Nano-X Earns an Important FDA Clearance (What It Means for Investors)
April 5, 2021
The FDA has cleared the single-source Nano.ARC machine, which will be used in tomosynthesis applications (checking for breast cancer). It’s a big step for the company which takes away some risk for investors. This is a major milestone for Nano-X, but much work remains as there are still manufacturing and distribution hurdles to be cleared. We’ll also be talking about Nike and its efforts to go direct-to-consumer which has shut out some major retailers.
Samantha Bailey 00:14
Welcome to seven investing 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 00:24
Good afternoon seven investors and welcome to the post Easter edition of seven investing now my name of course is Daniel Brooks Klein. I’m being joined today by Maxx Chatsko. And we are going to talk all sorts of biotech science but before we do that, Maxx, how was your Easter?
Maxx Chatsko 00:42
I was good. I didn’t really do much. And you know, it’s funny in the Slack channel on for seven investing, everyone’s posting pictures of their kids and their families. And I pretty much stayed inside and didn’t do much all weekend. So that was my Easter, Dan.
Dan Kline 00:55
Well, had it been a normal year we certainly somebody would have invited you on the team but a Maxx Max is still not vaccinated. So he’s not welcome in anybody’s house just about yet. But here’s the situation. So I inadvertently ended up at an Easter brunch, we had to kill time my wife and son were getting their second shot had to check out of our hotel at 10. We’re looking at a resort property near where we have a vacation place now. So we needed time to kill I booked the breakfast turned out it was an Easter brunch. And I realized Maxx that I approach brunch or buffets or whatever you want to call them. The way I do find it. So I went high value first you got to you got to load up on the lamb and the crab claws and the shrimp cocktail. You know, avoid the rolls. Like there’s a lot of pitfalls in a buffet, you know, you could fall for a waffle. I love a waffle. Everyone loves a waffle, you put whipped cream on it chocolate chips, but it’s still a mistake on a buffet where there are higher value items. So I got my money’s worth. I don’t think my wife and son did. But next year, hopefully it will be a normal Easter. We’re going to talk nano x in a second. I hope I’m saying that correctly. It’s actually think i’ve ever heard it out loud before. But before we do that, we of course welcome your questions and comments. We’re gonna do a question and comment section, probably just a brief one, towards the end of the show. So more than happy to take those questions and comments. But in our top story, we’ve got nano x, they’ve gotten an important FDA clearance aren’t all FDA clearances, important. Maxx Chatsko. What happened?
Maxx Chatsko 02:26
Yeah, so when you have a medical device you have to get usually you have to get clearance, there’s a category you can get approvals for, and for a drug, you have to get approval. So it’s a little more, it’s stricter, right, there’s more data that you need to run clinical trials, often not the case for medical devices. So for nano x imaging, it just announced over the weekend that the FDA has cleared its first systems called the single source nano ARK system. So this is gonna be used for something called tomo synthesis, which is basically a way to detect malignancies and tissues. This is like how we, one of the first steps we use to diagnose breast cancer, for instance. So the FDA cleared that device. And this is actually a pretty big, important regulatory milestone for nano x imaging, as you can imagine, Dan, but more so because in recent months, the company has been going back and forth with regulators, it’s submitted some applications, and FDA came back and said, We want more data, and then it would go and make those changes. And then the FDA wanted more data. So it was kind of frustrating actually forced the company to delay some of its commercialization timelines from its initial expectations already. But now that it has this first clearance, that’s certainly a good sign for the company and for shareholders.
Dan Kline 03:41
And this does a clearance mean, they can sell the device.
Maxx Chatsko 03:45
Yes and no. So yes, it’s going to be it’s ready to to be marketed. But nano x imaging hasn’t actually manufactured any of these devices yet. So that’s going to take some time. And importantly, I mean, one of the key things for investing in nano x imaging is its business model, right. So it’s medical services as a, as a medical, I don’t remember what the MS is the M SaaS business model, I just wrote about this. So I forget, I apologize. But they’re going to earn revenue from kind of like subscriptions like pay as you go model, right. So they’re going to get revenue from like per scan, rather than just selling each machine and getting a one time, you know, revenue event. So that’s pretty novel, it’s pretty interesting, and has to do with the form factor of the machines. You know, they’re smaller, they can be lower cost, the images and the scans can be lower cost. So this is good. This can be a very widely distributed platform. But the company still has to earn clearance for the nano cloud product, which is this software system. So that is supposed to be submitted to the FDA sometime before the end of 2021. But the company does expect to sell it and ship its first 1000 machines which would be the machines that just got cleared by the EFT over the weekend before the end of the first quarter chosen 22. So within 12 months, one year from today, if everything goes well, and the company should have shipped its first 1000 machines.
