Summary

Biotech entered JPM 2025 with a five-year return of negative 5%, versus nearly 200% for tech and 80% for the S&P, which Brad Loncar framed as evidence of structural change rather than merely a rate cycle. He called the COVID period a “bubble” and said it arguably, hopefully, would be a “once-in-a-generation thing,” while Sam Fazeli stressed that 5–6% returns from simply parking money still divert capital and that tech and AI may offer quicker returns. Yaron Werber’s near-term tell: if XBI and IBB remained down after JPM, history suggested a down year.
China now supplies one-third of big pharma’s newly in-licensed molecules, up from zero five years ago, with roughly $6 billion of upfronts over the last year that might otherwise have supported XBI companies. Loncar thinks Washington will eventually make Chinese partnerships as difficult as semiconductor ties. Fazeli defended accessing good science wherever it exists and urged the U.S. to address its “anti-science attitude.” Loncar warned the shift could hurt U.S. discovery jobs, money and small biotechs.
Private biotech has unprecedented dry powder, but investors are concentrating it in mega-Series A rounds and proven teams rather than spreading it “like peanut butter.” Four private deals announced that day totaled more than $800 million, three involving Chinese assets, while Cardigan launched with $300 million and Lilly partnered with a16z on a fund. This is capital abundance with harsher selection, not a system-wide financing thaw.
The JPM setup was expected to be muted—few mega-deals, delayed IPOs, and a tape where “if you have data, the stock goes down”—so stock-specific timing mattered more than conference spectacle. Argenx and Vyvgart looked strong; Amgen’s MariTide questions wait for midyear ADA; BioNTech and Summit’s VEGF–PD-1 updates come later; and Ultragenyx’s setrusumab had a more plausible second interim around May or June than the imminent first look. Werber’s blunt hierarchy: “Everybody cares about setrusumab.”
Pfizer quantified the 2025 Medicare Part D redesign as a $1 billion net hit—a $1.5 billion drag offset by $500 million, or about 1.6% of revenue—making reimbursement a direct earnings variable. The panel discussed a possible list of 15 more negotiated drugs, perhaps before January 20, including Ozempic, Januvia, Xtandi, Eliquis and Pomalyst. Loncar questioned whether incoming officials could change the depth of the cuts; Chris Garabedian highlighted a possible effort to equalize the seven-year small-molecule and 11-year biologic exemption windows. Senior FDA departures deepen uncertainty, though Yaron said some reform could address long-standing inconsistency.
Stoke and Jasper showed why financing duration can overpower apparently constructive clinical news in this market. Stoke’s zorevunersen phase 3 plan retained six-month seizure reduction as its primary endpoint after 70–80% phase 2 reductions, yet data may not arrive until late 2027; Jasper fell about 60% because its c-KIT antibody looked merely in line, remained roughly 18 months behind Celldex, and would need capital. “They’re trading at a seventh of the market cap” did not protect it.
Novo Nordisk faces a year of obesity readouts where CagriSema’s body-composition detail may matter as much as headline weight loss, while Lilly and others press with pills and muscle-preservation approaches. Fazeli kept only “a very small amount” of hope that higher dosing or preserved muscle could improve CagriSema’s interpretation. Separately, Galapagos announced a split between a roughly €2.5 billion cash SpinCo and a $500 million CAR-T company, potentially separating cash deployment from the CAR-T strategy.
Galapagos’s SpinCo may be intended to free asset development from the Gilead option, license and collaboration agreement, but Fazeli questioned why the agreement could not simply be renegotiated. The CAR-T thesis remains a decentralized, potentially fresher-cell, seven-day vein-to-vein manufacturing model, while Gilead’s 25% stake could let it combine or cherry-pick the technology if the data mature.

Deep dive

1. Biotech’s underperformance looks structural, not merely cyclical

Loncar’s baseline was unforgiving: biotech fell roughly 5% over five years while tech gained almost 200% and the S&P rose 80%; over the latest two years, the S&P delivered about 25% annually. Broad biotech investors “left a lot of money on the table” versus simply buying SPY.
He rejected the COVID-era market as a sensible benchmark for IPOs or valuations: it was a “bubble” and arguably, hopefully, “a once-in-a-generation thing.” More recent rate cuts have not rescued biotech because tech continued taking the incremental capital.
Fazeli’s macro qualification was that the relevant variable is the cost and availability of money. With 5–6% available by simply parking money—and a 256,000-job report supporting expectations for fewer rate cuts—investors have less reason to fund long-duration assets. He also stressed that AI and tech may offer quicker returns.
Werber’s short-term indicator was the JPMorgan-to-Cowen trading window. XBI and IBB were down only about 1% at the start of the year, but “if we still finish down next week, history suggests we’re going to be down for the year.”
Garabedian added the lack of M&A as another headwind: meaningful deals would normally bolster sentiment and valuations, but the FTC overhang and broader uncertainty have kept that support limited.

