Episode 133 - March 7, 2025

Summary

• The tape is brutal and getting worse: the S&P 500 is down 6% in a month with post-election gains erased, the XBI is off 5% this year, small caps are down 17% in three months, and 16 of 18 2024 IPOs trade below issue at a median decline of 61%. Jake Becraft’s specialist bull case is that nothing fundamental has changed; companies with real progress are simply cheaper, creating “a really rich opportunity set.” Stifel says the redemption window may be behind us.
• The panel debated biotech’s dependence on M&A. Yaron Werber said acquired companies stand out in a weak tape, making investors feel M&A is the only way to get paid. Brian Skorney invoked “short the launch” and the claim that launching a drug can be value-destructive, while noting that commercialization ties a former story stock to difficult financial fundamentals. Jake pushed back with Madrigal and Verona and argued for fewer me-too programs and more differentiated, market-creating assets.
• Yaron’s Cowen read: sentiment was poor, companies were stretching cash and cutting programs, and niche oncology assets near launch or in Phase 3 were trading at cash. Pfizer indicated BD capacity of 10 or 15 this year and higher next year, focused on internal medicine and I&I rather than vaccines or large oncology deals after Seagen. Yaron also sees obesity becoming more biotech-driven, citing Amgen’s go-fast, low-escalation Phase 3 approach, Metsera, and Kailera.
• The deal tape included Jazz-Chimerix and AbbVie-Gubra. Jazz agreed to pay about $935 million, a 72% premium, for Chimerix and dordaviprone after FDA alignment on accelerated approval in rare pediatric diffuse midline glioma. AbbVie paid $350 million upfront with $1.87 billion in biobucks for Gubra’s amylin, which has an approximately 270-hour half-life and a projected 15%–20% standalone weight-loss opportunity. BMS’s discontinuation of Mirati’s MRTX1133 after oral development failed on PK reinforced Yaron’s preference for taking clinical risk earlier rather than buying supposedly de-risked assets expensively.
• Negative-EV biotechs remain a major overhang: Brian estimated 100–200 names where shareholders value the cash as if it will be invested to be worth zero. Tang Capital’s unsolicited $3-per-share offer for Pliant was rejected in favor of the Alumis merger, and Pliant fell 13%. Jake praised Pliant’s board for laying off the workforce and redeploying capital rather than funding previously deprioritized programs. Pliant’s failed BEACON-IPF study left roughly $350 million in cash against about $100 million of market cap.
• Biohaven’s IgG degrader reduced IgG 84% at 1,000 mg after four doses versus roughly 75% for efgartigimod over four weekly doses. Brian called the result numerically better but not a clear standard-deviation improvement over FcRns, raising the question of whether a 5%–10% relative edge matters when entering years later. He remains optimistic about extracellular protein degradation, citing Biohaven’s Gd-IgA1 data and private companies such as Lycia and Avilar. Jake added that rising gMG placebo effects can shrink active-placebo deltas even with deeper IgG suppression.
• Vaccine and regulatory policy remained uncertain. Jake called RFK Jr.’s pro-vaccine op-ed positive in its headlines but “a little wishy-washy” beneath the surface. Yaron criticized a Reuters-reported CDC study of the vaccine-autism link, and described Marty Makary’s hearing as “pretty boring” and an effort to “play the game not to lose.” The panel saw plausible arguments for both worsening and improvement under the new administration.
• Pfizer’s hiring of former FDA director Patrizia Cavazzoni prompted a debate over revolving-door conflicts. Brian called the optics poor but said regulatory expertise can be valuable if conflicts and post-employment restrictions are properly managed. Other panelists argued for disclosure and nuance rather than purges, while noting distrust of science and the need for better science education.
• The closing discussion covered networking and 24-hour trading. The advice was to state the motivation or specific ask, research the recipient, and use double opt-in introductions. On Nasdaq’s proposed 24-hour trading, one panelist expected little overnight volume; Brian anticipated 3 a.m. client calls about stocks moving on five shares, while Yaron said innovation would likely bring initial mayhem before the system adjusted.

Deep dive

1. A market this washed out is the specialist’s opportunity set

• Sam Fazeli’s opening tally: the S&P 500 is down 6% in a month with post-election gains erased, the XBI is down 5% year-to-date, small caps are down 17% over three months, long-short biotech funds are down more than 10% this year, and some funds are shutting amid redemptions and indiscriminate selling. Stifel argued last week that the redemption period is behind us.
• The IPO scoreboard is grim: 16 of 18 companies from the 2024 class trade below issue at a median decline of 61%; three of four 2025 IPOs are underwater, with MSERA the lone exception, perhaps because it has a near-term catalyst.
• Jake Becraft’s bull case: companies that made real fundamental progress are simply cheaper, creating “a really rich opportunity set” in public and private markets. Pharma still needs to fill pipelines, China competition “can make us all better,” and drugs remain one of the most efficient ways to deliver health care as societies age.

