The Lollipop War Has Begun
Thanks to link to infra supporting this episode of Mark fully Lincoln jobs makes it easy to get matched. With quality candidates who make the most sense for your role post. A job today at Lincoln dot com slash fool and get fifty dollars off your first job post. It's Thursday March twenty first welcome to market fuller. I'm Chris sale. Joining me in studio. It's industry. Focus host, Shannon Jones. Thanks for me. Here. I am so excited to be here. Especially on today. Chris hill. Thank you for having me today. We've got a legal battle in the candy industry. We've got CVS experimenting with cannabis those take a backseat to the story of the day. And this is why for those who are wondering. Well, why Shannon Jones on because you know, she has her own show that she's busy hosting every Wednesday hosting the healthcare show on industry focus, and it's because that from time to time the news ferry shows up and every once in a while the news ferry shows up with news that makes someone in my position go, oh, it's not just that we need to talk about this. We need a specific person to talk about this. And when I walked over to Shannon's desk this morning, she turned around and looked at me and said, I think I know why you're here, you're here because of Biogen. That's right. Today's story is all about by gin. And what I can. I think comfortably say is the biggest most anticipated by Mary event in biotech for twenty nineteen. We didn't think we would get data from Biogen on their Alzheimer's drug educating mave until twenty twenty well, we got news, and we got it today. Basically they have shuttered their late stage phase three trials for this drug. It was an independent data monitoring group that said basically this drug works, no better than placebo by gin and partner east side decided to shut it down. So for those unfamiliar and look even someone like me who is not invested in the pharmaceutical industry. Even I have an awareness of Biogen by virtue of how long the company's been around. How big the company is or I should say how big the company was because shares of bio Jenner down nearly thirty percent on this news one point analysts were saying this Alzheimer's drug. If Biogen makes this work. This could be doing ten to twelve billion dollars a year in revenue and now it's going to be doing zero. And this is at a time whereby Jen has basically placed all its bets on this one drug. They've got a core. Multiple sclerosis franchise. This franchise has been in decline over the years really just due to competition. It's such a crowded field out there. But even more importantly, they've been able to kind of offset the decline in that franchise with just one drug, and that's been spin Rosza for those that listen industry, focus. We've talked a lot about that drug. But really the story for by is like where is your next big growth opportunity gonna come from? And for a lot of investors a lot of analysts they were hoping it was going to be this Alzheimer's drug as you mentioned t- ten to twelve billion in annual peak sales. I mean, that's huge right now for by. And there's nothing and it's pipeline that was as late stage and had such a tremendous opportunity as at kidnap did. So. This is a huge disappointment. Not just for the company, obviously for investors, but even more so really for patients, the Alzheimer's failure rate for new drugs is ninety nine percent, Chris. I mean, the the odds were stacked up against the company. So you would have thought they would have diversified much more than they have. But to say, this is a disappointment is really an understatement at this point. So yesterday by Jim was a sixty three billion dollar company today. It's a forty four billion dollar company. That's still something that's still so much bigger than almost every other company in the public markets, or certainly the vast majority of them, you said they've got nothing in the pipeline is like how dire is the future for Biogen. Because I someone like me who doesn't really know anything says, well, they're still worth forty four billion dollars. They must have something going on. Or are they in more like our let's start with this the stocks down when we walked in the studio twenty nine percent. Are you surprised? It's not more. Yes. Just because so much was riding on this. Drug one of the problems is that they're pipeline. They actually have a pretty deep pipeline. The problem is an extremely risky pipeline. So they have more products. Alzheimer's? They've got a Parkinson's drug on their pipeline. Probably the riskiest pipeline and olive biotechs. When you're looking out long-term growth opportunities if they can even hit on one of these targets than yes, it certainly justifies having such a huge market Cup. The problem is though because it's so risky, and they don't have a ton of late stage assets that can very quickly diversify Indira's the pipeline. That's really the big question, Mark. So for me, I'm looking at. Okay. Bye. Now is the time to really get aggressive in terms of your business development. There are a ton of small players out there. Hello Newark in biosciences alot sage their Pudi. The just got approval for postpartum depression, all of these smaller players that fit right into their CNS. They're they're neuroscience focused pipeline, I think could plug in. So I'm hoping that they'll actually do some bolt on acquisitions sooner rather than later. Or the other option on the table. Of course, is once you start really piling on the failures. Once you start having just a very risky pipeline. You become a takeover target yourself is kind of like either eat or be eaten and biotech. And I think that's kinda whereby Jin Ezzat reminds me a lot of cell gene, just a few years ago too. So you don't it sounds like you don't look at this stuff drop as a buying opportunity. Not yet. I'm really curious to see what the next growth levers going to be. I do love the fact that they've been making some smaller, acquisitions, certainly, not, you know, big transformative