Krzysztof explains why he’s now heavily invested in a tiny $140 million dollar biotech company, Coherus Biosciences $CHRS. There are two ways to make money in the market, and both have to do with a gap in perceived value. Coherus had very encouraging second quarter results, but an analyst downgrade sent the stock tumbling regardless. Are the downgrade reasons based on how the wall street game is played, or something more fundamental to the company broken?
Also in this week’s episode, Luke is unhappy with the state of the UK as a place for his investing dollars. Does his pro-USA investment thesis support American exceptionalism? Or does technology know no political boundaries and you have to go where the intellectual capital lives? One notable exception: UK listed fintech, Wise $WIZEY $WISE
Self-driving cars are the next revolutionary frontier, and Tesla $TSLA is not the only game in town. But the other player, Google’s $GOOG Waymo, is experiencing significant growing pains that are literally keeping people up at night. Badger challenges Monkey to ride in a driverless Waymo car in Austin without getting killed, to the tune of a 1:10,000 payout.
Disney’s $DIS corporate cruelty? A tragic case of when corporations lose their humanity – it’s sad to see the House of Mouse behave so heartlessly in the face of real tragedy.
Krzysztof bemoans the widening cap in the King of the Jungle portfolio challenge and begs Badger for mercy for a few extra days, but leniancy comes at a price! It’s not over yet though, and the Japanese Carry Trade might still have further market mayhem to come, so those on Team Monkey ought not despair… yet.
Segments:
[00:00:00] Introduction
[00:00:51] Why Tech Investors Should Stick to US Markets
[00:09:06] Waymo Night Terrors
[00:18:11] Outrageous Behaviour from Disney’s Legal Counsel
[00:23:18] Investing in Coherus Biosciences
[00:58:33] Krzysztof Almost Concedes the King of Jungle Portfolio Challenge
WSW E41
[00:00:00] Introduction
Luke: On today’s Wall Street Wildlife, we discuss why Christophe is invested in Coherus Biosciences, ticker CHRS, and why he thinks it’s a market beating investment.
And this is also the angry addition. I’m pissed off at investing in the uk. San Francisco. Residents are pissed off at Waymo and everybody should be pissed off at Disney.
Krzysztof: Badger, have you heard of a band called the Sex Pistols?
Luke: I am very familiar with ’em. Yes. Oh
Krzysztof: have a couple of tunes about, about issues with the UK.
Are they on to something?
Luke: So I don’t know if Sid was complaining about investing in the UK. I think that was more like a punk rebellion, right?
Krzysztof: Right, he, yeah, he had other societal problems he was addressing, correct?
Luke: Uh, he did, he did, but
[00:00:51] Why Tech Investors Should Stick to US Markets
Luke: why should investors be concerned about investing in the UK if they’re investing in technology companies? Now, this came out of quite an interesting question I got on the X’s, , the other week from Deborah Hedgefog on X. Deborah said, , my question relates to the UK market. I’ve been reading for many years how cheap the UK market is, but you, I, appear to invest mostly in U. S. stocks. Do I think the future continues to have better opportunities in the U. S. than the U. K.? I have thoughts about this. Have you got any instinctive sense about technology investments in the U. K. though, before I dive into my mini rant?
Krzysztof: Yeah, well, uh, it’s not about the UK specifically, but this is a little bit of a Bugbear I have about the United States. I’m doing, as you know, a deep dive into the economic history of the world over the last century and change. So I’m, I’m trying to get smarter about all that. And. It seems like the United States has been historically an exception to the rule of everything that had come before.
That all of a sudden, you know, all this land and resources, , showed up seemingly out of nowhere. this is that sometime around the 1870s, invention was invented. which is a kind of cool thing to think about, but what that allowed was the conglomeration of resources into things like corporations and laboratories, which accelerated the rate at which things were being invented.
And I think the United States was an exception. Now, politically, and, you know, there’s all this, like, the United States thinks it’s all that, you know, it’s the exception to the rule, and we’ve proven that’s not correct, because we’ve lost a bunch of wars recently, and, you know, the shine has sort of come off of U.
S. exceptionalism in that sense. But I do not think, to the point, that the United States has lost its tremendous lead in terms of technological superiority and advances over the rest of the world. And the rate at which everything is changing is now because it’s so quicker, I don’t see any other country really certainly not surpassing it anytime soon.
So short answer is U. S. exceptionalism in advances appears intact from where I’m seeing things.
Luke: there’s a lot of good reasons for that, right? It’s almost by luck or judgment, it was a good place to do business. And then if somewhere is a good place to do business, like it attracts other people who want to do the same kind of business.
and you, you know, you have like, the furniture store on a particular block in town, say in a new city and all the other furniture stores kind of end up in the same place because everyone wants to go to that place because they’re going to like fit out their home or compare beds or sofas or whatever the hell they’re going to do.
So it’s almost like the counterintuitive idea that you’ve got this competition because you’ve got, you know, you don’t want to be next door to this, these Starbucks, but maybe you do because. People might come by and then they’ll see your store and they’ll pop in and they’ll buy a coffee next door and they’ll buy a sandwich from you.
and I think this is the case with certainly technology investing, if you compare the US to probably any other market, to be honest, but I think to sort of tack directly onto Debra’s question, comparing the UK to the US. I think it’s a bit of a stark comparison. like the US is just a much bigger market with a lot more liquidity.
investors in the US are used to technology investing and investing in growth companies. And so if you list in the US, so you list on the NASDAQ or the NYSE rather than say the FTSE, you’re probably going to attract a higher valuation. as you raise more money at IPO or however, however you come to market.
So that’s good for the company. It kind of makes it an attractive market to list in. I think it’s probably. An easier market from a regulatory perspective as well, more used to the way tech companies want to structure themselves from a kind of capitalization perspective. Although I know the UK is trying to do stuff to address that.
and it’s just where you’re coming back to my kind of restaurants and furniture analogy, right? It’s a market that’s known for technology. So, It tends to attract tech companies because, uh, if you’re a tech investor, you’re almost certainly investing in the U S. So then if you’re a tiny old tech company, at least you get more eyeballs on your, stock, perhaps.
Krzysztof: I don’t know if this goes against your argument much, but tell me what you think when I mention the recent Google case, uh, and the problem with things like giant like let’s call it Google, Amazon, Apple, is that at some point it becomes impossible to compete.
