When it comes to the technical details of the pitch, they don’t miss a beat. But I’ve noticed many have difficulty articulating the sweeping, long-term vision for their companies.
I can relate because I struggled with the same thing when I was in their position. It’s a very common issue, especially with female founders. I’ve found women tend to be more realistic in their estimations, or they feel it’s too early to be talking about what long-term success looks like.
It took me years to get over those hang-ups and to speak fluently about the future of my business, but it’s such an important skill for talking with investors or trying to hire talented individuals.
I always try to coach women entrepreneurs on how to express their vision, so I want to share what that looks like.
In the early stages, you have to be able to articulate the long-term, high-level vision.
You can tell when an entrepreneur doesn’t quite understand the future of their company because there are gaps in the pitch deck.
The first few slides will be much too focused on what’s happening right now–on the tactical applications. That’s a problem because the beginning of the pitch deck should be three to five slides of the enormous market opportunity that you’re ready to revolutionize.
It should name three high-level things you’re going to do in order to achieve that massive goal and how you’re going to eventually change the world. After painting that picture, you can get down into the nitty-gritty and tell investors about the tactical execution.
At the seed stage, investors are really evaluating both your vision and you as a founder. They’re wondering if you’ll be able to attract talent, to handle the ups and downs of an early-stage company.
You want to sell them on the idea first, then show them you understand the realities of getting there.
Selling your vision becomes easier when you stop focusing on day-to-day goals.
As a young startup, you need funding and you need great team members who are inspired to work with you. The only way you get both of those things is by learning to convey your master plan in a clear and compelling manner.
A lot of founders make the mistake of talking about what they’re doing right now or what they’ll be doing next year. But what you’re really selling is where you’re going to be in five years.
I know it’s difficult to stop concentrating on the day-to-day aspects of your business. Still, whether you’re talking to investors or trying to inspire your team, you have to stop thinking about what’s happening today. You have to shift your mindset and start explaining what it will look like when you’re taking over the world.
It feels like such a leap from where you are now, to where you’re telling people you’ll be. And you’ll probably start to feel the imposter syndrome creep in as you rehearse your vision.
But here’s the thing: whatever that vision is, it’s not too big.
This is supposed to be your pie-in-the-sky, difficult to achieve statement of where you’re going. You’re not exaggerating or boasting, you’re simply telling people what’s going to happen if you execute on your plan.
When you realize that, you can reframe the conversation in your mind. It’s not that you’re being inauthentic, it’s your way of sharing the grand vision with people so they’ll be willing to help you achieve it.
Once you understand your vision, explaining it becomes second nature.
Obviously, as a female founder, you have to to be confident. But knowing and selling your vision requires another level of confidence.
I know entrepreneurs may not be comfortable with the idea of the grandiose vision. Trust me, I felt the same way five or six years ago. We had no brand name, no manufacturing partner, no product. And yet we had to articulate that vision of revolutionizing the lingerie industry and taking down Victoria’s Secret.
The only way to gain that extra level of confidence is through practice. Articulate your vision over and over again to friends, family, advisors, your own reflection in the mirror. Just make it a part of your story and get comfortable talking about it.
Over time it will become second nature, and you won’t hesitate when you tell someone which industry giant you’ll soon be toppling.
One of the most disheartening axioms about business today is that consumer trust is at an all-time low. Forrester predicted that 2018 will be a “year of reckoning” for many brands as they face the fact that consumers might not love them as much as they thought they did.
While data breaches are not a new phenomenon, consumers and lawmakers are fed up. Top it off with this week’s news that Google not only exposed the data of over half a million people, but also hid it – in part because of fears that doing so would draw regulatory scrutiny and cause reputational damage. They’re right, on both counts. Regulatory scrutiny has intensified in recent years, but so has consumer response to unethical business conduct.
Yet amid this storm of mistrust and headline-generating bad behavior, there are companies for whom consumer trust and principled practices are not mere marketing tactics or trendy buzzwords. As Jeffrey Hayzlett – well known entrepreneur, television and podcast show host and author – put it, “I think that it has always been the case that people like to do business with businesses that do good. The good news is that people are starting to state it.”
Hayzlett, who may be best known for being recurring guest judge on The Celebrity Apprentice, has a new book coming out in November called The Hero Factor: How Great Leaders Transform Organizations and Create Winning Cultures. In it, he explores the importance of a strong company culture as the backbone of a successful business. “We tend to see the light shone on bad behavior in business; that’s what the media focuses on.” But with the new book, Hayzlett will illuminate the many insights he’s gained through his stewardship of (and participation in) The Hero Club.
Acquired by Hayzlett’s C-Suite Network in 2016, The Hero Club strives to empower CEOs with resources, relationships, education, and experiences. But what sets it apart from other executive clubs and mentorship programs is that being a trustworthy business is an underlying tenant of membership.
Likening it to the bond of the pinky promise, Hayzlett says that Hero Club members pledge to (among other things) be responsible and ethical to employees, partners, and consumers as well as to be guided by a serving mentality to people, causes, and organizations. And, as anyone who has looked into the earnest eyes of child with pinkies locked knows: This is not a pledge to be taken lightly. As Hayzlett says, “There are going to be times at which your value system will be tested. The pledge is about keeping attention on these values in good and bad times.”
Clearly, there’s something to the idea that building a company around “heroic” values is good for business. Half of consumers rank transparency and honesty as critical factors when choosing which brands and companies to patronize. And more than a third of consumers rank ‘trust in brand’ among the top reasons affecting where they choose to shop. Trust, optimism, admiration, and acceptance all rank high for consumer brand loyalty. And consumers are actually willing to pay more to feel better about the purchases they make. The takeaway is that value-driven companies earn respect and will do better than organizations that customers see are just in it for the money.
To support the development and growth of value-driven companies of all sizes and across sectors, Hayzlett offers insights from the four pillars of The Hero Network:
Always be learning. Entrepreneurs need strategic planning, time saving tools and apps, and ways to gain insight into their business with tools such as data mining. Hero helps them sift through the options to find the gems. “I can dig a hole with my spoon or my hands. But I’d rather do it with great big shovels,” says Hayzlett. The Hero Network emphasizes ongoing training, support, and a flow of trustworthy information to support efficiency and quality practices.
Surround yourself with good people. Entrepreneurs are a special breed, according to Haylett. “Remember, the definition of entrepreneur is somebody who gives up a 40-hour-a-week job to work 120.” Another hallmark of founders is that their intense personal drive can also lead to isolation. From those they hire, to the partners and investors they work with, Hayzlett encourages entrepreneurs to seek out like-minded people to support their business – and its ethics. “There’s lots of ways to get together and connect, but there’s not a lot of smart ways. Because of the kind of people that make up our network, the relationships support high values and high growth.”
Continue to seek out – and make – sound investments in your business. Many Hero Club members are VCs, family funds, angel investors, and corporate development funds. The Club also hosts an annual investor summit, which saw over one billion dollars invested last year. However, Hayzlett points out that this isn’t simply a question of funding startups. Business leaders must constantly examine the ways in which strategic investment can support growth. Again, he emphasizes how important it is to seek out investors that share your values. When you do this, you don’t just fuel your business, “It is more like pouring gasoline on a fire.”
Maintain work-life balance. Entrepreneurs push themselves hard. But pushing too hard can be bad for their relationships, families, mental and physical health. “In everything you do, there’s got to be a balance,” says Hayzlett. “If there’s not, why are you doing what you are doing?” And he says good leaders extend this ethos to their teams as well. The Hero Club supports maintaining balance among its members through activities like hiking, taking a cruise together, or seeing a show. One activity Hayzlett particularly enjoys is fly fishing. “It makes you think, close off the rest of the world and concentrate on what you are doing in that moment – and have fun.” He says it is educational in that the sport is not easy to master and “requires hitting a lot of bad notes before you become a maestro.” He also points out that some of the most valuable moments are about “being in the boat, floating down the river, talking to the guys.”
