Episode 161 - October 31, 2025

Summary

• Daphne frames the biotech rally as potentially more durable, while Bruce says the cycle feels real: sub-cash companies have fallen from 200+ to ~50 (Stifel), M&A is on track for its strongest year since 2019, and layoffs exceeding 2024’s total may show discipline and culling of weak programs even as they are sad. Yaron Werber reports generalists physically back in meetings — argenx’s addition to the Euro Stoxx 50 at a 1% weighting is pulling them in — with one telling him “it’s time to at least close my short in healthcare.”
• Bruce Booth expects the IPO window to open in early 2026, not before year-end, given the 3-plus-month filing process and a closed SEC — but argues most companies shouldn’t walk through it. Being public costs $40-50M in the first two years, and with six or seven $100M+ private rounds a month, “if you can stay private, I’d encourage people to just stay private.” An unidentified panelist pushes back that “we’ve seen this movie before” — nobody in the system is incentivized to hold back. Bruce agrees that everybody is incentivized to go public, making discipline the key check.
• Novartis’s $12B Avidity takeout is, per Eric Schmidt, the largest deal they’ve seen for a company yet to read out a Phase 3 — and “a mixed bag for shareholders.” Avidity was one of the few genuine renewable-pipeline platforms, “where the next Alnylam or the next Vertex might come from,” so a mid-40s premium forgoes a potential $20-40B future. Brian Skorney’s read-through: Dyne’s DM1 drug is “a little better” but a little behind, and now competes with Novartis — or could itself be acquired.
• Novo’s up-to-$9B gate-crash of Pfizer’s $7.3B Metsera deal reads to the panel as a confession, not a coup. Yaron: after major board and management changes, including the foundation taking over and a new CEO arriving, “unquestionably they’re signaling that CagriSema is not going to cut it.” Sam Fazeli’s antitrust colleague at Bloomberg “can’t see any way this can escape” FTC scrutiny — and if Novo fails, it faces even more pipeline questions. Pfizer calls the bid “reckless” and has four business days to respond.
• Catalent’s Indiana plant has become the sector’s stealth headwind: an Official Action Indicated classification, CMC-related CRLs at Scholar Rock and Regeneron, and — per Bruce — roughly 50% of the summer’s ~270 FDA rejection letters were manufacturing-related. Brian says investors asked about Catalent Indiana in literally every meeting — awkward timing against tariff-driven pressure to move manufacturing.
• Intellia’s second liver-enzyme case, emerging around day 30 with no warning unlike typical early LNP toxicity, triggered a trial pause, an FDA clinical hold, and a ripple effect across gene-editing stocks (Beam, CRISPR, Editas, Prime). Eric: “this is a doozy,” and with orals and injectables crowding ATTR, the unmet need for a one-and-done therapy is “fairly kind of small.” The news also surfaced days early via an X user who heard from someone whose relative was in the trial, raising MNPI and information-sharing questions.
• At ACR, Eric flagged an “enormous disconnect” between packed rooms for autoimmune CAR-T and the modest valuations of Cabaletta and Kyverna — with favorable scleroderma data appearing for the first time, “probably no greater unmet need in the field.” In Sjögren’s, an $8-12B market per Yaron, Novartis’s ianalumab Phase 3s were technically positive but weak (~0.5-1 point ESSDAI vs ~3-3.5 for Vera’s RemeGen-origin BAFF/APRIL asset from China). The latter is moving into a global Phase 3.
• Bruce’s tradeable prediction: big-to-big pharma mergers “in the next three plus months,” with mid-to-high double-digit-billion companies absorbed by the giants. The lesson comes from Moderna — its market value fell more than 90%, from $185B at its 2021 peak to ~$10B, with EV now just $3-3.5B — which had “an AOL Time Warner moment” when its market cap exceeded Merck’s and could have used inflated equity to diversify. Sam is skeptical of takeout rumors and suggests that partnering out the infectious-disease vaccines might be the best path.

Deep dive

1. Generalists are back — and they’re hugging the analysts

• Daphne Zohar’s framing of the turn: solid clinical data, fewer weak players, successful commercial launches, renewed M&A and discipline — sub-cash names down from 200+ three years ago to ~50 (Stifel), 2025 layoffs already exceeding last year’s total (“it’s sad, but it also shows discipline and a culling of weak programs”), and M&A on track for its strongest year since 2019. Policy concerns also seem to be settling somewhat; the IPO market remains largely closed, and the XBI was around 112.
• Yaron’s on-the-ground evidence from a week marketing in Europe: argenx’s addition to the Euro Stoxx 50 at a 1% weighting is bringing generalists into biotech meetings, which “inevitably flows into things like an Ionis or a general sector discussion.” US small-cap generalists are dabbling too; old friends at conferences are saying “it’s time to at least close my short in healthcare.”
• What they’re buying: growthy large caps — argenx, UCB, Alnylam — and more diversified commercial stories like Ionis.

