The Great Chemo Shortfall

Plus: Consumers discover the interweb is good at banking ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 5, 2023

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Good morning.

The Apple mixed-reality headset, which could be unveiled today, is a machine with plenty of ambition as well as mixed opinions on the size of the market.

While leaders at some of the world’s biggest firms see a future dominated by AR and VR like something ripped out of Ready Player One, the tech just hasn’t gripped the masses yet. Mark Zuckerberg’s passion project, the Meta Quest, has shipped roughly 20 million units. That may sound like a lot, but it’s comparable to the Gamecube, a cult-classic but one of Nintendo’s worst selling products.

A potential $3,000 price tag for Apple’s headset isn’t likely to change minds either. So will this new computer on your face be the next iPod or will it be another Apple Pippin? Don’t remember that one? Exactly.

Morning Brief

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The US is short on life saving medicine.

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Everyone loves online banking.

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Cava wants to go public.

Pharmaceuticals

US Taps Chinese Drug Company Amid Chemotherapy Shortages

(Photo Credit: National Cancer Institute/Unsplash)

There are still some fields where the US and China play nice.

As America continues to struggle with a shortage of chemotherapy drugs, the FDA is allowing imports from a Chinese pharmaceutical company despite its drug not having federal approval and the vials being labeled in Chinese, The Wall Street Journal reported this weekend.

What’s the Prognosis?

Coupled with radiation and surgery, chemotherapy is the standard cancer treatment, and while it’s effective at killing rapidly growing cancer cells, chemo also attacks the normal, healthy cells in the body, leading to a weakened immune system. For that reason, many patients held off on the treatment during the heights of the pandemic. A highly contagious virus and no way to fight it was not a good combo. So when covid finally became more manageable, patients began their chemo regimens again, but supply chains were still weak, and the US quickly found itself facing a drug shortage.

The Financial Times reported that there are currently 14 oncology medicines listed “in shortage” by US regulators, and with more than 1 million Americans needing to undergo chemotherapy each year, doctors have begun rationing their supplies. One of those drugs — and often the first line of defense for most cancers — is cisplatin.

Exacerbating the influx of patients, in February, FDA inspectors found workers at an Inta Pharmaceuticals plant in India shredding internal records and loading trucks with garbage bags full of destroyed documents. The violations caused the FDA to stop allowing imports for that plant, but Intas provides roughly half of all the US’ cisplatin, so you can see how a bad situation was about to get worse:

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The FDA is now allowing Chinese imports of Qilu Pharmaceuticals’ cisplatin, a chemo treatment that roughly 10% to 20% of all cancer patients take, to offset the shortages. The FDA approved cisplatin for cancer treatment in the 1970s, just not this particular injection from Qilu.

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The agency reversed course with Intas and started accepting shipments from the plant in India again as long as a third party certifies their quality, among other conditions, the WSJ reported.

Breath of Fresh Air: As for good news in the world of cancer treatments, new test results found that the lung cancer patients who took AstraZeneca’s Tagrisso after surgery reduced their risk of dying by 51%. The FDA approved Tagrisso in 2018 and it has since become one of the biggest feathers in AstraZeneca’s cap, last year driving $5.4 billion in revenue, Reuters reported. “Fifty percent is a big deal in any disease, but certainly in a disease like lung cancer, which has typically been very resistant to therapies,” Dr Roy Herbst, the deputy director of Yale Cancer Center and lead author of the study, said at American Society of Clinical Oncology’s (Asco) annual meeting in Chicago.

– Griffin Kelly

Banking

Online Banks Are Winning This Year’s Deposit Wars

That’s another win for the internet.

Online banks — such as Goldman Sachs’ Marcus or Ally Financial — scored more deposits than outflows in the most recent quarter, bucking an industry-wide trend, according to analysis this weekend by The Wall Street Journal. Is it the latest nail in the coffin for bank branches?

‘You’re Money’s Not Here, It’s in the Cloud!’