Hayzlett grew up in Sioux Falls South Dakota, where he went to a pancake house for breakfast that was frequented by many local business people. “There was one table where the stewards of the community sat. These were the people who made sure that the community was cared for. I always wanted to grow up to sit at the big table, where the heroes sat.”
Not only has Hayzlett earned a seat at the table, he has a newfound purpose to help other business leaders see that it’s good business to be a good business. “I believe being mentally prepared for success and making small heroic decisions along the way are as important as success itself. Being a hero entrepreneur isn’t an end goal; it’s a way of doing business.
Unannounced. It’s debut day for new Google hardware, but first the search giant is making headlines for other, less positive reasons. After quite the hullabaloo from its employees over AI, Google said on Monday it would withdraw its bid for a $10 billion cloud services contract for the military due to objectionable terms and potential conflicts with its AI ethics policy. Amazon is widely expected to win the deal for the project called the Joint Enterprise Defense Infrastructure cloud, or JEDI. Google also announced it was shuttering its failed social network, Google+, while disclosing for the first time a security flaw at the service that could have allowed outside developers to view private profile data from hundreds of thousands of Google+ users. The company said there was no evidence of misuse of the data.
Double dealing. Dealmakers at Microsoft have been busy of late. The company says it is investing an undisclosed amount in Southeast Asian ride hailing service Grab in return for Grab using its Azure cloud platform. Separately, Microsoft’s LinkedIn unit said it bought employee survey startupGlint for an undisclosed amount that some reports put at over $400 million.
One giant leap for mankind. After private companies have sent many unmanned rockets into space, Virgin Galactic owner Richard Branson says he’s ready to send people up “within weeks, not months.” The company has successfully conducted three manned test flights within the Earth’s atmosphere this year.
Reintegration. Is the Hollywood studio system coming back together after splintering into a million pieces? Streaming video king Netflix has spent billions financing original productions. Now it’s buying a vast studio complex in Albuquerque, New Mexico, where movies such as Sicario and The Avengers were shot. Sign the top talent, produce the shows in-house, distribute the shows…sounds familiar.
Ahead of the curve. Venture capitalist Kirsten Green announced a new $360 million fund at her Forerunner Ventures, about triple the size of her prior fund. Green, who has focused on consumer businesses like Warby Parker and Birchbox, says she’ll look for startups that embody values consumers favor. “The consumer is leading the charge, and if the consumer is anchored around values and things that matter, that’s good for business,” she tells Fast Company in an interview.
Melting monster. Video gamers and videographers should be happy with Monday’s announcements out of Intel regarding new, ninth-generation desktop CPUs. Leading the class may be the i9-9900K, with eight cores and a top speed of 5 GHz at a price just under $500. Intel’s stock price was unchanged on the day but the slumping stock of rival AMD dropped another 3%, with its loss over the past week hitting 16%.
On a busy street, a JUMP bike looks like a bright-red blur. It’s eye-catching, a red that’s both a color and an announcement. But to Nick Foley, head of product at the electric bike-share company, the vibrant color is not only meant to turn heads. It’s a key part of shifting the way that commuters think about bikes as an urban transportation tool.
Bikes have been part of the urban transportation system for over a century. But as traffic congestion in cities worsens, and as concerns rise about about air pollution from gas-burning cars, cities have increasingly looked for solutions to decreasing reliance on automobile transportation. A few years ago, bike-share systems emerged as a possible solution to encourage alternative modes of transportation in cities.
“Ideally, we’re pulling people into the JUMP system who are not professional cyclists or even regular bicycle commuters,” Foley says. “The appeal of what we’re trying to do is that we’re getting everybody on an electric bike as a commuting tool.”
The red paint is part of Foley’s design ethos. To get “everybody” on a bike, you must first attract the attention of commuters who might not have considered a bike otherwise. But the paint’s appearance doesn’t tell the whole story. The breezy candy-apple color belies the fact that the paint has also undergone multiple chemical formulations to make it as corrosion resistant as possible. The paint performs the sleight of hand of effective design: purposeful, yet imperceptible to the user.
JUMP’s most pressing challenge, though, starts when the rider gets on. Each JUMP bike needs to accommodate a wide range of riders, wherever they choose to ride. So Foley faces a critical task: How do you build a single bike model that can serve the most people, in the most urban environments?
JUMP currently operates 40,000 bikes across 13 cities, including San Francisco, New York City, and Chicago. They’re lock-to dockless, which means that JUMP obtains permits from the city that allow for the bikes to be locked to any fixed post on the sidewalk, like a parking meter or a bench.
Cities aren’t the only stakeholders. Last April, JUMP was bought by Uber. CEO Dara Khosrowshahi has also announced that he aims to bring the JUMP system to Berlin, followed by other European cities, later this year. Now, not only must JUMP bikes work well across American cities, but around the world.
Foley—who has been with JUMP since it launched as bike-sharing startup Social Bicycles in 2010—knows that the bike needs to adapt not only to a range of riders and styles, but to ever-transforming cities.
“It’s obviously not the perfect ride for every rider of all types. But what we’ve been able to do is achieve something that is a really, really great ride experience for almost every rider that gets on board our bicycle.” Foley pauses, resting his gaze on the bike. “And that is hard. There are a lot of ways to get that wrong.”
A Bicycle Built for 40,000
A JUMP bike stands at 44 inches tall and 69.3 inches wide. The wide-set handlebars measure 24.6 inches from end to end. It has an integrated basket, large enough to hold a backpack or a big bag of groceries. It’s GPS equipped, with a 250w motor and Shimano braking system. On a single charge, the bike’s battery can run for about 30 miles, which Foley says matches the distance most JUMP bikes go each day. Its aluminum frame is painted in the signature red.
Foley’s team test rode major urban commuting bicycle types from around the world, from English roadsters to Dutch city bikes. They envisioned the bike as a combination of features from international cycling styles.
At first, Foley wanted to emulate the relaxed grip of Dutch bikes, whose handlebars curve in a sort of U-shape around the user. “That’s a very upright and stable position,” he says, which would encourage an alert posture that allows urban commuters to look out for traffic and safety signals. But Foley noticed that if a rider raises and lowers their torso, the U-shaped grip puts strain on the rider’s wrist.
It’s a small problem for an individual rider, who rides at roughly the same height for every ride. But the bike needed a handling geometry that could serve a taller rider, whose torso would sit higher on the bike, as well as a shorter rider. So Foley and his team landed on a compromise: a frame with higher handlebars that curve just slightly toward the user, lending a somewhat upright posture that feels comfortable enough for riders of most heights.
The low frame was also built to hold a long adjustable seat post. It can extend almost 12 inches; by comparison, adjustable dropper posts built for consumer mountain bikes don’t generally extend past 8 inches. JUMP says that the JUMP bike can accommodate riders between 4’11” and 6’6” in height.
There are only slight modifications to the bike depending on a city’s needs. In most cities, JUMP deploys its 3-speed model. In San Francisco, JUMP bikes have 8-speed electric drivetrains to be able to power up the city’s notoriously steep hills.
Reinventing the Wheel
Unlike an individual consumer bike, shared bikes are under the constant assault of the sun, rain, potholes, and perhaps the biggest danger of all, the humans who ride them. They’re left outside day and night, and they get a lot more mileage than individual bikes. That means they need to be a lot more durable than other bikes.