2. China has become both biotech’s asset factory and its political fault line

Tim Opler’s standout statistic, highlighted by Loncar, was that one-third of big pharma’s newly in-licensed molecules came from China over the last year, versus zero five years earlier. Roughly $6 billion of upfront payments flowed to Chinese companies—capital that might previously have reached XBI companies.
Garabedian traced the setup to China’s heavy investment beginning around 2017, followed by a U.S. downturn that rewarded proven management teams licensing already-developed assets. Scarcity then reinforces speed: buyers rush for attractive programs rather than fund de novo discovery.
Loncar expects political intervention, citing a congressional letter arguing that U.S. biotech should not conduct clinical trials at military hospitals in China: “Something is going to happen in Washington.” His endpoint is semiconductor-style restriction, with partnerships becoming materially harder.
Fazeli took a different position: “I’m a citizen of the world,” and good science should be accessed wherever it exists. His domestic prescription was to address the “anti-science attitude” in the U.S. rather than reject useful Chinese science.

3. Capital is plentiful, but only concentrated bets are clearing

Bruce Booth’s framing carried the private-market paradox: there is more dry powder than ever, yet firms are not spreading it “like peanut butter.” They are putting hundreds of millions behind selected management teams and unusually large Series A rounds.
Four private deals announced that morning totaled more than $800 million, three involving Chinese assets. Cardigan, led by former MyoKardia CEO Tassos Gianakakos, launched with $300 million from Perceptive, Arch and Sequoia Heritage.
Verdiva Bio exemplified the new-company template: raise several hundred million dollars, license Chinese oral GLP-1 and amylin programs, and construct a company around them. Loncar linked that model to concurrent U.S. layoffs and pressure on smaller discovery companies.
Lilly’s collaboration with a16z extended the external-innovation model beyond ordinary venture investing. Garabedian saw it as a large cash-generating pharma working with an outside venture firm focused on finding early-stage opportunities.

4. JPM’s tradeable setup is muted and catalyst-specific

Werber expected few mega-deals and postponed IPOs, with a market where “if you have data, the stock goes down” regardless of whether results are positive. Argenx was the stronger bellwether: he expected a preannouncement and a beat, while Vyvgart was performing well and would provide an early-pipeline update.
Amgen’s biosimilar Eylea could help, but MariTide remains the key debate and even midyear ADA data may not resolve concerns. BioNTech and Summit’s VEGF–PD-1 phase 2 updates were expected later in 2025, with possible Summit second-line EGFR-mutant phase 3 data late in the year.
Exelixis was not expected to be acquired; Cabo guidance looked roughly in line, leaving execution to the early pipeline. Ascendis faced Skytrofa competition and pricing pressure, while its recently launched once-daily PTH replacement Yorvipath was expected to start well.
Ultragenyx was Werber’s top pick, but setrusumab’s osteogenesis imperfecta phase 3 timing mattered: a first interim analysis was expected imminently, probably in January, but the May–June second look was considered much more likely to be powered correctly to stop. Failure there would push the decision toward an October final analysis.

5. IRA exposure and FDA turnover add policy risk to earnings risk

Fazeli said large pharma would get the Part D redesign “squarely in the face” in 2025. Pfizer disclosed unusual granularity: a $1.5 billion drag, a $500 million benefit, and a $1 billion net impact—about 1.6% of its top line. Other companies were not expected to provide the same level of detail.
The next list of 15 negotiated drugs could be named before Donald Trump’s January 20 inauguration. Discussed candidates included Novo Nordisk’s Ozempic, Merck’s Januvia, Pfizer’s Xtandi, Eliquis and Pomalyst.
Loncar questioned whether incoming leadership could choose deeper or shallower cuts and suggested Trump could simply allow the process to continue. Garabedian said a more plausible policy target might be extending the small-molecule exemption from seven to 11 years, while leaving the negotiation process intact.
Fazeli emphasized the departures of Patricia Cavazzoni, the FDA commissioner, the head of CDER and Bob Temple. Werber said some positive reform could emerge, noting long-standing inefficiency, inconsistency and tension between FDA hierarchy and the divisions.

