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    It might be Jonah Peretti’s last chance to turn BuzzFeed around

    CNBC spoke with BuzzFeed CEO Jonah Peretti in an exclusive interview.
    Peretti said he’s confident in his leadership abilities and hopes the company’s changes in focus will increase share value.
    BuzzFeed shares have been trading below $1 for more than a week.

    Jonah Peretti, founder and CEO of BuzzFeed, attends his company’s public debut outside the Nasdaq in Times Square in New York City, Dec. 6, 2021.
    Brendan McDermid | Reuters

    Corporate stories have ebbs and flows, ups and downs.
    To this point, BuzzFeed’s journey as a public company has been a bottomless pit. Co-founder and Chief Executive Jonah Peretti may be running out of time to alter his company’s trajectory.

    The digital media company known for its listicles and quizzes is in crisis mode. Its stock has fallen 95% since the company went public at $10 a share in December 2021. The shares closed Friday at nearly 54 cents, giving the company a market valuation of about $86 million.
    If a company trades for 30 consecutive business days below the $1 mark, Nasdaq will send a deficiency notice to the company, giving it 180 more days to top $1 or risk getting delisted. BuzzFeed has traded below $1 for six days in a row as of Friday’s close.
    There are loopholes and conditions. BuzzFeed could do a reverse stock split to artificially boost its share value and stay in compliance — a move last year executed by insurance firm Hippo after it had an average closing price of less than $1 over a consecutive 30-day trading period. Hippo continues to survive as a listed company.
    Peretti’s plan is to boost shares back over $1 by persuading investors he’s prepared to run a more profitable company. That’s what led him to shut down BuzzFeed’s Pulitzer-winning but money-losing newsroom last week and lay off 180 employees, or 15% of the company’s staff.
    “I’m trying to set us up with a better future and align with major trends,” Peretti said in an exclusive interview with CNBC. “If I do that well, my leadership will be a success. If not, it won’t be.”

    BuzzFeed reported a net loss of $201 million for 2022 (including a non-cash goodwill impairment charge of $102.3 million) after turning a $26 million profit in 2021. The company’s investor day is May 11. Peretti will try to convince shareholders his vision should be trusted.
    It’s fair to question Peretti’s decision-making in not shutting down BuzzFeed News earlier, he acknowledged. CNBC reported in March last year that investors asked him to shut it down.
    Still, he has no plans to step down as CEO or sell the company despite the company’s 95% loss in value, he said.
    “I’d be more concerned with my leadership if I didn’t see where the market was heading,” he said.

    Peretti’s strategy

    Peretti hopes incorporating more artificial intelligence into the company’s content will both boost engagement and save the company on cost. In the past two months, BuzzFeed AI-powered quizzes have led to a 40% spike in how long a user has participated compared with human-generated quizzes, Peretti wrote in a BuzzFeed blog post Thursday.
    “Formats that were developed before the AI-revolution, and many of the formats and conventions of the media industry will need to be updated and adapted, or begin to feel stale and outdated,” Peretti wrote in the post. “This is why we’ve been investing in AI-powered content and launching new formats like Infinity Quizzes and Chatbot games.”
    Some of Peretti’s predictions seem counterintuitive when considering what the next version of the internet might entail. He wrote that he expects news homepages to have a resurgence as destinations as social media companies such as Facebook, TikTok and Twitter turn their back on news for more general entertainment. That’s why he’s confident in the future of BuzzFeed brand HuffPost, which surged in popularity during the mid-2000s with its creative splash headlines.
    “In fact on Monday this week, HuffPost hit 16 million page views — a record high since joining BuzzFeed, Inc. — a sign this prediction is already coming true,” Peretti wrote.
    Peretti said he believes BuzzFeed can operate profitably by “covering trends, making shopping more playful, creating new interactive AI formats, and helping creators connect with our audience.”
    This, too, could be wishful thinking if digital audiences move beyond old methods of internet usage and toward augmented reality and gaming, where BuzzFeed has no current strategy.

    A dream burst

    BuzzFeed’s announcement in January that it would begin using AI to help generate quizzes gave BuzzFeed a brief surge in value, with shares jumping 120%.
    But for the most part, BuzzFeed shares have been all chute and no ladder.
    BuzzFeed went public via a special purpose acquisition company, or SPAC, to great fanfare on Dec. 6, 2021. For a moment on that day, shares surged from $10 to more than $14. BuzzFeed’s valuation briefly surged past $1.5 billion — more than three times the amount Disney offered to buy it a decade earlier, as described in an excerpt from a new book by former BuzzFeed News editor-in-chief Ben Smith.
    In those early hours of day one trading, an entire industry began thinking about its future differently. If BuzzFeed could find a receptive audience among public investors, companies such as Vice, Vox Media, Group Nine, and Bustle Digital Group — all of whom had venture capital backers who wanted to make a return on their investment — could either go public themselves or take publicly traded equity as part of an industrywide rollup.
    Then, the market turned. BuzzFeed ended the day down 11%. The next day, shares fell again. By the end of BuzzFeed’s first week of trading, shares were down 39%.
    “I just bought a f—ton of BuzzFeed shares at $6,” Bustle Digital Group CEO Bryan Goldberg told CNBC at the end of that first week. “If it goes lower, I’ll really back up the truck.”
    BuzzFeed shares did go lower. And lower. By June, shares were below $2. The advertising market started to sag as interest rates rose and company valuations suffered. Shares first fell below $1 last month. (Goldberg said he didn’t actually buy shares until they were closer to $1 and then sold them during February’s AI pop).
    With their fates tied to BuzzFeed’s performance, digital media companies have abandoned the rollup dream and the go-public experiment. Vice announced this week it’s restructuring its global news operation, including laying off 100 employees. The company has been searching for a buyer for more than a year. Vox Media sold a 20% stake to privately held Penske Media in February for a $100 million capital infusion. Vox and Group Nine merged last year.
    Instead of being the flag bearer for the digital media industry, BuzzFeed now looks like it’s trapped on an island, forced to publicly flail while onlookers shake their heads. When it went public, BuzzFeed promised surging revenue, estimating $654 million by the end of 2022, $833 million by the end of 2023 and $1.1 billion by the end of 2024.
    BuzzFeed’s actual annual revenue for 2022 was $437 million. The predictions for 2023 and 2024 currently look like pipe dreams.
    Peretti may have only one more chance to turn his company’s fate.
    “This feels like an inflection point,” he said.
    WATCH: CNBC’s full interview with BuzzFeed CEO Jonah Peretti in 2021 on market debut More

