Episode 152 - August 15, 2025

Summary

• Vinay Prasad is back at FDA two weeks after leaving; Tess pointed to Precigen’s full approval of Papzimeos for a small HPV-driven population on a “pretty small trial” as an early action to watch. Tess Cameron flagged Prasad’s line in the FDA press release — “randomized trials not always needed to approve medical products and this approval is proof of that philosophy… Our requirements for products given to tens of millions of healthy people will be different than products given to at most hundreds or thousands of patients with unique diseases” — a sharp contrast with earlier-year regulatory decisions “where there was a little less clarity on why things didn’t get approved.” Eric Schmidt’s read: Prasad and Makary are “joined at the hip,” and Makary pushed him back through “despite some of the political headwinds.”
• Asked whether it’s easier to make money playing or avoiding binary events, Eric answered “no doubt the latter… 100%.” His mechanism: the whole industry wears rose-colored glasses, so if consensus handicaps 70% odds when reality is 50/50, “that’s a terrible risk-reward” — the trade is buying 3–12 months before anyone’s playing the event. Tess added a bigger-fund constraint: you can’t “efficiently play around these events” without being the volume that moves the stock, so you enter with conviction knowing “you might have to sit through some binaries.”
• PDUFA risk/reward may actually be improving in gray cases because recent regulatory uncertainty makes approval outcomes harder to gauge. Tess’s examples: Precigen was “up dramatically” on an unanticipated approval, and UroGen — a dramatic advisory committee with a mixed vote, then FDA interactions — moved quite a bit before and after approval once it hired reps, versus Insmed’s brensocatib, where approval was fully baked and there was no huge day-of reaction.
• The mRNA funding pullback drew two different official rationales in a week or so — RFK Jr. on safety/efficacy, then NIH’s Bhattacharya citing “public distrust of the technology.” RFK Jr.’s view was that a monovalent mRNA vaccine, particularly for inhaled respiratory viruses, may be fodder for mutations and escape from those vaccines and perpetuated the pandemic. Eric’s retort: “Maybe it’s our government that’s been telling us to distrust the technology,” and his core framing — “mRNA is a molecule… It doesn’t have a political will. It’s just science” — a tool to be studied, not “a political football.”
• The product-launch trade still works for fresh launches, driven by ever-higher out-of-the-box pricing (“everything is priced to be a blockbuster”) and better payer navigation — but Josh warns the blockbuster bar is “now probably closer to $5 billion” and new-drug launch pricing could become the next political target. Tess disputes Eric’s claim that payer pressure has eased: it’s “very much still there,” companies have just gotten far more sophisticated about disclosing launch population, gross-to-net, IRA catastrophic payment and formulary strategy. Her MFN thesis: higher ex-US prices lower US prices long-term via fourth- and fifth-to-market competition — hepatitis C went from “$84,000 a year to… like $15,000.”
• Investment horizons have compressed to 3–4 months and “almost no interest in 2026 catalysts” — which Josh frames as the arbitrage: names priced at “a 5 to 10% chance of working and in reality it’s north of 50%,” gaps that close as data approaches. Eric’s risk-on theory: after a strong three months for smaller-cap development-stage companies and multi-fold binary winners, investors want near-term events; he cited the Cidaras, Sutros and Abivaxes. Tess calls it macro catch-up — “can you even focus on next week because you’re just trying to figure out what’s happening today.”
• The earnings-call debate for pre-commercial companies got a live case study: $20B development-stage Summit Therapeutics skipped its call, creating “a storm in a teacup” and making it Eric’s “number one incoming call volume stock in the last 5 days,” with the stock weak in a good tape. Tess says calls are “more of a distraction than a benefit” pre-Phase 3; Eric takes the other side — with 500 companies chasing capital, skip calls and “you’re in danger of becoming a non-entity”; Josh’s verdict: “these standard earnings calls don’t move stocks.”
• The IPO window is six months shut (longest historical drought ~20 months), and BBOT’s well-capitalized SPAC shows the workaround: agree on price like a private deal rather than the IPO’s game-theoretic price discovery. RA’s playbook is pricing deals with roughly 70% coverage from insiders; Josh’s structural worry is that the best companies least need to IPO, so the window gets tested by “the middle tier” — while Insmed’s clean Brinsupri label, ARS Pharma’s Neffy needing a Q3 step-up, and Sarepta’s fuller safety disclosure round out the launch scoreboard.

