Episode 155 - September 19, 2025

Summary

• The panel was broadly bullish on a biotech recovery increasingly grounded in industry maturation rather than M&A alone: the XBI is up over 40% since April’s “Liberation Day” lows, Stifel calculates aggregate global public-biotech enterprise value up 89%, and pharma holds $1.2 trillion of acquisition firepower against $180 billion in patent-cliff revenue at risk by 2030. Josh Schimmer’s component-level analysis says the XBI — “never ever on a weighted basis anywhere close to profitable” — is “now just on the cusp of profitability,” with meaningful inflection over the next two to three years, potentially drawing generalists “for the first time ever.”
• Josh and Matt Gline mounted an unusually blunt attack on biotech’s M&A obsession, arguing the sector is “hoping for the wrong thing.” Josh’s case: acquisitions deplete exactly the companies that could become profitable bellwethers, so cheering short-term takeout wins comes “at the expense of the sector overall.” Gline’s addendum — successful launches by Madrigal, Verona, and argenx matter more, and an industry where “the only way to win is to get bought” is “just boring.”
• Roche is buying 89bio for up to $3.5B — $2.4B upfront at $14.50/share plus commercial milestones (cirrhotic MASH launch by 2030, >$3B and >$4B global sales) — validating FGF-21 biology and the cardiometabolic push after Carmot and Zealand. Luba Greenwood flags the execution risk: Phase 3 is not expected to read out until 2027, and a panelist notes that the market appears to be ascribing little value to the CVR. Separately, Novartis licensed a discovery-stage Monte Rosa molecular-glue program for $120M upfront and up to roughly $5.7B potential all-in — its second deal with Monte Rosa in this area — supporting the view that AI-enabled drug discovery can pay off when it produces novel targets and advances them toward the clinic.
• aTyr Pharma’s Phase 3 efzofitimod miss in pulmonary sarcoidosis triggered a debate on short sellers after Martin Shkreli publicly called the failure and an 80% stock drop in late July — “he pretty much hit it on the head.” One panelist argued that thoughtful short analysis can help longs understand weaknesses and help management identify what is not resonating. Another cautioned that aggressive short reports — citing Iovance and FAERS database cases taken out of context — can cause confusion among patient and clinician groups. An issuer-side panelist said a healthy short thesis is “almost entirely upside” because it “drives rapid price discovery on good data,” and that, absent a pre-data financing, “science will come and be the reckoning.”
• Gline’s Priovant reported positive Phase 3 VALOR data for brepocitinib (JAK1/TYK2, acquired from Pfizer at the JAK-class nadir) in dermatomyositis — “the graveyard of drug development” with nine or ten failed studies in recent decades — showing “beautiful separation” plus benefit against a mandatory steroid taper. The muted stock reaction prompted Josh’s structural complaint: investors will not ascribe value beyond a company’s first one or two assets, leaving deep-pipeline and hub-and-spoke models with a cost of capital “higher than it should be.” Gline says he cares more about what the data mean over the next months and years than about the weekly stock reaction; Priovant is effectively a 75/25 Roivant–Pfizer joint venture, and Roivant did not raise money on the data.
• Gline’s experience shows how the closed IPO window is upgrading the private cohort: private companies are “forced to mature” and generate data before going public. Areteia reported positive Phase 3 data for oral dexpramipexole in eosinophilic asthma after repurposing a Biogen program that failed in ALS but showed a significant eosinophil-count reduction. UK-based Apollo Therapeutics reported positive top-line atopic-dermatitis data for an IL-7R antibody, though only the active-treatment arm, not placebo, was disclosed. Josh calls the resulting derisking “very healthy for the public markets.”
• Merck abandoning a planned £1B London research center and withdrawing from UK R&D facilities, AstraZeneca foregoing a $270M vaccine facility, and Lilly reconsidering its Gateway Labs crystallized a UK post-mortem. Josh blames a pricing regime at “the extreme end of conservatism” and frameworks like NICE and ICER that rarely consult the investors who allocate R&D capital. Another panelist countered that the UK may be “getting a little bit unlucky in a game of geopolitical chess,” with pharma’s concentrated investment shifts serving as much as a signal to the US and the Trump administration as to the UK. A different panelist rejected luck as the main explanation and cited weak incentives for investors, founders, boards, and company builders. Daphne’s frame is that UK regulation protects downside instead of incentivizing upside; Luba adds that UK finance and operating talent is not sufficiently trained for high-growth startups.
• Michal Preminger adds pharma proximity as a fourth hub ingredient beyond science, capital, and talent: in the Cambridge ecosystem, a young company can “within 25 minutes visit every pharma company” to access expertise, downstream development insight, and talent. She also flags Peter Kolchinsky’s 12,000-word “Massachusetts paradox” white paper on the tension between Massachusetts’s biotech support and some of its representatives’ harmful federal policies.
• Policy watch: J&J’s TAR-200 bladder-cancer approval prices near $750K for the first year of therapy and about $150K in year two, while the reconstituted ACIP “did illustrate their lack of expertise” with “some very cringy moments,” per Josh. The deeper issue is that vaccine policy rests on expert judgment where data cannot settle every question: the prior panel was strongly pro-vaccine and pro-science, while the new group is more cautious and divided in how comfortably it extrapolates from incomplete evidence. Luba adds that advisers brought in across policy areas have their own potential conflicts. Closing sentiment was broadly improved since April, with strong follow-ons but IPOs still the missing piece; Gline’s sign-off was that biotech “has the makings of a business model.”

