Episode 145 - June 13, 2025

Summary

• Paul Matteis makes the case that a TACO-style dip-buying thesis may have applied to therapeutics: investors may have been rewarded for buying the dips on RFK Jr.’s appointment, Peter Marks’s dismissal, and tariff day. The FDA looks “really open for business,” micro-caps are recapitalizing, and modest-premium M&A signals mid-caps becoming “willing, realistic sellers” — though pharma CEOs he talks to “are more worried than the average investor” that “some concession has to be made.” Yaron Werber’s stance: bottom is in, but “constructive, probably not bullish.”
• MFN remains the boogeyman, and the panel splits on how priced-in it is. Paul thinks sector-level fear is in the XBI but “the single stock impact is still kind of the wild card” — he’s very bullish on vutrisiran, yet asks, “what if MFN centers around Part B drugs?” Eric Schmidt is flatly worried: “this administration is going to take its pound of flesh out of drug pricing,” an IRA-style slippery slope, with Bernie Sanders and RFK Jr. agreeing on shutting down direct-to-consumer advertising as evidence of “the right and the left colluding” against the industry.
• UroGen’s UGN-102 (ZUSDURI) approval despite a 5–4 negative ODAC — ~$21,000/dose, potentially $100,000+ per course, a ~59,000-patient low-grade, intermediate-risk NMIBC market — shows a flexible FDA, but the panel separates that from the ACIP overhaul. Yaron’s analogy for the new vaccine committee of psychiatrists, nutritionists, an ER specialist and an OB practitioner, including noted vaccine skeptics: “a dessert menu full of pastries without a pastry chef.” Eric says, “It’s not okay to say, ‘well, the FDA is functional, but’” while public-health policy is being disrupted; Paul fears it may worsen until a public-health crisis stops it.
• Shareholder activism against zombie biotechs (ADAR1/Keros, Deep Track/Dynavax) draws strong support — Paul calls the Third Harmonic-style capital return “efficient capitalism,” saying six months ago nobody saw this coming and it is now nearly fait accompli. Yaron’s board-level caveat: “$100 million is never $100 million” after contracts, facilities and D&O insurance — but boards should kill programs faster anyway. Paul says he and Josh wrote about zombie biotechs in February; Eric warns management teams cannot simply hide behind bear-market inefficiency, while Josh argues drug-probability handicapping is “as much an art as a science.”
• Paul is bullish into Compass’s imminent first Phase 3 psilocybin readout, floating a 4–5-point-or-better placebo-adjusted MADRS delta and saying mid-to-high single digits may be the right range. Spravato validates the class — positive in only 2 of 4 trials, yet selling well over $1 billion and maybe reaching $3 billion-plus — making psychedelics a plausible “five-plus-billion-dollar” class; the real Compass debate is commercial, involving eight hours in a center and a trained therapist at most sites, not whether the drug works. Functional unblinding is why the placebo-controlled study is generally expected to succeed.
• Eric thinks the Street misread Avidity’s FSHD update: it fixated on accelerated-approval nuance while missing Phase 1/2 consistency across clinical and biomarker endpoints in a stochastic disease — “that just tells me this thing works” — so probability of success should rise meaningfully. He expects a late-next-year accelerated-approval filing to be approved. Paul adds a potential positive read-through to DM1, where Dyne is pursuing accelerated approval on a DMPK biomarker.
• Ascendis’s uncontrolled 21-patient TransCon CNP-plus-growth-hormone study, following its November 30 achondroplasia filing, looked “very provocative” against historical controls — better than prior CNP-alone data and Voxzogo and, in Yaron’s view, potentially even better than BridgeBio’s oral FGFR3 drug, infigratinib — while the 26-week data already matched prior 52-week benchmarks. Phase 3 will test CNP with or without growth hormone, not growth hormone alone; the open question is whether FDA demands two years of data as it did for Voxzogo. The surprise priority review may support an argument that Ascendis is more than a convenience product, potentially complicating BioMarin’s blocking case. Paul, who covers BioMarin, calls the stock “stuck in an Alexion-like universe of the undisprovable bear case,” with long-term guidance issued weeks before the data being “tough timing, tough luck.”
• Insmed’s once-daily TPIP versus TID Tyvaso, at a near-$20 billion market cap, reopens the too-big-to-acquire question — and the valuation-philosophy debate. Paul says even a couple-percent M&A chance “puts a company into a different valuation conversation” (Ionis being the discounted counterexample); Eric says development-stage valuation is “a fool’s game… garbage in, garbage out” — drugs either work or “they’re zeros.”
• Cabaletta’s CAR-T data show a buzz gap: Eric says patient and physician enthusiasm at EULAR has not reached investors because a likely forced $100 million raise at a low valuation creates a capital-and-manufacturing vicious cycle. Yaron calls 7 of 8 responses across several myositis types “definitely very encouraging,” points to FcRN and anti-BDCA2 innovation and upcoming Phase 3 studies, and says related data may arrive in September. Josh flags scleroderma/systemic sclerosis as one of rheumatology’s biggest unmet needs and Compass’s PTSD program as another underappreciated opportunity.

