Episode 198 - October 2, 2026
Summary
Biotech’s headline performance remains strong—XBI was up 27% through September versus 7% for XLV, 13% for the S&P 500, and 17% for Nasdaq—but the index masks a punishing ownership unwind. Eric Schmidt said underowned and heavily shorted stocks such as Moderna, Iovance, and Summit propped up Q3 while specialist-fund favorites “are just getting hammered.” XBI itself was roughly flat in Q3 and about 9% below its late-August peak of $169.
The Regeneron–Sanofi reunion is strategically logical but arrived with almost no surprise premium. Their four-program immunology extension gives Regeneron $1 billion upfront, up to $7 billion in milestones, and a 50/50 global P&L while targeting longer dosing intervals than DUPIXENT’s every two or four weeks. One buy-side description captured the reception: “an old married couple driving their car, taking the foot off the gas, and coming to a stop in the middle of the road in silence.”
AstraZeneca’s $2 billion premium-priced Summit investment signals strategic interest in PD-1/VEGF while leaving HARMONi-3’s clinical risk fully intact. Eric said Summit told him AstraZeneca had not seen efficacy data unavailable to public investors, but the deal supplies badly needed capital, combination assets, development scale, and sponsored trials after Summit struggled to raise roughly $500 million publicly. Eric called HARMONi-3 “potentially the biggest binary event I’ve ever seen in the history of biotechnology,” with PFS, the direction of OS, and even the precise wording around “immature” survival data likely to determine the trade.
Three China-origin transactions reinforced China’s role in global pipeline sourcing. Novo paid $300 million upfront for Hengrui’s Phase I-ready GLP-1/GIP agonist HRS-1596; Merck committed $400 million upfront for preclinical oral KRAS G12D inhibitor SPR-2015; and Novartis paid $575 million upfront in an Abogen transaction carrying up to $7.2 billion in milestones. At WCLC, Sam Fazeli likewise found that all five notes from his team were centered on China-associated assets.
Clinical wins produced radically different stock outcomes depending on expectations and financing. Kodiak more than doubled on positive Phase III wet-AMD data, while Immix fell almost 10% despite an 89% complete-response rate in 45 AL-amyloidosis patients because a concurrent $125 million financing “choked off” the move. UniQure dropped 37% after AMT-130 showed 44% slowing of Huntington’s progression at four years, down from the prior update’s 75%.
The gene-therapy debate has shifted from whether a construct produces protein to whether delivery and expression create durable clinical benefit. Brian Skorney contrasted clear biological successes in tractable settings with Sarepta’s microdystrophin experience, where protein production did not translate into success on prospective pivotal endpoints. His candid update: progress has been “slower than I expected,” because “science is a hard thing.” Sam added that VCs remain enthusiastic about solving delivery and expression problems, particularly in CNS, while pharma could go cold until another hit emerges.
Lilly reset the obesity benchmark at EASD, although tolerability and regulatory endpoints remain central constraints. Retatrutide produced 21% weight loss at 80 weeks in diabetics, while Lilly’s amylin–tirzepatide combination reached 23.3% at 48 weeks but carried 27% discontinuations versus 3% for tirzepatide alone. Sam’s verdict was that Lilly is “firing on all cylinders,” whereas most competing disclosures were “a bit of a meh.”
Deep dive
1. XBI’s 27% gain conceals a brutal ownership rotation
Graig Suvannavejh’s headline scoreboard remained emphatically positive: XBI gained 27% through September, comfortably ahead of XLV at 7%, the S&P 500 at 13%, and Nasdaq at 17%. He said biotech fundamentals remained intact, but warned that potential rate increases, energy prices, and geopolitical uncertainty could still hurt the sector. XBI peaked near $169 in late August and subsequently fell roughly 9%.
Eric’s pushback—worth keeping—is that flat Q3 index performance “belies what’s going on underneath.” Underowned or heavily shorted diagnostics names, Moderna, Iovance, and Summit supported XBI while broadly held specialist-fund positions suffered, producing unusually wide dispersion and a difficult six months for many biotech investors.
The issuance window nevertheless stayed open: Graig counted 23 biotech IPOs, with T-Rex Bio, Ambic Therapeutics, and City Therapeutics among those still coming, putting 30-plus deals within reach. Reverse mergers were also tracking toward a banner year, though Brian jokingly demanded an immediate halt so his December forecast of 23 IPOs could win.
Oura’s withdrawn attempt to raise more than $2 billion looked ominous but offered limited biotech read-through. Eric’s banking contact believed a deal existed at a lower valuation; Oura chose not to accept it. Biotech’s own new issues have performed unevenly, particularly during the six-week ownership divergence.
