Episode 159 - October 17, 2025

Summary

• The panel agrees the biotech rally is being driven by real money, not just vibes: Eric Schmidt notes the XBI has outperformed the S&P 500 by “a whopping 17% since the beginning of September” — “that can only be one thing, money coming into the sector” — with a “deluge” of generalist calls, and John Maraganore adds a second straight week of positive net fund flows plus rate cuts and the M&A drumbeat. Graig Suvannavejh pegs the XBI at more than +40% and the earlier-stage BBC ETF near +80% over six months, off the lows following the tariff announcements, but wants “a very gradual sustained increase” rather than “rocket-ship-like performance… because that sets up the potential for a crash.”
• Eric’s key hedge on the run: “I’m not sure that things have changed that much… they were never as bad as folks thought back in March or April, and maybe we need to be a little bit careful that today they’re not quite as good as the stock performance might have you think.” His evidence of continued FDA distress: a “very politicized” agency coming off the Tylenol/leucovorin episode, problems getting facilities inspected and PDUFA dates pushed out, and a STAT piece on the leucovorin approval being forced top-down onto review staff.
• Makary’s first nine CNPV programs (one-to-two-month reviews) drew a net-positive verdict from John — highlighting Regeneron/Decibel’s DB-OTO, Disc’s bitopertin, and Revolution Medicines’ RMC-6236 — but with well over 100 applications and criteria still unclear, “I do think and hope that there’s more transparency around the process.” Eric flags two catches: Makary suggested DB-OTO could be “given away for free” (“you’re paying to play”), and the FDA must avoid diverting resources from standard reviews — “robbing Peter to pay Paul.”
• The MFN deals so far look economically benign: AstraZeneca’s followed Pfizer’s as “boilerplate,” Trump’s $150 GLP-1 tweet was walked back by Dr. Oz almost immediately, and Pfizer hasn’t restated guidance or filed anything with the SEC. Paul Matteis argues companies benefit “from the opacity around the true cost of a drug” — the discounts may barely differ from gross-to-net — and John says the design is “cushioned… caught in the sausage-making,” so innovation gets rewarded while “middlemen might get squeezed.”
• The 2026 IPO class could be exceptional precisely because of the long drought: John calls it “about as good as it gets in the wine-making of biotech companies” — survivors coming out with phase 2/3 proof-of-concept, not preclinical ideas. Graig hears from bankers and late-stage privates that a window plausibly opens in the first or second quarter around JPMorgan; MapLight Therapeutics has filed and LB Pharmaceuticals “had a decent IPO.”
• Scholar Rock and Regeneron are stuck behind an OAI letter at a Novo-owned, ex-Catalent fill-finish plant, delaying apitegromab for SMA by months even though “there’s actually nothing wrong with the product” — Eric’s frame for investors: “it is just a matter of when, not if… buy the delay and sell the disaster.” John notes the “sadly ironic” onshoring angle: the troubled plant sits in Indiana, home state of Biosecure Act author Senator Young.
• BioCryst’s better-part-of-$1-billion acquisition of Astria consolidates HAE prophylaxis. Paul says the current FTC seems far less strict than its predecessor; John calls the deal “what M&A should be about — sticking to their knitting and doubling down on an indication.” Paul’s structural point is that sub-$500M rare-disease opportunities struggle for credit with blockbuster-hunting small-cap investors, while John calls broader consolidation “very healthy” given how many companies chase limited capital.
• Data is getting paid again: Praxis’s surprise essential-tremor win (stock up 100%+) after a prior pivotal failure looks to Paul like “likely an approvable product” in a huge market, and Bicara’s narrative “flipped almost on a dime” once Merus was acquired for $8B — capped by breakthrough designation this week. Next test: Alector’s phase 3 FTD topline in the middle of next month, with roughly $300M market cap against roughly $300M cash — the market ascribes little expectation of success, but Graig notes a neurology division with Aduhelm/Qalsody/Relyvrio-style flexibility: “if they’re at something like 0.07 or 0.08, it’ll be very interesting to see what the FDA does.”

Deep dive

1. The rally is real money — but “has anything really fundamentally changed?”

• Graig’s read from two or three weeks of marketing in Boston, Dallas, San Diego and Los Angeles: the XBI is up more than 40% over six months and the newer BBC ETF, tracking earlier clinical-stage names, is closer to up 80% off the lows six months ago following the tariff announcements. Buyside investors are asking “what has changed, if anything has changed.” His preferred path: “a very gradual sustained increase” versus “rocket-ship-like performance… because then that sets up the potential of a crash sometime thereafter.”
• The mechanics per Eric: XBI outperformance of the S&P by “a whopping 17% since the beginning of September” — “that can only be one thing, money coming into the sector” — plus a “deluge” of generalist calls from people he hadn’t spoken to in months or years. John adds the second straight week of positive net fund flows, rate cuts, “the numbing of the Washington policy risks,” and the M&A drumbeat: “it is going to be a sustainable recovery… it’s been a very cold winter.”
• Eric’s caution, the episode’s load-bearing hedge: “I don’t think they were ever as bad as folks thought back in March or April. And maybe we need to be a little bit careful that today they’re not quite as good as the stock performance might have you think.”