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    Are greedy corporations causing inflation?

    In the three years before covid-19 rich-world consumer prices rose by a total of 6%. In the three years since then they have risen by close to 20%. People are looking for someone to blame—and corporations are often top of the list. According to a recent survey by Morning Consult, a pollster, some 35% of Americans believe that “companies’ attempts to maximise profits” have contributed “the most” to inflation, more than any other factor by far. It is not just the general public who blame fat cats. “Recent inflation has been driven by an unusual expansion of profit margins,” Paul Donovan of ubs, a bank, has argued. A study by America’s Bureau of Labour Statistics (bls) suggests that “dealer mark-up” has raised the price of new vehicles. Central bankers are getting in on the act, too. Last month Fabio Panetta of the European Central Bank said that “there could be an increase in inflation due to increasing profits.” Last year Lael Brainard, a former vice-chairwoman of the Federal Reserve, now a White House official, said that “reductions in mark-ups could also make an important contribution to reduced pricing pressures”. The problem is that, at an aggregate level, evidence for head-honcho greed is thin on the ground. What actually seems to be happening is that families and businesses are sharing the spoils of the post-pandemic economy. This makes sense. Arguments for “greedflation” rest on unsure theoretical ground. Companies did not suddenly become avaricious. Red-hot demand, linked in part to massive stimulus programmes in 2020-21, is the true source of price pressure—and can sometimes result in margins expanding. The theory also fails on its own terms. To believe that corporations are making out like bandits is to believe they are winning the fundamental battle in economics. Output must flow either to owners of capital—in the form of profits, dividends and rents—or to labour, as pay and perks. Economists refer to this as the “capital” or “labour” share of gdp. When one group wins, by definition the other must lose. For the moment, the evidence suggests an even match-up. We have estimated the labour share across the oecd, a group of mostly rich countries. Labour has had the upper hand for most of the past three years, though more recently its share has fallen (see chart 1). In 2020 firms continued to pay people’s wages—helped by stimulus programmes—even as gdp dropped. In 2021 and 2022 strong demand for labour allowed many existing workers to demand more pay. It also pulled new people into the workforce. Across the oecd the share of working-age folk in a job is at an all-time high of 70%. Another way of assessing the balance of power is to look at “unit prices”. The second chart shows recent changes in the price of an average American good or service, split into the relative contributions of profits and labour costs. Corporations had the early spoils, but since 2021 workers have fought back. A calculation for the euro area published in a recent paper by Goldman Sachs, a bank, also suggests a relatively even match-up. If you are fuming at paying $10 for a coffee, blame the barista serving it to you as much as the owner. Recent months have been tougher for firms. In the first quarter of this year profit margins at companies in the s&p 500 are expected to sharply drop, perhaps because consumer tolerance for higher prices has worn thin. Workers, though, seem to be holding their own. The oecd’s headline rate of inflation is now decisively declining, even as there is little evidence of slowing wage growth. The latest monthly data from the bls show that, after falling for much of 2021 and 2022, American hourly real pay is rising again. David has not defeated Goliath, but he is putting up a good fight. ■ More

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    Charlie Munger reportedly warns of trouble for the U.S. commercial property market

    Charlie Munger reportedly believes there is trouble ahead for the U.S. commercial property market.
    The 99-year-old investor told the Financial Times that U.S. banks are packed with “bad loans” that will be vulnerable as “bad times come” and property prices fall.
    “It’s not nearly as bad as it was in 2008,” he told the Financial Times in an interview. “But trouble happens to banking just like trouble happens everywhere else.” 

    Charles Munger at the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska, April 29, 2022.
    David A. Grogan | CNBC

    Charlie Munger believes there is trouble ahead for the U.S. commercial property market.
    The 99-year-old investor told the Financial Times that U.S. banks are packed with “bad loans” that will be vulnerable as “bad times come” and property prices fall.

