"There are many companies in the US that are running out of time because of leverage. There is still $1 trillion in distressed or defaulted debt. Any company that could refinance has already done so. For all those companies that couldn't refinance, they're going to be hitting a wall this year or next year," said Marc Lasry, chairman of Avenue Capital Management, a top-performing fixed-income hedge fund.
Mad Hedge Biotech and Healthcare Letter
November 21, 2024
Fiat Lux
Featured Trade:
(TRACE ELEMENTS)
(SNY), (MTZPY), (BIIB), (IONS), (AMLX)
In a corner office somewhere in Cambridge, Massachusetts, a team of scientists is attempting something that sounds like it belongs in a sci-fi novel: they're trying to reprogram the genetic instructions that tell our neurons how to behave.
If they succeed, they might help 97% of people with ALS keep their neurons from self-destructing.
Welcome to Trace Neuroscience, where $101 million in venture capital is betting on what amounts to a molecular spell-check for your nervous system.
You might be wondering, as I did, how one starts a company with the audacious goal of tackling one of medicine's most notorious puzzle boxes.
The answer, it turns out, involves three scientists, working in three different labs, who all stumbled upon the same cellular culprit – a protein called UNC13A - the sort of name that makes you wonder if scientists moonlight as license plate generators.
But to understand why UNC13A has everyone buzzing, we need to talk about ALS itself.
ALS, if you're not familiar with it, is the kind of disease that keeps neurologists up at night. Every year, it claims about 5,000 new victims in the US alone, and we still don't know what causes 90% of cases.
Here's a simple way to envision it – think of your nervous system as a complex metropolitan subway system.
ALS is like having someone systematically shut down every station, one by one, until the entire network grinds to a halt. Despite decades of research and millions in funding, we're still mostly watching helplessly as stations go dark.
Sure, the global market for ALS treatments reached $667.3 million in 2023, but that impressive-sounding number masks an uncomfortable truth: we're still barely keeping the lights on, let alone fixing the underlying problem.
The current FDA-approved medications, Sanofi’s (SNY) Riluzole and Mitsubishi Tanabe Pharma’s (MTZPY) Edaravone (marketed as Radicava), are like trying to stop a flood with a handful of sandbags. They might slow things down a bit, but they're not exactly what you'd call a solution.
So how do you tackle a troublemaker like UNC13A? Enter Trace Neuroscience's bold approach: antisense oligonucleotides, or ASOs for those who don't enjoy tongue twisters.
Think of ASOs as tiny molecular scissors that can edit the body's protein-making instructions with surprising precision - in this case, they're specifically designed to fix how UNC13A behaves when it goes rogue.
The science behind this approach comes from a rather serendipitous confluence of research.
Aaron Gitler at Stanford, Pietro Fratta at University College London, and Michael Ward at the NIH – three scientists who probably should have just gotten a group chat going – independently discovered how certain RNA-processing molecules go haywire in ALS patients.
It's like they each found a different piece of the same puzzle, and when they put them together, the picture suddenly made sense.
And where there's breakthrough science in biotech, money usually follows.
In November 2024, Trace managed to convince some of the biggest names in venture capital – Third Rock Ventures, Atlas Venture, GV (formerly Google Ventures), and RA Capital Management – to part with $101 million.
That's quite a vote of confidence for a company whose main product is still theoretical.
The timing couldn't be more interesting. The ALS treatment market is expected to grow at a rather specific 5.8% per year until 2030, reaching about $1.1 billion.
But in this field, even the success stories come with asterisks.
Take Biogen's (BIIB) Qalsody, which got FDA-approved in May 2024 despite not actually meeting its main trial goals.
It's a rare win in a field where the scoreboard has been mostly zeros, as the rest of the ALS treatment landscape makes painfully clear.
Ionis Pharmaceuticals (IONS) had to shut down their ALS program with Biogen in May 2024, and Amylyx Pharmaceuticals (AMLX) faced the bitter task of pulling their drug Relyvrio from the market in April 2024, laying off 70% of their staff in the process.
These setbacks illuminate an uncomfortable truth about ALS drug development: the path from lab bench to pharmacy shelf is paved with perfectly logical theories that simply didn't work in real bodies.
The math is brutal - only 6.2% of neurological drugs survive the journey from Phase I to approval. Trace's response to these odds? Assemble a team that's seen enough clinical trial failures to know how to (hopefully) avoid them.
Their CEO, Eric Green, M.D., Ph.D., leads a squad that includes Chief Medical Officer Irina Antonijevic and Chief Operating Officer Megan Baierlein.