JUMP tests the structural integrity of its bike by putting prototypes under every possible duress that could befall an urban bike. Foley describes the testing process: the bike prototypes are run for about 1,500 miles on rollers that replicate riding over cobblestone, with weights that simulate “a heavy load in the basket and a really heavy rider who’s riding kind of violently. And then we run those tests until parts start to fail or parts start to fall off.”
The rubber that covers the saddle and handles also went through its own stress testing. Besides the threat of rips and sun damage, Foley also took into account the constant sweat and accumulated human skin on the handlebars. That’s normally not a problem for a personal bike, but it’s something that a shared bike has to withstand, too.
Foley knows that bike-share users probably aren’t as careful with a shared bike as they would be with their own bike, so shared bikes must be durable enough to withstand the elements (both environmental and human-induced). And then there’s the problem of vandalism. Last month, a teenager riding a shared bike operated by LimeBike was hospitalized when the bike failed to brake and crashed into a tree. Police suspected that the bike’s brake cords had been slashed in an act of vandalization. To account for cord-cutting—accidental and intentional—the JUMP bike’s brake cables are fully encased inside the frame.
Kicking into High Gear
Last month, the first fleet of 400 cherry-red JUMP bikes sped through the streets of Providence, Rhode Island. It’s a small city, spanning just 18.5 square miles, and the land that car infrastructures consume, like parking lots, limits the city’s opportunities for economic development, according to Martina Haggerty, Special Projects Director at the City of Providence Department of Planning and Development.
“Bike-share is really important for us,” she says, noting that Providence started to consider implementing a bike-share program in 2009. The city saw bike-shares as a mobility solution for low-income residents (the level of income inequality in Providence is the third-highest in the country) as well as a way to meet sustainability goals. After years of trying to implement a bike-share system, a funding opportunity arose, and the city decided to sign a five-year contract with JUMP.
While cities have boosted bike-shares, the competition for those city-wide contracts is stiffening. Just months after Uber bought JUMP, Lyft acquired bike-share operator Motivate, which already operates popular bike-share systems like GoBike in San Francisco and Citi Bike in New York City. And Lyft, Uber’s Silicon Valley arch-rival, is far from the only competition. When JUMP makes its international expansion in Berlin, the e-bike brand will have to compete with international bike and scooter shares like Lime, Mobike, and Ofo. If JUMP wants to keep pedaling with the competition, it has to get the design of its bike just right.
The future of JUMP’s bike will require continual changes at every level. To keep the bikes adaptable to changing technology, Foley says that he’s made nearly all of the parts of the bike disparate and interchangeable. So while the bike operates like an integrated system, its parts can be easily swapped out in case an updated model comes along. Even now, Foley says that his team is currently testing another iteration of the red paint, one that is hopefully even more UV-resistant.
He’s at least decided on the paint color. When he was choosing the color of the bike, he said he took into account the color that it might fade to in ten, twenty years. When they landed on what would become JUMP’s signature scarlet, it reminded him of another feat of design that has withstood the test of time and tech. He says, grinning, “If the bike fades to match the Golden Gate Bridge, I’m gonna be really happy.”
First off, a not-fun stat for you to ponder: According to a new study released last week, more than 80 percent of the accounts that purposefully spread misinformation during the 2016 election are still active. At the same time, even Star Wars: The Last Jedi is being attacked by trolls with political agendas, because there’s nothing so minor that it can’t be ruined by 2018. How are we still even making it through this in one piece? It has to have something to do with the fat bears, right? Meanwhile, here’s everything else people found themselves talking about on the internet in the last seven days.
You’re Not Thinking. You Never Do
What Happened: As if anyone needed reminding, a press conference early last week really underscored that President Donald Trump can’t help himself when it comes to belittling women.
What Really Happened: Last week started with a surprising—and yet, mostly unsurprising—reminder of just how boorish President Trump can be.
A sign that some in the White House were acutely aware of how embarrassing the exchange was for the president came when the officialtranscript showed up and was … well, wrong.
That error, once publicly shared and shamed, was soon corrected.
If only the original comments could be fixed as easily.
The Takeaway: While Trump’s snipes at Cecilia Vega were loudly shared and shamed, it’s worth pointing out that he actually didn’t limit himself to demeaning just one female reporter during the press conference.
The Stormy Daniels Story Brews Again
What Happened: You really can’t keep the Stormy Daniels story down, but the latest development was not what anyone expected—unless you happened to be the other son of the president.
OK, perhaps that’s going a little bit too far, but still: You do have to wonder just a little how Eric approached the subject, don’t you? Just a little.
I mean, it’s not like it’s an easy subject to broach, really.
The Takeaway: At the heart of this whole story is this one sad fact.
Kava-Yay or Kava-Nah?
What Happened: Last week was another big one for Brett Kavanaugh.
What Really Happened: It’s been quite the week for Supreme Court nominee and professional beer enthusiast Brett Kavanaugh. As you may remember, two weeks ago Kavanaugh and one of the women accusing him of sexual assault, Christine Blasey Ford, testified before the Senate Judicial Committee. In the wake of that, a proposed vote on whether or not to place Kavanaugh on the Supreme Court was postponed after Senator Jeff Flake (R-Arizona) demanded the FBI look into the matter. With a depressingly short window in which to do so—the investigation had to be completed within one week—the postponement took effect, and the FBI opened its (limited) investigation.
Surely placing Kavanaugh under further scrutiny would be good for him, considering he so aggressively defended himself in the hearing, right?
OK, so that doesn’t look good for the judge, but surely nothing else would happen to contradict his testimony.
This New York Times story caused its own minor ruckus when it turned out that some of it was sourced with the help of someone who had previously stated that she did not want Kavanaugh to be placed on the court, but that was pretty much a surreal sideshow, made all the moreso by a strange comment on the matter by a Times spokesperson. But back to Kavanaugh, who had sworn under oath that he liked beer, but wasn’t a particularly over-indulgent drinker. Is it possible there’s evidence from the past that contradicts that? Let’s go back to the Times.
Then it escalated.
And escalated again.
With this in mind, it’s not surprising that some were choosing to distance themselves from Kavanaugh.
While history tends to single out individuals, the truth is that when you look behind the story of any heroic leader, what you find is a network of loyal supporters, active collaborators and outside facilitators that are behind any great achievement. Nobody accomplishes anything significant alone.
That’s probably why it’s become fashionable for pundits to encourage us to “find our tribe,” a network of like-minded people who share your ambitions. Don’t listen to them. The truth is that great things are achieved not by taking comfort from your tribe, but from going beyond it and reaching out to those who aren’t of like mind.
The problem with focusing too much on your tribe is that those people tend to think the same way you do. They frequent the same places, watch the same TED talks and read the same blogs. That may be great for giving you some comfort and confidence, but it also acts as an echo chamber that will reinforce flawed assumptions and lead you down a false path.
The Problem with Closed Networks
In 2005, a team of researchers decided to study why some Broadway plays become hits and others flop. They looked at all the usual factors, such as production budget, marketing budget and the track record of the director, but what they found was that what was most important factor was the informal networks of relationships among the cast and crew.
If no one had ever worked together before, both financial and creative results tended to be poor. However, if the networks among the cast and crew became too dense–for all intents and purposes, becoming a tribe–performance also suffered. It was the teams that had elements of both, strong ties and new blood, that had the greatest success.
The same effect has been found elsewhere. In studies of star engineers at Bell Labs, the German automotive industry and currency traders it has been shown that tightly clustered groups, combined with long range “weak ties” that allow information to flow freely among disparate clusters of activity, consistently outperform close networks of likeminded people.
Just as we need to invest in building strong, trustful relationships, we also need to go beyond our comfort zone and seek out new connections. It’s far too easy to hide in a tribe.