Deep dive

1. The bull case: an XBI “on the cusp of profitability”

• Daphne’s setup from Tim Opler’s Stifel report: XBI up 40%+ since April, aggregate global public-biotech EV up 89% from the lows, annualized M&A tracking to ~$186B — the strongest year since 2019 despite no mega-deals — and a “healthy cleansing” that cut the public-biotech count by over 20% in 40 months, leaving 82% of U.S. public-biotech value concentrated in firms with strong data sets.
• Josh’s component-level analysis: play out each of the roughly 120 XBI components on consensus estimates and the index — “gone pretty much nowhere for the last 10 or so years… fairly uninvestable for generalist investors” — moves toward profitability with meaningful inflection over two to three years. His logic: “why would anyone ever want to invest in an unprofitable sector… unprofitable for decades,” and now “something is really different about the industry in a very fundamental way.”
• Luba’s confirmation from the trenches: it is a good time to fundraise for clinical-stage companies, generalists are already showing up, and new public-market funds are forming. Daphne’s historical marker: a few years ago this same show was calling the biotech business model “broken” because of its M&A dependence — watching biotechs “grow up and launch drugs successfully” is the change.

2. The M&A heresy: “we’re hoping for the wrong thing”

• Josh’s contrarian case, which he says earns him “the most side-eyed look” from investors: acquisitions deplete the companies that could drive sector profitability and become XBI bellwethers, so “we cheer these short-term victories, but… they come at the expense of the sector overall.” Aggregate deal value remains light — mostly “cleanup M&A” — and it is “really hard to move the needle” with M&A versus sound business models.
• Gline goes further: M&A-centric investing encourages crowding and “everyone playing this shell game of trying to figure out what other people are thinking.” Beyond the economics, “if the only way to win is to get bought, it’s just boring.” His optimism source is the emergence of repeat launch successes — Madrigal, Verona, and argenx — creating a more heterogeneous set of business models.
• Luba’s caveat from adjacent sectors: medical devices and diagnostics have very limited M&A options, “and none of us want to be in that sector. It’s not all that fun.”

