The $1B One-Person Company, China’s Pork Crisis, America’s New Weapon | Diet TBPN

0:00John Coogan:How was your weekend Jordi? Good. I saw Project Hail Mary. Oh you did? Yeah I did. I finally saw it. Did you see it Tyler? Reviewed. I did not see it. How was it? Ben you saw it right? Yeah. What was your review? It was great. I was telling you I think it was uh it was fresh. It was fun. People put it on the list. Will DePue did not like it. Yeah he didn't like it. He said it was interstellar for Judds right? Isn't that what he said? He said something. You liked it right? I thought it was great. It was a very enjoyable watch. I don't know. Should I see it? Yes I think you should see it. In theater.

0:27John Coogan:In theater for sure. Okay. It's definitely a good movie. That's a high bar. It's not too long. It's like two and a half hours. But it's an Andy Weir. Have you seen The Martian? It's brutal. It's basically just like endless stream of problems and then like quick solutions. So there's some sort of problem they need to figure it out, problem they need to figure it out. All of it's, I don't know, like loosely hard sci-fi, like somewhat believable. It does have aliens in it and stuff. But it's a fun time. Anyway. Well, speaking of real space, what's going on with Artemis II? Artemis 2 is live streaming right now to almost a million people on YouTube, on the NASA YouTube channel.

1:03John Coogan:I believe it's also on Netflix. The stream title is just, we are about to fly around the moon with authority from NASA. We can actually pull this up and see. I would love to hear what is going on right now. Because I think it's happening as we speak. One minute ago, NASA posted that the crew are now the farthest any human has ever traveled. 252 ,000 miles from the Earth. Anyway, Matthew Gallagher, he's the founder of MedV. And we were supposed to have him on the show today. He unfortunately cannot make it. We do have John Slotkin coming on, the chief medical officer from Gelsinger, or Geisinger, to talk about claims around oral GLP-1 drugs.

1:46John Coogan:We read the New York Times story on Thursday, and then over the weekend, there was a whole bunch more analysis about the company. And there were layers to the - Yeah, it's so interesting, because you would think that someone else would write the one person$1 billion company, and then the New York Times would take it down. But in this case, it happened in reverse. So last week, the New York Times broke down the story of Medvi, a telehealth provider of GLP-1 weight loss drugs. And the framing was basically that this was the first time in history a single person had built, quote, a billion dollar company.

2:21And that's what went viral.

2:24John Coogan:Digging in, there were some small caveats and some big caveats. The small caveats were that, you know, the founder, Matthew Gallagher, had hired his younger brother. So technically, it was a two person startup. Most people were like, Yeah, okay, we'll count that doesn't matter. It's a family member. Right? And then also, the other one, it's only twice as many people. Yeah. But but they had almost twice the revenue 1.8 billion. So but the question was the valuation. So the headline stat in the article was that they are on track to do 1.8 billion in sales this year. And that on track is doing a lot of work, of course, because that's clearly an ARR number that's extrapolated out.

3:04John Coogan:And the GOP-01 market's moving very quickly. It's not like Rowe and HIMSS and all the other providers are going to be just sitting down and letting this company run away with whatever secret sauce they've discovered around customer acquisition. Although they might not go into this, which we'll go into. And it was insane scale, but companies don't unilaterally trade at 1x revenue. Like that's sort of a given in this article. It's sort of presupposed that if you're doing 1.8 billion in revenue, you would trade above a billion dollars. And so this counts as a billion dollar company. I always thought that the billion dollar company would be on market cap.

3:40John Coogan:Yeah, valuation. Not on revenue. Because you could do, you know, if you're going to say, you know, okay, any, just try and say the biggest number, you would want to set up some sort of like payment network where basically you could report GMV really, really high. And you actually have a very, very small business because you're taking like 1 % as your true net revenue. So there was always a question about the margins. And then also revenue durability matters. Like the ongoing question around building these, you know, one person high growth companies is, is there durability? Because if you can do it, and then I can do it, and then Tyler can do it.