    “It’s not nearly as bad as it was in 2008,” he told the Financial Times in an interview. “But trouble happens to banking just like trouble happens everywhere else.” 
    Munger’s warning comes as U.S. regulators have asked banks for their best and final takeover offers for First Republic by Sunday afternoon, the latest in what has been a tumultuous period for midsized U.S. banks.
    Since the failure of Silicon Valley Bank in March, attention has turned to First Republic as the weakest link in the American banking system. Shares of the bank sank 90% last month and then collapsed further this week after First Republic disclosed how dire its situation is.
    Berkshire Hathaway, where Munger serves as vice chairman, has largely stayed on the fringe of the crisis despite its history of supporting American banks through times of turmoil. Munger, who is also Warren Buffett’s longtime investment partner, suggested that Berkshire’s restraint is partially due to risks that could emerge from banks’ numerous commercial property loans.
    “A lot of real estate isn’t so good anymore,” Munger said. “We have a lot of troubled office buildings, a lot of troubled shopping centers, a lot of troubled other properties. There’s a lot of agony out there.”
    Read the complete Financial Times interview here. More

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    Alzheimer’s patients may wait years to get treated with new drugs, putting them at risk of more severe disease

    A shortage of dementia specialists and testing capacity could result in significant wait times for new Alzheimer’s treatments as the U.S. population ages.
    Patients could face wait times ranging from 18 months to four years to get diagnosed and then treated for Alzheimer’s disease, according to studies.
    Time spent waiting only robs early Alzheimer’s patients of their memory and ability to live independently.
    But there are innovations on the horizon that could make diagnosis and treatment much easier.

    Juanmonino | E+ | Getty Images

    Seniors with early Alzheimer’s disease will face major hurdles to get treated even if promising new drugs roll out more broadly in the coming years, putting them at risk of developing more severe disease as they wait months or perhaps years for a diagnosis.
    The U.S. health-care system is not currently prepared to meet the needs of an aging population in which a growing number of people will need to undergo evaluation for Alzheimer’s, according to neurologists, health policy experts and the companies developing the drugs.

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    There are not enough dementia specialists or the needed testing capacity in the U.S. to diagnose everyone who may benefit from a new treatment like Eisai and Biogen’s Leqembi. After patients are diagnosed, the capacity may not exist — at least initially — to provide the twice monthly intravenous infusions for everyone who is eligible.
    Researchers estimate that the wait time from the initial evaluation to the confirmatory diagnostic tests to the infusions could range anywhere from a year and a half to four years or longer. Those months are critical for people with Alzheimer’s.
    “The whole process from that time of the family physician conversation to the point of infusion, I worry how long it will take and the complexities of the patient navigating through all of that to successfully get to the end,” Anne White, president of neuroscience at Eli Lilly, which is developing its own Alzheimer’s treatment, told CNBC.
    There are promising innovations in development, such as blood tests and injections that patients would take at home, which could make it significantly easier to get diagnosed and treated in the future.
    White also said Lilly is confident that more doctors will get into the field and help to alleviate capacity issues, as awareness grows that medicines are entering the market to treat Alzheimer’s.

    But time spent waiting robs early patients of their memory and ability to live independently. Alzheimer’s gets worse with time, and as patients deteriorate into more advanced stages of the disease, they no longer benefit from treatments like Leqembi that are designed to slow cognitive decline early.
    More than 2,000 seniors transition from mild to moderate dementia from the disease a day, according to estimates from the Alzheimer’s Association. At that stage, they become ineligible for Leqembi.
    The central challenge is that a large and rapidly growing group of people have early memory loss and other thinking problems known as mild cognitive impairment. This condition is often, though not always, a sign of early Alzheimer’s disease.
    An estimated 13 million people in the U.S. had mild cognitive impairment last year, according to a study published in the Alzheimer’s and Dementia Journal. As the U.S. population ages, the number of people with this condition is expected to reach 21 million by 2060, the study projected.
    The U.S. health-care system will deal with major logistical challenges in diagnosing the growing population of people with early Alzheimer’s — even before patients face potential issues with accessing treatment.
    “There’s a very large population of undiagnosed cognitive impairments that need to be evaluated in order to determine if people are eligible for treatment,” said Jodi Liu, an expert on health policy at the Rand Corporation.

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    Access to drugs like Leqembi is severely restricted because Medicare for now will only cover the $26,500-per-year treatment for people participating in clinical trials. Medicare has promised to provide broader coverage if Leqembi receives full approval from the Food and Drug Administration, which Eisai expects to happen in July.
    Eisai has estimated that 100,000 people in the U.S. will be diagnosed and eligible for Leqembi by the third year of the treatment’s rollout. The sum is a fraction of the total population that could benefit.
    Those patients could have other options if new treatments emerge from trials with positive marks.
    Eli Lilly will publish clinical trial data on its antibody infusion donanemab in the second quarter of this year. If the data is positive, the company will ask the FDA to approve the drug.
    Eisai’s U.S. CEO Ivan Cheung and Lilly’s White said during the companies’ respective earnings calls in February that they are focused on working with the U.S. health system to address the challenges of rolling out of Alzheimer’s treatments.
    “The primary goal right now during this launch phase […] is really get the market ready in terms of the diagnostic pathway, the infusion capacity, the education on how to monitor for this therapy, get all the hospitals and clinics ready,” Cheung said.