2. The IPO window opens in early 2026 — the question is who should walk through it

• Bruce’s mechanics: confidential filing to flip-public takes three-plus months, and especially about four months with a closed SEC; markets didn’t feel sustainably good until September — so expect little before year-end but “the first couple months of 2026 look like they could be pretty interesting.” His caveat: being public costs $40-50M in your first two years (bankers, D&O, the rest), and with six or seven $100M+ private financings a month, “if you can stay private, I’d encourage people to just stay private.”
• An unidentified panelist’s pushback — worth keeping: “I feel like we’ve seen this movie before” — VCs see a path to liquidity, bankers “keep cashing those coupons” at 7% per IPO, and analysts get new names. “Who’s going to exert that discipline?” Bruce’s answer: “everybody is incentivized to go public… it’s the discipline of knowing not to do it.” He also noted that going public provides a stock-option and 10b5-1 plan, removes private-company liquidation preferences in an M&A outcome, and gives VCs a path to liquidity.
• The alignment point Daphne pulled from Bruce’s 20-year trilogy: CEOs must stay aligned with current shareholders, not court future ones — Bruce notes he’s “usually the current shareholder in all those conversations,” a different lens than a new generalist’s.

3. Avidity at $12B: record price for pre-Phase 3 risk — and what it means for Dyne

• Brian’s breakdown: Novartis is paying for the muscle-targeting oligonucleotide platform (TfR antibody-mediated uptake), with a DMD exon-44 program planned for FDA filing in the very near future and pivotal DM1 data — the bigger investor driver — in 2026; a cardiovascular platform spins back out. Dyne’s DM1 drug is, he’d argue, “a little better” but a little behind, with a Phase 2 expansion cohort versus Avidity’s larger confirmatory Phase 3; both could potentially be reviewed in somewhat parallel fashion, and Dyne rose almost as much on the news.
• Eric’s ambivalence despite a great call: the largest deal they’ve seen for a company “that has really yet to prove that it has a drug,” and yet “a mixed bag for shareholders” — Avidity was one of the few renewable-pipeline platforms, “where the next Alnylam or the next Vertex might come from,” and selling here cedes a potential $20-40B valuation. On Twitter chatter that the tech is passé: “I really haven’t heard that at all” — the two companies’ lead on the field is tremendous.
• Sam’s Novartis logic: RNA know-how through Alnylam and Ionis cardiovascular deals, plus muscle-disease experience through SMA, and a need to replace future revenue — Cosentyx heading to ~$7.8B in 2028 with its compound patent expiring in 2028 or 2029 and flat consensus growth from 2029 onward. “This really fits very well” with Novartis’s knowledge base.
• Daphne’s pattern: women CEOs are doing well on the year’s biggest exits — Sarah Boyce at Avidity ($12B), Sharon Mates at Intra-Cellular ($14.6B to J&J), and Kate Haviland at Blueprint ($9.5B to Sanofi) — with the biotech CEO sisterhood now 400 women CEOs strong.

4. Novo vs. Pfizer for Metsera: a bid that admits two problems at once

• The tape: Pfizer had $7.3B agreed ($4.9B upfront, $2.4B milestones); Novo countered at up to $9B ($6.5B equity, $2.5B CVR, upfront de-risked via dividend) — ~19% better per share, ~22% on EV by Sam’s math. Metsera’s board deemed it superior, triggering a four-business-day window; Pfizer called the bid “reckless and unprecedented,” alleged antitrust violations, and said Metsera could not legally exit the existing agreement. A reference to Bourla’s “trump card” was paired with Daphne’s point that Novo is not domiciled in America.
• Sam’s antitrust read: structuring the deal to avoid a competition trigger “is actually saying that there’s actually an antitrust side,” and his Bloomberg antitrust colleague “just can’t see any way that this can escape it” — the FTC does not even need to be notified. He also raised the Greenland/Denmark backdrop as a possible reason for administration involvement. Sam noted that FTC risk could mean the deal takes six, 12, or 18 months, helping explain why Metsera’s board viewed the larger bid as superior despite the risk.
• Yaron on motive: Novo is in trouble, the foundation has effectively taken over after major board changes, much of management has been replaced, and there is a brand-new CEO — so “unquestionably they’re signaling that CagriSema is not going to cut it”: weaker amylin potency, not long-acting, and dosing and dropout trouble. Sam’s warning: if this reflects loss of confidence in the internal pipeline and Novo doesn’t win, “they’ve made a mistake — they’re going to end up with even more questions.”
• Precedents for buying ahead of the regulatory gauntlet: Illumina/GRAIL, and another panelist recalling the Boston Scientific–St. Jude–Medtronic saga.

