Episode 170 - January 23, 2026

Summary

• Tim Opler is doubling down on his bullish call: with the XBI at ~130 (up 5% YTD), he sees it topping 150 this year — “but that’s really just the beginning.” His core thesis is that the Trump–Lilly–Novo agreement pricing Mounjaro or Ozempic at $4,000/year for Medicare/Medicaid “essentially just ratified a new price benchmark” — a shift from small-markets-high-prices to “large markets, medium prices” that he thinks “is going to reshape our industry for a decade to come,” and which, unlike macro and M&A, is not yet priced in.
• The M&A math still argues for a busy year even though the actual tape is slow. Pharma faces at least a $90B revenue hole; at last year’s average 6.5x forward (2030) revenue, last year’s $90B of spend covered “less than a sixth” of it. Yet 2026’s $6.7B in deals so far — including RAPT/GSK, Ventyx/Lilly, and Dark Blue Therapeutics/Amgen — annualizes to less than half last year’s pace. The biggest deal was Hims & Hers going private for $2.5B, and Opler is “personally not so sure that Revolution Medicines gets bought anytime soon” given the price tag.
• Cantor’s Eric Schmidt matches the bull case (XBI “150 plus”) but itemizes what could break it: an FDA “potentially on the cusp of almost imploding on itself,” MFN reopening, and China. He cites Atara’s tab-cel CRL — a cell therapy for a rare, severe oncologic indication with no therapies, “derailed” after Vinay Prasad “inserted himself” — and warns that if Trump is losing the midterms and drug pricing becomes an issue, “all bets are off” on the Lilly/Novo pricing bargain.
• On IPOs, the panel sees a potentially attractive window, but the first tranche isn’t the best merchandise. Opler worries “a couple of belly flops” from the 100+ backlog could shake the market; Schmidt counters that three-to-four years of a closed window forced companies to mature through Phase 2 proof-of-concept privately, on down or flat rounds — leaving “a lot of public stock-price appreciation” on the table. Suvannavejh recalls the over/unders (Matteis ~15, Josh ~50, himself 20–25) and warns against a 2020–21-style undisciplined rush.
• GSK’s ~$2.2B RAPT takeout — a long-acting anti-IgE dosed every 8–12 weeks versus Xolair’s 2–4 — is the episode’s best pivot parable: the asset was in-licensed from China in December 2024 for just $35M upfront. Opler’s lesson: “pivots really work,” and a portfolio of 2022’s bad-data biotechs would have outperformed the good-data ones — yet bankers can’t get companies or investors to embrace pivots. Graig calls BMS’s Janux deal “a big vote of confidence” in masked T-cell engagers.
• Corvus (CRVS) is the week’s stock story: compelling atopic-derm data from ~24 patients on its oral ITK inhibitor sent shares up over 200% to a ~$2B cap and enabled an upsized ~$200M raise. Schmidt’s bigger point: ITK is “almost a new validated target” for I&I well beyond AD — with Richard Miller, who led BTK inhibitors forward, now potentially transforming T-cell-driven disease — and Aclaris rallied on the coattails.
• Policy delivered cautious relief: the House funding package would set HHS at ~$117B, give NIH a slight increase to ~$49B (all 27 institutes intact, versus a proposed 40% cut), keep CDC flat at $9B, and advance PBM reform including 100% rebate pass-through. Offsetting that, the US completed its WHO withdrawal — Opler’s analogy: like quitting “international air traffic coordination… that would just be self-defeating.”
• Schmidt flags a “schizophrenic” FDA: new draft guidance says MRD-negativity plus CR could support myeloma approvals, even as Prasad’s CBER steers companies toward randomized controlled outcomes. With myeloma survival stretched from 2–3 years to 10–15, MRD provides an important marker for long-term outcomes — but Schmidt says Prasad has not approved drugs like Replimune’s, has rejected a TCR drug, and seems to have rejected a Regeneron drug on single-arm ORR. Schmidt fears a return to the era when “cancer drugs were stymied” awaiting survival data.

Deep dive

1. Opler’s bull case: the government just ratified a new pricing regime

• Opler’s setup: XBI up 5% YTD to ~130 (from ~122 when his report ran), extraordinary financing activity, and “five or six different M&A rumors on the tape” in a single Monday. His published call was for more than 150 this year, “but that’s really just the beginning… biotech could go much higher” — while conceding nobody can time the week-to-week.
• His nearer-term case is twofold: the macro environment is under control, and M&A was high last year and is likely to be high this year. Pharma has “at least a $90 billion revenue hole” that pipelines can’t fill; last year’s deals averaged 6.5x forward revenue (defined as 2030 revenue), so last year’s $90B of spend covered “less than a sixth” of the hole. Valuations remain “very much under control” — the typical company trades at roughly half that takeout benchmark — so “there’s still plenty of room to run,” although policy and valuation levels remain uncertainties.
• The real thesis is structural: markets have gotten bigger. His historical analogue is drug repricing after Genzyme — oncology going from $20,000 to $200,000 a year ignited a bull market — and he sees the Lilly/Novo/Trump agreement ($4,000/year Mounjaro or Ozempic for Medicare/Medicaid) as the government “essentially just ratif[ying] a new price benchmark for drugs for large markets.” His label: “large markets, medium prices” — a trend that will “reshape our industry for a decade to come.”
• One tactical hedge amid the rumor mill: “I’m personally, and I’m not an insider… not so sure that Revolution Medicines gets bought anytime soon. It’s an incredibly high price tag.”

