Adam May on investing in biotech $NKTR $ABVX

Summary

• Adam May’s core edge framework: to find alpha in biotech you need two things — a read on the trial outcome, and “an equally good explanation as to what other people are missing.” On Abivax ($ABVX), the market wrote off obefazimod because nobody knew its mechanism of action — “we still don’t really truly know” — but May had enough clinical data to conclude “what matters is that it works,” and the stock is up roughly 1,400–1,500% in about eight months since the phase-three ulcerative colitis readout.
• May’s Nektar ($NKTR) thesis rested on his view that Eli Lilly had genuinely botched the rezpeg eczema data — a claim most investors refused to believe but which public legal documents from Nektar’s lawsuit indicated Lilly did not dispute. Lilly’s misanalysis showed a 9% response delta versus placebo on the 75% response endpoint; the corrected analysis showed low-20s, and May’s forensic read of a footnote — one responder apparently missing a single week-12 appointment plus a one-week placebo-response spike exactly at the primary endpoint — implied the true delta could have been ~43%, blockbuster territory against a ~30% benchmark.
• Nektar remains “the most asymmetric upside on my book” at ~$70–75 (versus ~$25 post-readout), on two legs: exceptional maintenance data and the collapse of the competing OX40 class. Phase-three OX40 efficacy fell to mid-teens with Kaposi’s sarcoma cases that May attributed to the drugs — Amgen already canceled its program — yet Sanofi still projects $3–5B peak sales for amlitelimab; Nektar’s drug is more efficacious so far with no comparable safety signal, and its once-every-12-weeks dosing (4 shots/year vs. Dupixent’s 26) held up as well as monthly dosing.
• The market has written Nektar’s alopecia areata indication “off to absolute zero” after a 50%+ selloff in December — May thinks the skew is “totally totally off.” The only approved class is JAK inhibitors with black-box warnings for lymphoma, blood clots, heart attacks and severe, potentially fatal infections; the Dupixent analog shows you only need to be “half as good” as a JAK to dominate. He sees a potential $3–5B NPV and $2B+ peak sales, with maintenance data due within weeks.
• The Abivax “killer slide” was one lonely slide near the end of the corporate deck: because only induction responders enroll into maintenance, the disclosed maintenance enrollment count let May estimate the pooled response rate — “basically mathematical proof that the trial was going to succeed.” Even plugging in the worst-ever phase-three placebo rate and worst response-to-remission conversion, the trial still probably hit; it read out in line with his math and rose ~600% the next day.
• May calls Abivax “the most obvious buyout candidate of any stock I’ve seen”: every successful ulcerative colitis trial has led to a buyout, most after phase two — Abivax is post phase three with a unique, hard-to-copy mechanism almost any pharma could slot in. The Merck/Prometheus comp: ~$11B after phase two, three-plus years behind where Abivax sits, with arguably worse data and a crowded TL1A field. He thinks they should sell after June maintenance data, where failure “seems off the table” — watch for a 20–30% delta, midpoint 25%.
• Context on the setup: small-cap biotech a year ago was at “absolutely biblical levels” of despair — over a decade of negative returns, quality names at 0.36x cash — so even transformative data left stocks obviously underpriced after 500% moves. May’s discipline was sitting on positions already up 2–3x because “it was very obvious to me that even after the rise… they had not appreciated even remotely enough.”

Deep dive

1. Broke med student to Tiger-seeded fund — launched at the exact top

• May is a practicing dermatologist who started trading small-cap biotech in med school “with the few thousand dollars that I could scrape together,” reasoning his medical training might carry real edge. He and a friend headed to Stanford GSB formalized a track record in 2020–early 2021 and returned ~1,400% in 18 months — “a lot of beta in there, maybe a little bit of alpha.”
• That record got them meetings with Alex Robertson of Tiger Management, who seeded Rare Life Capital with a couple million dollars; AUM peaked around $12M, run in May’s “spare time” during 80-hour resident weeks at the COVID peak. Launch was Q2 2021 — the top — the XBI drew down ~55%, and they closed at the one-year anniversary with roughly the index’s ~50% loss. He’s since consulted for small biotech funds and run his own capital, “something that probably I’ll be doing full-time here soon.”

2. Beta swings both ways — and edge means knowing what others are missing

• On correlation, May’s caveat: biotech is “probably the most if not one of the most uncorrelated sectors” — it “would be probably pretty pleased with a recession” via rate cuts — but sentiment swings so violently that in March–April 2025 “very clearly positive” readouts fell 30–40% on liquidity events, while under ZIRP “an obvious scam can put out a phony press release… and go up 300% in 1 day.”
• His two-part alpha test, offered against Andrew’s pushback that “slam dunk” readouts are already priced: you must approximate the trial outcome and “have a reason to explain why other people don’t think that.” Abivax was the specimen — investors demanded to know the mechanism “down to the very nitty-gritty,” wrote off “some weird drug from this tiny French company,” and May concedes the skepticism is often right: “for this one example of a drug with a mysterious mechanism of action that ended up working, we can give you a hundred others where shady management teams were kind of doing a hand-waving motion.”
• On the miR-124 mechanism story: obefazimod is a repurposed drug originally studied in HIV/AIDS; May speculates that the small Parisian biotech measured many things, “saw that this one thing miR-124 went up and they said, okay, that’s what this drug does.” His resolution: “what the company says the drug does, a lot of investors don’t think that’s what it does. But what matters is that it works.”
• Aside on AI drug discovery — practitioners “will laugh out loud at you” if you say AI replaces it: “you have to put a molecule in thousands of human bodies to know what it actually does.”