Dan Kline 05:12
So Maxx, the stock is up something like what’s up like 40%? When I looked over the weekend, that can often change. I didn’t I didn’t take a snapshot before we got on the air. But this is really like what like second inning and a nine inning game like this is still very early, and it’s still a very risky company. Is that a reasonable way to look at it?
Maxx Chatsko 05:32
Yeah, absolutely. Like we said it, then it hasn’t manufactured any of these devices or systems yet. So you know, that’s obviously a risk and, and it has partners, I mean, its partner with, you know, South Korean manufacturing leaders Foxconn in China. So it has made, you know, methodical partnerships in order to navigate some of those risks for scale, but it’s never trivial. You know, there are going to be some delays and bottlenecks inevitably, and, and because this is a volatile stock. You know, I’m not saying that to scare investors. But you know, if manufacturing delays anything by a couple weeks or months, I mean, in the grand scheme of things that might not be a big deal, but maybe just expect that to happen. Additionally, this system that just got cleared over the weekend, isn’t the system that nano x imaging intends to use as its commercial system, kind of confusing, but the company has. So the one that got cleared, is called the single source nano ARK. So that uses just one version of the digital X ray technology that a company has pioneered. But it’s going to use a multi source nano ARK as its commercial system. So that along with the nano cloud software product are going to be filed with with the FDA for approval before the end of 2021. So the end goal is that the system that just got clear today is eventually going to be maybe licensed out to a partner, maybe they’ll have a different business model there with you know, collecting royalties or licenses or some combination of those two. And you know, it’s it’s the business model is using the N SaaS business model is going to be a combination of the cloud product and then the multisource nano ARK system, which has yet to be cleared by the FDA.
Dan Kline 07:13
So let’s talk a little bit investing lesson here. And Mike fee, Lauren noble, we really appreciate your comments. The investing lesson here is stocks tend to pop on very small pieces of news. Now, this is a big piece of news for this company. But it’s not the giant news, this isn’t the one that takes them over the top. And we’ll see this with just about anything, you know, a big tech company reports encouraging numbers, but some analysts doesn’t see them as encouraging enough, and the stock is down. This is a hard concrete piece of news. But it doesn’t guarantee success for nano x, it doesn’t mean this is going to be the next you know 100 billion dollar company Maxx, I’ll give you the last word. Any any words of warning, we appreciate Mike v say hanging out, you know, to not hype this stock, we’re not hyping the stock. We’re covering the news, as it happens. And we’re giving you the appropriate level of warning because this is a risky investment.
Maxx Chatsko 08:05
Yeah, I appreciate that comment from the top of the show, Mike. You know, I always try to be very balanced, right? Every company, look at every investment you make, there’s challenges and there’s opportunities. And I think in this environment that we’re in, a lot of people tend to only focus on the opportunities and not the challenges. So again, with nano x, you know, they still they face, I guess the way to look at it is this is one regulatory risk that’s been kind of, you know, brushed aside now it’s it’s no longer a risk, but they’re still commercial risks and challenges and opportunities there. Right. So they saw the, you know, scale manufacturing, they still have to get clearance for their cloud product, and they had clearance for their multi source system, which is what they intend to use commercially. So the system that was approved isn’t even in their long term plans, really. So just keep that in mind. This is this is a solid development for investors in the company. But like you said, it’s it’s still a very early in this this business’s trajectory and Dan, you’re
Dan Kline 09:02
going to have time later in the show to ask your questions and your comments that can be about biotech that can be about retail that can be about investing in general in a second. We’re going to talk about two very different companies in what we’re watching. We’re talking about Nike, we’re going to talk about invitations. But before we do that Maxx it’s the fifth of the month on April 1, our new pics came out at seven investing. Each of us picks our highest conviction stock each month, and we write up a really large report Maxx makes those look really nice. On the website. We do a slide deck that we present to other members and to other lead advisors and that gets videotaped that comes out on the eighth where you can actually watch each of us spend about a half hour doing a real deep dive into why we pick the stock with other people firing back questions at us sometimes making us go back and do research on why we picked it hasn’t made anyone change their mind yet, but certainly has made us you know understand the bear case Maxx how People get access to our not just our April picks. But all our picks our members only calls all the great paywalled content we have at seven investing.
Maxx Chatsko 10:09
So let me give out Simon Erickson cell phone number. It’s no just kidding. If you go to seven investing.com slash Subscribe $17 a month, $170 a year, you can see all of our picks or recommendations. So you get those reports like Dan said, Here there comes a subscriber only calls in the middle of the month, ask us directly questions behind the screen, like where it’s only for members, right. And we also provide continuous coverage of all of our past recommendations. So if there’s a material development from one of our recommendations, we published a company update for members only as well. So you know, we’re right there with you the whole time because we’re long term investors. So these are going to be with us in our scorecards for a long time.