And this is a little bit to the point I started making about techno feudalism, where it’s no longer really capitalism, you’re no longer, you’re not There is no free market working. Uh, it’s, it’s just these big companies are renting out their products to the Lords and then the, you know, we provide the, the data and whatnot.
the argument in favor of maybe, uh, the UK as a smaller place is that if there’s no behemoth. ruling the land, then those smaller companies have a better shot at competing with one another on fair terms. Therefore, potentially, you know, may the best rise to the top and that could be a tremendous incentive. Because you still have free competition.
Luke: I understand what you’re saying, but I think technology is the exception to that because it’s by its very nature, it’s global. Like, it’s not like in the UK, like we have Google here, you know, and we have Amazon and we have Apple and everything else. Right.
maybe this takes me into my anecdote because I think it is kind of self fulfilling prophecy.
So I used to have one of my, in fact, my very first, venture capital investment, probably coming up for about eight or nine, 10 years ago now. I owned a friends and family round piece of a small technology company, and it had really interesting potential. And they, they just executed really well.
Great founder, did a great job. And then they got acquired actually pretty quickly, about two years after I bought in, by Snapchat, like big global, another, you know, North American tech giant. And Snap clearly saw the global applicability of this small tech company’s technology and how it could integrate into like the Snap ecosystem.
So I think this probably happens quite often. Often. This isn’t an anecdote, but I think it’s a fairly common anecdote that if you have like a little tech company, it tends to get gobbled up. By one of the tech giants, because you know, an eight figure acquisition is kind of pocket change to some of these giant companies.
barely touches the sides of their free cashflow. and so this probably happens a lot. thing about technology is like, you don’t have to, unless you’re say an Amazon where you need like warehouses and you’re dealing with physical stuff. Yeah. It’s really easy for Google to make its capabilities available globally.
So. Kind of build it once, deploy it globally, and save the barriers to getting global scale with software are far lighter.
Krzysztof: hmm. That, that makes sense.
Luke: So anyway, like let’s, let’s get onto the next thing that someone is pissed off about. I’m not really pissed off at the UK. It’s just kind of sad that, if you want to be a growth focused technology investor, like the US is the only place to look really. There are certainly exceptions to that, but I think that’s a fairly.
Good rule. I will just plug one exceptional UK fintech, which is one I own, and it’s a company called WISE. W I S E. If you want to know a bit more about WISE, we actually interviewed a member of their policy team just, uh, maybe 10 episodes ago. So go check that one out.
Krzysztof: I am now a wise user thanks to our field trip and, residing in part time in Europe
[00:09:06] Waymo Night Terrors
Luke: very good. But there is a company you’re not a user of yet, and I gave you some homework, and you failed miserably at your homework. So I’m going to share the homework publicly on the podcast, and then task you for an upcoming episode. But before we get into that, tell us who this company is, and why San Francisco residents are pissed off at them.
Krzysztof: Well, uh, from what I understand Waymo is Google’s, uh, self driving automated initiative, and they’re the cars that kind of look funny because they have all the gizmos and gadgets sort of on the roof. they’re not Teslas, in other words, because Teslas look like normal cars that could self, well, um, I guess that’s where it gets a little wonky.
You can’t, the Tesla is not driving by itself yet, whereas Waymo cars, uh, because of the gizmos and gadgets are attempting to drive by themselves in fenced in, Regions, correct? Right? So they’re only allowed within jurisdictions, right? And so you share the clip with me that showed some poor San Francisco natives in right outside of a Waymo parking lot.
in which the cars are returning from wherever they were, say, from partying at night for three, four in the morning, the fleet of Waymo cars are trying to land a parking spot in this Waymo parking lot, and in order to navigate all of it is obviously AI, there are no drivers inside, and somehow they’re trying to navigate into the spots and when there’s something goes awry, one of them honks and then another one honks back and all of a sudden you have, you have a parking lot of Waymo honking cars and the poor San Franciscans are more or less ready to jump out of their 20 story building because this seems to go on each and every night.
Poor creatures.
Luke: Pretty funny, like amusing
Krzysztof: If you’re not, if you’re not there, right? Yeah,
Luke: Yeah, right. If you’re not there, yeah, like Seeing these cars. backing up and shuffling around and trying to navigate around each other and beeping at each other. Like, it’s almost like I’ve driven in India before.
It was reminiscent of that, where like someone’s on the horn every couple of seconds. So yeah, not a lot of fun if you’re a neighbor. But I thought it was quite interesting that that’s how Waymo cars are communicating with each other. Like, clearly, The horn honking is like a pretty low bandwidth communication, right?
It’s either on or it’s off. And I guess, like, if someone honks at you, like, what are they saying? Like, oh, like, supposedly they’re saying, I’m here, be aware that I’m here. But most of the time, they’re just saying, like, get out of the effing way or screw you or nice ass or something.
Krzysztof: Wow, I don’t think I’ve ever honked a horn to mean nice ass, but I do think, I don’t know if this is too far off field. I think the optimistic vision I have for autonomous driving is precisely because of what will happen when the threshold of inter car communication comes online, whether it’s via honking or just, say, the vision.
or the camera vision or Wi Fi, whatever, however they maneuver that. I do believe that that’s what gets us over the threshold of accidents stopping, like dropping the clip, the rate of accidents dropping precipitously, because inter system communications, if it’s done by, say, call it just math, we know that’s going to be systemically more reliable, stable, than any chaotic factors like a human being, right?
Isn’t that the, the bull case for autonomous driving? Precisely the Waymo ranking that we’re seeing, but done on a more sophisticated scale.
Luke: Yeah, absolutely. And you’re right, like, I think there’s an initiative, I haven’t read too deeply on this, called Vehicle to Anything. And so this is like, vehicle to vehicle, vehicle to infrastructure, vehicle to pedestrian, and like an autonomous car has a lot more. Senses than a human driver could ever have, because it’s plugged into like the grid and it can see things that you can’t even see, right?
Cause it could know what’s around the corner because there’s another car there or there’s a traffic light that’s kind of broadcasting information to the car and telling it what’s coming up even before it gets to it. So that you can imagine lots of ways in which autonomous cars can be and will be far smarter than humans could ever be.
