lenS & thoughtS – Page 13

Casper’s IPO And Valuation

DTC is a buzzword that attracts capital in the private market.

However, public market usually doesn’t have much patience or appetite for future stories.

Casper, the magical mattress unicorn, which raised $100 million in March 2019, marketing itself as a “Sleep Economy” company, is receiving a market cap of $400 million (EV ~$300 million).

The main problem though, is not about the DTC model.

Brands such as Canada Goose and Lululemon are counting on DTC to grow.

The slowing revenue growth rate is also okay. Public market is not relentlessly looking for 100% or 50% growth.

Indeed, Canada Goose and Lululemon, which grew at sub-25% in the last 12 month, are valued at over 4x and 8x sales respectively.

Casper, which is expected to grow at 23% for 2019, has EV/Revenue below 1x.

The cost structure is where things are different.

From 2019 April to December (FY20Q1-Q3), Canada Goose‘s SG&A expenses are 31.2% of revenue.

From 2019 February to October (FY19Q1-Q3), Lululemon‘s SG&A expenses are 36.4% of revenue.

That ratio is 70.5% for Casper from Jan to Sep 2019.

Plus the differences in gross margin, the unprofitable DTC brand growing at sub-25% still needs additional efforts to prove its business is viable/sustainable.

CAR-T Therapies: 2+ Years Into Commercialization (2)

Attaching a chart of quarterly sales for the two CAR-T products discussed before.

With Yescarta’s annual sales of $456 million in 2019 and Kymriah catching up, the acquisition price paid in 2017 by Gilead was indeed very high.

In its 19Q4 earnings, Gilead disclosed an $800 million write-down related to a Kite Pharma setback in indolent non-Hodgkin lymphoma. That followed an $820 million write-down this time last year related to Kite’s multiple myeloma candidate KITE-585. [fiercepharma]

The competition will become more fierce as BMY just submitted application for its CAR-T therapy acquired from Celgene (Celgene acquired from Juno) -lisocabtagene maraleucel (liso-cel). The treatment is also for adult patients with relapsed or refractory (R/R) large B-cell lymphoma (LBCL) after at least two prior therapies.

BMY’s data: among patients evaluable for efficacy (n=256), the overall response rate (ORR) was 73% (187/256, 95% CI: 67 – 78) with 53% of patients (136/256, 95% CI: 47 – 59) achieving a complete response (CR). Responses were similar across all patient subgroups. Among all patients, 79% (213/269) had grade 3 or higher treatment-emergent adverse events (TEAE). Instances of any grade cytokine release syndrome (CRS) occurred in 42% (113/269) of patients at a median onset of 5 days and grade 3 or higher CRS occurring in 2% (6/269) of patients.

Youtube’s First Official Financial Result

It has been more than 13 years since Youtube was acquired for $1.65 billion by Google back in October 2006.

Founded in February 2005, with $11.5 million total venture funding and 65 employees at that time, Youtube commanded 46% of visits to U.S. online-video sites in September. That compared with a 21% share for the video activities of News Corp.’s MySpace site and 11% for Google Video. Youtube had close to 20 million monthly visitors in August 2006.

A year and half before Youtube’s acquisition, MySpace’s parent company Intermix Media Inc. was acquired by News Corp. for $580 million.

Back then, Google reported total revenues of $6.14 billion in 2005 and $10.60 billion in 2006, and had a market value of $132 billion. Its net income was $3 billion in 2006 with $3.6 billion cash flow from operations and more than $11 billion cash balance.

On Monday Feb 3, 2020, Alphabet first provided the breakdown for some of its non-Google-search businesses, including Youtube.

Year Ended December 31,
	2017		2018		2019
Google Search & other	$	69,811	$	85,296	$	98,115
YouTube ads⁽¹⁾	8,150		11,155		15,149

(1) YouTube non-advertising revenues are included in Google other revenues.

Youtube ads generated $4,717 million revenue in 2019 Q4 – a ~$19 billion run rate.

Using a multiple of 5.0x, Youtube could be valued at ~$100 billion – a 60 times return for google acquisition or an IRR of 37% for 13 years.

I guess the success formula is: with the right synergies, acquire early & provide support to grow it.

Alphabet 2019 10-K

2019 Q4 Earnings Call Transcript

A Python Generated Graph On Airlines’ Load Factors

Major airlines usually would post their monthly operation results on IR websites. While United Airlines and Southwest Airlines among other stopped reporting in 2019, Alaska and Delta are still doing so.

Load factor is a measure of the use of aircraft capacity that compares Revenue Passenger-Miles as a proportion of Available Seat-Miles.

Below is a three-part project that automatically downloads, summarizes and creates chart for 4 airlines’ load factor.