Deep dive

1. The “taco trade” comes to biotech: buy the policy dips

• Paul’s framing off the Bloomberg “taco” piece — “Trump always chickens out” — is that therapeutics may have traded the same way: investors may have benefited from buying the dip when RFK Jr. was appointed, when Peter Marks was dismissed, and on tariff day. The healing tape: an FDA “really open for business,” strong launches by companies without a buyer, micro-caps recapitalizing, and M&A at modest premiums he reads as mid-caps becoming “willing, realistic sellers.”
• His caveat: pharma CEOs in his coverage “are more worried than the average investor” — their view is that pharma will not escape entirely unscathed and “some concession has to be made” on pricing. Eric’s fundamental overlay: with EULAR, EHA, a surprise approval and ASCO before it, this was “the best maybe two-week string of events that we’ve seen in the industry in a long, long time.”
• Yaron splits the difference: the bottom is in, expectations were “as bad as it gets,” but “there’s no structural bull thesis here… we’re constructive, probably not bullish.”
• On MFN, Paul argues sector-level fear is priced in but “the single stock impact is still kind of the wild card” — he’s very bullish on vutrisiran, yet asks, “what if MFN centers around Part B drugs?” Eric won’t soften it: “this administration is going to take its pound of flesh out of drug pricing,” a slippery slope like the still-painful IRA — and Sanders and RFK Jr. converging on shutting down direct-to-consumer advertising shows “the right and the left colluding”; “our industry is on the defensive.”

2. UroGen’s approval proves FDA flexibility — but “the FDA is functional, but…” doesn’t fly

• Eric on UGN-102 (ZUSDURI): the drug always looked efficacious, but a Phase 3 with no substantive control arm produced a 5–4 negative ODAC — and the FDA “did what we all thought it should have done” and approved it anyway. Priced at about $21,000 per dose, potentially $100,000-plus per course, it targets a ~59,000-patient low-grade, intermediate-risk NMIBC market and may be best suited to elderly or highly recurrent patients versus TURBT.
• The counterweight is RFK Jr. “tearing to shreds” the ACIP committee — replaced with a psychiatrist, a nutritionist, an ER specialist, an OB practitioner and noted vaccine skeptics, some reportedly tied to RFK through Merck litigation, though Yaron says he is not sure he has the facts right. Yaron’s image: “trying to have a dessert menu full of pastries without a pastry chef. People who make steak cannot make pastry… vaccines are a very specific breed of therapeutics.”
• Eric draws the line the growing “FDA is fine” narrative elides: “It’s not okay to say, ‘well, the FDA is functional, but’ and then point to the disaster that’s going on in our public health system.” Paul, whose family is expecting a child in three weeks, says, “I’m hoping we can get some vaccines in the next couple years.” He fears the situation may worsen until a public-health crisis stops it.

