Episode 178 - April 3, 2026

Summary

• Biotech is massively outperforming despite macro chop: Eric Schmidt thinks the XBI never trended below the S&P 500 and notes it is up ~7.4% YTD versus the S&P 500 down ~4%; Tuesday’s 7%+ single-session surge was, he thinks, “the fourth largest or fourth best day” for the index in ten years. Mike Yee’s stance through the ~10% March pullback (Middle East conflict, rate-cut pause fears) was to “use the pullback as a buying opportunity” — drug pricing, M&A, and the financing window remain intact, and investors are still “getting rewarded for data.”
• Q1 2026 was the best first quarter for public-company biotech M&A in the 10+ years Cantor’s tracker has run — nine acquisitions, ~$32B aggregate — with two deals landing on the quarter’s final day. Eric flags the premium dispersion: Biogen paid 140% over Apellis’ last close (“I can’t remember seeing anything nearly as large in terms of premium for a multi-billion-dollar acquisition”), a week after Merck’s “paltry” ~6% premium for Terns.
• Biogen’s $5.6B Apellis buy is “a Robin Kramer deal,” not a science bet: financial management plus a commercial ramp for Biogen’s kidney pipeline, including a renal drug in three Phase 3 studies, offsetting the ~$1.5B Ocrevus royalty line that could halve in 2029–2030. Mike’s caveat: Biogen bought ahead of Alexion and Regeneron GA readouts later this year — competitive data could make the premium look worse. For Apellis holders, whose stock fell 47% in 2024, 21% last year, and 32% YTD, Graig calls it “a tremendous outcome.”
• Lilly’s $6B purchase of Phase 3-ready orexin player Syntessa is “a tick, a bid-ask spread” against a $1T market cap, but signals multi-billion-dollar ambitions in narcolepsy and idiopathic hypersomnia. Takeda leads with a Q3 PDUFA, Alkermes follows, and Harmony’s BP-15205 reads out Phase 1 data mid-year; Graig estimates the opportunity at roughly $2B-ish, depending on label expansion, with ~$150K/year pricing and upside beyond the ~20% of patients Jazz’s oxybates reached.
• Blood-brain-barrier shuttles are gaining proof of concept: Roche’s Trontinimab gets ~75% of patients amyloid-plaque-negative within six months with “a fraction of the ARIA” of donanemab/Leqembi, and Denali just won approval shuttling an enzyme for Hunter disease. The Corsana–Cyclerion reverse merger ($380M raise, funded to 2029) plus AbbVie/Aliada ($1.4B) and Novartis’ in-license ($165M upfront, ~$1.5B biobucks) show strategic interest — while Mike notes “Lilly doesn’t really have a disclosed shuttle… and Biogen gave the shuttle back to Denali. Uh-oh.”
• Orforglipron (“Foundeo”) was approved via FDA Commissioner Priority Voucher — but as a 17mg tablet cleared using a bioequivalence study that analysts had not previously seen, when the studies used 35mg capsules; Mike’s takeaway: “big pharma doesn’t have to show you anything.” Consensus sees ~$1.75B US Lilly sales in just seven months plus ~$1.5B for Novo’s oral Wegovy — ~$3.5B year one atop $20B in injectables — with Lilly cutting price $49 to narrow Novo’s gap to $50 and Novo partnering with Hims after the FDA came down hard on Hims’ compounded version.
• The post-Vinay Prasad FDA looks “kinder and gentler” on orphan drugs — Eric calls it “almost a public perception marketing campaign” — and companies are testing the window. Agios is filing an sNDA for midapevad in sickle cell despite missing the pain-crisis endpoint; Scholar Rock surprised by resubmitting aptenerumab with two fill-finish options before either is fully cleared (September PDUFA); Replimune’s refractory-melanoma PDUFA lands Friday as a barometer.
• Viridian fell ~30% on positive Phase 3 subcutaneous TED data because the placebo-adjusted response was roughly half the IV form’s — “Have we heard that before?” The IV version, similar to or slightly better than Amgen’s $2B Tepezza with five infusions versus eight, still has its June PDUFA intact; the market is discounting the sub-Q opportunity.

