Scientists Question Data Behind an Experimental Alzheimer's Drug; Apollo Global Considers Participating in a Bid for Twitter; Twitter debate; The 26-Year-Old Dropout Lapping the Hedge-Fund Field
1) The stock of biotech company Cassava Sciences (SAVA) is crashing this morning thanks to this damning New York Times story: Scientists Question Data Behind an Experimental Alzheimer's Drug. Excerpt:
A small biotech company that trumpeted an exciting new treatment for Alzheimer's disease is now under fire for irregularities in its research results, after several studies related to its work were retracted or questioned by scientific journals.
The company, Cassava Sciences, based in Austin, Texas, announced last summer that its drug, simufilam, improved cognition in Alzheimer's patients in a small clinical trial, describing it as the first such advance in treatment of the disease. Cassava later initiated a larger trial.
The drug's potential garnered enormous attention from investors. Alzheimer's disease affects roughly six million Americans, a number that is expected to double by 2050, and an effective treatment would be lucrative. Cassava's stock soared, by more than 1,500% at one point. The company was worth nearly $5 billion last summer.
But many scientists have been deeply skeptical of the company's claims, asserting that Cassava's studies were flawed, its methods opaque and its results improbable.
Families of some trial participants have said they see improvements. But critics noted that the trial reporting better cognition due to simufilam lacked a placebo group, and asserted that the Alzheimer's patients were not followed long enough to confirm that any improvements in cognition were genuine.
Some experts went further, accusing the company of manipulating its scientific results...
The New York Times contacted nine prominent experts for comment about the scientific underpinnings of Cassava's trials. All said they did not trust the company's methods, results or even the premise underlying the drug's supposed effectiveness.
Dr. Roger Nicoll, a neuroscientist at the University of California, San Francisco, said he was particularly angered that Cassava's work is partly funded by taxpayers. In all, the company has received more than $20 million from the National Institutes of Health.
"This drug should not be put into patients. It should never have been. Never," he added. "The longer this goes on, the more outraged I am."
The stock is now down 65% since November 3, when I flagged the short report on it written by my friend and former student Gabriel Grego of Quintessential Capital Management. (I wrote follow-up dailies on it here, here, and here.)
The NYT story confirms pretty much everything that Gabriel wrote.
2) The bidding war for Twitter (TWTR) has begun, exactly as I predicted: Apollo Global Considers Participating in a Bid for Twitter. Excerpt:
Apollo Global Management (APO) is considering participating in a bid for Twitter according to people familiar with the matter, after Elon Musk's $43 billion bid put the social-media company in play.
Apollo, one of the world's largest buyout firms, has held discussions about backing a possible deal for Twitter and could provide Mr. Musk or another bidder like private-equity firm Thoma Bravo with equity or debt to support an offer, the people said.
Apollo, which owns Yahoo, has also been evaluating potential cooperation between the online-media company and Twitter, the people said.
3) For more color on Twitter, here's an interesting thread by former Reddit CEO Yishan Wong. Excerpt:
I've now been asked multiple times for my take on Elon's offer for Twitter.
So fine, this is what I think about that. I will assume the takeover succeeds, and he takes Twitter private. (I have little knowledge/insight into how actual takeover battles work or play out)
I think if Elon takes over Twitter, he is in for a world of pain. He has no idea.
He concludes:
The process through which all of that will happen is painful, which is why I don't think Elon should do it. It is not a good use of his time, and I think his time is uniquely valuable and limited.
Musk responded:
My most immediate takeaway from this novella of a thread is that Twitter is *way* overdue for long form tweets!
Famed venture capitalist Marc Andreessen took issue with many of Wong's assertions in numerous tweets. Here's the first:
Some of his other tweets are here, here, here, here, here, and here.
4) I have such mixed thoughts after reading this article in yesterday's Wall Street Journal about two friends who dropped out of Harvard in 2016 to start their own hedge fund, which currently manages $665 million: The 26-Year-Old Dropout Lapping the Hedge-Fund Field. Excerpt:
Eva Shang is doing the hedge-fund thing her way. That means making money but also making time to blog about dreams, her labradoodle and her fear of becoming a Silicon Valley has-been at age 26.
Legalist Inc., Ms. Shang's technology-powered investment firm, raised about $400 million in the past six months. Its funds focus on private debt, a hot patch of Wall Street populated mostly by men with pedigrees from top investment banks and private-equity firms.
Ms. Shang and fellow Harvard University dropout Christian Haigh launched Legalist with a splash in 2016 when she was 20, then struggled for years to attract backers.
"I don't blame them," Ms. Shang said about the investors who swiped left on Legalist. "If I were an allocator, there would be no reason to take a 20-year-old dropout with a computer seriously."
Now, Legalist's flagship strategy of litigation finance – where fund managers back plaintiff lawsuits in exchange for a percentage of court-awarded judgments – has a record of gross annual returns around 25%, people familiar with the matter said. Insurers and endowments are buying into its funds, which manage $665 million, and the San Francisco-based firm has expanded into corporate bankruptcy loans and lending to government contractors.
Ms. Shang had no formal investment training before starting Legalist...
On the one hand, I love entrepreneurial stories like this that have happy endings (so far, anyway). This is the kind of spirit that has existed in America since its founding that has made us a great (and enormously rich) country.
I have trouble thinking of many other countries in which two people at age 20, however talented, can drop out of college and start a business in an industry in which they have no experience or family connections, and make a go of it.
For all of our troubles, the U.S. remains by far the best place to start a business and be an entrepreneur – and I speak from the experience of starting (or being involved with starting) more than a dozen for-profit and nonprofit ventures, ranging from three hedge funds, two mutual funds, a conference business, two newsletter businesses, Teach for America, KIPP charter schools, etc.
That said, I would argue that what Ms. Shang and Mr. Haigh did was extremely risky to the point of recklessness. If one of my daughters came to me with this hare-brained plan, I would absolutely forbid it (not that they'd listen to me!).
Just because you can start a business doesn't mean you should.
How many Americans have lost their shirts starting lousy businesses that had little chance of success?
The answer is millions, fueled by the countless companies that prey upon Americans' entrepreneurial spirits. The worst actors are in the multi-level marketing industry, most of which are little more than pyramid schemes. (For more on this, read this excellent book, Ponzinomics: The Untold Story of Multi-Level Marketing, about which I'll comment further in a future e-mail.)
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.