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Is Apple Building a Car? Changes in the App Store & An FDA Safety Crackdown

Rumors of an Apple car have been around for quite a while but the noise got a little louder this week with DigiTimes reporting that the company has been working with Toyota to mass produce an “Apple  Car” by 2024. Apple has been working on a car since 2014, though at various times it has also been reported that it dropped those efforts to focus on creating software for vehicles. Matt Cochrane and Maxx Chatsko join the Sept. 3 edition of “7investing Now” to discuss this report and to take a look at a big change Apple has made in its app store as well as a safety crackdown by the U.S. Food and Drug Administration.

September 3, 2021

Rumors of an Apple car have been around for quite a while but the noise got a little louder this week with DigiTimes reporting that the company has been working with Toyota to mass produce an “Apple  Car” by 2024. Apple has been working on a car since 2014, though at various times it has also been reported that it dropped those efforts to focus on creating software for vehicles. Matt Cochrane and Maxx Chatsko join the Sept. 3 edition of “7investing Now” to discuss this report and to take a look at a big change Apple has made in its app store as well as a safety crackdown by the U.S. Food and Drug Administration.


Sam Bailey  0:13 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 Good afternoon 7Investors and welcome to the Friday edition of 7Investing Now. My name of course is Daniel Brooks Kline. I’m being joined today by Maxx Chatsko and Matt Cochrane and we are going to talk about a grab bag of news stories. We’re going to talk about the potential for an Apple Car, Apple changing in App Store policy sort of that’s not all that popular, and FDA crackdowns on safety for multiple drugs. If we have time, I am also going to talk about the jobs report, we may or may not have time for that. We are also well aware that it’s a holiday weekend, and all of you are probably at the beach or in your car somewhere. But if you do happen to be watching this live, feel free to ask us questions. And for those of you who who celebrate on early Happy Rosh Hashanah since we won’t be having a show on Monday, I won’t get to say that on Tuesday.

So Gentlemen, welcome to the program.

Matt Cochrane  1:17  Hey, let’s do it.

Dan Kline  1:19 That would work better if I if I had a question there or, or something. But uh, you know, did not we had a very fun conversation before the show, none of which we can share on air. So we will not do that. But we would love your questions and comments. But let’s start with it. Are Apple (NASDAQ: AAPL) and Toyota (NYSE: TM) building a car? So some news came out yesterday. But let me point out that this is all in the rumor category.

This is a this is not in the like Apple came out like driving a car, which I assume would look like the the car that the Apple Car that brings like the relief pitcher in at various baseball stadiums, but probably not. Apple is rumored to be in Asia, I would assume that’s people from Apple, not the entire company, visiting Toyota as it prepares to lay the supplier groundwork to mass produce a branded car by 2024. That is, according to a report by Digitimes. An outlet I’m not all that familiar with.

But it was reported a lot of places. They’ve been working on car-related projects since 2014. So this is a long time coming. And the rumor is that this project will hinge around a new type of battery technology. Matt Cochrane, you just bought a car, I assume it is not a particularly nice car, because I think it’s for your for your kid. But do you think Apple should be entering this space?

Matt Cochrane  2:35 We bought a new 2008 Toyota Camry is our fancy car. Glad you asked because I was worried about answering that part of the question.

Dan Kline  2:45 I had a 2003 Toyota Camry, those things go forever. Those are actually really, really good investments. I asked, should Apple be entering the car business? To me, I can see the upside, I can also see a lot of things going very wrong.

Matt Cochrane  3:01 Sure. So I think a lot of this depends on how much of this is a partnership with a car manufacturer like Toyota, which like possibly provide infotainment features or battery and autonomous driving technology, or Apple going more alone and trying to make a car from scratch with a little support from Toyota. So Apple has had an amazing run by making auxiliary products to the iPhone, like the Apple Watch and AirPods and services to support that ecosystem. So if they’re doing this alone, that I think it’s a horrible use of money.

But if it’s more of a partnership, where they’re just offering like some key technology to some features, again, like I’m thinking like battery technology or autonomous driving technology. I mean, battery technology would be great, because they can probably apply a lot of that R&D to their phones, too, then I think it’s fine. I think it’s a smart move. But if it’s like Apple really wants to make the car on their own with a little support from Toyota, that I think it’s a horrible idea.

Dan Kline  3:57 Yeah, I actually tend to agree with Matt there. And I think that’s what’s happening. So I drive a Toyota Prius, which is a pretty impressive car, and I have an older one. So it’s not it’s a 2016. So it’s not even the most up-to-date. But, Maxx, from a marketing point of view. And I know that’s not your area, but you’ve been marketed to. From a marketing point of view, would you get more excited by a new Toyota, assisted by Apple or an Apple Car that Toyota built? I think this is going to be a Toyota using some assistance from Apple if it’s a real thing. And I think that’s just a brilliant play, because we’re talking about this two years in advance of it happening. And we are not the only ones.