Download

Given certain years, the program will go through pre-defined links to search for monthly report urls and scrap relevant data based on the page structure. BeautifulSoup is used here.

Summary

The program uses file reading and writing to put four airlines’ data together while adjusting for missing data (aligning based on month)

Charting

The program converts csv to excel and draws the chart based on data. pandas and xlsxwriter are used here.

With some adjustments, the program should be able to scrape and virtualize other web-based standard reports.

Germline Genetic Testing: BRCA

Genetic testings have different significances and it seems that BRCA is currently the only gene of hard demand (CDx) in cancer treatments among germline testings.

Myriad and AstraZeneca

Back in Dec 2014, AstraZeneca received FDA approval for the first PARP inhibitor LYNPARZA, as monotherapy in patients with deleterious or suspected deleterious germline BRCA-mutated advanced ovarian cancer who have been treated with three or more prior lines of chemotherapy.

Concurrent with the approval of LYNPARZA, FDA has approved the BRACAnalysis CDx (Myriad Genetics) for the qualitative detection and classification of variants in the BRCA1 and BRCA2 genes.

Myriad is a pioneer in genetic testing, especially for BRCA. BRACAnalysis CDx is blood-based, using PCR and Sanger sequencing to gauge single nucleotide variants and small indels, and multiplex PCR to assess large deletions and duplications.

Foundation Medicine and Clovis Oncology

In Dec 2016, Foundation Medicine’s FoundationFocus CDxBRCA was approved by FDA as the first NGS-based companion diagnostic, for Clovis Oncology’s PARP inhibitor Rubraca (rucaparib), for patients with deleterious BRCA mutation (germline and/or somatic)-associated advanced ovarian cancer who have been treated with two or more chemotherapies.

Myriad and Clovis

In April 2017, Myriad and Clovis Oncology announced the CDx collaboration on Rubraca. “The companion diagnostic test approved with Rubraca does not discriminate between germline and somatic mutations. Knowledge of germline status is important to provide patients appropriate counseling.”

Myriad and Pfizer

In Oct 2018, the Myriad’s BRCA test was also approved as CDx for Pfizer’s PARP inhibitor Talzenna, for patients with HER2-negative metastatic breast cancer (mBC) who have a germline BRCA mutation.

Expanded PARP usage

In Jan 2018, AstraZeneca’s LYNPARZA received approval for expanded usage in breast cancer, for patients with germline breast cancer susceptibility gene (BRCA) mutated, HER2-negative metastatic breast cancer, who have been previously treated with chemotherapy. Patients with hormone receptor (HR)-positive breast cancer should have been treated with a prior hormonal (endocrine) therapy or be considered inappropriate for endocrine treatment.

FDA also expanded the approval of the BRACAnalysis CDx, an approved companion diagnostic to Lynparza, to include the detection of BRCA mutations in blood samples from patients with breast cancer.

In Dec 2019, Lynparza was approved in the US as a 1st-line maintenance treatment of germline BRCA-mutated metastatic pancreatic cancer, for patients whose disease has not progressed on at least 16 weeks of a 1st-line platinum-based chemotherapy regimen. Myriad’s CDx usage was also expanded.

While the market expanded, more players are coming to this field. Since 2013, there is a growing number of labs providing BRCA testings – mostly are not for CDx.

Prices are very different for example.

Image result for brca testing price

But overtime, the ASP is definitely coming down.

Image result for brca testing price 2018

Meanwhile, FDA approved 23andMe’s DTC BRCA genetic testing in March 2018 (again, not for CDx) – testing for 3 BRCA1 or BRCA2 mutations to identify women at increased lifetime risk of breast cancer.

Drugstore Chains In China Adding More Franchised Locations

Two leading national drugstore chains keeps adding more franchised stores than directly operated stores.

Franchised model is more efficient in

1. leveraging existing distribution network -> improving its utilization
2. aggregating demand & volume -> better pricing terms from manufacturers
3. distributing store management (inventory + O2O sales + payment + CRM) software -> higher margin fees

Quanterix: A Growth Story Just Began (1)

Quanterix (Nasdaq: QTRX) is building a razor-blade model just like Illumina. With its ultra sensitive detection, Quanterix is revolutionizing immunoassay especially in neurology, improving the industry’s capabilities to access/evaluate related molecular data, understand diseases better and designing drugs/trials around it.

In recent quarters, Quanterix saw a continued growth in its consumables, which is the bread-and-butter due to its recurring nature and higher margin (than selling instruments.

Of course, the instrument sales are important, as the cumulative count (or installed base) should drive more recurring revenues in consumables.

Currently, the consumables revenue / instrument is ~$70k per year.

[no post today] Happy New Year! 2020 新年快乐

Online Higher Education (4) – Online Degrees

Online Degrees Before MOOCs

While the previous posts (2) (3) summarized the birth and development (especially the model of fee-for-certificates) of MOOCs, online degrees, as a more “formal” segment of online higher educations, was actually born before 2011.

