Episode 197 - September 25, 2026
Summary
- Biotech’s headline tape remains healthy, but a rough week exposed heavy long-short degrossing and renewed sensitivity to rising rates. The XBI is only modestly below its recent peak, 22 IPOs are trading, and average IPO proceeds are the highest in the period Fazeli checked, going back roughly to 2019—even above 2021—yet individual setbacks have punished specialist books. Matt Gline’s rueful lesson from his own stock: “Never get a drug approved and don’t bother with clinical data.”
- The MFN agreements look more constructive than feared because they seek higher overseas contributions rather than simply cutting U.S. prices. Pfizer’s partially redacted agreement apparently gives the government a share of incremental revenue if foreign prices rise; Gline called that reasonable if Washington successfully advocates for U.S. biopharma. His irreducible math: absent global equalization, investors accept lower returns or “fewer drugs could be developed.”
- Europe’s constrained budgets could turn MFN’s intended rebalancing into restricted access—or open the market to cheaper Chinese drugs. Sam Fazeli argued that energy, defense and weak growth leave little room for European drug-price increases; governments might instead limit eligible patients. Chinese PD-1s and ADCs create another five-year possibility: comparable, lower-cost products capture the market while U.S. companies receive none of the hoped-for upside.
- Heidi Overton’s confirmation hearing signaled a more industry-compatible FDA, although Compass Therapeutics showed that evidentiary standards remain demanding. Overton emphasized faster innovation, competition with China and stated that MMR—and every vaccine on the U.S. market, according to the FDA—is “safe and effective.” Separately, Compass may need a new biliary-tract-cancer trial demonstrating overall survival after 54% crossover confounded its existing result.
- The week’s renal and autoimmune data expanded credible markets while preserving sharp competitive questions. Vertex’s inaxaplin supported APOL1 efficacy beyond FSGS in non-diabetics, but diabetes still looks difficult and Maze re-entered the competitive frame. In Sjögren’s, Amgen’s positive phase 3 dazodalibep study strengthened a potentially multibillion-dollar opportunity spanning CD40 ligand, BAFF, BAFF/APRIL and FcRn mechanisms.
- Viking and Celldex produced commercially meaningful profiles in markets where durability and safety matter as much as headline efficacy. VK2735 delivered 19% placebo-adjusted weight loss at 21 weeks, retaining 97% with every-other-week maintenance and 90% with monthly dosing; Fazeli cautiously called it “best-in-class.” Celldex’s barzolvolimab combined strong urticaria and angioedema control with two drug-associated anaphylaxis cases among roughly 1,500 patients versus three in a placebo group about half as large.
- Orexin, Ionis, Moderna and Lexeo illustrated the episode’s broader theme: platform value emerges through successive indications and assets, not one binary event. Alkermes’ successful ADHD study suggested orexin agonists could eventually occupy a Ritalin-like role across cognition and wakefulness, while Ionis’ factor B success provided a potential win in a story bruised by TTR and Lp(a) failures. Moderna’s ESMO positioning and Lexeo’s expansion around Friedreich’s ataxia supplied the next major catalysts.
Deep dive
1. The index concealed a painful long-short unwind
Fazeli’s market setup was superficially benign: the XBI had only eased from its recent peak, 22 biotech IPOs were trading, and another deal was indicating meaningfully higher. Average proceeds were the highest in the period he checked, going back roughly to 2019, exceeding even the “go-go days” of 2021 despite far fewer offerings.
A cohost saw a rough week layered onto a strong year, with one severe selloff followed by continued pressure. Long-short funds appeared squeezed across the sector, making degrossing a plausible driver of XBI weakness even if it remained unclear whether the unwind was cause or consequence.
Rising interest rates supplied the second candidate explanation. Investors had spent months remarking on biotech’s apparent imperviousness to escalating rates; crossing some unstated threshold may finally have changed behavior. Gline’s company-level experience captured the tape: a drug approval was followed by an approximately 8% one-day decline, good data added value, and another negative result erased much of it.
2. MFN only works if global drug revenue is rebalanced
Gline read the partially redacted Pfizer MFN agreement, accessed through what was effectively a FOIA request, as more constructive than the industry’s “somewhere between angst and existential angst” might suggest. If prices rise in other jurisdictions, Pfizer apparently shares part of the incremental net revenue with the U.S. government—an incentive to equalize global contributions rather than merely compress American pricing.
His policy case was conditional but clear: mechanisms and implementation matter, yet making the U.S. a less disproportionate share of global pharmaceutical revenue would reduce the ecosystem’s dependence on one country’s policy. If Washington successfully pushes foreign governments to pay more, “it’s reasonable the taxpayers should get some of that benefit.” He said Roivant does not have an MFN agreement today, but suspected such discussions may reach mid-caps and said the company would be open to one.
