US Drug Shortage Hits Record High & Apple Loses Crown to Samsung

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0:28Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, drug shortages in the U.S. have reached a record high. What's going on and how do we fix it? Then Tesla is laying off employees as Elon tries to steer the automaker through the EV doldrums. It's Tuesday, April 16th. Let's ride.

0:53A new Gallup poll dropped yesterday that hits especially close to home for the crew here at Morning Brew Daily. When asked about sleep habits, only 42 % of respondents say they are getting as much sleep as they need, while only 26 % say they are getting a full recommended eight hours. And here's the data point that has me yawning. 20 % say they got just five hours or less, which is a jump from 14 % back in 2013. Neil, we're in the 20%. Speak for yourself, man. I'm hitting the pillow at 8 p.m. these days. But can we talk about the people in 1942? In this same poll, about 60 % of Americans in 1942 said they slept eight or more hours and 33 % said they slept six to seven hours.

1:38I guess they just weren't worried about World War II at all. We had in the bag. I think it was the – I'm going to blame it on smartphones again because none of that blue light. You're just falling asleep a lot easier. And then, yeah, that five hour or less category that I mentioned basically was non-existent. No one reported that they got five hours or less. So clearly we're working too hard and we're sleeping not enough. If anyone needs a little recommendation on how to fall asleep, my aunt gave me this tip and it works like a charm. You just pick a category and then go through the alphabet and try to think of items that fit in that category that start with each letter.

2:11So say national parks, you go arches, Big Ben, Carlsberg Caverns, Death Valley, Everglades, so on until you reach G or H and then you're passed out. I like that strategy a lot. I'm going to try it tonight. Now let's hear a word from our friends at Robin Hood. I'm reading a book series right now called The Gray Man and the main character always says hope is not a strategy and I think it applies to investing too. You and the gray man are right, Toby. Hope is not what you should be basing your investment decisions on, but Robinhood has tools to help. They offer a host of exchange-traded funds, aka ETFs, and they could recommend you a portfolio of them curated based on your financial goals and risk tolerance, or you could always pick your own.

2:54I love the diversification an ETF strategy gives you. No need to find the exact stock you think is going to do well. It's better to get exposure to a curated bundle of stocks instead. But keep in mind that diversification does not ensure a profit or guarantee against loss. You got all that from a fictional book series? Hey, I'm a man of culture, okay? I have a range. We know, Toby. Learn more about Robinhood app in the App Store or Google Play Store. Disclosures, investing is risky. Investors should consider the investment objectives, risks, and charges and expenses of any ETF carefully before investing.

3:27Be sure to review a prospectus before investing. More information in the description of this podcast.

3:59Going to a pharmacy these days is like shopping at a Trader Joe's at 8 p.m. on a Sunday. You're going to find a lot of things out of stock. Drug shortages in the U.S. have risen to an all-time high, according to the University of Utah Drug Information Service, which began tracking shortages in 2001. A total of 323 drugs were in tight supply in the first quarter, topping the previous peak of 320 in 2014. This drug shortage crisis is taking no prisoners. All drug classes are vulnerable, including life-saving allergy treatments, chemotherapy medications, diabetes drugs like Ozempic, and ADHD meds like Adderall.

4:38The shortages are causing havoc for patients who may need to visit several pharmacies to find a drug, wait longer until it's available, or pay more for a brand name instead of a generic. And it's all the more frustrating because there is no easy fix. The shortages are being caused by so many factors that it's like playing whack-a-mole. Where do you even start tackling the problem? The manufacturing shutdowns, the broken pharma supply chain, the misaligned profit incentives. Toby, break it down for us. Yeah, shortages can arise for a lot of different reasons. One, manufacturing complexity. Two, heavy regulation.