Deep dive

1. A 10% pullback, then the fourth-best XBI day in a decade

• Mike Yee’s recap of Q1: biotech entered 2026 off a huge rally, then March delivered a ~10% XBI pullback as the Middle East conflict stoked oil-price and rate worries — “if rates aren’t coming down and we have a global conflict, this is probably a risk-off environment.” His call through the drawdown: the tailwinds (drug pricing largely resolved, M&A, financings) were intact, so “use the pullback as a buying opportunity.”
• Eric Schmidt’s numbers: he thinks the XBI never trended below the S&P 500 and notes it sits up ~7.4% YTD versus the S&P down ~4% — 11+ points of outperformance he calls “really, really startling” for a sector “not usually thought of as a risk-off kind of performance sector.” Tuesday’s 7%+ gain was, he thinks, “the fourth largest or fourth best day” in the index in ten years.
• The division of labor they converge on: great micro (data, cheap valuations, deals) drives the outperformance; macro sets the amplitude — “we do need the macro to work in order for the micro to come to the fore.” Mike’s test for staying bullish: investors are still getting rewarded for taking risk, and “until I’ve seen that materially turn around, where good data is just sold off really quick… there continues to be broad support.”

2. Pharma’s turnaround: single-digit multiples, patent cliffs, and a record M&A quarter

• Mike’s pharma playbook: names out of favor for three to four years are now leading — Merck +10% YTD, Bristol Myers +10%, Pfizer “funny enough… one of the largest outperformers, up 13%” — trading at 9–13x (Gilead now 15x), with drug pricing “out of the way” and many buying biotech to address patent cliffs. “That is a story fund managers can understand.”
• Eric’s objective frame, from Josh Schimmer’s tracker at Cantor Fitzgerald: nine public-company acquisitions in Q1 — the best first quarter in 10+ years of records — with Biogen/Apellis and Lilly/Syntessa squeezing in on the quarter’s last day. The ~$32B aggregate is “more of an average” quarter, “not a high watermark,” but meaningful dollars recycled into the industry. Mike’s punchline on the drought narrative: “bam, two in the same day.”

3. Biogen–Apellis: a 140% premium for a cost-cutting, kidney-platform story

• Eric’s read on the $5.6B deal: the 140% premium over Apellis’ last close is unusually large at this size in his memory — especially “on the heels of” Merck’s ~6% “paltry” premium for Terns last week. But this isn’t Chris Viehbacher (“don’t hire me unless you wanna do deals”) buying a shiny toy — “this isn’t so much a Chris Viehbacher deal as it is a Robin Kramer deal”: Biogen will “cut a knife to the Apellis organization,” take on ~$1B in sales, aim to make the deal accretive next year, and use the C3G nephropathy product to support a commercial path for its renal pipeline, including a drug in three Phase 3 studies.
• Mike agrees it’s “an okay positive deal” — explicitly not a pipeline bet, but a financial transaction covering the Ocrevus royalty loss of exclusivity, a $1.5B line item that “could get cut in half in 2029 and 2030.” His watch item: Biogen bought before Alexion and Regeneron Phase 3 GA data later this year, adding uncertainty to whether the premium ages well.
• Graig’s Apellis-side view: consensus Syfovre peak sales once ran $2–3B and have come down hard; the stock fell 47% in 2024, 21% last year, and 32% YTD, while $41 was an 18-month low — “a great outcome if you’re an Apellis shareholder,” though “if you’re an Apellis employee or maybe even management, this is not the way you thought the story was going to turn out.” He’s “a little befuddled” on the ophthalmology fit given Biogen has not historically had a large presence there; the call made it seem the kidney franchise was largely the strategy.

4. Lilly buys into orexins: $6B is “a tick” on a $1 trillion market cap

• Mike’s sizing: with 95% of the focus and more than 60% of revenue in GLP-1s, $6B for Syntessa is “about a one-hour move on the stock… a tick, a bid-ask spread.” He also notes Lilly’s moonshot strategy — buying Ventyx and Verve as “literally one- and two-dollar stocks,” with Verve “trading at cash.” The Syntessa logic: a Phase 3-ready orexin agonist with multi-billion-dollar potential across narcolepsy and idiopathic hypersomnia, plus therapeutic overlap into diabetes, obesity, and other primary-care indications.
• Graig’s market map: Takeda leads with an FDA submission and unspecified Q3 PDUFA, Alkermes follows, and Harmony’s BP-15205 — claimed “most potent of the orexins” — has first Phase 1 data mid-year. KOLs call orexin “very elegant biology”; at ~$150K/year pricing, Graig sees a roughly $2B-ish opportunity, with upside depending on label expansion because Jazz’s oxybates reached ~$1.5B while targeting only the ~20% moderate-to-severe slice of the market.

