Summary

Biotech’s 2025 selloff looks more like a buyer strike and forced-selling problem than a deterioration in science: XBI was $84.45, down 4% for the week. Tim Opler heard rumors—without specific admissions—that certain funds, including funds that had gone long the market and underperformed, were facing LP withdrawal requests amid insufficient demand, while Bruce Booth noted that the S&P had beaten XBI by roughly 10,000 basis points over both five and ten years. Fundamentals remain constructive, but “it doesn’t feel great…right before the darkest hour of the night.”
Venture deployment remains near $5 billion quarterly, but capital is concentrating into dramatically fewer companies. First financings fell from roughly 100 per quarter in 2018-19 and 180 at the 2021 peak to barely above 50, perhaps 70 after late data arrive; meanwhile, the average round rose from $46 million to $56 million and now $65 million. Booth’s countercyclical call: contractions can produce strong vintages if companies are built “with discipline and capital efficiency.”
PIPEs may be providing necessary runway at the cost of alienating the generalists biotech needs. The cited analysis showed most returns accruing between wall-crossing and public disclosure—Tim’s uncomfortable shorthand was “legal insider trading”—with little subsequent alpha; Chris added that mean returns were positive but the median was negative and roughly two-thirds failed. For cash-starved issuers, however, “the price of poker is you got to show some leg.”
The planned HHS reductions create material FDA execution risk even if, as reported, drug reviewers are protected. Tim described 10,000 cuts plus 10,000 voluntary retirements across an 82,000-person department and illustrated how FDA staffing might fall from 19,700 to 12,200 under one allocation assumption. With China expanding its regulatory and drug-development infrastructure, his strategic objection was blunt: “We want to make it easier for the FDA to do its job,” not harder.
J&J’s EGFR-lung-cancer challenge to AstraZeneca’s Tagrisso has credible efficacy but remains a tolerability and adoption contest. Rybrevant plus an EGFR TKI delivered progression-free-survival benefit and roughly an extra year of overall survival, yet skin toxicity and IV administration matter against a daily oral incumbent; subcutaneous Rybrevant addresses only part of that burden. AstraZeneca still has Tagrisso-plus-chemotherapy and a promising savolitinib combination, so physician behavior—not a headline claiming a new crown—will decide the outcome.
China is advancing from fast follower to source of first-in-class programs, changing both sourcing and disclosure strategy. Molecules from China rose from 31% of large-pharma sourcing in 2024 to 41% in 2025 to date, with an even higher share of upfront dollars; Tim’s Hangzhou meetings included next-generation ASGPR degraders and an in-vivo cell-therapy approach to functional HIV cure. Booth’s conclusion: investors ignoring China are “missing the boat,” while US startups may delay patents and target disclosure to deter rapid followers.
Obesity remains a manufacturing-and-market-access race as much as a mechanism race. Novo Nordisk paid United Laboratories $200 million upfront, with up to $2 billion in contingencies, for ex-China rights to UBT251 after 16.6% weight loss at 12 weeks; the GLP-1/GIP/glucagon triagonist offers faster entry behind Lilly’s retatrutide. With more than 100 developers pursuing 160 drugs, Dave Ricks’s framing survives: “If you have the same mechanisms, you’re going to get the same efficacy. There’s no magic here.”
Rare-disease data showed how small, neglected indications can still create billions in value—while preserving major evidentiary risk. Soleno rose from roughly $4-5 eighteen months earlier to above $70 after Vykat XR’s Prader-Willi approval, carrying an average price near $500,000 and projected peak sales around $2 billion. Wave’s exon-53 DMD candidate improved time-to-rise by more than three seconds, but its 11-patient, open-label comparison with historical controls leaves the new FDA’s approval threshold a central uncertainty.

Deep dive

1. Forced selling is overpowering biotech fundamentals

Tim Opler’s screen-level snapshot was XBI at $84.45, down 4% for the week. The science, assets, and management teams had not suddenly deteriorated; “the actual fundamentals right now are not that bad.” What changed was marginal demand under Trump-policy and macroeconomic uncertainty.
The more immediate pressure may be mechanical. Two fund managers cited rumors of forced selling, and one source—previously early and correct about Armistice—said some funds had been strong performers while certain funds that went long the market underperformed sharply in 2025 and then faced LP withdrawal requests. “There’s just not enough buyers in the market to absorb that flow.”
Bruce Booth supplied the asset-allocation explanation: over five and ten years, the S&P had outperformed XBI by roughly 10,000 basis points. Biotech therefore became a drag for managers benchmarked against broad indices, reversing the prior decade when being underweight the sector often meant underperforming.
Booth also cautioned that “zombie” biotechs are cyclical rather than new: he recalled 1991 IPOs still trading at or below their IPO prices in 2010 and the 2005-07 class falling below IPO prices within months.
Sam Fazeli’s generalist test was simpler: after watching biotechnology lag for five years, why buy it rather than a depressed, cash-generating Nasdaq or S&P company? After correcting himself, he cited roughly 8% declines for the Nasdaq 100 and S&P over the recent period. “It’s so much easier” to buy those dips. How biotech exits its “dark night,” he admitted, “I have no idea.”

