Archive for March, 2025
Investing in Pigs and Kidneys: Building a $100 Billion Empire and Revolutionizing Organ Transplants
How does one create a $100 billion empire while pioneering an endless supply of transplantable organs that could save millions of lives? The first step is launching a multi-billion-dollar satellite company (SiriusXM – SIRI). The next step? Founding a biotechnology company with nothing more than a high school-level biology education — all in a desperate attempt to save the life of your seven-year-old daughter from a rare heart disease that claims lives within three to five years.
This is the extraordinary path of Martine Rothblatt, CEO and visionary of United Therapeutics Corp. (UTHR), who began this journey 35 years ago.
Transforming Industries: From SiriusXM to Organ Transplants
Few individuals have singlehandedly transformed entire industries. One name that comes to mind is Steve Jobs – who revolutionized consumer electronics and laid the foundation for Apple Inc.’s (AAPL) meteoric rise to a multi-trillion dollar company before he passed away. While Rothblatt and United Therapeutics may not yet be household names, she is undeniably reshaping the healthcare industry and steering it toward a future of unprecedented, life-extending medical advancements.
How can these ambitious, world-changing goals be achieved? A whole aisle of books could be written about Rothblatt’s impressive lifetime accomplishments, but the unique investment opportunity for investors cannot be fully understood without appreciating the person that created United Therapeutics 29 years ago in 1996.
Rothblatt has accomplished more than most humans could in multiple lifetimes – here is a partial sampling of her achievements:
- Earned a Bachelor of Arts, a Juris Doctor (JD), and Master of Business Administration (MBA) degrees from the University of California, Los Angeles (UCLA).
- Finished her PhD at The London School of Medicine (Barts)
- Practiced law at the Covington & Burling law firm representing the television broadcasting industry before the Federal Communications Commission (FCC).
- Hired by NASA to seek approval from the FCC for NASA systems used to track and relay satellite data.
- Created the multi-billion-dollar satellite radio company SiriusXM in 1990 with the inspiration of physicist Gerard O’Neill, the same Princeton professor who motivated Amazon CEO, Jeff Bezos to create Blue Origin.
- Invented the Terasem Movement, an organization with the mission of human life extension that uses cognitive and artificial intelligence software. Terasem’s technology has created a lifelike robot (BINA48), which is modeled after her spouse, Bina Rothblatt.
- Pioneered EV (electric) helicopter transportation through the company’s Unither Bioelectronics division with the purpose of cutting energy consumption and speeding up organ delivery times.
The United Therapeutics Story
In 1996, while leading SiriusXM, Rothblatt faced every parent’s worst nightmare. Doctors diagnosed her seven-year-old daughter, Jenesis, with Pulmonary Arterial Hypertension (PAH) — a rare, devastating disease with no known cure. Determined to save her daughter, Rothblatt initially funded research grants totaling over a million dollars to a narrow group of five doctors studying the disease. When the scientists failed to find a cure, she took matters into her own hands.
With no formal medical background, she quit SiriusXM, immersed herself in biology, and founded United Therapeutics. Against all odds, armed with her mantra that “persistence leads to omnipotence,” Rothblatt’s relentless pursuit paid off when she discovered a cure. Today, decades later, Jenesis is 42 years old and thriving as a high-profile manager at United Therapeutics.
Addressing the Organ Shortage Crisis
United Therapeutics’ advancements in PAH treatment have allowed patients like Jenesis to live long, productive lives. However, many eventually require organ transplants – the company is already assisting hundreds of patients with lifesaving human lung transplants. Despite some progress, the current organ shortage crisis is staggering:
- Over 100,000 people are on the national transplant waiting list.
- More than 92,000 of them need a kidney due to kidney failure or End-Stage Renal Disease (ESRD).
To address the organ shortage, United Therapeutics recently made history last month when the FDA approved the first-ever clinical trial for its UKidney xenotransplantation procedure for kidney failure patients.