Maxx Chatsko  4:34 Yeah, I mean, we’ve seen a lot of the newer companies that trying to make cars, right. It’s been hard to be successful there. But like, look at Tesla. That’s a very large outlier, obviously. But some of the newer companies are kind of reimagining what cars might look like, little more innovative for interiors, exteriors, you know how the car is designed. So I mean, that would be pretty interesting if Apple can come in and shake things up again, and unlike some of these other companies, and has certainly the deep pockets to be able to do so.

Dan Kline  5:03 Yeah, and Apple also has a good design aesthetic. I always worry with some of these companies if you ever saw the episode where Homer finds his Simpsons episode, where Homer finds his long lost brother who owns a car company, and he designs a car for the average man. And it, of course, turns out to be a debacle that bankrupts the company. I wish I had that image, I would have shared it before the show, but it is a ridiculous car.

I worry about that with some of these or just some of the sameness like we have a Lucid Motors near us and like they’re fine. Like, there’s a big glass showroom, I’ve never been in there. But you can see the cars as you as you walk by used to be a pizza place. And to me, it’s like, well, why do I need this? Like, if I’m gonna buy an electric car, I’m probably gonna buy a Tesla. Unless you’re doing something really different by really different, I mean, double the battery length, half the price. That doesn’t seem like an apple thing. Matt, can Apple innovate in this space?

Matt Cochrane  5:53 Sure. I mean, like, in some aspects? Absolutely. You know, look, Apple has a substantial war chest, just I think, like $61 billion. They’re a free cash flow machine. So they can throw that money out a lot of, you know, researching solutions for again, things like autonomous driving or battery technology on the ladder, you know, which could also be applied to its phones. So yeah, I think they have a lot to offer their infotainment or just the way your car connects to your phone without like a Bluetooth connection, things like that. I think Apple has a lot to offer a car manufacturer.

Do they have like, you know, do I think they can come out with like a better four-wheel drive, then like Toyota has or like, a better like, you know, transmission or something like that? No, absolutely not. So again, it just really kind of depends on what the partnership is for.

Dan Kline  6:42  They could come up with a lot of better things that especially if we move to a driverless world. Things like the in-car entertainment system are going to be very important. And again, having a car that rethinks design could be very important. But Maxx, they’ve talked about some of these stories reported that batteries, were going to be the crux of it. Do you think Apple can out Tesla, Tesla when it comes to batteries?

Maxx Chatsko  7:06  Yeah, I know. So Tesla has been very successful, right, obviously, and it’s, again, reimagine what a car should be. It’s reimagine how we manufacture batteries and doing so at very large scales, right? That’s always been one of the issues there for manufacturing, you know, energy storage devices. So you cannot fault that Tesla for that. But in terms of batteries, they’re pretty much a commodity. There are going to be other companies.

There’s others are right now, there’s plenty of Gigafactories that are planned throughout the world. Most electric vehicle, or most automakers, I should say, are planning their own Gigafactories. So in terms of out Tesla-ing Tesla, you’re giving me a tongue twister there, Dan. In terms of out doing Tesla, I’m not sure that’s really the right metric to go on. Important to note, though, Toyota has gotten a lot of flack for being one of the slowest adopters of electric vehicles. So this might be obviously it’s still a rumor, but this would be me be more important for Toyota than Apple. And if you’re going to partner with anyone and trying to catch back up because you’ve been delaying your entry into electric vehicles, well partnering with someone like Apple is probably a pretty good way to make up for lost time.

Dan Kline  8:17  That JT, we will share that in a second. I’d like to take Max Lucas’s comment before we move back to what Matt Matt was talking about. Max Lucas, friend of the program, this is going to screw up our transcription service. When I have both Maxx’s on there. They’re never sure how many x’s are in Maxx. My problem with anything Apple is their veil, their walled garden. I use a Samsung phone, so I’d never buy an Apple product because they don’t integrate well. I think that’s fair.

But I do think that the reality is the overlap between people who are spending, you know, let’s call it 40 to $60,000 would be my guests for an Apple car based on where – and that’ll come down over time. People who are going to spend that kind of money are probably more likely to be iPhone users. I think, you know, look, I am an Apple person but I drew the line at Apple TV because the Amazon Fire and the Roku device are cheap. I wasn’t buying a super expensive device. Our producer JT Street dug up a picture of homers, the car Homer Simpson generate and that is very much what it looked. Like separate seating, and it had drinks that could drink holders that could accommodate a Big Gulp. We’re being a little silly. We’re probably violating copyright laws. So we will move on. Matt Cochrane

Matt Cochrane  9:28  Hold on, Dan. An important point here is that Homer’s brother came back a few years later with a baby translator. And I wonder maybe Apple has something like that in the works that would be a big thing.

Dan Kline  9:37 Well it’s funny. You mentioned that because I think a lot about the Apple Newton. There’s a chapter in my book, Worst Ideas Ever, funny book that don’t send me any money so it doesn’t matter if you buy it. There’s a chapter in my book about the Apple Newton being one of the worst ideas ever.

