3D-Printed Healthcare – Devices Transforming Hospitals ForeverMay31

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Daily Intelligence Briefing – May 31, 2018

FEATURED TOPIC: 3D-PRINTED HEALTHCARE – Devices Transforming Hospitals Forever

Innovations enabled by 3D printing are growing exponentially across multiple sectors. According to Sculpteo’s 4th annual State of 3D Printing survey, 70% of respondents increased their investments in 3D printing in 2017, versus 49% in 2016. As more investment flows into additive manufacturing technologies, the disruption will be felt strongly in healthcare, an industry with an immediate need for large amounts of differentiated materials, and sky high fixed costs.

Just this week, scientists have successfully 3D printed human corneas for the first time. Almost 5 million people suffer total blindness due to corneal scarring caused by burns, lacerations, abrasion or disease, and up to 10 million people worldwide require surgery to prevent corneal blindness from disease such as trachoma. While new corneas can be transplanted, supply of donor corneas is falling short of demand. Using a mix of stem cells from a healthy donor cornea with alginate and collagen, researchers have generated a solution, what the researchers called a “bio-ink”, that could be printed in a 3D printer in less than 10 minutes. Other 3D printed prosthetics, including spinal and ankle implants, as well as patient-specific facial implants for corrective surgeries, are also beginning to make their way onto the market.

Even the diversity of materials that 3D printers can work with, from titanium to sugar, is expanding its medicinal applications. Researchers at the University of Illinois have used isomalt– a sugar substitute derived from beets and commonly found in throat lozenges – to fortify organic scaffolds that will hold tissues in place as they mature into a full organ. After growing tissue around a printed sugar scaffold, the sugar would simply dissolve, leaving behind a self-sustaining organic structure. When the sugar dissolves, it leaves behind a series of inter-laced tubes and tunnels that can be used like blood vessels to transport nutrients or to create channels in certain medical devices.

3D printing in hospitals is becoming much more useful outside of the body as well, from printed medical models to complex software that allows medical professionals to plan and practice tricky surgeries before operating for real. GE Healthcare’s 3D printing software works seamlessly with GE Advantage Workstation systems, which are being used by hospitals around the world. When a CT scan is taken, the anatomy is then rendered as a 3D image using GE’s Volume Viewer software, a 3D imaging platform that combines data from sources like CT, MRI and X-ray. The software then converts the image file generated by the Volume Viewer and translates it into a 3D printable file within seconds. More than 100 hospitals have ordered the software, which can be used to 3D print models of any organ as well as bones and muscles.

Using printed models of a patient’s brain can help surgeons map out the best route for tumor removal, which is one of the most important stages of surgery – and it happens before they even make any incisions. When it comes to cosmetic procedures, like rhinoplasty, 3D digital images can be customized to create printed models of the proposed appearance of the new nose. Once the patient and surgeon agree on the “idealized outcome” of rhinoplasty, the digital images of the patient’s current appearance and simulated outcome are converted into 3D printed models. In the operating room, the surgeon can refer to the 3D-printed models as a “side-by-side reference,” helping to adhere to subtle changes occurring during the procedure.

One of the most essential uses for hospitals, however, could be securing their supplies of surgical equipment and other medical devices against the threat of supply chain disruptions that could drive up costs of delivery or, even worse, put lives at risk. New designs for 3D printed needles, inspired by honeybees, are already prepared to go to market. Made from a polymer blend, the advanced needles can decrease tissue damage while increasing precision.

Just this month, SABIC, a leading developer of 3D printed materials, released two new models of their healthcare-grade filaments made with the company’s resins. The materials are suitable for printing a wide variety of medical devices and customized 3D components including surgical instruments, single-use devices, casts and splints. The concept of printing pharmaceuticals in-house also raises a large opportunity for hospitals, and it is not impossible, considering some companies like CyclePharma are already printing customized pills for those with patients with difficulty swallowing. 

While the advent of 3D printing doesn’t come for free, researchers from the University of California San Diego and Rady Children’s Hospital who used 3D printers to create planning models to practice ahead of surgery found that the models helped cut the time spent in surgery by an amount that translated into $2,700 in cost savings per surgery. Further, reduced surgical risk creates a huge upside for savings on external costs like legal fees if something were to go wrong. A 1-2% reduction in surgical complications due to surgical models could translate into millions of dollars of medical savings and eventual cost reimbursement by medical insurance companies.

Investors can gain access to 3D printing via the 3D Printing ETF (PRNT). We added Short Healthcare to MRP’s list of investment themes on October 16, 2017. Since then, the iShares US Healthcare Providers ETF (IHF) has returned 23% versus the S&P 500’s 7% over the same period. However, since headwinds remain strong for healthcare, and healthcare companies are typically adopters of 3D printing technology, not the developers, we continue to believe that healthcare will soon underperform the broader market.