Deep dive

1. Prasad is back, and the Precigen approval is the tell

• Eric’s read on the reinstatement: “these two leaders are joined at the hip” — Makary “pushed very hard and very aggressively to bring him back despite some of the political headwinds,” even though most assumed the exit two weeks ago reflected “too much havoc, too much chaos, too much drama.” His posture: hope both have “learned a few lessons in their first six months on the job,” cross fingers, and support them given what’s at risk in US drug regulation.
• Tess is watching actions over rhetoric: Prasad is “very actively involved in approvals,” and Precigen’s Papzimeos — for a small population with recurrent respiratory papillomatosis caused by persistent HPV — got full approval on a “pretty small trial,” with Prasad quoted in the FDA release: “randomized trials not always needed to approve medical products and this approval is proof of that philosophy… Our requirements for products given to tens of millions of healthy people will be different than products given to at most hundreds or thousands of patients with unique diseases.”
• Her contrast, worth keeping: that explicit philosophy versus earlier-this-year regulatory decisions “where there was a little less clarity on why things didn’t get approved.”

2. Binaries: the money is made avoiding them — except where regulatory uncertainty created mispricing

• Josh’s setup: PDUFA risk/reward has “always been marginal at best” — rarely paid on approval, “relatively catastrophic” on rejection — and could be even worse under this administration. Tess’s counter: uncertainty around open-label trials, small samples and imperfect controls means gray-case approvals may pay — Precigen was “up dramatically,” and UroGen, after a dramatic advisory committee with a mixed vote, moved quite a bit before approval once it hired reps and afterward. Where approval is baked in — Insmed and brensocatib — there was no huge day-of reaction.
• Eric, asked playing versus avoiding binaries: “no doubt the latter… 100%.” “The best way to play any event is well, well, well before anyone else is playing it” — buy 3, 6 or 12 months out and capture the run-in without the binary risk.
• The mechanism behind that rule: industry-wide rose-colored glasses, after Josh called Eric out on his own. If everyone handicaps success at 70% when it’s really 50/50, “that’s a terrible risk-reward” — “we’ve proven ourselves that way time and time again.”
• Tess’s fund-scale reality: big funds can’t “efficiently play around these events” because they’d be a substantial share of volume and move the stock themselves; you enter with conviction and accept sitting through binaries. Eric adds that he favors setups where several outcomes still leave “an opportunity to buy.”

3. mRNA as political football

• Two official rationales in a week or so for pulling mRNA research funding: RFK Jr. on safety/efficacy — his view that a monovalent mRNA vaccine, particularly for inhaled respiratory viruses, may be fodder for mutations and escape from those vaccines and perpetuated the pandemic — then Bhattacharya saying no, it’s about “public distrust of the technology.” Eric: “Maybe it’s our government that’s been telling us to distrust the technology.”
• Eric’s framing, verbatim: “mRNA is a molecule… It doesn’t have a political will. It’s just science” — a tool, “maybe an imperfect tool in some cases,” that should be “assessed… funded… developed… critiqued… studied in clinical trials,” not treated as “a political football.”
• Josh on why the vacuum persists: a platform that “saved the world” is vilified by “a fairly fringe group but a fringe group that now has a national voice”; vaccine-safety capture is genuinely hard — an event a week, month or five years post-dose is difficult to connect to the vaccine — and unknowns “get filled with conspiracy theories, speculation, half-truths” absent a “healthy balanced pro-patient, pro-science dialogue.”

4. The launch trade still works — but watch new-drug pricing politics and MFN

• Eric’s two drivers: for 12–18-month-old launches the trade is already priced in, but fresh launches keep working because out-of-the-box pricing gets more aggressive every year — “everything is priced to be a blockbuster” — and he hears far less about reimbursement restrictions and tiering than in the last three to five years.
• Tess’s pushback: payer pressure is “very much still there”; what changed is sophistication. Companies now have more perspective around the launch population versus total population, gross-to-net frameworks, IRA catastrophic payment, payer mix and formulary strategy when they discuss Phase 3 data — “they have to navigate this stuff… pretty early if they’re going to be successful.”
• Josh’s escalation: the old blockbuster was $1B; “now the blockbuster definition’s probably closer to $5 billion,” partly because, as Eric argued, the IRA’s answer was launching at a higher price — so what’s the probability new-drug launch pricing enters politicians’ crosshairs next cycle? Tess’s calibration variable is “outrage”: recent high-priced launches haven’t triggered it because payers tightly manage utilization, and companies should stay “within bounds of what society thinks is acceptable.”
• Her MFN thesis via No Patient Left Behind: raising ex-US prices may lower US prices long-term by making it easier for fourth- and fifth-to-market companies to enter and compete — hepatitis C went “from like $84,000 a year to… like $15,000 a year for a hepatitis C cure” through that competition.