4:17John Coogan:And then anyone with access to a coding model can build it very quickly. We're going to erode each other's markets and trade market cap very quickly. And I think any VC that would look at this, they might get to a point where they're like, Yeah, this is a unicorn company, look at the growth. I think there's something here. But at the same time, you could see someone like a private equity valuing this and saying, Well, I need to see a risk. I need to see durability, some lawsuits. Exactly. And we'll get into that. So MedB uses two companies care validate and open loop help open loop Health to handle the doctors, pharmacies, shipping and compliance.

4:52John Coogan:And we'll get into the compliance thing, but that's a lot of outsourcing. And of course that outsourcing takes a toll on margin because you have to pay the doctors, you have to pay the pharmacies, you have to pay the shipping, you have to pay the compliance. And they're paying CareValidate and Open Loop Health to flow that value through to those individual stakeholders. So it's still a good start. Yeah, I started asking what does this company actually do itself? Just marketing and maybe they're too aggressive about it. We'll get to do it. So these GLP-1 drugs also aren't cheap. And even when you sell them legally, even as a telehealth wrapper, a lot of the value is going to accrue to the pharmaceutical companies that own the intellectual property.

5:32John Coogan:At least that's how it should flow when things are functioning properly. So you can effectively build a telehealth company on top of a pharmaceutical company like Novo that where you are taking a thin margin on top, you can get to big numbers, but the pharmaceutical companies are gonna wanna be paid because they did all of the expensive FDA trials, all the expensive R &D, and they need to recoup that. So then the other question is, you add in the CAC from digital ads, they were apparently spending a lot on Facebook to acquire customers, and you quickly wind up an estimate of pretty thin margins.

6:09John Coogan:I think the estimate Sheil shared, Shil Monat shared was like 15 % or something like that. It's totally possible to get to a valuation that's lower than a billion dollars, depending on how everything flows through the things. Yeah, at the same time though, if they're outsourcing all of the kind of key areas of the business to these other players, open loop, et cetera, it's possible that of that, those very thin margins, right, the 15-ish percent, the margins on that are very, very extreme, right? Sure, yeah. So you could still get to a number that was in the hundreds of millions of dollars of EBITDA.

6:47John Coogan:Yeah. Yeah. I mean, the 15 % margin looks like 150 million, maybe 200 million in like, basically profit. That is crazy. But we'll see what the FDA has to say long term about that, whether there will be lawsuits or settlements. There was already a warning letter. And this turned into a big drama about the company. The drama was it was there any mention of this in the original story? I don't think so. And so there were a lot of people that were and I believe I pulled up the the New York Times piece and there was no like correction or anything yet maybe there will be more follow-on I feel like the the founder does need to you know respond and have their opportunity to kind of correct the record because these things can kind of run away in either direction even with all the drama there were a ton of you know super legitimate questions about how valuable the company really is and how long they'll be able to continue their current business model without pretty serious changes and that's around the marketing stuff.

7:39John Coogan:So Medvi received an FDA warning letter just two months ago for misbranding violations. So warning letter, if you're not familiar with the FDA's language, it can be pretty wide ranging. Like sometimes it requires just a small change to marketing materials to remain compliant. And sometimes it's basically like a shut down the company moment. This happened a lot with the nicotine category with illegal vapor products. Right. And sometimes, like the warning letter would be, you are warned in that if you continue to sell these, like we will put you out of business. And some of them are, okay, we're warning you about this particular claim on your website.

8:16John Coogan:You need to change this language. And it's pretty minimal. I went through this 10 years ago. We started Lucy 2016. And while I was there, we were extremely nervous about warning letters because if we got a warning letter, we thought it would mess up the FDA applications that we had in progress. It would mess up distributors like anyone who you're partnering with would say well I don't want to work with somebody that has a warning letter. Have you dealt with this? We were able to avoid all this but one one kind of concrete example is that we like Lucy cannot make quit claims about the nicotine gum product so Even though most people think oh this is like Nicorette.