2. Moderna’s valuation leaves almost no room for ordinary execution
Potential Nasdaq-100 inclusion did not lift Moderna, suggesting that the news mattered less than the company’s XBI weighting and existing fundamental skepticism. Sam noted that investors already see substantial success embedded in a valuation near $70 billion—an awkward comparison with Sanofi at roughly $90 billion despite Sanofi’s far deeper operating base.
The next major test is kidney-cancer data. Sam read Merck R&D chief Dean Li’s description of renal-cell carcinoma as lower-TMB and still unresponsive to IO, with the RCC and bladder-cancer trials serving as “bookends” for the range of data Merck expected. Other investors interpreted the comments as routine Merck conservatism rather than a warning.
That disagreement captures Moderna’s setup: numerous upcoming programs must work to sustain the current valuation, while even ostensibly positive technical news competes with downgrades and trial-specific doubt. Sam did not claim the RCC signal was definitive: “I read it as negative,” followed by “let’s see what happens.”
3. Regeneron and Sanofi bought another shot at extending DUPIXENT
The companies renewed a 20-year partnership that produced DUPIXENT despite a later dispute over selling practices, payer discounts, and whether commercial terms favored Sanofi. The agreement covers four related immunology antibodies: an IL-13 program, an IL-13/IL-4Rα bispecific, an IL-4Rα antibody called “Super DUPIXENT,” and another long-acting IL-4Rα antibody.
Brian framed the strategic challenge precisely: DUPIXENT doses every two or four weeks, while competitors are pursuing every-three-month or every-six-month schedules. Regeneron and Sanofi must move largely early-stage programs through pivotal development quickly enough to switch patients before competitors arrive or DUPIXENT loses exclusivity.
Economics are substantial—$1 billion upfront to Regeneron, up to $7 billion in milestones, and continued 50/50 global profit sharing—but the stocks barely reacted. The buy side largely felt, “We knew this was coming, and it came,” with some questioning whether Sanofi overpaid despite agreeing the move was necessary.
Patent duration could matter more than the announcement itself. Sanofi’s CFO suggested generic competition may be pushed several years past the 2031 composition-of-matter date; Sam’s patent team had previously argued protection could extend to late 2037.
4. AstraZeneca gave Summit runway, combinations, and a larger binary
AstraZeneca invested $2 billion in Summit at a premium, taking roughly 10% ownership and providing a major cash infusion after Summit had struggled to raise about $500 million at a lower valuation. Summit also gains access to AstraZeneca ADCs, including a CLDN18 program, plus clinical infrastructure and pharma-sponsored combination trials.
Eric saw a striking valuation disconnect: he said Summit told him AstraZeneca had not seen efficacy data unavailable to public investors. The strategic was nevertheless willing to provide four times the attempted public raise, premium equity pricing, combination assets, and development support.
Sam’s less exuberant interpretation was that AstraZeneca wanted “skin in the PD-1/VEGF game” without making a full acquisition commitment. Summit needed capital, AstraZeneca could test several hypotheses for $2 billion, and the memorandum-of-understanding language initially sounded tentative. Sam also highlighted that Summit, AstraZeneca, and Daiichi Sankyo were contributing to trial costs, which he described as an uncommon structure.
The subsequent Daiichi Sankyo collaboration adds its TROP2 ADC, Datroway, to the combination effort. The headline indication is TNBC, where Sam noted encouraging PD-L1/VEGF data; non-small-cell lung cancer was also mentioned, although AstraZeneca has AVANZAR reading out soon.
HARMONi-3 remains the fulcrum. Eric rejected the idea of an immediate readout as “very, very awkward” after the transaction and allowed that results could slip into late Q4 or early 2027. A PFS win plus directional OS would support the thesis; Sam warned that simply calling OS “immature” could be interpreted as an absence of a favorable trend.
5. China supplied three more globally financed pipelines
Novo’s Hengrui deal carries $300 million upfront and up to $2.6 billion for HRS-1596, a Phase I-ready GLP-1/GIP dual agonist. Sam viewed it as filling a portfolio gap against Lilly’s tirzepatide after Novo’s earlier dual-agonist effort disappeared from view.
Merck paid $400 million upfront with up to $2.13 billion attached to SPR-2015, a preclinical oral KRAS G12D inhibitor aimed initially at pancreatic cancer and potentially a second KRAS mutation in lung cancer. The program could eventually compete with Revolution Medicines.
Novartis committed $575 million upfront and up to $7.2 billion in milestones for Abogen’s ABO-2203 and the broader program, using mRNA to express a CD19/CD3 T-cell engager. Sam left the central modality question open: why manufacture an antibody in vivo rather than administer the antibody itself?
6. Small-market approvals rewarded differentiated development models
Mirum’s newly approved oral FOP therapy addresses an irreversible disease in which soft tissue progressively forms bone, locking joints and restricting movement. With only about 900 patients worldwide and now three approved therapies, Mirum priced the drug near $1.7 million gross—comparable to Regeneron’s roughly $1.5 million–$2 million injected alternative.