    Not enough specialists

    Long lines are expected at the offices of geriatricians, neurologists and radiologists as millions of people with mild cognitive impairment undergo evaluation to diagnose whether they have Alzheimer’s disease.
    Demand for geriatricians — doctors who are experts in diseases that affect the elderly — is expected to outstrip the number of specialists available in the field through at least 2035, according to projections from the federal Health Resources and Services Administration.
    The American Academy of Neurology told Medicare in a February letter that increased demand for Alzheimer’s treatments will put substantial pressure on neurologists, who will need additional resources. The federal data predicts a substantial shortage of these specialists in rural areas through at least 2035.
    “You just look at the neurologists, look at geriatricians — there are fewer and fewer geriatricians per person in the U.S.,” Rand’s Liu said. “It’s just a few number of specialists to do this kind of work.”
    White said Lilly has heard stories of patients waiting six to 12 months to see a neurologist or other doctors who treat dementia due to current capacity issues.
    The number of radiologists — who also play a role in diagnosing the disease — is expected to decline in the U.S. through 2035 even as demand increases, the data shows.
    In a study published in 2017, Liu and other Rand researchers estimated an initial wait of 18 months for patients to get evaluated by a dementia specialist, tested to confirm a diagnosis, and then treated in the first year that an Alzheimer’s antibody treatment becomes available. The wait would decrease to 1.3 months by 2030 as the patient backlog is cleared, they estimated at the time.
    But more recent research found that the wait would actually increase as demand created by an aging U.S. population outstrips the supply of specialists.
    Patients seeking a first specialist visit could face an initial wait of 20 months, according to a study by researchers at the University of Southern California published in the journal Alzheimer’s and Dementia in 2021. The delay could increase to about four years as early as 2028 and grow longer through 2050, the study found.
    The journal is published by the Alzheimer’s Association.
    Both studies are based on assumptions made before Leqembi received expedited approval from the FDA in January. Actual wait times could differ from the studies’ projections.

    PET scans cumbersome

    Two types of tests can diagnosis Alzheimer’s disease: PET scans and spinal taps. PET scans are accurate and safe diagnostic tools, but they are also cumbersome and expensive, said Dr. David Russell, a neurologist.
    Patients are injected with a tracer that makes brain abnormalities visible to the machine that does the imaging. Tracers have to be made for each patient and used on the same day.
    “We don’t have the infrastructure to roll out PET scanning on a major scale,” said Russell, director of clinical research at the Institute for Neurodegenerative Disorders in New Haven, Connecticut. He is the principal investigator on the clinical trials of Leqembi and donanemab at the institute.
    Medicare coverage of PET scans for Alzheimer’s patients is also limited right now. The insurance program for seniors will only cover one scan per lifetime, and only when the patient is participating in a clinical trail approved by the federal Centers for for Medicare and Medicaid Services.
    “That’s concerning because people may actually test negative at one point but then obviously as they age, they may need to get tested again,” White said.
    Early Alzheimer’s disease can also be diagnosed with a spinal tap, in which fluid around the spinal cord is extracted with a catheter and tested. While there’s plenty of capacity to do spinal taps, this option isn’t attractive to many patients due to unfounded fears that it’s painful and dangerous, Russell said.
    Though “there’s a lot of resistance” to the procedure, it is well tolerated and safe, he noted.

    Rural areas at a disadvantage

    The lack of access to PET scans is even more of an issue for patients who live in rural areas.
    There are an estimated 2,300 PET scan machines in the U.S., according to a 2021 study published in Alzheimer’s and Dementia. But the machines are often in bigger cities, which puts people in rural areas at a disadvantage.
    “There are certainly areas that don’t have a PET scanner, rural areas, so people would need to travel to a health center that has a PET scanner,” Liu said.
    In a large, sparsely populated rural state like New Mexico, many patients would have to drive three to five hours to get a PET scan in a city such as Albuquerque, said Dr. Gary Rosenberg, a neurologist and director of the New Mexico Alzheimer’s Disease Research Center.
    “It’s not California or the East Coast where everything’s very compressed and people can travel and get to a center pretty easily and go through these kinds of treatments,” Rosenberg said.
    The state has an estimated population of 43,000 people with dementia, and there are very few neurologists outside of the Albuquerque area, Rosenberg said. The New Mexico Alzheimer’s Disease Research Center in Albuquerque is one of only three such facilities funded by the federal National Institute of Aging in a vast region stretching west from Texas to Arizona.
    To do a PET scan, a tracer has to be made for each patient off-site in Phoenix, flown on a private plane to Albuquerque and used within hours because the tracers have a short shelf life, according to Rosenberg. The whole process costs more than $12,000 per patient, he added.
    “It’s logistically going to be very challenging,” Rosenberg said.

    IV infusion capacity

    After spending months or possibly years waiting to get diagnosed with early Alzheimer’s, patients would then be eligible for intravenous infusions of Leqembi. But the U.S. doesn’t currently have the capacity to give infusions twice monthly for everyone who likely has the disease, Russell said.
    “Having an IV infusion every two weeks would sort of ration people to availability and that’s a problem,” Russell said.
    The University of New Mexico Hospital is already maxed out with demand for infusion therapies for cancer, rheumatoid arthritis and autoimmune diseases, and could have a “problem” adding new capacity, said Rosenberg.
    Intravenous infusions of monoclonal antibodies like Leqembi aren’t difficult to administer, Russell said.
    The infrastructure to offer infusions should expand rapidly once industry sees there’s demand for treatments like Leqembi. But the process of building out capacity could still take a couple years, Russell said. He believes big players like CVS will provide infusions for Alzheimer’s disease on a major scale if they see there’s a large and stable market.
    “In one sense, capitalism works, and if it looks like that’s going to be the future, I think infusion centers will explode onto the scene,” the neurologist said.
    Eisai and Biogen hope to move early Alzheimer’s patients to a single monthly dose of Leqembi after they’ve completed their initial course of twice monthly infusions, which could help alleviate some of the capacity issues with infusions over time. They plan to ask the FDA to approve this plan in early 2024.
    Eli Lilly’s Alzheimer’s candidate antibody treatment donanemab is a single monthly dose, potentially making the logistics of administration easier if the drug gets approved. Dr. Dan Skovronsky, Lilly’s chief medical officer, told analysts during the company’s first-quarter earnings call that he expects many patients will be able to stop taking donanemab at 12 months.