But we ain’t there yet, currently, I guess, like 99 percent of the cars that are Waymo interacts with on the road is like a human driven car, so I guess the horn is kind of where we are right now.
Krzysztof: Yeah, this is an interesting, we’ve talked about this ad nauseam, but I did use My FSD, full self driving, in my Tesla to pick up my better half at the airport the other day, and it was truly magnificent.
it did, it got me from my house to the airport. With zero incidents, and I felt, here’s the crucial piece, I actually felt relaxed during the drive. I mean, I, I wasn’t, I was obviously paying attention to everything, but the way it changed lanes and sped up and slowed down, I was like, wow, you know, like this is early innings, but if, if, if this is the, The skill of it now, it.
I see what Musk is talking about as a future.
Luke: definitely. Like, the technology is getting there. It feels like we’re, we’re close. The question is whether regulations can keep up. Actually, this reminds me of, uh, one news article I saw a couple of months ago, which maybe makes me a little bit less pissed off about technology in the UK.
So I think the UK House of Lords passed a, a landmark piece of legislation that would allow autonomous vehicle manufacturers to assume legal liability for the drive, I guess you must have in some way in the US if Waymo’s are running around already. But maybe it hasn’t been tested in court yet, like until a Waymo runs someone over, maybe that’s when, like, the Supreme Court will help manufacturers and the passenger and the victim, like, set some, set some ground rules and some legislation that applies.
But the UK have got ahead of that. And so I think we’ve set some regs. So from 2026, companies like Tesla or Google or whoever else, BYD, if they can provide sufficient safety data, then they can. Accept accountability for a drive, either as essentially sort of level four, where there’s a bit like you going to the airport and you’re not quite in control, but you’re ready to take over.
And also level five, where you’re sat in the back seat as a passenger reading a book or half asleep.
Krzysztof: Yeah, the way the insurance, plays out is crucial and also the inevitable tragic cases, as we know, will have to happen where there is no, you know, the machine is the thing that killed or caused an accident and how people Deal with that existential dread.
Luke: Yep.
Krzysztof: we’ll determine, yeah, the pace of, of how this unfolds, but we should expect all those things.
Luke: Yeah, very good. Well, anyway, to your homework then, because you’ve got a Tesla and Waymo is live in Austin. It’s one of the five or six cities, I think, they’ve, that they’re now doing, riderless drives in, and I think they’re out of beta. So just like, Get on your handset, install the Waymo app or Google it, I don’t know how it, how it works with Waymo, and see if you can get a, get some video from the back of a Waymo for our listeners over the next couple of weeks.
Krzysztof: So tell me if, if I’m hearing this right, you, you want me to be a guinea pig for, for the benefit, for the benefit of your education.
Luke: Hey, look how you sent me to the damn moon in an Apple Vision Pro. I had to walk on the lunar surface. So the least you can do is go Waymo. Don’t be the, uh, the test case that goes to the Zufferin court though. Don’t have your vehicle run over some passing pedestrian. We don’t want a murder on our hands.
Krzysztof: so you would not at all be, be worried for my safety, my well being in the Waymo without a driver
Luke: I mean, if you were going to do, say, 10 billion miles before the next podcast, I suppose there’s a statistically higher chance you’re going to die in the car, but I think you’re pretty safe.
Krzysztof: You’re willing to take the chance that this will be our last conversation ever.
Luke: I’m willing to bet with you, I’ll give you 10, 000 to one odds that you don’t die on your Waymo journey. There you go. Put my money where my mouth is.
Krzysztof: I’ll, I’ll, I’ll wager one.
Luke: Okay. All right. Cool. Okay. If you die, I will pay 10, 000 to your estate.
Krzysztof: Okay. Okay. Oh,
Luke: it’s not just Waymo’s that are potentially,
[00:18:11] Outrageous Behaviour from Disney’s Legal Counsel
Luke: it’s not just Waymo’s that are potentially killing people. Unfortunately. Disney accidentally did kill someone, and it’s a pretty tragic case, but I think we’ve all got good reason to be Mr. Angry at the way that at least their external legal team have navigated this one.
so sadly, a family visiting Disney, uh, Springs, uh, which is kind of a bunch of restaurants and things within a couple of miles of, Florida, Disney World. Uh, they went for dinner at an Irish restaurant called Raglan Road.
It’s caught my eye. Because I used to live on Raglan Road as a kid, and I have eaten at that restaurant. unfortunately, uh, the, uh, the poor lady suffered an allergic reaction. I think there was some confusion with the kitchen and foodstuffs that she was intolerant to, and unfortunately she died as a consequence of this, uh, this dinner.
And this stuff does happen, sadly, when you’re a mega corporation with, like, millions of people. Customers, you know, life happens and I feel very sorry for the victims, but, you know, this is life. But the reason that we’re talking about this story on the podcast is the way Disney Legal or their external counsel have handled the case that’s been brought.
by the bereaved husband. And evidently, Disney have, challenged and said that this case can’t be heard in court because the, the victim signed up, I think on her PlayStation, signed up for Disney Plus many years prior to the incident. And in clicking, like, I accept the terms and conditions, she accepted.
That at any time in the future, if she ever came into legal conflict with Disney, it would be resolved through arbitration, i. e. like a private sort of civil affair rather than in the courts. And so Disney are pulling a bit of a fast one here and essentially saying that, I don’t know, the hundreds of millions of people who’ve used Disney Plus or indeed have visited any Disney property ever have apparently accepted this TNC.
and have no right to sue Disney pretty much for anything, seemingly including death. What do you think of that?
Krzysztof: Why that makes me so mad.
Luke: It’s ridiculous, really. It is ridiculous. I used to be a Disney shareholder and it is a stock that I consider to be like one of those story stocks. I bought it for all of my nieces and nephews, my cousins, kids, because I buy, I buy them all like a Christmas present stock every year. I sold Disney for totally different reasons.
Just because they’re just challenged as an investment. Leadership transition problems. Problems with Disney Plus, like the finance is not working, the cost of streaming. Quite frankly, I will bleep this out. Fuck Disney for trying to pull this one with the legal team. And I’m taking it off of my watch list of stocks to re add.
Krzysztof: I’m gonna philosophize just a little bit. Earlier in the show, I talked about why the last, call it, 150 years have been so, the first time in human history that we’ve experienced so much growth. I called it the invention of invention, which allowed the rise of corporations. So that’s, I’m framing that in a good sense, progress has been accelerated, but we also know when I hear stories like this that the flip side of that is when corporations, because they become bureaucratized and so big and legal, that all humanity is sucked out of it.
