tracking Well, it’s about two months, from the time it hit a $100 billion mark, all of these other companies also outperformed the S&P 500 in their first two months after reaching $100 billion valuation.
Maxx Chatsko 12:48 So if we look over there on one of those columns, about the revenue, and this is really what it all comes down to, there is kind of a limitation. There’s a ceiling on drug developers. These aren’t tech companies, they have drug revenue. Drug products will ramp in the marketplace, they’ll generate hundreds of millions or maybe billions of dollars, if you’re lucky. But eventually there’s competition, there’s new technology, there’s new drugs, there’s, there’s whatever it is.
So eventually, your new products are just generating revenue, it’s replacing revenue, that’s from older products. So there is that ceiling. And this is something that I don’t think people really understand for Moderna, and it’s gonna hit the ceiling much more quickly. Because, you know, two, three years from now, we’re not going to need, you know, hundreds of millions of doses of Coronavirus vaccines.
So the company is gonna have a really tough time replacing, you know, 10-15, maybe $20 billion of revenue come 2024-2025. The rest of its pipelines in the early stages of development, those products are many years away from hitting the market if they do at all. So the valuation right now makes sense based on the revenue from this year, next year. But it’s not a sustainable amount of revenue, because it’s coming from one product, it’s not going to be needed in three or four years. So investors do have to keep that in mind.
Dan Kline 14:03 And Maxx, we talk a lot about Moderna and Pfizer (NYSE: PFE), and Johnson and Johnson to a lesser extent, for obvious reasons during the pandemic. But without making it clear that none of these are recommendations. We’re just talking about stocks here, or maybe they are, but we’re not endorsing any of these particular stocks on the podcast here. There are other players in the mRNA space, right?
Maxx Chatsko 14:24 Yeah. And so this is the thing like I showed you that the chart we just looked at with all the drug developers that have ever reached a $100 billion market valuation. The difference with Moderna, and this is probably gonna be true for other genomic medicine modalities as well, is that it’s a technology platform, right? It’s mRNA. So we can throw that out infectious diseases, they may be thinking about throwing that as certain types of cancers. They can use it maybe for protein replacement for rare diseases, maybe even some common diseases.
Maxx Chatsko 14:51 So you can deploy this technology broadly across a lot of different therapeutic areas. That’s a difference from what maybe you know, Eli Lilly, or Merck or Johnson & Johnson have. So theoretically like, you know, that’s an advantage. And over time, I think some of these companies could set a higher ceiling than we’ve seen in the past. So companies with technology platforms.
The other thing to think about, though, is when you have a technology platform in genetic medicines like mRNA, RNA interference, gene editing, anybody can use those tools, right? Yeah, sure, there’s IP, but for the most part it’s very easy to reproduce those, those results. So there’s a lot of companies that are using mRNA. And we’ve seen just recently a lot of acquisitions. So obviously, we have Moderna. And then we talked about Pfizer, but the tech actually came from BioNTech, the German company, it’s actually also publicly traded. So that ticker is $BNTX, it also actually reached a $100 billion valuation this summer, shortly after Moderna.
So those are the two that develop these vaccines that we have now, obviously, but then there’s a lot of others. I mean, Merck went out and acquired AmpTec, Sanofi went out and acquired Translate Bio just a few months ago. CureVac is another one working on mRNA. There’s Arcturus another publicly-traded company. And there’s a whole host of privately traded companies, for instance, Replicate is one kind of similar to Arcturus.
They have something called self-replicating, self-amplifying mRNA technology and tools that just came out of stealth mode with some money recently. So there’s gonna be a lot of players in this space. And you know, again, like we’re gonna use mRNA for like the flu vaccine eventually, right? That makes total sense, it’s way easier to use, you’re probably gonna get better results, way easier to manufacture. But we’re also going to have like a half a dozen or more flu vaccines based on mRNA. So it’s not just going to be Moderna that has the whole market opportunity to itself, or just BioNTech, or Pfizer, there’s going to be all of these companies trying to get their piece of the pie as well.