Dan Kline 10:50
We’re gonna move to what we’re watching so Maxx, do you wear Nike sneakers?
Maxx Chatsko 10:56
I don’t have like a I’m not like a shoe dog or anything. But yeah, I’ve worn them before. I don’t like seek them out though.
Dan Kline 11:02
So I wear a lot of Nike t shirts, I own some Nike sneakers, and almost all of my Nike products I purchased from the Nike outlet, which is literally across the street from where I live right now, but many people bought Nikes wherever they happen to be. And Nikes actually decided that’s not going to be the case anymore. So they’ve had two waves of getting rid of retail partners. So you know, they’re calling it anybody that has an undifferentiated Nike experience, meaning you’ll walk into the store and you know, Nikes are just sitting there on the shelf. They’re going to get rid of you so last August, they got rid of Belk dillards Zappos boss cubs, Bob stores, Fred Meyer Evelyn’s VM and city blue. Not a murderer’s row of retailers, but still an awful lot of distribution. Most recently they got rid of D SW D. SW is a major shoe chain. Urban Outfitters certainly appealing to a certain audience at Macy’s. They’ll still be Nike at the finish line inside Macy’s for ones that have those. They’re also got rid of Big Five never heard of that one. Olympia sports Dunham’s and shoe show. So Maxx why are they doing this? They’re doing this because they want to control the brand experience. So if you go into a dedicated sneaker store that’s hyping up Nike, that’s a that’s a great experience. They can do shoe drops, they can do release parties, all sorts of stuff there. That doesn’t really work with the Kohl’s or the Macy’s business model, where they’re just kind of on the shelf. So what is Nike want to do? They’re going to launch about two to 300 of their own stores. It’s you know, small format, really interactive fun, you’ll probably be able to do the thing you do at New Balance where you know, you can test your fit and run on a treadmill. I was awful. I did that it was not fun to watch myself running. And they get you the perfect fit. You know, they can do the release parties the lineup at midnight, but they’re also doubling down on their direct to consumer channel. They want to see more shoes get ordered through their sneakers app. And that means my son who is a sneaker head to a sense, who follows these things has me at like eight in the morning logging on and trying to get you know, and here’s a nine and a half, which is a really really common size, so they’re often sold out. So this is really about Nike taking control. This is a trend to watch and retail and I brought this up today because Simon Erickson and I are going to tape tomorrow, a podcast where we really dig into it’s not just Nike do doing this Adidas is doing this Under Armour is doing this. This is somewhat the Lulu lemon business model where they are not distributing into other stores. And then you’re also seeing direct to consumer brands move into stores. If you go to a target right now, you can buy both Harry’s and Dollar Shave Club for a while you could buy quip the toothbrush, I don’t know if they’re out of stock or simply that deal is over. So you’re seeing this very strange retail world where pure digital brands are going into physical stores. And previously retail brands are pulling out of some physical stores. So it’s a massive change in retail and we’re going to be following that very, very aggressively. I see a bunch of you have comments and questions in please keep them coming. But Maxx, we had some other giant news on a well followed, I guess a genetic testing leader and that is SoftBank, SoftBank of sprint and many other botched investment failed but we work SoftBank has not had a great run recently with its investing arm. But they’ve invested 1.11 5 billion that’s what the bee into genetic testing leader invitation. Do you want to go through and explain to us what happened here.
Maxx Chatsko 14:29
So it’s interesting, you know, SoftBank is the vision fund usually invests in privately held company startups, right. And recently, though, we’ve seen a kind of take stakes in publicly traded companies, which is a little bit different for SoftBank. But, so recently, we saw it, invest $900 million in Pacific bio sciences. So that’s a DNA sequencing company. And now it’s taking $1.15 billion stake through convertible debt, we should say, in nvta. So It’s interesting to see that and MBTI is one of these fast growing leaders in genetic testing. You know, and ended last year I had to write these numbers down, because there’s a lot happening and mutate, it ended 2020 with $350 million in cash. A couple weeks ago, or months ago, now, it raised $460 million in gross proceeds, they now just announced $1.15 billion investment from SoftBank. So without accounting for cash burn from the first quarter, you know, the company has, you know, at least one and a half billion dollars in cash $2 billion in cash right now, which is going to plow into acquisition scaling its platform, you know, so this is a really big shot in the arm for me, TJ
Dan Kline 15:40
Maxx, do they need this much money?
