Radiopharmaceuticals have a structural moat because radioisotopes are off-limits to Chinese replication — the US actinium supply comes from legacy nuclear weapons waste that China never produced, making generics and biosimilar competition nearly impossible.

(00:00:00) Maybe you could tell us a little bit about how you selected our presenters and your vision for this. (00:00:05) I mean, for any of you guys who've been involved in Ira Soan, this is a gentleman that passed away from cancer far too young. (00:00:13) And his family created this thing called the Soan Foundation. (00:00:15) And they would host this event. (00:00:17) And it started in Lincoln Center. (00:00:19) And they would ask these managers. (00:00:21) And so at the time, I was like a young venture investor. (00:00:24) And I got this invite, and I showed up in New York at Lincoln Center in 2015. (00:00:29) And I said, Amazon's going to be a trillion dollar company. (00:00:32) And I was laughed out of the room. (00:00:34) David Einhorn, who's a friend of mine, but who is totally wrong, said, I know trillion dollar companies. (00:00:41) This is not a trillion dollar company. (00:00:42) Wrong. (00:00:44) It turned out to be a great bet. (00:00:45) I went back. (00:00:46) I did Tesla in 2016. (00:00:48) We picked the converts. (00:00:49) And then in 2017, I was like, all right, this is my, this is it. (00:00:54) This is my magnum opus. (00:00:57) And I said, AI is the future. (00:00:59) And then I picked Box. (00:01:00) I was like, if I had just picked Nvidia, I would have been a legend that I could have retired. (00:01:08) Anyway, so we wanted to recreate Iris Zone and start to get these great managers who are making great picks, making a ton of money for their LPs. (00:01:15) They don't get the distribution. (00:01:17) And so it's just the chance to like get to know some of these names. (00:01:20) You don't have to see them on CNBC. (00:01:21) You'll see them here more and more often. (00:01:24) And we can just get to Opine. (00:01:25) Roll the video. (00:01:26) Yeah. (00:01:26) Ladies and gentlemen, welcome to the Best Ideas Pitch. (00:01:32) Let's meet our contestants. (00:01:36) Anyone should be able to trade any asset, anywhere in the world, anytime, 24/7, with just an internet connection and a phone in their pocket. (00:01:43) We're building a new financial system from the ground up here. (00:01:45) People are going to want to own equities, and it's going to be fun in the next couple of years. (00:01:50) Companies are going to innovate and create products and applications, and that's where, hopefully, long-short managers like us can make a boatload of money. (00:01:57) My fund, EcoR1 Capital, which is based in San Francisco, thinks of investing in biotech in a slightly different way. (00:02:02) We're looking for unfollowed, unloved, misunderstood biotech companies. (00:02:06) It's an amazing moment in time for those types of companies. (00:02:09) There's been a structural and permanent perception shift where both sides of the aisle are going to be leaning into nuclear in a big way. (00:02:19) I'm massively optimistic. (00:02:20) You know, all of this leads me to just the maximum risk on. (00:02:30) Thanks to the Vesties for having me. (00:02:31) And this is obviously a fabulous event you guys have put on. (00:02:33) I'm happy to be here. (00:02:35) For those of you who don't know me, I run a $4 billion firm in New York called Ceretta Capital. (00:02:41) Before founding my firm, I ran the equities business for George Soros. (00:02:46) I was then CIO for Steve Cohen, and I've been doing hedge funds now for 29 years. (00:02:51) So I'm definitely on the older edge of my peer group. (00:02:56) So I was thinking about, you know, I run a generalist fund, (00:02:59) And we own a bunch of tech stocks, but given this audience here, for me to pitch a tech stock would be absolutely completely stupid. (00:03:07) So I was thinking about what else. (00:03:09) And obviously the theme of this conference besides tech is poker. (00:03:14) So I'm going to pitch to you MGM. (00:03:17) Now, most of you know MGM as you would think about it as the Vegas company. (00:03:23) They own 13 properties in Vegas. (00:03:27) Them and Caesars are the two largest owners of casino assets in Vegas. (00:03:33) Now, if you notice the other day, Caesars got taken out. (00:03:40) And so we think Vegas is actually starting to improve. (00:03:44) But I'm not here to pitch MGM because of Vegas. (00:03:48) What I'm going to tell you is there's a couple of things we noticed. (00:03:52) One is, this company's been very aggressively been, stock's been aggressively acquired by Barry Dillard lately. (00:04:00) Barry now owns 26% of the company. (00:04:03) Now, I put this presentation together 2 weeks ago. (00:04:06) Yesterday, he actually bid for the company. (00:04:09) Okay, so when I put the presentation together, the stock was about $37. (00:04:13) It's now high 40s. (00:04:15) He bid $48, okay? (00:04:18) When did we get this presentation? (00:04:21) Did we get it early enough to transfer? (00:04:24) I would not sell his, I would not sell my stock to him for a second. (00:04:27) And the reason is also, besides him buying the stock, the company's also been buying the stock. (00:04:34) Rarely have I ever seen a company in six years buy half their float back. (00:04:40) So you have Barry Diller, who's the legend (00:04:43) aggressively buying the stock. (00:04:44) And it's also now 80% of his NAV. (00:04:46) Okay, so most people think of Barry Diller as the ABC