Episode 168 - January 9, 2026

Summary

• The panel enters JPM week near-unanimously bullish, with the XBI at 125.53 — a level last seen November 10, 2021 — and Tess Cameron saying her team’s forthcoming report finds 2025’s returns were “actually really strong even if we take out M&A.” Brian Skorney’s specialist-investor analysis shows performance was discriminating, not indiscriminate: companies with specialist investors and real fundamental progress drove the tape, which the panel reads as sector health. Paul Matteis owns the consensus: “I sound like the cliche sellside analyst, right? Bullish, more M&A, but in general I really feel that way.”
• The Merck–Revolution Medicines rumor (FT, $28–32bn) is the week’s biggest tradeable story, after the Wall Street Journal first floated AbbVie, which told Bloomberg “no, no, we’re not in discussions.” Sam Fazeli calls the mooted price rich on EV/sales versus oncology deals back to Loxo and Array, but welcomes it: “if Merck’s prepared to pay that… there’s a pile of cash coming into the sector.” Context: AstraZeneca just paid Jacobio $100M upfront plus ~$2bn milestones for a pan-KRAS asset, and Lilly’s Ventyx deal actually happened.
• Aktis’s IPO priced at $18 (top of range), raised $318M on a reportedly 10x-covered book with ~$100M from Lilly, opened near $27 and settled around $22–23 — despite having no clinical data yet and being in Phase 1b, with data possibly due at the end of 2026 into 2027. Sam admits he worried “do we really want to start with this?” but calls it a great start; his one unresolved diligence item is anti-drug antibodies against the novel 50–75-amino-acid designed miniproteins. Brian says the names on his follow-on list are up double digits with upsizes, and imagines the greenshoes were exercised — “follow-on performance is a great indicator for the level of enthusiasm.”
• Policy risk is being priced at zero, and both Tess and Paul flag complacency itself as the downside risk. Stocks “didn’t bat an eyelid” at the CMS MFN memo; Sam rejects the offset thesis that pharma can just raise U.S. prices (“I don’t think any U.S. pharmas or biotechs are really leaving a lot of pricing room on the table… we might see some surprises”), while Tess thinks existing products are more exposed than new launches. On the CDC stripping six pediatric vaccines from the recommended list without ACIP input, Tess asks “what does it take for us to remember that these are real risks… to public health.” Paul says investors are “so jaded to drug pricing headline risks that that probably is a real risk to the downside.”
• The data scoreboard split cleanly: Crinetics (+21% from its follow-on price) beat on Palsonify’s first quarter with 200 enrollment forms and impressive CAH phase 2 data, while Zenas’s “positive” IgG4-RD headline collapsed the stock on a 56% flare reduction versus ~87% for Uplizna cross-trial, and Ultragenyx’s setrusumab missed statistical significance on fractures at the final OI analysis. Monte Rosa’s NLRP3 degrader produced ~85% hsCRP and ~65% IL-6 reductions in healthy volunteers, opening a shot at the ASCVD market.
• Paul’s psychedelics thesis has flipped from skepticism to conviction: GH Research’s inhaled 5-MeO-DMT — “one of the best data sets we’ve seen for any psychedelic in treatment-resistant depression,” a 15-point MADRS delta versus the ~3-point average drug — is finally off FDA clinical hold and heading to Phase 3. With Spravato “crushing it” toward $3–4bn, Compass’s second Phase 3 plus durability data due this quarter, and MindMed Phase 3s coming, he’s optimistic “even outside of the RFK bull case.” Conversely, on Neumora’s Alzheimer’s-agitation trend he stays cautious: in neuropsych “you kind of want data in a Phase 1b study that is super clean.”
• The best exchange of the episode: Paul challenges Bright Minds’ (ticker: DRUG) open-label epilepsy numbers — 63.3% seizure reduction in DEEs, 73% in absence — citing Zogenix’s 55% open-label LGS effect that shrank to ~25% in the RCT. Brian concedes the point estimate won’t hold but argues the magnitude answers “a big part of the question of does it work,” and would power Phase 3 conservatively rather than at the observed delta. Sam’s verdict on the debate itself: “gold dust.”
• Two structural calls: Brian says next-gen TYK2 data from Alumis and Takeda’s TAK-279 now match J&J’s oral IL-23 icotrokinra and biologic-level PASI 90/100 rates, reframing the class after Sotyktu’s commercial flop — with SLE readouts this year and potential expansion into psoriatic arthritis and IBD. A later speaker said Lilly’s orforglipron may be approved in January under the CNPV, making the voucher’s potential impact real: “moving from a 12-month review cycle to a two-month review cycle — that’s kind of a big deal.”