Maxx Chatsko 15:42
Yeah, you know, so we see this a lot, right? A lot of a lot of investors ask questions about genetic testing, right? And they say, well, isn’t this just going to be a commodity eventually, like, costs are going low, anybody can do it. And yes, you’re right, it will become a commodity in a way. And that’s also kind of the point, right? To make it accessible to everybody and grow and expand the market. But something that I’ve come to learn is that, you know, you’re going to succeed in genetic testing through scale. So the barriers to entry for genetic testing are very low. But the barriers to success in genetic testing are very high. So if you’re making investments in the space, you need to optimize for the ladder, there’s gonna be multiple winners, you know, but those winners are going to be the ones that scale and do so you know, very rapidly and also are, you know, forward thinking right? entities trying to build this end to end platform, and wants to have like a subscription service one day where it’s not just you go through your doctor to get your genome sequenced, or, or some genetic tests, or some part of your genome, but rather, it’s more of this continuous, you know, relationship with the genetic testing and some interactions with your genome. So more proactive health care than what we have today.
Dan Kline 16:51
Maxx how vulnerable are they though, to one well funded competitor coming along, and sort of just, you know, it only takes two for it to become a commodity, even even in a space like say, you know, wireless phones, where there are three players, we there are some price limits, because there is competition, due and there’s probably been some collusion there, that’s not so so, you know, acceptable. Is this something where their entire pricing structure could be challenged?
Maxx Chatsko 17:18
Well, no. So for this, you have to go down and cost. So that’s kind of the race now, right? How they’re, they’re kind of competing on who can offer like the lowest cost tests that are also the highest quality. So there’s already multiple, large companies here, there’s Myriad Genetics, so they’ve kind of stumbled, given their history. But there’s others exact sciences kind of has some similar tests in certain areas. You know, there’s color genomics. I mean, there’s a lot of different companies here. So it’s already, there’s already a lot of competitors, there’s going to be multiple winners. So I don’t think in mutase, really under too much pressure threats. But one thing though, is, you know, it’s pursued this growth at all cost business model, where just like, we’re going to burn $300 million this year. And you know, operating losses are going to be that high every year. And I’ve always kind of that ever makes me feel great. I don’t like that business ball. But in this environment, when the cost of capital solo and interest rates are near zero, there’s almost no penalty to doing it. So it makes sense. It’s almost like financial markets have moved towards you know, invertase business model and how it’s pursuing that. So you know, off to the races, keep making acquisitions, keep expanding the platform, there’s there’s no penalty for doing that right now.
Dan Kline 18:26
We’ve got a question here from sun deep, David, more of a comment if you want to pull that up. Sam Bailey, the pricing of the convertible debt was unfavorable to current shareholders as the conversion prices where the stock was trading at a few weeks ago, pretty diluted info selling 1,000,000,000.5 or billion point one in new shares, no matter what the price, but generally pricing is set a few weeks before Is this something that worries you Max? Or is it just better that they have the cash on hand?
Maxx Chatsko 18:51
Yeah, I would not see this as a major concern. I don’t think the debt comes due until 2028. So by then, I mean, what could the market valuation for the company be, you know, $1 billion, then might be relatively insignificant, you know, amount of money or dilution, the company could raise new debt in 2028, to pay off the old debt or come to some other arrangement with SoftBank. So I think that’s a pretty distinct concern. Definitely something you know, you got to look at those details for these types of deals. But for this specific instance, I don’t think that’s much of a concern.
Dan Kline 19:22
And by 2028, we’ll be taking a sidewalk genetic test, as we walk into Whole Foods to know what we should be shopping for. I’m teasing a little bit, but I do think genetic testing is going to become a bigger part of the health care picture. You know, we’re just going to know a lot more about what’s coming and sort of preventative what we should be doing. Maxx and I had a very funny conversation on slack all weekend about Brazil nuts, which apparently, I should be eating Brazil nuts occasionally because they have Selenium in them. I’ve never heard of that before. But if you store it incorrectly, they can taste terrible. So I am learning all sorts about what I should be doing. We’re going to move into the homestretch here and take some of your Questions. So got a question. How is your Nike outlet assignment property? Yeah, it is. Simon, not our own Simon Erickson Simon, the the outlet company has done a really good job with how they’ve handled their outdoor outlets. I think they’re actually going to come out of the pandemic stronger, as much as a tear malls are going to do well. We’re going to talk about this later this week on the podcast with our own Simon Erickson. I do think more of the country likes the idea of not being in a crowded enclosure, I think there’s gonna be some hangover from the pandemic. A bit of a procedural question or comment from Mike fee here. Thanks for discussing. I was watching this company closely and glad you guys are doing a deep dive. That is not the one I meant to take. I meant to take the next one, Sam, glad you discuss the company and not the stock trying to place a price target. Thank you, you guys are doing great. You know, we don’t place price targets, I think it’s important to realize, when we buy a company, we do do a section on valuation. And valuation is a problem on some of these biotech companies. But when I look at a company, and Maxx you can jump in in a second year, I look and say, What is the road ahead? So you might look at Apple and say, okay, they’re gonna flame out in healthcare, I don’t believe they’re going to be a big player there. So I don’t think there’s that much growth they can have. That’s a credible argument, I would argue that they’re going to add a trillion dollars in healthcare sales, and probably another half, half trillion in services and other items, they might even move to a subscription model for some of their hardware, like Microsoft has essentially done with the Xbox. So it really is not where the company is now. It’s where do you think the company can get Maxx? Chatsko? Your thoughts there?