producer. (00:04:52) He did IEC, which owned assets like Expedia. (00:04:55) And now he's a casino guy. (00:04:57) What is going on here? (00:04:59) So we spent a lot of time asking ourselves why. (00:05:06) And why is MGM has two hidden assets. (00:05:12) The first one is, and this is sort of the punchline of what we think the stock is worth. (00:05:20) So you add the Vegas assets plus China, you get about a little low 60s. (00:05:26) So from $48 or 37 when I started this, great return. (00:05:32) What they have now is a license to open a casino in Osaka, Japan. (00:05:38) Japan, a couple of years ago, went through a whole referendum around the country. (00:05:42) They have prefectures. (00:05:44) The prefectures voted. (00:05:45) The only one that decided to open a casino is Osaka. (00:05:50) Now, Osaka is, and this is what the asset's going to look like, it's going to open in 2030. (00:05:57) If you go to the company slide presentations, they sort of mention this, but they're not really talking about it. (00:06:04) Japan, just for you people, sorry, I don't know, this is very slow. (00:06:10) Japan actually has a reasonably large gambling market. (00:06:13) They have pachinko parlors and they have horses. (00:06:15) That's about a $40 billion market. (00:06:17) If you look at the market in Macau, that's $30 billion. (00:06:20) And if you look at Vegas, it's only $10 billion. (00:06:23) So this could be a massive opportunity. (00:06:27) You know, we're estimating they'll do about $2 billion of EBITDA. (00:06:31) They own 40% of the property. (00:06:33) They also get a management fee for this. (00:06:36) If you also look at where Osaka is located, (00:06:39) It's a great, so the Japanese like to gamble, but the Chinese really gamble. (00:06:44) Okay. (00:06:45) So if you look at where it is from Shanghai, it's shorter than Macau and Singapore, which is the two big gaming options in Asia. (00:06:53) And from Beijing, it's about the same distance as Macau and obviously much shorter than going to Singapore. (00:06:59) So if you want to go gambling for a weekend and you live in Shanghai, live in Beijing, Osaka is great. (00:07:04) It's also a first world nation. (00:07:07) And if you think about it as an investor, where would you want to have your money? (00:07:10) Look, Macau has issues. (00:07:13) It's a low multiple business. (00:07:14) This is Japan. (00:07:15) It's a first world country. (00:07:17) So we think Barry Diller understands gambling, he understands casinos, but what he's really doing is now trying to pick off the company to get the Japanese opportunity, which we think is worth more than double the stock. (00:07:32) The final option, and I'm keeping this simple, what I love about this pitch is it's really simple. (00:07:37) It's not that hard to do the math. (00:07:39) MGM is built, somebody, they're branding, they're building a property in Dubai, okay? (00:07:45) Now, it's a grand complex. (00:07:48) It has an Aria, it has an MGM, and it has a Bellagio. (00:07:52) Gambling is illegal in Dubai right now, okay? (00:07:56) But they have snuck in this building. (00:07:59) 300,000 square feet of space. (00:08:04) Well, one day, if Dubai decides to legalize gambling, guess where it's going? (00:08:10) Right there. (00:08:12) Next year, sorry, two years from now, Wynn is going to open a casino in a place called Al Marjan, which is 45 minutes away from Dubai. (00:08:20) Now, any of us who want to go gambling in Dubai, (00:08:24) we, Al Marjan's a bit of a pain in the ass to get to. (00:08:27) We're going to want to go here. (00:08:29) So we think there's a chance that, especially when Wynn opens, also look, there's a possibility of the war, Dubai wants to reestablish themselves, that they open a casino in Dubai. (00:08:43) And you know what that would be worth. (00:08:45) So when you take the biggest assets, which we think are worth about 60, when you take (00:08:51) Japan, which we think is worth about 50 bucks. (00:08:53) If Dubai happens, that's worth another 40 or $50. (00:08:56) So we think the stock is a triple. (00:09:00) Remember, Barry's bidding for the company, okay? (00:09:02) He is not a strategic buyer. (00:09:05) He is a financial buyer and he's doing it to get rich. (00:09:08) So therefore, I think this company is now in play. (00:09:12) I don't know how it's all going to play out, but if you own shares, don't tender them. (00:09:16) And the risk reward is incredible right now, because I'm telling you, I think the stock could be easily worth over 100, could be worth 150. (00:09:24) And now you have Barry Diller, who has a firm bid, owns 26% of the company, basically at the same price. (00:09:32) So I think this is a cool idea. (00:09:34) Well done. (00:09:36) Okay. (00:09:37) Anybody, let's do two questions. (00:09:40) And we'll give you both questions at the same time for efficiency. (00:09:44) How much have you looked at the monetization of the assets outside of gambling? (00:09:48) I had heard from someone that Barry Diller was spending a lot of time trying to reinvent the entertainment piece of the properties. (00:09:54) He was active on the board. (00:09:56) And they were trying to identify that the entertainment property is way, the entertainment value is way under monetized. (00:10:02) And they could be making a lot more per... (00:10:04) Okay, don't answer yet. (00:10:05) That's question one. (00:10:06) And then question two is how, when you expand internationally, do you scale customer credit? (00:10:12) Because that tends to be the thing that drives people