Deep dive

1. JPM-eve consensus: cheap sector, strong tape, everything pulled forward

• Brian’s read one week in: a “manic” start with big swing days but modest XBI outperformance, and sentiment that’s genuinely good — the sector is “certainly not an expensive sector relative to a lot of other parts of the equity markets,” and he’s “pretty bullish on 2026 as a whole.” His structural observation: news and follow-ons that used to price after JPM now land before it — companies want to be “early on the curve,” and the buy side is busier this week than tradition dictates.
• Sam’s marker: XBI at 125.53, a level last touched November 10, 2021 — the tail end of COVID euphoria, before the sector “went in the opposite direction.”
• Tess says her team’s forthcoming report will show that 2025 returns were “actually really strong even if we take out M&A.” Brian’s specialist-investor analysis found that performance was not indiscriminate — companies with specialist investors still showed “a lot of discrimination in the market,” with the winners driving sector outperformance. Tess’s hedge, kept precisely: “hopeful is a better word than necessarily optimistic.”
• Paul, self-aware: “I sound like the cliche sellside analyst, right? Bullish, more M&A, but in general I really feel that way” — adding that a RevMed deal might “take some pressure off of needing some big M&A” at JPM.

2. Policy risk is real; the market’s shrug is the risk

• Sam notes stocks “didn’t bat an eyelid” at the CMS MFN memo — “I’ve gone on record saying the MFN dust has settled. Maybe that was premature… nothing happened. The market just moved on.”
• Sam offers two readings of the shrug: the “TACO trade thesis” (it won’t actually be implemented), or the belief companies can raise U.S. prices to offset skipping Germany — which he rejects: “I don’t think that any U.S. pharmas or biotechs are really leaving a lot of pricing room on the table… if MFN actually becomes a thing, I think we might see some surprises.” Tess separately says existing products would likely be hit harder than new launches that have yet to set a price.
• Paul’s warning: investors “have become so jaded to drug pricing headline risks that that probably is a real risk to the downside… something significant comes along, that really could take the wind out of our sails.”
• On the CDC removing six pediatric vaccines (rotavirus, COVID, influenza, meningococcal, hep A, hep B; HPV cut to a single dose) from the recommended list without ACIP discussion: Tess does not anticipate an insurance-coverage change but sees a real risk to vaccination rates — “what does it take for us to remember that these are real risks… not just to our sector but to public health.” Vaxcyte actually rose on removal of the worst case (pneumococcal being taken off the schedule). Sam adds the schedule roughly resembles Denmark’s, “but Denmark is a very different type of society”; in his framing, groups such as the American Academy of Pediatrics have taken over parts of ACIP’s role.

3. Aktis’s data-free IPO worked — and the follow-on window is wide open

• The mechanics, per Sam: priced $18 at top of the $16–18 range, raised $318M (more than planned), book reportedly 10x covered, opened ~$27 and settled ~$22–23. Roughly $100M came from Lilly, which already signed a May 21 deal — $60M upfront, $1.1bn milestones split ~50/50 development/commercial. The September 2024 $175M Series B included RA Capital, RTW and Janus Henderson, alongside existing investors Lilly, Bristol Myers Squibb and Merck Venture Fund; that backing “tells you a lot.”
• Sam’s honest reservation: the company is in Phase 1b but has no clinical data yet, with data possibly expected at the end of 2026 into 2027 — “do we really want to start with this? Should we not have a company with a bunch of data in hand?… hats off to them.” His open diligence item is anti-drug antibodies against the designed 50–75-amino-acid miniproteins — he could find nothing on it, but trusts the banks’ and investors’ work. The first clinical asset targets Nectin-4, prompting his Padcev bladder-cancer analogy.
• Brian on the broader follow-on wave — possibly the strongest first week of January ever in follow-on land: the names on his list are up double digits from price and were able to upsize; he imagines the greenshoes were exercised. “Follow-on performance is a great indicator for the level of enthusiasm… certainly there’s capital to put to work.”