    Blood tests could reduce wait times

    Though the projected wait times to get diagnosed and treated are sobering, innovations on the horizon promise to significantly improve access to Alzheimer’s drugs over time.
    Blood tests for Alzheimer’s are in development and some are already on the market. Primary-care doctors could administer the tests, which would ease the burden on patients, especially those in rural communities where the closest PET scan machine is hours away.
    These tests detect proteins in the blood associated with Alzheimer’s. They promise to help diagnose the disease before people display cognitive symptoms, potentially giving patients the chance to get treated before they suffer irreparable brain damage, according to the National Institutes of Health.
    At least three blood tests made by C2N Diagnostics, Quest Diagnostics and Qaunterix are currently on the market. But they are used to evaluate people who are already presenting symptoms and aren’t available on the mass scale needed for the expected increase in Alzheimer’s patients.
    C2N’s PrecivityAD test costs $1,250 and is not covered by insurance — though the company has a financial assistance program. Quest Diagnostics’ AD-Detect test costs $650. Quest’s test is covered by some insurance plans but not Medicare at the moment. The company also has a financial assistance program. Quanterix wouldn’t disclose the price of its test, which insurance does not cover.
    Right now, these are not stand-alone tests that can definitively diagnose Alzheimer’s. But the tests could help identify the patients who likely have the disease, which would narrow the population that needs further evaluation and reduce wait times for dementia specialists or confirmatory PET scans.
    A study in the journal Alzheimer’s and Dementia estimated that a cognitive test combined with a blood test could slash wait times for dementia specialists from 50 months down to 12 months.
    Eisai believes that inexpensive blood tests could completely replace PET scans and spinal taps by the fourth year of Leqembi’s rollout. The quicker diagnosis could increase the number of people eligible for treatment.
    Rosenberg said widespread availability of blood tests will allow mobile clinics to go into rural communities and identify who has markers associated with Alzheimer’s. This would allow patients in remote towns avoid the hours-long drive to cities with PET scan machines, Rosenberg said.
    “It’s a game changer,” the neurologist said.
    Lilly is developing at least two blood tests. The company is already using one test in clinical trials and hopes to commercialize it sometime this year. It is developing a second test through a collaboration with Roche. White said it is reasonable to expect that in a few years blood tests could replace more burdensome PET scans.

    Injections could make treatment easier

    Biogen and Eisai are also developing an injectable form of Leqembi which patients could administer themselves with an autoinjector similar to insulin pens, saving the trip to a site that provides intravenous infusions. They plan to ask the FDA to approve these so-called subcutaneous injections in early 2024.
    Eli Lilly is also conducting clinical trials on an antibody treatment called remternetug as a self-administered injection. But the promise of injections that can be administered at home could make companies reluctant to invest in building out intravenous infusion capacity, Russell said.
    In the future, Alzheimer’s diagnosis and treatment could be folded into routine checkups with a family doctor, Russell said. When people turn 50 and head in to get a colonoscopy or a cholesterol check, the doctor could also run a blood test for Alzheimer’s.
    If the test comes back positive, the doctor could then schedule patients for an MRI and get them started on an autoinjector treatment, Russell said.
    “That’s going to be the way that we’re looking at it in the not too distant future,” he said. More

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    SpaceX to spend about $2 billion on Starship this year, as Elon Musk pushes to reach orbit

    Elon Musk expects SpaceX to spend about $2 billion on its Starship rocket development this year, as the company pushes to build on its first launch earlier this month.
    “My expectation for the next flight would be to reach orbit,” Musk said on Saturday.
    The Starship flight got off the launchpad and achieved several milestones, but Musk gave more details on a variety of the problems the rocket suffered.

    The SpaceX Starship lifts off from the launchpad during a flight test from Starbase in Boca Chica, Texas, on April 20, 2023. 
    Patrick T. Fallon | Afp | Getty Images

    Elon Musk expects SpaceX to spend about $2 billion on its Starship rocket development this year, as the company pushes to build on its first launch earlier this month.
    “My expectation for the next flight would be to reach orbit,” Musk said, speaking during a discussion on Twitter Spaces on Saturday.

    While SpaceX does secondary rounds about twice a year, to give employees and other company shareholders a chance to sell stock, Musk said the company does “not anticipate needing to raise funding” to further bolster the Starship program and its other ventures.
    “To my knowledge, we do not need to raise incremental funding for SpaceX,” Musk said.
    As for the dramatic first fully stacked Starship rocket launch on April 20,” the SpaceX CEO said, “The outcome was roughly in what I expected, and maybe slightly exceeding my expectations.”

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    SpaceX has multiple further prototypes in various stages of assembly and aims to launch the next attempt at reaching space with the towering rocket within a few months.
    “The goal of these missions is just information. Like, we don’t have any payload or anything — it’s just to learn as much as possible,” Musk said.

    He put the probability of reaching orbit with a Starship flight this year at “probably” 80%, but espoused that he thinks there is a “100% chance of reaching orbit within 12 months.”

    Launch review

    Starship launches for the first time on its Super Heavy booster from Texas on April 20, 2023.