They're aiming to start clinical trials by early 2026, which in drug development terms is practically tomorrow.
For investors, timing like this transforms Trace from a scientific curiosity into a near-term catalyst.
Their approach - anchored in genetic evidence and measurable biomarkers - stands out in a field where most companies are still shooting in the dark with better bullets.
The story of Trace Neuroscience reads like molecular medicine's version of going from medieval star-gazing to GPS navigation.
While traditional ALS treatments chase symptoms, Trace is tracking proteins with the precision of an atomic clock.
They've transformed one of medicine's most frustrating puzzles into something remarkably concrete: either their molecular markers will move, or they won't.
In the biotech world, that kind of clarity is worth watching.
Global Market Comments
November 21, 2024
Fiat Lux
Featured Trade:
(THURSDAY, JANUARY 16, 2025 SARASOTA FLORIDA STRATEGY LUNCHEON)
(TEN REASONS WHY I ONLY EXECUTE VERTICAL CALL DEBIT SPREADS)
(AAPL), ($VIX), (SPY)
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting in Sarasota, Florida on Thursday, January 16, 2025. The cost of the luncheon will be $277.
An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I’ll be arriving early and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at an exclusive Sarasota hotel. The precise location will be emailed with your purchase confirmation. Mad Hedge guests will be assigned their own dedicated table in a ballroom with 200 other participants.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets for this luncheon, please click here.
(IBM), (MSFT), (GOOG), (HON), (QBTS), (IONQ)
There's something oddly domestic about the scene at ETH Zürich's quantum lab, where a cluster of physicists are hovering over what looks like an elaborate microwave dinner plate.
Except this particular plate costs roughly the same as a small yacht and might just revolutionize artificial intelligence as we know it.
These physicists just managed to create something called a “mechanical qubit” – the quantum computing equivalent of finally teaching a cat to fetch.
And while most of us were busy arguing about whether our chatbots have feelings, these scientists might have just altered the future of AI.
Naturally, this required a pilgrimage to the holy grail of quantum computing: IBM's facility, where the air is colder than a penguin's lunch box and the machinery hums with the sort of expectant energy usually reserved for rocket launches.
A researcher – let's call him Dave, because that's his name – is trying to explain to me why this new mechanical qubit is such a big deal.
"Traditional qubits are like temperamental opera singers," he says, adjusting his safety goggles. "They need perfect conditions, or everything falls apart. But these mechanical ones? They're more like street musicians – they can perform in less than ideal conditions."
The technical term for what makes these new qubits special is "piezoelectric material," which I've now attempted to pronounce correctly 17 times. The key idea here is that they're more stable than their predecessors.
And here's where things get interesting for anyone with a stock portfolio and a passion for technological gambling (I mean, investing).
The global quantum computing market, currently lounging at a modest $1.3 billion in 2024, is expected to bulk up to $5.3 billion by 2029.
That's a 32.7% compound annual growth rate – the kind of numbers that make venture capitalists wake up in the middle of the night in a cold sweat of excitement.
Speaking of venture capitalists, they've been throwing money at quantum technology startups like sailors on shore leave – $2.35 billion in 2022 alone.
In fact, global public investment has reached $42 billion, which is roughly the GDP of Brunei. And as expected, the usual tech suspects are all over this like ants at a picnic.
IBM (IBM), which has more quantum computers than most people have coffee mugs, has developed something called Qiskit, which sounds like a Scandinavian breakfast cereal but is actually a quantum software development kit.
Microsoft's (MSFT) Azure Quantum platform is bringing quantum computing to the clouds (not those clouds – the digital ones).
Meanwhile, Google's (GOOG) been strutting around since 2019 claiming "quantum supremacy," which sounds like a rejected Marvel movie title but actually means they did something really impressive with quantum computers that I'm told changed everything.
Then there's Honeywell (HON), which spun off its quantum division into something called Quantinuum, presumably because all the good quantum company names were taken.
They're sharing the quantum playground with pure-play companies like IonQ (IONQ) and D-Wave Quantum Inc. (QBTS), the latter of which specializes in quantum annealing, which, contrary to what it sounds like, has nothing to do with heat therapy.
And here's where the quantum story gets interesting for anyone clutching their investment portfolio: these companies aren't just pushing scientific boundaries – they're pushing market valuations into what Dave calls “the twilight zone of growth.”
We're talking about a jump from $239.4 million in 2023 to $3.9 billion by 2033. To put that in perspective, that's like turning a nice Honda Civic into a fleet of Lamborghinis in 10 years.