The reality is the Apple Newton laid the groundwork for the iPod, which later became the phone. So it’s absolutely possible that There could be a misstep here. On the other hand, there’s an awful lot of, you know, I doubt Amazon’s going back into the phone business anytime soon. You know, same for ESPN. If you remember the ESPN phone. But Matt you have a couple of graphics you wanted to close out here, I’ll tee up the question. Can Apple afford to do this, I’m pretty sure there’s nothing Apple can’t afford to do.

Matt Cochrane  10:18 Well, that’s probably a good point, there is nothing Apple cannot afford to do. So like, let’s like, take a quick look at Apple’s balance sheet here. Like they have more than $60 billion in cash, right, in short term investments on its balance sheet. Now, this is a lot of money, like there’s no getting around that this is a lot of money. But compared to its overall market size – so like, if you look at this, like per share, it only comes out to, you know, a few bucks per share. So you’re talking you’re talking about like, you know, I’m not good at math, but like two and a half percent 3% of its of its share value of $150 share price you’re talking about, like $3 and change or something, have cash per share on its balance sheet. So like, it’s still a very small part of Apple.

So $60 billion in cash, a few bucks per share. Look over the last five years, or over the last several years since Tim Cook over. But we have a five year chart. So we’re gonna just talk about last five years. Apple share count has come down dramatically, because Apple has spent this money on their balance sheet buying back shares and raising its dividend. So if we can JT we can share that graphic. So this is why like Apple has done phenomenally well, right? Because they have this great ecosystem, sticky ecosystem where it captures consumers around the iPhone, and they add the supporting products like air pods and the Apple Watch, and all these services it offers.

And they use all that free cash flow or not all of it, but a lot of that free cash flow, they’re buying back shares to raising its dividend. So is it better? Like would it reward shareholders and shareholders have been rewarded substantially from this. Over the last five years, as a share counts been going down and as that dividends been going up, Apple total share, returns, total returns are over 500%. Right? So like Apple’s done phenomenally well. I mean, we all know that Apple’s a phenomenal company. It’s done phenomenally well. Like, is this a distraction from that winning formula? Yeah, you have to wonder if it is. And you have to wonder if even Apple might be biting off more than it can chew here on that formula.

Dan Kline  12:17 Let me let me jump in here. And Maxx, I want to hear your opinion on this as well. If you’re Apple, don’t you have to take giant swings? Because we have the Apple Watch. I always point to my wrist. But I’m wearing a Fitbit at the moment, not an Apple Watch. The Apple Watch is like a rounding error on the Apple results. So don’t they have to do something like that’s a huge market like automobiles or healthcare, if they’re going to continue to move the needle and prepare for the theory that eventually the world moves on from the iPhone? And I don’t know what that would look like if it’s implants or robots or who knows what. But Matt, am I wrong in thinking that as long as they work with Toyota, which can provide the manufacturing, they kind of need to do things like this?

Oop, and Matt is talking but no sound is coming out. So I’m going to assume he’s either muted. Or something has gone wrong there. Maxx, why don’t you weigh in on the health care aspect of this? Well, while we see if we can get Matt figured out.

Maxx Chatsko  13:15  Matt, you go ahead. Yeah, I see. yourself.

Dan Kline  13:18  Yeah, we can hear you now.

Matt Cochrane  13:19  Okay. Um, so I would just say like, like, yeah, I actually think Apple should be more worried about AR and VR glasses and things like that, where Microsoft and Facebook already have substantial head starts, um, then cars. Like I think they need to be worried about the –  you know, Mark Zuckerberg always talks about the next computing platform. I think Apple should be more worried about that, then cars.

Dan Kline  13:43 Maxx, your thoughts here? We’ve talked a lot about Apple and healthcare and sort of their ambitions there.

Maxx Chatsko  13:49  Yeah, you’re right. I mean, what’s the company’s valued at, $2 trillion? It’s a machine in terms of generating cash. Sure. I mean, I don’t see the reason that it can’t take big swings, like maybe a vehicle or healthcare. And of course, we’ve been careful to point out this is a rumor, I think maybe it’s more likely that Apple’s may be developing platform for cars, maybe that can be licensed out broadly across, you know, the globe. So maybe it’s not just like one car, one vehicle with Toyota.

Maybe it is I don’t know, but lots of interesting ways to use software AI, within you know, energy storage or distribution or optimizing, you know, charging or things like that. Things that can be deployed widely across the rest of its ecosystem as well. So sure, no, not my area, but I can’t fault Apple for trying to innovate in new spaces, like maybe auto manufacturing or medicine.

Dan Kline  14:41 I actually think this is pretty low-hanging fruit, as silly as that sounds. Toyota knows how to make cars. And I’m not saying this is just Toyota slapping Apple branding on a car. I think there will be Apple innovation if this actually happens. But there’s a very big leap to go from being part of developing a car to opening up car manufacturing plants. And obviously, this is something where if it works, Apple can take a stake in Toyota.