The severity of the organ shortage problem is clear-cut if you examine the numbers. In addition to the 92,000 patients on the kidney transplant waitlist mentioned above, there are approximately 500,000 additional ESRD dialysis patients not on the national transplant list. Roughly 10% of these ESRD patients die each year due to dialysis-related complications.
If you combine the wait list population with the dialysis patient population you get to a total of around 600,000 people total. Regrettably, the vast majority of these patients do not receive an organ. In fact, only 27,759 kidney transplants were performed in the U.S. last year. In other words, despite the enormous demand for transplantable organs, less than 5% of the addressable market have actually benefited from a new kidney.
The Future of Organ Transplants: Profitable Pig Potential
How can this massive undersupply of transplants be fixed? One word…pigs. With a very scarce supply of human donors, pigs may hold the key to solving the organ shortage. United Therapeutics has pioneered genetically engineered pig organs (xenotransplantation) by modifying 10 key genes to prevent immune system rejection. As part of the xenotransplantation trial, United Therapeutics has built multiple DPF (designated pathogen free) facilities that house the pigs carrying the gene-modified kidneys.
All of this may sound like science fiction, but the dream of xenotransplantation has already become reality. Just last November, a genetically engineered pig kidney was transplanted into a patient (Towana Looney) under a compassionate use basis granted by the FDA. With its new clinical trial now underway, United Therapeutics is planning to transplant up to 50 patients with modified pig kidneys in the coming months.
And UKidney is just the beginning. United Therapeutics has a deep organ transplant pipeline that extends beyond kidneys into livers, hearts, and lungs (see graphic below). The company is also working on the “holy grail” of transplants – 3D printed organs using the cells of organ recipients to build the tissue structure, which dramatically reduces or eliminates the risk of organ rejection.
If UKidney is successful, United Therapeutics and Martine Rothblatt will be one step closer to realizing the company’s vision of manufacturing an endless supply of transplantable organs.
Source: United Therapeutics
Investment Opportunity of a Lifetime?
Nothing in life is certain, and there are risks to making any investment, but betting against Martine Rothblatt over the years has been a major losing proposition. From an investment standpoint, the core PAH drug business is trading at an immense discount, and investors are essentially valuing the organ transplant business at $0.
Despite its groundbreaking advancements and tremendous profit growth, United Therapeutics has huge stock price appreciation potential. Here’s why:
Stock is Dirt Cheap: At $317 per share, the stock currently trades at roughly a 50% discount to the trailing S&P 500 Price-Earnings ratio (PE) – 13x P/E vs. 26x index P/E. In other words, the shares should be trading north of $600 (double the price), if United Therapeutics was afforded an “average” company P/E multiple. But United Therapeutics clearly is not an average company.
Over the last two years, the company has grown revenues +48% from $1.9 billion to $2.9 billion and seen earnings explode +64% higher from $15.00 per share to $24.64. The stock becomes even cheaper on a forward P/E multiple (11x P/E) if the company can meet 2025 Wall Street expectations of 15% growth in its EPS to $28.23. Its superior products, execution, and competitive moats should afford the company a significant premium, not a drastic discount. Short-term investors are missing the boat by ignoring the gargantuan market potential for the company.
Is it possible for a $15 billion company to reach a $100 billion market value? This is not difficult to imagine if the company can bring its innovative and revolutionary pipeline products to market and take its current revenue base of almost $3 billion to $16 billion (see graphic below). The company certainly will not reach $16 billion in revenues tomorrow, but if you applied an average market multiple to those projections, and the company were able to maintain its current profit margin profile, a $3,000 per share stock price would be well within reason, equating to a market value well above $100 billion.
Source: United Therapeutics
Many Irons (Catalysts) in the Fire: United Therapeutics is no one-trick pony. Besides the company’s organ transplant plans, and their core commercial PAH and PH-ILD franchise, which includes, Remodulin, Orenitram, and Adcirca, United Therapeutics has many more irons in the fire that can be catalysts for stock price appreciation over the next 12 – 24 months (see graphic below).
