January 2023
6 minutes

Perspectives on Progress #2

Claire Shaw – Portfolio Director

Key points

  • Moderna’s cancer vaccine and UPSIDE Food’s cultivated meat look less like science fiction and more like reality
  • For Kering, Alessandro Michele’s departure opens the door for brand revival at the luxury fashion house, Gucci
  • Can Zoom continue to zoom? Its annual user conference suggests it can

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Upside Foods

Cultivated meat gets no questions letter from FDA

Writing an open letter to the chickens of the world – yes, you read that right! – UPSIDE Foods founder Uma Valeti thought they should be first to know, “they could be dismissed from the dinner table”. The ad, featured in The New York Times, marks UPSIDE becoming the first company in the world to receive a ‘No Questions’ letter for cultivated meat from the US Food and Drug Administration (FDA). It means the FDA has accepted the science behind UPSIDE’s production method and believes its cultivated meat is safe to eat.

Cultivated meat is not vegan, vegetarian or plant-based, it is real meat grown from animal cells in cultivators in a laboratory. This method eliminates the need to raise and slaughter millions of animals, thus avoiding the environmental impacts associated with animal agriculture. 

Meat is a $1tn dollar industry. With demand for meat expected to double by 2050, cultivated meat has the potential to help satisfy the growing global demand while reducing the environmental impacts of our food system.

From here, the company will work with the USDA’s Food Safety and Inspection Service to secure the remaining approvals before its cultivated chicken can be sold to consumers. 

Valeti noted that it was a “watershed moment” in the history of food, with this regulatory milestone marking a major step towards a new era in meat production. We are excited to be on this journey with Uma and the team!


A game-changing vaccine for cancer?

“Better than my highest expectations” is how Moderna CEO Stephane Bancel described the phase two data from its mRNA vaccine for cancer. The experimental cancer vaccine, in combination with Merck’s immunotherapy drug Keytruda, reduced the risk of death or recurrence of melanoma in high-risk patients by 44 per cent compared with treatment using just Keytruda.

And Bancel thinks this should also work with other tumours.

The experimental vaccine uses mRNA to deliver a vaccine that teaches the immune system to specifically target cancer tumours.

Creating a personalised cancer vaccine starts in the clinic. You take tissue from the tumour, sequence it and then over a six-week period, Moderna manufactures a vaccine that matches the top 10/20 mutations.

We think this has the potential to be a new paradigm in the treatment of cancer patients. It endorses our view that Moderna is pioneering a new class of medicine based on mRNA and confirms it can broaden its offering beyond respiratory diseases.

Moderna and Merck plan to launch a phase three trial in 2023 and we are very excited to watch developments unfold.


Michele leaves the House of Gucci after 20 years 

Gucci’s Creative Director, Alessandro Michele, has stepped down after eight years at the helm and more than twenty years at the illustrious fashion house. Starting as an accessories designer in 2002, he was relatively unknown outside Gucci when he was named creative director in 2015. While his appointment raised a few eyebrows at the time, Michele has played a fundamental part in making the brand what it is today. He has overseen one of the most successful periods in Gucci’s history, with sales more than doubling and profits tripling in his tenure.

Defining Michele’s Gucci aesthetic in a few words is impossible. Its mixture of adidas and North Face logos with renaissance-style frills and fabrics does not lend itself to an easy description – it was just simply ‘Gucci’. He has a distinct style that embodied wider cultural conversations around gender, sexual identity and race.

However, the pace of revenue growth at Gucci has been slowing, with some critics highlighting ‘fatigue’ around Michele’s designs as the reason why. Against that backdrop, Michele’s departure should come as no surprise. Unexpected and unsentimental changes at the top are not new at Kering.

The willingness to let creative directors experiment artistically is what makes Pinault’s management style and culture so unique and we look forward to seeing what the new chapter holds.


The recipe may change, but Zoom’s secret sauce hasn’t

Hoovering, Xeroxing, Rollerblading, FedExing and Googling. Typically, a company name becomes a verb because of creeping industry dominance over a lengthy period. For videoconferencing, however, the rise of ‘Zooming’ materialised almost overnight during the pandemic.

Zoom’s revenue has grown more than tenfold over the past three years, with a commensurate explosion in its enterprise customer base – from less than 50,000 to over 200,000 enterprise users. But as the pandemic subsides, Act One is over for Zoom. Their growth trajectory will never see a repeat of 2020 and 2021.

So what will drive the company’s next leg of growth? Zoom’s product engineers have been busy building 1,500 new features and enhancements in the last year alone. To give a flavour, it has been:

  • developing the ability for users to have multiple co-working spaces live on their screen
  • considering how to replicate its services on the move: a partnership with Tesla enables video calls in the car
  • and developing machine learning capabilities to seamlessly integrate different languages.


Just as Microsoft and Adobe continually add features and encourage users to move up the price curve, so too could Zoom. Safe to say the pipeline looks sufficiently compelling to make the post-pandemic air pocket worth riding out.


Navigating tough times

Carvana’s mission is to change the way people buy cars through the online automotive dealership that it operates across the US. This is a trillion-dollar market, characterised by highly-fragmented, legacy car dealership networks with customer service that is often shoddy at best. Carvana’s near-term ambition is to sell 2 million of the 40 million used cars sold in the US and Canada each year. In the longer term, they could conceivably gain a much higher market share and our numerical scenario analysis implies the potential for over 20x upside.

That’s all well and good but there’s a significant near-term challenge for Carvana to overcome. Economic headwinds are muting Carvana’s growth in the context of a business model that was designed to have economics at higher levels of scale. We’ve been engaging extensively with Carvana’s management team on this front. They’ve made decent progress on making the cost structure leaner to reduce their losses but there’s material pressure on the company’s balance sheet.

Some other holdings have faced similar challenges in the past, but have managed to weather the storm. Our role at this juncture is to patiently support the management team - but with discipline and prudent monitoring.

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The trust has a significant investment in private companies. The trust’s risk could be increased as these assets may be more difficult to sell, so changes in their prices may be greater.

The trust invests in emerging markets where difficulties in dealing, settlement and custody could arise, resulting in a negative impact on the value of your investment.

About the author - Claire Shaw

Portfolio Director

Claire Shaw is a portfolio director and plays a prominent role in servicing Scottish Mortgage’s UK shareholder base. Before joining in 2019, she spent over a decade as a fund manager with a focus on managing European equity portfolios for a global client base. With a background in analysing companies and communicating investment ideas, Claire is also responsible for creating engaging content that makes the Scottish Mortgage portfolio accessible to all its shareholders. Beyond that, she works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders.

Important information

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor any reliance be placed on them when making investment decisions.

This content contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned.

Baillie Gifford & Co Limited is the authorised Alternative Investment Fund Manager and Company Secretary of the Trust. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies. Scottish Mortgage Investment Trust PLC (Scottish Mortgage) is listed on the London Stock Exchange and is not authorised or regulated by the FCA.

Any images used in this content are for illustrative purposes only.

All data is sourced from Baillie Gifford & Co unless otherwise stated. A key information document is available on the Documents page.


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