That sort of leads into our last question. We’ll let Daniel Delgado close this out. I’m not sure if any of us are gonna have an answer here, but we will try to get this up there. Apple still has a connection financial interests with Lordstown motors. That is symbol, RIDE? Do you think Apple should be buying Lordstown since they’re in financial trouble? No. I think Apple can pick the corpse if they want if that if that’s what happens. Maxx, your thoughts here?

Maxx Chatsko  15:30  Yeah. I mean, there’s a reason that Apple is in Asia talking to Toyota, right? It wants the manufacturing in the scale of expertise, right? It doesn’t want to buy some rundown manufacturing plant in Ohio, and then try to make it work. It’s gonna work with Toyota, one of the big boys, if it’s ever going to do this, and it has the money to do that. It makes more sense.

Dan Kline  15:50  Yeah. And Apple also needs global distribution. So look, when a Lordstown Motors struggles or goes out of business, you often will not even notice that Apple like hires all their engineers or like all all the tech people, or whatever the infrastructure is, they will often buy startups, kill their product and just be like, oh, like we liked how you use the button here. We want to integrate that into some aspect of what we do. I don’t think we really understand and I understand that a tiny bit from my days at Microsoft, just how many like coders and and program managers and people you need to make these companies work. So when you have a chance to get a bunch of you know, coders who are experienced in the car space, Apple will probably pounce. But so will Tesla and so will other people with aspirations like that.

We’re going to move on to the next segment here. We’re going to talk about Apple again because there was some interesting news yesterday. Apple has tweaked its payment rules in its App Store. What does that mean? Well, traditionally, Apple takes a 15 to 30% cut of any transaction. So I download an app, let’s pick, I don’t want to pick the one we’re going to talk about here. That leads to funk now.

So when I downloaded WWE Network, if I had a subscription, I could download it and log into my subscription, Apple doesn’t get any money. If I didn’t have a subscription, and they wanted to enable me to get one on through Apple, Apple would get that cut. So some companies were doing workarounds. Netflix basically said, Hey, we know it’s inconvenient, but we can’t take you to our website. And we have to let you sign up. And now what’s happening is Apple is allowing you to go off site. So you leave the app, you go to a website, you can sign up. Matt, what are your initial reactions to this? This obviously wasn’t something Apple did willingly. It was something that they were forced to do for a variety of legal reasons.

Matt Cochrane  17:37  Right? Well, so they said they did it as a result of an investigation by the Japan Fair Trade Commission. So basically, Japan’s version of the FTC, and but they’re gonna make the changes globally. So look, I’ve been pretty vocal about most anti-trust action being taken against big tech companies. And I think most of it is, is a it’s just wrong. I think it’s like, you know, a lot of the cases have been dismissed, you know, by the judge, they don’t even go to trial. And I think I just think most of it is just wrong sided. They’re they’re bad solutions. I don’t think it’s good for innovation overall, or for the economy overall, for consumers.

That being said, I think, if you look at the presidental administration, Biden has has stocked the FTC and like his cabinet members, with people who want to go after big tech. And I think the biggest vulnerability is Apple’s App Store, and Google’s [Alphabet] (NASDAQ: GOOG) (NASDAQ: GOOGL) App Store, because they almost are like monopolies. Like Apple competes directly with services that because of the cost of acquiring their content, cannot like cannot bear Apples 30% fee. And Apple doesn’t let those services link to their websites for purchase like that. That just sounds like there is anti-trust case there. Um, so I think this is like Apple kind of making the bare minimum changes to like, kind of like get Japan off. Its back. But I think more is coming. And I think Apple and Alphabet are vulnerable here.

Dan Kline  19:02  So Alphabet does not have a fully walled garden. The only way you can install something on your iPhone, unless you jailbreak it, which invalidates your warranty is to go through the app store. You can add content to a Google-based device, not going through the store. It’s not always easy, but it is possible. So there are some differences here. I think the challenge, I ran a store and when you run a store, you’re selling items, and you’re making money on them. But you know that basically, the ones you choose to surface in places customers are going to see them, there’s some value to that. So that’s kind of why you’re getting a markup here.

With Apple, and Matt, I want you to weigh in here. I think the challenge is, if I go to the the App Store, and I type in, you know, app to record interviews, and it gives me five apps and I look at them and I picked the best one. Apple essentially did the marketing at surface something for me that I didn’t know. If I go into the app store and type in Netflix, I am not entirely sure Apple deserves 15 to 30 percent because obviously, the vast majority of Netflix customers do not get there by typing in streaming video service. They know what Netflix is.

So I wonder if some of this is just, it’s negotiating like anything else. We saw some of these new services like HBO Max, not debut on various platforms at launch, because they wanted better deals. I actually think this is more of a free market thing. Because Do you really think that Netflix customers would be like happy if it wasn’t in the app store because they couldn’t reach a deal?