Maxx Chatsko 21:41
Yeah, exactly. That’s why we don’t place price targets on things, we’re looking at the long term. And, you know, in biotech in my area here, you know, the market tends to be inefficient, and how it prices these companies, right? Usually we wait for these big events, you know, clinical results, or, or getting regulatory clearance or something to price that into a company. And it makes sense in some level to do that. But because, you know, Dan, how many times have you seen like maybe a biotech company jump like 80%, or something in a day, it’s because that’s not really effectively priced in leading up to that event, we kind of wait and see. And we treat these as binary events. But there’s ways to kind of see and put the pieces together and constrain risks ahead of those events. So you can make a little bit better investing decisions. And now I think, in this current market, and because of the pandemic, I think there’s this like expectation that we’ve solved health. And you know, biology is just so easy now, and we’re just gonna cure all the things. So there’s like, on the other end, I think it’s inefficiently priced because a lot of biotech companies are overvalued. Right. So investors do have to be careful here and think about valuations, you know, and again, it depends on the long term time horizon. But if you buy too, you can overpay for growth or a good business, and then you’re just gonna be sitting on some company and maybe not have any returns, or have to wait a very, very long time to get any return. So you do have to think about all of these aspects.
Dan Kline 22:59
smaller, more speculative companies are also open to these giant moves. So you know, not that we’re generally buying shares of companies that are, you know, trading below $10. But there are some good companies that we do own in that space. And sometimes news will come out or a quarterly report will come out, that doesn’t actually move the goalposts, it doesn’t actually prove anything as to whether the company will succeed or fail. And you’ll see a giant overreaction to that in one way or the other. So with any of these companies, I would expect a roller coaster I would expect 20% gains on really thin news, I would expect 20% drops on equally thin news you really have to focus on when you read one of Max’s reports, what is he telling you the underlying story is and that’s what you want to see play out. It is not important. You know, when you’re watching a romantic comedy, if the couple has a fight, of course, they’re gonna have a fight. What’s important is in that last scene, as they’re, you know, both racing to the altar or meeting at the top of the Empire State Building, or whatever it is, do they actually come together? And does the story play out? That is a very strange analogy, but it has been a very strange weekend,
Maxx Chatsko 24:03
Dan, I like it. Well, yeah. And that’s thing like, you know, some pics on my scorecard are down somewhere up by double digits. And it’s like, you know, they haven’t reached any of their milestones yet, right? So in my mind, both of those are irrelevant, whether up or down until they reach those milestones. So you know, for nano x imaging, even after today’s pop, it’s only valued at $2 billion. So it’s going to be a volatile stock especially it’s become kind of like a meme or like momentum company in a way right. And also to correct something from the beginning of the show. m SaaS, which is the business model, which was doing stands for medical screening as a service. So I got tripped up by that earlier.
Dan Kline 24:39
We are full of SaaS here on the program. Yeah. Watching more stock goes is also sort of like sports like I’m a big Boston Celtics fan and they have struggled all season. But if they end up finishing six and make it to an NBA final, that would be a successful season. Or in a story this morning, judging my brother’s team Tottenham, the Tottenham hotspurs and basically They’re their coach who’s a legendary Jose Marino. I’m hope I’m pronouncing that correctly, has traditionally done very well and then burned out. And now he’s following that pattern. But he hasn’t done very well. He’s just burnt out. They’re in fifth place. If you get to fourth place, you’re in the Champions League. It’s not time to judge things yet. And that’s very true with these volatile healthcare stocks. If you want to get a question or comment in, we have time for a couple more, we’ll take one from john king that came over Twitter. Not sure this is where to ask this is absolutely where to ask. You can ask us questions all the time at seven investing on Twitter. But for biotech and healthcare, what are the major themes that look interesting? And where do you see us five to 10 years out if themes play out, Maxx, I’m gonna let you jump in. I’m gonna say that wearables is a major theme that our ability to have data, you’re not getting that much data from, say your your Apple Watch, but I do obsessively follow my heart rate, which is probably a problem because it goes up or down for some very trivial things, and you worry about it. But eventually, I don’t think we’re that far off of getting meaningful medical advice. We’ve all seen the Gator a $25 disposable patch that will tell you whether you need to drink more Gatorade, they say it’s whether you need hydration, I’m a little skeptical of their motives. But I do think we’re gonna have more of that we’re seeing in the high performance athlete level. If you play for a pro team, they’re analyzing every single thing you need and making sure you’re consuming exactly what you need to consume. And we’re gonna see that on a people based level Maxx what trends and themes are you watching?
