Episode 167 - December 19, 2025

Summary

• The 2025 rally is pausing into year-end, but both hosts read the pause as healthy rather than ominous. With the XBI near 124 — levels not seen “since really the peak of the pandemic” — Eric Schmidt says biotech has modestly underperformed broader indices for the first time in three or four months and that “the buy side just seems a little bit tired,” while Bruce Booth stresses this is a discerning stock-pickers’ market, not 2021-style correlated froth: Pyxis and Nektar’s mediocre data were “heavily punished” even as good news earns incremental value.
• Follow-on indigestion is real and self-reinforcing: nearly $9B priced across October and November, and recent deals (Immunome’s desmoid readout, Kyverna) popped on news then sold off post-offering. Eric relays an insider telling him, “because last week’s deals didn’t do so well, I’m going to need more of a discount this week… I know others aren’t going to outbid me” — first-day statistics now influence the next week’s terms.
• Expect a wave of confidential S-1 flips in the next three weeks and a Q1 IPO rush — with quality as the real risk. The IPO process takes four to five months, so post-Labor Day conviction lands in January or February; predictions floated ranged from 25 to 60 flips. Eric’s worry: stale late-2024/early-2025 names with existing syndicates get “recycled” first, and “it’s really critical… to make sure that the bar is very high.”
• The FDA is politically “in shambles” at the top but still functioning at the working level — a distinction investors should hold. Daphne reports 4,000 departures (20% of the agency, at 2016 staffing levels), no new hires in 2025 beyond transfers, and “policy by podium”; Eric calls the commissioner’s national priority vouchers political candy and notes Disc Medicine fell about 15% after STAT reported that Vinay Prasad may dislike its drug despite the company receiving a voucher. Bruce’s counter from roughly 45 portfolio companies: reviewers are delivering feedback on time — “kudos to them for being able to keep their heads low.”
• The policy picture remains unsettled. Daphne relays a New York Times piece suggesting a possible RFK-led coup attempt against Makary and says replacing Makary could be worse for biotech. She also warns that the White House may use existing MFN deals as a blanket framework for biotech, which she calls “disastrous” for small and midsize companies. Bruce sees a possible benefit for new medicines from GDP-adjusted global pricing, and Eric explicitly agrees that the U.S. should no longer subsidize lower prices abroad. Eric separately warns that RFK’s vaccine policies threaten public health, citing the American Academy of Pediatrics’ funding loss after criticism of RFK and Paul Offit’s refusal of a proposed $1 million vaccine debate.
• The M&A-as-gold-medal framing got a genuine debate: Bruce sees acquisition as the ecosystem’s natural recycling given pharma’s distribution capacity and cash-heavy balance sheets, while Eric warns it can slow drugs for patients. Daphne’s Avidity example: after Novartis took over, the base case shifted from biomarker-based approval to clinical data potentially 12–24 months later. Both hosts stress that luck complicates STAT’s best/worst CEO lists — seven of the best were dealmakers in a roughly $240B M&A year — while Bruce makes the “celebrate the losers” case for Bluebird’s Andrew Obenshain.
• Kyverna’s CD19 cell therapy in stiff-person syndrome looks like “a clean victory” and possibly the first cell therapy ever approved for an autoimmune disease; Amicus’s $4.8B BioMarin takeout is a parable about dilution. Amicus IPO’d in May 2007 at $15 and was acquired at $14.50 per share — yet its market cap rose 13–15x — “great outcome for patients… not so much for investors.” For 2026, Daphne’s XBI target was 120, Bruce’s was 130, and Eric closes that “the innovation in our industry is almost unstoppable.”

Deep dive

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