Here is a more detailed description of the drivers:
- New Markets for Core Drugs: Any biotech or pharmaceutical company is in the business of searching for new markets to sell its products. United Therapeutics has found that in both the IPF (Idiopathic Pulmonary Fibrosis) and PPF (Progressive Pulmonary Fibrosis) markets, which are two different forms of chronic lung disease that are characterized by the gradual scarring and thickening of the lung tissue, which is called fibrosis. These patients can be administered with modified formulations of its existing Tyvaso molecule. The revenue potential is huge if the efficacy data comes in as planned because the pools of patients suffering from these horrible, progressive lung diseases could more than double the size of the present addressable market. Data from the company’s TETON 1 (IPF), TETON 2 (IPF), and TETON PPF studies will be released over the next few years, starting as early as next quarter.
- Improved Drug Formulation: United Therapeutics is also waiting for groundbreaking data from a drug called Ralinepag, the first once-per-day prostacyclin pill that is an improvement over its existing drugs of Remodulin, Tyvaso, and Orenitram. The company is releasing the Ralinepag data from its ADVANCE OUTCOMES study next year, and if the data proves to be positive, this could represent another multi-billion dollar opportunity for the company and investors.
- Other Near-Term Catalysts: Although perhaps representing a less meaningful potential from a long-term revenue standpoint, the company’s Centralized Lung Evaluation System (CLES) program is awaiting an FDA decision this year – CLES is designed to expand the supply of donor lungs. Last, but not least, data from United Therapeutics’ microliverELAP study represents another sizeable revenue opportunity for liver transplants.
Source: United Therapeutics
Fly in the Ointment: Failing Capital Allocation Grade
United Therapeutics deserves an A+ grade for developing the critical, world-class therapeutics that serve the PAH and PH-ILD market and the massive potential pipeline in xenotransplantation and alternative organ platforms. However, the company receives a failing grade for the implementation of its capital allocation strategy. United Therapeutics holds an excessively bloated cash surplus on its balance sheet, which has exploded higher from $1.0 billion in 2015 to $4.7 billion in 2024.
Sadly, the problem is only getting worse, as the company is on pace to add more than $1 billion more to the cash balance this year, and in subsequent years. This is woefully inefficient and becoming an alarmingly growing percentage (approximately 30% currently) of the company’s market value. To put this issue into perspective, investors should consider the company has enough cash on its balance sheet to effectively fund two decades of capital expenditure requirements. Profitable companies in United Therapeutics’ hand-selected proxy peer group hold a much more responsible amount of cash, representing about 4% of their market values.
If you had $100k of annual spending requirements, would you negligently place $2 million dollars in a low-single-digit yielding checking account or multi-year CD at your bank, when you could responsibly earn a 10% or higher return by paying down credit card debt? This is what United Therapeutics is doing. The company is essentially burning shareholder money by letting cash sit idly on its balance sheet earning a pittance when it could be earning significantly more. Why invest in government Treasuries when you could invest in your own company, compounding at rates greater than 10%?
The solution is clear. Implement a meaningful share repurchase program that is immediately EPS-accretive with the company’s bloated mountain of cash and bring down to responsible levels that are consistent with profitable growth peers. And rather than limiting your share repurchase to a one-time accelerated stock repurchase (ASR) program, expand the buyback to be more open ended on top of immediate purchases. This strategy provides the company with the flexibility to opportunistically purchase shares at a discount when the share price is depressed – like now, when shares are down -24% over the last five months.
Unfortunately, my message appears to be falling on deaf ears. I was hoping to gain clarity through communications with the company along with a letter sent to management and the board of directors. In my letter, I attempted to remind management of the importance of upholding its rigorous corporate governance standards and exercise its fiduciary duty when it comes to the company’s allocation strategy. However, regrettably, up to this point, there has been no indication to the market or me that there is any urgency to take advantage of the massively discounted United Therapeutics share price that exists today.
READ RECENT LETTER SENT TO MANAGEMENT & BOARD OF DIRECTORS BY CLICKING HERE
Investors Should Not Miss the Forest for the Trees
Although the company receives a failing capital allocation grade from my perspective, investors should not miss the forest from the trees. United Therapeutics’ share price is currently trading at a gigantic discount, yet it boasts unparalleled profitability and a groundbreaking organ transplant pipeline.