Brian’s commercial thesis was not that FOP becomes enormous, but that Mirum repeatedly makes under-the-radar indications meaningful. Livmarli established the company in pediatric cholestatic liver diseases, another IBAT inhibitor is advancing in PBC and PSC, and small deals bringing in late-stage products are turning Mirum into “a nice little specialty pharma story.”
AbbVie’s Juvmo, or tavapadon, provided a tangible return from its $9 billion Cerevel acquisition. Graig emphasized its differentiated D1/D5 dopamine-receptor activity in Parkinson’s versus the usual D2/D3 modulation, while acknowledging that the greater unmet need remains disease modification.
The approval also partly offsets Cerevel’s disappointment: emraclidine was treated as the acquisition’s crown jewel, but its key Phase 2/3 data were negative less than a year after the transaction. Tavapadon had been further advanced but “lost in the shuffle” around enthusiasm for muscarinic drugs.
7. The week’s datasets separated biological promise from investable outcomes
Dyne’s additional one-year DM1 data—eight former placebo patients who crossed to treatment—continued to show improvement in vHOT, or video hand-opening time. Brian saw plausibility for next year’s registrational readout, but both he and Eric stressed that vHOT is subjective, variable, and burdened by high baseline standard deviations.
Novartis’s failed DM1 program damaged Dyne because both pursued mutant-DMPK knockdown through muscle-targeted delivery. Eric nevertheless saw fewer holes in Dyne’s mechanistic and functional package; his bottom line was appropriately conditional: “I wouldn’t be surprised if this did work,” and if it does, “the stock’s gonna rip.”
Mirum’s 153-patient AZURE-1 Phase III study in hepatitis delta met its composite endpoint of virologic response and ALT normalization across two arms. Brian highlighted rapid RNA declines, durable responses, and management’s report of improving liver stiffness; another Phase III dataset is still needed before filing.
The gene-therapy debate focused on the gap between protein production and clinical benefit. Brian said delivery to the desired cells, adequate expression, and a measurable clinical effect remain separate hurdles. He cited Bektez in hemophilia B as a clear success in making factor B in blood, while contrasting Sarepta’s microdystrophin experience, where protein production had not demonstrated efficacy on prospective pivotal endpoints. Sam said VCs remain enthusiastic about vectors, constructs, and delivery mechanisms, especially for CNS diseases, although pharma may go cold until another hit emerges.
Market structure dominated three other reactions. Kodiak more than doubled on Phase III data for a combination of Zencuda and KSI-501 in wet AMD, a roughly 1 million–1.5 million-patient US market historically dominated by anti-VEGF products generating about $15 billion in US product sales. Immix fell despite an 89% complete-response rate in 45 AL-amyloidosis patients; the result compared favorably with the 5%–35% complete-response rates cited for current standard-of-care treatments, and MRD-negative patients could ultimately raise the response rate toward 98%, but the concurrent $125 million financing choked off price movement. UniQure fell 37% after AMT-130’s estimated slowing fell from 75% to 44%; the company had submitted its BLA the prior month and requested priority review.
8. EASD crowned Lilly while WCLC reinforced China’s oncology reach
At WCLC, Sam’s five notes all involved China-associated assets across PD-1/PD-L1–VEGF bispecifics, B7-H3 programs, and small-cell lung cancer assets, including ADCs and DLL3/CD3 engagers. He deferred a fuller verdict until Amgen’s DeLLphi-305 presentation at ESMO, where he expects a potential doubling of OS and a first-line standard-of-care reset alongside DeLLphi-312.
Lilly’s TRIUMPH-2 data showed 21% weight loss at 80 weeks with retatrutide in diabetics—a population in which weight loss is typically harder to produce. Brian called crossing 20% “very meaningful” and found tolerability encouraging for the next major asset following tirzepatide.
Lilly’s amylin–tirzepatide combination pushed weight loss to 23.3% at 48 weeks, but discontinuations reached 27% versus 3% on tirzepatide alone, with substantial nausea and vomiting. Sam still saw an unusually strong portfolio spanning GLP-1, GLP-1/glucagon, and GLP-1/amylin combinations: “Lilly is firing on all cylinders.”
Regeneron’s anti-myostatin antibody Tre-trovogrmab appeared to preserve more or less all muscle on MRI during semaglutide-driven weight loss, but approvability remains unclear because Brian said the FDA probably will not accept MRI as a clinically validated endpoint. Sam also noted that Roche had discontinued development of its anti-myostatin candidate, likely because efficacy fell short of expectations.
Graig added that Corbus’s differentiated CB1-modulator safety and tolerability received little investor credit, illustrating how demanding obesity expectations have become.