2. Capital is concentrating as company formation collapses

Booth’s first-financing data showed roughly 100 new biotechs funded each quarter in 2018-19, rising to about 180 at the Q1 2021 peak and falling to just above 50 now—perhaps 70 when reporting settles. That is a 60-70% contraction from the bubble and well below the pre-pandemic norm.
Yet quarterly venture deployment remains near $5 billion, producing the largest mean-versus-median financing skew Booth has seen. Tim’s complementary series put the average round at $65 million this year, versus $56 million last year and $46 million the year before; removing Bain and ARCH did not eliminate the concentration.
Later-stage companies unable to reach public markets are capitulating on price through repriced Series B, C, and D rounds. Booth nevertheless called this an attractive creation environment: Nimbus began near the spring 2009 bottom and Kymera amid the 2015-16 turmoil. The condition is disciplined, capital-efficient construction.

3. PIPE economics solve runway but repel generalists

The PIPE analysis discussed by the group located most investor returns between receipt of confidential information and public disclosure, with little money made afterward. Tim’s deliberately uncomfortable description was “legal insider trading”: investors see the data, receive an inducement price, and capture the disclosure jump.
Chris Garabedian highlighted the distribution hidden by averages: mean PIPE performance was positive, but the median was negative and roughly two-thirds did not work. Those transactions may outperform XBI or some small-cap benchmarks without constituting a broadly successful strategy.
The issuer’s defense remains survival. Companies should ideally hold at least three years of cash, but many do not; in this market, wall-crossing may be a “necessary evil.” Tim’s phrasing captured the bargain: “The price of poker is you got to show some leg.”
Chris argued that the sector-level cost is exclusion. Generalists see privileged diligence and conclude they cannot evaluate biotechnology on equal terms, reinforcing the buyer shortage that makes PIPEs necessary in the first place.

4. FDA retrenchment turns regulation into a competitiveness question

Tim began with the announced arithmetic: 10,000 HHS cuts plus 10,000 voluntary retirements from an 82,000-person organization, implying 62,000 remaining. More than two-thirds of the reductions were expected across FDA, CDC, and NIH rather than proportionally across HHS.
Chris had relayed a reported roughly 2,500 FDA cuts—about 25%-30%, up to a third, of the HHS cuts—that supposedly spared division reviewers. Tim’s arithmetic was less reassuring because it did not account for the voluntary departures.
FDA employed about 19,000 people in 2019 and 19,700 at the start of 2024. Tim’s illustrative—not official—scenario assigned 3,000 voluntary departures and another 3,500 cuts to FDA, leaving 12,200. Protecting reviewers would push the burden onto plant inspections, food safety, tobacco regulation, communications, policy, HR, and other functions that still affect agency performance.
Across roughly 50 portfolio companies, Booth had seen no material deterioration in FDA engagement during the four or five months after the election. But that evidence predated the newest cuts by only 48 hours, and he found it “hard to imagine” reductions of this scale would not affect timelines, engagement quality, and medicine development.
The competitive comparison sharpened the concern: China is adding pharmaceutical infrastructure while its regulator accelerates early patient access. Booth’s companies already often begin in Australia, Europe, or the UK because early-stage regulators are more collaborative; US programs commonly prepare a parallel pivot if pre-IND discussions restrict SAD/MAD escalation. Chris’s hopeful case is that Makary’s FDA lowers those barriers without degrading rigor.

