ARK Disrupt Issue 64

ARK Disrupt Issue 64: Snapchat, Diagnostics, Space News, and Fintech

Please enjoy ARK Disrupt Issue 64. 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. SNAP Soars To An Exalted Valuation…And That’s Before Incorporating Potential Dilution

The markets devoured SnapSNAP during its initial public offering (IPO) this week, sending it soaring nearly 60% from $17 to $27.

By most standards, Snap’s valuation is anywhere from high to outrageously high, even more so when incorporating potential dilution. Today, Snap’s basic share count is 1.16 billion which, at $27 per share, values its stock at $31 billion, or 31x estimated 2017 sales…nearly 10 times the price-to-sales ratio of the NASDAQ.

Adding another dimension to this valuation, Snap had issued 237 million in stock options and restricted stock as of December 2016, with another 402 million earmarked for 2017. If converted into common stock, these shares would boost the potential outstanding share count by 55% to almost 1.8 billion, pushing Snap’s potential fully diluted market capitalization to $48.6 billion, nearly 50x estimated 2017 sales, as shown below. While startling, anything is possible.

ARK Disrupt Issue 64 SNAP

2. Soon, A Blood Test Could Diagnose Lung Cancer

A recent abstract highlights that Exact Sciences and the Mayo Clinic have teamed up to develop a promising blood-based test for lung cancer. The AACR abstract “highlights methylation markers capable of detecting all types of lung cancer with more than 90% sensitivity and specificity.” The results will be presented on April 2, 2017.

Lung cancer is the leading cause of death among cancer patients, killing nearly 160,000 people in the US alone each year. As with most cancers, early diagnosis is imperative to increasing survival rates.

A common form of screening for lung cancer, approved for smokers and other high risk patients, is low dose CT screening. Unfortunately, low dose CT screening results often include indeterminate lung nodules – not clearly benign or cancerous – and lead to more tests. VeracyteVCYT addresses this problem with its Percepta Bronchial Genomic Classifier, which “analyzes genomic changes that occur in the airways of current or former smokers to assess a patient’s risk of having lung cancer, without the need to test the often-hard-to-reach nodule directly.”

That said, Exact Sciences and the Mayo Clinic could offer another solution to early detection with their new methylated DNA markers. According to Dr. David Midthun of the Mayo Clinic, “This plasma DNA test approach appears to be a promising method and may serve as a rational follow-up to the common findings of lung nodules on CT scanning.” ARK is invigorated by the research community’s focus on and progress toward tests for the early and accurate diagnosis of lung cancer.

3. Space News Is Making The Rounds

The space industry broke lots of news last week. Here are four of the most important stories:

  • Intelsat hopes to merge with OneWeb. The deal depends on a debt swap, as bondholders effectively control Intelsat, and a $1.7 billion investment from Softbank. The combined company would provide telecommunications services from both geostationary and low earth orbit satellites. If the deal goes through, Softbank will have a 39.9% voting stake.
  • SpaceX announced that it plans to fly two private citizens on a trip around the moon late next year. The mission would use the Falcon Heavy rocket with passengers in the Dragon 2 capsule. SpaceX has not identified the two individuals, though it did note that they put down significant deposits to participate.
  • Blue Origin is developing a lunar spacecraft named “Blue Moon.” It is aiming to launch a delivery service that would transport the equipment necessary for human settlement on the moon by the mid 2020s.
  • Virgin Galactic formed a company called Virgin Orbit to launch small low cost satellites from the LauncherOne system. A two-stage rocket dropped from a carrier aircraft, the LauncherOne differs from both Blue Origin’s and SpaceX’s launch systems.

Clearly, the private space race has begun. Led by visionaries and colorful figures like Masayoshi Son (Softbank), Elon Musk (SpaceX), Jeff Bezos (Blue Origin), and Richard Branson (Virgin Galactic), the space race should be fascinating and entertaining, if not breath-taking!

4. Financial Inclusion Has Come Along Way, But Has A Long Road To Hoe

Financial inclusion may be one of the best solutions to economic development and the elimination of poverty. An imperative in this movement is the access to financial services, including savings, credit, and payment services. On that score, the news is good. A recent World Bank report1 on financial inclusion revealed that 62% of adults around the world have access to financial services through a bank or a mobile money provider. Since 2011, 700 million adults have gained such access.

While other measures of access to payment instruments like debit and credit cards also are reassuring, the gap between “access” and “usage”2 is provocative and somewhat concerning, as shown in the charts below. For example, while 38% of adults around the world have a debit card, only 22% of them actually use one, a gap of more than 40%. Credit card penetration and usage are much lower, at 17% and 14%, respectively.

ARK Disrupt Issue 64 FintechSource: Global Findex Database

Perhaps the discomfort with and difficulty of using physical debit and credit cards are signaling the market potential for mobile payments. With accelerating smart phone penetration, mobile based financial products could be the game changer for financial inclusion.

  1. World Bank, Measuring financial inclusion around the world, 2014
  2.  “Usage” refers to adults with a financial institution account that have used debit card or credit card in the past year.

The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any securities mentioned. It is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance is no guarantee of future results. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. 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.