Monday, November 30, 2020

The Haiku of Finance for 11/30/20

Volatile return
Hedge move in both directions
Wide premium range

Wednesday, November 11, 2020

The Haiku of Finance for 11/11/20

One November day
Know who defends our country
Thank you for serving

Saturday, October 31, 2020

The Haiku of Finance for 10/31/20

Pandemic relief
Added a massive debt pile
Pay with inflation

Monday, September 28, 2020

Monday, August 31, 2020

Monday, July 27, 2020

Monday, June 29, 2020

The Haiku of Finance for 06/29/20

Serious money
Never laughs at Wall Street jokes
Shrugs off market noise

Sunday, May 31, 2020

Wednesday, April 29, 2020

Tuesday, March 31, 2020

The Haiku of Finance for 03/31/20

How to pay a tax
Dig deep into your account
Then keep on digging

Monday, February 24, 2020

The Haiku of Finance for 02/24/20

Global disruption
Unforeseen health care crisis
Wrecks all supply chains

Tuesday, January 28, 2020

Tuesday, December 31, 2019

The Haiku of Finance for 12/31/19

Ending one more year
Summarize market action
Ring in bonanza

Recapping Alfidi Capital Coverage of JPM Healthcare Conference 2018

Hey folks, I know it's near the end of 2019 already, but I had a really interesting 2018 and 2019. I am just now publishing my thoughts on attending events around the JP Morgan Healthcare Conference in 2018. It's been quite some time, but the next conference will soon kick off in San Francisco, so I might as well look back to see if anything from 2018 is still important to know.

I still wasn't important enough in 2018 to score an invitation to the main JPM conference, so I kept busy attending a few sideline events. Someday the big shots running the big show will realize just how much they're missing by not having me inside the big tent. Anyway, here we go with some real knowledge.

Data-empowered consumers and capital efficiency were some popular concepts, staring into the face of GDPR implementation. Superfluid markets were supposed to disintermediate middle-level provider organizations, with tech shifting power to payers and patients. Gene editing got some attention, which turned out to be pretty prescient as CRISPR developments became news later in 2018. I still think it's premature to announce the death of Big Pharma, as major drug makers still survive and thrive into 2019. I can't wait to see how new "platform-based" business models will foster collaboration among insurers and lets everyone see transparent licensing data, all while somehow magically preserving privacy. Bite that silver bullet if you can, folks. I still have not seen how life science business models are moving towards the type of CX interfaces that make Uber and Amazon so easy to use. I also have not seen how open architecture models adapt to life science. I agreed with some experts who thought AI could dramatically accelerate drug trials, but I think they are too conservative in estimating that AI is still years away. The AI revolution is right here, right now, and any drug startup that leverages it now will be an immediate buyout target. Sorting through unorganized dark data that degrades machine learning capability will IMHO be one big challenge for AI use in drug development.

The Alliance for Regenerative Medicine presented their rundown of the sector's status. The regulatory approval pipeline for cell therapy products was moving along just fine. The FDA approval pathway for cell therapies called Regenerative Medicine Advanced Therapy (RMAT) designation reminds me of the orphan drug category. I wonder about the downsides to cell/gene therapy, like whether it can be weaponized by rogue actors. It's chilling to think of threat actors using open source tissue engineering for homemade bioweapons.

I cam up with some bold-type original ideas thanks to the Alliance for Regenerative Medicine presenters that investors should know, because I am a bold genius. Automated processes and AI will make the supply chain cheaper for cell and gene products, and that sounds like an opportunity for pick and shovel plays in life science stocks. I'm thinking specifically of specialty REITs for medical labs and data science companies running apps. Data libraries have a big opportunity by licensing gene population data to life sciences companies that adopt machine learning as a core function. Compare the opportunity with Microsoft's ownership of GitHub and LinkedIn as the analogy. The data populations within those two acquisitions are leverage for Microsoft's enterprise services.

There was a "leader's forum" on health care services that made me smarter. Everyone was optimistic for strong M+A and private equity buyouts, but of course this was long before the equity markets started having chest pains (pardon the health care pun) in late 2018. I wanted one of these leaders to explain their checklist-driven process for a health service provider's valuation, something investment banks and other valuation experts use prior to shopping a transaction around. Local geography still matters in service delivery, so bonus points in a valuation must go to local practices that can leverage any national networks to control their costs. I was dismayed to hear that these experts still used EBITDA to value mature medical practices, as if they were new tech startups with unproven revenues. That is really amateurish. There cannot be that much uncertainty about revenue collection even with reimbursement concerns.

Some other revelations from this leader's forum got me thinking. Medicare's definition of a hospital is based on the number of beds available and the level of care provided, which determines how providers structure their business models and how investors value these providers. I suspect there's a bubble in acquirers paying much higher multiples of revenue to acquire practices, based on unrealistic expectations in either future patient population growth or rising reimbursements.I do not expect the Affordable Care Act (ACA) structures to indefinitely continue subsidies for health care plan buyers, so take that revenue stream out of valuation calculations. The 21st Century Cures Act has now aligned multiple US government agencies on med-tech regulation, thus removing some uncertainty from the marketplace and reducing friction in medical companies' go-to-market strategies. Gene therapy needs a lot of infrastructure; retail pharma, drug manufacturing, and distribution will add up to one big bonanza.

Local economists had their own perspective on how the health care sector impacts the San Francisco Bay Area's economy. The potential repeal of the ACA without a suitable replacement is a poor approach to policy planning. There is bipartisan support for innovation in Medicare, but Medicare's political immunity from reform is partly due to resistance from insurers. I dislike any "health policy nihilism" that destroys existing architecture while leaving us bereft of whatever comes next.

My fun meter was pegged at Freemind's 13th Annual Non-Dilutive Funding Summit. I never turn down the chance to learn about how for-profit companies can get so much of their early operations funded without surrendering equity. Get the NIH and other federal partners to jumpstart your med-tech startup's research, and it enhances credibility when you seek more private funding. Check out public-private consortia like Medical Technology Enterprise Consortium (MTEC) and Advanced Technology International (ATI) as tech development accelerants. I think there's a big bonanza opportunity in combating antibiotic resistance, and BARDA's participation in the CARB-X portfolio is a funding opportunity for just such an approach. Tracking the resources at the US Government's Medical Countermeasures effort offers insight into funding for biodefense priorities. I still think crowdfunding is a option for med-tech startups; it cannot be ruled out completely as long as it's not the main effort in fundraising. The nonexpert layperson investor may not be professionally equipped to evaluate a crowdfunded med-tech project. The NIH I-Corps brings the lean startup methodology into the US Government's medical research community. Read each Funding Opportunity Agreement (FOA) carefully when you apply for an NIH grant. Uncle Sam does not mind at all if its researchers and funded programs make American entrepreneurs rich as long as they enhance our nation's security in the process. God bless America.

I don't mind taking longer than usual to evaluate what I learn at these events. Anything worth doing will be more difficult than it looks at first glance. That's why the events around the JPM Healthcare Conference 2018 were worth attending even if I could not get access to the main show. Those VIPs should save me a seat.

Author's Note: I am gradually working through a backlog of writing material that I have gathered since 2018. It will take me some time to get caught up to the present day.