Matt Cochrane  20:33 No, I don’t I just think like when Apple’s competing with the services and charges, like can charge advertising for their app store. Like I think it put them in a difficult situation where they don’t allow, like, competing ways to pay. It’s a good question. I don’t think like imagine if Google Search like, so you need a recording app. But you did it through Google search, and Google took and there was only one search engine you could use on your phone. There weren’t multiple search engines, just one. And Google took a 30% cut, because you’d showed up in the Google search column. I don’t know if that’s free market. I think it’s interesting, but I think this is a real vulnerability for both Apple and I think Alphabet too. But all the other thing I would say too, is like even this change that Apple made, and only applies to reader apps.

And reader apps are like magazines, newspapers, books, audio, music, and video. That doesn’t apply to games. So like the Epic, like, you know, with it’s also going on in Fortnight doesn’t apply. To a productivity app? Doesn’t apply. So there’s still a lot of things like this doesn’t apply to. And I just think Apple’s gonna be vulnerable here. Look, I think the Biden administration is going after big tech. And I think they made that clear with their appointments. And I think like, if there’s any low-hanging fruit for that, this would be it.

Dan Kline  21:49 it’s probably important to mention that there is bipartisan support for going after big tech for different reasons. And we’re not getting into those reasons, most certainly, but there is absolutely some fervor there. Look, the easiest thing for Apple to do here would be to end the walled garden. And the reality is, while you can get apps and I did when I when I was back in the app creation world, you can get apps onto a Google phone. It’s not that easy to do. So it’s not, you know, the average person is going to use the app store or one of the Google Play Store, whatever you call it there. Maxx. I have a question. It’s related to this. Sometimes you’re very techie. Sometimes you’re anti tech. Do you have an iPhone? Are you using like a jitterbug?

Maxx Chatsko  22:27  Yeah I have a flip phone, I use Nextel, Dan. Smoke signals. That’s how I text. No, actually, I have a question for Matt. We saw I think I saw and I just might be wrong. But wasn’t Microsoft going to eventually allow its operating system to be used on like Chrome OS? Wasn’t there’s some kind of like a cross-licensing deal going on there?

Matt Cochrane  22:47  The what platform is going to be used?

Maxx Chatsko  22:50  Wasn’t it? Were you gonna be able to use Windows on Chrome? Like offer like Chrome devices? Chromebooks? Is there like maybe a potential solution, there were all these companies are cross-licensing operating systems.

Matt Cochrane  23:00 So I think Microsoft has partnered a lot with a lot of companies, and that’s definitely since Nadella took over. That’s the direction they’ve gone in. I don’t know specifically, though, it’s like, on the Chrome OS or something.

Dan Kline  23:13  So since Satya Nadella or as our transcription service calls him, says, Hi, Nutella, took over Microsoft, he’s been very open about being willing to be cross-platform. So right now, we’re actually in the process of porting Android apps over directly onto windows. And Microsoft has been openly willing, I doubt your typical Chromebook could run at full windows. Now, that said, there are definitely thinned-down versions of Windows for lower-powered Windows laptops, for Internet of Things devices. So Microsoft has been gone from being one of the more walled garden companies where I think Office for Mac hadn’t been updated in like five years, at the point I worked there, which was, you know, six or seven years ago, or seven or eight years ago. To being a company that’s open to working with others. So we are going to move on here.

Matt Cochrane  24:06  And I would say like, it’s not a coincidence, either that like since Microsoft had done that, there are probably of all the big tech companies they’re the company that’s least in the crosshairs of government right now.

Dan Kline  24:18  That is definitely true. Max Lucas says the bet MGM app is not on Android and assume that is because they don’t want to give Google a cut. I would assume it’s because MGM and Caesars have for some reason been lagging the the also-rans in this space, and I’ve talked about this a lot. Eventually, if you’re the leader, and you don’t do something, you won’t still be the leader and that that huge edge you had and I’ve talked a lot about the edge Caesars and MGM have and having these massive players clubs. But I tried to place an online bet through the Caesars app while I was in Las Vegas and could not get it to work. That to me is a big weakness. So I wonder if they’re not on because they’re just not spending the time they’re just not seeing it as an opportunity. I actually hope that’s something that changes soon.

But we appreciate your questions and comments, feel free to ask more things, but we’re gonna, we’re gonna zig a little bit we’re gonna stop talking about Apple. This has been the Apple-iest show we’ve ever done. We’re actually going to have Gwyneth Paltrow and Chris, Chris Martin’s daughter on later app. Her name is Edna, we’re not going to do that. Maxx, you want to talk about the FDA crackdowns on safety for multiple drug classes? I assume this goes beyond putting the things in those bottles that I can’t open.