This lack of appreciation for the shares is surprising given how wildly profitable the company is and its tremendous long-term track record of success. But the company is not sitting on its hands – United Therapeutics has ambitious plans to expand its current annual revenue base by more than five-fold from $3 billion to $16 billion due to full cupboard of pipeline products.
With Martine Rothblatt at the helm—a visionary with a track record rivaling Steve Jobs—the company is poised to revolutionize healthcare. The world is a better place due to Martine Rothblatt, and your portfolio will be a better place with an investment in United Therapeutics.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in UTHR, AAPL, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in SIRI or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on the IC Contact page.
Par for the Course
Stocks have been in a multi-year bull market, but just as investors cannot earn positive returns every month, golfers also cannot achieve a hole-in-one or birdie on every hole, either. A challenging performance is exactly what happened last month when stocks recorded a bogey on the scorecard.
More specifically, this is how far out-of-bounds the major indexes were last month:
- S&P 500: -1.4%
- Dow Jones Industrial Average -1.6%
- NASDAQ: -4.0%
Technology stocks and the Magnificent 7 stocks felt the largest brunt of the force last month as tariffs and the impact of Chinese AI (Artificial Intelligence) competition gave investors heartburn as they digested the information (see New Year, New AI ERA & New Tariff Sheriff).
Tariffs – More Molehill Than Mountain
As mentioned, a large part of last month’s volatility can be explained by the policy uncertainty surrounding the impending tariffs on China, Canada, and Mexico. Despite the absence of new tariffs being implemented, in an attempt to lock in cheaper imported goods, U.S. corporations and consumers have been stockpiling foreign goods before prices move higher due to tariffs. The 25% proposed tariffs on Canadian and Mexican goods are set to be applied as soon as March 4th. A flat 25% tariff on imported steel and aluminum products is expected to begin on March 12th – these particular tariffs are expected to have a disproportionately negative impact on the automotive industry.
Regarding other proposed reciprocal trade agreements, the White House’s analysis on tariffs for all other countries (beyond China, Canada, and Mexico) is expected to arrive on the president’s desk on April 2nd.
All these proposed changes are having an immediate economic impact whether intended or not. Not only are consumers buying more overseas products now, as they brace for higher prices, but businesses are also shifting supply chains to countries outside of China, Canada, and Mexico, in hopes of finding temporary tariff loopholes.
The bottom-line is our country’s imports have been spiking up recently, especially in the first quarter. Imports by definition subtract from America’s economic activity, so if businesses and consumers are rationally stockpiling foreign goods before prices go up from tariffs, investors should not be surprised that GDP (Gross Domestic Product) growth is set to go negative in the first quarter (-1.5%), according to the Federal Reserve Bank of Atlanta.
This short-term spike in foreign product purchases should be temporary until the tariffs are officially put in place. Subsequently, demand for relatively cheaper U.S. goods should rise because foreign goods will be pricier. In other words, buyers may begin purchasing more American-made t-shirts on Amazon because those shirts could be cheaper than the Chinese-made t-shirts after the additional tariffs commence on China.
How large are these overall tariffs? When it comes to Mexico and Canada, the size of these countries’ imports is estimated at $918 billion (see the 2023 import breakdown below for the two countries). On the surface, this sounds like a very large number, and it is. However, if you consider the size of the U.S. GDP ($29.4 trillion), these tariffs will mathematically have less than a 1% impact on the direction of our country’s economic activity.
However, if demand for American products goes up after the tariffs begin, as mentioned above, then it is perfectly logical to expect the drag from imports can be diminished or possibly completely reversed, if consumers decide to buy more American goods.