to come back and... (00:10:16) Well, obviously, MGA, sorry, your question first. (00:10:18) MGA has a massive database of customers, right? (00:10:22) So, you know, I assume the Vegas properties have guys that come from China, they come from Japan. (00:10:29) They'll use that database to do it. (00:10:30) They also have a loyalty program. (00:10:32) I unfortunately made a bad investment in a company called Rio, which was in Vegas, which we bought where they separate, when Caesars merged with El Dorado, they had to shed an asset. (00:10:44) That was the Rio. (00:10:47) I did an investment with a couple of friends and we were buying the thing at $200 per square foot. (00:10:52) The thing we forgot was when you separated from Caesar's, you lost the loyalty program. (00:10:57) And that ended up being pretty bad investment. (00:10:59) And I have two quick questions from the audience. (00:11:01) Wait, wait, I got to ask a question. (00:11:02) Hold on, question and then from the audience. (00:11:04) Let me get his first. (00:11:05) Yeah, the entertainment question. (00:11:06) I don't know the answer to that. (00:11:08) I don't know the answer to that. (00:11:10) If it's if he can make them better, it will help. (00:11:13) But as I'm saying, this is not really a Vegas play. (00:11:16) This is an Asian casino play that, and if you look at their presentations, which is really cool, they are not, they barely mention it. (00:11:27) So one of the things we happened besides, we were hoping in one of the, so look, I worked at SAC, and one of the things we focus on is Catalyst Path. (00:11:35) So what was the Catalyst Path? (00:11:36) The Catalyst Path was they would have an investor day, blah, blah, blah. (00:11:40) Barry just showed his cards. (00:11:42) So (00:11:43) Aaron, two questions. (00:11:46) Caesars left Dubai waiting for a license. (00:11:49) Why would this be different for MGM? (00:11:51) That's question one. (00:11:52) And then question two is the Osaka casino was approved in 2023. (00:11:57) Why was the market ignoring this hidden asset until the bid? (00:12:01) Sure. (00:12:01) Let me answer this back. (00:12:02) So what's also cool about this idea was, so I've been doing this for 29 years. (00:12:08) When (00:12:10) They opened Macau. (00:12:11) So Wynn started as a Vegas property, then opened Macau. (00:12:15) The market started caring about it about three years before it opened. (00:12:19) So the answer is they should care about it. (00:12:23) The reality is it tends to be about three years before it opens. (00:12:26) Well, we're almost in that time frame, which is why we think it's opportunistically the right period of time. (00:12:33) Regarding the question with Caesars, look, this is an option. (00:12:36) As I told you, somebody built this project for them. (00:12:39) They are running it for them. (00:12:42) And they were intelligent enough to leave 300,000 square feet of empty space in case they get a casino. (00:12:48) Well, if that happens, great. (00:12:50) If it doesn't, you know, you're still going to double it more than double your money. (00:12:54) So, you know, if it happens, you triple your money. (00:12:57) Free option, you're saying. (00:12:58) All right. (00:12:58) Free option. (00:12:59) Well done. (00:13:00) Big round of applause. (00:13:01) Thanks, guys. (00:13:02) Appreciate it. (00:13:02) Nicely done, Aaron. (00:13:04) Next up, Daniel. (00:13:07) Long time no see. (00:13:09) So today we're talking about Talon Energy. (00:13:12) But first, the anatomy of a power cycle. (00:13:19) So a power cycle typically goes like this. (00:13:23) In normal times, power demand grows about GDP. (00:13:26) So if GDP grows 2%, power demand grows 2. (00:13:29) If GDP grows 3, power demand grows 3. (00:13:32) And there's moments in time where we get technological breakthroughs. (00:13:36) And a lot of those technological breakthroughs are very power intensive. (00:13:40) So power demand spikes. (00:13:42) And once everybody adopts that technology, it trends back down to its on algorithm GDP growth. (00:13:52) And then you go through the efficiencies phase where we say, let's try to conserve and figure out ways to consume less power. (00:14:00) And then the cycle starts all over again. (00:14:03) So, in history, the big technological boom that sent power demand skyrocketing was appliances and air conditioning. (00:14:10) Everybody had to get their kettles and the air con. (00:14:14) Then in the 70s and 80s and 90s, demand normalized again. (00:14:18) But then the 2000s were all about efficiencies. (00:14:21) You know, we had like LED lighting, smart HVAC, tinted windows, smart electronics. (00:14:27) And at the same time, as I said earlier, we were ripping down all our power-hungry infrastructure, like aluminum smelters and moving over China. (00:14:34) So we had two decades of effectively no power demand. (00:14:38) And now we're just coming out of it and starting a technological cycle again, where power demand is going to really start to explode from these sort of high 2% numbers you're seeing on the screen. (00:14:49) Now, I want to say something right now that is incredibly important. (00:14:58) We do not need AI demand to keep the power markets incredibly tight for the next 20 years. (00:15:11) AI demand just turbocharges. (00:15:14) That's all it does. (00:15:15) And it creates shortages. (00:15:17) So just remember that. (00:15:20) Early in my career, I was on a panel with Sam Zell. (00:15:24) Interestingly, it was a panel on opportunities in Mongolia. (00:15:27) I was