Please enjoy ARK Disrupt Issue 117. 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. Is Facebook’s Fall from Grace Going to Derail It?
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This week Mark Zuckerberg apologized for the data leak which impacted 50 million FacebookFB users. The data didn’t leak directly from Facebook, but from a developer who tricked Facebook users into taking a personality test designed to download personal data, which he then sold to Cambridge Analytica, a company that used it to profile and target potential voters.
This data breach occurred during Facebook’s open era, as it was trying to attract developers to build applications on top of its platform. After the transition to mobile, however, AppleAAPL and GoogleGOOG owned the emerging operating systems, ending Facebook’s platform ambitions and forcing it to pivot and focus on advertising.
Several years ago, it switched off the APIs (application programming interface) that allowed third parties to download massive amounts of data. As a result, Cambridge Analytica was sharing dated information in 2016.
Facebook now faces numerous lawsuits and investigations from US and European agencies. While the impact to its user growth and advertising may not be apparent in the short term, Facebook now is on the defensive, fighting fires instead of focusing on a fast-changing future. Talent retention and acquisition could become more challenging.
Facebook has managed to overcome many challenges and crises over time, not the least of which was the shift from desktop to mobile in 2012-14. Time will tell if this time is different. If nothing else, Facebook probably will pivot to the monetization of Instagram, WhatsApp, and Messenger much faster than otherwise would have been the case.
2. Salesforce Acquires MuleSoft, Perhaps to Leverage Data from SAP and Oracle
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SalesforceCRM announced this week that it signed a definitive agreement to acquire MuleSoftMULE, which had IPO’d in 2017, for an enterprise value of approximately $6.5 billion. MuleSoft sells software that makes it easier for companies to share data on many different systems both on premise and in the cloud, connecting and unlocking disparate applications, data and devices. According to Saleforce’s CEO, Marc Benioff, “Together, Salesforce and MuleSoft will enable customers to connect all of the information throughout their enterprise across all public and private clouds and data sources—radically enhancing innovation.”
While expensive at 14 times enterprise value to sales, the acquisition could serve as the interconnective tissue between Salesforce’s cloud-based microservices and corporate enterprise software enabled by the likes of SAPSAP and OracleORCL. Additionally, perhaps its Einstein-enabled predictive analytics will be able to highlight hotspots and bottlenecks, both on premise and in the cloud, pointing Salesforce to product expansions or other acquisitions well before its competition.
3. Did Uber’s Accident Set Back the Adoption of Autonomous Vehicles?
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This week, an Uber autonomous test car killed a pedestrian in Arizona, adding significant scrutiny to autonomous driving programs. Besides Uber, ToyotaTM is the only company which has halted tests in response to the incident, seeking to limit emotional stress for its safety drivers.
Despite early police reports that have blamed the pedestrian, we think the accident reflects poorly on Uber. Based on its own dash cam, with footage both internal and external to the car, the “safety” driver was not paying attention, nor did the car slow down, at the time of the accident. Uber’s autonomous car project already had faced performance-based scrutiny, particularly since it lost both its project head, Anthony Levandowski, and his LiDAR design after Alphabet’sGOOGL lawsuit. The test vehicle involved in the accident was equipped with Velodyne LiDAR, likely a recent addition to the sensor suite in the aftermath of the Waymo (Alphabet/Google) lawsuit claiming that Levandowski had stolen its intellectual property when he defected to Uber. Velodyne has defended its sensor, as LiDAR has proven a highly accurate object detection system both in sunlight and in darkness.
Uber may have cut engineering corners and taken on significant risk in testing its autonomous cars, setting back the movement toward autonomous taxi networks. Alternatively, regulators may determine that this accident surfaced an Uber-specific problem, putting a competitor in the space out of commission, at least in the short-term.
4. The FDA is Encouraging More Innovation
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Historically, drug development has been laborious and expensive, leaving little room for innovation and breakthrough drug candidates. Until the last five to ten years, most pharmaceutical and biotech companies allocated resources to “me-too” drugs that navigated through the complex Food and Drug Administration (FDA) regulatory process at the expense of potentially transformative, life-changing drug candidates.
Appointed FDA Commissioner last May, Scott Gottlieb is adding momentum to the upward move since 2012 in breakthrough drug approvals. As depicted below, the number of drug approvals in the US for orphan diseases – ailments that afflict fewer than 200,000 people – has doubled during the last five years, with 2017 likely to have set a new record once its books are closed.
Source: FDA.gov September, 2017
Increasingly, like orphan disease drug approvals, it seems that the FDA has been loosening its strict oversight of the drug development process, encouraging companies to innovate and address serious diseases with drugs that will not reach blockbuster status. The genesis of this shift was the Orphan Drug Act of 1983, which allowed proxy endpoints instead of more stringent controls to evaluate cancer drug efficacy. As a result, and as shown below, cancer-related orphan drug approvals as a percent of all orphan drug approvals have increased from 12% to 41%.
Under Scott Gottlieb, FDA-issued regulations dropped to a two decade low in 2017. Instead of introducing new rules, Gottlieb is updating archaic FDA regulations with two goals:
- Foster Innovation and Development
- Allow use of data gathered from wearables
- Enable faster approvals for digital therapeutics
- Aid development of gene therapies and printed organs
- Expedite Drug Development and Lower Costs
- Allow proxy endpoints for indications beyond cancer, importantly dementia
- Create a modular clinical trial process based on demonstrated efficacy in early data instead of data formalized in Phase 1, Phase 2, Phase 3 trials
In response to this change, the rate of innovation should continue to accelerate, to the benefit of both patients and biotech companies.
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