HERE IN THE MEANTIME are some articles relating to this featured topic (the stories are summarized in the BIOTECHNOLOGY & HEALTHCARE section of today’s report):

• 3DP – Researchers create the first 3D-printed corneas to combat blindness
• 3DP – The State of 3D Printing, 2018
• 3DP – Custom 3D-printed models help plastic surgeons plan and perform rhinoplasty
• 3DP – Zimmer Biomet Introduces First  3D Printed Spinal Implant to Market

CHART: 3D Printing (PRNT) vs Healthcare (IHF) vs S&P 500 (SPY)

OTHER DISRUPTIVE CHANGE:

• Markets:
  • Risk – Red Flags Are Suddenly Rampant in Markets
• Economics and Trade:
  • EM – Emerging markets raise interest rates to stem dollar strength
• Finance:
  • Cannabis – This investment bank is quietly dominating the booming marijuana industry — but big banks are starting to muscle their way in
  • Cryptocurrencies – Kuwait Bank Adopts Ripple for Instant Cross-Border Payments
  • Banks – Big Banks to Get Reprieve From Volcker Rule
• Real Estate:
  • Housing – Rural America Has Jobs. Now it Just Needs Housing
• Services:
  • Retail – How Amazon Is Using Whole Foods in a Bid for Total Retail Domination
  • Sports Betting – Startups Want to Lure You Into Sports Betting
• Manufacturing and Logistics:
  • Factories – Fed Gauges Show Factories Shift to Higher Gear After Soft April
• Technology:
  • Quantum – Cloud-based quantum computer takes on deuteron and wins
• Transportation: 
  • EVs – Wireless Charging Is The Future Of EVs
• Commodities:
  • Lithium – One Chinese company now controls most of the metal needed to make the world’s advanced batteries
• Biotech:
  • 3DP – Researchers create the first 3D-printed corneas to combat blindness
• Endnote: 
  • One Kind of Store Is Beating the Retail Apocalypse

JOE MAC’S MARKET VIEWPOINT

• Joe Mac’s Market Viewpoint: The INFLATION COMPLICATION
• Joe Mac’s Market Viewpoint: A Review of MRP Themes
• Joe Mac’s Market Viewpoint: Beyond the HOUSING HEADWINDS
• Joe Mac’s Market Viewpoint: The Coming Value Rotation
• Joe Mac’s Market Viewpoint: Beyond the BOND BUBBLE

CURRENT JOE MAC THEMES

About the DIBs: MRP focuses on identifying transformational change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP’s compilation of articles and data from multiple sources on subjects reflecting disruptive change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. 

US Stocks Rebound Sharply on Wednesday

Wall Street rebounded following Tuesday’s selloff and closed deeply in the green on Wednesday 30 May 2018 as political concerns over Italy eased and bank shares recovered. Gains came despite a small downward revision for US Q1 GDP growth to 2.2% from 2.3%. Also, figures showed corporate profits went up 5.9 percent compared to a 6 percent growth in market expectations. TE

Most European Shares Rally and Euro Rises as Italy Restarts Talks to Form Government

Most European stock markets closed deep in the green Wednesday following a sharp sell off in recent days on hopes that a last-minute deal between the 5-Star Movement and right-wing League to form a new government would enable the country to avoid a second election. TE

The euro rose 1.1% to $1.166 around 5 PM London time Wednesday helped by stronger-than-expected inflation data from Germany and Spain, and following news that Italy’s two largest parties are in talks to form a new government and avoid a second election. TE

Crude Oil Prices Surge

Crude Oil increased by 2% to 67.936 USD/Bbl. TE

Risk – Red Flags Are Suddenly Rampant in Markets

Europe’s deepening troubles and disappointing global growth signals are sparking a sudden rally in haven bonds like U.S. Treasurys.

The moves are notable because haven bond yields have until now shown little reaction to the creeping tide of unsettling news that has emerged in 2018. The overwhelming focus has been on how far and fast yields might rise, particularly in the U.S. Instead they have been falling rapidly. The 10-year German Bund yield Tuesday morning briefly dipped below 0.20% before backing up to 0.28%. In the eurozone, the move in German yields makes the selloff in Italian debt look even more extreme. The gap between 10-year German and Italian bond yields—a key indicator of market stress—has now risen above 2.75 percentage points, its widest since 2013.

In the U.S., the move may put renewed focus on the flattening of the Treasury yield curve since short-dated yields should be supported by expectations of further Federal Reserve rate increases, and worries that Italy could cause the eurozone to fragment are also pushing up the dollar.

