Please enjoy ARK Disrupt Issue 104. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.
1. Volvo Pumps the Brakes on Autonomous Cars
Follow @tashaARK on Twitter
After initial plans to test 100 autonomous cars in Sweden this year, Volvo’s GEELYF Drive Me project announced that it will start with semi-autonomous XC90 SUVs in 2021. Moreover, XC90 car drivers will have to keep their hands on the wheel at all times. According to its autoblog, Volvo had a difficult time committing to an autonomous sensor stack and had a “huge challenge” with the electrical architecture.
Volvo’s struggles highlight that building an autonomous car from the ground up will be a difficult task. Companies like Tesla TSLA and GM GM, integrating both the vehicle and the autonomous platform in-house, may have an advantage. Conversely, Baidu’s BIDU project Apollo, offering a software platform for many different vehicle types, could face integration issues.
2. Battery Production Is Ramping to Support the Shift to Electric Vehicles
Follow @skorusARK on Twitter
Toyota TM and Bosch BSWQY made major battery production announcements this past week. Toyota is in talks with Panasonic PCRFY to build a joint battery factory as it plans for an electric vehicle (EV) future. Currently, Panasonic supplies Tesla’s Gigafactory with most, if not all, of its battery cells, calling into question whether a partnership with Toyota will limit its willingness to invest in future Tesla Gigafactories. Also this week, Bosch announced that it is considering investing €20 billion to bring 200GWh of battery production online by 2030.
For perspective, global battery announcements suggest production of roughly 275GWh, accommodating 6.5 million EVs, by the early 2020s. ARK’s expects EV demand to hit 17 million units in 2022 If so, then battery supply will have to more than double between now and then to accommodate demand.
3. Cryptoassets Hit $500 Billion in Network Value
Follow @bhavanaARK on Twitter
This week the value of all cryptoassets crossed $500 billion, as shown below, with bitcoin accounting for more than half.
At more than $500 billion, cryptoassets now account for 0.6% of global GDP and have gained significant traction since Chris Burniske conducted the survey depicted below this past summer. Other asset classes like bonds and stocks have taken more than ~20 years to reach 1% of GDP, suggesting that bitcoin and other cryptoassets are enabling the world to change at an accelerating rate.
Recently, bitcoin’s network value has scaled dramatically for several reasons: Japan deeming it as legal tender in April, the launch of the CBOE bitcoin futures market last Sunday and the impending launch of the CME bitcoin futures today, and its adoption in countries plagued with corruption and hyperinflation like Zimbabwe and Venezuela. In ARK’s view, bitcoin has been ringing the bell for a new asset class, one that could evolve much faster than any other in history.
4. Life Saving CAR-T Therapies Are Facing Reimbursement Challenges
Follow @msamyARK on Twitter
This year Chimeric Antigen Receptor-T (CAR-T) cell therapies made a splash, offering hope to patients who had failed all other lines of cancer therapy. CAR-T therapy unleashes a patient’s own T-cells, or immune system, to kill cancer cells, resulting in complete remission rates as high as 90% at six month follow-ups. In the second half of 2017, the US FDA approved two of the first CAR-T gene therapies:
- Kymriah for pediatric-acute lymphoblastic leukemia (ALL), priced at $475,000, and
- Yescarta for aggressive relapsed or refractory Non-Hodgkin’s Lymphoma (r/r NHL), priced at $373,000.
Gilead GILD acquired Kite Pharmaceuticals KITE for roughly $12 billion a few months before the FDA approved Yescarta, its lead therapy. While Kite Is the strategic acquisition that Gilead’s investors had anticipated, reimbursement bottlenecks could delay its growth in the near-term.
According to Bloomberg Business, Yescarta has been administered only to five patients since its approval in October because insurers are deliberating over reimbursement policies and procedures. While an estimated 200 patients in the US are waiting for this life-saving drug, private insurers are approving it on a case by case basis, and Medicare has not approved it at all. According to Michael Bishop, the Director of the cellular therapy program at the University of Chicago, “There’s no billing code for this. It’s been difficult, to be very blunt.” Hospitals have to choose between spending millions of dollars which may not be reimbursed and asking dying patients to wait for insurance coverage.
Unlike Gilead, Novartis NVS has chosen a value-based pricing system for its CAR-T therapy: patients/ insurers pay the $475,000 for Kymriah only if it works within one month of administration. While $475,000 might sound unreasonable, ARK estimates that, after failing three or four lines of therapy, each patient in this population already has cost the system $2.2 million and has been left with a lower quality of life.
ARK expects value-based pricing to dominate in future gene therapies. Thus far, Anthem is the only large insurer openly committed to covering CAR-T. As more patients experience complete remission, reimbursements for CAR-T therapy should fall into place, benefiting companies like Juno Therapeutics JUNO and Cellectis CLLS who seem to be next in line for FDA approvals.
ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.