Maxx Chatsko  25:33  Yes. Just have your wife do it Dan. That’s that’s the chip. So yeah, I don’t know maybe crackdowns too strong of a word. But it’s caught my eye. I mean, recently, last month, we’ve seen three different drug classes kind of have a little bit more scrutiny from the FDA. And this was kind of, you know, long, it’s not really surprising, necessarily analysts were kind of expecting some of these, but it seems like the FDA is actually trying to send a signal amount of some drug developers. So if we have PD-1 inhibitors, right, so different types of antibody-based drugs. Huge markets, I think $20 billion in annual revenues in the US alone. This like last year, and then maybe up to $30 billion by 2026. So one of the most successful drug classes ever developed.

And what happened was the FDA granted some accelerated approvals in recent years, right. So some of these drug developers conducted a mid-stage trial, they got some promising signs that maybe it works, and it’s safe. And the FDA said, Hey, you know what, this looks pretty good. Why don’t you guys start marketing this, but there’s a catch, you still have to run a follow up study, a longer study, and company said, woohoo, we’re going to market our drugs, awesome. And then they ran those larger studies and sometimes dragging their feet sometimes delaying as long as they could, and then the results, but they didn’t actually back up what the mid stage trial said, but they were still marketing those drugs. And the FDA was like, Well, hey, hang on, what are you guys doing? And they kind of just let it go for a while but they’ve convened some different meetings, and it looked like they were gonna start to bring down the hammer.

So this actually caused Roche to pull Tencentriq, one of its PD-1 or its PD-1 inhibitor, rather. It had $3 billion in revenue in 2020. So it pulled it from the market in triple-negative breast cancer, not actually a very large market for Tencentriq, so not really like a major impact for shareholders or the company. But you know, it’s interesting, nonetheless, it looks a lot better when you voluntarily withdraw your drug from the market, then when you get a heavy-handed letter from the FDA saying, hey, this needs to get pulled from the market looks a lot better for the optics perspective.

Dan Kline  27:31  Yeah, the FDA never writes you just to say What’s up? A letter from the FDA as a drug developer is not great. Maxx, is this fallout from the scrutiny of the let’s call it questionable approval of an Alzheimer’s drug earlier this year? Is this just sort of the FDA realize people are watching a lot more now?

Maxx Chatsko  27:49  Well, some of these are already in the works, right. But certainly, I thought that the way that the Alzheimer’s approval went down, made it more likely that there’s gonna it was gonna be worse for drug developers in the long run, because that leaves a lot less wiggle room for the FDA, right, there’s going to be more scrutiny on the FDA, so they need to be tougher. And then they you know, they can’t give as long of a leash for drug developers.

Actually a great example, again, in JAK inhibitors. So this is a broader drug class as well. The FDA just announced new warning labels for labels for any of these drugs that are used in autoimmune disorders. So this actually impacts three different drugs, they had sales of about $3.6 billion in 2020. And that’s because JAK inhibitors actually affect your immune system. It can increase your risk of blood clots. And these already had warning labels on them. But now they have even more added to those warning labels. So another example of a kind of bringing down the hammer. This was just recently.

And then finally, this is actually going on right now today, as we’re talking here. The FDA is convening a panel to talk about the safety of gene therapies. So we’ve seen some safety problems in gene therapy, some liver toxicities. We actually had some patient deaths, I think last summer. Right before one of the most important gene therapy scientific meetings like a week before talk about a buzzkill.

Dan Kline  29:06  Those meetings are a blast, I’m sure the gene therapy scientific summit, that is one to write home about.

Maxx Chatsko  29:13  Yeah, so there’s over 300 clinical trials underway for gene therapy in the FDA convening panels from not from industry or academic scientists, and they’re just trying to get a handle in a read on. They’re bringing all the best and brightest minds into the same room. And they’re letting them say what needs to be, you know, regulated a little more, what doesn’t need to be regulated, what’s working just fine. And I think one of the eventual likely outcomes of this meeting, it’s not going to happen immediately. But it seems like the FDA might issue some, you know, maybe the little cap, how high doses can be for gene therapy, and maybe come up with some additional restrictions on how you conduct animal trials or how you design human trials. You know, in the name of patient safety,

Dan Kline  29:54  Maxx, let me ask one question to close this out here. How does the FDA balance the sort of demand for drugs to cure things that are uncurable. I’ll share a bit of a personal story. I have someone in my family I won’t be that specific. But a somewhat older than me relative who has a difficult to treat form of cancer. And he’s been in a couple of speculative trials where that which worked for him and did not work for many of the other people in the trials. And now he’s gotten to a point where the next trial recommended by his doctor that might prolong his life is not available in the US. So he has to travel to another country to get this. If you’re facing a case of probably nothing else is going to work for you and this may or may not work, there’s compassionate use, right? There are ways that these drugs can be used, if it’s a life or death situation, am I am I reading that incorrectly?

Maxx Chatsko  30:48  Yeah, I mean, that’s a tough one. Because a lot of times, you know, we’ve heard about like stem cells, for example, right. And reality is, they don’t really work that well, because we don’t have a great understanding of how to control what they do when they’re in the body, right. So that you hear a lot of, you know, clinics and other countries having stem cell trials or whatever. But they don’t work yet, they will work eventually, we just don’t understand it. And, you know, with the corral the complexity of biology a little bit better. So on the whole, I mean, the FDA does a good job.