5. Catalent Indiana: CMC stops being a footnote

• Brian’s status report on “the gift that keeps on giving”: one of pharma’s largest GMP facilities, ramped during COVID, has gone from Form 483s to an Official Action Indicated classification — the most severe — with Scholar Rock and Regeneron both receiving CRLs due to the Catalent Indiana facility and its CMC issues. “We spend so much time on clinical and regulatory… CMC takes a backseat in investors’ minds,” yet in every meeting for a development-stage client that week, investors asked about exposure. The 483s themselves are “pretty grotesque.”
• Bruce’s number: of the ~270 CRLs in the FDA rejection letters from the summer, about 50% were manufacturing-related — “an enormous driver of downside,” front and center for boards alongside the broader collapse of cell manufacturing. Daphne’s juxtaposition: tariff pressure and the push to move manufacturing limit alternatives just as domestic capacity stumbles.

6. Intellia’s day-30 liver-enzyme case — and a leak on X before the press release

• Eric on the science: a second liver-enzyme elevation, this one a high-ALT case, on the in vivo gene-edited ATTR therapy — but arising around day 30 with no warning, unlike LNP-mediated toxicity that typically appears early and may be improving by about day seven. The company paused the trial itself (“did the right thing”) before the FDA’s clinical hold; a few hundred patients have been treated fairly safely, but “this is going to be a tough one to get past,” and Beam, CRISPR, Editas, and Prime were all down on the week. “Not all gene editing products are created equal… I’d hope that this doesn’t poison the well.”
• Yaron’s commercial overlay: ATTR now has “so many amazing therapies” — orals, an Ionis autoinjector, and longer-interval injectables coming — so the unmet need a one-and-done therapy addresses is “fairly kind of small” once the safety profile is not clean.
• Daphne’s process point: the tox issue surfaced days early via an X user relaying what someone whose relative was in the trial had told him — he had no confidentiality duty, received significant backlash, and the episode raised MNPI and information-sharing questions.

7. ACR week: argenx executes, Sjögren’s gets crowded, CAR-T packs the rooms

• Yaron on argenx: another very strong Vyvgart quarter across gMG and CIDP — “it’s really jarring to see a company perform that well” at launch execution — while pragmatically halting enrollment in the IV dermatomyositis Phase 2 because IV trials were not enrolling well there, the same issue seen with Pfizer’s brepocitinib.
• Sjögren’s, an $8-12B market by his estimate: Novartis’s ianalumab Phase 3s (NEPTUNUS) were technically positive but “it’s like you finished the marathon and you collapse” — roughly 0.5-1 point on ESSDAI versus ~3-3.5 points for Vera’s RemeGen-origin BAFF/APRIL asset from China, which is moving into a global Phase 3. FcRn data from Vyvgart and J&J’s nipocalimab looked identical in Phase 2, while Amgen’s CD40-ligand antagonist is in Phase 3 and is expected to read out late next year.
• Eric on CAR-T at ACR: “an enormous disconnect” between physician, patient, and even pharma enthusiasm and investor skepticism toward Cabaletta, Kyverna, and peers at “very modest valuations.” Scleroderma — “probably no greater unmet need in the field” — is showing favorable activity for the first time in Cabaletta and Bristol data sets; despite cost and complexity, “probably just a matter of time before companies make a business out of this.”

8. Moderna’s cautionary tale and Bruce’s 20-year rules

• Sam’s math on the more-than-90% market-value fall ($185B peak to ~$10B): ~$6-6.5B cash at year-end means an EV of just $3-3.5B. Moderna retained its COVID vaccine rather than sharing it as BioNTech did with Pfizer, accumulated substantial cash, and then committed to large Phase 3 respiratory and infectious-disease programs while financing much of its oncology work itself, apart from the 50/50 Merck deal. If COVID sales continue declining — perhaps from $1.5B this year to $1.2B next — the company has limited room to cut while it continues financing trials, making a takeout unlikely. Sam’s standing scientific critique: the cancer-vaccine benefit may just be “very broad, nice innate immune activation” — he’s long wanted an unrelated-mRNA control arm. He suggested that perhaps the best path would be to partner out the infectious-disease vaccines.
• Bruce’s lesson, offered “from the cheap seats”: Moderna had “an AOL Time Warner moment” — a bigger market cap than Merck — and it is easy to argue that it should have used the inflated equity to buy a mainstream business. Generalized: when your board thinks the stock is “exuberantly valued,” take advantage of it. His prediction: big-to-big mergers within the next three-plus months, with mid-to-high double-digit-billion companies bought or merged with much larger companies, given the spread from $40B to $800B across pharma.
• From the trilogy, the people lessons: luck is “a super important part of what we do” — the “triple bullseye” of talent, scientific success, and exit rarely aligns, so stay humble and resist celebrity worship. CEO-change signals are visible well before the decision — storytelling, fundraising, and BD traction can deteriorate; hard B and C rounds and a stalled deal may be signals. Most leaders are “openers or closers,” rarely both. Boards should “err on the side of knowing too much” — the loss of large-owner directors in small-cap public boards is “a huge problem.”
• The closing theme — truth-seeking leadership: pre-agree what success looks like, what is gray, and what is a no-go, because otherwise when data disappoints “the handwaving starts and the handwaving moves really really fast,” and “time from a really great executive is more scarce than capital, frankly.”