Dear Reader,
The world received some welcome news yesterday.
Biotechnology company Moderna, which has been working on a vaccine for COVID-19, announced some very early results from its Phase 1 trial. The results were optimistic.
The S&P 500 enjoyed more than a 3% pop on the good news. And Moderna is now trading at an astounding forward valuation for 2020 of 340 enterprise value (EV)/sales. You read that right – the equivalent of 340 years of revenue, not profit.
It is always good to keep things in context.
The trial has data from just eight healthy patients so far. It demonstrated that the patients were able to produce neutralizing antibodies after taking Moderna’s candidate vaccine.
Antibodies are critical for protecting against a virus. So this is optimistic news.
The FDA already approved Phase 2 trials. These trials will be used to evaluate the efficacy of the candidate vaccine against patients who have COVID-19. Presuming that Phase 2 goes well, Phase 3 trials could begin as soon as July.
It is a race against time, but not because the COVID-19 pandemic is getting worse. Soon, there may not be enough patients with COVID-19 to conduct a large-scale Phase 3 trial.
We have already seen this happen in China. Gilead, which has also seen positive results from its antiviral drug remdesivir, had to cancel its earlier clinical trial in China due to a lack of patients.
New cases have been dropping in the U.S. since early April. This is despite the dramatic spike in testing – more tests reveal a larger part of the population has or had COVID-19. And I predict we are going to see a rapid drop in new cases as we enter June.
Testing facilities around the country are already having a problem finding enough people to test. Even though the U.S. is now testing about 350,000 people a day, in most states, testing facilities are running at a fraction of their capacity.
I’m rooting for Moderna to move as quickly as possible. A successful Phase 3 clinical trial won’t result in FDA approval for a vaccine. But as we have already seen with Gilead’s remdesivir, it could receive a quick emergency use authorization as early as this fall.
Assuming Moderna is successful, there are some exciting implications.
The company used the genetic sequence of COVID-19 to create a synthetic vaccine in a short period. Success will usher in a new generation of synthetic biology companies that have long struggled to get attention and funding for research and development.
Things are about to change in a good way in the biotech industry.
Now to our insights…
We have talked a lot about Waymo and self-driving cars recently. This is a trend that’s moving fast.
Back in March, Waymo raised $2.25 billion from outside investors in the automotive industry. It was purely a strategic move.
Google didn’t need the money – it was just putting strategic partnerships in place for the future of its self-driving technology division. That move signaled that Google was close to spinning out Waymo into its own entity.
And Waymo just took in another $750 million in outside investment, this time from investment firms like T. Rowe Price and Fidelity Investments.
This tells us not only that Google is not only going to spin Waymo out soon but that there is a very good chance that Waymo is preparing to go public. That’s the only reason why they would be raising money from investment firms at this stage.
And it makes sense if we look at where Waymo is in the product cycle. It just released the fifth generation of its self-driving cars. We talked about that earlier this month. This current generation is being positioned as the finished product, the version that is ready for production and deployment.
So I predict that Waymo will announce at least one major partnership this calendar year focused on commercialization. Then we should expect to see the company file for an initial public offering as early as 2021. I will be watching closely for that.
A sale is unlikely. Google will want to maintain tight control over the software code to ensure that any data collected from the cars and passengers will remain the property of Google.
We are really starting to see the autonomous vehicle industry come together.
We talked last week about Tesla’s Autopilot subscription program and the company’s master plan.
Back in January, General Motors’ autonomous vehicle company Cruise announced its first self-driving car.
Meanwhile, Ford is quietly preparing to launch a self-driving fleet in Austin, Texas, even if its launch date was pushed back. And we are seeing the other carmakers scramble to catch up as well.
For investors, we should prepare for some exciting opportunities in this space. At the right valuation, Waymo could be a great investment.
And as consumers, we should start rethinking everything we think we know about transportation. A brand-new industry is forming right before our eyes, and the major players are each making big moves to stake their claim in the industry.
Last month, we talked about how 27.7 million people showed up to watch a live music concert inside of Fortnite.
For the benefit of new readers, Fortnite is an incredibly successful multiplayer game set in an immersive digital world.