Maxx Chatsko 26:30
I’m looking forward to the Gatorade Apple partnership, Dan, coming our way. Some big themes and trends I mean, so important to remember biotech, we use it interchangeably to mean healthcare and biopharmaceuticals. But that’s not the case. Right? So I would say, in biopharmaceuticals, there’s trends like genetic medicines look very promising. And there’s gonna be multiple winners there as well, right gene therapy, we’re really navigating a lot of those problems. Well, things like RNA AI, or there’s some next generation nucleotide technologies, maybe even CRISPR gene editing, although I think we still have a little bit more obstacles to navigate with that one. So those are promising some next generation cell therapies look promising, you know, I questioned if we’re going to be using Carty cells at all, which is sounds kind of crazy to say that now, that was all the rage, you know, within the last 10 years, but I think we’re going to transition to natural killer cells, right. So there’s a lot of pipelines that are moving that way. And then again, because biotech doesn’t mean biopharma. There’s also industrial biotech, which I think is going to pick up here this decade, in terms of publicly tradable companies and opportunities. We actually in the United States, we generate more revenue, Dan from industrial biotech today than we do from bio pharmaceuticals. But there’s such a mismatch on public markets in terms of investable opportunities. So it’s, it’s kind of interesting, but I think that sets investor expectations in certain way. But there’s a lot of interesting additional biotech companies that’s using microbes to make useful materials or chemicals. And to bring it full circle, Dan, a lot of those will find early success in consumer brands and consumer products, whether that’s through cosmetics, or sometimes it’s through like fashion materials and things like that. So that’s really the ticket to success early on. Because it’s high margin opportunities you can make partners with like Adidas or Sephora, you get high margin revenue, and you can plow that back into growth for some of these bigger opportunities that require more scale, more investment. So industrial biotech, I went to sleep on that, in the next 10 years.
Dan Kline 28:27
I think we’re also in the early early days of changing how we deliver healthcare. We’ve talked a lot about Tella Doc, the company on the show, but telemedicine is really early on. So imagine if it becomes very common that your watch can take a blood pressure reading or even provide other data, you might be able to have your annual physical remotely. And maybe you do have to go for a blood draw maybe like Amazon is doing a nurses dispatched and, and weighs you and measures you and takes a blood draw or does other things that are necessary. But I do think we’re going to move to a major revolution in how we deliver healthcare. I also think that’s going to touch upon health insurance, we’re seeing sort of a change in the insurance model moving to an AI driven model, like lemonade users where you’re not going in, you know, for medical testing, they’re basically you know, saying, okay, where do you fit in among people your age based on height and weight and just a few other factors. And they’re using that to predict, hey, should we take this guy’s money? How much should we charge? I think you’re going to see some sort of similar revolution in health care, and I don’t know anyone that’s like, you know what, I love my health insurance. You know, it’s great. That’s not true. I know people who work for Microsoft, I the place we used to work in the employees there have really good health insurance. It’s not universally not true, but generally most people see the flaws, they’re looking for change. So I think it’s a really interesting time to be alive and I joke about this. It’s also a great time to stay alive. If you’re gonna stick alive for a few more years. You know, we’ll all be taking supersoldier CRM or whatever It might be to get us through the next level. We’re gonna take one more question on our sheet from Twitter from David Strauss, then Sam Bailey, we’re going to take the question on Celsius, a product that’s sort of health care is Shiva. Yeah, I don’t like that one. David Stroh says, not a question but more of an observation. I went to the mall this weekend and it was packed. busier than I’ve ever seen it before the pandemic people are wanting to be out and spend it. I bring this up now Max, you haven’t gone out much you are still being very very careful because you are pre vaccinated. I would say here in Florida Yeah, people are out and about some of them stupidly, but a lot of people are getting vaccinated was opened up to all ages as of today doesn’t mean you have an appointment. And we did you know some safe going out this weekend. We ate in restaurants we and there still are masked man. Well, maybe not mandates but the restaurants themselves are requiring masks. tables were distanced my son and I went to a hot pot place when you went up to get your your food that you put into the hot soup. You had to put a glove on you had to sanitize you had to be wearing your mask. There were distance markers, there were people enforcing it. malls are kind of one of the things people get wrong. There’s this idea that mall traffic was massively off before the pandemic, the pandemic killed mall traffic heading into last two weeks before Christmas, talk to your malls were at like 90% or 98% of previous traffic, basically, because we needed Christmas presents that we hadn’t managed to find online. And now as it’s summer as more people are vaccinated as we start to feel like this is ending, you’re going to see an absolute rebound effect. But here’s what I would say, Don’t play that as an investment. What we don’t know is is there pent up demand like people want to see Kong Vs Godzilla this weekend, it was the biggest opening, since the pandemic was like $38,000,000.54 for the holiday weekend. That’s a pretty good opening for that movie, not in a pandemic. But is that because we really want to go to the movies regularly. Or because we’re eager to do something. You’re going to see disney world you know, pop back, you’re going to see the cruise lines when they’re allowed to cruise out of the US or even the cruises like the one I’m doing out of NASA, which are expensive and selling. Well. Thank you. I got compte and this is going to be one of those things where you cannot judge the first few months. Yep. If you haven’t been out to eat in a year, you might go out to eat twice as often as you normally do for the first couple of months. Maxx when you were vaccinated. What are you looking forward to doing? I know you’ve been out a little bit playing some some disc golf and I know you want to get back to playing darts. Is there a restaurant you’re excited to go to or place you want to be?