    The Starship flight got off the launchpad and achieved several milestones, but Musk gave more details on a variety of the problems the rocket suffered.
    The rocket took off with only 30 of the 33 Raptor engines ignited at the base of the Super Heavy booster. Musk said SpaceX “chose not to start” three engines, as they were not “healthy enough to bring them to full thrust. Starship slid laterally off the launchpad as it climbed into the sky, which Musk said was “because of the engine failures.”
    About 27 seconds into the flight, SpaceX “lost communications” with another engine — an incident that happened “with some kind of energetic event” that removed the heat shield around several other engines. “Things really hit the fan” around 85 seconds into the launch, when SpaceX lost “thrust vector control” — or the ability to steer the rocket.
    Additionally, Musk reported that it took about 40 seconds for the rocket’s AFTS (Autonomous Flight Termination System, which destroys the vehicle in the event it flies off course) to kick in, which SpaceX will need to correct before the next launch attempt.
    The strongest part of the rocket’s performance was how well it held together, including passing through a launch milestone called “Max Q,” or the moment when atmospheric pressure is strongest on the rocket.
    “The vehicle’s structural margins appear to be better than we expected, as we can tell from the vehicle actually doing somersaults towards the end and still staying intact,” Musk said.
    Looking forward, Musk said SpaceX has “made so many improvements” to future prototypes. The company needs to ensure “that we don’t lose thrust vector control” with the next launch.

    ‘Rock tornado’

    Members of the public walk through a debris field at the launch pad on April 22, 2023, after the SpaceX Starship lifted off on April 20 for a flight test from Starbase in Boca Chica, Texas.
    Patrick T. Fallon | Afp | Getty Images

    Back on the ground, Musk said the booster created a “rock tornado” underneath the rocket as it was lifting off. While SpaceX has not seen “evidence that the rock tornado actually damaged engines or heat shields in a material way,” Musk noted that the company “certainly didn’t expect” to destroy the launch pad’s concrete and create a crater in its wake.
    “One of the more plausible explanations is that … we may have compressed the sand underneath the concrete to such a degree that the concrete effectively bent and then cracked,” Musk said.
    A priority for the next flight will be starting the 33 Raptor engines “faster and get off the pad faster,” Musk said. It took about five seconds for SpaceX to start the engines and launch the rocket, which Musk noted “is a really long time to be blasting the pad.” The company aims to cut that time in half for the next attempt.

    A dust cloud grows underneath Starship as the rocket launches on its Super Heavy booster from Texas on April 20, 2023.

    Photos of the aftermath have shown the violent result of the Super Heavy booster’s engines. A report from the U.S. Fish and Wildlife Service said the launch flung concrete and metal “thousands of feet away” and created a cloud of dust and pulverized concrete that fell as far as 6.5 miles from the launch site.
    On Saturday, Musk said “the pad damage is actually quite small” and should “be repaired quickly.” He estimated the needed repairs mean SpaceX will be “probably ready to launch in six to eight weeks.” SpaceX will replace some of the propellant tanks near the launchpad. The 500-foot tall tower “is in good shape,” with “no meaningful damage” even though it was struck by “some pretty big chunks of concrete.”
    Musk believes the biggest hurdle to flying again “is probably requalification” of the AFTS that destroyed the rocket, since “it took way too long” to detonate.
    SpaceX is moving forward with a plan to put steel plates, which will be cooled by a water system, underneath the launch tower for the next Starship rocket.
    Environmental activists and researchers have raised alarms about the cloud of pulverized concrete and dust that the launch created. Musk argued that the debris was “not toxic at all,” but said that “we don’t want to do that again.”
    “To the best of our knowledge there has not been any meaningful damage to the environment that we’re aware of,” Musk said. More

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    Big banks including JPMorgan Chase, Bank of America asked for final bids on First Republic

    U.S. regulators have asked banks for their best and final takeover offers for First Republic by Sunday afternoon, in a move that authorities hope will cap a period of uncertainty for regional lenders.
    JPMorgan Chase and PNC are likely bidders for the ailing lender, which would be seized in receivership and immediately sold to the winning bank, according to sources.
    Bank of America is among several other institutions that are weighing a potential bid for First Republic, according to people with knowledge of the matter.

    A First Republic bank branch in Manhattan on April 24, 2023 in New York City.
    Spencer Platt | Getty Images

    U.S. regulators have asked banks for their best and final takeover offers for First Republic by Sunday afternoon, in a move that authorities hope will calm markets and cap a period of uncertainty for regional lenders.
    JPMorgan Chase and PNC are likely bidders for the ailing lender, which would be seized in receivership and immediately sold to the winning bank, according to people with knowledge of the situation. The Wall Street Journal reported those banks’ interest late Friday.

    Other companies are likely to step up. Bank of America is among several other institutions that are weighing a bid for First Republic, CNBC has learned according to other people with knowledge of the situation.
    If regulators led by the Federal Deposit Insurance Corp. receive an acceptable offer by Sunday, it’s possible a new First Republic owner could be announced early Monday. That scenario would create the least disruption for First Republic customers, who would start the week knowing their bank was now owned by a financially-stable operator.
    The First Republic auction may end a tumultuous period for midsized U.S. banks. Since the failure of Silicon Valley Bank in March, attention has turned to First Republic as the weakest link in the American banking system. Shares of the bank sank 90% last month, and then collapsed further this week after First Republic disclosed how dire its situation is.
    Like SVB, which catered to the tech startup community, First Republic is also a California-based specialty lender. It focused on serving rich Americans, enticing them with low-rate mortgages in exchange for leaving cash at the bank. That model unraveled in the wake of the SVB collapse as First Republic clients withdrew more than $100 billion in deposits, the bank disclosed Monday.

