Relativity Space Plans to 3D Print Rockets on Mars 

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Relativity Space, a rocket manufacturing startup, just secured launching space at Cape Canaveral. Relativity Space hopes to commercialize in 2021 with a near-term plan to deliver satellites to space and a long-term goal to 3D print rockets on Mars. Led by executives trained at Blue Origin and SpaceX, Relativity Space believes that a rocket typically built with 100,000 parts can be 3D printed with fewer than 1,000 parts. So far, the company has printed its engine injector and chamber in just 3 pieces, three orders of magnitude fewer pieces than the 3,000 that traditional manufacturing techniques would have required.^[1]

3D printing should not only reduce complexity but also compress manufacturing times and slash costs. Relativity Space expects to 3D print and assemble rockets in just 60 days instead of many months or years. Its metal 3D printer consists of three collaborative robotic arms, controlled by Relativity’s path planning software, that manufacture parts autonomously. Relativity envisions that 95% of the manufacturing will take place without human help, a significant advance given estimates that labor costs account for 80-90% of the typical manufacturing costs of a rocket today. NASA programs cost hundreds of millions of dollars in labor hours, so 3D printing and automation could compress launch costs considerably.

[1] Source: Verge article linked above

Dockless Electric Scooters Are 140X More Dangerous Than Bicycles 

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Cities have had love-hate relationships with dockless electric scooters (eScooters) and are studying how best to regulate them. Portland Oregon, which ran a four-month trial, published its report this week. Among the results, 71% of the participants reported that they used scooters to reach a destination, not joyride, while 34% of locals and 48% of visitors used a scooter instead of a personal car or Uber/Lyft. Both results suggest that scooters could diminish vehicle use.

The more interesting, if not shocking, results involved safety. During the trial, scooter-related accidents resulted in 176 emergency room and urgent care visits, suggesting that, on a per mile basis, scooters are roughly 140 times more dangerous than bicycles, as shown below.

Source: ARK Investment Management LLC, NHTSA, http://www.nyc.gov/html/dot/downloads/pdf/bike-safety-study-fullreport2017.pdf, https://www.portlandoregon.gov/transportation/article/709719

Accounting for the different speeds associated with each mode of transportation, we can calculate the average time of use between injuries or death. On that basis, bikes are the safest mode at nearly 68,000 hours of use between serious injuries or death, roughly 100 times longer than the 607 hours for scooters, as shown below. Safety concerns are sure to pose additional political threats to scooter-sharing businesses as they attempt to scale.

Source:ARK Investment Management LLC, 2018

Netflix Mastered TV Series, and Now It Is Mastering Movies

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More than 80 million households watched Bird Box,Netflix’s survival horror film starring Sandra Bullock. An astounding success for a “direct-to-streaming” title, Bird Box attracted more than half of Netflix’s subscribers and roughly as many viewers as the US Super Bowl.

During the past few years, Netflix has mastered the art of sourcing, producing, and launching scripted TV shows like House of Cards and The OA. Now it’s doing the same for movies. Smelling success, the company is doubling down on its strategy:

“Looking forward in 2019, we will be launching many new highly-anticipated titles including The Umbrella Academy (February 15th); Triple Frontier from J.C. Chandor (March); The Irishman from Martin Scorsese; 6 Underground from Michael Bay; and The Politician from Ryan Murphy.” (Netflix Q4 Letter)

As culturally influential as it is today—with myriad memes on Bird Box and Tidying Up—Netflix still is in an embryonic stage as it aims to become the world’s largest video entertainment company.Its share of total US TV viewing time is 10% and its share of domestic TV-attributable spend roughly 5%.^[1]

Netflix has room to take attention-share and is raising prices to invest in the tools and content to do so. Recently, it acquired its own content production studio in New Mexico, bought the Millarworld comic book IP, and forecast $3 billion of negative free cashflow for 2019 as it invests in more content. Playing the long game, Netflix is just getting started.

Videos: See James talk about Netflix earnings on Cheddar and Yahoo.

More: Bloomberg’s Shira Ovide provides a level headed analysis of Netflix’s growth strategy, warts and all.

[1] Netflix Q4 letter. Total US TV spend assumes approximately $40 billion annualized on TV advertising and 90 million pay TV households paying $85 per month for cable packages.

Is BTC/LN a Homage to TCP/IP?

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In the Bitcoin community, BTC/LN increasingly describes the growing Bitcoin (BTC) protocol stack including the Lightning Network (LN), a second layer solution that enables fast and free transactions. As Nik Bhatia first pointed out, BTC/LN seems to be paying “homage to TCP/IP and [is] a prognostication of the future Bitcoin protocol stack, [the] perfect signal to send the market about bitcoin’s evolution.”

As ARK has suggested, Bitcoin’s network is likely to scale on a layered architecture, much like the internet itself evolved. Today, Bitcoin’s base serves as a settlement layer for large value transactions. Layered on top is the Lightning Network, a payment protocol and bi-directional payment channel network enabling fast and ‘fee-less’ transactions.

In 2018, Bitcoin’s base layer handled $1.3 trillion of transactions value, double that of Paypal and within an order of magnitude that of Visa. Launched in early 2018, the Lightning Network has grown exponentially. As illustrated below, as BTC capacity grew 400x, the number of LN nodes grew by more than 4x, and the number of LN channels by 7.4x, a strong sign that the Lightning network is gaining traction.