And if they just let it be the wild west or drug developers throw whatever they want into patients, that wouldn’t be good, that wouldn’t be good for the industry that wouldn’t be good for patients. And I know when you have like a rare disease or something you want solutions, but you know, we have to be careful about your own safety as well. And if it’s not gonna work, or can make things worse, in the end, as well. A lot of treatments actually, you know, cause cancers to become resistant. So then, we can’t let limits the number of options we have or it makes your tumors more aggressive. So you do have to be careful in those instances.

Dan Kline  31:49  We appreciate so many of you watching. We’ve got one more topic here. I’m going to get to work one. Before we do that, it is now September 3, which is unfathomable to me because if you had told me it was, it was July 5, I totally would have believed you. But Matt, Maxx, what happens on the first of the month we just had a big big day here in the 7Investing universe, which is almost as involved as the Marvel Cinematic Universe.

Maxx Chatsko  32:15  Yeah, on the first of the month, Dan gets on a unicycle and he juggles and this time he got up to five balls in the air at the same time.

Dan Kline  32:21  I can actually I can actually juggle. Three is easy. Four is just juggling two twice five is exponentially harder. I cannot do five but I absolutely can juggle I taught myself how to juggle in high school by reading the clutch book of juggling to do a report on how to do something. It’s probably the only thing in high school I ever put any particular effort in that was academic but it is a skill that has served me well.

But that is not what happens and me on a unicycle wouldn’t be pretty what happens on the first of the month is our new picks come out. We each make our highest conviction stock pick we do a write up we shoot a video there’s a transcript of that video and you as a member can read everything you could watch these 35, 45-minute videos where the team asked questions or you could just look at the key takeaway. Geez why does Maxx buy this okay that’s kind of what I did like I went to Maxx’s presentation but I own I bought shares today in fact of the stock he recommended because it’s a couple days after members got that information.

How do you become a member? That is very simple. You go to, and you give us either $49 a month, or $399 a year. These would be a value at triple the price. You get access to our member call, you get access to all sorts of content. My pick this month had major news that happened on the day the pick came out. So I literally heard this news I was discussing it with a friend and then wrote a story. I am very lucky that I can write stories very, very quickly based on my news training, and had a story up about 19 minutes after I learned to the news. And it is relevant for people who are deciding whether to buy it.

Now Maxx’s companies which tend to be in the biotech field might have updates more often than if I’m picking you know, sort of a stayed retailer or Maxx’s or Matt is picking a somewhat mature technology company. But when things happen we update them for members we do all sorts of exciting stuff. Matt Cochrane, anything you want to say to potential members here as they contemplate giving us their hard-earned or maybe stolen money? We’re not where we’re fine you could no don’t do not steal money to join 7Investing. That was a joke, Matt?

Matt Cochrane  34:36  No, we definitely we look we want to be the champions for retail investors, right? Look, if you’re looking to save some money away, whether that’s for like college for kids or for retirement goals or whatever your financial goals are. We want to help you we think we can help you and our track, our track record right now proves it. So yeah.

Dan Kline  34:55  And I am very excited about our $87 students subscription. If you have if you are a students if you have a child who’s interested in investing, we have all sorts of cool things we’re going to start doing for our student members as that program ramps up. And I will throw this out. If any of you are in South Florida next week, Matt and I are having dinner on Thursday night. So you want to come by buy us a drink message me, we will let you know we will buy the drinks. Of course.

I want to talk about one more thing here. This is a something I shared on Twitter today. JT, if you have that, that would be great. If you don’t, not a problem.

The jobs report number moves the market. So we get every every month, we get a federal jobs number. But it’s a meaningless number, when the US has more job openings than it has people to fill them. Companies stop listing jobs when they can’t find people to fill them. So this is a product of reporting. Now, when I was a reporter, when I worked at the last place, we worked, I was doing a lot of news coverage, I had all these different dates. This report comes out then that report comes out then because our partners the USA, Today’s and MSN, and those types of places in the world that took our content, they wanted news-based content. So the problem is news happening can be a story but you need to actually report what happening.

So what happened. We only added I forget the number 275,000 jobs and the expectation was way higher than that. But if there’s 8 million job openings, and 5 million people looking for a job, who cares if there’s 8.2 million people looking at 8.2 million openings are 8.75, it doesn’t matter. Now, here’s the reality. Being unemployed can be very personal. Just because there’s more job openings, doesn’t mean there’s a job that’s right for you or that you’re qualified for. That gets certainly harder as you get older and more specialized and more experienced. But the reality is this is something that’s reported endlessly that’s kind of based on nothing. And I’m pointing this out, because this happens a lot. It is not unique to the jobs report.