3. Zombie biotechs and activists: “efficient capitalism”

• Against Josh’s setup — ADAR1’s letter to the Keros board, Deep Track battling Dynavax — Paul sees no over-aggression: Third Harmonic returned capital and its executives’ reputations rose; the offending pattern is a lead asset at 90%+ of valuation failing, then management spending the pile on projects “that weren’t really the premise of them getting the money in the first place.”
• Yaron, drawing on conversations with people involved in these situations, says unwinding risks litigation and “$100 million is never $100 million” after employee contracts, facilities and D&O insurance — but companies must “be equally skeptical about what they have” and terminate programs faster, recycling shells for the next IPO cohort.
• Paul notes that he and Josh wrote about “zombie biotech companies” in February, when none of this was happening; now capital return after a blow-up is nearly fait accompli — “I find this to be efficient capitalism… I honestly love the trend.” Eric warns management teams hiding behind bear-market inefficiency: “that’s a tough place for a management team to hide.” Josh’s partial pushback: drug-probability handicapping is “as much an art as a science,” and insiders with more information may honestly see different odds — so who do you defer to?

4. Psychedelics: from “science-projecty” to a potential $5B+ class

• Paul’s conversion arc: “this space felt a little science-projecty a half-decade ago.” What changed is Spravato — “not an amazing drug,” positive in only two of four trials, two hours in a patient every other week — selling well over $1 billion and plausibly $3 billion-plus, validating both the market and FDA’s willingness to engage on trial design and functional unblinding. Premium products in treatment-resistant depression and anxiety “could be a five-plus-billion-dollar class. I don’t think that’s crazy.”
• The Compass setup: Phase 3 COMP360 top-line is likely this month, placebo-controlled and “generally expected to succeed” partly because psychedelic trials involve some functional unblinding. Disclosure will be limited to protect the second Phase 3, whose control is a subtherapeutic dose. Paul is bullish on the data but says the debate is commercial — eight hours in a center, with a trained therapist at most sites — and questions the readout will not resolve.
• His effect-size handicapping: placebo response is “enormously variable” — healthy placebo gains in Spravato trials, none in GH Research’s Phase 2 — so a 4–5-point drug-placebo MADRS delta could look like half of 5-MeO-DMT’s yet remain hard to interpret without seeing the placebo arm. Base case: 4–5 or better, with “mid-to-high single digits… probably the right range.”
• Josh on delivery infrastructure that Compass always said “is building itself”: he is literally watching a former convenience store across his street become an interventional psychiatry clinic; psychiatrists have “partly been practicing pseudo-medicine” for lack of meaningful tools, and Paul says MGH has, as he understands it, turned Spravato into a revenue driver.

5. Avidity’s FSHD data: “this thing works” — and the market isn’t paying for it

• Eric’s three-part read of the FSHD update: FDA is open to accelerated approval, with work left on the DUX4 biomarker package; a confirmatory outcomes Phase 3 has started; and extended Phase 1/2 data “looked really good.” The Street fixated on part one and sold the stock; what it missed, in his view, is 35–40 patients over 12 months showing consistency across physician-reported, patient-reported and objective biomarker endpoints in a slowly, stochastically progressive disease — “that just tells me this thing works,” and probability of success should go up meaningfully.
• He expects a late-next-year accelerated-approval filing to succeed. Paul’s wider lens: this joins uniQure’s Huntington’s alignment as evidence of regulatory flexibility, with a potential positive read-through to DM1 — Avidity on a full-approval path, Dyne pursuing accelerated approval on a DMPK biomarker — “and we should know soon.”