The Discomfort of Diversity
Just as studies show that closed networks lead to worse performance, it has long been established that diversity improves performance. Researchers at the University of Michigan found that diverse groups can solve problems better than a more homogenous team of greater objective ability. Another study that simulated markets showed that ethnic diversity deflated asset bubbles.
While the studies noted above merely simulate diversity in a controlled setting, there is also evidence from the real world that diversity produces better outcomes. A McKinsey report that covered 366 public companies in a variety of countries and industries found that those which were more ethnically and gender diverse performed significantly better than others.
Yet diversity also has a downside. In Political Tribes, Yale Professor Amy Chua notes that we are hardwired to be suspicious of others. For example, in a study where young children were randomly assigned to red or blue groups, they liked pictures of other kids who wore t-shirts that reflected their own group better. A study of adults had similar findings.
So you can see the attraction of tribes. We feel uncomfortable with people who we perceive as different. Surrounding ourselves with people who see things the way we do, on the other hand, makes us feel confident and powerful.
Mixing with the Heathens
Growing up in Iowa in the 1930s, Everett Rogers, noticed something strange in his father’s behavior. Although his father loved electrical gadgets, he was hesitant to adopt hybrid seed corn, even though it had higher yields. In fact, his father only made the switch after he saw his neighbors hybrid crop thrive during a drought in 1936.
This became the inspiration for Rogers’ now-familiar diffusion of innovations theory, in which an idea first gets popular with a group of early adopters and then only later spreads to other people. Geoffrey Moore later pointed out that most innovations fail because they never cross the chasm from the early adopters to the mainstream.
A study done by researchers at Kellogg and Stanford explains why. They put together groups of college students to solve a murder mystery. The groups made up of students from the same sorority or fraternity felt more confident and successful, even though they performed worse on the task than integrated groups that experienced more conflict, uncertainty and doubt.
That’s the problem with staying in your tribe. Sure, it feels great to have your ideas supported and reinforced by people you like and respect, but they are doing so because they already believe the same things that you do. To actually achieve something worthwhile, however, you have to go beyond preaching to the choir and start mixing with the heathens.
Do You Want to Make a Point Or Do You Want to Make a Difference?
In my upcoming book, Cascades, I cover a wide range of movements. Some, like the civil rights movement and the campaign to save 100,000 lives, succeeded brilliantly. Others, like Occupy and the technology companies along Boston’s Route 128, failed miserably. Another thing I found is that many movements that ultimately succeeded, failed initially because they failed to go beyond their tribe
These were very ‘Occupy’ type of protests where we occupied the five biggest universities and lived there in our little islands of common sense with intellectuals and rock bands while the rest of the country was more or less supportive of Milošević’s idea. And this is where we began to understand that staying in your little blurb of common sense was not going to save the country.
In a similar vein, Nelson Mandela started out as an angry nationalist, but eventually learned that to get results, he would have to actively collaborate with others that didn’t quite see things the same way he did. In Poland, Solidarity’s first actions were disastrous, because they only involved workers. It was only through a later alliance between workers, intellectuals and the church that the movement ultimately succeeded.
Today, both America and the world have become increasingly tribal and it’s easy to retreat into what Srdja calls “your little blurb of common sense.” You can state your beliefs, make your point and see the heads nod around you. You can live in comfort, knowing that any voices of dissent will be quickly shouted down, as you self righteously feel they should be.
However, at some point, you will have to decide if you want to make a point or whether you want to make a difference. To achieve anything worthwhile, you have to go beyond your tribe.
It makes sense to me. People do seem a little more high strung here.
But then I looked deeper. The least-stressed state? Iowa, supposedly. Followed by Minnesota and North Dakota. (I think I’d be stressed out about the cold, alone.)
And right behind New Jersey, second-most stressed? Georgia, according to this study, and then Florida. Hmmm. Neither really struck me as particularly in the same category.
And then it hit me. They say that “hell is other people.” So I compared this list to a ranking of the most urbanized states–and the correlation was stunning. For a strong majority of the states, their ranking on the most-stressed out list was within 10 spots of their ranking on the most-densely populated list.
Here’s the list of most-stressed states, coupled with their rankings in terms of how urban they are. Yes, there are a few outliers, but by and large, “more urban equals more stressed.”
Let us know in the comments what you think of your state’s placement on the list.
1. New Jersey
Stress Rank: 1
Urban Rank: 2
Most stressed state. Second most urbanized. We’re off to a strong start.
Stress Rank: 2
Urban Rank: 23
Okay, already we have a problem: Ranked #2 for stress, and #23 for urbanization. But, this was one of the biggest stress/urban gaps. The folks at Zippia, who complied the list, explain it partly by saying that because the state is so sprawling, many people live in a less urban area, but have to commute into one each day.
Stress Rank: 3 Urban Rank: 6 Difference: 3 Back on track. The difference here is just three. Florida is a lot more urban than many people realize. (Also, there’s a really high rate of people who don’t have health insurance.)
Stress Rank: 4
Urban Rank: 1
Don’t let the beaches, deserts and farms fool you; when you add up the cities, California is by far the most urban state. And it’s #4 for stress.
5. New York
Stress Rank: 5
Urban Rank: 12
Obvious a high urban ranking, and a high stress rate. What do you expect from a state that contains the city that never sleeps?
Stress Rank: 6
Urban Rank: 27
A bit out an outlier, but not radically so. Zippia opines that it’s because people work an especially high number of hours a week.
Stress Rank: 7
Urban Rank: 13
No surprise. Quite urban, very stressed.
8. North Carolina
Stress Rank: 8
Urban Rank: 36
The high uninsured rate in North Carolina made it rank more stressed than it otherwise would have.
Stress Rank: 9
Urban Rank: 22
Similar to Georgia: the urban rank isn’t super high, but the percentage of people commuting from exurbs and rural areas to Washington D.C. leads to higher stress.
Stress Rank: 10
Urban Rank: 47
Mississippi was one of the few states with a very high urban/stressed differential. According to Zippia, it’s because the state just isn’t doing very well, period. Comparatively high unemployment, very low insurance rates, and long hours worked for those who do have jobs.
11. South Carolina
Stress Rank: 11
Urban Rank: 34
Another one of the slight outliers, but with a similar likely explanation: people live in rural areas, but have to commute to urban ones. Also, high uninsurance rates.
Stress Rank: 12
Urban Rank: 15
Big state, big urbanization, big stress.
Stress Rank: 13
Urban Rank: 10
Again: the stress rank and urbanization rank are very close.
Stress Rank: 14
Urban Rank: 3
So many people live in and around either Las Vegas or Reno. Urban rank is very high, stress level is high, too.
Stress Rank: 15
Urban Rank: 9
A small differential between Stress Rank and urban rank.
Stress Rank: 17
Urban Rank: 42
Again, we see one of the southern states with a fairly high differential, which seems to be explainable by a lower standard of living from a financial standpoint, including low insurance rates.
Stress Rank: 18
Urban Rank: 5
I’d be interested to see Hawaii broken down by island in terms of stress rates. Once you get off Oahu, it’s pretty mellow. But even so, stress and urbanization rates are pretty similar.
Stress Rank: 19
Urban Rank: 37
Alaska has some of the same stress explanations as some of the southern states, despite its outlier differential between urbanization and stress level.
Stress Rank: 20
Urban Rank: 4
Why does Massachusetts have a lower stress rating than you might expect? One key reason would seem to be the very high rate of medical insurance.
Stress Rank: 21
Urban Rank: 11
Having lived in Connecticut, I would have thought it would rank higher for stress. But its cities are smaller, and the state is less urban.
Stress Rank: 22
Urban Rank: 16
Moderately urban, moderately stressed.
Stress Rank: 23
Urban Rank: 14
Pretty close on both urban and Stress Rankings.