3. Roche–89bio and Novartis–Monte Rosa: two templates for pharma risk-sharing

• Luba’s read on Roche/89bio: up to $3.5B; $2.4B upfront at $14.50/share; and three commercially based milestones — cirrhotic MASH launch by 2030, then over $3B and over $4B in global sales. She describes this as a classic Roche structure from her own M&A experience that “limits the upfront risk” while signaling blockbuster potential in FGF-21. Rezdiffra/resmetirom is approved for noncirrhotic MASH, leaving cirrhosis as a major unmet need where pegozafermin and Akero’s EFX show encouraging fibrosis-regression data. Roche also sees FGF-21 plus GLP-1 combinations as a way to extend its cardiometabolic efforts following Carmot and Zealand. The risk: Phase 3 is not expected to read out until 2027. A panelist adds that the market appears to ascribe little value to the CVR at current pricing.
• The Novartis–Monte Rosa licensing deal is described as $120M upfront and up to roughly $5.7B potential all-in, covering an undisclosed discovery-stage immunology target from the QuEEN molecular-glue degrader platform, with options on two more preclinical programs. It follows last year’s deal on MRT6160, targeting VAV1 and already in the clinic. Luba’s takeaway for operators: pharma is “betting very heavily” on degraders, and AI-enabled drug discovery can pay off when companies produce novel targets and advance them through discovery and early testing into the clinic — but upfronts remain modest, keeping pharma’s risk low while the biotech delivers discovery.

4. aTyr’s sarcoidosis miss — and a genuine split on short sellers

• Gline, whose own anti-GM-CSF antibody study failed in sarcoidosis just under a year earlier, credits aTyr for trying a difficult disease — a couple hundred thousand patients, high morbidity and mortality, and “mostly no good treatment options” — and for using a true steroid-sparing primary endpoint. The study may have been powered for, or targeted, roughly a 3mg delta; it showed, in his estimate, roughly a 7–8mg difference versus placebo. The general consensus going in was that the study faced “a real uphill battle,” with some mechanistic uncertainty, but investors watched because success could have moved the stock significantly — an echo of Abivax earlier in the summer.
• One panelist noted that Martin Shkreli posted in late July that the study would fail and the stock would drop 80% — “he pretty much hit it on the head.” The panelist argued that thoughtful short analysis helps longs understand a data set’s weaknesses and helps management see what is not resonating.
• Another panelist cautioned that visible short reports mixing accurate and misleading information can “cause confusion amongst patient and clinician groups,” citing Iovance, where FAERS database cases were allegedly taken out of context. An issuer-side panelist said a healthy short thesis in company data is “almost entirely upside” because it drives rapid price discovery on good data; provided the company does not need to raise before the readout, “science will come and be the reckoning.”

5. Roivant’s dermatomyositis win, and the pipeline-discount problem

• Gline’s origin story for brepocitinib: the JAK1/TYK2 dual inhibitor was acquired from Pfizer when JAK development was “at a local nadir” after the black-box class warning — “the baby had been thrown out with the bathwater” — on the view that the mechanism could still work in severe orphan diseases. Dermatomyositis is interferon- and IL-12/23-driven, “the graveyard of drug development,” with nine or ten failed studies of major mechanisms over the last couple of decades. IVIG from Octapharma, Octagam, was approved a few years ago, but IVIGs had been used for a long time and were not novel. VALOR showed “beautiful separation,” benefit across skin, muscle, and patient-reported disability, and meaningful clinical benefit against a mandatory steroid taper.
• On the muted Roivant stock reaction, Gline points to the absence of a large short thesis, Roivant’s size and cash holdings, and a run-up into the data — “I care relatively little about the stock price reaction this week and a lot more about what it means for the next months and years.” More data are coming for brepocitinib and Roivant’s FcRn franchise. Priovant is effectively a 75/25 Roivant–Pfizer joint venture: Roivant owns 75% and Pfizer 25%. Daphne notes that no money was raised on the data and draws a parallel to her own experience founding a similar hub-and-spoke company.
• Josh’s structural gripe: Roivant “has put the ROI in Roivant” yet gets little benefit of the doubt for repeating that performance. Investors’ refusal to ascribe value beyond the first one or two assets leaves deep-pipeline companies with a cost of capital “higher than it should be,” forcing choices they might otherwise avoid.