6. Insmed’s TPIP, the M&A obsession, and dueling valuation philosophies

• Josh on TPIP: once-daily inhaled prostacyclin data are “looking quite good” against TID Tyvaso — and his history lesson, CoTherix’s Ventavis, an iloprost therapy requiring four or more daily inhalations of up to 10 minutes each, underscores how powerful dosing-burden reduction can be for share. With Insmed near a $20 billion cap, Adam Feuerstein’s “too big to be acquired?” question prompts: why is biotech M&A-obsessed rather than company-building-obsessed?
• Paul says the industry needs the next Vertex, Regeneron, Celgene, Alnylam or argenx — all built on a sizable first product — and those who can should “fly the flag and sail across the ocean.” He still thinks it a shame Acceleron sold: “they would have done fantastically on their own.” Yaron adds that more large biopharma companies could, in theory, create more acquirers for companies that cannot become very large independently.
• Paul’s explanation for the obsession: biotech isn’t really valued on DCF — “I feel like as a sell-side analyst, I have to have one” — so even a couple-percent takeout probability “puts a company into a different valuation conversation.” Exhibit: Ionis, an impressive multi-shot company denied a premium because it is seen as an extremely unlikely target. “For the risk that you take on, you almost need a couple percent chance of that dream case… to justify everything else.”
• The methods split: Yaron finds DCFs hopelessly subjective, including terminal value, discount rate and working capital, and prefers a five-year outlook with a P/E multiple; Eric goes further — development-stage valuation is “a fool’s game… garbage in, garbage out”: drugs either work and are worth more than their weight in gold, “or they don’t and they’re zeros” — spend less time on fictitious models, more on diligence.

7. Ascendis’s CNP/GH data challenge Voxzogo; priority review may complicate blocking

• Yaron’s walkthrough: Ascendis filed its achondroplasia application on November 30, and its TransCon CNP married to the company’s own growth hormone produced “very provocative” results in an uncontrolled 21-patient study using historical controls. Annualized growth velocity and body proportionality looked better than prior TransCon CNP-alone data or Voxzogo, and Yaron said the combination looked even better than BridgeBio’s oral FGFR3 drug, infigratinib. The 26-week data already looked as good as prior therapies’ 52-week data.
• Phase 3 will test CNP alone versus CNP plus growth hormone; it will not test growth hormone alone because growth hormone is not approved there. The underlying question is that these are children generally treated for a limited period, not lifelong, while historical data suggest growth-hormone benefit may be strongest in the first year and not continue after two years. The study is planned for one year, but FDA may still ask for two-year data as it did with Voxzogo.
• Paul, who covers BioMarin, says the stock is “stuck in an Alexion-like universe of the undisprovable bear case,” with two credible sides — why take a daily when a weekly exists, versus incumbent resilience seen in growth-hormone weeklies and hemophilia long-acting therapies. Issuing long-term guidance a couple of weeks before the Ascendis data: “tough timing, tough luck for them.”
• Josh’s specialist checks suggest vulnerability for Voxzogo — doctors are “nonplussed” about daily injections for children and underwhelmed by efficacy — with high enthusiasm for oral infigratinib if its profile holds. On IP, Eric says Ascendis challenged BioMarin’s key European patent, which was narrowed but still retains claims; patent calls suggest “BioMarin’s got a real case,” although blocking in the US, including through the ITC question Josh raised, is “really, really hard.”
• Eric was “really surprised” Ascendis got priority review: if Ascendis can make a regulatory argument that it is not merely a convenience product, that could make blocking more challenging. Yaron said the priority review immediately looked like a possible precedent that FDA was comfortable with the mechanism without requiring two-year data. Hypochondroplasia and other indications also matter; BioMarin has discussed a market growing from $1 billion to $5 billion.

8. Cabaletta’s CAR-T buzz gap and the sleeper indications nobody prices

• Eric on why patient and physician excitement at EULAR has not reached investors: Cabaletta is “showing something that’s never been seen before” in severe rheumatologic disease, but the capital issue dominates — a likely forced $100 million raise at a low valuation creates a vicious cycle for cell-therapy companies facing manufacturing spend and expensive studies before revenue.
• Yaron’s data check: seven of eight responses across several myositis types in refractory patients — “definitely very encouraging” — in a growth market with innovation from FcRN agents and an anti-BDCA2 antibody. He also mentions upcoming Phase 3 studies from Bristol and Roivant, plus a study associated with colleague Matt Gantz that could read out in September.
• Josh, a trained rheumatologist, flags scleroderma/systemic sclerosis as “one of the absolute biggest needs in rheumatology,” with high morbidity and mortality and promising early CAR-T signals. He also points to Compass in PTSD, where “no one ever talks about PTSD.” Paul agrees “it looks like it works,” but investors anchor to depression’s far bigger market and treat PTSD as “more of the upside thing.”