2. Underneath the tape, the FDA still looks distressed

• Eric’s evidence: a “very politicized” agency coming off the “Tylenol and leucovorin debacle,” problems getting facilities inspected on time and PDUFA dates pushed out that “people have brushed under the rug — but I think it’s quite real,” and a STAT piece earlier this week describing the leucovorin approval as coming top-down from agency brass in a way that “ruffled some feathers.” His verdict: “our government may not be operating with the best of efficiencies right now.”
• Paul’s floor for the sector: as long as pharma’s ring-kissing — manufacturing moves and negotiated deals — staves off “true, tangible MFN,” M&A “continues to seem inevitable” and raises the floor. On valuation, COVID may be the wrong benchmark, “but we’re so, so, so far from that still.”

3. Vintage 2026: the best IPO crop in years

• Graig, off meetings with late-stage privates plus banking and law-firm contacts: MapLight Therapeutics has filed, LB Pharmaceuticals “went out and had a decent IPO,” and a new window plausibly opens “coincident with the first quarter or second quarter,” timed around JPMorgan.
• Eric on quality: the best private companies “don’t want to be first to put a toe in,” so they’ve waited, “building, creating, innovating” — “it may be one of the best-quality years we ever see in 2026.” John’s structural version: the long winter means survivors come public with “phase 2 and phase 3 programs with strong proof of concept… the vintage 2026 IPOs are going to be about as good as it gets in the wine-making of biotech companies.”

4. CNPV’s first nine: real innovation, opaque process, pricing strings

• John’s take on Commissioner Makary’s nine CNPV programs (targeting one-to-two-month NDA/BLA reviews versus “9 to 12 months if you’re lucky”): three genuinely innovative picks — Regeneron/Decibel’s DB-OTO for hereditary deafness, Disc’s bitopertin for erythropoietic protoporphyria, and Revolution Medicines’ RMC-6236 for pancreatic cancer — plus Augmentin and ketamine for U.S. manufacturing supply. “This is a net positive,” but with well over 100 applications and criteria unclear even to his own portfolio companies, “I do think and hope that there’s more transparency around the process.”
• Eric’s catches: one listed drug from Senti “actually failed, I think, in a trial — I was scratching my head on that one,” and Makary said DB-OTO “could be priced at a very, very low price point or even given away for free”: “if pricing is part of the bargain here… you’re paying to play, and you may not be able to get the return on your innovation.”
• Eric’s glass-half-empty coda, with a possible second tranche expected “within weeks”: “we just hope the FDA has the resources to keep its eye on the ball with regard to standard-review applications… I hope we’re not robbing Peter to pay Paul.”
• Paul’s open question: does a CNPV designation double as regulatory de-risking — “is that an endorsement that this now does look approvable?” He also wonders whether sub-$500M fast followers to Revolution Medicines’ RMC-6236 are automatically ineligible. Graig asks how applications and rejections are communicated, but no answer is available.

5. MFN deals look benign — the cut is caught “in the sausage-making”

• Eric’s recap: AstraZeneca’s deal a week after Pfizer’s was “pretty boilerplate” and gives a road map; the White House’s $150 out-of-pocket GLP-1 tweet was “almost immediately corrected” by Dr. Oz; and Pfizer hasn’t restated guidance or filed anything with the SEC. “If they’re cutting a deal with the government, it’s probably going to be an okay deal economically for them” — though pricing will stay tense “for probably as long as all of us are alive.”
• Paul’s mechanism: companies are benefiting “from the opacity around the true cost of a drug” — the TrumpRx/direct-to-consumer discounts may not differ much from gross-to-net, echoing the IRA’s gap between political sticker cuts and true P&L impact. John: the deals are “cushioned… caught in the sausage-making between gross-to-net and discounts and rebates,” so “innovation will get rewarded and maybe the things that get less rewarded are the middlemen.” John’s aside: “I would just hate to have the kneecaps of one of the pharma CEOs right now.”