4. RevMed at $28–32bn would be rich — and the panel would take it

• The sequence as Sam tells it: WSJ reported AbbVie interest; AbbVie told Bloomberg “no, no, we’re not in discussions” (“I don’t know what that means”); the next day the FT reported Merck in talks at $28–32bn. On EV/sales versus recent oncology deals back to Loxo and Array, “that would be a rich valuation” — but “if Merck’s prepared to pay that, that’d be great because there’s a pile of cash coming into the sector.” Asked for disagreement, he got none: “Can we just keep it like this?”
• The fundamental case from Bloomberg Intelligence’s KRAS work: RevMed’s pan-RAS inhibitor daraxonrasib and the coming generation “are better in terms of the evidence” on efficacy and safety than first-generation drugs from Mirati/Bristol Myers Squibb and Amgen, with Phase 3 assets and a possible pancreatic-cancer launch “in a couple of years where there is massive unmet need.”
• Read-across: AstraZeneca paid Jacobio $100M upfront and near-$2bn milestones for a pan-KRAS inhibitor with little public data, and Lilly’s Ventyx deal actually happened — announced before JPM, possibly because of market rumors.

5. The week’s data scoreboard: Crinetics and Monte Rosa up, Zenas and Ultragenyx down

• Brian’s case study in pull-forward: Crinetics announced early metrics from Palsonify’s first full launch quarter well above consensus — the 200 enrollment forms being “very robust for this size indication” — then topped it with Phase 2 CAH cohort data impressive on both biomarkers and glucocorticoid reduction. With Neurocrine’s Crenessity launch also beating, the CAH market looks bigger than assumed; Crinetics raised into strength and sits ~21% above the offer in three days.
• Tess on Monte Rosa: its NLRP3 degrader in healthy volunteers produced an hsCRP reduction of ~85% and an IL-6 reduction of ~65%. The potential market is cardiovascular risk/ASCVD; Tourmaline has an IL-6 drug, and Novo Nordisk also has an IL-6 drug with outcomes data potentially later this year. Ventyx’s CRP reduction landed in the same range, tying the theme back to M&A.
• Zenas’s obexelimab in IgG4-related disease: a positive press-release headline, then a collapse — the CD19×FcγRIIb co-engagement pitch promised more potency than CD19-focused Uplizna, but cross-trial flare reduction came in ~56% versus ~87%, and baseline characteristics “didn’t explain why that would be meaningfully different.” The company plans to file with the FDA and EMA, with weekly subcutaneous dosing as a potential differentiator.
• Ultragenyx’s setrusumab in osteogenesis imperfecta missed statistical significance on fracture rate at the final analysis after the first and second interim analyses did not hit — despite the “pretty phenomenal” Phase 2 fracture data that built the thesis. BMD secondaries improved and safety was consistent; Tess is “hoping for an update around JP Morgan” on the FDA path.

6. Psychedelics: Paul’s conversion story, with GH Research the cleanest asset

• On Neumora’s V1aR program in Alzheimer’s agitation: a small, unpowered trend versus placebo, data “not totally an intention-to-treat data set,” and an elevated-anxiety subset the company likes. Paul’s rule from years of neuropsychiatry readouts: “you kind of want data in a Phase 1b study that is super clean because you kind of have to bank on there being some meaningful level of regression in your effect size in future trials.” Cautious read — but the opportunity if someone threads efficacy against sedation and related side effects “is enormous,” and the Ventyx deal also lit up Neumora’s NLRP3.
• GH Research has “one of the best data sets we’ve seen for any psychedelic in treatment-resistant depression”: inhaled 5-MeO-DMT with a 15-point drug-placebo MADRS difference versus a ~3-point average drug — caveated by trial size, modest placebo effects and functional-unblinding questions. After the FDA held up the IND over a potentially rat-model-specific toxicology issue despite multiple ex-U.S. trials, a clean dog study helped get them off hold for Phase 3 later this year.
• The category call: Spravato heading toward $3–4bn “really validates the market”; Compass’s second psilocybin Phase 3 plus long-term durability data land this quarter, and durability is the big regulatory unknown — Spravato is fixed-interval while next-gens want PRN dosing, and it’s “a little bit gray” how FDA weighs maintenance of benefit versus leaving it to physicians.
• Paul’s change of mind, explicit: when Compass went public off academic studies with poor placebo controls there were “just so many reasons to be skeptical… the tide has [shifted]” — and not on “the RFK bull case”; he’s optimistic even assuming a normally stringent psych division.