5:11Those two things mean there's a lot of room for error, a lot of room for mistakes. I mean, if the FDA comes and inspects a manufacturing plant, finds a little quality area, it could cause the entire manufacturing plant to shut down, which, boom, suddenly you're without a major supplier. Also, you mentioned misaligned profit incentives. Generic drug market works. It's kind of been set up for companies to compete on price. The FDA looks at all generics as the same. So the only way to differentiate yourself from the competition is price, which makes them not a very high priority for these pharmaceutical companies.

5:47It diminishes their motivation to produce them whatsoever. So there's almost this race to a bottom when it comes to either halting production or taking shortcuts when it comes to quality on these generic drugs, which down the supply chain leads to these shortages that we're seeing. And many of the drugs that are in these shortages are those generics. There's just, you know, patients are the ones that are suffering here. And the manufacturers say, well, we don't really make money on these anyway, so we're not going to invest much into redundancies in our supply chain to get these back on the market.

6:20I also think you can't overlook the surge in demand for certain drugs that are creating huge supply demand imbalances. One of those, obviously, is those diabetes drugs, those weight loss drugs like Monjaro. Eli Lilly said they had an unparalleled surge in demand over the past year for Monjaro and its sister drug, ZepBound. Meanwhile, one of the poster children for the drug shortages is Adderall. And there's been a huge spike in demand over the past decade. Demand is up 45 percent for stimulants. Stimulants providers wrote more than 73 million prescriptions for stimulants in 2021, right at the peak of the of the pandemic, which was, you know, 45 percent higher than a decade earlier.

7:06And drug makers were just not prepared for this spike in demand. Right. And also adding to that Adderall spike in demand, they started being able to be prescribed via telehealth, which just led to even more of those subscriptions being handed out and even less of the the supply side being able to catch up. The type of drug also comes into play, meaning if it's an injectable or not, because injectables are the most complex manufacturing supply chain. They have the most things that could potentially go wrong. And so injectables are those things like the Ozempics of the world. So that's another thing.

7:40The classification of drug also feeds into whether it's facing a shortage or not. What stuns me the most about this is the lack of transparency that we have into why these shortages are happening. We've floated how many different types of factors, but we actually just don't really know because manufacturers are not required to say why there are shortages. In this study, 60 % of cases, manufacturers said they did not know or did not provide any reasons why their drugs were in a short supply. So more than half of these drugs are in shortages, and all we can do is conjecture about why that may be the case.

8:16For the last few months, it looked increasing like Tesla was going to conduct a round of layoffs. And even though there isn't a combustion engine inside at Tesla, where there's smoke, there's fire. Tesla is indeed laying off 10 % of its global workforce. That translates to around 14 ,000 employees. We don't know which teams will be affected yet, but two long-term execs, one from the powertrain and energy division, the other Tesla's policy chair, are no longer with the company. The layoffs fall on the heels of a no-good, dirty, rotten quarter for Tesla. where it missed delivery estimates by a wide margin and even had a rare year-over-year drop in sales.

8:51Some analysts are even predicting that Tesla sales will shrink overall for the year, given tepid Cybertruck production and demand, as well as a lack of new models hitting the market. Neil, Tesla ended last year with just over 140 ,000 employees, which is double its total from three years ago. Did it just get too big too fast, or is this more of a current reflection of the current state of the market? Tesla will say that it is in between two growth waves right now. The first was propelled by the Model 3 car and the Model Y. And we're in this trough right now before they say they're going to roll out their new models, one of which may be this$25 ,000 affordable car or a robo taxi, which is a self-driving car.

9:34Those are set to be introduced maybe soon and go into production in 2026. But what is it now? 2024? That is two years of this stagnant lineup that they have. So Elon Musk in a memo to employees said, we're preparing for the next phase of growth. We're clearly not in a growth phase right now. There is nothing I hate more than layoffs. But he said it must be done because these cars are just not selling like they used to. Right. And I was reading some of the industry reaction to this. A lot of people have felt like Tesla actually has been underemployed for years now, given the size and the scope of their ambitions.