looking at a copper mine, and he was looking at real estate. (00:15:30) There was one thing he said that stuck with me for the rest of my career, is he said, if you can buy an asset, a hard asset at below replacement cost for an asset that's going to be needed in the future, where we're going to need to build new capacity of that asset, then you buy that asset at the discount to replacement cost, you hold it, (00:15:51) and you sell it at a big premium to replacement cost when the market wakes up. (00:15:55) That's exactly what we did with Equity Office Properties, sold it at the peak of the market, but bought it at a discount to replacement value. (00:16:02) Talon Energy is a power producer. (00:16:05) They have 2 gigawatts of nuclear power, and they've got 6 gigawatts of natural gas base load power. (00:16:10) Today in the stock market, (00:16:14) As a good speculation, you could purchase this company at a $25 billion enterprise value. (00:16:19) The replacement cost is $45 billion. (00:16:21) And because they've got debt, it means that the equity value, just to get to replacement cost, is more than a double from where it's trading today. (00:16:32) And if you follow Sam's playbook, then we ultimately end this cycle at a big premium to replacement value. (00:16:39) So when I see this, (00:16:42) I say the plan for America on the power side has to be this. (00:16:49) Make America great again. (00:16:52) Copy China. (00:16:55) If you look what China did over the last 20 years, we started out this cycle with having 2x the power generation that China had. (00:17:03) Fast forward to today, China has three times the power generation capacity that we have. (00:17:09) Now, (00:17:10) If you believe that artificial intelligence is going to be responsible for scientific breakthroughs, you either have it or you don't have the scientific breakthroughs. (00:17:17) If you believe that artificial intelligence is going to drive robotics, you either have it or you don't have that productivity from the robots. (00:17:23) If you believe that artificial intelligence is going to be helpful for national security and military affairs, then you either have it or you're dead. (00:17:32) And so this is an absolutely mandatory build out that we have to do (00:17:39) Otherwise, we're going to fall behind. (00:17:40) Because at the end of the day, what is a data center? (00:17:43) In my world, in the commodities world, I look at the data center as the exact same thing as a refinery. (00:17:48) In a traditional hydrocarbon refinery, you put oil in, crude oil in, you refine it into jet fuel or gasoline for your car. (00:17:56) With a data center, you put electricity in, and on the other end, instead of gasoline or jet fuel, out comes photons or tokens or intelligence, whatever you want to call it. (00:18:05) But it's the same thing. (00:18:07) big capital-intensive asset, $50 billion per gigawatt. (00:18:11) And power, electricity, just like oil, is the input to that refinery. (00:18:18) So here's Jensen, and he was just recently quoted that we need 1,000 times more power than we currently have. (00:18:29) Now, if that's remotely true, (00:18:32) We need every single source of power that you can imagine. (00:18:35) We need hundreds of gigawatts of nuclear. (00:18:37) We need solar. (00:18:38) We need orbital. (00:18:40) We need it all. (00:18:42) If this is even (00:18:44) Remotely true. (00:18:45) But the challenge, as we spoke about before, is the supply chain, right? (00:18:48) All of these, a data center competes for the same supply chain of the critical minerals that space launches and orbital data centers do. (00:18:55) Power plants need all the same nickel super alloys that it takes to launch rockets and the silver that goes into these photovoltaic cells. (00:19:03) And so there's going to be shortages of everything and delays everywhere. (00:19:09) And my point here is we are just going to need every solution that we can throw at this for the foreseeable future. (00:19:18) So here's a little region in the US called the PJM, Pennsylvania, Jersey, Maryland. (00:19:23) This is a forecast from the grid operator, where they say that over the next 10 years, we're going to need 106 gigawatts of new power in the PJM, in just one little area of the US. (00:19:35) Now, in 10 years, in geological time, that's like tomorrow morning, right? (00:19:39) We're all so used to internet time. (00:19:40) You press a button and you get your food delivered to you or your car picks you up in two seconds. (00:19:44) Building infrastructure happens in geological time. (00:19:47) Ten years to build out 106 gigawatts is literally a nanosecond from now. (00:19:52) And you see that thermal coal retirements. (00:19:56) We ain't retiring those coal plants because there's no world where we're going to be building 100 gigawatts. (00:20:00) kilowatts in 10 years. (00:20:01) That's the size of what Japan consumes today for one little part of the US. (00:20:06) And what I'll say is those that understand the supply chain and what goes into building all this, everybody's in panic mode because we know that we don't have the raw materials to meet this level of demand that's coming our way. (00:20:24) So that's going to keep existing capacity and power prices very tight. (00:20:28) Now, the data centers and the hyperscalers are in a panic. (00:20:33) They're trying everything they can to source as much power as they can under long-term PPAs, power purchase price agreements at fixed prices for 20 years. (00:20:42) There's a famous example. (00:20:43) You