RWW Port Update: esp. NARI, TDOC, FUBO, GAN

[Robworldwide]

Down to 11 equities, really 10 as I consider 2 an inextricable pair. I exited 2 positions - Teledoc and Inari - and as a physician, my comments on those might be the only original thoughts I have about an equity that aren’t echoed other places on the board.

Exited positions (TDOC, NARI)

Teledoc (TDOC)
I sold after finally concluding that it really is just GLORIFIED TRIAGE. As an ER physician (I also do critical care), via telehealth I can’t repair a laceration, run heart tests and refer you for emergent stents, or any other thing that requires labs or a CT scan. In short, all the things that MATTER and all the things that REIMBURSE well, I CAN’T DO. Feedback we get from surveys is patients hate virtual health (except a few millenials who aren’t are target market anyway, we like frail, old people and the accident prone). The only ones who seem to push it is the big insurers hoping to save few bucks in the space of primary care. And since that’s their motive, it’s probably not a surprise to you that this modality compensates docs poorly. Which it should - since we’re really not doing much. So why did I get into Teledoc in the first place? For one, remote patient monitoring (this was why they acquired InTouch). I remain excited by this, but it’s not a big enough part of their business to justify the valuation in my mind. Second, I had hoped they might be in pursuit, ultimately, of what I consider the holy grail of healthcare technology. That is… wait for it … A SaaS application! Apple has failed. Google has failed. Someday, some company, will figure out how to centralize everyone’s health records that is secure, and accessible to both patients and their doctors with ease. This will be a true value add to healthcare. We aren’t there yet, and TDOC has made no inroads or given any indication that is their aim.

Inari (NARI)
Like Saul, I initiated a small position to learn more. Unlike Saul, I went the other direction (which I think reinforces Saul’s advice that we should all make our own decisions as befits our own criteria and investing style!). Principally, I disagree with Inari’s estimates of TAM and I refute the notion that this will materially change the way we treat patients with respect to anticoagulants. That, and CEOs are gonna find any reason not to buy more expensive medical devices.

INARI’s products “treat” deep venous thrombosis (DVTs) by removing the clot. But the difference between “treating” the clot, and “preventing the next one” is the nuance here. Most times, blood clots in the venous system disintegrate over time on their own. When we find them (usually a patient comes in with a swollen and painful leg) we put them on anticoagulants not for THAT clot but for the PREVENTION OF THE NEXT ONE (the next one might be the killer). And while Inari’s devices remove the current one, in only the rarest of cases is the clinical history and patient-specific characteristics sufficiently known for all of us to promise the patient that they aren’t at risk of another clot. And so we put them on anticoagulation for at least 3-6 months while a hematologist decides if they have any specific condition to suggest they might have another one. Some folks stop anticoagulation after this 3-6 month period, others continue it indefinitely. This includes even those treated with Inari devices, and I’m not even sure the Inari reps understand this!

TAM is vastly over-estimated because only a small subset of DVTs are in the right place, with the right burden, in the right patient, to warrant the use of this device – most patients aren’t gonna get whisked off to the cath lab for this type of intervention because it’s cheaper to treat the patient in other ways (mainly observation and anticoagulants) and only a small subset of patients are the ones that benefit from aggressive clot REMOVAL. That’s what Inari isn’t very forthcoming about when they talk about TAM because their estimate of DVT prevalence isn’t granular enough to tease out the specific subset that might actually need a clot REMOVED IMMEDIATELY. Also, among those patients who fit the REMOVE NOW criteria, there are other devices – and even altogether different strategies – that might be used to remove the clot. Even if there are TAILWINDS here that expand the pool of patients considered candidates for clot removal (mostly related, I suspect, to interventional doctors who want to make a lot of money doing this procedure when it really doesn’t make a difference in most patients, most of the time) I don’t see the percentage of eligible patients growing to the extent the company suggests.

Even if you discount the above two paragraphs, hospital CEOs aren’t in the business of necessarily purchasing large numbers of expensive medical devices that will “save ICU days and reduce hospital length of stay”. These are, cynically, money makers after all. Unless there is COMPELLING data such that hospital systems really can’t justify in the face of, say, a lawsuit, the interests of all stake holders are not necessarily aligned (Ah, American Healthcare!). The data isn’t that robust.
For me, it is too specific a device, for too specific of a condition, with too narrow of a subset of afflicted condition holders for me to sleep soundly with this position.