6. Constructive clinical news is being discounted by time and financing needs

Stoke’s phase 3 path for zorevunersen in SCN1A-related Dravet syndrome looked at least as good as expected: breakthrough designation, a six-month seizure endpoint, and phase 2 data showing roughly 70–80% seizure reductions plus cognitive and neurocognitive benefit. The stock still fell because the study would not start until around midyear and results may not arrive until late 2027.
Jasper’s phase 1/2 c-KIT antibody data produced efficacy broadly in line with Celldex’s barzolvolimab and similar class-specific side effects, but offered no clear differentiation. With Jasper about 18 months behind, still evaluating higher doses and likely needing capital, the shares fell roughly 60%.
Werber’s through-line was that a seventh-of-the-competitor valuation did not matter when the asset was a fast follower. In this tape, companies may think twice about raising money or releasing data unless disclosure is legally required.

7. Obesity competition is shifting from weight loss alone to treatment quality

Fazeli’s “very small amount” of remaining optimism on CagriSema rested on two possibilities: Novo might push dosing higher, or the semaglutide–amylin combination might preserve more muscle while losing fat, making total weight loss understate its body-composition benefit. He was unsure whether ADA would provide the needed data.
Novo’s 2025 news-flow risk remains heavy: Lilly’s oral GLP-1 orforglipron, a possible Pfizer pill, and muscle-preservation readouts from Scholar Rock, Regeneron and Lilly’s bimagrumab. Fazeli nevertheless expected demand to remain powerful—friends were already asking after Christmas whether to start Zepbound or Wegovy.
Yaron viewed Novo’s expanded Valo Health relationship, potentially covering 10 to 18 assets and carrying potentially several billion dollars in milestones, as a way to access AI capabilities in cardiometabolic drug discovery off its balance sheet. Whether it yields meaningful drugs remains open.

8. Galapagos and new platforms are being forced to prove their structure

Galapagos announced a split under which Galapagos would retain its CAR-T work and about $500 million, while a new SpinCo would receive roughly €2.5 billion, new management and responsibility for finding and developing assets. Fazeli’s dry reaction—finding assets was “what I thought was Galapagos in the first place”—captured the unresolved question of why the Gilead agreement could not simply be renegotiated.
Fazeli speculated that the structure could help move SpinCo out of Gilead’s 10-year option, license and collaboration agreement, whose option rights may have made it difficult to advance assets beyond phase 1. He explicitly questioned why a split was needed to achieve that.
Loncar saw the split as a response to a persistent multibillion-dollar negative enterprise value, investor pressure and dislike of the CAR-T acquisition. Separating the cash creates a distinct capital-allocation vehicle rather than forcing one investor base to underwrite two unrelated strategies.
The CAR-T thesis is technically distinct: distributed manufacturing near hospitals, potentially fresher cells rather than frozen ones, and approximately seven-day vein-to-vein delivery. Fazeli thought Gilead’s 25% position could let it combine or cherry-pick the manufacturing system with its own CAR-T operations if the data mature.
In masked T-cell engagers, Vir’s technology acquired from Sanofi blocks both CD3 and tumor-antigen binding until protease activation in the tumor. The early data looked competitive, possibly better, on safety, but efficacy did not look as strong as Janux’s and dose escalation was ongoing. Vir was testing up to 1 mg/kg—roughly 70–80 mg in an average patient—versus Janux’s 6, 8, 10 and 12 dose levels. Fazeli wondered whether masking the antigen-binding side requires higher exposure for adequate tumor distribution, and whether safety would hold at higher doses.
The Louisiana H5N1 death briefly lifted CureVac, Novavax, Moderna and BioNTech, then the gains reversed the next day. Fazeli emphasized that the frequency of mutations allowing human-to-human transmission was very low and no human-to-human spread had been shown: that, rather than an isolated case with comorbidities, would be the pandemic-stockpile trigger.

Episode 127 - January 17, 2025 Achieve Peak Creativity: Merging Flow States with AI Technology w/ Steven Kotler | EP #151