know, I thought Microsoft was a green company. (00:20:47) But they went and convinced Constellation Energy, which is a company that owns the Three Mile Island nuclear reactor, the one that melted down and created the nuclear meltdown that gave nuclear a bad name for 30 years. (00:20:58) It was Microsoft that told them they needed to start it up, and in order to incentivize, to stimulate their hand-to-wallet reflex to start this thing up, they said, power prices stay at $50 a MW hour. (00:21:10) We'll pay you 100 a year for 20 years, minimum price. (00:21:15) for you guys to start this up. (00:21:17) And so here we have it, Three Mile Island brought to you by Microsoft Azure. (00:21:23) So, you know, it's getting harder to do these deals because the regulators are saying, wait a minute, if you're taking all this power off the grid for your data center, how are we going to heat the homes of our customers? (00:21:36) And so, you know, we're getting ourselves into the moment of what I call crunch time. (00:21:43) So just to finish up, (00:21:44) Here are the numbers on Talon. (00:21:47) The stock today is sort of in the high 300s. (00:21:50) If they just do absolutely nothing, just absolutely nothing, just sit there and run the business, let their Amazon data center contract roll up, (00:22:00) these guys will be generating $50 a share of free cash flow per year. (00:22:05) Again, the stock is in the high 300s. (00:22:07) So it's about 7 times free cash flow. (00:22:09) Good infrastructure assets in the US, traded about 15 times. (00:22:12) So that's pretty good. (00:22:13) You get a double for basically management just sitting around and doing nothing. (00:22:17) But if they continue to figure out ways to sign contracts with data centers at premium prices, or if power prices go up, I mean, the amazing thing right now is in the PJM where these guys operate, (00:22:29) the power price is still too low to stimulate new capacity. (00:22:32) The math still doesn't work, which is really mind-boggling. (00:22:36) So if power prices go up a bit, they do more deals, you get to $70 a share of recurring annual free cash flow, put a $15 multiple on that, that's $1,050. (00:22:45) But then if they get into building power plants, right, and right now the regulator is telling these companies to go sit in a room, power producer, data center, come in a room, make a deal so that you build power and get a good return on it, and the data center gets their power, gets a good return on it, and Talon is in a pole position to be able to do this. (00:23:04) If they just build like 4 gigawatts or the 100 gigawatts that we need, you could get up to over $100 a share of free cash flow. (00:23:11) The stock's in the high 300s today. (00:23:13) So (00:23:14) Go and buy the shares. (00:23:15) It's a good speculation and we can chat. (00:23:18) All right, not financial advice. (00:23:21) Gavin, go. (00:23:21) Gavin, go. (00:23:22) I'm just very curious, like how do you think about regulatory risks here? (00:23:26) Nobody likes their electricity prices going up. (00:23:29) AI is an increasingly political issue. (00:23:32) Just like how do you think about that risk? (00:23:35) We need AI and we need to figure this out. (00:23:37) And so there's different ways to skin a cat here, right? (00:23:40) My personal view is during peak hours, right? (00:23:44) If you go drive down a highway at 4:00 in the morning, you would sit there and say, why do we have all this highway capacity? (00:23:51) This is crazy. (00:23:51) But then you go on that same highway at rush hour. (00:23:53) You're like, oh, we don't have enough highway capacity. (00:23:56) There's not enough lanes. (00:23:57) Power is the same thing. (00:23:58) It's only a few hours a day where you really stress the system. (00:24:02) And so I think the working solution to get around this regulatory issue is you do the PPAs with the data centers. (00:24:09) You force the data centers to throw a ton of battery behind it and some peakers just to get through that really intense period. (00:24:16) And then that's a good Band-Aid solution until we build more power. (00:24:20) So there's ways to do this. (00:24:21) Human ingenuity is going to win here. (00:24:23) We're going to get our data centers and consumer power bills are going to be, I think, relatively under control. (00:24:28) They're going to go up. (00:24:28) They're going to be under control. (00:24:29) Okay, Dan, I have three questions. (00:24:31) from the audience, really good ones. (00:24:32) Number one, does your thesis actually need behind the meter co-location to clear, or is it just a bet that clean, firm base load is scarce enough that it doesn't matter whether power flows in front of or behind the meter? (00:24:46) It's the latter, and that's why I gave 3 scenarios, right? (00:24:49) The $50 a share of earnings per share, again, a high $300 stock, right? (00:24:54) $50 a share of earnings, nothing has to happen. (00:24:56) You just sit. (00:24:58) right? (00:24:58) And then you double your money. (00:24:59) Now, if you get more behind the meter or even front of the meter, that's how you get up to that $70 a share of earnings from 50. (00:25:06) And then if you get up to the 70, but start building new capacity, then you get to the $100 plus. (00:25:11) Okay, question two from Brad. (00:25:13) How do you think about competition for power from things like fuel cells, gas turbines, aero derivative turbines, orbital compute? (00:25:21) and other sort of IPPs, independent power producers. (00:25:24) We