Episode 160 - October 24, 2025

Summary

• Biotech’s catch-up trade is finally on: healthcare was among the most net-bought sectors this month and biotech exposure is “pulling to five-year highs.” Baird’s Brian Skorney calls it a liftoff “without crazy valuations”—contrasting with companies four years from entering the clinic IPOing at a billion dollars—as tech’s AI trade has pushed valuations to historical extremes while biotech sat it out. The sector’s potential for “massive alpha capture” is illustrated by uniQure and Praxis, where a program whose futility look went poorly nevertheless continued and later produced hundreds of percent of upside.
• The financing-overhang bear thesis has inverted into post-deal FOMO. For years clients told Skorney “even if I like this story… these companies are going to suffer massive dilution”; now Alto Neuroscience rose 65% on the week in part around a $50M PIPE, and Nurix’s $250M registered direct answered the how-do-you-fund-CLL-against-BeiGene objection. His standing advice: “take money when they can and pad the balance sheets to weather harder days.”
• Summit raised $500M with roughly half from insiders—Bob Duggan again playing chief financier—and the panel split on the signal. Sam Fazeli: with a Phase 3 asset carrying meaningful data, “you do wonder why they couldn’t go and get more from institutional investors, or did they not want to?” His verdict: “50% coming from insiders—bullish, bearish, I don’t know.”
• Ivonescimab’s HARMONi-6 delivered a clear PFS win—11.1 vs. 6.9 months, hazard ratio 0.6, effect even below 1% PD-L1—but no OS data, “not even a commentary about trends.” Fazeli’s nag: mostly parallel Kaplan-Meier curves after early scans and a PD-L1-agnostic hazard ratio ask “is this just VEGF doing a lot of the work?” Skorney is torn but pragmatic: “if you’re successful, you’re successful and you become the standard of care.”
• Deal flow stayed broad: Alkermes paid $2.1B for Avadel’s Lumryz ($265–275M in 2025 revenue) as an accretive narcolepsy beachhead ahead of ALKS-2680, and Takeda paid Innovent $1.2B upfront—about $4.5B in total deal value—notable because the Chinese partner keeps global co-development and co-commercialization rights on PD-1/IL-2 bispecific IBI-363. Fazeli’s quick-and-caveated 2025 China tally: ~$4.7B upfront and roughly $84.5B in total biobucks value.
• TIGIT is quietly rehabilitating: Arcus/Gilead’s EDGE-Gastric data looked promising in first-line gastric cancer and AstraZeneca’s rilvegostomig looked good against KEYNOTE-042, backed by about 8,000 patients across trials. Fazeli stays a bull—“you can shoot me down when the trials read out”—while Arcus had run up almost 50% over the prior month. The live dispute is AZ’s same-cell bispecific thesis versus Arcus/Gilead’s two-antibody approach.
• Europe put up a real number—Tubulis’s $360M Series C behind a NaPi2b ADC with a 59% response rate in its overall ovarian-cancer dose-ranging trial—and the VC thaw is starting. Chris Garabedian, whose fund made three investments in six weeks, frames venture as “a lagging indicator to the public market sentiment—on the way down and on the way up,” with European companies “toiling away… waiting for the appetite for investment to tick up.”
• The week’s non-oncology readouts were a lesson in biomarker-clinical disconnects. Alector (-50%, half its staff cut) hit progranulin but missed the clinical co-primary in FTD; Arcturus’s inhaled mRNA restored CFTR but not lung function; Moderna’s congenital CMV vaccine failed Phase 3; only Ventyx’s NLRP3 cardiovascular win—which could trigger Sanofi’s right of first negotiation, though whether Sanofi acts remains open—nearly doubled the stock.

Deep dive

1. The catch-up trade is on—and it’s healthier than 2021

• Chris Garabedian opened with the XBI having broken 100 and held there despite pullbacks. Skorney’s ground truth from marketing in New York: investors are genuinely upbeat because this is a liftoff off a multi-year XBI trough “without crazy valuations and companies that are four years from going into the clinic IPOing at a billion dollar valuation.” Healthcare has been one of the most net-bought sectors this month; biotech exposure is at five-year highs.
• The thesis: AI chasing pushed tech valuations “to historical extremes but biotech kind of sat it out,” making a catch-up inevitable in a sector known for “massive alpha capture”—uniQure last month, Praxis last week, where a program whose futility look went poorly but whose study continued later hit “every endpoint” and produced hundreds of percent of upside.
• On IPOs, Skorney expects acceleration for fundamental reasons: the COVID bubble pulled companies public too early, and after the crash the private universe had to catch up—“everything that didn’t IPO, now you’re getting close to the clinic,” which is where reasonable IPO potential lives.
• Garabedian’s VC read: venture is “a lagging indicator to the public market sentiment, and that’s true on the way down and on the way up.” His fund made three deals in six weeks—a device, a diagnostic, and a gout therapeutic, Crystalis—and peers are getting comfortable writing checks again.