3. Process: look at 300 names, own five, and diligence the competitors

• The funnel is “high throughput”: a concentrated book of maybe five to ten names distilled from several hundred, starting with 15-minute corporate-deck passes, narrowing through successive diligence rounds. Sourcing: a tightly curated X follow list of small-cap biotech investors, a running quarterly re-screen list, and sell-side catalyst calendars.
• The mistake he flags: relying on the company’s own materials. “If you’re really going to go long something… you need to be spending more time diligencing other drugs, other competitors, other parts of the market” — “you can’t expect the company to give you an unbiased view of what their competition actually looks like.”

4. Why he still holds the winners: the sector was so bombed out that 500% moves weren’t enough

• May doesn’t want a book that’s all binary catalysts: post-data but mispriced names and commercial launches balance longs that “could go to zero” — “ABVX is never going to zero.” A stock graduating “from the unvalidated $100 million market cap phase into a $500 million validated phase” isn’t a reason to ditch it.
• The macro backdrop: a year ago small-cap biotech sat at “absolutely biblical levels” — “over a decade worth of negative returns” during an otherwise secular bull market. May said the index was down more than the S&P, while financial indexes were at levels seen in the Great Financial Crisis; names traded at 50% of cash, and his hindsight regret was that buying good-data names at 80% of cash beat “the shittiest ones” at 50%.
• The consequence: even “transformatively amazing data like ABVX had” left stocks obviously cheap after 500% moves. Nektar went ~$25 post-readout to $75; Abivax low-60s to ~$120 — “I was just sitting on the stuff that was up two or three fold already.”

5. Nektar: Lilly’s botched analysis, and the patient who may have missed week 12

• The setup: Nektar’s serial-failure reputation (the Bristol Myers cancer-drug failure) obscured rezpeg, partnered with Lilly in eczema, lupus, and psoriasis. Lilly’s presented eczema data “looked awful” — a 9% response delta versus a ~30% market benchmark on the 75% response endpoint. A year later Nektar demanded the drug back, press-releasing that Lilly botched the analysis; the corrected delta was low-20s. Investors scoffed, but legal documents in Nektar’s ongoing suit indicated that Eli Lilly did not dispute the data-set misanalysis — and as a dermatologist who calculates that endpoint, May “knew that what Nektar was saying was correct.”
• Second misconception: “Dupixent is good enough.” May sees the opposite daily — only ~50% of trial patients ever responded to Dupixent, and nemolizumab, with a delta of just 13%, is heading to ~$4B peak sales because “half of the market fails the drug that everybody’s using” and the alternatives are dangerous immunosuppressants. (His answer to Andrew’s why-only-50% question: “atopic dermatitis” is probably “20 different conditions that we put under this umbrella.”)
• The eureka: buried near the footnotes of one corporate-deck slide, responses were high at weeks 6, 8, 10, dipped exactly at the week-12 primary endpoint, then recovered at 14 — while placebo responders spiked to two only at week 12, out of 18 measurements. Patient counts suggested the cause may have been that one responder “just didn’t show up at week 12.” Excluding the outlier placebo responder puts the delta in the 30s; adding back the missed appointment, ~43%. “That was the biggest source of alpha for that trade.”
• The market’s terror was maximal: a pre-data reverse split, a CMO departure that May said was for personal reasons (he thought she might have been sick), and a trough at 0.36x cash. The phase two delivered a ~27% delta and the stock rose almost 200% — May “actually was surprised that it didn’t go up more.”

6. Nektar today: maintenance blowout plus an OX40 vacuum

• February’s maintenance data were “stronger than probably I had even hoped”: more patients maintained response on rezpeg than on Dupixent, and once-every-12-weeks dosing matched monthly — four shots a year versus Dupixent’s 26, the Skyrizi-style cadence that “patients love.”
• His conviction into that readout traced back to the phase-one dataset: patients dosed only 12 weeks then followed 40 more with no treatment “all kept their responses” — atypical for eczema, where disease returns off-drug. Mechanistically rezpeg creates T-regs, “an anti-inflammatory population of cells that then live in your body,” suggesting “remittive potential” — hedged: “could have been luck or noise.”
• The bigger driver: the rival OX40 class imploded. Amgen’s and Sanofi’s candidates carried multi-billion-dollar NPVs; phase-three efficacy “fell off a cliff” to ~16%, and Kaposi’s sarcoma appeared — May argued the cases were caused by the drugs, reasoning that OX40-mutation carriers develop the cancer. Amgen canceled; May expects Sanofi to follow after “another case or two.” Yet Sanofi still projects $3–5B peak for amlitelimab — on that yardstick, Nektar’s market cap “would probably be about 3x.”
• On endgame: May “would prefer that they sell, probably,” but concedes “they might want to go the other way” — noting the old Bristol Myers deal (a billion upfront, ~$1.5B in biobucks, over half of revenue retained) shows partnership is a real middle path, and if they choose to commercialize themselves, a partnership would be “almost mandatory.”