Source: ARK Investment Management LLC, 2018 | Data from: bitcoinvisuals.com/lightning

Arjun Balaji, technical analyst at The Block, notes that the Lightning Network has been primed for a year of major network improvements “centered around four areas: (1) improving security guarantees in the system, (2) maximizing liquidity at all steps of the process…, (3) improving privacy, and (4) simplifying UX as much as possible.” An extensive overview of LN’s current state and pipeline can be found here.

Fintech Disruptors Are A Serious Threat to Traditional Bank Deposits 

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One of the biggest fintech trends today is digital deposits offered by companies like Square and Acorns. A few startups are doubling down with interest rates higher than those at traditional banks. Robinhood, Marcus and Affirm, for example, are offering 2%+ interest rates to attract new users.

Cash apps and high-yield digital savings deposits are disrupting traditional banking. Instead of using checks, debit cards, or credit cards, consumers are stashing cash on apps such as Paypal’s Venmo, Starbucks, or Square’s Cash App for day to day transactions. They have little incentive to send excess cash back to their banks for a pittance of interest income because they pay fees up to 2% for transfers out, compared to no fees for cash transfers into most of these apps. Meanwhile, services like Goldman Sachs’ Marcus are aiming to gut the rest of savings in checking and other accounts with interest rates roughly ten times higher than those offered at traditional banks, with early success illustrated by deposit displacements. 

The digital applications disrupting traditional bank deposits are cumulating, among them: 1) peer to peer apps such as PayPal’s Venmo and Square’s Cash App (see ARK’s Big Ideas, page 19), 2) retail mobile apps like Starbucks and Amazon, 3) robo advisor platforms like Robinhood, Betterment, and Wealthfront, and 4) online only platforms like Marcus. As digital platforms offer increasingly attractive value propositions, the exodus should accelerate from bricks and mortar banks saddled with inherently higher cost structures and uncompetitive products and services.

The 2019 JPM Healthcare Conference Put a Spotlight on Innovation 

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Here are the highlights that ARK’s analysts gleaned from the conference:

1. The FDA is ready for innovation, as are pharmaceutical giants thanks to the acceleration of technology-based science.

Ahead of the conference, Bristol Myers Squibb (BMY) announced that it would acquire Celgene (CELG), one of the leaders in CAR-T technology, for $74 billion, creating a buzz. During the conference,  Eli Lilly (LLY) announced that it will acquire Loxo Oncology (LOXO), a leader in next-gen oncology with which Illumina  (ILMN) has collaborated, for $8 billion.

As the 23^rd Commissioner of the Food and Drug Administration (FDA), Scott Gottlieb has placed a high priority on modernizing the drug approval process. At JPM, he highlighted plans to fund and encourage the validation and use of biomarkers, bioinformatics, and patient-reported outcomes to increase patient response to therapies. He also announced the formation of the Office of Drug Evaluation Science, which first will review safety data and then expedite and modernize the drug review process to accommodate more trials of potential breakthrough therapies.

2. China is discovering and advancing novel biotechnologies.

As illustrated in ARK’s Big Ideas 2019, China is advancing new health care technologies rapidly and attracting both capital and talent from the US and other developed countries.  The JPM conference featured many Chinese companies and Asia-based panels, while other companies hosted several China-centric satellite conferences.  

Melinda Richter, head of JNJ Innovation noted that the next JLABs will be located in Asia, primarily because 60% of the world’s population lives in the Asia Pacific (APAC). Richter noted that 500 million diabetic patients reside in China and India alone. Last year, JNJ struck a deal with Legend Biotech, a Chinese-based CAR-T company, so it must be pleased with early reviews in that region.

The China patient-provider ecosystem also is ripe for disruption. Tencent’s (TCEHY) web-based WeDoctor caters to more than 2,700 hospitals now and plans to extend its reach across China. It supports appointment bookings, online diagnoses, and consultations with live doctors.

In the meantime, the CFDA (the equivalent of the US FDA) has been hiring aggressively and, in 2018 alone, approved 40 new drugs including its first western drug, one developed by AstraZeneca (AZN).

3. Deep learning is driving precision medicine.

Increasingly, traditional tech players and AI experts are shifting their focus towards health care and drug development. Guardant Health (GH), GRAIL, Veracyte (VCYT), and Exact Sciences (EXAS), for example, are developing AI-powered cancer diagnostic tools to improve accuracy and precision. Microsoft (MSFT) is developing algorithms to surface the ever-elusive immunome, potentially enabling next generation immunotherapies. ResMed is attaching digital sensors to its connected respiratory inhalers to help monitor and guard against respiratory attacks and failure. Meanwhile, every digital health panel speculated on Apple’s (AAPL) and Google’s (GOOG) next move in the healthcare space.

4. Curing cancer is no longer a moonshot.

The number of companies aiming to cure cancer – including solid tumors - with well-developed pipelines was mind-blowing. While the stocks of many of these companies did not reflect much enthusiasm, the trial data was impressive, as were the number of commitments to commercial-ready manufacturing facilities.

Just a year ago at JPM 2018, many companies questioned CAR-T’s ability to treat solid tumors. Now, they are planning not only second generation but also third and fourth generation CARs and T-Cell therapies to target them. Many are pursuing combo therapies with PD-1 inhibitors and bi-specifics. Bi-specific antibodies are relatively new treatments that could enhance CAR-Ts’ effectiveness in solid tumor indications.