Dan Kline 16:53 Maxx, let me ask sort of one last question from an investing point of view here is, we don’t talk about selling all that much. But if you look at one of these companies, and they get to that 100 billion mark, do you then look at like the long term viability of what they have coming to decide if that’s a sell point? Maybe that’s the goal line that are not likely to stay at?
Yeah, I don’t know. It’s tough, right? Because historically companies that have reached that milestone, that $100 billion mark, in the long run, they don’t tend to actually outperform the S&P 500. That makes sense, again, in the context of drug developers are not tech companies, and a lot of the S&P 500 returns now are driven by tech companies that don’t have the same capital constraints, they have much different operating margins, they can scale to much greater levels than a drug developer can, you know, they’re less regulated as well.
Maxx Chatsko 17:45 So I mean, I don’t know, I guess I would stop short of saying you should sell a company, a drug developer, just because it gets to a $100 billion market valuation. But this does affect how I go about investing in this space, I tend to look at companies that are much smaller than that, because I keep that in mind. Once the company gets to a certain market valuation, even in the 10s of billions of dollars, it is harder because that’s factoring in, you know, expectations for drug revenue from products that may or may not even be on the market yet.
So your returns are going to be limited at a certain point. So that’s why I tend to just look at smaller companies that are less proven that seems to be when you have the best returns rather. So again, like if you invested in Moderna a year ago, or four years ago, then you really have no reason to sell right now. Right? But if you invested three weeks ago, and you think it’s gonna just go to a $1 trillion market valuation or something, I have some bad news for you.
Dan Kline 18:40 I look at it a little bit like the way I look at the movie business, that unless you’re Disney, which has these sort of Cornerstone IPs that you can just kind of mine forever. The number two player is Comcast, and Comcast, like their top franchise, like probably doesn’t even like make it into like a Disney theme park. So I understand drugs are different because there’s exclusivity period, like you control the Avengers for like 200 years, you don’t control a drug for that long.
Dan Kline 19:04 But that is sort of how I view it. This is a space that looks like there’s a ton of opportunity. And there is but there’s also a ton of losers. And a ton of, especially we’ve seen this during the pandemic, fool’s gold. Oh my god, this company might come up with a COVID whatever, magic COVID detector, and the valuation jumps up by you know, half a billion dollars in a weekend. Well, that’s not really how these things work. We’re gonna move on to our third story here, and I don’t know that much about this one, Maxx, but AbbVie is getting back into gene therapy. Why don’t you explain?
Maxx Chatsko: Yeah, so we just talked about $100 billion drug developers AbbVie was one of the last before Moderna to reach that mark. I think it wasn’t like chosen 13 or 14, it was in that graphic. But AbbVie is getting back into gene therapy. Just today it announced a new collaboration with a company called Regenxbio (NASDAQ: RGNX), a gene therapy to treat eye diseases. So Regenxbio is developing enhanced viral vectors. These are kind of like the delivery vehicles we use to package and capsulate therapeutic payloads in gene therapy.
And so it’s working on enhanced viral vectors that can get to different tissues and overcome some of the challenges we’ve seen with those viral vectors in the past. Now, its lead drug candidate is RGX-314. And this is actually at the center of the deal with AbbVie. It’s aimed at treating wet age, macular, I’m sorry, wet age related macular degeneration or wet AMD. This causes blurred vision. So this gene therapy be used to treat other eye conditions as well, not just wet AMD, but maybe things like diabetic retinopathy, and so forth.
So this is provides a copy of a protein to patients in their eyes, and it blocks the VEGF protein. So this is actually a tested a well-validated target. There’s current treatments on the market today, they’re antibody drugs. So they block this protein, and it prevents the formation of abnormal blood vessels and leakage from those that eventually lead to blurred vision and these eye diseases in general. So these antibody drugs generate billions of dollars a year in revenue.
But of course, you need to get injections into your eye, every month or every so many months, that just makes me squeamish to think about so the promise of a gene therapy is that it’s a one and done treatment. Or maybe you only need it one every so many years or decades, maybe if we can re-dose it, so a lot of potential there. So AbbVie’s back in on gene therapies, kind of really, the bigger news story I think of this morning, in about a $1.8 billion deal, I think is a total consideration, gave up about $350 million dollars upfront. So that’s a big hall for Regenxbio, which is a relatively small company. And this is AbbVie first foray back into gene therapy, I think since it was working on neuroscience indications with a company called Voyager therapeutics, and then it backed out not very long after that. So AbbVie back in gene therapy Dan.