Maxx Chatsko 32:40
Yeah, right around where I live. There’s like new breweries and all kinds of things coming in actually this spring. So I hope it lines up with my vaccination plans anyway. But I’m looking forward to doing that and I can walk to it and stumble home. So I’m looking forward to checking all that out this summer.
Dan Kline 32:56
It has felt really nice. So you know, to know that I’ve been vaccinated, you know, for a while my wife and son got their second shot. So they still have sort of that two week period to go. But it does bring some peace of mind doesn’t mean where you know, we’re outside looking strangers, doesn’t mean where we’re going places that are overcrowded. I’m absolutely turned away from some stores and stores I really like because there were too many people in the store. So it’s not going to be a regular normal for quite a while. It takes quite a bit to get people vaccinated at the scale. We’re trying to do it but Sam will take that question on Celsius to close out the q&a here. Celsius that is that cel H is the ticker symbol an energy companies focusing more on the direct to sale model calling it white glove service to ensure inventory displays are correct inventory is well stocked, etc. Here’s the problem with it so Celsius Maxx they call their beverage, they basically say it helps you burn calories that drinking it has a negative net calorie that that’s not a substantiated claim. That’s something that yes, they’ve done studies on it. But there’s no medical evidence of this. So it’s a good energy drink. Their cola flavor is tasty. A lot of people like their orange flavor, but they say they’re doing that. And so in theory when they first started selling at Publix here in Florida, or at least here in West Palm Beach, you would go and they’d have really nice Celsius displays. It would be all well set up. It was a premium product. Well it didn’t sell that well. And you know what you see Celsius now in Publix, you see it in discount aisles you see it in all the places next to Coca Cola. You You see it on the regular shelf. So yes, if you’re Nike and you can command that kind of, you know, loyalty. There are a lot of retailers out there that are thinking I don’t want to lose Nike. There are probably some retailers that lost Nike that shouldn’t have that we’re doing that job. There are some some small companies but Celsius doesn’t have that kind of poll. If Celsius says I don’t want to sell to Publix anymore because they’re selling my product to for $4 because they have too much inventory. Well then they could say okay, well Take the 19th flavor of Red Bull. And you know, the 75th flavor of monster and six more products from Starbucks like, so. Yep, I like what Celsius is trying to do. I don’t like the medical claims. I like how they’re trying to differentiate as an energy brand. I like the product. But you actually do have to succeed with consumers. And I’m not so sure that just having that like well stocked white label thing is necessarily going to work Maxx if you try to Celsius,
Maxx Chatsko 35:25
No, I have not. But I just looked at their ingredients. So it’s like green tea extract egcg, which is actually a pretty good ingredient. And then some other things. So, you know, look, when I was a young guy my earlier 20s, you know, I looked into all these different health guys, I used to drink all kinds of stuff, supplements and this and that, right? I got to get big and small, right? Like every other 20 year old something. But you know, the reality is, most of those claims are not really strong. Like they’ll, they’ll say, like, Oh, we did a study, and it was like three mice and one of them was named Jim. And like we threw out the other seven studies that didn’t cooperate, our claims are like they’ll never actually support it in like larger trials or things like that. So the science is never really quite great that supports these claims. And it’s the supplement industry. So it’s not really regulated anyway. So I’d be very cautious. And definitely be careful what you’re putting in your body to like, these things aren’t manufactured at like FDA approved facilities. You know, who knows what they’re making from batch to batch and it’s, yeah, just be careful when you drink and all that. I don’t know I,
Dan Kline 36:24