5. Nobody’s looking at 2026 — that’s the arbitrage

• Josh’s observation: with MFN, tariffs, IRA, HHS and FDA in the field of view, already-short horizons compressed further — “almost no interest in 2026 catalysts” at the point of the year when it should pick up. Eric confirms: call volume is all next 3–4 months; his rose-tinted theory is investors want near-term risk-on after a very good three months, especially for smaller-cap development-stage companies, and multi-fold binary winners such as the Cidaras, Sutros and Abivaxes.
• Tess’s simpler explanation: catch-up after “such an incredible macro upheaval… can you even focus on next week because you’re just trying to figure out what’s happening today.”
• Josh’s payoff: situations where valuation “might reflect a 5 to 10% chance of working and in reality it’s north of 50%” — arbitrages that close as data approaches, driving performance without event-day binary exposure.

6. The earnings-call debate — and Summit as exhibit A

• Tess’s position: for development-stage companies, calls are “more of a distraction than a benefit” — cash, runway and program status fit in a press release; do calls around data, and start regular calls only at Phase 3/pre-launch when moving parts multiply.
• Eric takes the other side of the coin: 500 companies are competing for capital, and without calls, sell-side notes and analyst questions, “you’re in danger of becoming a nonentity… a really, really, really dangerous place to be.” Calls keep him current on 20 or 30 names closely and another 30 or so somewhat closely.
• Josh’s gripes: reviewing trivial R&D financials is “a little knock on your credibility”; “these standard earnings calls don’t move stocks”; why not flexible mid-quarter updates instead of being one of 100 companies on the same day? His concession: “to some extent, it’s our problem… they’re not doing anything wrong.”
• The live case: Summit — a $20B development-stage outlier — did a call last quarter, skipped this one, added some “unorthodox” financial disclosures, and the resulting information vacuum made it “a storm in a teacup,” Eric’s “number one incoming call volume stock in the last 5 days,” and an underperformer in an otherwise good biotech tape.

7. Six months without an IPO; SPACs and reverse mergers fill the gap

• Per Endpoints, six months since the last real biotech IPO, Artiva Biotherapeutics, versus a historical worst drought of roughly 20 months. BBOT (BridgeBio Oncology Therapeutics) instead went public via SPAC, raising a lot of money with a strong but narrow shareholder list; Eric doubts a traditional “dog and pony” roadshow would have done as well, at the cost of lower visibility.
• Tess on why structure matters: SPACs and reverse mergers let you “agree on price” like a private deal, versus IPO price discovery where “everyone’s kind of sitting around the table watching each other… is that like your real order?” RA’s approach: compensate insiders for truthful pricing with the allocation they want, targeting deals that are 70% covered by insiders.
• Josh’s structural catch: the highest-caliber companies least need to IPO — they still access private capital — so the window gets tested by “that middle tier,” requiring an even healthier market pull. He’s hopeful, holding “a long list of high-caliber companies” if it cracks open — “unbelievably intimidated” by how busy that would be.

8. Scoreboard: Insmed’s clean label, Neffy’s Q3 test, Sarepta’s disclosure

• Insmed’s Brinsupri (brensocatib) approval for bronchiectasis was among the sector’s most anticipated — Tess calls it “an excellent case study in communicating the market opportunity and unmet need,” with a “really clean label”: no prior-exacerbation restriction and flexibility for 10 mg or 25 mg. First launch read comes next quarter.
• ARS Pharma’s Neffy (nasal epinephrine replacing EpiPens) is executing a “mile wide, inch deep” high-volume launch with back-to-school help, but Josh reads the post-Q2 selloff as the market demanding a Q3 step-up — plus Aquestive’s under-the-tongue dissolving therapy, which is in discussions with the FDA about its approval path and a potential advisory committee, and paired a substantial equity offering with RTW funding contingent on approval, a structure that can reassure investors about launch financing.
• Sarepta gave the patient community more detail on deaths and the ambulatory/non-ambulatory split — Tess’s principle: with safety, it’s “just critical to get this information out ideally as early as possible” and well characterized.