Source: Visual Capitalist
Also worth noting, as I documented last month in my Investing Caffeine blog, imports only account for 13.9% of our country’s economic activity (see New Tariff Sheriff). So, while tariffs make for great scary headlines, the reality of the numbers paints a different picture. Overall, the uncertainty surrounding the discussion of tariffs is having a much larger economic impact than the actual tariffs themselves. In other words, what we are discussing is more molehill than mountain. We saw this same movie before during the administration’s first-term when tariffs did not crater the economy into recession or create disproportionately high inflation.
War at the White House
A geopolitical soap opera played out on global television last Friday during a meeting between Ukraine’s President Volodymyr Zelensky and President Trump in the Oval Office. The meeting was designed to be a celebratory signing of a minerals deal in which the U.S. would gain access to strategically important Ukrainian rare earth metals in exchange for continued U.S. aid and military support. A signed deal would increase the probability of a peace deal between Russia and Ukraine dramatically. What actually happened was a war of words at the White House, which resulted in Zelensky getting kicked out of the White House with no signed deal.
Both sides have economic and strategic incentives to reengage in peace and mineral deal negotiations, but if the U.S.-Ukraine relationship totally crumbles, Europe and the other NATO (North Atlantic Treaty Organization) countries will need to pick up the slack in their military and economic aid to Ukraine. Regardless, increased European support is required to stave off a broader incursion by Russia and Vladimir Putin into a wider portion of Europe.
Tariffs, the Russia-Ukraine war, and AI issues may have heightened investor anxiety last month, but long-term investors understand that annual -5% and -10% corrections in the equity markets are considered par for the course. In fact, over the last 12 months, the S&P 500 index has declined -5% five times, and -10% one time, yet the stock market is still up +16% on a trailing 12-month basis (see chart below).
Source: Trading Economics
Financial markets end up in the rough plenty of the time, which often results in performance scorecard bogeys. However, long-term investors and Sidoxia Capital Management clients have won more often than not because the benefits of American capitalism have created many more birdies and pars over time.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (March 3, 2025). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in META, NVDA, certain exchange traded funds (ETFs), but at the time of publishing had no direct position in BABA or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on the IC Contact page.
How to Profit from the Trump Crypto Wave
We were honored to have our white paper on the cryptocurrency market published by the California Business Journal last month. Please enjoy the article below.
Newly inaugurated President Donald Trump has wholeheartedly embraced the multi-trillion dollar cryptocurrency and digital asset industry. This is a seismic shift from the anti-crypto stance harbored by the previous administration. In the first week of his second term, President Trump not only appointed crypto-friendly Paul Atkins as the SEC Chairman, but Trump also named David Sacks as the first-ever White House Crypto Czar. If that was not a strong enough signal, Trump issued an executive order on his third day in the Oval Office, entitled, “Strengthening American Leadership in Digital Financial Technology.”
With this massive political and legislative tailwind behind the cryptocurrency industry, what is the best way to profit from this cryptocurrency wave? Is it just as easy as buying Bitcoin? Not exactly, if history repeats itself. Since Bitcoin was introduced in early 2009, the value of the cryptocurrency has fallen by more than -50% seven times. There have been many causes for Bitcoin’s historical volatility, including the hacking of the largest Bitcoin exchange in 2011 (Mt. Gox); China banning Bitcoin in 2013; and the COVID pandemic crash in 2020. Matters got worse for the cryptocurrency industry when FTX, one of the world’s largest crypto exchanges went bankrupt in 2022, and its founder and CEO, Sam Bankman-Fried, was subsequently arrested and convicted for fraud and money laundering.
Investing in a currency or asset class with that much volatility is very challenging. To compensate for volatility and risk, investors require the potential for higher returns backed by robust fundamentals. Unfortunately, to date, many of the broadest use cases for cryptocurrencies have been limited to illicit and illegal activities. There certainly are some speed and security advantages to the blockchain technology and the associated ledger structure of the major cryptocurrencies. However, the benefits have not been so clear-cut that Fortune 1000 companies and mass consumers have adopted it. A relatively small 15.5% of Americans (and 6.9% worldwide) are estimated to own a cryptocurrency, and a smaller fraction of that actually transact in a crypto.