8:53John Coogan:It's actually regulated in a different category It's regulated tobacco product not as a pharmaceutical product and so you can't run a digital ad that says like hey you're a smoker quit smoking with Lucy. That's a violation because it's not regulated as a pharmaceutical as a smoking cessation aid is the term. And so in the nicotine category, you would have companies create a product. Usually there would be no founder associated with said products because people didn't want to put their face on it. Yeah. And they would do a lot of things that would they would make sales grow incredibly quickly. Like, you know, making marketing claims, just where and how they decided to sell, etc, etc, that the ad channels that they use, And so they would go from zero to hundreds of millions or billions of revenue very, very quickly.

9:38But the enterprise value of the company would be near zero, right? Because nobody would want to buy a company that had all that kind of baggage. And so if you were going to value it, it'd be like, what is the very, very, very near-term revenue opportunity?

9:55John Coogan:Yeah. Yeah. I mean, the famous comparison is Juul versus Puff Bar. So Juul went, you know, raised a bunch of money, got very big, put in FDA applications, got those applications denied, marketing denial orders, then got them stayed in the courts. They set up a, I think their whole headquarters was in DC. They were working very closely with the FDA, truly engaging to sort of clean up all of the problems around marketing and sales and formulation, just really try and get to a clean bill of health with regard to the government relations. They were successful and they got approved as not as a smoking cessation aid.

10:33John Coogan:So they still can't make the claim that Juul will help you quit smoking. But they did get approved as a tobacco product, which I think the FDA says it has to be suitable for the protection of public health, which is a very vague way of saying like it's a net benefit, net good that it's on the market, which is, you know, people can debate that back. But back in the Juul days, they also could not say quit smoking with Juul. They wanted to put say they wanted like a lot of people that were you know We're smoking cigarettes did switch to Juul and they were pushing for that But they couldn't actually make quick claims.

11:06John Coogan:So they used the word switch. They said switch to Juul instead of quit with Juul and That seemed fine for a long time I think they they eventually trademarked it and then I think they had to pull away from it at various points time But there's clearly like this gray area in your marketing Can you say you want smokers to upgrade to nicotine gum? You know, all of these things need to be sort of litigated with the FDA. And what has MedV been up to? We wound up playing it very safe. And that probably kept us from mooning in revenue to$1.8 billion overnight. But I still think it was the right decision for Lucy.

11:40John Coogan:Now, MedV appears to have taken a much more aggressive approach. They are apparently running 800 fake doctor accounts on Facebook to sell compounded GLP-1s. Shilmonat verified that the accounts are not actually doctors. Some even have cartoonishly fake names. Dr. Tucker Carlson, MD. If you... This is one of those things where I feel bad for someone who clicked on an ad that was deceptive. From Dr. Tucker Carlson, MD. But if you're getting your GLP ones from Dr. Carl Tucker's in, you probably are in on the joke to some extent. I don't know. It's clearly not above board and they have to clean this up and deal with this.

12:26John Coogan:They were also sued in a class action lawsuit last month for violating California's anti-spam law. That stuff can be crazy expensive because a lot of the fines are on like a per instance basis. So it'll be like, OK, yeah,$10 fine for every text message you sent. and it could be like you sent like 50 million text messages or something. So you could have some massive, massive liability. Of course, that will be litigated in the court of law and there might be a settlement and they can figure out what the right damage is. If they are even guilty, they're still early in the process. And so the end result is more of a story of pushing over aggressive marketing tactics.

13:02Yeah, I mean, so pull up the actual picture of Sheil's post because I think that you can just see how confusing this would be to somebody maybe a little bit older. You want to zoom in on one of those? Yeah, zoom in. You can just see. You see somebody that looks like a doctor. Oh, yeah, they got the stephospital on. And if you're 70 years old on Facebook, you're not necessarily putting it together. It's Dr. Tucker Carlson, MD.

13:28John Coogan:So my co-founder, Lucy, he has a PhD from Caltech, but it's in biophysics. And so he's not a medical doctor, but he is a doctor of science from Caltech. Like he has a really good background, but he's not a medical doctor. And I would always joke with him, like, we got to put you in a stethoscope. We got to take some photos of you in a stethoscope. Like the aura is so high. And he was like, no, that's like such bad practice. Like we can't do that. Like a doctor is associated with medical doctor, even if you have a doctorate in something. It's like the famous, like, I'm dying. Does anyone have a doctorate?