Current positions: 11* (really 10 as I consider FUBO+GAN inextricable)

Fubotv Inc (FUBO) + Gan Ltd (GAN) - 9.2% (combined)
My thesis here is that FUBO’s real upside is as a sports betting platform rather than a streaming service and I think the market has a MASSIVE BLINDSPOT for FUBO. I seriously think even the name FuboTV is a misnomer with the suffix. GAN is a SasS stock for online gaming and online betting, and it is the latter for which I think it has superior upside. They “missed earnings” – and promptly got battered, so I increased my position after reading the earnings transcript. Reading the report cost me some $$$ by ensuring I couldn’t buy at the nadir, but I still got a nice discount and it is a small price to pay for sleeping well at night that is afforded once I confirmed nothing has materially changed. 10 months after their NASDAQ listing, they are spring-loaded for success here in the U.S. as they add new clients and expand licensing. 75% of their 2020 revenue is recurring. 2020 revenue grew 67% yoy.

Roku (ROKU) - 17.6%
Increased my position from last month due to adding at various technical levels and removing two equities from my portfolio. I’ve accumulated to a “full position” in my mind, but it is among my highest conviction stocks so if the percentage goes up it is due to outperforming others in the port, and I’m not likely to trim anytime soon.

Crowdstrike Holdings (CRWD) - 11.1%
I added some this month. I think someone else mentioned the impressive customer base growth. High conviction.

DataDog (DDOG) - 10.4%
I added incrementally as we dipped below the 200sma and again as we breached $80. No earth shattering comments from me. High conviction.

Snowflake (SNOW) - 8.0%
I’ve added to this position at various technical levels, dollar-cost averaging along the way.

Okta Inc (OKTA) - 7.9%
I got interested in this stock when they became the go-to, splash-page security portal for one of the large health systems I work in. Seems like their acquisition, though “expensive”, was a great way to buy revenue for cents on the dollar and after reading what many smarter-than-me people have written here on the board, I hold steady.

Docusign (DOCU) - 7.1%
Transformative technology that is just scratching the surface both in terms of TAM for current products and the natural extension into new service lines. This is a high conviction stock for me for the long term.

Tradedesk (TTD) - 6.8%
Struggles with market perception, I believe, due to the changing environment of how ads are targeted vis-a-vis cookies, but from comments made by their leadership they don’t think this will materially affect long term revenue or business model.

Cloudfare (NET) - 5.3%
No substantive comments to bore you.

Palantir (PLTR) - 3%
I’ve always been intrigued by their unique affiliation with government agencies and have taken this as a sign that they must have some moat as it pertains to national security -level technology. My position remains small as I learn more - I know there’s lots out there about it, I just haven’t had much time what with COVID and all.

Cash position: 13.6% (down from 20%)

[gerrard87]

Thanks for your opinion on NARI.I have a Medium size position in NARI so its good to listen other opinions which are not always about the current high valuation…

So how do you explain the strong growth at the moment? The demand for their products is sky high. There must be something to it, or is it just a new product that has been hype for a short time?

And other devices are designed for arterial and are wrong size/poorly designed for vascular system including penumbra.

There are 1M PE/DVTs in US/year!, with over 100k deaths!, Of course not all will get intervention but there TAM is huge especially considering how much safer/efficacious $NARI products are vs eliquis, xarelto, lovenox, warfarin

Thank you

[Robworldwide]

Hi Gerrard,

To explain the growth, I’ll invoke Bill Parcells: “You are what your record says you are”. In other words, I can’t explain, defend, or refute their growth – it’s strong growth to date is an immutable FACT! But what I’m interested in (at least interested in PAYING FOR), is FUTURE GROWTH; and my take on Nari is that the future growth faces headwinds that the market is minimizing for three principal reasons.