The euro has fallen to its lowest since July, below $1.16. Along with the currency, bond-market returns have flipped, likely wrong-footing investors. German bonds are now up 1.3% on the year, while Italian bonds are down 3%. Treasurys gained 0.8% last week, their best performance so far this year. WSJ

EM – Emerging markets raise interest rates to stem dollar strength

Indonesia’s central bank on Wednesday raised interest rates for the second time in a fortnight, pushing up its benchmark seven-day repo rate by 25 basis points. The dollar’s strength since mid-May has also triggered rate rises in Turkey and Argentina. Turkey’s rate move, viewed as long overdue by international investors and commentators, has arrested a slide in the lira that had wiped 23 per cent off its value in the past three months.

Higher official rates have helped stem pressure for some EM currencies. Indonesia’s rupiah, which up until last week had lost 4.6 per cent against the dollar this year, gained 0.4 per cent in the wake of the latest tightening. The lira has rebounded 10 per cent since last week’s rate increase, but further pressure on Turkey’s currency could materialise if inflation data on Monday turn negative.

The Argentine peso, which had lost 18 per cent in the first nine trading days of May, also responded well after the country’s central bank raised rates to 40 per cent. But the peso has weakened again in recent days, albeit more gradually, as investors await the outcome of bailout talks with the IMF.

EM countries such as Indonesia, Turkey and Argentina were suffering currency falls because of their large current account deficits. FT

Cannabis – This investment bank is quietly dominating the booming marijuana industry — but big banks are starting to muscle their way in

Since 2016, Canaccord has outpaced the competition in both advising and underwriting cannabis companies, acting as the sole or joint bookrunner on more than $1.5 billion of financings and advising on more than 50 transactions.

The firm’s most recent deals include co-leading $143 million in financing for MedMen, the ‘Apple store’ of weed, and acting as an advisor on the $2.3 billion stock deal between Aurora Cannabis and Medreleaf — the largest merger in the cannabis sector yet.

But as legalization looms in Canada, bigger banks like the Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CIBC) — which have yet to jump into the sector full-scale — will inevitably start to muscle their way in. Firms that manage hundreds of billions of dollars, like BMO and CIBC (the fourth-and-fifth largest lenders in Canada, respectively) are now starting to dip their toes into the sector. CIBC started covering the sector earlier in May, releasing its first report in anticipation of these changes. And BMO advised Aurora Cannabis on the $2.3 billion Medreleaf deal.

Big investors are starting to open up to cannabis in the US as well. Tiger Global, a New York-based firm with $22 billion under management, led a Series A round into Green Bits, a cannabis-tech firm in April. BI

Cryptocurrencies – Kuwait Bank Adopts Ripple for Instant Cross-Border Payments

The Kuwaiti bank confirmed its move to join RippleNet, a SWIFT-replacement global blockchain network that sees over 100 financial use the product for real-time clearing and settlement of international transactions. Details of the offering are currently scarce and it remains to be seen if the bank uses Ripple’s xCurrent for real-time liquidity for international transactions.

While the bank says it will require the approval of the Central Bank of Kuwait (CBK) prior to the launch of the Ripple-enabled service, KFH insists customers will benefit from faster payments in increased efficiency, security and transparency of the transaction at markedly lower costs than traditional remittance solutions.

Elsewhere in the region, UAE-based RAK Bank became a RippleNet member in September to enable “instant, frictionless and secure money transfer services” to recipients with accounts in India’s Axis Bank, also a RippleNet member. In February, one of the Middle East’s biggest money transfer and forex firms, the UAE Exchange, also joined the blockchain network developed by San Francisco-based Ripple.

The Saudi Arabian Monetary Authority (SAMA), the defacto central bank of Saudi Arabia, has also partnered Ripple to pilot Ripple’s xCurrent among a number of regional banks. The SAMA also became the first central bank in the world to join RippleNet. CCN

Banks – Big Banks to Get Reprieve From Volcker Rule

Federal bank regulators on Wednesday unveiled a sweeping plan to soften the Volcker Rule, opening the door for banks to resume some trading activities restricted as part of the 2010 Dodd-Frank law. The changes would give the largest banks significant freedom to engage in more complicated — and possibly riskier — activities by largely leaving it up to Wall Street firms to determine which trading is permissible under the rule and which is not.

Among the biggest proposed change outlined on Wednesday: Banks will no longer have to specifically prove that each of their trades serves a clear purpose that goes beyond a speculative bet. The proposal would allow banks to more freely engage in hedging, and put the onus on regulators to prove that a trade was not done to hedge an actual risk.

However, regulators will require big banks to create new internal controls to keep themselves from betting with depositors’ money. Regulators will also continue to collect trading information from the largest banks.

The changes are already prompting outrage among consumer advocates and other financial watchdogs, who warn it will allow a return to the Wild West days on Wall Street. NYT

Housing – Rural America Has Jobs. Now it Just Needs Housing

Fewer homes are being built per household than at almost any time in U.S. history, and it is even worse in rural communities. Developers in less populated areas can’t tap into the economies of scale available in urban centers, making materials and labor more expensive. Rural areas are also seeing their populations stagnate or decline as younger people opt for urban living, adding to the gamble involved in speculative building.