And you have these bloodless, soulless. entities that you can’t really fight against because of, you know, shenanigans and loopholes, like what you just said. And, you know, I see the way of humanity, the forward path of humanity is trying to navigate between, obviously we, we, we need corporations and companies, but at what point are they, have they exceeded a, a reasonable, boundary of how they go about their business.
And the truth usually is somewhere in the middle, but this is, yes, an egregious example of, uh, it’s just maddening.
Luke: And I think it’s particularly damning for Disney. When you just think about like their scale, but also like the brand, the Disney brand, right? It’s supposed to be about, it’s in theory, like family values and, you know, it’s kind of togetherness and all these sort of warm, fuzzy, things that make you feel good about life.
And here they are pulling this corporate stunt. That’s just like an embarrassment. I’m, I’m just shocked. They have all companies have, have taken that action and they’ve been called out now, which is good.
Krzysztof: Agreed. no more Mickey Mouse for you. You’re cut off.
Luke: I do have a, God, look, I’m gonna get rid of it. I’ve got a, no, maybe I threw it already. I had a, I had a Disney wristband up on there from, from the visit to Disney World, like a decade ago. I, I was gonna sling that in the trash, but it looks like I already did. Yeah,
Krzysztof: Yeah, no, no more Mickey Mouse ears for you.
Luke: no indeed. Well.
[00:23:18] Investing in Coherus Biosciences
Luke: should we come on to our headline topic for the day? Uh, I think we’ve done all the angry we’re gonna do today. Let’s try and try and get nice. Maybe I’ll get a bit angry at you if you can’t defend your stockholding in Coherus Biosciences sufficiently well. I think I may have classed it as a shit co a few weeks ago, so you were kind of incensed and you’re responding to that on today’s episode.
Krzysztof: Yeah. Well, I’ve prepped quite a bit for this because I think there’s a lot of substantial investing, I hope, wisdom to what I’m about to say, but I really welcome your, your legit questions and pushback and, or places where, you might. reconsider your opinion. I’m going to take the long and winding road here, if that’s okay
Luke: Yeah, and let’s structure it a bit, like tell us, tell us
just super, from the super basics, who they are, what they do,
tell us about your stockholding, because that will get us on the hook for uh, why this is so material to your financial future, and then we’ll get into the nitty gritty.
Krzysztof: Yeah. So I want to, in part, explain how did I get here? How did I get to be a holder of, with a huge stake in what is now, a 140 million market cap company. this is not my bread and butter know how. So let’s go back to that. how do people make money in the stock market?
I kind of broke it down in two sort of, this is all reductive, but you know, we don’t have two centuries. You, you can either invest in a company, that you think will exceed, in other words, do better than current projections, right? And this is how I mostly invest. This is how you predominantly invest, right?
You find great companies, but because of their greatness, they will do better than other, say, merely good or average or below average companies. And that compounds over time, right? So that strategy is what we’re mostly about. There’s another strategy, which is harder to get right, but this is what I’m talking about with Coherus Biosciences.
It’s what happens when the company stumbles a bunch of times. Typically they’re called turnarounds, but there’s been some issues, right? And because of these issues, the expectations start dropping along with its price. So it’s one of these situations where the company is sort of, I would say, left for dead.
Um, like the expectations are, are so low, and you would invest in those primarily if you think the company is being somehow misrepresented, misunderstood, or if this turnaround has a high probability of happening in the context of the market not thinking that way, right? And in both of these situations, I say there’s a gap, right?
That’s the, that’s what these, these, these, these, call alpha, right? The gap between expectations and real value. I think now would be a good time to explain what Coherus does, right? Just, just in the general sense, right? well, one more thing before that. You know that I remain worried about the large macroeconomic picture, including valuations of even the best companies. So that’s when I started doing more legitimate research into what I would call investments that are uncorrelated from the broader market. So what do I mean by that? When the market overall is high, meaning the the valuations of stocks we buy are expensive, when there’s a large correction, It doesn’t matter how good the business is, stock prices will drop because there’s just that much more selling pressure, right?
So, the money the company’s making doesn’t change, but the multiple we, we, in part, let’s write the multiples get compressed. There are some companies, though, out there, biotech being a huge swath of them, that are disattached, uncorrelated from the market predominantly, in general, there’s always exceptions, because their success or failure depends on whether the drugs work or not. Right, it’s kind of, it’s, it’s, they’re binary, they’re more like binary events. part because a lot of these drugs we’re talking about are life and death or health related, so patients, hospitals can’t stop buying them, right?
Luke: Makes total sense like a narrow industry vertical. And if you’re a tiny company, like as you said, 140 something million dollar company, like that’s incredibly small. If people don’t know, like, you know, public market investments, typically something’s considered a small cap if it’s less than like, 20 billion dollars, and this is like 140 odd million dollars.
This is like a micro cap. and when you’re a micro cap, like, you know, one risk can wipe you out. And particularly if you’re a biotech, like you live or die by the clinical trials and the things that, you know, your, your drugs pipeline. So yeah, you know, macro affects you, But it’s not the most important thing that affects you.
It’s like the risks that you actually have right on your table are the ones that are gonna, like the sword of Damocles over your CEO’s bed.
Krzysztof: Predominantly, If I saw a microcap biotech at the 140 million valuation, my assumption would be this is a pre revenue company that has some sort of clinical pipeline which costs a lot of money and is no sure thing because these drugs are not yet available.
So that’s why danger warning sirens ought to be going off, right? It’s more like a casino, right? If they get an FDA approval, then you see the stock often shoot up massively because it shifts the company from maybe they will, maybe they won’t, to okay, now they actually have a product. But this is not the case with Coherus Biosciences. Coherus Biosciences, I’m going to keep, try to keep this really simple, recently underwent a major transition from having a bunch of products to essentially two kinds of products. One is the drug Loqtorzi, and that drug is technically called a PD 1 inhibitor, but for simplicity’s sake, it interferes with how cancerous cells work. That’s what you need to know. Currently, It’s targeted specifically for a particular cancer, uh, and that is, uh, nasopharyngeal cancer, pharyngeal cancer, NPC for short, which has, uh, number of patients it has is in the thousands.