2. “Short the launch” — the sector’s M&A dependence

• Yaron Werber’s diagnosis: when only acquired names are in the green, investors naturally conclude, “the only way I’m getting paid is through M&A.” He also argued that go-it-alone companies now face intense “what are you going to do for me next?” scrutiny, often within one or two years after launch, as investors look toward the eventual cash-flow cliff.
• Jake pushed back with independent successes including Madrigal, under Bill Sibold, and Verona, asking when the market switches from rewarding a small biotech for launching well to demanding the next growth driver.
• Brian Skorney invoked the buy-side maxims “short the launch” and “the most value-destructive thing a biotech company can do is launch a drug.” He said those claims overstate the situation, but commercialization does tie a former story stock to actual financial fundamentals. The traditional thesis that pharma is better at commercialization while biotech is better at R&D keeps M&A structurally important, though he sees an over-reliance on takeouts to “save the day.”
• Jake’s proposed fix: biotech is not especially good at launching me-too products, but it can launch differentiated assets that create markets or address major needs. The sector may need to accept higher-risk programs and invest in fewer me-too products.

3. Cowen takeaways: Pfizer’s BD signal, I&I, and obesity

• Yaron’s Cowen read: sentiment was poor, companies were discussing how far they could stretch cash and which programs to cut, and many near-launch or Phase 3 oncology assets expected to be niche were trading at cash. That creates a self-fulfilling prophecy, but “it’s all upside at this point” for assets at those valuations.
• Via colleague Steve Scala, Pfizer indicated BD capacity of 10 or 15 this year and higher next year. Pfizer sees few vaccine opportunities because of its internal pipeline, and after acquiring Seagen it needs little large-scale oncology innovation beyond smaller assets that can be combined with an ADC. The focus should be internal medicine and I&I.
• Yaron described growing or newly competitive I&I markets including MMN, CIDP, and gMG, along with myositis, Sjögren’s, TED, humoral rejection, Graves’ disease, COPD, and asthma. The theme is new biology rather than simply another FcRn me-too.
• On obesity, Yaron said it “is not going to be the Lilly-Novo show” and will probably become more of a biotech show. Amgen has started Phase 3 trials of its go-fast, low-escalation approach; Metsera has more data coming; and Kailera, the Bain/Atlas/RTW spinout out of Hengrui, is expected to show Phase 2 and Phase 3 data this year. His close: “Valuations cannot go any lower. Knock on wood.”

4. The deal tape: Jazz-Chimerix, AbbVie-Gubra, and Mirati’s cautionary lesson

• Brian on Jazz-Chimerix: the roughly $935 million deal, a 72% premium, fits the trend of niche oncology products being better placed inside larger organizations. Chimerix was a roughly $1 stock three or four months earlier, before FDA alignment on an accelerated-approval strategy for dordaviprone in rare pediatric diffuse midline glioma, followed by priority review. Jazz’s acquisition strategy favors “singles and doubles,” and this could be a case where “one plus one can equal three.”
• Jake on AbbVie-Gubra: AbbVie entered obesity through an amylin rather than leading with a GLP-1. Gubra’s compound has an approximately 270-hour half-life that could enable less frequent dosing, and analysts expect about 15%–20% standalone weight loss, potentially above what other amylins have shown. Jake expects smaller follow-on deals as AbbVie builds a portfolio.
• Jake rejected the idea that Pfizer is simply too late: “I don’t think it’s ever too late for something that’s different.” Monthly dosing, oral peptides, improved tolerability, and other differentiated approaches could still matter in a large market.
• The other side of M&A: BMS discontinued MRTX1133, the first G12D inhibitor from its $4.8 billion Mirati acquisition, after the program’s oral formulation failed and PK remained the central challenge. Yaron also noted disappointment around PRMT5 as a class and that Amgen’s Lumakras remained the number-one brand despite expectations that Mirati would win the market. His lesson is to go earlier and take clinical risk rather than pay heavily for something supposedly de-risked.

5. Zombies, Tang’s bid, and Pliant’s slow car crash

• Brian framed the negative-EV problem as roughly 100–200 companies where shareholders value the cash “as if the cash that it has in the bank is just going to be invested to be a zero,” assigning no value to the assets and expecting continued cash burn.
• The live test case is Pliant: Tang Capital made an unsolicited $3-per-share offer, but Pliant rejected it and stayed with its planned Alumis merger. The stock fell 13%. Brian, who covers Alumis, called the merger “a really, really good deal for Alumis” and a “fantastic infusion of capital,” while acknowledging that the deal remains debatable for Pliant holders.
• Jake praised Pliant’s board and management for acting quickly after the setback rather than reinvesting capital into pipeline drugs they had previously deemed undeserving of funding. The team chose to lay off the workforce and seek a more efficient way to deploy the remaining capital instead of throwing good money after bad.
• Pliant discontinued the Phase 2b BEACON-IPF study after a DSMB recommendation prompted by an imbalance of unadjudicated IPF-related adverse events. The stock was down about 40% on the week and 80% over the month, after already falling roughly 40% following a ClinicalTrials.gov recruiting-status update. Pliant ended the year with about $350 million in cash versus approximately $100 million of market cap, or roughly $250 million of net cash above market cap.
• Brian noted that Biogen had also pursued an IPF drug against the related αvβ6 target, while Pliant’s program targeted αvβ1. The market may therefore be reading the result as a broader concern about αv integrin subunits, although IPF has been a particularly difficult disease in which to run trials. Jake noted that only a few mechanisms have worked and that tolerability remains a key area for improvement, citing PureTech’s work on a better version of Esbriet. Sam, who said he was conflicted on IPF, declined to comment specifically.