There were 71,000 single-family homes built in rural areas in 2016, representing about 10% of all new single-family homes. The rural market share of single-family homes has been falling in recent years. It was 14% in 2010. The housing shortage in rural communities has become especially acute as unemployment hits record lows. The national unemployment rate in April was at 3.9%, while in Platte County, which includes Columbus, unemployment fell to 2.7% in March.

There are around 990 job openings in Platte County and a total of 65 homes are now available for sale with a median listing price of $209,550. It’s a pretty simple equation – the incomes in this country have not really matched housing prices so you continue to have this disconnect. WSJ

Retail – How Amazon Is Using Whole Foods in a Bid for Total Retail Domination

For a decade, Amazon—a company with $178 billion in revenue and seemingly limitless resources—had not come close to breaking the billion-­dollar sales mark in its fresh food operation.

A head of lettuce has a margin of less than a dollar and can survive outside the fridge for no more than a day. How can a retailer deliver it at peak quality—and make a profit? But with the $13.7 billion acquisition, Amazon had bought itself a real shot at remaking the $800 billion U.S. grocery sector—the last frontier of e-commerce and a massive one at that. Some 20% of retail spending goes toward food, but only 2% of those sales take place on the Internet.

Amazon is partial to building businesses rather buying them. But after a decade of trying to grow its grocery operation on its own, it was time for the latter. Along with scale, Amazon was buying credibility. Most of the products consumers buy on Amazon are branded. But with the exception of a few products, fresh goods don’t have brands, or at least not ones that the consumer knows. Instead, we decide where to buy our broccoli and tomatoes based on our trust in the retailer. Whole Foods supplied it—as well as providing Amazon shoppers with a more appealing story about where their food originated. Fortune

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Sports Betting – Startups Want to Lure You Into Sports Betting

As it aims to create many new gamblers, Readyfire is developing games that will appeal to people who are unlikely ever to set foot in a casino or cultivate a relationship with the neighborhood bookie.

Readyfire’s first product, Halftime Live, is a sports-themed HQ lookalike that takes place during the halftime of sporting events. It launched in February, and its average game draws about 6,000 people, handing out prizes in the $400 range. Some of its functions aren’t gambling at all; some would fall under existing rules regulating fantasy sports; and still others would require changes to state law. Part of Readyfire’s service would be to convert all that complexity into the simply pleasure of a digital dopamine drip.

Another company that has been building an audience it hopes to convert to sports gambling in the near future is WinView Inc., whose investors include Graham Holdings Company, former owner of the Washington Post, TV company Discovery Inc., and Monumental Sports & Entertainment, which owns several sports teams. WinView offers a quiz-like game where people make series of predictions about what will happen in a particular match. Because smarter players outperform others, such contests are considered games of skill, rather than gambling, and are allowed.

Predictions are that there will be an uneven patchwork rather than a single nationwide gambling market for the foreseeable future. B

Factories – Fed Gauges Show Factories Shift to Higher Gear After Soft April

The latest regional tallies on U.S. manufacturing so far this month should dispel any concern about industrial momentum in the wake of some soft April readings.

Factory gains were most pronounced for the Philadelphia and Kansas City Federal Reserve regions, while indexes for the mid-Atlantic, Texas and New York state showed more moderate expansion. By and large, producers reported improvements in orders growth, spurring labor-market indicators, and they also noted higher prices paid and received.

The latest figures show resilience in manufacturing even though the data suggested that respondents remained concerned about the adverse effects from U.S. tariffs on their business and on materials costs.

The regional figures help provide economists with a basis for their estimates of the Institute for Supply Management’s closely followed manufacturing gauge, due Friday. The median forecast in a Bloomberg survey calls for an increase in May to 58.2 from an April reading of 57.3 that was the weakest since July of last year. B

Quantum – Cloud-based quantum computer takes on deuteron and wins

Quantum computers have been used to calculate some of the properties of an atomic nucleus: the deuterium nucleus to be precise. The issue with calculating these properties is that it takes a lot of resources. The result is that even a small calculation requires a lot of qubits.

The calculation itself is nothing special. This particular nucleus has long been solvable with classical computers. The point was to start developing ways to fit calculations on small quantum computers. And this is important, because while many companies and research labs are developing quantum computers with more qubits, they’re not increasing the number of operations we can do before a large error builds up on the qubit. That means all those new qubits have to be used to correct errors rather than perform calculations.

This does not mean that quantum computers will be limited to a low number of qubits or a low number of logic operations indefinitely. Instead, you should think of this as accepting that progress may be slow, and we’re figuring out how to use what we have already as soon as possible. ARSTech

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