So it’s not a very big cancer population, but this is life and death, uh, situation. And it’s the only. one on the market for this particular kind of cancer. So if you think about it from the hospitals, patients have no choice really, but to buy this drug and it was only, uh, FDA approved at the beginning of this past year.
And only in July did they receive, in parlance of the market, like a JCO, which means it has easier access to the reimbursement payments via the healthcare system. So it’s only, call it two months ago, that this thing is really starting to unfold and spread its wings. It’s already FDA approved. So all of the money that Coherus had to invest to get it to the market, that’s in the hindsight.
Now it’s about ramping up the product, right? In the last quarter, this product brought in 4 million of revenue. That’s a tiny,
Luke: That’s peanuts, right? Yep yep. Right.
Krzysztof: remember, everything is relative investing. So what’s 4 million to Google is literally a rounding error. But for a company that’s at 140 million market cap, 4 million, yes, that is also peanuts, but it’s, it’s slightly bigger peanut.
But the point is that this drug is expected to bring in based on pure, simple math of how many patients have this cancer annually. All of them will need to buy this drug. We have the ASP. It’s estimated that the market for this drug is 150 to 200 million dollars annually. And, side note, on the latest conference call, there was talk that they are going to, start clinical trials to expand it to a certain kind of lung cancer by about 2027, so still years away, but that would increase the market to about 500 to 700 million dollars. So, let me restate the investment case on this particular drug. It’s that currently what the market is seeing is a mere 4 million of revenue, but it’s ramping, and it’s going to ramp very, very quickly, to approach, call it, let’s be, let’s take the middle of the road, estimate about 175 million in revenue from this drug alone, right? Now compare that to its market cap of 140 million dollars. To me, if, it’s not gambling, it’s just waiting for the ramp to continue. which it’s just at its beginning, right? Part two to this. This is what’s unusual about this particular drug, Luke, is that we know cancer needs to be attacked from multiple angles.
So usually it’s not one drug fixes the problem. It’s you, you hit it from this side and you hit it from that side. So basically therapies that, uh, are combination therapies, Often have greater success rates. So this little Coherus drug, Loqtorzi, has demonstrated efficacy in different kinds of cancer cells.
And right now it’s one of, uh, I think six or seven companies that have this kind of inhibitor in their FDA approved roster. So it’s competing against big boys, right? But it’s ability to license itself out to some big boys that don’t have this drug is another really appealing future source of revenue.
Again, main point is it’s already approved and it’s already efficacious. So it will not take Much from the relative base of 140 million to start bringing in the kinds of revenues that for Coherus and anyone tracking the company to really see, you know, a major gap between what the company is worth.
And how much money it’s bringing in. Let me pause there. It seems like you might have a question just about that.
Luke: Yeah, like just like a very obvious question and you said there were two things and there’s like another. Piece of the thesis, but let’s talk about this one in particular, because this seems like it should be hugely material. Like, as they love to say on Reddit, like everything is priced in, right? So the market knows you don’t have like secret non public information.
Everybody knows the information you just shared with us. So why is this, if these revenues are baked in, why is there still 140 million company?
Krzysztof: Well, this is, this actually brings me to the, the sort of punchline of my explanation, but that’s part three that has to do with analyst estimates. So, hold on to that question. I’ll return to it.
Luke: I’m the innocent, well it’s true, I am the innocent, know nothing about this company really. so what you’ve said, as long as that’s, that all kind of holds, that’s all factual. Yep. Okay. It makes sense. It makes sense that they are the only company that maybe have this therapy because there are, cancer isn’t one thing, cancer’s like a thousand different types of problem that are all fairly distinct.
And when we, when we’re curing cancer, Like, I did air quotes there if you’re not on YouTube. Like, that’s not one magic pill in the Star Trek world that just cures all cancers. Like, you have to chip away at them in different ways with different kinds of drug therapy, radiotherapy, maybe highly targeted personalized medicine.
Like, there’s thousands of different initiatives from lots of different research hospitals trying to attack this big complex problem. And okay, so Coherus has The only solution for a particular, very small sort of subset of cancers. And so, yeah, okay. That makes sense to me as part of the investment thesis.
Krzysztof: right. And also, uh, the other part, just it’s the, it’s a numbers thing. I would not have, I would not be touching this if it wasn’t for the gap between the, what I see as the Value on paper based on what I call logic and just adding things up and perceived value by the market. So what’s curious in this particular moment?
Again, if you just even take the pessimistic, low end. of the revenue brought in by this one drug as 150 million annually, once the commercial ramp is a few more months in, and you look at how much the company itself is worth at 140 million, this one drug, pessimistically itself will bring in the same amount of revenue as what the company is worth. that’s an unusual situation, but there’s more because you have to obviously take into consideration operating costs and how much of it they’re keeping. But in this case, because there’s no competition for this drug, it’s basically, it has a whole field all to itself and high margins. And all of it. So it’s, it’s a very good situation to be in from Coherus’s standpoint.
Some investors are frustrated that they haven’t announced any more licensing agreements, but that is to be determined. You know, the investment thesis does not rest on. them needing that, but it’s, of course, really nice to have if they get it. Part two of Coherus is, in some ways, it’s a similar thing, uh, with Loqtorzi, except in a different cancerous realm.
They have a drug called Udenyca, which is a biosimilar. And, um, the, the official is something called the pegfilgrastim. These are drugs that help patients who undergo chemotherapy replenish their white blood cell counts. Easiest way to understand that. And essentially, there’s two competitors here.
Amgen has the original drug. Amgen’s a big behemoth. And then Coherus made this biosimilar, that’s a drug that basically looks the same and acts the same way as the originator, But what’s
interesting
Luke: you help us help us understand? Cause I’m not a biotech guy, so I’m, I’m familiar with say generics. So you might buy like your name brand. Aspirin or paracetamol. And well, that’s a bad, bad example. There might be an expensive drug, but then you’ll have generics if that drug is out of patent and it’s just, they see biologically, it’s exactly the same thing.
It just doesn’t have the fancy marketing campaign and the brand, but you’re buying, like literally your body doesn’t know, right? You just ate the thing and you metabolize it. it’s the same drug, whatever the packet said. So generics, great, makes sense and is good to the consumer. How is that different to biosimilars?