Fazeli’s European counterpoint was fiscal reality. Energy costs, higher defense spending, slow growth and U.S.-based AI businesses extracting revenue all compete with healthcare budgets; a demand for higher drug prices could therefore produce narrower patient access rather than more industry revenue. “I’m not condoning low prices here,” he stressed, while allowing that U.S. prices might also be too high.
The unresolved equation had three outputs: smaller investor returns, fewer drugs developed, or geographic price equalization. Fazeli added a disruptive fourth path—lower-cost Chinese PD-1s and ADCs could prove comparable and take European share, much as Chinese electric vehicles have, leaving U.S. biopharma with lost markets rather than MFN proceeds.
3. FDA signals improved, but Compass exposed the evidentiary bar
Skorney judged Overton an “okay pick” within an RFK Jr.-led HHS, particularly because she appeared to oppose some of the more extreme MAHA positions and seemed more committed to Trump than to RFK Jr. and the MAHA movement. She emphasized faster development, Operation Trailblazer and competition with China, while her vaccine answers were notably direct: MMR and every vaccine on the U.S. market are safe and effective according to the FDA.
Confirmation remains political: Overton needs 11 committee votes from a panel containing 12 Republicans. Some Republicans have broken with Trump, while chairman Bill Cassidy appeared to regret his vote supporting RFK Jr.; after losing his primary, Cassidy had little to lose. Even without detailed policy commitments, Skorney saw the hearing, Diamontes’ stabilizing presence as acting commissioner and the appointment of permanent CDER and CBER directors as evidence that the administration wants to “calm the chaos of the FDA.”
Compass Therapeutics supplied the harder regulatory counterexample. Its second-line biliary-tract-cancer study showed response and PFS benefit, but median overall survival was confounded by 54% crossover; regulators indicated that a phase 3 trial demonstrating OS might be needed, and the FDA has since given feedback to the company. The investment questions are whether a no-crossover study is feasible, whether Compass can finance it, and whether regulators could instead have allowed accelerated approval with an OS confirmatory trial.
4. APOL1 efficacy broadened, with diabetes still the hard cohort
Vertex’s inaxaplin targets kidney disease driven by high-risk APOL1 variants, estimated to affect roughly 250,000 people in the U.S. Earlier FSGS results were impressive, but the investable question was whether activity extended to the broader genetically defined population.
Maze’s earlier data had complicated that thesis: FSGS patients performed well, non-FSGS results were mixed, and diabetes looked particularly resistant. Vertex’s new non-diabetic cohort was “kind of okay”—the eGFR effect looked good, and the proteinuria effect was more or less similar to Maze’s non-diabetic cohort. Vertex did not provide the clean FSGS versus non-FSGS split investors wanted, saying only that the cohort was mostly not diagnosed with FSGS.
Cross-trial comparisons simultaneously supported APOL1 inhibition beyond FSGS and restored Maze’s competitive credibility. Both datasets leave diabetes as the harder hurdle; Vertex’s next decisive event is an interim phase 3 APOL1-mediated-kidney-disease analysis expected within roughly six months.
5. Sjögren’s is becoming a large, mechanism-rich market
Amgen’s phase 3 dazodalibep result addressed systemic Sjögren’s, a heterogeneous disease littered with prior failures. Werber noted that Amgen was the only company with positive phase 2 data in both symptomatic and systemic disease. The release called the benefit clinically and statistically meaningful, described rapid onset, and reported no imbalance in opportunistic infections or thrombotic events; the CD40-ligand fusion protein was deliberately engineered without the Fc portion associated with thrombosis in other programs.
The second phase 3 study, in symptomatic disease, is due by year-end. Werber’s “very surgical” sizing still produced roughly a $5 billion U.S. systemic opportunity and another $20 billion in symptomatic patients using a $250,000 annual price assumption—hence his view that Sjögren’s could become a major commercial category.
Competition is extensive: Novartis’ ianalumab should arrive first with positive but relatively modest efficacy; Argenx, J&J and Roivant are pursuing FcRn; and the BAFF/APRIL approach atacicept from Vera also looked strong. Pricing could shape sequencing: Werber contrasted a possible $200,000 orphan price for ianalumab with Vyvgart’s roughly $870,000 gross weekly price.
Gline’s acquisition lesson was broader than Sjögren’s: Horizon was discussed chiefly as a Tepezza transaction, yet dazodalibep and Uplizna may also become important Amgen assets. “Sometimes the second, third, fourth drug in an acquisition can matter in the long run.”