So I hate picking on this one company because they do great paid research. But there’s a company called Consumer Intelligence Research Partners, and they do a I forget if it’s monthly or quarterly, study on how much money Amazon Prime members spend versus how much people who are not Amazon Prime members. And that gets reported pretty much universally throughout the media. I’m not sure they still do this. But they used to do this and it was reported everywhere. The problem is it’s a survey of 500 people. To say a survey of 500 people is a little questionable, is putting it mildly. And then here’s the other one, Matt, I’m sure you’ve seen this. There are all sorts of surveys being done out there by credible organizations, where they do 1000 people. 1000 people is kind of the baseline for asking broadly, like, Do you have money in your savings account or like something just incredibly broad. They do that and the top line data might be interesting, but they will break out well, 82% of millennials have no money in a savings or checking account? Well, when you look at the survey of 1000 people, there’s 17 millennials in that survey, and it’s an absolutely irrelevant number, but it will get reported elsewhere.

So I think it’s very important when you’re looking at things like the jobs report that again, front page of every financial site, you need the context. What’s the context here, unemployment fell from 5.4 to 5.2%. That is very meaningful. There’s also millions of people – I have the number here somewhere. I don’t have the number here somewhere. Something like 5.6 million people who are not in the job market for COVID-related reasons. That could be childcare. That could be health issues. That could be fear. You know, you’re immunocompromised, you can’t go to work. So I talk about this a lot. Ignore the headlines. The headlines are not important.

It is a Friday. It is a holiday. We appreciate so many of you sticking around but we are not going to keep you for the full hour here that we do sometimes. But so why don’t we JT? Why don’t we climb up on the top rope here and hit our finisher and send you all off on the weekend. Which restaurant loyalty program will prove to be the most important business driver over the next five years? 3.4% said Burger King that one was announced this week. That’s why I asked the question. 67% said Chipotle, 26% said McDonald’s, 3% said Wednesday, Wednesday Wendy’s. I actually think it’s McDonald’s. I don’t think a Chipotle customer. Yes, they may use it but I don’t think it’s as important. Like look, I have Starbucks rewards. I forget to use them all the time. I’m going into Starbucks, whether they give me a free beverage every 150 points or not. Matt, you’re a customer of some of these restaurants, your thoughts here.

Matt Cochrane  39:39 So I think actually Wendy’s is a sneaky play. They have a surprisingly robust loyalty program. I think that’s overlooked by others. They hired a big shot from Domino’s a year or two ago and to head that up and like I think like you know, 3% was answered in the polls, but Wendy’s has already moved this year. A part of that was like, somehow I got caught up in all the meme stock nonsense, but Wendy’s is making some real changes. So I think Wendy’s is like an underappreciated restaurant play right now.

Dan Kline  40:07  My 17-year-old works at Wendy’s so I will abstain here. I will just say that in a broad sense, I am wary of franchise restaurants where the franchisor does not exhibit McDonald’s like control. Like Yes, a local franchisee owns a McDonald’s, but there’s very strict rules and even there and there’s problems with you know, wages at McDonald’s on one street being different than wages on another and changing the quality of service. I feel much more confident in company run at restaurants. I understand. The asset-light model can be very good for stock. Maxx, I have no idea if you eat at any of these. What are your thoughts here?

Maxx Chatsko  40:44  I have no idea which program might be most successful. I did work at Wendy’s one winter. I used to work in a golf course obviously to open in the winter here in Pittsburgh where we experienced all four seasons and during that winter, Wendy’s launched breakfast and the Baconator it was the busiest winter in my life.

Dan Kline  41:00  Matt will take that there are four seasons on your word because there are not four seasons here. With that, probably the first time the Baconator has been mentioned on this show. We will be back on Wednesday. There is no show on Monday, Monday, Monday is Labor Day. Take the weekend. Have some fun. I will be heading to Hollywood Studios on Monday unless it is oppressively hot. If you’d like to get in touch with us.

We are for young folks, that is an email account. You know, so dig your email account up. We are not on Tik Tok, though maybe we will be but we are not yet at the moment. That is for questions about joining questions about your membership questions about you know, maybe something we’ve posted on the site or how do you find it. We promise we are working on the search on the site and trying to make it better that that is a work in progress, but it is actively being done.

If you would like to interact with us. The best way to do that is on social media. We are on Twitter @7 that is the number seven, investing. We share a lot of interactive polls I throw out today, what stock do you use the most in your day to day and I threw one out that I thought was the most and then a lot of other people answered and I went oh wait a minute, like actually maybe those are are the right ones. So really interesting discussions, you’ll get some great healthcare insight from from Maxx. You’ll get some long posts from from Matt, who will not be constrained by 280 characters. He is willing to go the extra mile with a multi tweet post.

But with that, I think it’s basically the weekend so tell your boss Dan said it was okay. You can go home or stop working because you probably are home. That probably won’t fly if your boss doesn’t know who I am. For Maxx Chatsko, for Matt Cochrane, for JT street, for Homer Simpson. We will see you on Wednesday.




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