6. Biohaven: a low-expectation Kv7 miss and the IgG degrader debate

• Brian said expectations for Biohaven’s acute-mania study of a Kv7 activator were “pretty much zero.” There was little preclinical or clinical evidence for Kv7 in mania, and the more relevant read-through was to Xenon. Most of Biohaven’s other Kv7 studies focus on epileptic seizures or depression.
• The bigger controversy is Biohaven’s extracellular IgG degrader: at 1,000 mg, four doses produced an 84% IgG reduction, versus roughly 75% for efgartigimod over four weekly doses. The result is numerically better but not clearly a standard deviation beyond the FcRns, and it falls short of Biohaven’s preclinical modeling. The key question is whether a 5%–10% relative improvement matters for a program entering the market years later.
• Brian remains positive on the degrader platform. Biohaven’s Gd-IgA1 degrader data in IgA nephropathy showed what he called a “game-changing” ability to rapidly reduce the pathogenic factor. He expects more attention on extracellular protein degraders, including private companies such as Carolyn Bertozzi’s Lycia and Avilar.
• Jake added that IgG reduction does not translate linearly into clinical outcomes. In gMG, rising placebo effects can shrink the active-placebo delta even when deeper IgG suppression is achieved. The encouraging point is that available data suggest IgG can be reduced substantially without necessarily increasing infections; Immunovant data were expected imminently.

7. RFK’s “wishy-washy” op-ed, a vaccine-autism study, and the Makary hearing

• Against a Texas measles outbreak with roughly 225 CDC-reported cases, Jake described RFK Jr.’s Fox News op-ed as positive in its headlines but “a little wishy-washy” beneath the surface. It emphasized individual choice and a balanced view of safety and efficacy rather than offering an unambiguous endorsement of vaccination. Sam also noted references to fish oil that added to the mixed message.
• During the recording, Reuters reported that the CDC was planning a large study of the vaccine-autism link. Yaron called the link already debunked and asked rhetorically, “What’s next? NASA’s going to plan a study into whether the Earth is round?”
• Yaron described Marty Makary’s hearing as “pretty boring” and said he “played the game not to lose.” He viewed confirmation of Makary and Jay Bhattacharya as a foregone conclusion; Makary said he would take an analysis-based approach and follow the data once in office.
• The discussion acknowledged uncertainty around the future of FDA and HHS. One panelist highlighted the low morale of an agency that feels pushed around and deprioritized. Another saw equally plausible bear and bull cases: more attention to debunked theories could worsen matters, but a severe outbreak could remind the public why vaccines matter. BIO CEO John Crowley was scheduled to join the following week.

8. Cavazzoni at Pfizer: revolving doors, conflicts, and nuance

• Brian said his client note was titled “Revolving Regulatory Door Triggers Synchronous Face-Palms.” Pfizer’s hiring of former FDA director Patrizia Cavazzoni as CMO looked like poor PR, especially alongside Scott Gottlieb’s role as a director and the administration’s criticism of regulatory-industry ties. Brian noted that former FDA officials are valuable consultants because companies want to understand regulators’ preferred trial designs, endpoints, and failure modes.
• He also acknowledged the ethical risk: people seeking industry jobs could become too close to the companies whose drugs they review. The counterweight is that post-employment restrictions and other controls limit what former officials can do, and collaboration can be valuable if conflicts are disclosed and managed.
• A panelist described a debate with Vinay Prasad, who argued that patients should avoid oncologists who had accepted pharma money. The response was that such a rule would exclude many highly regarded oncologists who run trials and understand new treatments. The panel favored disclosure and controls over blanket exclusions, while another panelist said distrust of science and bias against scientists were disheartening.
• Brian also joked that, given the administration’s inconsistencies, there was “at least a 20% chance” that within six months the FDA would be eliminated and Pfizer would handle drug regulation.

9. Networking etiquette — and Nasdaq’s 3 a.m. future

• The networking advice was to state a specific ask or, at minimum, explain the motivation for the conversation rather than simply asking to “pick your brain.” Research the person and their work before reaching out. For introductions, use double opt-in: ask the recipient first, because a low-value introduction can damage both relationships and future access.
• Other panelists added that networking need not be transactional. Someone who explains an interest in moving from big pharma to biotech may still merit an open-ended conversation, while demonstrating specific knowledge of the recipient’s work shows diligence and seriousness.
• On Nasdaq’s proposed move to 24-hour trading, one panelist expected very low overnight volume despite occasional sharp moves around data events. Brian looked forward to the 3 a.m. client call asking why stock XXX was up 10% “on five shares.” Yaron said the change could produce initial mayhem but ultimately lead to innovation and more complexity, joking that firms might need “two Brian Skorneys”—one for the morning and one for the night.