2. Alkermes pays $2.1B for Avadel—accretion plus an orexin beachhead

• The deal (covered at Baird by Luke Hermans): Lumryz, an oxybate narcolepsy drug competing directly with Jazz’s Xywav, is expected to generate $265–275M of 2025 revenue, with label-expansion studies ongoing—“not a peak,” with both products growing together.
• Skorney’s framing: an unusual two-fer, a strategic and accretive deal that also builds commercial infrastructure in narcolepsy ahead of ALKS-2680, Alkermes’ orexin-2 receptor agonist once it gets through Phase 3. Not a megablockbuster deal, “but needle moving for the sector.”
• Garabedian’s parallel: BioCryst’s acquisition of Astria, a company in which they were investors, similarly expanded a commercial footprint and consolidated leadership in HAE.

3. Financings: Duggan’s half-insider raise, and the follow-on FOMO machine

• Summit’s $500M deal came roughly 50% from insiders. Skorney’s context: Bob Duggan has a history of being the main financier of his own companies—Pharmacyclics, the subject of Nate Vardi’s For Blood and Money, became one of the biggest deals and produced one of the best products of all time—and funding half a raise “from their own personal checkbooks” is “certainly a bullish signal.”
• Fazeli’s needle, worth keeping: insider participation is almost always bullish, “it’s just in a situation like this where you have a Phase 3 drug which has meaningful data behind it, you do wonder why they couldn’t go and get more from institutional investors, or did they not want to?” Garabedian adds that you’d want to know what Duggan’s check represents against his net worth. Fazeli’s verdict: “bullish, bearish, I don’t know.”
• The broader dynamic: the sector’s dominant bear case was financing risk—“how are they going to get to catalysts… massive dilution.” Now a raise resolves the objection and creates FOMO: Alto Neuroscience announced a positive FDA meeting on ALTO-207, then a $50M PIPE with named investors, and rose 65% on the week, in part because of the financing.
• Nurix’s $250M registered direct worked the same way—the knock was funding CLL studies to move its BTK degrader up lines “when you’re competing against a much bigger name like BeiGene,” and “this is the answer,” backed by well-respected investors.

4. Takeda–Innovent headlines an ~$84B China year; Tubulis carries Europe’s flag

• The deal: $1.2B upfront to Innovent, a $100M equity purchase at a premium, and about $4.5B in total potential value. Lead asset IBI-363, a PD-1/IL-2 alpha-biased bispecific with ASCO lung data Fazeli found “pretty exciting,” comes with global co-development and co-commercialization—he’s seen few cases where “the Chinese partner keeps some of the rights,” with the U.S. explicitly included. Also in: IBI-343, a Claudin 18.2 ADC, and an option on IBI-3001, an EGFR/B7-H3 bispecific ADC.
• Fazeli’s 2025 tally (“a very quick analysis, just to caveat that”): ~$4.7B upfront and roughly $84.5B in total biobucks value from China licensing, following Pfizer/3SBio’s $1.25B PD-1/VEGF upfront deal around ASCO.
• Europe’s data point: Tubulis raised a $360M Series C—“a pretty chunky number for a Series C” even globally—behind TUB-040, an anti-NaPi2b ADC that posted a 59% response rate across its overall ovarian-cancer dose-ranging trial at ESMO. Venrock led, with Wellington, Sanderling, Nextech, EQT Life Sciences, Frazier, Deep Track, Bayern Kapital and others; the open question is whether the financing is enough for Phase 3 or whether to “load up with cash and then go and partner” rather than partner with “coffers that are empty.”
• Garabedian, back from BioSpain: European companies are “toiling away… waiting for the appetite for investment to tick up.” Discovery research is not that expensive, so they can get ready for a $30M Series A or $80M Series B while the U.S. appetite firms up. Fazeli notes argenx is above $50B.

5. Ivonescimab at ESMO: clear PFS win, nagging VEGF ghosts

• The bull print from Akeso’s HARMONi-6 (squamous NSCLC in China, ivonescimab plus chemotherapy vs. PD-1 plus chemotherapy, 532 patients, 10.3-month median follow-up): PFS 11.1 vs. 6.9 months, hazard ratio 0.6—“pretty good in essentially adding one extra mechanism”—manageable AEs in a histology where VEGF historically raised safety concerns, and a clear effect across all PD-L1 strata including under 1%.
• Fazeli’s bear side: no OS data, “not even a commentary about trends,” after the earlier HARMONi trial showed a PFS difference but failed to demonstrate a statistically significant OS benefit. The Kaplan-Meier curves mostly run parallel after the early scans, raising the concern that early VEGF-related tumor shrinkage may not extend life, and the uniform hazard ratio across PD-L1 leaves “this little nagging feeling: is this just VEGF doing a lot of the work?” Add bleeding-risk exclusions and the question of U.S. translatability.
• Competitive overhang: PD-1/VEGF rivals keep multiplying—new NSCLC and gastric datasets also looked good—and Summit needs combination partners the way Pfizer/3SBio and BMS/BioNTech have paired. Summit did one deal with Pfizer, “but then Pfizer went and did the 3SBio deal.”
• Skorney, torn: “is this really doing something different than if you combined Avastin and Keytruda? And does that even matter? Because no one’s combining Keytruda and Avastin in any of these studies anyway… if you’re successful, you’re successful and you become the standard of care.”