need all of it. (00:25:25) We need all of it. (00:25:26) We, you know, fuel cells and, the Caterpillar solar turbines, these are fantastic bridge solutions. (00:25:34) But the cost to run these things, the LCOE is like through the roof. (00:25:37) But look, to build a $50 billion data center, you don't want it to sit idle for three years waiting for your base load CCGT. (00:25:43) So you do whatever it takes. (00:25:44) You don't give a crap what you pay for that bridge solution. (00:25:47) And so we're finding ways through fuel cells, through, you know, Caterpillar solar turbines, hopefully through orbital data centers where we can alleviate this because I want AI to happen in a really big way and we're going to need all the above. (00:26:00) Okay, question three. (00:26:02) By the way, great questions, guys. (00:26:03) Thank you for these. (00:26:04) What is the right terminal multiple for Talend if the business mix shifts from merchant IPP to contracted infrastructure? (00:26:12) Fabulous question. (00:26:13) And the addendum here, and what percentage of EBITDA needs to be contracted before the market should re-rate it? (00:26:21) So that's a great question. (00:26:22) And I only had 6 minutes to do this, and I think I blew through my time, so I couldn't get into this kind of detail, but it's something I would have really wanted to get into. (00:26:28) So whoever asked that, thank you. (00:26:30) I just use the 15 multiple because it's sort of a blended multiple between the contracted stuff, which will get a big premium multiple because it's a bond-like cash flow stream and bond-like cash flow streams trade at a small spread to treasuries. (00:26:43) And so treasuries, if they're at 5%, should trade at 20 times plus some growth or whatever, plus or minus. (00:26:48) The uncontracted stuff, the merchant stuff that has spot market exposure is more volatile, less visible, that should trade at a lower multiple. (00:26:56) We can get into the minutia, but just suffice to say, the more contracts, the higher the multiple, the less the lower the multiple. (00:27:03) Use 15 times as a good rule of thumb and you'll probably get to the right answer, which is what I used. (00:27:08) That last question from Daniel Schurer, thank you for that. (00:27:11) Dan, thank you. (00:27:12) That was great. (00:27:12) Yeah, great. (00:27:13) Thanks. (00:27:18) My name's Oleg Noedelman. (00:27:19) I'm the founder and managing director of EcoR1 Capital, a San Francisco-based value-oriented biotech fund that I started about 13 years ago. (00:27:29) Thanks a lot to the besties for having me here. (00:27:32) I'm a huge fan of the pod, like I'm sure all of us are, and I know how challenged Science Corner can get. (00:27:38) So I wrote this in a way that even David Sachs would appreciate and pay attention to if he were here. (00:27:45) Well, paradoxically, he's taking a nap, which is what he normally does during Science Corner. (00:27:49) Exactly. (00:27:52) Generally speaking, investing in biotech companies is a horrible idea, sandwiched somewhere between movies, wineries, and SPACs. (00:28:01) In fact, our sector often feels a lot more like a casino than an actual financial market. (00:28:07) And most of the tourists who are investing are playing the slots. (00:28:12) Of course, at EqualR1, we consider ourselves poker players. (00:28:16) In a sector where virtually everyone else is a momentum investor, betting on science, we focus on margin of safety. (00:28:22) We're one of the few funds not managed by PhDs or MDs, and that's by design. (00:28:27) because we don't want to fall in love with the science. (00:28:29) We fall in love with the risk-reward. (00:28:31) And like the slide says, we want to monetize other kids' science projects. (00:28:37) This is my 25th year investing in biotech. (00:28:39) I started my career with an 11-year stint at another fund and launched EcoR1 in 2013, humble beginnings with $13 million. (00:28:47) Since inception, we've 10x'd to our investors and annualized at 20%. (00:28:51) And today, we have about $2.5 billion under management. (00:28:56) We're lucky to have long-term partners, many of whom are biotech entrepreneurs themselves, and have been with us since day one. (00:29:01) And we recently reopened for the first time in four years. (00:29:09) Today, I'm going to tell you about a company that's on the front lines of the war on cancer. (00:29:14) Military terminology has been used when describing treatments for the disease since the early 70s, when President Nixon signed the National Cancer Act. (00:29:24) The warfare analogy is actually perfect. (00:29:28) The warfare is actually perfect for cancer because both domains are trying to accomplish the exact same thing. (00:29:33) Find the enemy, figure out the best weapon to kill them, and have minimal unwanted casualties along the way. (00:29:42) First, a quick history of how this war has evolved. (00:29:47) Early surgical cancer treatment and radiation was akin to a medieval siege. (00:29:51) Level the entire castle, (00:29:53) burn the surrounding village, and hope the enemy was left somewhere in the rubble. (00:29:59) Chemo actually evolved from an accidental observation during World War I, that mustard gas killed rapidly dividing tissue. (00:30:07) Tumor cells divide fast, so doctors would flood a patient's body with chemo and hoped it killed the enemy faster than it killed allies. (00:30:13) Unfortunately, hair, skin, gut, and marrow cells also divide quickly, and the poison doesn't discriminate. (00:30:21) First-generation