Stress Rank: 24
Urban Rank: 17
Hardly worth mentioning the difference.
25. Rhode Island
Stress Rank: 25
Urban Rank: 7
A bit of an outlier, but not by much.
Stress Rank: 26
Urban Rank: 19
Very close in terms of urban and Stress Ranking.
27. New Mexico
Stress Rank: 27
Urban Rank: 21
Again, very close.
28. West Virginia
Stress Rank: 28
Urban Rank: 48
Once again, a very low urban rate would predict less stress, except for the financial stress that residents are under. Low health insurance rate doesn’t help, either.
29. New Hampshire
Stress Rank: 29
Urban Rank: 40
Pretty close urban and Stress Rank.
Stress Rank: 30
Urban Rank: 18
Similar to New Hampshire, except it’s going the other way: ranks a bit less stressed than you might imagine, but still pretty close.
Stress Rank: 31
Urban Rank: 45
A 14 point difference pushes the boundaries a bit, but once again, the low health insurance rate is a big factor.
Stress Rank: 32
Urban Rank: 35
Not very urban, not very stressed.
Stress Rank: 33
Urban Rank: 43
Same thing: less urban, less stressed.
Stress Rank: 33
Urban Rank: 33
One of two states where the differential was zero.
Stress Rank: 34
Urban Rank: 29
Once again: Fairly rural, fairly unstressed.
Stress Rank: 35
Urban Rank: 31
Another with a low differential.
Stress Rank: 36
Urban Rank: 32
And yet another.
Stress Rank: 37
Urban Rank: 20
A small outlier, but not too far off. I don’t have a great explanation for this one, but good for Ohioans who are in a fairly urban state, but don’t have as much stress.
Stress Rank: 38
Urban Rank: 38
My second favorite state for this purpose, because its urbanization and stress rates are identical.
Stress Rank: 39
Urban Rank: 46
Seven points difference isn’t that much.
Stress Rank: 40
Urban Rank: 30
Within 10 points. It’s a pretty nice place to visit, by the way.
Stress Rank: 41
Urban Rank: 50
I hadn’t realized Maine was the least urban state in the country. But it is, and it’s also one of the least stressed.
Stress Rank: 42
Urban Rank: 25
A little bit of an outlier… but not too far off.
Stress Rank: 43
Urban Rank: 8
Okay, there is just something about Utah. I don’t think I’ve ever met a high strung person from there. But its differential is an outlier.
Stress Rank: 44
Urban Rank: 24
Fairly close. A tough regional economy could explain a lot of this.
Stress Rank: 45
Urban Rank: 49
46. South Dakota
Stress Rank: 46
Urban Rank: 44
Even tinier differential.
Stress Rank: 47
Urban Rank: 28
While Nebraska has a higher urbanization rating than you might expect, it’s still not very densely populated, which sort of offsets the differential.
47. North Dakota
Stress Rank: 47
Urban Rank: 41
Very cold, but very low differential.
Stress Rank: 49
Urban Rank: 26
Fairly high urbanization and low stress. Let’s call it an outlier and chalk it up to Minnesota Nice.
Stress Rank: 50
Urban Rank: 39
The least-stressed state in the country. Congratulations Iowa. And a low differential. I rest my case.
Signing on to test the new Specialized Turbo Levo mountain bike is a little like making a deal with the devil—especially if you live in a town, like I do (Duluth, Minnesota), where e-bikes aren’t allowed on the 93 miles of IMBA gold-medal-level, purpose-built singletrack. There are many purists out there who firmly believe that only those who can ride trails under their own power should have access to them. My sensibilities fall in that camp, but in the name of open-minded evolution and a hardwired quest for fun, I felt obliged to test the new bike anyway.
Haters, you’re going to cringe at my conclusion: This e-bike is a blast. Before you dismiss me as a traitor and a slacker, hear me out on why the bike deserves to exist on authorized trails.
For starters, Specialized employed 40 people to design this bike, hiring three system engineers whose sole job was to make sure every component would seamlessly integrate. Being bike manufacturers, they started with the frame design: The Levo uses the same asymmetric frame as Specialized’s new Stumpjumper, which makes the bike 20 percent stiffer over the previous Levo while reducing its weight by 110 to 550 grams. It’s also longer and slacker in the front, which translates to a flowing, precision ride on downhills.
Working off the benefits of that frame design, Specialized worked to integrate a motor within it. First, the company designed and perfected its proprietary software. Then they hired manufacturer Brose to wrap the inner workings in magnesium, which makes the motor 14 ounces lighter. When you make a motor, you also have to figure out where and how to mount it on the bike. The solution was to use a direct motor-to-frame system The motor mounts on the bottom bracket, which shaves off an additional 14 ounces. Like all Type 1 vehicles, the max speed the motor allows is 20 mph. But when it reaches that 20 mph max, the two freewheels in the motor disengage from the crank and the bike starts pedaling naturally, which makes it a much smoother ride.
In the highest-end S-Works ($12,050) and Expert Levo ($8,250) models, Specialized amped up the battery up to 700 watt-hours—200Wh more powerful than the standard e-mountain bike. This gives it a whopping 40 percent longer life and extinguishes riders’ “range anxiety,” that sinking feeling that you’re going to be stranded in the back of beyond with a behemoth bike after the battery dies. In the alloy models like the Turbo Levo Comp, the battery is 500Wh, the industry standard. Both the 500Wh and 700Wh models are 15 percent smaller and 11 percent lighter and housed in the downtube.
To control the motor’s brains, Specialized installed a small Turbo Connect Unit (TCU) on the top tube. The TCU turns the bike on and tells the rider how much power the battery has—one LED bar equals 10 percent of the battery’s charge. For more data, Specialized upgraded its Mission Control app (available for Android and iOS) which allows the rider to connect to the bike over Bluetooth, then tune it, diagnose it, track rides, and connect to third-party platforms like Strava.
The best new features: “Smart Control,” which acts as a governor, regulating the power of the motor to ensure that a desired battery capacity is retained throughout the selected length of the ride; and “Shuttle Mode,” which gives maximum power output with less required pedaling force for going uphill fast with to get in more downhill runs.
All of this sounds fantastic on paper, but how does it translate to the trail? Quite seamlessly. I started my first 2.5-hour test of the alloy Turbo Levo Comp on a mile-long bermy, bumpy downhill flow trail. Despite the Levo being roughly 20 pounds heavier than the carbon Stumpjumper, it felt surprisingly similar—stable, deftly absorbing bumps, and cornering well in the berms with its 150 mm of travel in both the rear shock and front fork. The almost silent whirr of the motor was mesmerizing, with no glitchy cutouts or surges in power.
I soon learned, however, that if my weight was too far forward, especially on tight rollers, I was dangerously close to flying over the bars. This ensured that I couldn’t get lazy. I had to play close attention to my technique throughout the downhills. This is why some coaches like to use e-bikes as a teaching tool: The bikes allow riders to reach higher speeds more regularly with less effort and more easily simulate a racing scenario.
My only crash of the three-day test came when I engaged “Smart Control” on the downhills. Without being able to click into turbo mode, I didn’t generate enough speed going into berms. In one instance I found myself too high, too slow, and washed out the front wheel.
My guiltiest pleasure while riding the Turbo Levo was engaging full Shuttle mode on a particularly challenging 800-foot singletrack climb. I confess I was cheating a little: Real athletes would have ridden uphill in the battery-saving eco mode, forcing a more challenging workout. But the battery-juice-munching climb was worth it. I felt like a superhero, or at least a doped cyclist, as I charged up the steep, technical stretch, beating my boyfriend Brian by a solid five minutes.
