The billionaire doctor duo behind Regeneron
The Hustle

The billionaire doctor duo behind Regeneron

PLUS: Are loyalty programs worth more than airlines?
October 5, 2020

President Donald Trump and the First Lady, Melania Trump, tested positive for COVID-19, with cases across the White House rising over the weekend. Echoing the words of candidate Joe Biden and former President Barack Obama, we wish everyone affected a speedy recovery from the illness.

The Big Idea

The billionaire doctor duo behind President Trump’s experimental drug

There are no treatments approved for COVID-19, but President Trump was given an experimental antibody cocktail late last week, under the FDA’s compassionate use clearance.

The drug is manufactured by Regeneron, a New York-based company whose CEO has known Mr. Trump for years, The New York Times reports.

“All I can say is that [the White House] asked… and we were happy to oblige,” Dr. Leonard S. Schleifer, Regeneron’s co-founder and CEO, told the Times.

A doctor spies a market opportunity

Regeneron’s story starts in 1988.

According to Forbes, Schleifer completed his MD and PhD degrees and was working as a neurology professor at Weill Cornell Medical College when he took an entrepreneurial turn.

After seeing the success of biotech firm Genentech, Schleifer convinced venture investors to put up $1m to support his startup that would do research on diseases of the nervous system.

Schleifer then went out to convince a partner to join him. That man was George Yancopoulos, another MD/PhD who became Regeneron’s chief scientific officer.

A prolific partnership

Schleifer and Yancopoulos actually grew up on the same street in Queens, NY, but had never met.

As business partners, Schleifer was the dealmaker who gave Yancopoulos the resources and space to do research… and research he did.

Forbes describes Yancopoulos as one of the “most prolific drug hunters of his generation.”

But Regeneron’s first blockbuster drug would take decades

Eylea, an injectable eye treatment to prevent macular degeneration (AKA vision impairment), hit markets in the early-2010s.

Eylea is now one of the world’s top-selling prescription drugs and the anchor of Regeneron’s $60B market value.

Based on their Regeneron stakes, Shleifer and Yancopoulos are now worth $2.3B and $1.3B, respectively.

Is the COVID-19 cocktail next?

According to the NYT, Regeneron’s antibody treatment “hastened recovery time” of a small number of volunteers in its ongoing study.

Much more testing will have to take place before the FDA deems the cocktail safe for wider use.

The success (or failure) of this treatment will define the next chapter for this accomplished doctor duo.

How loyal are you?

Are airline loyalty programs worth more than the actual airlines?

Airline loyalty programs — incentives (like free miles) given to travelers — are a massive business.

The top 100 loyalty programs could be worth as much as $200B. And during the pandemic, they’ve become a lifeline for ailing airlines.

To wit: Delta (SkyMiles) and United (MileagePlus) secured respective loans of $6.5B and $5B against their loyalty programs to face off a quarantine cash crunch.

Airlines have a ‘negative’ worth without loyalty programs

According to a Financial Times analysis, loyalty programs are worth ~$26B to Delta — more than the airline’s current market value of $20B.

The same holds for America Airlines ($24B vs $6.6B) and United ($20B vs $10.5B).

Without their loyalty program, tech writer Byrne Hobart notes, Delta’s physical airline operation (planes, landing slots, brand) is worth less than zero — in this case, negative $6B.

However, the valuation exercise is not that straightforward

As Hobart explains, you can’t just simply separate the loyalty programs from the airlines.

Customers are loyal to programs because of the capacity and network of destinations they offer. An airline can’t willy-nilly cut ticketing options because of a belief that loyalty programs hold all the value.

It’s a package deal.

“An airline without its highly profitable loyalty program is a company that faces high labor costs, volatile fuel prices, and a rapidly changing demand environment,” says Hobart.

“With loyalty programs,” he says, “that’s offset by a high-margin, high-growth side business.”

(You can find more of Hobart’s great analysis at his newsletter, The Diff)


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Making Paper

How a Pennsylvania investor group scored a $15B stake in TikTok’s parent company, Bytedance

Move over Dunder Mifflin, there’s a new corporate top dog in Pennsylvania.

According to a report from the Wall Street Journal, the owners of Susquehanna International Group (SIG) — a derivatives trading firm based in Bala Cynwyd, PA — have been sitting on a 15% stake in ByteDance (TikTok’s China-based holding company) for years.

SIG is an option-trading giant

Per the WSJ, SIG was founded in 1987 by Arthur Dantchik and a group of college friends. Today, the privately held firm is responsible for more than 1 in 5 options trades in America.

SIG, which has no outside investors, has printed so much cash in the past few decades that the ownership group has aggressively looked for investment opportunities outside of its core business.

The investment portfolio is extensive

SIG’s owners started with so-called PIPE deals (the sale of large public equity stakes in a private transaction) in the 1990s.

The road to TikTok began in the early 2000s when the firm opened SIG Asia Investments in Shanghai. In total, SIG’s China arm invested a collective $2B in 260 companies, including ByteDance.

SIG plunked down $5m in ByteDance in 2012, the year of the company’s founding. Today, that stake is worth $15B — a casual 3000x return.

That’s more “paper” than Dunder Mifflin has ever made.

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