First, TAM is greatly overestimated. Only a small SUBSET of DVT/PEs actually require (or are even amenable) to device intervention. Second, it’s irrelevant that Team Nari thinks their device is safer than anticoagulants because it’s not an either-or proposition. Most folks who get a successful Nari intervention will still need anticoagulation because while Nari is designed to remove the current clot, in most cases it’s the NEXT clot we’re worried about. Patients who got Nari’d in the first place probably have risk factors for future clots. So, we use prophylaxis even AFTER a patient has survived clot #1, whether they were NARI’D OR NOT. Better to go this route with prophylaxis (which is also not 100% effective) then to bet on the next clot being suitably benign and again amenable to Nari intervention (these patients don’t need to tempt fate twice!). Third, yes, I believe that there is a novelty to their products right now and that this will dim. Hospital CEOs don’t dither much before trying to cut budgets for all manner of products… and the data supporting Nari just isn’t so strong, nor does it impact a large enough percentage of patients, for it to be immune to this. To be clear, the data for efficacy and complication profile is good, but there is no data yet that shows, say, how much morbidity and mortality is reduced per unit purchase of the product. It’s very probable that when a CEO is asked to choose between buying more Nari vs. buying something else in her hospital that will reduce morbidity, Nari won’t be the one offering the best bang for the buck).

Hope this helps at least explain my reasoning why I feel this way; I’m certainly not trying to tell anyone else how they should invest.

Happy Easter,

RWW

Thank you

[IRdoc]

I agree with what RWW says. NARI is enjoying a “shiny new toy” period where everyone wants to try it out. Penumbra has devices that function essentially the same. Perhaps other devices weren’t specifically designed for the arteries, but remember that Inari’s devices are used in both veins and arteries (pulmonary arteries). Personally I do not think there is really any difference when it comes to removing clot and would use devices in both arteries and veins.

The comparisons to anticoagulation alone, or an ICU stay, or traditional catheter thrombolysis are pretty dubious to me as none of the users really compare the two. I suppose that is all part of the game to attract investors. A sales rep coming and showing me data with those comparison wouldn’t be very convincing.

But Inari is growing very quickly. As an investment, if I’m going to ignore all the technical details about why one service is not really that superior to its competitors and just follow the growth, I should treat medical devices the same. As long as it’s “good enough” and the company is able to sell, then it should be a good investment, at least if one is willing to follow the company closely and move on when the growth story has changed.

No position in NARI, though it’s right on the cusp.

[GDavenport]

RWW,

I want to key in on your Teledoc summary:

“Teledoc (TDOC)
I sold after finally concluding that it really is just GLORIFIED TRIAGE. As an ER physician (I also do critical care), via telehealth I can’t repair a laceration, run heart tests and refer you for emergent stents, or any other thing that requires labs or a CT scan. In short, all the things that MATTER and all the things that REIMBURSE well, I CAN’T DO. Feedback we get from surveys is patients hate virtual health (except a few millenials who aren’t are target market anyway, we like frail, old people and the accident prone). The only ones who seem to push it is the big insurers hoping to save few bucks in the space of primary care. And since that’s their motive, it’s probably not a surprise to you that this modality compensates docs poorly. Which it should - since we’re really not doing much. So why did I get into Teledoc in the first place? For one, remote patient monitoring (this was why they acquired InTouch). I remain excited by this, but it’s not a big enough part of their business to justify the valuation in my mind. Second, I had hoped they might be in pursuit, ultimately, of what I consider the holy grail of healthcare technology. That is… wait for it … A SaaS application! Apple has failed. Google has failed. Someday, some company, will figure out how to centralize everyone’s health records that is secure, and accessible to both patients and their doctors with ease. This will be a true value add to healthcare. We aren’t there yet, and TDOC has made no inroads or given any indication that is their aim.”

I think you’ve nailed quite a bit about the limitations of remote work. I feel there is more to this story though, and this comes through the LVGO technology partnership. As this is PROACTIVE care and PREVENTATIVE care, it is much earlier in the overall payor, patient, care value chain interface.

Yes, triage isn’t that powerful, but I think the reduction in premia for those payors who use this relationship represents margins that can be used for profit, or for expansion of capability in care. This is a virtuous cycle which will continue to grow with the number of patients and benefit providers. That the patients get better care only increases the net promoter score for TDOC.

They have slowed in growth. I think this might be the most important reason to put them on the second team, however.

[MAS4R]

“I think you’ve nailed quite a bit about the limitations of remote work. I feel there is more to this story though, and this comes through the LVGO technology partnership.”

Just a short note that when Cathie Wood began buying TDOC in fall 2020, she made it clear that ARK is buying because of the LVGO component.