5. Lung and bladder data reward efficacy only when delivery is workable

In EGFR-mutant non-small-cell lung cancer, AstraZeneca’s Tagrisso remains the standard J&J is trying to displace. Rybrevant plus an EGFR-directed TKI produced progression-free-survival improvement and roughly an extra year of overall survival, but competes against a daily pill with IV burden and troublesome skin disorders.
Subcutaneous Rybrevant could improve administration and parts of the adverse-event profile, yet a dedicated skin-toxicity session signaled that the residual problem is real. AstraZeneca is also advancing Tagrisso plus chemotherapy and an oral c-MET inhibitor, savolitinib, from Hutchmed; Sam viewed the latter’s deep response waterfall as sufficiently promising to keep the succession unsettled.
BioNTech’s BNT327, a PD-L1/VEGF bispecific, showed second-line small-cell-lung-cancer response rates falling from roughly 60% to 42%. Sam attributed much of the decline to enrolling more immunotherapy-pretreated patients and still considered median OS, PFS, ORR, and disease-control data respectable. Sam thought first-line results supported Phase 3, but the spider plot contained too many patients progressing at two or four months for an unqualified victory call.
CG Oncology’s intravesical oncolytic immunotherapy generated decent complete responses in 112 BOND-003 patients with non-muscle-invasive bladder cancer and appeared somewhat cleaner than J&J’s TAR-200. Cross-trial differences in carcinoma-in-situ and papillary disease complicate comparison, while the commercial question looms larger: “Who wants to go up against Johnson & Johnson?” Partnership or acquisition may matter as much as incremental efficacy.

6. China’s innovation surge is rewriting sourcing and secrecy

DealForma data put China-originated molecules at 31% of large-pharma sourcing in 2024 and 41% in 2025 to date, with an even greater share by upfront dollars. Tim said China appeared materially changed from his November 2024 visit only four months earlier.
The shift was qualitative as well as quantitative. A Chinese team was designing around weaknesses in emerging ASGPR-based extracellular degraders; another Hangzhou scientist rejected conventional CAR-T assumptions for functional HIV cure and showed early work on an in-vivo cell-therapy alternative. Hangzhou’s new-company landscape looked “just like Kendall Square…maybe better.”
Booth sees China as an asset source for new companies and existing portfolios, with US teams still able to add translational and development innovation. But fast-following changes disclosure incentives: targets, patents, and programs may stay confidential until dosing begins. Sam’s wider point was that biotechnology lacks AI’s semiconductor bottleneck—here, “the barrier is how many people do you have and how much money do you throw at it and how good are your scientists.”

7. Obesity and rare disease are producing radically different value curves

Novo Nordisk paid United Laboratories $200 million upfront and up to $2 billion in milestones for ex-China rights to UBT251, a GLP-1/GIP/glucagon triagonist that Sam understood to be a single molecule. Its 16.6% weight loss at 12 weeks was competitive, though Lilly’s retatrutide was already in Phase 3 with data expected from late 2025.
More than 100 drugmakers were pursuing 160 obesity drugs, up from 120 in August, with over 40% in Phase 2 and many originating in China. Sam’s adopted Dave Ricks rule—“same mechanisms…same efficacy”—made manufacturing, patient access, and market-share execution more differentiating than a one- or two-point efficacy edge.
Novo also paid Lexicon $75 million upfront for a preclinical ACLY inhibitor intended to influence satiety and energy expenditure. Sam had not yet formed a view on the unfamiliar biology, but his valuation reaction was clear: “$75 million for a pre-clinical asset sounds pretty punchy.”
Soleno’s Vykat XR approval for Prader-Willi syndrome moved a company once trading around $4-5 above $70. The hyperphagia score fell from more than nine points to below three, with a five-point placebo-adjusted difference in the label; average weight-based pricing approached $500,000 and projected peak sales were about $2 billion.

8. Translation remains the gate between ambitious science and durable companies

Wave’s exon-53 DMD program improved time-to-rise by more than three seconds and showed supportive dystrophin, creatine-kinase, fibrosis, and directional functional findings. But only 11 patients were treated in an open-label study against historical controls, making FDA receptivity, a possible advisory committee, and the precedent of Sarepta’s exon-skipping approvals decisive. Chris also noted that exon skipping is the mechanism behind Sarepta’s first three approvals and argued that recent gene-therapy safety concerns leave it in the DMD armamentarium.
Tim’s aging history traced the pharmaceutical ambition of immortality back to Paracelsus and 1620, then distilled today’s vast literature into three plausible strategies: remove senescent cells, reprogram cells toward younger phenotypes, or replace cells. He was not promising “this pill…tomorrow,” but argued the field is becoming translationally ready and could “make even obesity look like a very small indication.”
The closing company tape kept that optimism honest. Lyndra could not finance its schizophrenia pivotal trial and wound down; Entrada and ElevateBio announced double-digit layoffs; 23andMe entered bankruptcy after failing to secure a buyer or investor. Co-founder Linda Avey’s account of the company’s genesis, her replacement as CEO, and lessons learned was offered as the useful postmortem behind a high-profile brand’s failure.

Episode 137 - April 4, 2025 Inside Magic Johnson’s Billion-Dollar Empire | EP #163