I will. I will also say I’ve largely given up energy drinks. So I decided I’m going to go coffee one time a day. I’m not always caffeinated. I have a cold brew decaf maker where I or it’s a cold brew maker that I make decaf in. But I’ve tried to limit how much caffeine I take in because I don’t really need it. As you may have noticed Maxx me pretty high energy guy. With that being said, I am looking at are there things I don’t eat that I should be eating a little more of are there things I’m deficient in. It’s why we had the Brazil nuts. It’s like, oh, wait a minute, like, there’s this thing I’ve never heard of that might be beneficial for weight loss, which, you know, I spend it three days a week at the trainer, I take a long walk, you know, the days I don’t do that working pretty hard. So if I could eat something that would make that better. That’s important. But you know, when you see a study that says like, you know, green tea is great for your heart, like it might be somewhat beneficial over the long term. But like if you’re eating like a, you know, a bacon sandwich every day following that up with like a bucket of ice cream. Having a green tea at noon is not going to change your health trajectory. That was a health lesson on an investing show. We’re not intended to go there, but we’re going to we’re gonna go someplace else. Sam Bailey, we are going to climb up on the top rope. We are going to hit our finisher. Post pandemic, do you think people will return to offices overwhelmingly about 60% said partially? Maxx we work remotely? And Sam, you can take it down about 33% said yes. I actually think the number is going to be way higher. We’re seeing the tech companies already start to say like no, could you come back to the office, you know, former colleague of ours Sagittarius Sagittarius switched jobs, because he wanted to have more flexibility about where he’s working. I’m not gonna say where he worked or where he does work. But both both big big tech companies. I actually think we’re really overplaying this idea that the office is dead, the five day office might be dead for a lot of people. But I think the three or four day office is gonna make a roaring comeback now for us. We all work remotely. But Maxx your thoughts here?
Maxx Chatsko 38:28
Yeah, I think that’s right. I think we’ll see maybe changes in like more flexibility, but we’re still gonna be working at offices, it makes sense to centralize workers and things like that. We think about like New York City or any major city. You know, a lot of those economies are built around, hey, there’s a lot of people that live and work here. So people are going to go back to those cities, right? Like all the restaurants and things like that need workers to be in the buildings. We can’t just have everybody on the beach or infiltrating Florida where Dan is, you know, because they don’t want to leave New York City during a pandemic. They’re going to go back eventually.
Dan Kline 38:57
If you’d like to move to Florida, I have a condo. I have at worst ideas. Seven. I don’t know why in the hottest housing market ever. My condo is languishing on the market. I do know why there’s nothing else like it out there. So people aren’t necessarily searching using those parameters is a really tricky thing. That being said, I do think there’s an investment opportunity here in the the the remote working space that nobody really thinks about. We work with people in all different time zones. We have honorbound in Australia, Simon and Sam Bailey are two hours difference from us in Texas. Steve Symington is two hours difference. Matt Cochrane has a day job. I think there’s something that should organize your communication to sort of, you know, correct for time differences. So poor autobahn doesn’t get up and have 9 billion messages from us or Matt doesn’t get home from from work. And there are days like I was in the pool on Saturday, and I came back and it was a Saturday of a holiday weekend. And I came back and I’m like, I don’t even know where to start digging in on all Have the messages. If that if you could integrate Twitter if you can integrate slack all the different things and sort of figure out a way to prioritize it. Like I know, we have a boss, Simon Erickson as our CEO, I’m gonna want to check a direct message from Simon or something where he, you know, surfaces it’s all of us before I necessarily want to talk to you about Brazil nuts. I think there is a lot of investable space coming in this sort of change of work. And it isn’t what people think it is and isn’t the offices are dead, it’s that there’s going to be more flexibility. We appreciate your flexibility. We’re going to be back on Wednesday. Not only with with Steve Symington, I believe but we’re gonna have a tape segment with honor bond, our first one of those, he’ll be joining us live from Australia, where it’s 230 in the morning during the show, but not always, we’re gonna do a couple of tape segments with him this week. We are very excited for that. If you’d like to get in touch with us, you can reach us via email info at seven investing.com. That’s for questions about our service you’d like to join, something’s wrong, whatever it is, you got a tip for us. It’s not really to ask us to work up individual stocks. If you’d like to interact with us live. That’s at seven. That’s at the number seven, investing on Twitter. We’re very active on Twitter. We’re throwing stuff out there. There are deep conversations. You know, we’ve had Twitter posts and about a couple 100,000 interactions. We appreciate everybody who’s watching. Tell your friends about seven investing now. We’ll be back Wednesday at noon for Maxx Chatsko. Thank you, Sam Bailey. I am Dan Kline. We’ll see you Wednesday!
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