“Wow, that thing is the great equalizer,” Brian said when he finally reached the top, sweat dripping out of his helmet. But my e-assisted hard charging gave Brian even more incentive to beat me riding back down. He did so with ease. Which brings me to the reality that any bike is only as fast and technically proficient as its rider, so invest as much time in developing your skills as you would investing money in your e-mountain bike.
For almost as long as I have covered MannKind (MNKD) I have always stated that I would rather see this company as a research and development entity than one that is attempting to get into the business of sales and distribution. My opinion on that front became more solidified when it was blatantly apparent that MannKind was really struggling to deliver Afrezza sales numbers that were able to impress the Street or help the bottom line.
The pipeline deal with United Therapeutics (UTHR) gave some new life to the idea that MannKind might be able to shift its business model to something more in line with what I have always seen as the best opportunity for this stock. To that end, MannKind seems to be focusing its more recent presentations to the possibilities of the pipeline, a move which I applaud.
In my opinion, the perfect situation would be one that saw the company essentially sell off Afrezza and make a pronounced shift to the pipeline. To see some flavor on the possibilities with such a move, investors can look to Arena Pharmaceuticals (ARNA). Arena was in a very similar situation to the one MannKind finds itself in. The company developed a drug, got a big partnership deal, saw that partner essentially pull out, and was wallowing along without enough capital and with prospects that were not very compelling. The main difference is that Arena had a more mature pipeline that was closer to seeing new drugs come to fruition than what MannKind has. To make a long story short, Arena essentially sold off the first drug for some upfront cash and a royalty and shifted its entire business to its pipeline. Today, Arena has three very mature drugs in its pipeline and is on the cusp of either partnerships or FDA approval.
The issue here is simple, and it is something that less experienced investors often seem to miss. The Street will place more value on potential than it will on a drug that has a history of poor sales, or even one that is growing, but growing very slowly.
If MannKind were to announce that it had a buyer for the Afrezza franchise, the company could trim back its expenses greatly. If it were able to garner $50 million for the Afrezza move and add another $100 to $150 million with an offering, we would have a company that has a better appearance to Wall Street.
MannKind, as it currently exists, is paying out almost $1 million per week for selling and marketing, and another $200,000 plus in rebates, discounts, returns, etc., whilst paying out just $200,000 per week in research and development. Imagine what could transpire if monies were dedicated to the pipeline rather than attempting to sell a drug that is simply not selling well.
In its most recent presentation at Cantor Fitzgerald, management had to spend time discussing Afrezza, which, in my opinion, is a detraction from the current pipeline possibilities. If one were to look at the presentation in a vacuum, it was quite good. That being said, if one does a little digging (which the big players will do), you start to see the weak spots. Some examples below relative to a milestone checklist of management:
Chart Source – MannKind Corp.
Looking at the chart, it would appear that every goal management has outlined is tracking well. Looking deeper though, we see where there is some weakness. Let’s assess one at a time.
Growth Trajectory Continues With Afrezza
On its face, it is a truthful statement. The problem is that the growth trajectory is not even meeting management’s own stated goals, and is not a trajectory that impresses the Street. In fact, it can be argued that the growth trajectory delivered is getting more costly to support. Management might put a check mark next to the bullet point, but I would characterize this point as incomplete.
FDA Label Change 2017
Indeed, a label change happened. The issue here is that the company did not get everything it wanted, and compounding the problem is that the label change has not really shifted the trajectory on sales.
Completion of STAT
This sounds great, and did happen, but what has the impact been? It was a small study that provides some anecdotal data, but lacks the scope, size, and design to really move the needle in a way that will help the bottom line. It is a study that provides enough positive data to warrant additional studies, but funding those may not deliver the needed value in a reasonable time frame.
IND Filed For TreT and Partnered With United Therapeutics
This is the best accomplishment. I applauded the phase 1 trial of TreT as a smart choice. It was a great candidate with great odds for success. Attracting a partner was a big boost. In my opinion, MannKind did not get all that it could have in the deal because of a lack of leverage, but it does point to the possibilities of Technosphere as having real potential. The check mark in this bullet point is warranted.
Increase Payor Coverage
This is another statement that on its face is true. That being said, the level of coverage is still disappointing. MannKind made a big move in May of this year, but since then the coverage has not had much traction, and despite this better move in May, the sales trajectory has not shifted by very much. Many formularies will be re-established here in October, so this bears watching.
Chart Source – Spencer Osborne (based on data from FingertipFormulary)
In simple terms, Afrezza is on lower level tiers and still carries many restrictions. It will be costly to get onto higher tiers.
Recapitalization (Complete upon UTHR closing)
This bullet point is off of the mark, in my opinion. This company is not near being fully funded. The United Therapeutics deal does provide a couple of quarters worth of cash in the near term and possibly another couple of quarters during the next 2 years. But beyond that, the company still needs cash. Currently the company has some breathing room in until 2021, but it will need to address some substantial debt payments that year.
Management checks this box, but the deals it has established thus far have lacked attractiveness. There was no upfront money for Brazil, and minimal upfront money for India. The company has stated it intends to file for approval in Mexico and Canada. In my opinion, the Brazil and India deal will help the company use up contracted insulin, but will not be a driver of substantial cash making it to the bottom line. The insulin contract with Amphastar is a big burden to MannKind. The company still has to pay Amphastar almost $100 million over the next 5 years. As yet, the company is not able to use all of the insulin it must buy. International deals help use up what would otherwise expire, but until Afrezza can actually help the bottom line, it remains a burden that investors consider.
Of the seven bullet points that the company outlined as complete, five of them relate to Afrezza. Of the three remaining bullet points two relate to Afrezza. Perhaps the most important point that remains is a Co-Promote deal for the inhaled insulin. As yet, the company has not really defined what it means by co-promote, and due to a lack of analyst coverage, has been able to keep that point as undefined. If a co-promote partner were to take over the drug, pay the ongoing trials, absorb the insulin purchase requirements and simply pay MannKind a manufacturing contract and royalty, I think that the Street would celebrate the deal. Even if it was for a relatively small upfront payment.
Simply stated, I like MannKind as an R&D company much more than I like it as a company trying to mount its own sales force, and spending money on marketing, patient management, etc.
The deal with Receptor Life Science could be compelling if something were to actually happen. The cannabinoid sector is hot at the moment. Some of my regular readers have likely already seen some healthy returns of Youngevity (YGYI), a company I cover that is entering the CBD space and working toward a field-to-finish hemp and CBD oil capability. The current problem is that Receptor Life Science is on radio silence and has been for years. If RLS were to break radio silence while that sector is hot, it could provide a compelling move in MannKind stock. That, however, is a big if, but let’s take a moment to assess.
If MannKind were to be able to extract itself from Afrezza costs at the same time that it is able to announce something in the cannabinoid space, it could provide the very best opportunity for the stock to rise, the warrants to get taken out, and even provide for an offering that could raise enough capital to fund bringing some pipeline candidates forward, which could in turn bring in added partners.
Let me make this clear. I am not anti Afrezza. I feel that the product has some compelling attributes that can serve needs within the diabetes space. My issue with Afrezza is that MannKind cannot afford to market the drug the way that it needs to be marketed, and it has some legacy deals (Amphastar – and Deerfield milestones) that will make it difficult for any company to see a quick return on the drug without making a substantial investment into marketing it. That means that such a company would need to minimize its acquisition costs on the rights. If MannKind had hundreds of millions in the bank, and a pipeline that was a bit more mature, it could be worth continuing the efforts with Afrezza. Unfortunately, MannKind does not have that level of cash, and does not have a more mature pipeline.
With all of that being said, MannKind could be a great speculative play on the possibility of RLS alone if RLS gets moving. I am oft asked what would make me bullish on MannKind. The answer is rather simple.