Krzysztof: Yeah, that’s a great, analogy. this is a complex piece I’m going to leave out, but essentially this story has been unfolding for many years, and the healthcare system is complicating, reimbursements are complicated, but more or less there are two companies left standing with this very important cancer drug, and that’s Amgen, which is huge.
and Coherus. Now this drug is divided into three separate what are called indications, meaning the way it’s delivered, and each indication has to be FDA approved. That also was a major problem in part for Coherus because part they received a delay from the FDA because of manufacturing. They outsourced it to a third party and COVID happened and they couldn’t, you know, the FDA people couldn’t get into the factories and then it was a whole mess, right?
So the FDA approval timeline got really extended. So Coherus lost a bunch of money in the interim. But again, all of it finally. the approvals were, were given at the start of this year. So Coherus now has 3 of these indications, which is important because this drug, Udenyca, can be given, think of it this way, um, via a doctor’s visit that is like a shot in the arm.
There’s something called the automatic injector that you could do it yourself. And then there’s a third kind, the on body that basically releases the drug over a period of time and saves patients trips to the doctor’s office. Point being that when you have all three. working, it’s a lot easier for the prescribers and doctors to basically sign on board to the drug and then just pick and choose from the three.
So it kind of boosts the whole, label, if you will. Now, the reason I was really looking forward to the last earnings report was because we needed to see Coherus starting to take market share. The growth rate from, Amgen. And that’s precisely what we saw. The revenue came in higher than Wall Street expected.
And it was kind of like a, a really not best case outcome, but a better than expected outcome. So. What is the total addressable market for It’s an approximate number, but I’ve seen it quoted as approximately 1. 5 billion dollars. So it’s a fairly big market. Again, you can’t not have this drug. And based on estimates, I think Coherus has a shot at getting approximately 35 to 40 percent of this market and letting Amgen have the remainder, right? So translate that to numbers, and this is annual by the way, uh, that comes in at 600 million annually, give or take. Right now, however, It’s still ramping, just like Loqtorzi, right? So it’s still in the early stages of commercial execution. It takes time for hospitals and healthcare providers to buy into a newly approved drug. But the data is that, again, it’s taken market share. So just on these numbers, You have an annual potential income of, with Lactorsi, call it 150, 600, 750 million per year, market cap only 140 million at this point. I won’t say too much about their future pipeline. They have three promising drugs already past initial clinical trials and getting good data, but that’s a little bit more of the typical biotech Let’s see what the, we don’t know what the future holds, right? So I’m looking at this And I see now, based on last of Wall Street, the last earnings, that Coherus now has approximately 160 million dollars in cash.
And this was a worry, but this is why they divested some of these other drugs from their repertoire. So with 160 million in cash and these ramps starting to be successful, I expect that by the end of 2024, Coherus will no longer be losing money. They, in other words, have enough cash. for the revenue ramp to cover, cover way more than, than what Wall Street is seeing. And a lot of that will have, will also be to diminishing operating expenses because they divested a bunch of these other drugs. So now this really ends up being a commercial execution story. Let me rephrase. Already FDA approved. So not burning money in trials. Evidence for the ramp being successful. in hand. No optionality. These drugs are necessary. And a market that’s saying, we don’t believe you. Essentially, the market is, is valuing this company as it’s about to go bankrupt.
Luke: me jump in here because I think even without knowing the story, right, as an investor, right, there’s probably, there’s probably thousands of things, but I’ll pick on three particular reasons why a company might not be sort of fairly valued based on thesis. Right. So, and there are many more, but I think these ones come to mind for this.
And I don’t know the answer. Maybe you can tell me either. The market doesn’t believe. that the revenues will come in the way that you described and that the company believes they will. Either the drugs will fail, or the market just doesn’t exist, or there’ll be a competing thing, but basically the revenues don’t flow.
Or, number two, the money comes in, but the company is structured in such a way or the cost base is such that the company can’t translate that revenue into Like real earnings because it, maybe they have to spend, for example, they have to spend so much on marketing and sales and marketing. Cause that’s a big part of the, like the drugs, the healthcare game in the U S you have to sell it to prescribing doctors.
Maybe they can’t sell the drug profitably. So all this revenue, but there’s no money left over at the end of having operated the company, or the company is just so fundamentally broken. Like you said, balance sheet, but there might be other reasons as well that. The market just doesn’t believe that they’re going to survive as a company.
And even if they have this crazy revenue rolling in, it’s very profitable. They’re just not going to survive long enough to realize the benefits. And they’re going to. You know, wither on the vine as an organization. So there’s many other reasons, but there’s three, like, headlines. Let’s zoom out a little bit. Coherus Biosciences was a one and a half billion dollar company, not so long ago, a couple of years ago. It’s now 140 something million dollar company. So if you were an investor from a few years back, like, you’re down over 90 percent, What’s happened? Let’s just say in the last couple of quarters that the market ain’t believing the story you just told us.
Krzysztof: Right, this, uh, so, bunch of points. This, in the end, right now, is will they commercially execute on the ramps or not? This is why the last quarter report was so important. If we saw a slower uptick in Lektorzy and Udenica, I would have been terrified out of my, out of my shoes. The one thing that Coherus has done exceptionally well historically is once they have the FDA drug in hand, they ramp it up exceptionally efficiently and successfully. I mean, it’s its strength, really. So, all of the ways that the company failed in the past are almost like, It’s not that they’re immaterial.
It’s those mistakes are what brought the company to its knees at this point. But those, all those things are now in hindsight. If the company executes as its strength takes advantage of its strength and its network relationships and all of the things already in place, then this stock has to re raid is strong word.
Nothing has to happen, but it would be a self inflicted wound. That is an all of a sudden Starbucks, uh, baristas stop knowing how to ring the register. You know, like, uh, having the, the problems having nothing to do with the products themselves or the hardships. You asked an interesting point, and this is why I’ve wanted to talk about this, this episode. I thought from, for the king of the jungle competition, I was actually in pretty good shape because I closed the gap, we were within say 200 and the revenue, the reports from the last quarter were, were really good.
And I thought the stock would now start inching its way up. That’s what we started seeing. By the way, I have at this point 725 shares. So all it would take for Coherus would be to get back to its levels from early in the year, and then I would take the lead. That’s what was happening, right?