6. BioCryst–Astria: small-cap M&A that “sticks to its knitting”

• Paul’s case: a better-part-of-a-billion-dollar buy is significant for a company BioCryst’s size, but consolidating HAE prophylaxis — Astria’s next-generation Takhzyro-like asset — is smart because sub-$500M rare-disease opportunities struggle for credit with blockbuster-hunting small-cap investors. Paul also says the current FTC seems “far less strict than its predecessor”; John agrees the political environment is more favorable and says the crowded HAE field may make any one transaction less likely to trigger attention.
• John: “companies sticking to their knitting and doubling down on an indication, getting stronger — that’s what M&A should be about,” with a note that Astria used to be Catabasis and had survived for 15 or 20 years. Graig congratulates Jill DeSimone and her team on the exit.
• Graig says the HAE space is crowded enough that companies can struggle to get full credit for their programs; he calls CalVista’s launch in the acute space promising but still a show-me story for some investors. John’s bigger-picture view is that the public-biotech denominator is too high for available capital, so consolidation — even with job losses — “is very healthy,” provided deals are strategic rather than the 2000s large-pharma model where “putting two ugly companies together made one somewhat prettier company.”

7. Scholar Rock/Regeneron: fill-finish limbo and the onshoring irony

• Eric’s setup: both companies are “coupled together” behind a Novo-owned, ex-Catalent fill-finish plant that received an OAI letter, requiring a reinspection that will take months — delaying Scholar Rock’s apitegromab for SMA even though, as far as he knows, “there’s actually nothing wrong with the product coming out of that facility… What a shame for the industry.”
• John’s irony: amid the zeal to domesticate manufacturing, the troubled facility is in Indiana — Biosecure Act author Senator Young’s state — “you’d expect to see a higher level of urgency to get this one done… It is sadly ironic in this era.”
• On read-through, Eric admits the problem is visibility: until August nobody covering either name knew, and timelines remain unknowable. But “it is just a matter of when these drugs get approved, not if — investors always like to buy the delay and sell the disaster,” and weekly management transparency has preserved credibility.

8. From the STAT summit: GLP-1 pile-ons and a “Sputnik moment”

• John’s panel with Chris Viehbacher and GSK’s Emma Walmsley: all were generally positive on the industry’s resiliency despite policy headwinds. Viehbacher’s sharpest point — too much of the sector is “doubling down, tripling down on different incremental aspects” of the GLP-1 category instead of other innovation. Walmsley: GSK is “currently cautious on the U.S.” for vaccines but keeping a long-term view — “this too shall pass.”
• John’s China framing: “we really are at a Sputnik moment,” best answered with initiatives like CNPV, faster U.S. trials, and clinical evidence “for less money.” In a closing exchange, Walmsley called the matter “an administrative matter”; John said, “I just hope they stay grounded in the science. I left it at that.”

9. Getting paid for clinical risk: Praxis now, Bicara’s flip, Alector next

• Paul on Praxis’s 100%-plus week: essential tremor is a huge market but brutally hard drug design — nonselective tremor attenuation can bring fatigue, dizziness and somnolence in an elderly population — and after a prior pivotal failure, both the randomized-withdrawal and parallel-group analyses surprised, especially the latter. “From my look, this looks like it’s likely an approvable product,” though effect-size debate looms; Paul compares it with tardive dyskinesia. Since Labor Day — MBX, Rapport and uniQure — data wins have “emboldened people’s confidence that you can get paid for taking on clinical risk.”
• Eric on Bicara: strong but small-N Phase 2 data in head-and-neck cancer — a potentially “$4 billion-plus market” — was long overshadowed by “800-pound gorilla” Merus in a “he said, she said” where “usually there’s one loser, sometimes two.” Then Merus got acquired for $8B “and the narrative just changes… flips almost on a dime,” capped by breakthrough designation this week. John agreed: “rarely is health care and biotech and medicine a fight for market share. Almost always it’s a fight for the size of the pie.”
• Graig’s Alector setup for the middle-of-next-month Phase 3 FTD topline (GSK-partnered progranulin program): roughly $300M market cap against roughly $300M cash means “clearly the market is not ascribing a lot of value or expectation that this is going to work.” The wrinkles: the SAP was recently changed to add a biomarker-based co-primary endpoint, the disease is fatal, and this is the first drug taken to Phase 3 by any company in the condition. Graig notes a neurology division with regulatory-flexibility precedents — Aduhelm, Qalsody and Relyvrio — and says that while trials are generally framed around hitting 0.005 or better, “if they were to hit something like a p-value of 0.07 or 0.08… it’ll be very interesting to see what the FDA does.” Paul, explicitly consensus: “I certainly wish this would work… but I’m not holding my breath.”
• Closing calls: John on the New England Journal of Medicine otoferlin paper with Regeneron — “gene therapy is not over… it remains an important modality for some of these ultrarare diseases. Look at uniQure.” Eric heads to Berlin this weekend expecting to see cancer innovation: oncology gets “bashed for being too crowded, too competitive,” but “there’s some great stuff coming out.”