7. Bright Minds (DRUG) and the open-label epilepsy debate

• Brian’s setup: open-label Phase 2 showed 63.3% mean seizure reduction in a DEE basket — “on the upper end if not the highest end of open-label seizure reductions we’ve seen” — and 73% in absence epilepsy, an area that has not been a major focus of drug development. He thinks it beats fenfluramine, the most recent approval in the class; the company is planning roughly four Phase 3s across the two indications, and its financing sits 37% above the $90 offer.
• Paul’s pushback — worth keeping: open-label-to-RCT regression is brutal, his specimen being Zogenix’s ~55% LGS reduction in roughly 12 open-label patients that became ~25% in the randomized trial; and absence seizures “are so subjective to quantify, I don’t know how you really can tease that out in a small n.”
• Brian’s concession-plus-rebuttal: he’d “absolutely not” take 73% as the placebo-adjusted estimate, and would power conservatively — a 30% delta might be considered, but he would be more conservative — while arguing that numbers this high in specific subgroups answer “a big part of the question of does it work, is it reasonably probable to hit in a Phase 3.” Brian’s principle: “always randomize placebo patients in every study if it’s not unethical.” Sam’s coda: that exchange is “gold dust” — the reason the podcast exists.

8. TYK2 gets reframed: oral drugs at biologic-level efficacy

• Brian’s history lesson: Sotyktu beat Otezla head-to-head in Phase 3 yet has been “commercially very, very disappointing,” while Amgen has been “absolutely smashing it” with the divested, less-effective Otezla — souring investors on the TYK2 class and associating it with JAK safety baggage.
• The reframe: within two months, Alumis’s next-gen TYK2 and Takeda’s TAK-279 both posted psoriasis data Brian argues is “very much on par” with J&J’s oral IL-23 icotrokinra — which itself delivered biologic-like PASI 90 in over half of patients and PASI 100 in 30–40%, “which you just really don’t see with oral drugs at all.” The class could expand across indications: Bristol’s Sotyktu Phase 3 SLE data and Alumis’s Phase 2 SLE data are due this year, with psoriatic arthritis and IBD as potential additional indications.
• Paul’s probe — is the problem safety/branding rather than efficacy, with Otezla winning as “oral and super safe”? Brian’s answer: greater selectivity may avoid many of the safety issues, and the JAK precedent illustrates the pattern — Pfizer’s first-generation drug looked commercially “terrible” for years, yet Rinvoq is now “one of the biggest oral drugs in the world”; nothing in the Alumis or Takeda data flags a safety issue.

9. Obesity beyond GLP-1s, and a CNPV that actually matters

• Sam on Arrowhead’s ARO-INHBE program: monotherapy in obese patients “didn’t do anything, I think it’s fair to say,” but in combination with tirzepatide in obese diabetics the effect was “brilliant” — with detailed wins on visceral adipose tissue, total adipose tissue and liver fat. The market rewarded it with an upsized $625M raise. His thesis: “the story of GLP-1s is last year’s story,” and 2026 may be about novel modalities for incremental weight loss and fat-versus-muscle quality. Tess adds that Arrowhead’s ARO-ALK7 data is still forthcoming; Sam says safety remains the key question for RNA or small-nucleotide approaches, particularly where the target is the liver itself.
• A later speaker said Lilly submitted orforglipron for the Commissioner’s National Priority Voucher, with discussion of approval in January. The speaker had questioned whether the CNPV had any real impact — “a lot of us kind of scratched our heads whether it has any real impact” — but said that moving big drugs from a 12-month review cycle to a two-month review cycle “is kind of a big deal” for present values.
• The oral-obesity battle to watch, per Sam: oral Wegovy at ~14% weight loss but with dosing-schedule constraints and roughly 10 times the dose of the 2.4mg injectable, versus orforglipron at 12% as “a real oral drug.” He was similarly excited by the Commissioner’s National Priority designation for Tecvayli in second-line multiple myeloma, an already-approved drug with “spectacular” results in the tested patients — possibly a Q1 event. Sam briefly alluded to bad news from an unnamed Sanofi item but declined to discuss it because “I don’t want to end on a negative.”