Luke: just to sort of ground us in your emotional state with regard to this one. So you’ve got a couple of hundred shares in your Wall Street wildlife portfolio and are king of the jungle, but presumably you also own a chunk more than that in your real money portfolio, which is like your investing future.
Okay.
Krzysztof: Correct. So here’s the curious thing about the Wall Street game, Well, before last quarter, I think there were seven or eight Wall Street analysts following Coherus. And all of their price tags on the drug, uh, I’m sorry, on Coherus were between, I think it was seven and twelve dollars per share.
One of which just reinstated their target price at eight. So again, from a dollar, whatever, 40 to eight, that’s 500%, 600 percent gain. So big gap. And when that analyst reinstated that price tag, what happened to the stock? Nothing. Because, from the perspective of the market, The market’s raising the questions you are, like show me, don’t tell me, we need to see the results, right? Versus what happened on Friday. One of the analysts revised their price target from 4 down to 1. 50, and the stock plummeted 20%, now in total call it a 25 percent drop. Why do I think this one analyst had such a different effect? Well, one, you know, we react to fear. much more precipitously than than optimistic projections.
That’s one. Why did the analyst drop his rating? I did not read the report itself because it’s behind a paywall, but in talking to other Coherus investors, my understanding is that this analyst took the most pessimistic revenue assumptions and factored those into his models, including the, projection that Udenica will bring in, near zero revenue for one that’s in one of its indications, which is a highly, highly unlikely scenario. So maybe the guy doesn’t know the industry. Maybe the guy just thinks,
uh, Okay, big, I mean, maybe you’re right, maybe you’re not, but it’s a big jump to go, oh, this guy is so pessimistic that the whole market of, you know, and I’m not saying the market is magically efficient, uh, and everything is truly priced in clearly, Uh, you know, if we, will we generate alpha?
Luke: I certainly have over the last 20 something years by finding mispriced opportunities and just buying into stuff and taking a longer view. But it’s still a leap to say that this professional analyst for one of the big banks has got it so far wrong, and everybody else has kind of jumped off the cliff with him, right?
Krzysztof: it’s, I’m saying something a little more subtle. I named the fact that his projections. The most pessimistic and severe you could come up with rationally. It’s not that he can’t be right, but it’s just not what the basic fundamental facts show. So he’s, either he’s, an insider and understands this better than all the other analysts, which would also put him, how’s this guy know so much that nobody else does, right?
That, that would be odd. But I have a different point about this. The analyst game strange because usually analysts are lagging indicators because from their perspective, they will lose their jobs if they make a call. that is so far outfield. Because they think they’re smarter than, you know, the rest of the world.
And usually it’s safer to, track the price itself, if that makes sense, because you can’t get fired as old adage says for recommending whatever company du jour. It’s so happened. that this analyst, I think, simplest explanation is that he’s saying here’s what the stock’s worth now. I’m gonna save my own hide and just go with what the market is telling me. If I’m wrong, great. But if I’m right, then you know I’m not out there with a price target that’s 300% higher. Curious though, I, I wanna reiterate what’s curious is a bunch of the analysts have a much higher price. Target stock doesn’t react.
One who lowers the price, the stock drops 25%. This is why I think that the game is inefficient and you don’t. make any money following what the analysts say. You have to have some sense of your own due diligence and your own understanding of the industries you’re investing in.
In this case, have some industry understanding of the dynamics. I get a lot of my information from the work of Maxx Chatsko, who is a biotech expert who lives and breathes this stuff and runs his own platform called SoltDB. So he’s looking at these numbers and, you know, fact checking all of this and saying, like, here’s what it looks like from the insider’s perspective.
I’m going to trust that kind of intelligence way more than what I perceive to be an analyst downgrade that conveniently aligns with the current share price. Again, lagging indicators. So I’m looking at all this and I’m going to land the plane here and saying, one, it’s a sad day for Team Monkey
Luke: like let’s put aside the fact that you’re financially ruined in your real life. Let’s focus on the Wall Street wildlife game. What’s happened there?
Krzysztof: Um, I thought that before this analyst downgrade that I’m going to catch you. I think this analyst downgrade spoiled that recovery. out another three months. And what I predict will happen is that the next quarter will continue the trend of seeing than expected market share and revenue.
We’re going to start seeing break even profitability just around the corner, and then. Starting November, the slow rerate is going to start to which the stock starts climbing back above 2 and change maybe into February, but from poor humble monkeys, um, competition with Badger, I, it looks like it’s unlikely that I’m now going to catch you because the majority of my portfolio.
Is in Coherus, unless e, unless EOS pulls, uh, a rabbit out of the hat, I’m starting to exceed your victory in round one of the competition.
Luke: Very good. And it was never inevitable, but it is, it does draw a stark line under our two different strategies, because I was, I think I could have confidently predicted that Barring some, you know, fairly unusual market, I will have beaten the S& P by 10 to 15 percent, because that’s kind of what I’ve done for the last 20 years, and I just did my own normal strategy in my Wall Street Wildlife portfolio.
Whereas you’ve gone for this, like, swingy approach, where you are either going to knock it out of the park and destroy me, or you’re gonna, like, bet yourself into oblivion. And sadly, it’s the latter.
Krzysztof: Ah, I, I wanna, I wanna push back on that a little bit. Remember the context in which all of this is happening. And remember just two weeks ago we had a bit of a black Monday episode, which side note? one perspective I hold is the cause of that Black Monday drop was we talked about the carry trade.
That’s a 20 trillion, call it entanglement of funds that simply was not resolved in one morning’s trading sessions and that in Japan is still in massive trouble.
So I’m saying to me, the market remains. is precarious. it is not out of the realm of possibility that there’s going to not going to be a 10 percent 25 percent correction, right? At the levels in which I hold EOSE and Coherus, My stocks might drop temporarily just because everything’s selling off if something happens, but they won’t drop much further because they’re at, you know, basically cash equivalencies.
In fact, Coherus, like another point, has 159 million in cash but is worth its enterprise value or, you know, roughly if you add that, it’s, it’s not much more than cash. So when you say right? I’m taking these wild swinging bets. I feel a little insulted because, because in one sense, yes, you’re right. It’s riskier to play around with smaller companies, but if you add valuations into the picture, and if you recall what I said at the beginning, that there’s two ways to make money, the great companies keep getting better.
but the small ones catch up to what’s reasonable. I don’t think of that as a swinging bet, because in this case, uh, I hold all these Coherus shares as shares. I think this is a matter of a small cap requiring more patience for the fundamentals to catch up to what is logically on the pa on paper. Of course I could be wrong, but that’s always the case, right?