10:07But Tesla has always had this very scrappy startup mentality. But if you actually zoom out for a second, Tesla is a 20-year-old company at this point. You don't want this overworked culture, this culture of very high turnover. They've been able to paper over it via very good recruiting. But this latest round of layoffs cannot help. It's definitely not going to help in morale at the company right now. It feels like morale is at an all-time low. And you're right. It feels like it's regrouping itself. It's in between these moments of growth. The entire EV market is also facing these headwinds. Let's see if they can kind of emerge out stronger on the other side.

10:47Yeah, there's new data about EV sales versus hybrids in the first quarter. And hybrids are just lapping the field right now. EV sales were up only about 2.7 % in the quarter. in the U.S. Meanwhile, hybrid sales rose 43%. Ford is going all in on hybrids. It said it's going to offer a hybrid version of every vehicle in its U.S. lineup by 2030. That is where the growth market is right now. Tesla does not have any hybrids in its lineup. It has five or six EVs. It just rolled out the Cybertruck, but now it's halting deliveries until April 20th because of problems there. So it's just not really finding ways to spark itself.

11:28Right. Tesla's upcoming earnings report is coming up on next Tuesday. It can help it calm those investors' worst fears, or it can help stoke them even further. And let's expect Tesla to report its worst quarterly profit since 2021, worst quarterly revenue since 2022. So it's a very low bar for Tesla right now. Let's see if they can kind of limp over it. Everyone's looking forward to August 8th when Elon Musk said Tesla is going to be introducing its robo taxi, whatever that looks like. Bluetext might be going out of fashion also because Apple is no longer the top dog in the smartphone market. According to a report from IDC, Apple's iPhone shipments plunged 10 % in the first quarter, which put it behind Samsung as the number one smartphone maker in the world.

12:13The drop is the steepest since COVID lockdowns and another sign people are thinking different about Apple's handheld supremacy. And here's the biggest problem. While Tesla can blame its troubles on the industry-wide slowdown for EVs, Apple cannot pull the same move. The smartphone market is booming, with producers shipping 7.8 % more than they did a year ago. So while its rivals are growing, Apple is declining. And that's something, in large part, is increased competition in China, a crucial market where Apple gets 20 % of its revenue. Domestic manufacturers like Xiaomi and Transyn are taking a big bite out of Apple with phones that are friendlier on the wallet and popular around the world.

12:51Toby, I haven't checked the weather, but I would bet that clouds are forming in Cupertino. It absolutely is. What's also super interesting to me is, one, you mentioned that the smartphone market as a whole is experiencing these tailwinds, but also the average purchase price for smartphones has been on the rise, meaning consumers are increasingly opting for these pricier, high-end models, And that should play right into Apple's hands because they've always had the average ASP, average, average, it's called average selling price in the industry. But they are even despite this kind of turn towards a price year model, they're still seeing sales fall as consumers are becoming more price sensitive.

13:30So that to me is the biggest alarm bells here is that they should be dominating right now, but they're not. No, and that's because of this heated competition in China where these budget smartphone makers are absolutely killing it right now, taking a huge bite of its market share. Transyn, I mentioned at the top, increased its shipments by 85%. They have three different models that they sell in China and around the world. It's the largest smartphone maker in Africa, actually, in Xiaomi. Their market share is up to 14 % from 11 % last year. They grew their shipments 33%. So these two companies, along with Huawei and the South Korean giant Samsung, are really putting a lot of pressure in Apple in Asia, which is where they do a ton of their sales.

14:11And at the same time, Apple is looking at the Chinese market right now. There's definitely some headwinds when it comes to, remember, those devices were banned from official government positions. And it's trying to diversify its manufacturing away from China right now. Tim Cook was visiting Vietnam this past week as they're trying to grow their supply chain there. And then also, they made$14 billion of iPhones in India last fiscal year, doubling its production there. So you can see how this reliance on China is something that Apple is well aware of, both from a sales perspective and a manufacturing perspective.