targeted therapies were next, like a GPS-guided munition. (00:30:26) Instead of carpet bombing every dividing cell, you identify the enemy's command and control center and destroy it. (00:30:32) The problem, like with any weapon, is that the enemy adapts and hides. (00:30:36) And in cancer, these are called resistant mutations. (00:30:43) Immunotherapy was first introduced to patients a decade ago. (00:30:46) With IO, you don't send in your own troops, you recruit local allies, also known as T-cells, and let them do the fighting for you. (00:30:53) Spectacular when it works, but highly dependent on the terrain or the tumor microenvironment. (00:30:58) This brings me to the reason we're here today. (00:31:00) Modern day radiopharmaceuticals. (00:31:02) Like A swarm of micro drones, small enough to navigate the bloodstream and find their target by molecular recognition, then detonate A precisely sized warhead with a blast radius of 100 microns or the diameter of a single cell. (00:31:15) An autonomous assassination with the force of a bunker buster and minimum collateral damage. (00:31:21) The company I'm going to tell you about today is Actus Oncology. (00:31:24) The ticker is AKTS. (00:31:26) The company has a billion dollar market cap, a $500 million enterprise value, and a stockpile of cash which should last them over three years. (00:31:35) Long past critical milestones that are coming next year. (00:31:38) Actis was started five years ago, but recently went public with a $300 million IPO that was 18 times oversubscribed and backstopped with a $100 million order by Eli Lilly, the folks who bring you all the weight loss drugs. (00:31:52) The company has designed a platform that can carry any radioactive payload, is complex enough to go after a variety of targets, and small enough to clear your body with minimal side effects. (00:32:01) The beautiful thing about this approach is that physicians can verify target engagement in early clinical trials with imaging. (00:32:07) This significantly de-risks clinical development because you know the drug is getting to the tumor. (00:32:13) Another de-risking strategy, for their first few programs, Actus chose known valid targets like Nectin 4 and B7H3. (00:32:21) Nectin 4 is critical in bladder cancer, and the company's second program targeting B7H3 is even more ambitious, expressed on every major solid tumor, including the big three, prostate, colorectal, and lung. (00:32:34) Aptis started clinical trials last year and is publicly guided to initial clinical data in both of these lead programs in 2027, with Nectin 4 coming as early as Q1, so you won't have to wait long. (00:32:48) If either program shows a signal, the company is likely to get value not only for those programs, but the entire mini-protein platform. (00:32:55) This is the holy grail in biotech, getting value simply for the promise of what might come. (00:33:05) What's even more compelling is there's an amazing amount of interest in radiotherapies from pharma. (00:33:10) The big ones, including Bristol, Novartis, Bayer, and Lilly, who backstopped the Axis IPO, have been building radiotherapy capabilities, and they're hungry for assets to add to their pipelines. (00:33:21) There's been $15 billion in M&A in deal-making in radiotherapy in the last few years, and we're very much in the early innings. (00:33:27) The neatest thing about this modality is that it's very hard to replicate. (00:33:30) Generics generally don't traffic in radiopharma, and because the class involves radioisotopes, it's off limits to China. (00:33:38) So unlike most of biotech, there's a real moat. (00:33:42) And now, the obligatory safety warning: Axis is not for everyone. (00:33:45) You should consult your biotech analyst before purchasing Axis. (00:33:47) Initiating a position may cause increased anxiety, reduced sleep through the night. (00:33:50) Serious sometimes drops in stock risk occur in biotech immediately after investing may experience sudden volatility due to handling risk from competitors. (00:33:55) If stock declines are experienced, no phone reason, call your broker immediately to increase your position. (00:33:58) Remember, serious safety concerns overs in other companies close with other programs. (00:34:01) Although safety concerns occur with any Axis program date, they may in the future. (00:34:04) The use of mini proteins is liberated pharmaceutics is not been proven. (00:34:07) Axis is no market products and thus no refer in revenue. (00:34:09) Solution for equity offerings may occur in the event of a secondary offering immediately. (00:34:13) with Axis management team to discuss placing an order. (00:34:23) It's notoriously challenging to value biotech companies because when you risk adjust and discount back, you pretty quickly get to 0. (00:34:30) For earlier stage opportunities like this, we like to triangulate. (00:34:33) We think Actis could be worth $10 billion or $200 per share if even one of their programs makes it to market. (00:34:39) And in this case, you have a lot of outs. (00:34:41) I'm not familiar with why radioisotopes are off limits to China. (00:34:46) So in this particular case, Actis's radioisotope payload is actinium. (00:34:53) And actinium is manufactured from radium-233, which was used in our own nuclear programs in the US in the 50s and 60s. (00:35:03) So it's a waste product from there. (00:35:05) So actinium is not even available in other countries like China because they had a completely different (00:35:11) Their own program was completely different with