Even though the practical use cases for cryptocurrencies over the last two decades have been extremely constrained, the speculative fervor surrounding this asset class has grown exponentially to the point there are over an estimated 10,000 cryptocurrencies that exist today, including speculative meme coins such as Dogecoin, the Trump coin, and other crude joke coins.
In my more than three decades of investing, I have repeatedly encountered extensive segments of the financial markets that would qualify as speculative bubbles, whether it was subprime mortgages and credit default swaps (CDS) in the 2008 Financial Crisis, or dot-com companies in the 2000 bursting of the technology bubble.
Today, in 2025, the current cryptocurrency wave definitely qualifies as another bubble. But depending on an investor’s time horizon, there is still potential to make significant profits during these frothy investment waves. For example, take Amazon.com, which was at the epicenter of the dot-com bubble as it saw its stock price crater approximately -95% in the 2000-2001 timeframe. Before Amazon’s stock collapsed, its price peaked at $5.65 per share at the end of 1999 – today, the stock price in 2025 has exceeded $240 per share (a more than 40-fold increase). Despite the bursting of the tech bubble, a tremendous amount of money has been made by long-term investors in Amazon and a select few other long-term technology winners.
I believe the same opportunity exists today in the cryptocurrency market. There are a few historical parallels that inform our crypto investment strategy at my investment firm, Sidoxia Capital Management. Let’s begin with the gambling industry that flourished in Las Vegas during the 1940s after the end of Prohibition. It was not the gamblers and speculators that made all the money, but rather the casinos, including some remaining today like the Flamingo and the Golden Nugget.
Currently, the dominant casino in the cryptocurrency industry is Coinbase Global Inc. (COIN). Coinbase is the 800-pound gorilla in the U.S. cryptocurrency exchange space, handling transactions that total more than $4 billion in daily trading volume across hundreds of cryptocurrencies, stable coins, meme coins and other digital assets. And the company is highly profitable with substantial growth. More specifically, the company has generated more than $5 billion in sales and greater than $1 billion in profits over the last year. Just like Las Vegas casinos make money off every gambler’s bets, so too does Coinbase make profits off every crypto speculator’s trades, whether those transactions in Bitcoin, Tether, Ethereum, or meme coins go up or down in value.
Another lucrative way for investors to look at the nascent cryptocurrency industry is to compare it to the California gold rush that occurred from 1848 – 1855. Hundreds of thousands of “forty-niners” (the peak year of gold rush immigration – 1849) flocked out west in hopes of discovering perceived limitless riches – an attitude held by many cryptocurrency purchasers presently. Unfortunately, it was not the forty-niners digging and panning for gold who made most of the money, it was the merchants selling all the picks and shovels to the gold rush speculators that profited the greatest.
The contemporary merchants in today’s cryptocurrency world are companies like NVIDIA Corp. (NVDA), the creator of the graphics processing unit (GPU) semiconductors that power the critical mining operations of cryptocurrencies like Bitcoin. The GPUs serve as the picks and shovels for crypto miners who receive rewards in the form of cryptocurrencies (i.e., Bitcoin) in return for performing computationally intensive calculations, which are necessary to verify transactions on a digital decentralized crypto ledger. NVIDIA GPUs have a broad range of applications beyond crypto mining, including data center applications for artificial intelligence (AI), video games, gene sequencing, virtual-augmented reality, and other large-scale markets. Over the last year, NVIDIA has produced more than $110 billion in sales and created more than $60 billion in net profits. Not only was NVDIA successful commercially, but equity investors were also rewarded handsomely last year with an appreciation of +171% in the share price.
There are plenty of reasons to remain skeptical about the euphoria surrounding the cryptocurrency industry, especially due to the lack of legitimate use cases across the avalanche of digital assets endlessly introduced. However, the pro-crypto wave of Trump regulations and policies allow plenty of ways for investors to profit from this digital gold rush, especially if you can find the winning crypto casino and leading merchant of digital picks and shovels.
By Wade W. Slome, CFA, CFP®, Exclusive to California Business Journal
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in NVDA, COIN, IBIT, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
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