14:46And they're trying to diversify away from China. Up next, boomers aren't moving and ghost kitchens may be a thing of the past. Eczema isn't always obvious, but it's real. and so is the relief from EBCLIS. After an initial dosing phase, about four in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

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15:59When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets mom's 60th. And never miss a meme or milestone, all protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. boomers are currently the empty nest generation as most of their children have moved out but the issue the housing market is reckoning with is one they're not leaving their nests and two their nests are way too big according to the wall street journal and redfin around 28 of all u.s homes with three or more bedrooms are owned by people between the ages of 60 and 78 living by themselves or with just one other adult.

16:52To put that into perspective, millennials living with children own just 14 % of those bigger homes. It's yet another sign that boomers are still the kings and queens of the housing market and plan to ride their housing golden ticket for as long as they can. A recent survey from Fannie Mae found that most Americans 60 years and older don't intend to ever move. Neil, for years, millennials and younger generations have been waiting for boomers to pack up, downsize and potentially relieve some supply pressure on the housing market, but they just aren't budget. And it's very clear why it's because rates have skyrocketed.

17:27They rose so fast, so fast, so fast, so high, so quickly as the Fed jacked up interest rates since 2022. There's one stat I want people to take away from this podcast. Here it is. And it shows why the housing market is so frozen right now. So between 1998 and 2020, There was never a time when more than 40 % of American mortgage holders had locked in rates more than one percentage point below market conditions. But at the end of 2023, about 70 % of all mortgage holders had rates more than three percentage points below what the market would offer them if they tried to take out a new loan. So there is no reason why you would move if 70 % of all mortgage holders would have to get a rate that is three percentage points higher than what they're currently paying.

18:16and most boomers have already paid off their mortgages anyway. Frozen is certainly the word that comes to mind here. And it isn't boomers fault necessarily. One, that they got a great deal on housing, but then two, even if they wanted to move, there aren't a lot of options out there for downsizing. Supply just isn't there. Home building activity just plummeted in the wake of the housing crisis, also during COVID. It's been depressed for years and it's contributed to this historic decline in construction of new homes. So even if boomers did want to take pack up downsize, because again, they are empty nesters right now, that'd probably just lead to more competition for those single family or single bedroom homes that millennials are probably competing over for their starter homes right now.

18:58So it's not necessarily boomers fault. Like you can't fault them for having these awesome deals and then not having anywhere to move. And they have had an awesome deal because if they bought a house, say in the seventies, their their home price, the median home price has increased more than 10x. So they are sitting on so much wealth right now. Boomers are kind of loaded. They own half of all the 32 trillion dollars in home equity in the United States. They are the wealthiest generation by far. They timed it right. I don't know how they did it, but they got these they got these real estate deals.

19:32They bought their homes a long time ago. And there's been incredible appreciation in home prices and they're just sitting on so much money. They're not going to move because they'd have to pay so much more in mortgages and they would have to pay a lot of capital gains tax as well. The crazy part too is boomers keep buying. Boomers made up 31 % of home buyers in 2023, while millennials made up 38%. So even though they are eventually being overpassed by millennials entering the housing market, they're still counting for 31 % of new home sales. And a lot is because they are sitting on these piles of cash and can afford to buy homes in cash and not take on these higher interest rates.

20:10So yes, it seems like a lot of things went very right for boomers and they're still going right to this day. Yeah, and this is more than just a housing story too because there's overall economic malaise. There's this vibe session going around. Even if the economy is doing well, people aren't feeling so great. And a lot of experts point to the housing market and the ability that you can't afford a house. And this unaffordability crisis is one of the main reasons that people are feeling so bad about their own personal finances when the economy is doing well. So this is really a big U.S. economy story as well.