6. TIGIT refuses to die—and the target-hype-cycle debate

• Garabedian’s question: do new IO targets such as CD47 and TIGIT always peak early and fade? Skorney: situation-dependent—as a bull on Pharmacyclics, he “still wound up underestimating it.” But TIGIT is “super unique… one of the only times a not totally rigorous but somewhat rigorous randomized controlled study showed a profound benefit that just was never replicated again.”
• Fazeli stays long—“I’m going to remain a bull of TIGIT; you can shoot me down when the trials read out”—on same-cell biology: TIGIT×PD-1 and CTLA-4×PD-1 bispecifics act on the same cell and, especially with conditional or partly conditional binding, could mitigate some class-toxicity issues. His contrast: “PD-1 VEGF, I don’t know.”
• The ESMO evidence: Arcus/Gilead’s EDGE-Gastric (Fc-inactivated domvanalimab plus zimberelimab plus chemotherapy) showed promising first-line gastric efficacy, while AstraZeneca’s rilvegostomig (PD-1×TIGIT bispecific, ARTEMIS-1) looked good against KEYNOTE-042 above and below 50% PD-L1, with about 8,000 patients across the totality of its trials. The live dispute: AZ says you need the bispecific; Arcus/Gilead say two antibodies “will be fine.” Arcus had run up almost 50% over the prior month—the share price was “reflecting that some people are beginning to believe it.”

7. Exelixis’s whipsaw and “the resurgence of Incyte”

• STELLAR-303 (zanzalintinib plus Tecentriq, third-line CRC) initially dropped the stock: heavier-than-expected toxicity, OS of 10.9 vs. 9.4 months and PFS that “didn’t really go beyond benchmarks,” a likely higher-cost novel mechanism, and an IV infusion.
• Then the bull case won: third-line patients have already had two lines of chemotherapy and may not be ready for another, doctors want to identify durable IO responders, the drug still performed post-VEGF agents, and physicians think the toxicity is manageable. Fazeli: “the bulls are winning here now post the conference, and I think that’s probably the right place to be.”
• Incyte entered the KRAS G12D space with its GenFleet-partnered molecule: strong dose-dependent tumor control up to about 86% at 1,200 mg and 64% ORR at 600 mg, which Fazeli thought rivaled Revolution Medicines’ zoldonrasib, while GenFleet’s own GFH375 had fallen to about 41% from its earlier disclosure. Incyte also showed a PD-1×TGF-beta bispecific whose toxicity looked “downright easy, relatively speaking,” against the class’s GSK-era baggage.

8. Biomarkers without clinic: Alector, Arcturus, Moderna—and one winner in Ventyx

• Alector’s latozinemab (anti-sortilin, GSK-partnered, more than 100 frontotemporal-dementia patients) hit the progranulin biomarker co-primary but failed the clinical co-primary and showed no benefit on the other secondary or exploratory endpoints—stock down about 50%, half the staff laid off, a year after its TREM2 Alzheimer’s failure. Garabedian’s takeaway: another failure for a transferrin-receptor brain-shuttle technology to penetrate the blood-brain barrier, with a longer-half-life sibling antibody reading out in early Alzheimer’s in the first half of next year.
• Skorney’s frame—the sector iterates: solanezumab targeted amyloid but “didn’t really cross the blood-brain barrier effectively and totally failed study after study,” yet the field now has two drugs that work. Same for delivery: “20 years ago everyone was knocking Alnylam and RNAi… now it’s hit prime time. They will get there eventually.”
• The scorecard elsewhere: Ventyx’s NLRP3 cardiovascular data nearly doubled the stock and should trigger Sanofi’s right of first negotiation, though whether Sanofi acts remains open; positive Parkinson’s biomarker data could create synergies. Arcturus’s inhaled mRNA for CF restored CFTR in six patients over four weeks but didn’t meaningfully move lung function—down 50%+ before rebounding on 4/6 mucus-plug reductions and a planned 15-mg cohort followed by a 20-patient, 12-week study.
• Moderna’s congenital CMV vaccine failed Phase 3 in women 16–40 after the market had already handicapped the study following the interim case-count warning; the bone-marrow-transplant reactivation study continues as “a completely different goal.” Fazeli says the mRNA successes he is pointing to have been in seasonal respiratory settings given “at the right moment”—at least in the antibody context—and that chronic infections “might have a tougher time.” Garabedian says Moderna is trying to become more of a cancer company; “the proof of the pudding will be in 2026 and 2027.”