5. The blood-brain-barrier shuttle stack is gaining validation

• Mike’s proof-of-concept chain: Roche’s Trontinimab — old gantenerumab tagged to a transferrin-receptor antibody — delivers 10–20x the naked antibody’s effect: “essentially 75% of these patients are getting to A-beta plaque negative within six months, and they have a fraction of the ARIA that Biogen and Lilly show.” Denali’s approval last week — shuttling an enzyme across the BBB for Hunter disease, with better data than current Elaprase — further validates the transferrin mechanism; Denali’s shuttle-tagged A-beta antibody and MAPT tau ASO follow, the latter into the clinic “later next year.” Mike says they will watch the BIB80 data.
• The deal context: Corsana’s reverse merger with fallen-angel Cyclerion came with a ~$380M concurrent raise, funding a Phase 1 beta-amyloid asset through 2029. Graig’s tape of strategic demand: AbbVie paid $1.4B for preclinical-stage Aliada in fall 2024; Novartis in-licensed a BBB-enabled beta-amyloid asset from a China-based biotech identified in the transcript as Synuro [?] in January for $165M upfront, up to $1.5B in biobucks; Alector’s ABC platform can shuttle antibodies, siRNAs, and enzymes.
• Mike’s closing tell, delivered deadpan: given all this validation, market caps are “actually not that big” — and “Lilly doesn’t really have a disclosed shuttle. Interesting. And Biogen gave the shuttle back to Denali for the A-beta one. Uh-oh.”

6. Orforglipron approved — on a bioequivalence study analysts had not seen

• Mike on the approval of Lilly’s oral GLP-1 (“Foundeo”), cleared this week via the FDA Commissioner Priority Voucher: consensus has ~$1.75B in US sales in just seven months, plus ~$1.5B for Novo’s oral Wegovy — ~$3.5B in year one, “some of the fastest launches… of any pharmaceutical that we’ve seen, save for hepatitis C drugs,” atop $20B in injectables.
• The wrinkle: approval came for a 17mg tablet when the studies used 35mg capsules. Lilly bridged via an FDA-reviewed bioequivalence study that analysts had not previously seen — same efficacy at ~50% of the drug weight, using “significantly less API.” “Big pharma doesn’t have to show you anything… it all came out in the label.”
• Commercial skirmishing: after the FDA came down hard on Hims’ compounded oral Wegovy effort, Novo turned around and partnered with Hims to sell the real drug, plus annual discounted pricing — though Mike bristles: “you don’t subscribe to a drug.” Lilly cut its price $49, narrowing the difference between the products to $50; Novo’s peptide pill carries a 30-minute fasting requirement that Lilly’s small molecule doesn’t.
• On mechanisms beyond GLP-1: Nomura delayed first clinical data on its obesity NLRP3 inhibitor to early next year after unspecified adverse findings in a toxicology study; Graig confirmed with the company that they were not related to elevated liver enzymes or liver toxicity. Despite DIO-mouse data showing 25–29% weight loss with semaglutide, Mike and Eric note that many players, including Ventyx, Nathera, and BioAge, have shifted NLRP3 toward cardiometabolic or cardiovascular outcomes; Nomura is “probably the last one interrogating the obesity hypothesis.” Nomura’s hypothesis is to maintain high IC90 levels, while Mike sees NLRP3 in obesity as potentially useful for maintenance treatment.

7. A “kinder and gentler” FDA — and a placebo problem at Viridian

• Eric’s regulatory read: Agios filing an sNDA for midapevad in sickle cell — after hitting hemoglobin response but missing the pain-crisis co-primary that investors viewed negatively — is a bet on leniency. Post-Vinay Prasad, the FDA seems to be on “almost a public perception marketing campaign,” with a BioCentury piece describing an FDA leader holding off-calendar one-on-ones with companies that recently received CRLs while Commissioner Makary absorbs pressure over orphan-drug approvals and reviews. Still “a little bit of an uphill battle,” but the stock reacted well.
• The live barometer: Replimune’s refractory-melanoma PDUFA hits Friday — Mike notes “Vinay played a big role in stopping that one” and assumes consensus odds are low.
• On Scholar Rock’s surprise aptenerumab resubmission for SMA: Mike credits execution, not necessarily FDA charity — refiling using the facility through Catalent that had Form 483s plus a second not-yet-ready fill-finish site, both potentially ready and signed off by the September PDUFA. Eric suggests there may be some flexibility in accepting a filing where neither facility is “signed, sealed, and delivered,” giving Scholar Rock greater optionality in an indication with substantial unmet need.
• Mike on Viridian: positive first Phase 3 data for its subcutaneous IGF-1R antibody in thyroid eye disease — a real convenience edge versus Amgen’s $2B Tepezza (eight IV infusions over six months) — yet the stock fell 30% because the response rate came in below the IV form and placebo ran high (“Have we heard that before?”), leaving a placebo-subtracted delta “approximately half the effect of the IV form.” A second Phase 3 is pending; the five-infusion IV version’s June PDUFA remains the nearer catalyst.