14:02It's like, yeah, I have a doctor and a jurist doctor or whatever. The other interesting thing, Medvi uses the.org domain. What?

14:10John Coogan:Isn't that for nonprofits, typically? I would think so. I don't know if it's technically illegal to use it as a for-profit, but certainly when you add that to all the other things. Yeah, because you land on that site and then you think, oh, it looks like. It looks like, oh, a doctor advertised this to me. And now I'm on a nonprofit medical website. Yeah, in general, I think the story is pushing overaggressive marketing tactics to the limit more than AI allowing low headcount scaling. And this has happened for a long time. Back in the old days, I want to say like 2014 Facebook era, but the early days of online marketing, there were countless stories of questionable supplement sales or telehealth operations scaling on the back of insane ads.

14:52John Coogan:The classic formula for mega scale was if you could get an ad approved, if you could get it sort of white listed or through the approval process, it wouldn't automatically get reviewed that often. So once you were approved, you could spend$1 ,000 or you could spend$50 million. And early on, there wasn't a natural trigger to re-fact check. It was like if you could get approved for a small ad, you could scale it up. And so people would do all these crazy things to try and get the ads approved. there were all these tricky things where they would route to one website and then after the ad was approved they changed the website and then you know all the ad platforms had to eventually figure out like okay we need to be scraping a layer deeper like consistently or like every day but the canonical example of the health supplement or telehealth operation that would always go viral and always just print was if you could get an ad approved that had harvard scientists brain pill and Johnny Depp all in one call to action.

15:54John Coogan:I'm not kidding about this. This is real. So it was like always this picture of Johnny Depp coming out of the ocean. That was the one that was like really scroll stopping. No, no, it was like a paparazzi photo, which they didn't have the rights to use. They would not partner with Johnny Depp. They should not be running that ad at all. And then something about brain boosting or like making like limitless pill, make you a genius, that type of marketing. It's very general. Like who doesn't want to be smarter? so everyone would click on that. And then Harvard scientists would lend its credibility, because, oh, if it's from Harvard, it's good.

16:26John Coogan:And so if you could get those three terms approved, there were a whole bunch of sketchy operations that would get ads approved and then just pump $100 million of sales behind them. And it seems like maybe there's a little bit of that going on here where a lot of these ads should not have been approved. Maybe there needs to be a validation. I know that a lot of companies that partner with doctors, even just to sell skincare, care, supplements, sunscreens, really anything, the rate to advertise with an influencer who's a, who actually has some sort of medical credential is like way higher. Yeah, because it's way more effective.

17:00John Coogan:And that, yeah, it's way more effective. But if you can just like fake that, then you're basically arbitraging that, but you shouldn't be. We have two employees, but 800 fake doctors on Facebook. Not great. Yeah, maybe I want to be the one person,$1 billion company, but I want to win more. Yeah. So if adding incremental people helps me build a better company. Yeah, there's Ryan Pierce at this point. Yeah. Why would I not add at least a handful of people? Yeah. Yeah. Totally. So, yeah, I mean, I think software is an interesting category, especially if it's open source software somehow, where there was some sort of flywheel where you could verify what was actually built and then you could verify what the sales were because it was done on some sort of open platform or some sort of thing where the actual reporting and the analytics, I mean, apparently the New York Times did verify the run rate that they used.

17:50John Coogan:So their money was flowing through the business, but having a much cleaner representation of what the financial picture is, I think would help. I was personally excited about the prospect of a video game and just more video game developers seeing breakout success. So a couple years ago, in the olden days when I had free time, I got woefully addicted to a poker-themed roguelike deck-building game called Bellatro, which I don't think anyone here has played. But this game is amazing. So much fun. So you're basically playing poker, but there's no financial stakes, there's no money, there's no microtransactions at all.

18:28John Coogan:Interestingly, the game actually got banned, I think in Japan or some other country, for being like poker and being a gambling. Banned for being anti-gambling. No, no. No, no. Banned for being like gambling aesthetics because you are playing with cards. There's no real money. You pay like$10,$15 for the game and then you can just play unlimited. But it's done extremely well. So it sold over 5 million units. I saw some reporting that it might be 7 million and maybe even more now because they've gone multi-platform. and I think at$15,$20 a download, that might be close to$100 million in revenue.