What makes games like Fortnite “sticky” is that young people play them to hang out with friends. They put on headphones with a microphone, and they talk to each other while exploring the virtual world together.
Imagine a social media platform like Facebook in the context of a gaming environment… That’s what Fortnite is like. Friends get to hang out and chat while having fun. You can play one on one, in teams, or last man standing.
Epic Games is the company behind Fortnite and the wildly successful virtual concert. It’s now valued at around $15 billion. And this company is making all the right moves.
Epic Games just announced the next version of its gaming engine called Unreal Engine 5. We can think of this engine as the underlying software that games like Fortnite are built on top of.
And the name is not a misnomer. The graphics are simply stunning. Look at this:
Unreal Engine 5
Source: Epic Games
It’s hard to believe that this is a video game. Everything looks so lifelike.
And here’s the best part – Epic Games made this gaming engine available for other companies to use. That means outside developers can take it and build new games on top of it.
This is a brilliant move because Epic Games earns royalties on all games developed using its platform. The company will get 5% of all future revenues, right off the top. This is a great residual income stream.
And it’s a win-win for the industry because this will save other developers a lot of time. They can just build new games on top of this fantastic gaming engine.
So Epic Games has positioned itself perfectly in what will be a monumental year in the gaming industry. Both Sony and Microsoft are set to launch their next-generation consoles – the PlayStation 5 and Series X – later this year. Developers will be able to use the Unreal Engine 5 to build games for both consoles.
Plus, the COVID-19 lockdown has been an absolute boon for the gaming industry. With the kids out of school and people stuck at home, these virtual game worlds have become a prime source of social interaction. That’s a trend that will continue, even after the lockdown officially ends.
As we have discussed before, gaming is a massive $105 billion global market… And COVID-19 is pushing that number higher. Epic Games is one of the best players in this space, and it may soon be an excellent way to get exposure to the gaming trend.
The company is in the process of raising more capital right now to gear up for increased demand. That will likely value the company above $20 billion. From there, Epic Games will be in a perfect position to go public.
The days of physical cash are numbered. That’s what Visa’s new patent tells me…
The patent outlines the details of a digital currency system – a replacement of paper money. Physical currency would no longer be in circulation.
Instead, we have digital fiat currencies. These are digital representations of the U.S. dollar, the British pound, the Japanese yen, the euro, and so on.
And Visa’s patent details a central computer that manages the money supply and digital transactions of the new digital currencies.
Visa is the largest credit card company and payment network in the world. It has 336 million cardholders and 40 million merchants in its network. The fact that Visa is moving in this direction tells us that the push for digital currency is picking up.
And notice how Visa’s approach is the exact opposite of the blockchain industry.
Blockchain technology was designed to be used as a decentralized network where no one party has control. And a set of mathematical rules determine a digital asset’s monetary policy, not be a central bank.
In contrast, Visa’s patent outlines a permissioned, centralized system that will keep the powers that be in full control of money. We can bet this will be well-received by governments and central banks around the world.
And, of course, they will present this as a good thing.
After all, it would have been much easier to administer the COVID-19 stimulus and aid checks if we had a digital currency system. The money could be transferred to people’s digital wallets instantly with a few keystrokes.
And policymakers are already aware of this idea. The original version of the economic stimulus package that Congress put forward in late March outlined a “digital dollar” and “digital dollar wallets.”
That proposal was ultimately removed. But there is no doubt that digital currency is the future. And that future is coming much faster than most people realize. I’m on record saying that China will have a digital version of the renminbi before the year is out.
The only question is if the digital currencies we use will be centralized or decentralized. That’s setting us up for a major competition between decentralized assets like bitcoin and digital currencies designed to represent countries’ fiat currencies. Visa is positioning itself to be a player in this newly emerging space.
This will be a historic battle to watch.
Regards,
Jeff Brown
Editor, The Bleeding Edge
P.S. Digital currencies are inevitable. And when they arrive, they will raise the profile of blockchain technology. A handful of blockchain stocks are set to profit in the age of digital currencies.
But 99% of investors have no idea this is coming. That’s why I’ve been quietly preparing my readers with quality blockchain-related technology stocks that will prosper in the years ahead. Learn about my favorite blockchain stocks right here.
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