6. The closed IPO window is quietly upgrading the private cohort

• Josh’s thesis: with the window shut for so long, private companies are “forced to mature, generate data that otherwise would have been generated in a very binary way in the public markets.” Exhibit A: Areteia, which pulled dexpramipexole from Biogen after its failure in ALS but noticed a significant eosinophil-count reduction, repurposed it for eosinophilic asthma, and reported positive Phase 3 results as an oral option. Exhibit B: UK-based Apollo Therapeutics, which formed partnerships with leading UK academic centers and reported positive top-line atopic-dermatitis data for its IL-7R antibody — though only the active-treatment arm, not placebo, was disclosed.
• The consequence, per Josh: an IPO class that arrives more derisked — “ultimately that is very healthy for the public markets at the end of the day.”

7. Pharma’s UK retreat: pricing regime, geopolitical chess, or missing hub DNA?

• The news: Merck is abandoning a planned £1B London research center and withdrawing from existing UK facilities at the Francis Crick Institute and London BioScience Innovation Centre; AstraZeneca is foregoing a $270M UK vaccine facility; and Lilly is reconsidering its UK Gateway Labs plans.
• Josh’s diagnosis: the UK sits at “the extreme end of conservatism” on paying for innovation, and his broader frustration is that “very few of the policy makers, the think tanks, the ICERs of the world, the NICEs of the world ever sit down and talk to investors or analysts” who allocate R&D capital. “If you create a system that doesn’t reward innovation, there’s going to be no innovation.”
• Another panelist’s counterpoint: UK prices “are not that much lower than other important places in Europe,” and the country may be “getting a little bit unlucky in a game of geopolitical chess.” Pharma wants to show the Trump administration that U.S. investment is flowing there, so the concentration of these moves is “as much a signal to the US as it is to the UK.”
• A different panelist rejects luck as the explanation and argues that, beyond pricing, the UK has done too little to build incentives around board structures, investors, founders, and company builders. Daphne’s frame is that UK regulation “is around protecting downside as opposed to incentivizing upside”: boards frown on members owning shares, and the UK Takeover Panel may have cost UK investors billions. Luba separately adds that the UK has plenty of talent but not enough CFOs and finance professionals trained to operate in high-growth startups.
• Michal Preminger adds a fourth hub ingredient beyond science, capital, and talent: pharma proximity. In the Cambridge ecosystem, a young company can “within 25 minutes visit every pharma company” to access expertise, downstream development insight, regulatory and indication guidance, and talent. She also flags Peter Kolchinsky’s 12,000-word “Massachusetts paradox” white paper: if biotech cannot get support from representatives in the state where it drives so much prosperity, “how could any other ecosystem expect to do so?”

8. Policy round-up: a $750K pretzel and an ACIP out of its depth

• Josh on J&J’s approval of TAR-200, the gemcitabine-eluting “pretzel” branded Inlexzo, in bladder cancer: close to $750K for a full first year of therapy, falling to about $150K in year two as dosing frequency drops — “another signal in terms of the direction that drug prices can continue to head.”
• On the HELP Committee hearing over Dr. Susan Monarez’s CDC firing, Josh describes roughly a four-to-one balance of concern about the CDC’s leadership direction versus a couple of Republican senators who focused more on Monarez’s integrity, which he viewed as fairly unimpeachable. On the new ACIP, many members were defensive about being characterized as antivaccine and asked some reasonable safety questions, but “it did illustrate their lack of expertise” and produced “some very cringy moments.”
• Josh’s core point is that vaccine policy rests on expert judgment where “there’s just not perfect data.” A previously pro-vaccine, pro-science panel has been replaced by a more cautious group; some members are more comfortable extrapolating favorably from the available evidence, while others are not. That is creating noise, confusion, and uncertainty. Luba adds that advisers brought in across policy areas have their own potential conflicts.
• Closing temperature check: green shoots and improved sentiment since April, follow-ons strong but IPOs still the missing piece. Gline’s sign-off after his data week: “biotech looks like it actually has the makings of a business model, and that’s what it’s going to take for the sector to thrive from here.”