2. Schmidt’s bear checklist inside a shared bull view

• Schmidt first awards Opler “a victory lap” for a similarly bullish mid-2025 piece, then one-ups him: XBI “maybe in the 150 plus range this year,” on good fundamentals, “very very positive fund flows,” and an underappreciated pricing dynamic — “the year is still long and we know in biotech things can turn on a dime.”
• Risk one is the FDA, “in a really tumultuous place… potentially on the cusp of almost imploding on itself.” Exhibit A: Atara’s complete response letter for tab-cel, a cell therapy for a rare, severe oncologic indication with no therapies, “on the cusp of approval prior to Vinay Prasad inserting himself into the discussion and derailing it.”
• Risk two: everything is now “priced for billion-dollar blockbuster peak-potential success — but how long can that really go on for?” If Trump feels he’s losing the population’s favor into the midterms and drug pricing becomes the issue, “all bets are off” on MFN. Risk three, China: “potentially a disruptive force” — the preclinical-to-clinical engine sourced out of the US “has changed, and it may not necessarily be a good thing all the time for the US-based industry.”
• Suvannavejh’s confirmation from the buy side: sentiment has turned “beyond the biotech specialists,” positive data-driven raises are getting upsized, and deals are “subscribed anywhere from four to 10 times.”

3. The IPO window: mature companies, attractive prices — but mind the first tranche

• Grace’s question — does a reopened IPO market break the buyers’ market in M&A? — gets answered through supply quality. Opler: “not all IPOs are of the same quality… some are going public as if they have to,” the best candidates (he names Candid Therapeutics) aren’t going this month, and with 100+ companies looking to go public, “a couple of belly flops get out there and the market starts to feel a little shakier.”
• Schmidt agrees the early 2026 cohort is largely 2025 holdovers — “if you’re a venture investor and you have what you think is a surefire winner, you probably don’t want to take the risk of a shaky IPO” — but his bigger picture is bullish: three-to-four years without an IPO market left good companies captive in the private market, forced through Phase 2 proof-of-concept milestones that historically read out publicly.
• The kicker: because there was no IPO market guaranteeing exits, many last rounds were down or flat — so these seasoned companies can price at levels “that allow for a lot of public stock-price appreciation.”
• Suvannavejh replays the prior episode’s over/unders — Matteis at ~15, Josh at 50, himself hoping for 20–25 — and wants discipline: a wide-open window risks a 2020–21-style “bubbly” rush, and “we also want a very good 2027 and 2028.”

4. RAPT and Janux: a $35M pivot becomes $2.2B, and a platform gets validated

• The GSK/RAPT deal: a little over $2B, with a premium believed to be around 60–65%, for a long-acting anti-IgE dosed perhaps every 8–12 weeks versus Xolair’s every 2–4 — a strategically clean fit for GSK’s immunology presence in an allergy space that rarely sees deals. Suvannavejh’s precedent: Nestlé’s roughly $2B Aimmune buy around 2020, later divested without disclosing the sum.
• The history is the story: RAPT went public on a CCR4 inhibitor that failed on liver toxicity in atopic derm, then in-licensed this asset from China in December 2024 for only $35M upfront. Thirteen months later it’s worth over $2.2B — “biotech always has another life.”
• Opler’s lesson, worth keeping: “I cannot tell you how many companies as a banker I’ve talked to in the last three or four years that they just wouldn’t pivot… pivots really work.” His buried report stat: a portfolio of biotechs with bad 2022 data would have outperformed those with great data — yet investors remain risk-off, congregating around the haves while have-nots languish.
• On BMS/Janux: Suvannavejh calls it “a big vote of confidence in the platform” after disappointment around Janux’s lead programs; Schmidt explains the mechanism — masked bispecifics activated only in the tumor microenvironment, delivering T-cell efficacy without cytokine release syndrome. Janux showed proof of concept with PSMA; Bristol is buying into a new target, and “if they or someone else can repeatedly do this… it’s going to be extraordinarily valuable.”