enriched uranium and plutonium. (00:35:15) But the risk for a lot of biotech and China replication came about that Amgen Sanofi Supreme Court case, didn't it, where you could make a small, because it basically said all patents are composition of matter patents. (00:35:28) So you could change one amino acid, get around the patent. (00:35:31) And China's basically done that with a lot of biologics that are patented in the US and Europe. (00:35:35) They just rip them off and then you attach the radio emitting (00:35:39) radioisotope to the molecule and you can kind of chase it. (00:35:42) That's kind of why a lot of biotech's been depressed. (00:35:44) Is that not true? (00:35:45) Yeah, so with radioisotopes, again, because you have to have a manufacturing supply that you have to source locally in the US. (00:35:56) We haven't seen any competition coming from China at all. (00:35:59) And if they have a successful readout, though, would it not be like the case that someone in China would say, hey, let's go get some of the necessary radioisotopes and (00:36:09) I'm sure they can do it for the Chinese market, but in terms of then transferring that over here, we haven't we haven't seen it or kind of any wind of it at all. (00:36:19) And so then my last question, I'm sorry for monopolizing, why do you think the market's discounted the value so much since the IPO? (00:36:25) Oh, gosh. (00:36:26) Given the return in biotech valuation? (00:36:27) It's pretty classic biotech, so it's traded flat since the IPO. (00:36:31) Biotech investors are so insanely short-term oriented that even though we're now (00:36:36) call it eight or nine months from data, that's still way too long. (00:36:40) And so our expectation is that the folks will start accumulating this in the second-half in anticipation of the data coming in the first quarter. (00:36:46) Gavin, you had a question? (00:36:47) Yeah, sure. (00:36:48) So in the distant past, I ran a biopharmaceutical fund. (00:36:54) And it's a very hard job. (00:36:55) Congratulations on those numbers. (00:36:58) But I ran that fund right after the human genome had been sequenced. (00:37:01) And there was an expectation that the sequencing of the genome was going to lead to this explosion in therapies, personalized medicines, et cetera, et cetera. (00:37:10) And I don't think, broadly speaking, we've made as much progress over the last 25 years as maybe people thought in the early 2000s. (00:37:18) And my hypothesis is that the genome is too big of a problem space for the human mind (00:37:24) or software written by humans, and AI is going to unlock a lot of kind of revolutionary therapies. (00:37:31) So my question to you, I will just admit it's a selfish question. (00:37:34) It is not about your stock pitch, which is great. (00:37:36) It's what do you think the odds are that in the lifetimes of everyone in this room, the average human lifespan in a developed country extends well past 100, to 125, 150? (00:37:49) I would take the over on that. (00:37:53) In no small part because we already have one of the best longevity drugs out there and folks don't even realize it in the GLIP ones and the obesity drugs. (00:38:00) So one of the only things that's ever been shown in actual data to extend life is caloric restriction. (00:38:05) And that's literally what all the obesity drugs do. (00:38:07) So I'm sure half the people in this room are on one of them. (00:38:10) And that's just the beginning because it's trained people that you can inject yourself with something and have healthy living through pharmaceuticals. (00:38:17) So I think that's only going to continue. (00:38:19) Oh, I have two questions from the audience. (00:38:21) First one, (00:38:22) As the launch costs per kilogram continue to fall, is there a credible pathway to use space and microgravity as a therapeutic variable, given that cancer cells appear to behave differently in low gravity environments? (00:38:35) That is a great question. (00:38:36) It's probably not applicable to this. (00:38:39) Okay. (00:38:39) And then the second question, what would be a technological breakthrough that could disrupt precision radiotherapy as a result of AI at scale to drug development and pre-cancer screening? (00:38:52) Another awesome question. (00:38:53) There's a small skunks work project within Actis AI project. (00:38:57) So with all these biotech companies, they have their little proprietary data sets that they hope to leverage with various insights. (00:39:03) So a company like this, with their mini proteins and everything else they're trying to accomplish, they have their own little tiny group of PhD data scientist nerds who are seeing if they can leverage that in a pretty decent way. (00:39:14) So it's been really hard to get CAR-T in solid tumors. (00:39:21) Is it the case that these kind of personalized peptide-based immunotherapies are showing some efficacy in some solid tumors, and is that a space that's going to expand and kind of intersect here? (00:39:33) What's most promising that I think a lot of folks have probably heard of is a new drug for pancreatic cancer from a company called RevMed with just another targeted therapy. (00:39:42) So (00:39:44) For now, there's not a huge amount of progress from peptides. (00:39:47) Have you looked at D proteins before? (00:39:49) These kind of right-handed proteins that seem to be able to penetrate solid tumors? (00:39:53) Well, so one of the neat things about these mini proteins is they're hopefully of the right size to be able to deliver their patients.