Getting fully funded
Getting a more mature pipeline
Getting out of the sales and marketing business
Getting leaner on overhead and more swift on R&D
Recapitalizing existing debt and getting a cash stockpile to develop new drug candidates
I know that there are some readers that are full-fledged members of the “Afrezza Army.” Much of what I am saying in this article may be upsetting to those readers. My answer to you is simple. The investment is in MannKind, and not Afrezza. Public companies need to re-invent themselves, grow, and be nimble enough to shift the path when the situation dictates. Some might even say that the best chances to see Afrezza succeed may be in the hands of another company. Do not fear it. Celebrate it.
It is clear that the Street is looking to put money into inhaled solutions. Look no further than Liquidia (LQDA). That company was $11 per share just 2 months ago. Today it trades at nearly 3 times that level. Liquidia is focused on research and development. Liquidia has a story that the Street likes. Liquidia is not (at least not yet) attempting to be a pharma company that takes a drug to approval and then tries to market it alone.
There are many times that I would have been a player in trading MannKind stock. I committed to not buy the stock as long as I was actively writing about it, thus have no shares. In fact, I have never had a position in MannKind. That being said, I have made clear when the opportunities exist to trade this effectively, or even build a longer term position as a speculative play in one’s portfolio. MannKind has had a tendency to be late to the game in many respects, and to box itself into corners on the financial front. These are things that can be repaired, but it takes a bold move on the part of MannKind and a bold move on the part of potential investors and partners.
There is opportunity here for traders as there has always been. There is also more upside speculative potential than has existed in the past. Is MannKind going to rocket to the moon so fast that investors miss out? Not in my opinion. Can it make a substantial pop on the right news? Yes. Investors should not get themselves so hung up on the potential without balancing it with the cash situation, cash commitments, and cash flow. There will be bears that will argue that Technosphere cannot make it and that it is expensive. I do not subscribe to that thesis. What Technosphere needs is funding. In my opinion, the Street could be eager to fund Technosphere programs. What I do think the Street is not eager to fund is Afrezza sales and marketing efforts. That is simply my opinion based on the lack of appetite of the Street to play MannKind stock in a bigger way. If MannKind can re-invent itself, there could be a much more compelling story in the making. Stay tuned!
Disclosure:I am/we are long YGYI, ARNA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Based on price action, Tilray Inc. (NASDAQ:TLRY) is currently the most exciting name in the very hot Canadian pot stock space. Also based on price action, Novartis AG (NYSE:NVS) is a boring Big Pharma stock. While I have previously warned investors that pot stocks are unlikely to be good buy-and-hold stocks, TLRY seems to have its supporters.
A point of difference between TLRY and other pot stocks is that it has a collaboration with Sandoz Canada, the Canadian arm of Sandoz, Novartis AG’s generics business. The aim of this article is to see if this collaboration justifies any of the current hype surrounding TLRY and if it might be something worth getting excited about for NVS investors.
Figure 1: 2018 has been another boring year for NVS but an exciting beginning for TLRY
The TLRY-Sandoz Canada alliance
On March 18, 2018, TLRY issued a press release noting it had signed a binding letter of intent, which in concert with anticipated agreements to follow, allied TLRY with Sandoz Canada. TLRY noted it had become the exclusive collaborator of Sandoz Canada to “accelerate innovation and increase availability of high quality medical cannabis products.” So TLRY and Sandoz were set to sell cannabis together.
On June 19, 2018, Sandoz Canada announced that it had finalized the collaboration agreement. It noted that eight TLRY-Sandoz co-branded, non-combustible medical cannabis products were now available, including three dosages of capsules and five strengths of oils.
Figure 2: Eight products available under the TLRY-Sandoz Canada alliance. Source: TLRY website.
The Canadian medical cannabis market
Although legal access to cannabis for medical purposes in Canada came online during the period of 1999-2001, the initial framework for patients to access cannabis, coupled with the unwillingness to prescribe by many physicians, led to an initially tepid pace of growth. From humble beginnings, however, the medical cannabis market in Canada has transformed into a sizable industry.
Arcview Group and BDS Analytics have suggested the Canadian legal cannabis industry will generate $1.3 billion in 2018 ($600 million of that from medical use) and $5.4 billion in 2022 ($500 million of that from medical use). The predicted drop in revenues from medical cannabis is based on the fact that legalization may lead to those previously obtaining cannabis via the more complex medical route to simply obtain it as those using cannabis recreationally will. There are, however, two key factors which might offset patients switching from obtaining cannabis via the medical route to the newly legal recreational route come October 17, 2018. The first factor is that physician attitudes to prescribing cannabis continue to improve, which means prescribing might continue to increase, generating new patients.
Figure 3: Results from two studies examining attitudes among Canadian physicians to prescribing cannabis. The two studies were commissioned by CanniMed Therapeutics (OTC:CMMDF), which was subsequently acquired by Aurora Cannabis Inc. (OTCQX:ACBFF). Source: CMMDF prospectus.
The second factor is the recent commencement of coverage for medical cannabis by Canadian health insurers. For example, in February, Sun Life (NYSE:SLF) announced it would offer optional medical marijuana coverage of up to $6000 yearly per person in select conditions, including cancer pain and rheumatoid arthritis. In June, Markers Financial Inc. announced it too would soon offer coverage for medical cannabis prescriptions. For patients with insurance coverage, it may not make sense to access cannabis by the recreational route, although this will depend how much they would normally spend on cannabis.
Should NVS investors get excited?
The initial press release concerning the TLRY and Sandoz collaboration was just from TLRY – not TLRY and Sandoz (a Novartis division) or TLRY and NVS itself. Compare that to other developments which Sandoz felt it was worth bothering investors with, such as a collaboration with Biocon (OTC:BCNQY) to develop biosimilars. The same can be said of NVS, which does tend to issue a press release on major collaborations and their developments.
However, the website of Sandoz Canada does include press releases related to its collaboration with TLRY and medicinal cannabis. Now, this might seem like a simple way to analyze the impact of this new collaboration, but the point is that if NVS hasn’t bothered investors with this development, it might not be hugely material. If Sandoz Canada is talking about it, then it is relevant on the level of Sandoz Canada, which is not a stock you can buy.
NVS reported net sales of $49.1 billion in 2017, so even if Sandoz Canada and TLRY captured the entire Canadian legal medical cannabis market (say $500-600 million), that would not be a game changer for NVS. Rather, such an unlikely scenario (capturing an entire market) would be similar to NVS getting a new drug approved which is not quite a blockbuster. Then, Sandoz Canada’s entry into the Canadian medical cannabis space can be thought of as simply another recently approved drug in the NVS portfolio.
Figure 4: Breakdown of NVS sales by geographic region, including Canada/Latin America, and by division. Source: NVS 2017 annual report.
For the medical cannabis space to become more important to NVS’s bottom line, Sandoz Canada and NVS will need to do two things. The first would be to grow the market in Canada, don’t let it peak as the recreational route becomes legal. The second thing would be NVS (or other regional arms of Sandoz) to enter the medical cannabis space in other countries. NVS investors should keep an eye out for that second potential development, because the Sandoz Canada-TLRY collaboration does suggest that NVS is taking cannabis seriously, and so, collaborations in other countries seem possible (not necessarily with TLRY). Combined medical cannabis revenues from multiple countries could be a bit more meaningful for NVS and its investors.
Regarding attempts not to let the legal medical cannabis market peak too soon in Canada, Sandoz Canada is making moves. One of the attempts to further legitimize medicinal cannabis in the minds of unwilling physicians can be seen in a recent PR from Sandoz Canada, where the company essentially suggested pharmacies could serve as an ideal place to dispense medicinal cannabis.