6. Viking and Celldex turned durability and safety into differentiation
Viking’s VK2735 produced 19% placebo-adjusted weight loss after 21 weeks of induction, which Fazeli said exceeded tirzepatide in cross-trial comparisons. Over the following 12 weeks, patients retained 97% of that loss on every-other-week dosing and 90% on monthly dosing—strong support for convenient maintenance when patients struggle to remain on their starting doses. Its oral version could become the first oral GLP-1/GIP to market.
Fazeli saw a clean safety profile, low discontinuation and room to explore higher doses, while acknowledging the hazards of cross-trial comparisons and compressed titration. Phase 3 VANQUISH is expected to start in early 2027; the discussion cited $5.4 billion in risk-adjusted 2035 sales, roughly 20%-25% above consensus, though partnering may be needed to maximize the asset. The stock rose 35% on the data before settling back, and the company raised $500 million, with one investor taking 33% of the equity portion.
Werber first framed Celldex’s barzolvolimab against a larger-than-assumed chronic urticaria market: the disease can involve substantial angioedema and severe skin disease, and Xolair generated more than $4 billion, about half from urticaria despite not being marketed specifically for it. The phase 3 result then challenged fears around profound mast-cell depletion. Skin clearance and angioedema responses were strong and improved from weeks 12 to 24; hair and skin-color changes were subtle and reversible, neutrophil counts recovered quickly, grade 3 events were in the single digits, and no infection signal emerged.
Most importantly, two drug-treated patients among roughly 1,500 experienced anaphylaxis versus three placebo patients in a group about half that size, suggesting background hypersensitivity rather than a treatment-specific black-box problem. With 52-week follow-up continuing and filing possible next year, Werber remained constructive despite the stock moving from 30% up to 30% down premarket, ending down 4% at one point and closing down 10% in a bad market.
7. Orexin optionality rose while Ionis remained a data-by-data story
Alkermes’ orexin study succeeded in ADHD, even if the market’s response was mixed. Gline expects information on the class to seep upward “like water” because orexin affects sleep, wakefulness, cognition and energy; longevity enthusiasts already discuss it “in hushed tones.”
His provocative endpoint was a future successor to Ritalin: broadly used, approved across multiple settings and carrying a complicated social presence. Fazeli preserved the biological paradox—antagonism promotes sleep, yet agonism may treat ADHD—and compared it with the once-counterintuitive success of GIP agonism.
Werber rejected the reflexive framing of Ionis as simply ASO versus siRNA. TTR cardiomyopathy failed despite a similar TTR reduction because current patients are either earlier and healthier or more advanced, and were treated on top of oral stabilizers that were not available in the earlier studies. Lp(a) failed despite what probably looks like roughly 80% lowering, raising doubts about the target in patients whose LDL and blood pressure are otherwise tightly controlled.
Ionis nevertheless remained competitive with Arrowhead in severe hypertriglyceridemia; Ionis’ drug is monthly, while Arrowhead’s is expected to be every three months and to arrive around the middle of next year. Ionis also finally “registered a win” with monthly factor B therapy, IONIS-FB-LRx, partnered with Roche. Phase 3 details arrive at ASN; management hinted at best-in-class complement data, though Werber expects the eventual role may be salvage, add-on or switching after BAFF/APRIL therapies rather than frontline use.
8. Late-year catalysts favored platform breadth over single assets
Moderna rose from roughly $14 to just over $20 as its Merck-partnered melanoma vaccine earned the first presentation in ESMO’s first plenary. Detailed results remain the test, with investors apparently expecting a hazard ratio of about 6; renal-cell-carcinoma data provide the next major question.
The oncology watchlist also included detailed Akeso overall-survival data relevant to Summit Therapeutics, although Summit investors remain more focused on the HARMONi-3 readout expected within weeks. Fazeli grouped Summit, Revolution Medicines and Moderna as the year’s three prominent cancer stories.
Lexeo expanded from a pivotal Friedreich’s-ataxia cardiomyopathy gene therapy, LX206, into a multi-pronged franchise by acquiring Mantle Therapeutics. Its new approaches include an HDAC-inhibitor/NRF2 combination, TfR1-conjugated recombinant frataxin and a discovery-stage TfR1-conjugated ASO intended to stabilize frataxin mRNA, sequential systemic and intrathecal dosing, a blood-brain-barrier-crossing capsid, and VTX-P, an IgG-degrading enzyme intended to complement its immunosuppressive regimen.
Skorney’s conclusion was that Lexeo may now be “the FA company with the most going on,” targeting frataxin restoration through several routes in a severely undertreated disease. The next conference cycle adds EASD data from AstraZeneca, AbbVie, Gubra, Lilly’s amylin program and Hansoh’s GLP-1/GIP, plus longer follow-up on Regeneron’s trevogrumab-plus-Wegovy strategy to preserve muscle during weight loss.