But before you sell your house to invest in quantum computing stocks, there's a catch. (Isn't there always?)
The technology is still unpredictable. Technical barriers persist, commercialization timelines are fuzzy, and the ethical implications of super-powered AI remain debatable.
Still, the academic paper mill churns on with impressive determination.
In 2022 alone, there were 1,589 quantum technology-related patents granted and 44,155 publications, which is either a sign of incredible progress or proof that a lot of physicists need to justify their research grants.
But while academics race to publish, investors face a more practical question: where to put their money? The safest bet might be the tech giants – your IBMs, Microsofts, and Alphabets.
They're like the aircraft carriers of the tech world: slow to turn, but hard to sink.
The more adventurous might consider pure-play quantum companies like IonQ and D-Wave, though investing in these is a bit like betting on which butterfly's wingbeat will cause the next tornado.
The potential payoff by 2040? A cool $850 billion. But remember, that's the same year we're supposed to have flying cars and robot butlers, so maybe keep some money in your savings account.
As I leave IBM's quantum facility, Dave tells me something that sticks: “Quantum computing isn't just about making computers faster – it's about solving problems we didn't even know we could solve.”
I nod sagely, pretending I completely understand, while mentally calculating whether I should move my retirement fund into quantum computing stocks.
The mechanical qubit might be microscopic, but like Max Planck discovering that the smallest units of energy could reshape physics, it's showing us that the tiniest technological advances might just revolutionize our financial futures.
Just remember: even Einstein called quantum mechanics “spooky” – and that goes double for quantum investing.
Mad Hedge Technology Letter
November 20, 2024
Fiat Lux
Featured Trade:
(THE FUTURE IS HERE)
(NO CODE)
The future is here.
No code or low code will bring a raft of new innovative tech companies to market, and we are in the early innings of this transformative development.
What is no code?
No-code is an approach to designing and using applications that requires zero coding or knowledge of programming languages.
This type of software hits us at a perfect time when the home office is beginning to become ubiquitous.
The self-service movement that empowers business users will support the creation, manipulation, and employment of data-driven applications.
If we turn back the pages of history, companies needed an army of software programmers to develop even the measliest application.
That was then, and this is now.
Fast forward to today, and automated technology doesn’t only include cutting-edge industries like automotive cars but also software on laptops that can be rejigged by individual entrepreneurs.
That’s right, one person with no coding experience will be able to design, develop, and offer a real-life application with meaningful business value without the help of expert programmers.
The research data backs up my thesis with research firms projecting a 23% increase in the global market for this type of technology.
During the pandemic, low-code/no-code tools saw steady growth due to their effectiveness in addressing some of tech’s most complicated challenges.
The essential need to digitize workflows and enhance customer and employee experiences will be a boost to the efficiency of commercial and operational teams.
No-code platforms have evolved from just facilitating mundane tasks to making it possible for a broader range of business employees to truly own their automation and build new software applications with no coding while increasing organizational capacity.
A few risks that larger companies might consider is that even for remote developers building new applications, governance is paramount.
IT staff will need to install guardrails in place and have those built into low-code/no-code platforms to maintain consistent levels of security across the organization.
Cybersecurity solutions need to be integrated into this workflow by training every employee at the organization on security behavior and using compartmentalization and limited access to prevent opportunities for mistakes.
Hard landings are hard to recover from, and some can be crippling to the business model.
For no-code companies, harmonizing workflows is a key requirement for success.
In a low-code/no-code organization, departments should be able to work without silos and communicate freely across functions.
Elevated performance enabled by low-code/no-code tools will mean that the number of useful apps hurling toward the marketplace will be more and merrier than ever before.
Higher performance will no doubt usher in a new renaissance of efficiency and even better performance.
This also puts a 3 or even 4-day workweek squarely in play.
Many of the best tech minds in the world have supported the concept of working smarter instead of working harder.
A low code/no-code standard will allow for these achievements to take place.
The cratering of costs to start and run a tech firm is affected, too.
Deploying startup capital to pay for other expenses will make it easier for successful incubation.
This will ultimately mean that this new type of tech company will need to embrace the fusion of IT and business staff, empowering them with composable applications to speed up the time to market for new solutions.
Low-code/no-code APIs and other tools are enabling companies to integrate new applications into their existing tech stack in a more seamless manner with a lift-and-shift approach vs a rip-and-replace.
At the entrepreneur level, individuals will be able to harness the technology to build $100 million companies with a snap of the fingers when it wasn’t possible to do it before.
This is finally a chance for the little guy to recapture their moxie in the vast and sometimes overwhelming business world.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