5. Washington: NIH survives, PBM reform advances, WHO exit completes

• Grace’s rundown of the House-passed 2026 funding package: HHS at ~$117B — well above the administration’s request — NIH up slightly to ~$49B with all 27 institutes preserved (versus a proposed 40% cut), CDC flat at $9B against a proposed $4B, plus disease-specific additions for cancer, Alzheimer’s, and women’s health. PBM reform would bar tying compensation to drug prices in Medicare and force 100% of commercial rebates to employer plans — though it “could still get stripped” on the CBO score; the bill still needs Senate passage and signature by the 30th.
• On the completed WHO withdrawal — which has already forced the WHO to cut almost a quarter of its staff and left it roughly 25% short of its budget — Opler refuses the ideological frame: “imagine that the United States said, hey, we’re not going to be involved in international air traffic coordination… that would just be self-defeating.”
• Schmidt and Suvannavejh both make it personal: universities were considering slashing graduate cohorts under the mere threat of the NIH cut, and Suvannavejh recalls direct conversations “maybe nine months ago” with people considering or attending graduate school whose funding was cut and who had to consider changing careers. Grace’s close: credit John Crowley and the BIO team, and engage — “we can’t stop. They’re going to continue to try to chip away at this.”

6. The FDA’s split personality: MRD guidance versus Prasad’s single-arm crackdown

• The news: draft FDA guidance says MRD-negative status plus a complete response can support approval in multiple myeloma. Schmidt’s rationale for why it matters — new therapies stretched myeloma from “a death sentence within two or three years” to 10–15-year survival, making overall-survival proof progressively harder — and it validates what ODAC discussed a year or two ago.
• The contradiction: “it flies a little bit in the face” of Prasad, who has been “very antagonistic toward single-arm response-rate outcomes.” Schmidt cites a history of not approving drugs like Replimune’s, a rejected TCR drug, and what he says seems to be a Regeneron drug rejected based on single-arm readouts. This is distinct from his earlier Atara/tab-cel example. “We’re getting a little bit of a maybe schizophrenic view from the FDA… a little bit of an internal struggle.”
• Schmidt’s warning: steering companies in CBER toward randomized controlled trials when responses are “so robust” recalls the era when “cancer drugs were stymied… we delayed bringing innovative therapies to patients for many many years. I certainly hope we don’t go back there.”

7. Atopic derm goes vertical: Corvus’s ITK inhibitor and a crowding field

• Suvannavejh’s setup: AD (eczema) covers anywhere from 15M to 42M+ US patients “depending on the estimates you want to believe,” with injectable Dupixent the current gold standard and oral JAKs hobbled by a black-box warning — leaving substantial room for alternatives.
• His call on Corvus (CRVS): Tuesday’s data from only ~24 patients on the oral ITK inhibitor looked “quite compelling… potentially best in class,” with a safe and well-tolerated profile. The stock is up over 200% this week to ~$2B market cap, and a company with cash only into Q4 upsized a raise to close to $200M — funding a Phase 2 in AD plus proof-of-signal expansion into asthma and hidradenitis suppurativa; the drug is already in Phase 3 in lymphoma.
• Schmidt’s amplification: “we now have almost a new validated target” for I&I well beyond AD — and the history rhymes: CEO Richard Miller was a leading CEO in taking BTK inhibitors forward, which transformed B-cell disease; ITK “may transform many T-cell-driven diseases.” Watch Aclaris (ACRS), preclinical but claiming it might be more selective and potent, whose stock “did extremely well on the coattails of Corvus.”
• The rest of the field: Kymera’s oral STAT6 degrader (December Phase 1, no placebo control, market cap moved up over $1B, ~$500M raised), Apogee’s roughly quarterly injectable, and Sanofi’s anti-OX40L antibody, believed to be amlitelimab, whose “a bit mixed” Phase 3 data the market disliked today — though Sanofi says it will continue considering a filing.

8. Women’s health: “a topic whose moment has come”

• Opler’s second report of the year is a historical excavation: centuries of misogyny blocking women from literacy and the medical profession, midwifery “systematically taken over by men” — against which mammography, Gardasil, GnRH agonists, and above all the pill changed everything. “No innovation has been bigger, not just for women but for our civilization, than the oral contraceptive… I’m not sure there’s been anything really bigger than that in our industry ever.”
• Grace’s investable-market case: an a16z report over JPM tallied more than $100B in realized women’s-health exits over 25 years, depending on how counted — with almost half occurring in the past five years and 27 women’s-health companies achieving billion-dollar exits — as fragmented diagnostics, devices, and therapeutics communities finally organize.
• Her equity point: 50% of US pregnancies are still unplanned, hitting the most vulnerable hardest; the mini-pill represents only ~10% of women who are on the pill, and getting the combination pill over the counter and affordable (she cites Samantha Miller at CadenceOTC) would have “huge impacts.”
• Opler’s surprise ending: “I’ve never had more people write in after getting one of my reports than this report” — from men and women alike. His prediction: “5, 10 years from now, we’ll all look back and say, gosh, why didn’t we take women’s health more seriously back in 2026?”