Dan Kline 22:07 Maxx, let me jump in with one last question. Is this just endemic of the space that you constantly have to be investing in some of these smaller companies or making deals or making acquisitions?
Yeah, I mean, that’s the thing. So AbbVie is a good example, actually, for Moderna investors to consider, right. I think 35% of its revenue comes from Humera, which is I think it’s the top selling drug in the world right now. Soon to be true for Merck, but so Humera’s gonna lose patent exclusivity. And in 2023, July 1 2023, mark your calendars. A lot of biosimilars are going to be launching in the United States. And AbbVie dominance for that drug will be no more.
Maxx Chatsko 22:44 So AbbVie has to replace that revenue, it’s going to be losing a lot of revenue. It’s like 16, I think by in two years, it might be $18 billion per year. So it’s nice to just go in and invest in what’s the next thing? What’s the next blockbuster drug? How do we generate, you know, billions of dollars more to replace that revenue, we’re gonna start losing here in a few years. So this actually fits in nicely with the other topic we we just talked about today.
Dan Kline 23:08 This was a crash course on three topics. We appreciate you putting up with us. We promise on Friday, we’ll get back to a fully interactive show. Maxx, thank you for getting through this quickly. Let’s hit our finisher and this one is a doozy. This one got a lot of votes online. If you want to pull this up JT, and we got to work on getting these graphics scaled properly. How do you feel about investing in Chinese stocks? 22.7% of you said Buy. 50% said sell. 27.2% said hold.
Dan Kline 23:43 Maxx, this might be true for you, too. I don’t own any Chinese stocks. Because generally, if I don’t understand the culture of a place, I’m not going to invest based on market and potential alone. And the political part of it has always made me squeamish, which seems to be getting worse right now. So for me, I can’t buy sell or hold. I never owned any of them. What’s your thoughts here?
Yeah, I’ve stayed away from China. That’s one of the red lines I don’t cross in my own portfolio. And I’ve had a tinfoil hat on when it comes to Chinese stocks for many years. And now I’m being vindicated in 2021 finally, so I don’t look so crazy anymore. But yeah there’s too much risk there. And it’s different kinds of risks, right. It’s geopolitical risks, or, again, just how the federal government there works and what their goals are for society so much different here than in the west. And as we’ve seen, that can change fortunes of companies overnight.
Dan Kline 24:36 This is of course not a simple topic and it is one we are going to revisit with Simon Erickson, Steve Symington, Anirban Mahanti and maybe Matt Cochrane, even they all know more about this than we do. We appreciate you listening to what is a short show for us. Usually we do about an hour, though in the beginning we did shows of this length, we hit three topics. We really appreciate you being here.
If you’d like to get in touch with us, that is info@7Investing.com that is for questions about your membership, questions about the service, questions you’d like to ask one of us don’t ask us to work up a penny stock we’ve never heard of. But certainly if you ask us about a stock that we’ve done a lot of work on, perhaps we’ll have an answer. If it’s one we’ve talked about on the show and you want to know something more about it. We’re usually happy to answer those questions though we might do it on a live show.
If you’d like to interact with us on Twitter, you can do that @7Investing. We are a lot of fun to follow. And of course, if you’re bored the next few days, follow me on twitter @worstideas7 because I will be sending you pictures from all of the various beautiful places I am going to be. Lots of islands, lots of beaches, Maxx Chatsko thank you for doing this. JT Street. Sam Bailey. Thank you for all the work behind the scenes. We will see you on Wednesday with Anirban Mahanti and then back on Friday with pretty much the entire team. See ya everybody!
7investing Operations 25:54
Moderna (NASDAQ: MRNA)
Pfizer (NYSE: PFE)
Johnson & Johnson (NYSE: JNJ)
AbbVie (NYSE: ABBV)
Regenxbio (NASDAQ: RGNX)
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