    Not a systemic risk?

    As First Republic’s situation deteriorated, regulators initially cast a wide net, asking a large group of banks what they thought the company was worth, according to a person with knowledge of the process. That group has narrowed in recent days, with the idea that regulators would share information necessary to make a final bid only with the most serious contenders.

    Regulators are expected to choose the bid that results in the smallest financial hit to the FDIC for resolving First Republic, according to a person with knowledge of the situation.
    The SVB failure, by way of example, will cost the FDIC’s Deposit Insurance Fund roughly $20 billion, the agency said. The biggest banks will bear the brunt of that expense, because member banks will likely be assessed fees to replenish the FDIC fund over several years.
    While the emergency takeovers of SVB and Signature both involved invoking a systemic risk exception to protect uninsured depositors from losses, that probably won’t be necessary in the First Republic receivership. That’s because the new owner would presumably be able to handle deposit outflows; in the case of SVB’s receivership, it took two full weeks to announce a deal.

    The big get bigger

    The auction means it’s likely one of the biggest U.S. banks will grow even larger and benefit from a government-brokered receivership process that leaves the FDIC holding undesirable assets.
    That’s what happened when SVB was sold to First Citizens last month; the buyer won a raft of concessions including loss-sharing agreements. First Citizens’ shares shot up 55% on news of the favorable deal.
    The likely bidders are all represented in the group of 11 banks that banded together last month to inject $30 billion in deposits into First Republic. That move helped stem the larger deposit drain from midsized banks into top-four institutions including JPMorgan and Wells Fargo, thus giving regulators breathing room to resolve First Republic, CNBC reported last month.

    Goldman, Wells Fargo sit out

    But not every big bank that participated in the deposit injection will make an offer. Wells Fargo, Goldman Sachs and Citigroup are each unlikely to make a bid, according to people with knowledge of the banks.
    Wells Fargo is still laboring under a 2018 asset cap imposed by the Federal Reserve. Goldman has made a strategic decision to pivot away from retail finance and is selling consumer loans. Citigroup has been offloading business units to simplify operations while improving its risk controls.
    The takeover makes the most sense for institutions looking to grow among the coastal affluent; First Republic’s branches are concentrated in California, New York, Boston and Florida.
    First Republic’s advisors had hoped to avoid a government takeover by persuading the biggest U.S. banks to help once again. One version of the plan circulated recently involved asking banks to pay above-market rates for bonds on First Republic’s balance sheet, which would enable it to raise capital from other sources.
    But ultimately the banks wouldn’t bite on the last-ditch effort, leaving the government poised to end First Republic’s 38 year run. More

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    Why GM is killing the Chevy Bolt — America’s cheapest EV — amid record sales

    As America’s cheapest EV, U.S. sales of the Chevy Bolt were up more than 50% last year and GM said it would make a record 70,000 units in 2023.
    But GM CEO Mary Barra on Tuesday said the automaker would end production of the car later this year.
    To reach those goals, GM needs the production capacity, profits and market positioning of its forthcoming next-generation EVs. It doesn’t believe it needs the Bolt.

    A Chevrolet Bolt EUV on display at the New York Auto Show, April 13, 2022.
    Scott Mlyn | CNBC

    DETROIT — After years of lackluster performance and a fire-provoked recall, the all-electric Chevrolet Bolt EV was finally gaining traction for General Motors.
    As America’s cheapest EV following significant price cuts, U.S. sales of the Chevy Bolt were up more than 50% last year and the automaker said it would make a record 70,000 units in 2023.

    But instead of leaning further into the vehicle’s recent success and increased production, GM CEO Mary Barra on Tuesday said the automaker would end production later this year of the vehicle she once hailed as a “real game-changer” for the industry and an “EV for everyone.”
    “We have progressed so far that it’s now time to plan to end the Chevrolet Bolt EV and EUV production, which will happen at the very end of the year,” Barra told investors during an earnings call.
    Barra’s comments about the vehicle getting axed were as swift as a butcher cutting the head off a chicken but spoke volumes when combined with the company’s plans to churn out profitable electric vehicles in the years ahead.
    GM is on a path to deliver single-digit profits off its EV portfolio by 2025, when it aims to have a production capacity of 1 million electric vehicles in North America.
    To reach those goals, GM needs the production capacity, profits and market positioning of its forthcoming next-generation EVs. It doesn’t believe it needs the Bolt.

    Production predictions

    To industry experts, the writing was on the wall for the Bolt’s end of days. But the timing of the decision caught many experts off guard. Expectations were GM would produce the vehicle at least into next year.
    “It was more sudden than I expected,” said Michelle Krebs, executive analyst for Detroit-based Cox Automotive. “I thought it would go away at some point when new batteries came on and they went to more body styles, but it struck me as rather abrupt.”