acquisitions, they did one recently and gene therapy with night star. I like that they are trying to branch out. I would say if anything maybe this is a good hold until we get a better idea of where that next big growth levers going to be for Biogen. CVS announced it has started selling cannabis based products in eight states. These are topical products of lotions creams sprays at cetera being sold in Alabama, California. Colorado, Illinois, Indiana, Kentucky, Maryland and Tennessee. Is this a good move for them? I think So Chris I really do. I think what's CVS. They rolled out. I think it was last month that they're going to be exploring and piloting this health hubs concept. So CVS has really been trying to build out and really make a name for it self with this health and wellness trend that's going on. And so in addition to you know, the minute clinics and the pharmacy. Now, you're talking about staff dietitians there you're talking about you know, yoga they're inside of a CVS store. I think this makes a lot of sense this deal. I think it makes more sense for cure leave. He was actually going to be supplying all of these hemp Basie be. And I think that's an important distinction. This is based CBD which was made legal due to the farm Bill that was signed in two thousand eighteen but really for both companies you give number one cure leaf the opportunity to actually go mainstream with the CVS deal and for CVS you can play on this health and wellness trend. So I did a double take when I saw this. This headline because it was really just I didn't realize they were referring to the headline. I saw didn't refer to well. These are topical. Because I vividly remember five years ago when CVS came out February of two thousand fourteen and announced two things one. We're changing our name to CVS health, and because we're moving more in the direction of health we are going to stop selling tobacco in our stores and the stock fell I think about five percent that day which for a company of of CVS is size was the kind of a lot. And because CBS, yes, they've got the back of the store business the pharmacy business, but they were selling a couple of billion dollars worth of tobacco products at the front of the store. So at the time, I thought, well, this makes sense if they're truly going in the direction of health, but there's obviously going to be some short term pain in terms of top line revenue with this. And by the way, in the intervening five years, we've seen CVS health do well as a stock, and then sort of come back down to the point where it's I think it's basically where it was five years ago. So how much more should we expect them to go in this direction because they clearly need to grow their top line more. And this could be one way to do it. Absolutely. This is definitely still company in transition and the company's been very I think honest and transparent about that. I expect the next couple of years to be relatively slow as they transition away from just being, you know, the largest drugstore chain into more of this overall, health and wellness brand and really becoming a one stop shop for all of your health needs. Which is what they're attempting to do. So I think you know, in the short term, we're still going to see some some headwinds there. But I think long term you're starting to see where they're going. I think this deal with Kerley makes a lot of sense on both ends it. Certainly sounds to me like. Makes more sense than trying to convince people to do yoga inside of CVS can't say that I would sign up for that. But you know, it's interesting being an analyst on our marijuana service. We've been talking a lot about with now the farm Bill being in place, which of the marijuana companies would actually begin to make the pivot into, you know, mainstream retailers didn't expect it to happen this soon, but to see cure leaf doing this. I highly anticipate all of the other retailers also thinking about hemp based CBD strategy to. So I think this is probably the first of many such deals happening with a lot of these CBD in marijuana companies to and is it these eight states because of regulations in those states, or is this something that could be rolled out even further. Yeah, I think they're starting small these eight states, and that's something that CVS has just been doing in general. But yes, starting in the markets like California, Colorado where it's already legal in the regulatory framework is a little bit more clear. There's still some regulatory uncertainty because again, as you mentioned these are just creams and topical 's ultimately what they wanna do is really start going into edibles and beverages. And that's where the regulatory framework has to be put in place. It's not there yet. But you can see that they're starting to make the their way into that. But yet it makes sense to start small start in the states where you know, you can actually get traction easily but actually selling marijuana cigarettes. We should not expect that not expect that will not happen anytime soon quick shot to linked in when it's time to hire for your small business naturally. You want to find the best person for the job? And the odds are that. That person is on Lincoln Lincoln jobs makes it easy to get matched. With quality candidates who make the most sense for your role people come to Lincoln everyday to learn and advance their careers. So Lincoln understands what they're interested in and what they're looking for. And that means when you use Lincoln jobs to hire someone your matches are based on a lot more than just a resume your Lincoln job matches are based on skills and back. Horster based on skills and background. But they're also based on interest, activities and passions network vex people. It's like with Oetzi today. It's like EBay back in the day sellers. Want to go where they're the most buyers and vice versa. And that's why you want to be on Lincoln post. A job today on Lincoln dot com slash full. And you'll get fifty dollars off your first job post. That's a Lincoln dot