7. The alopecia call: written off to zero because investors used the wrong benchmark

• December’s alopecia areata data sent the stock down 50%+, which May thinks misreads the bar. The only approved class is JAK inhibitors carrying FDA black-box warnings for lymphoma, blood clots, heart attacks, severe potentially fatal infections. His prescriber’s-eye view: “we dermatologists would use a safe, less efficacious drug nine times out of 10, if not 10 times out of 10” first. The Dupixent analog: half as efficacious as JAKs in eczema, ~$10B in sales — “you just got to be half as good and you will dominate.”
• The trial quirk investors missed: rezpeg is slow-onset. Most responders didn’t start responding until ~30 weeks in, yet 40% of drug-arm patients dropped out before week 36 — probably not because of side effects but because of discouragement in a never-before-tested indication. Phase three runs a full year with lower dropout, so May thinks “it’s going to be over half as effective as a JAK inhibitor” and become the obvious first-line therapy.
• Sizing, with hedges intact: NPV “could be three to five billion dollars… potentially,” $2B peak “might be conservative” given market expansion — validated by nemolizumab’s prurigo nodularis, a third the size, contributing to a $4B peak drug. Near-term catalyst: 16-week maintenance data in weeks; he wants to see “just a couple patients had deepening of response after that 36-week cutoff.”

8. Abivax: from red-flag French orphan to “mathematical proof”

• The hair on phase two: unknown mechanism, old management burning UC money on a COVID study, and an inverse dose response — 3mg beating 6mg — which investors hate because “if it’s statistical noise, then is the evidence of efficacy just statistical noise?” May looked through it: pooled dosing arms looked good, secondary endpoints were competitive, and the enrolled patients had “the most severe ulcerative colitis of any trial I could find ever,” making the efficacy signal mean more.
• His original edge was retention math: a higher percentage of patients stayed on Abivax’s unapproved drug in maintenance at one, two, and three years than on FDA-approved oral UC drugs. “It’s not because these extremely severe patients are having random placebo responses for five years. It’s because the drug is active.”
• The killer slide: since only induction responders enroll into maintenance, the deck’s disclosure — 80% through the trial, ~600 patients enrolled in maintenance — gave May a way to estimate the pooled response rate. He subtracted historical phase-three pill placebo rates, applied typical response-to-remission conversion ratios, and landed on “a thousand percent upside if it was real.” Stress-tested with the worst-ever placebo rate and conversion ratio, “it was probably still going to hit” — and a statistically significant hit alone was 100%+ upside. “I sent it to a couple people and I was like, ‘Hey, I think I found some material public information here.’” The readout matched his math; +~600% next day.

9. The endgame: sell after June maintenance — and the CCO game theory

• May’s buyout case: “the most obvious buyout candidate of any stock I’ve seen.” Every successful UC trial has led to a multi-billion-dollar buyout, most after phase two; Abivax is post phase three with a unique, hard-to-copy mechanism complementary to any portfolio — nearly anyone could buy except perhaps AbbVie on FTC grounds. The comp: Merck paid ~$11B for Prometheus after phase two, “over three years behind where Abivax is right now with arguably worse data” and a dozen same-mechanism TL1A rivals.
• On the missing chief commercial officer: degenerate-gambler logic says no CCO means an imminent deal, but May’s game theory cuts the other way — on a $15B (best case ~$20B) buyout, a $1M CCO hire that moves bargaining power 1% is worth $150M: “I personally think that they probably should have done it already.” Andrew’s pushback — worth keeping: with four potential mega-buyers, you don’t need the go-it-alone illusion, “you just say, okay, we’re for sale, jump ball, bids are due in four weeks” — which May grants: “if there ever was a company that was going to have multiple bidders, this one makes a lot of sense.” Plus the CEO was brought out of retirement having sold his last two companies, one to AstraZeneca.
• June maintenance data: “no drug that’s ever done well in induction has failed in maintenance,” and Abivax’s induction was arguably the third most efficacious ever in UC (behind dangerous JAKs). Watch the 20–30% delta range — forced to pick, “25” — below 20 and statistically significant, the stock could dip; above 30 makes it second only to Rinvoq. Even at 25 it could rise as the downside catalyst clears, with the DSMB already clean through 80% of maintenance. Then Crohn’s data later in the year — and until then, “mostly the stock is going to trade on buyout rumors.”