    2024 Sierra EV Denali Edition 1
    Source: General Motors

    A company spokesman said the timing of the announcement coincided with GM’s need to notify suppliers about the end of production and about progress associated with the $4 billion the company is spending to retool the Bolt plant in Orion Township, Michigan, for the GMC Sierra and Chevrolet Silverado electric pickup trucks.
    It’s part of GM’s EV strategy to retool existing plants rather than building new ones, although it could do so in the future. Others such as Ford Motor and Hyundai Motor have announced new plants in addition to retooling current facilities.
    GM has said retooling saves time and capital, and it’s also allowed the company the flexibility to partially convert plants and build different gas-powered models in tandem. But in the case of the Orion plant, which solely manufactures the Bolt, it didn’t make sense to take that tack, because GM believes it needs the additional capacity. Plus, the Bolt doesn’t contribute to the company’s bottom line like plants that produce money-making gas-powered vehicles.
    Barra on Tuesday said once the Orion plant reopens next year, the company will have a total production capacity of 600,000 EV pickups annually, including a Detroit plant that’s been slow to ramp up production of the GMC Hummer EVs.
    “We’ll need this capacity because our trucks more than measure up to our customers’ expectation, and we’ll demonstrate that work and EV range are not mutually exclusive terms for Chevrolet and GMC trucks,” Barra said Tuesday.

    Profits tied to Ultium

    GM has promised investors its next-generation EVs, built on a new architecture known as Ultium, would be profitable. That’s a milestone that the Bolt models, including a larger “EUV” version, never were believed to have achieved.
    To spur interest and make the Bolt more affordable, GM cut the starting prices by as much as $6,300 for the 2022 model year. The Bolt EV would start at $26,595, followed by the Bolt EUV at $28,195.
    “Bolt is selling better than it ever has since the company dropped the price. On the other hand, that probably also means that they’re losing more money than they ever have on that car,” said Sam Abuelsamid, a principal analyst at Guidehouse Insights. “So, they don’t want to keep it going longer. They’re losing money on it.”

    US President Joe Biden, with General Motors CEO Mary Barra, looks at a Chevrolet Silverado EV as he tours the 2022 North American International Auto Show at Huntington Place Convention Center in Detroit, Michigan on September 14, 2022. – Biden is visiting the auto show to highlight electric vehicle manufacturing.
    Mandel Ngan | Afp | Getty Images

    GM expects to earn low to mid-single-digit adjusted profit margins on its EV portfolio in 2025, excluding any positive impact of clean energy tax credits such as those included in the Inflation Reduction Act.
    Taking those credits into account, the company has said it expects its new EV portfolio to be as profitable as its cars and trucks with traditional engines by 2025 — years earlier than what many thought was possible.
    While those credits likely would have boosted the profit margin on the Bolt as well, the car uses older battery technology purchased from LG, and GM is currently focused on scaling up more cost-effective in-house battery production through a plant it operates as a joint venture with the South Korean company.
    That Ultium ramp-up, plus cost efficiencies achieved with the new EV pickups, means margin improvements that the Bolt couldn’t have realized, especially in the long term.
    “As we scale EVs, we will lower fixed costs and will continue to drive margin improvements,” Barra said Tuesday.

    Mixed reputation

    The Bolt will leave behind a mixed reputation. It was the first “affordable,” long-range EV to market, but it never achieved its stated potential.
    The Bolt brand name also was damaged after the company in 2020 and 2021 recalled all of the vehicles ever produced due to fire concerns resulting from defects with supplier-manufacturer batteries. At least 13 Bolts spontaneously caught fire as a result of the issue.

    A 2019 Chevrolet Bolt EV caught fire at a home in Cherokee County, Georgia on Sept. 13, 2021, according to the local fire department.
    Cherokee County Fire Department

    Still, GM touted the Bolt EV as proof of the concept for its electric-powered future. The company said the vehicles attracted new customers, with 75% of Bolt owners making the switch from non-GM vehicles.
    Now, the company will need a new entry-level EV, and it’s looking to the upcoming Equinox EV, starting at around $30,000, to fill that void.
    “We think this is our big opportunity here to really start to get a massive adoption, and we have that expectation with the price; the volume that we expect to do,” Scott Bell, global vice president of Chevrolet, said during a media briefing last year. “This is a game-changer for us and for the industry.”
    Whether the Equinox EV, which will be produced at a plant in Mexico, can serve as more of a “game-changer” than the Bolt truly could be determined later this year when the car goes on sale.
    Barra told CNBC’s Phil LeBeau last year that GM expects to ramp up production of the Equinox EV far more quickly than its current EVs. She said the vehicle should be close to full production by the first quarter of next year. More

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    Major Wall Street firm sees a breakout in luxury stocks — and lists three reasons why ETFs are a great way to play it

    As luxury stocks make waves overseas, State Street Global Advisors believes investors should consider European ETFs if they want to capture the gains from their outperformance.
    Matt Bartolini, the firm’s head of SPDR Americas research, finds three reasons why the backdrop is becoming particularly attractive. First and second on his list: valuations and earnings upgrades.

    “That’s completely different than what we saw for U.S. firms,” he told CNBC’s Bob Pisani on “ETF Edge” this week.
    His remarks come as LVMH became the first European company to surpass $500 billion in market value earlier this week.
    Bartolini lists price momentum as a third driver of the investor shift.
    His SPDR Euro Stoxx 50 ETF (FEZ) is considered a broad European ETF. The ETF is up about 20% so far this year, with a price increase of nearly 1.2% since the beginning of January.
    While the fund’s top holding is LVMH at 7.29%, according to the company’s website, Bartolini contends the shift applies beyond luxury stocks and to lower-end consumer stocks.

    His firm’s website lists French cosmetics company L’Oreal — which is up almost 30% this year — as another one of his fund’s major holdings. It also shows FEZ allocating more than 20% to consumer discretionary — 2.5% higher than its second-most allocated industry.
    “That’s on a broad-based level,” he said. “So, basically, buy Europe and sell U.S. has been some of the trade that we have seen.”
    FEZ closed the week down 0.41% but ended the month up more than 3.1%.

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