20:40Ghosts are known to suddenly appear and vanish just as quickly, and ghost kitchens are no different. These spaces, essentially virtual restaurants that focus exclusively on delivery, are firmly in their bust area following a boom during COVID, the New York Times reported. Kitchen United, a large operator of ghost kitchens that received$175 million in funding and was backed by Kroger, announced it was shutting down at the end of last year. Wendy's jammed the brakes on plans to open 700 ghost kitchens. Applebee's closed its virtual dining options completely. There's carnage everywhere. And it's carnage that few could have expected.

21:17Ghost kitchens were seen as the savior for restaurants when the pandemic shut down dining rooms. At the time, the concept made so much sense. More people are ordering delivery from apps. Here we've got these industrial kitchens that are being put to use. Let's pool our resources so that multiple restaurants can share the same kitchen and sling burgers to send to people's homes. The buzz around ghost kitchens was so deafening that real estate firm CBRE predicted that ghost kitchens would account for 21 % of restaurant sales by 2025. And that is certainly going to be off by a mile. I was going to be off by a mile too, because I thought ghost kitchens were going to stick around because it does just make so much sense.

21:56You don't necessarily need all this overhead that seating and staffing requires. Why not just make the food? Because we do live in this delivery culture right now, but I think it didn't factor in human nature as much because humans like to connect with the brand. They like to sit in a restaurant. They like to dine out with people. And so as customers started going out to eat, as we emerged from the pandemic, they started craving that relationship that you develop with a brand. And you just don't have that when you, it is a faceless operation operating out of a ghost kitchen. You combine that with the fact that there were some serious quality control issues as well.

22:31I mean, the most famous ghost kitchen operation that went South was Mr. Beast and Mr. And Beast Burger. There was tons of complaints around the quality of product that he was serving. And so eventually that relationship fractured. So the fact that people do want to connect with the brand combined with quality control issues kind of spelled the writing on the wall for for ghost kitchen but i'm not ready to write them off completely yet because we are in a delivery era i'm not i don't think that people are going to order less delivery in the future i have to expect that delivery is only going to go up i just think these brands need to not apply this very haphazard approach to what the brands that they're building in uh in the virtual kitchen space felt very haphazard very slapdash they thought that they could just put pizza or french fries or burgers or thai food and people would order it because they were just on these apps searching i think you'd really need to build a smart brand around a ghost kitchen and put a little more effort and marketing into it but if you do that i don't see why this couldn't work right remember uber eats removed 8 000 storefronts from its app over the last year over complaints that yeah it was basically people just copy and pasting the same iterations of the same brand while operating out of the same ghost kitchen so you're right.

23:41I don't think it's time to fully write them off, but you do need to be a little bit more cognizant of how you're presenting these brands on these apps. You thought I forgot, but I would never fail you like that. It's time to wrap up Tuesday's show with Toby's Trends, where I dig deep into the depths of the internet to find a trend to share with you all. And today, I've emerged with the news that cats are finally getting their moment in Hollywood's spotlight. Cats have long been regulated to the periphery of big box office motion pictures because of the reputation for being notoriously difficult to train.

24:15But recently, directors have been including them as more major characters. There's a Maine Coon named Lucio from the new Netflix series Ripley, the tuxedo cat Frodo from A Quiet Place Part 2, and a Scottish foal named Alfie from Apple TV's Argyle. All cats, all named characters, all mold breakers in their own right. Usually it's canines, not cats, getting the leading roles in movies with cats regulated to animated movies or villainous sidekicks. So why the sudden main character turn? Well, cats are kind of zeitgeisty right now. Taylor Swift posed with her cat in the Time Person of the Year photoshoot.

24:49One of the more popular video games of 2023 was called Stray, where you play as a stray cat. Maybe cats just needed the opportunity to show what they're made of. Justice for cats. There's definitely a wave of momentum around cats right now. A study published last year found that they displayed at least 276 different facial expressions, which was far more than people expected. So there is this growing awareness that cats are maybe a little more expressive than than you might think. They're also you can train them. It's really hard. But if you spend the work, it takes 12 to 14 weeks to train a cat to be able to, quote unquote, perform in a movie or TV show.