The boom can be attributed to the 1. advancement in technology infrastructure (higher internet speed, 4G, streaming, etc.) 2. people’s behavior changes such as the growing adoption of smart personal devices (smartphones, etc.) 3. increasingly burdensome higher education costs in the US and associated student debts 4. the incentives provided by the regulatory environment such as the re-authorized Higher Education (Opportunity) Act in 2008.

Distance education: US Department of Education shall not require an accreditor to have separate standards, procedures or policies for evaluation of distance education. Accreditors must, however, require institutions that offer distance education to establish that a student registered for a distance education course is the same student who completes and receives credit for it.

Then, there emerged a group of companies called Online Program Management (OPM) providers, with 2U being the current leader.

2U

The first of its kind was launched in 2008 – MAT@USC, Master of Arts in Teaching Program, developed by the USC Rossier School of Education in partnership with 2tor Inc. (the company later its changed name into 2U Inc. in 2012)

The basic idea is to replicate the degree offerings in the online format as much as possible. Private companies like 2tor will invest upfront and share the majority of future tuitions. The programs costs were a little cheaper (but at the similar level) than the traditional on-campus version.

The agreement of MAT@USC program provides a glimpse into the structure. As mentioned in the announcement, “tuition for MAT@USC is the same as the USC on-campus program at approximately $1,300 per credit.”

In 2012, when MOOCs were getting more attentions, 2tor also raised more capital and expanded the partnerships. It raised $26 million Series D in April and had 5 programs in agreement: USC’s Rossier School of Education for the MAT@USC mentioned before, USC’s Masters of Social Work Program (MSW@USC) added in 2010, Georgetown’s nursing program (Nursing@Georgetown) launched in Spring 2011, UNC’s MBA program (MBA@UNC) starting in July 2011, and announced the addition of UNC’s Master of Public Administration (MPA@UNC) right before this financing round. (See appendix for the current tuition of these five programs)

As we shall see in the next post that, as OPMs grew, at the same time, MOOCs were expanding into OPM’s fields, partnering with universities to offer degrees related programs.

At the same time, they are also trying to provide non-university based higher education, usually for/with companies in industries.

Born with different origins and offerings, MOOCs and OPMs are now coming to fight similar battles and creating full-service online higher education platforms:

1. fee-for-certificates
2. degrees-based programs
3. career-oriented continuing education

To be continued

Other more recent highly watched events for 2U included:

May 2017 2U to acquire GetSmarter for approximately $103 million, which provides online short courses in partnership with universities – just like what MOOCs did.

August 2017 HBS, SEAS and FAS partner with 2U, Inc., to offer the Harvard Business Analytics Program. The first cohort of students is expected start classes in March 2018. The total cost of the program—not including travel and lodging expenses—to be $51,500 based on current program fee rates.

January 2018 2U and WeWork announced a broad partnership: e.g. WeWork spaces are available to 2U students enrolled in graduate degree programs; WeWork members and employees can access $5 million in scholarships to enroll in 2U programs, etc.

April 2019 2U to Trilogy for $750 million in cash and shares, a large boot camp provider that partners with continuing education divisions at dozens of universities.

Appendix

MAT@USC current rate of tuition for the 2019–2020 academic year is $1,928 per credit.
MSW@USC 2019-2020 Unit Charges: $1,928 is the per-unit rate for students enrolled in 1-14 units. $28,628 is the flat rate for students enrolled in 15-18 units.
Nursing@Georgetown’s tuition is $2,139.00 per credit hour as of Academic Year 2019-2020.
MBA@UNC in 2011 said “tuition will be $89,000 for the two-year program and will include books, texts, student fees and lodging and food costs for four weekend immersions.” For students beginning in the July 2019 term, the tuition for the 2019-2020 academic year (July – June) is $125,589.06.
For MPA@UNC students enrolled in the program in academic year 2019–2020, tuition will be $1,209 per credit hour. Students who start the online MPA program in academic year 2019–2020 can expect to pay at least $54,405 for the entire program.

End of Decade Thoughts (1): An Increasingly Divided United States

This is a series about what we have seen in the past decade.

An Increasingly Divided United States

Three aspects:

1. The 2008 financial crisis provided a great opportunity for those who had equity while made many others in debt work years to recover. And the tax reform exacerbated the process.

– When we entered the past decade, prices were cheap for a lot of equities, but only for those who can buy.

– Differences were then created when the economy recovered – those who held equities enjoyed it.

– On the other hand, those who can’t buy didn’t share the growth (in any bull markets like stock, housing, etc.)

– Thus, more wealth inequalities were created. Supporting evidences could be found for a graph