If cannabis is used to treat a medical condition, Sandoz Canada believes that it should be distributed through appropriate channels to properly regulate the therapeutic intent of the treatment. If medical cannabis is authorized by a healthcare professional, it would be logical for it to be distributed by another professional, such as a pharmacist, so that patients can benefit from adequate follow-up and guidance from healthcare professionals if they wish. Sandoz Canada will share this vision during the upcoming consultation launched by the Ontario government.
Even if the market doubles or holds steady thanks to the efforts of Sandoz Canada and others in the space, NVS will need to enter other worldwide markets before the cannabis business becomes a big line item on the balance sheet. NVS investors can stop here then.
Should TLRY investors get excited?
Although the medical cannabis market is not the size of the recreational market, TLRY does have some potentially competitive products worth review. One of the oils available as part of the Sandoz Canada collaboration is Tilray 2:100 (also known as TIL-TC150), which contains 2 mg/mL of Δ9 tetrahydrocannabidiol (THC) and 100 mg/mL of cannabidiol (CBD). On August 1, TLRY issued a press release noting published results from a phase 2 study of TIL-TC150 in children with a type of epilepsy called Dravet syndrome (notably, these patients had drug-resistant epilepsy). Twenty children in the study received TIL-TC150, 19 of them completing 20 weeks of treatment with TIL-TC150 being used as an add-on to existing anti-convulsant therapy. There was no control group in the study, but the drug did produce a statistically significant improvement in quality of life – and a statistically significant reduction in seizure count – at week 20 (compared to baseline).
Figure 5: Change in seizure frequency based on patient seizure diaries. Each column represents a patient, and the percentage change is calculated based on a comparison of weeks 17-20 (endpoint period of the study) to weeks -4 to 0 (lead-in portion of the study when patients were not on TIL-TC150). Five patients did experience an increase in seizures based on that comparison, whereas two patients were unchanged and 12 experienced a decrease in seizures (two patients had a 100% reduction and were thus seizure-free during weeks 17-20). The overlaid line represents the average change in seizures frequency across the 20 weeks of treatment. Source: Publication in Annals of Clinical and Translational Neurology.
Despite the size of the study I find the results to be quite promising. I would like to see TLRY run follow-up studies, which the press release indicates TLRY will, with some sort of control group (be it placebo or active comparator). TLRY is not really a biotech/pharma company, although it is making drugs and selling them, and so, it might need some help furthering that clinical development. The phase 2 study in Dravet syndrome was designed and conducted by researchers at The Hospital for Sick Children in Toronto. Larger studies might require enrollment across multiple sites, and so, more expertise might be required to plan such studies, including hiring a contract research organization. TLRY might also need to make new hires to bring additional expertise on board (TLRY has some of the necessary people on board already). Another possibility is a partnership with a company with expertise in clinical development. With a partnership with Sandoz Canada already in place, the possibility of NVS stepping in to help with clinical development seems like a bright idea, although this is speculation on my part.
One last thing worth noting about the August 1 press release is the clarity with which the results and their meaning were presented. The press release even noted the limitations of the phase 2 study (that is not something seen often from biotech companies). I have to give TLRY some credit for its transparency.
A limitation in this study concerns the small number of participants, the majority of whom were already taking a prescribed antiepileptic drug. Tilray donated product for the trial and funded the research. Next steps include additional research with more participants and variable doses of combined THC/CBD.
– TLRY communicates clearly with investors in its August 1, 2018, press release.
If the company is to continue clinical studies on its medical cannabis products, it would do well to note the methods of GW Pharmaceuticals plc (NASDAQ:GWPH), which has been successful in its studies.
TLRY is no GW Pharma competitor yet
GWPH is a biopharmaceutical company with a market cap of ~$4 billion, focused on the development and marketing of plant-derived cannabinoid therapeutics. The company has marketing approval for Sativex (an oralmucosal spray containing THC and CBD in a 1:1 ratio along with other minor cannabinoids) in a number of ex-US territories, including approval in 21 European countries.
GWPH has run placebo-controlled, double-blind, randomized clinical trials demonstrating the efficacy of Sativex in spasticity due to multiple sclerosis (including a 572-patient study published in 2011 and a 337-patient study published in 2013). It is currently in phase 3 trials in the US for the same indication, and so, approval is likely not far away in that market (Sativex is already available in Canada).
The company also markets Epidiolex (plant-derived CBD), which was recently approved in the US for Dravet syndrome and Lennox-Gastaut syndrome. A timeline for submission of Epidiolex to the regulator in Canada is unclear.
Figure 6: GWPH has produced an impressive body of clinical research with Epidiolex as it did with Sativex. Source: Company investor presentation.
It seems likely that Epidiolex, should it gain approval in Canada, is going to have an advantage over non-approved formulations like TLRY’s Tilray 2:100 in Dravet syndrome and Lennox-Gastaut syndrome (as much as I like the data seen with Tilray 2:100). Physicians could prescribe Epidiolex to their patients like they would any other drug for epilepsy and know they are getting a product which has undergone multiple clinical trials and is approved by the Canadian regulatory authority. Now TLRY could one day seek approval for its products, but GWPH is obviously far ahead, with Sativex already on the market and Epidiolex already having completed clinical studies in two indications.
… we are working hard to make EPIDIOLEX available within the next six weeks as we know there is excitement for a standardized version of cannabidiol that has undergone the rigor of controlled clinical trials and been approved by the FDA.
– GWPH comments in September 27, 2018,press release. Note these comments apply to the US market, but a similar argument could be made for the Canadian market, were Epidiolex approved.
In summary, GWPH represents a likely TLRY-Sandoz competitor in certain groups of patients (seizure disorders and potentially off-label use), but also a competitor that has laid down the pathway to develop and gain approval of cannabis-derived pharmaceuticals. Of course, TLRY needs to continue down the recreational cannabis road given the size of that market. Nonetheless, a phase 3 study of something like Tilray 2:100 would attract a lot of positive attention, as an approved product can be sold at a much higher price point, and as discussed above, some physicians may have a strong preference for something that has been run through rigorous clinical trials.
While I am excited about TLRY’s collaboration with Sandoz Canada, particularly products such as Tilray 2:100 given the studies behind it, I feel that the Sandoz name will only take TLRY so far. Revenues from the medical cannabis space may peak as Canadian patients simply acquire products via the recreational route, and those going via the medical route may end up on competitors’ cannabis products or even approved drugs (Sativex and, potentially, Epidiolex). As other pharma players like Johnson & Johnson (NYSE:JNJ) and Apotex seem to be interested in entering, or have entered, the medical cannabis space, the market share held by TLRY-Sandoz can easily be divided. Even if the $600 million market size for 2018 remains in years to come, and TLRY could capture 20 percent of it, would $120 million per year in revenues be worth getting that excited about for a company which already has a $13 billion+ market cap?
Unlike Canopy Growth Corporation (OTC:CGC) or Hexo Corp. (OTCPK:HYYDF), TLRY doesn’t yet have a major collaboration with or investment from a beverage maker. I find the current partnership with Sandoz Canada to be a poor substitute for a large deal with a beverage maker. Meanwhile, TLRY isn’t yet ready to do what GWPH has. Although it could follow in GWPH’s footsteps in the future, the recreational market is likely lower-hanging fruit near term. If TLRY could do something similar what CGC has done in securing a multi-billion dollar investment from Constellation Brands (NYSE:STZ), then it might be possible to get behind a multi-billion dollar market cap. Until that happens, I remain bearish on TLRY at these prices despite my enthusiasm for the company’s medical cannabis products, clear communication and potential to follow in GWPH’s footsteps. Investors would do well to take profits on TLRY at current prices and come back when it is cheaper or has a deal worth getting excited about.
Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.