com slash full, terms and conditions apply. Quick shadow to Mark Goldman one of our listeners who I ran into on Sunday. I was doing a couple of races in DC and Mark was doing the announcements. And so when across the finish line, they call them names for people in the cross the finish line and called up my name, and then proceeded to do basically an impromptu promotion from Otley full podcasts, which was which was wonderful to hear. So thank you Mark for that. Thank you also to Jason Newman. I was in New York earlier this week, and I got a chance to catch up with him. And thank you to the dozens of listeners who very. Quickly in the last twenty four hours pointed out, the duck jumping is a thing. Got some. Well, the listeners new I didn't know, but the listeners new. Austin Morgan our man behind the glass today, he knew, but yeah, got Email from people got a bunch of tweets video. So so that was great. We've got a battle brewing. I shouldn't even say brewing. It's on in the candy industry, and it is happening specifically in the lollipop industry. So for anyone. Really, I was gonna say anyone who has children's. But really anyone anyone in America? Probably is familiar with lollipops with what's available in terms of brand. You've got the dumdum lollipops the little ones Tootsie roll a much bigger company has to see pops. They've got charms the blow pops all that sort of thing. Dumb dumbs made by these Spangler candy company a much smaller company filed an injunction against Tootsie roll. And a federal judge has ruled in dumb dumbs favor. Basically the judge ruled that the packaging the Tootsie roll has been using for its charms minicpap lollipops way too closely resemble the packaging for dumb dumps. And I get it for the Tootsie roll people. I get it because I've looked at the data. I actually did some research on lollipop sales in America and found out that you know, what dumb dumbs they're selling better than teapots or charms blow pops. So the two zero people are like how do we get some of that mini lollipop action? And they went a little too far with the packaging. Can I say, Chris, I'm I'm shocked that dumb dumbs is actually got more market share at least growing faster than two zero. Is that is that accurate where did you get this data? I'm Chris because I don't know that I trust this a little nickel the internet. Really you're surprised at dumps because they're like, they're they're small. Look, we've both got kids. Dumbed ups, you can buy like a million of those. In a bag. They're cheap. They're small and the appeal if you're a parent is okay, it's candy. But it's a little bit of candy. It's not like something like charms blow up that like you could jump the kids want. That's what they're going. After is the big blow pops that have Steph on the inside of them. So it's shocking to me that that dumb dumbs, right? And and the lane here and Tootsie roll, I think was operating under that thinking for decades where they said, well, of course, kids are gonna want what we're selling because our lollipops are bigger, and there's something in the middle of them. And then they looked at the actual data and said, wait a minute. What if we start selling? I love this. I love that. This is happening. I can't imagine for one second that Tootsie roll is just going to take this lying down. I'm sure they're going to appeal. This say say we'll have we officially entered the air of the candy wars with dum dum and two zero. Do you think is happening now, I think that's happening. But the candy well much like the industry that you follow every week on industry focus, which is a vast industry. When people talk about healthcare. It's like, well what part of the healthcare industry. Are you talking about the candy industry? It's like, well, what part are we are. We talking about the chocolate part in this case, we're talking about the hard candy part. Which is ruled by jolly rancher. But then, you know. Yeah. I think I think the hard candy war is is on is on more shocked that you were able to somehow create an analogy between healthcare and hard candies. I didn't that was even possible. Chris. I am impressed with that look show me a pediatrician's office that hasn't maybe they don't do this anymore. Maybe more it's about stickers. But for when I was a kid back in the nineteen thirties, you go to see the pediatrician. And you know, if you were good you got rewarded with even the banks have stopped offering them. Now, thankfully, the barbershop has not stopped. That is true. The barbershop is nuts. You should be listening to Shannon Jones every week on industry, focus, if you're not. But you know, you should only listen to Shannon on industry, focus, if you want to get more informed about a little thing we like to call the healthcare industry. Thank you for being here. Anytime Chris always fun real quick before we go. Someone mentioned to me. Hey, you know, what you haven't mentioned in a while. You haven't mentioned the podcast swag shop. So for those who are unfamiliar. We have a podcast swag shop. If you wanna check it out, we sell coffee, mugs, we sell such shirts we sell hoodies. You can go to shop dot full dot com to check that out. If you're interested feel looking for a little swag. You can check that. We did not sell hard candy on their. Although, well, we're not using our lawyers want us to Wade into this now. No, we're not I'm not one of the one of the things I pride myself on in my tenure at the motley fool is for the most part. I have not run afoul of our legal department. And so I'm not looking at anytime. Yeah. I'm not looking to do that. Anytime soon. So so, yeah, if you're looking for some swag check it out, it's shop dot full dot com. As always people on the program may have interested in the stocks. They talk about the motley fool man formal recommendations for against the don't buy or sell stocks. Big silly. And what you hear that's going to do it for this edition of market. Fully the show is mixed by Austin Morgan on Chris L. Thanks for listening. We'll see on Monday.