America’s banking industry has something of a love-affair with both physical branches and online banking. Brick-and-mortar locations are expensive to operate and maintain; the annual costs of branches can run anywhere between $500,000 and $1.3 million, depending on the location, Brian Riley, Javelin Strategy & Research’s co-head of payment strategy, told the WSJ. There’s a reason, afterall, that banks closed around 6,100 branches between 2019 and 2022, according to the FDIC, the highest ever in a three-year period. Still, branches often attract new customers while in-person appointments are still often the best way to complete complex transactions.

Online banking, meanwhile, offers convenience and access to customers — though that same convenience cuts two ways, helping fuel the runs that doomed Silicon Valley Bank, First Republic, and Signature Bank earlier this year. And as regional banks spiraled, all that money from fleeing customers had to go somewhere. While bigger banks offered stability, hyper-online alternatives — free from the costs of maintaining many physical locations — offered something brick-and-mortar locations often couldn’t: higher interest rates.

That may have been enough to win this round:

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Goldman Sachs said deposits increased at Marcus, though didn’t reveal specifics. Meanwhile, Capital One, primarily an online bank, saw deposits climb 5% quarter-over-quarter, while Ally Financial saw deposits tick up 1%.

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That’s in stark contrast to the banking industry writ large, which saw deposits collectively fall by 3%, or some $472 billion, in the first quarter, the largest quarterly decline since at least 1984, according to FDIC data.

Capital One and Ally paid average interest rates on deposits of 2.4% and 3.2%, respectively, both roughly 2 percentage points higher than a year ago, according to WSJ, and far better for customers than the 1% average interest rates on deposits paid by Bank of America and Wells Fargo in the first quarter.

Dimon in the Rough: Standing out, as always, however, is JPMorgan. Unlike Wells Fargo and BofA, Chase actually saw deposits increase in the quarter by a full 2%. And it’s more delicately walking the digital transition tightrope, closing hundreds of branch locations since 2018 while opening dozens of new ones in locations it considers prime real estate. Even when everyone else is losing, Jamie Dimon somehow always finds a way to win.

– Brian Boyle

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Restaurants

Fast-Casual Chain Cava Moves for an IPO

The market is starved for initial public offerings, and the folks at Cava are hoping a chicken shawarma bowl may just be the fix investors need.

A sort of Chipotle-but-make-it-Mediterranean fast-casual lunch chain, Cava is planning a roadshow to market a potential IPO that could launch on the New York Stock Exchange as soon as next week, according to The Wall Street Journal.

Pitas Over Profits

Cava, which launched in 2011, has a simple pitch to investors, whom it hopes to sell shares to at around $18 a piece: Its enterprise has exploded in recent years, now counting over 260 restaurants in over 22 states, while the group said in filings that it aims to operate over 1,000 locations by 2032. That’s a lot of growth… which may be a bit of a problem.

2023 has thus far offered little respite from last year’s IPO drought, in large part because investors are still wary of companies prioritizing growth over profits. It’s a class that Cava fits all too well:

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Cava reported average sales of $2.4 million at its locations last year, making it solidly fast-casual middle class — below Chipotle, Sweetgreen, and Panera, but better than Five Guys and Panda Express, per market research firm Technomic.

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That wasn’t enough to generate positive cash-flow. Last year, the restaurant group reported a net loss of $59 million, up from just $37 million a year prior.

Still, the drum beat of falafel bowl assembly lines continues forever apace — and may just be leading Cava down a path toward profitability. In a recent securities filing, the group said restaurant-level profits have nearly doubled in the past two fiscal years. But is that enough to sell investors? Ask the Oracle of Delphi.

– Brian Boyle

Extra Upside

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Sgt. Green Thumb: Marine operates the first licensed weed delivery service in NYC.

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The bus is back: The VW ID. Buzz is a futuristic throwback to the ‘60s.

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Just For Fun

Use a coaster.

Cut throat circus.

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