19:04John Coogan:And it was made by a solo developer who goes by Local Thunk. Over a two and a half year period, he originally wanted the game to be a side project that he could put on his resume, but it wound up being a massive success. And so depending on your valuation methodology, you could probably underwrite Bellatro close to a billion dollars if it's generated$100 million of basically free cash flow. You know, there was obviously two and a half years of R &D, but that was just this developer's time. The future revenue streams, the offshoots, the merch, like you get to a number that's close and you have to imagine that his two and a half year development like life cycle would have been pulled forward by the help of AI.

19:43John Coogan:So he basically developed the game entirely in the pre-AI period. So it came out as - Does it still have momentum? I think it's probably trailed off a little bit because people sort of, you get to the end of the game after, I don't know, 10, 20, 50 hours or something. And then there are some people on YouTube that will do like tons and tons of like, try and break the game because you can get really, really crazy with like combinations of different things. But at a certain point, like you do kind of finish the game and then you're like, okay, I'm moving on. Yeah, I mean, some of the stuff that I've seen internally at TPN, it's like gonna blow.

20:16John Coogan:Already vague post. Are you the vague post king? Have you stared into the abyss, the abyss yet? Because everyone talks about at the AI labs, they all have abysses. And I feel like abyss 101 is like do not stare into it. It's like first-hand onboarding. Where's the abyss? I think a glance is okay. Or maybe saddling up to the abyss and just kind of peeking your head in is fine. But I would not stare into it. I think that's something you can do. Let's go over to the App Store. The App Store saw an 85 % increase in new apps this past quarter. Let's pour one out. Pour one out for the App Store review team.

20:53Yeah, they're working hard. In most recent quarters, new app count has grown less than 10%. So it was just ticking up quarter over quarter and then jumped massively. No surprises here. Everybody that I know outside of tech has an app now. They're unconstrained. They have an app, but at the same time,

21:14John Coogan:I have yet to find an app that's on my home screen that was solo developer vibe coded, something like that. So I'm waiting for the flappy bird moment or the Bellatro moment, this like solo thing, even if it's like a productivity tool, there's clearly more apps, but actually going viral, like what is the Harry Potter Balenciaga moment? What is the, you know, the viral moment that breaks through and actually makes it to the top of the app charts. Because right now it just feels like the long tail of the app store is getting potentially fatter because there's more single use apps, there's more small apps.

21:53John Coogan:But will we see one of those break out and become, you know, fantastically successful? That's sort of like the next, you know, critical moment that I'm, you know, eagerly awaiting, but we'll see. What's going on in China, John? The pork industry is a victim of its own success. This story is incredible. They got swine scrapers over there. Skyscrapers filled with swine. I'm not kidding about this. So this is from The Economist, and I read this yesterday and really enjoyed it. Pork holds a unique place in the Chinese diet. It was once a symbol of the good life. The Chinese character for home is a pictogram of a pig under a roof.

22:30John Coogan:It is so important that the government has a strategic frozen pork reserve, and the news media are always full of the ups and downs of the pork industry. It's like they got to cover it like it's a horse race. Like what's going on? It's the pork race. No, it's serious. TBPN for the pork industry in China. That's the real opportunity. There have been plenty of peaks and troughs in the past decade. The trough is active over there, literally. In 2018 to 2019, when African swine fever ravaged pig herds, many smaller backyard farms were wiped out. But prices went through the roof. Before long, the industry came trotting back.

23:07John Coogan:The big worry now is that it is doing too well. More efficient farming methods producing ever more pork are colliding with slow consumption of the meat. Now all the news is about overcapacity. She who sells cuts of pork at a market in Beijing says she only got to eat the meat on special occasions with a child. These days, she says, it's so cheap people can have it whenever they fancy. The oversupply pushed live pig prices to a 15-year low in March. Some farmers are losing over$40 per animal. Part of the problem is that some pig farmers have aggressively expanded production in an attempt to gain a bigger share of a shrinking market.