[00:58:33] Krzysztof Almost Concedes the King of Jungle Portfolio Challenge
Luke: What’s that saying though? The market can remain illogical longer than you can remain solvent. So okay, all right, let’s, let’s, let’s, let’s land the plane because we’ve already spent half an hour on Coherus. I was teasing you a little bit, like I, I kind of buy your thesis and I’ll probably read a bit more about this myself now.
And I’ll go and try and find that analyst downgrade and get, get to the root of what the, what the complaint was or concern was. Okay. Um, like I like opportunities like this maybe I’ll use this as a, to reinvigorate my options portfolio. Always a bit of fun with that. one of my brokers, uh, like thinks I’m a complete lunatic because they only see some sub part of my portfolio, but it’s the wild part.
Uh, so yeah, maybe there’s a, maybe there’s an options play for me here. I won’t, I’ll stick to my tried and true strategy in Wall Street Wildlife though. Don’t concede too early. You never know. You might make a drastic comeback or maybe the yen carry trade will wipe me out before we get to the finishing line in a couple of months time.
Krzysztof: a side note. Is our competition, uh, is the end date November 1st or did we start at a weirder date? Do you remember? Because I need to know. I, I want one more shot at the earnings report. I need to have that date in the calendar. Like, I, I’m, I’m hoping, I’m hoping it’s, it’s, yeah. Anyway, do you remember?
If you want to be a mensch, you would you would give me an extra two weeks to include Coherus the next time. Why would you?
Luke: You’re talking to a pogo player. Why would I give you free advertising? You can buy it. Okay. I’ll tell you what, I’ll tell you what, cause I think it’s before the 1st of November, I will allow you to purchase the extra, the extra few days it takes you to get across the finishing line. There’s a poker player’s angle.
So, uh, I think the, I think the bet is, uh, the loser is buying dinner for the winner dressed as a, the animal of their choice. So if we increase the, uh, the wager on your side, then yeah, I’ll give you that extra quarter.
Krzysztof: Oh, you are cruel. You are
Luke: I got an anecdote that’s probably not podcast appropriate. I’ll tell it anyway and maybe we cut it out. With a close friend and excellent poker player on a vacation, a ski vacation that ended up in San Francisco. And we had adjoining rooms and I was sharing like a twin with my buddy.
And in the other adjoining room, one of the single guys brought back a lady that he met in San Francisco and was having a bit of a, uh, bit of a getting into it, shall we say, experiencing the local culture with a girl he met in a bar. And then he came knocking on the door and he came into, uh, the room of myself and my poker, poker buddy.
And he said, Boys, has anybody got any condoms? So my friend, uh, his immediate reaction, because he did have some, his immediate reaction was, yeah, are there going to be a hundred dollars each? And they negotiated at 2am and they finally got down to about 40 bucks for the condom.
Krzysztof: That is
Luke: if you’re a poker player, you’re always shooting the angles.
Krzysztof: and here I thought monkeys and badgers could get along, but no. So anyway, uh, sorry for the long, long spiel. Um, maybe, maybe the summary for me about Coherus is This way of trying to be, in a sense, smarter than the market has a lower probability of success. You really have to trust your sources and due diligence in the, you know, industrial mechanics and how things are unfolding and why.
Understand why Wall Street is so severely underestimating the company. And for my money, it’s not just a wild bet, but these opportunities come in different forms and this is one of them. And I feel, uh, right now it’s hard, right? Right now it’s very hard to sort of be wrong in this, in this very egregious way, but I don’t think I’m wrong about the fundamentals.
And so the patience is what I have to fall back on. And possibly dollar cost averaging, right? But it’s already a massive, portion of my portfolio. So that becomes less and less appealing because of the risk factors that
Luke: you can, you can keep sort of, you know, dollar cost averaging yourself into oblivion, like you have to also maintain a bit of portfolio discipline, which you might already be bumming up against. Well, I feel like we should definitely Do a, like, do your own due diligence, because Krzysztof has just set out, like, his bull thesis for the stock.
The market disagrees with that currently. like, you might come away from this thinking, oh, I need to just go and buy all the Coherus biosciences I can. Like, maybe there’s a place for it in your investment portfolio, dear listener, but do your own due diligence. And if you follow the Badger way, like, with these wild, crazy biotechs and other micro cap stocks.
Like weight it appropriately. Ideally, well, in my view, you don’t want more than like 1 percent in your portfolio in this. And you want like 10 similar opportunities because, you know, the market can stay irrational, perhaps longer than the company can stay solvent. And, uh, you know, Coherus might not be here in a couple of quarters time.
I’m sure that’s a very low probability outcome, but it’s not impossible. So, bear in mind the risk, uh, when you think about all the juicy returns that you could make.
Krzysztof: Wise words, wise words.
Luke: Yes, indeed. Well, this has been a long episode. We should probably wrap it up. but maybe this is a good, uh, a good sort of lead in to next week. We should talk about managing your emotions. I know it’s a, a frequent topic we come back to, but here you are looking fairly frustrated with the way things are going.
Uh, the stock market is treating your Coherus stock. So maybe we can delve into, uh, frustration as an emotion next week and how you’re managing that.
Krzysztof: I just really wanted to see you in the badger outfit and it started serving me, uh, the finest sushi platters, but I’m starting to have to realign myself with a unfortunate reality about round one. But just you wait till round two. Oh, there will be no mercy for your, for your furry face.
Luke: Very good. Well, if you’re enjoying our banter, we are on YouTube and all major podcast platforms. you can also find us at wallstreetwildlife. com. We have our 10 Laws of the Investing Jungle PDF download for free. If you read that and think about today’s episode, maybe you can invest in us. Tweet us and tell us about all the different laws of the investing jungle that Krzysztof himself is breaking with his Coherus allocation in his own personal portfolio.
You can find us on the Twitters and various places, but X is our favorite place to chat. I’m at 7LukeHallard.
Krzysztof: I am at seven fine platypus.
Luke: Are you ready to become a beast of an investor? Your journey starts here.
