第167期｜2025年12月19日

You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry with a group of biotech insiders. I'm Daphne Zohar and my co-hosts today are Bruce Booth and Eric Schmidt. For more information about our hosts and guest speakers or to listen to the most recent episode, please go to biotechout.com.

This is going to be our last Hangout episode this year, and it's a perfect time to review 2025 and put forth some thoughts regarding 2026, as well as touch on the latest news of the week.

1. Biotech Rally Meets Year End Fatigue

Starting with the markets, after underperforming for years, biotech rebounded in recent months. Reasons include macro rotations, biopharma as an AI-trade hedge, and, more importantly, fundamentals, including greater clarity on drug pricing, biotech launching drugs successfully, and M&A momentum. Capital inflows are spiking, and we hear of a risk-on environment. With that said, the IPO market has not yet fully opened, though follow-on activity remains strong. Eric, you were saying the last few follow-ons have been a bit more wobbly. Tell us more about that.

First, it's just a privilege to be on this last episode of the year with you guys. I hope everyone has a safe and happy holiday season and gets some rest.

In terms of the market sentiment, it feels to me that we're stumbling into year-end a little bit. Maybe for the first time in the last 3 or 4 months, biotech has modestly underperformed some of the broader indices. We've seen some initial pops in stock-price performance, but a lot of these follow-ons have come right on the heels of such positive news flow and maybe diluted the post-market deal performance, which has been mixed to negative in some cases.

We had a couple of good announcements this week. One was from Immunome on its gamma-secretase inhibitor for desmoid tumors. The stock was up relatively well and then sold off into and after the deal. Another transaction was from Kyverna on its CD19 cell therapy for stiff-person syndrome. It was kind of the same reaction: good first-day performance, the deal comes, and then a sell-off.

At least from where I sit, it seems like people just want to close the books on 2025 and go home. This is the first year in which you could actually lock in some positive stock gains, and the buy side just seems a little bit tired, a little bit done with 2025. Hopefully, we can crawl into year-end and preserve the big year that we've had.

I know Bruce is going to talk more about the year in review and maybe the tale of two cities—the first half and second half of the year—but it doesn't feel like it's going to be a particularly robust run into year-end here. The news flow continues to be pretty good on the margin, but we're just not seeing the kind of momentum that we had in October and November.

Bruce, why don't you give your thoughts on the market, and then let's go to your year-end review, which was very thorough and nuanced, as always.

Eric, because you live day to day in the markets, you're feeling fatigue. I have to admit I'm feeling a lot more optimism, at least on the private side, looking at our public portfolio and looking at performance.

It is definitely a year where the tale of two cities is a good way to describe it. In the first half of the year, everybody felt depressed. The S&P was outperforming biotech by a large measure. But post-Labor Day, after some momentum in the summer, I think everybody was cautious that maybe that summer momentum would fade away, as has happened in past moves. It certainly has felt sustained.

It's hard to believe that the XBI is at almost 124. We haven't been at these levels since really the peak of the pandemic, which is amazing. I think the drivers behind a lot of this enthusiasm are things we've talked about here on this Hangout in the past, with M&A being a big part of that.

We hadn't seen any M&A in the last week or so, so it was nice to see Amicus this morning. I would love your thoughts on that one. I've heard that there are other deals to be done or announced that are right on the verge between now and J.P. Morgan. That's not related to any privileged information; I'm just hearing chatter from bankers that there's still a lot of deal activity happening out there. I'm curious as to your thoughts on that.

In some ways, I think fatigue and this pause we're taking are not a bad thing. I actually do share your optimism, as I'm sure we'll talk about, for the fundamentals of our group, Bruce, and for the outlook into 2026. I could probably even try and one-up you there in terms of my optimism for all the good companies and innovation that we're seeing.

It's a good thing, right, that this rally has not been of the same substance as what we saw in 2021 and 2022, where everything went up in correlated fashion and in concert, no matter the fundamentals. This market is very discerning. We've seen some mixed news. Companies like Pyxis, for example, or Nektar, that had mediocre data, I would say, were heavily punished in today's market. Again, we're seeing good news being awarded incremental value, too.

I like this stock-pickers' environment we're in. I think it's very healthy. I think where we start to worry and get concerned about the markets becoming a little bit frothy is when everything moves up in concert with one another, and that's not what we're seeing. I like the pause. I kind of like the consolidation.

Yes, that's true. I think your comment about lots of paper is interesting. I was just looking at the monthly follow-on financings as we reflect on the fourth quarter. October was really a huge month. November was the second-largest month in 18 months or something like that. We had 2 months back-to-back with almost $9 billion of follow-on financings between them.

December will be less active than that, as it traditionally is heading into the holidays, but there's still been a reasonable amount of offerings. One question I have for you is, how do you guys think about the post-market performance of these follow-ons? As an early-stage, longer-term investor, I don't think about the day-after trading, the 5-day trading, or the 10-day trading. It's more about where we think this capital will take the company and where it will trade over the next year or 18 months. Is that too long-term of a view that you guys in the public markets don't think about?

If only all of my clients were like you, it would be such an easy job.

Unfortunately, the market has gotten even more short-termist as it has evolved over the past few years, and those first-day or even first-week statistics are so critical to who might be investing the next week. It's crazy to say this, but if we have three half-billion-dollar financings, like you pointed out we had just last week—or in 1 day last week alone—and that paper doesn't perform that well, I think it honestly impacts how people think about this week's deals.

I have one discussion in my mind right now. One of the insiders on a subsequent transaction said to me, “Because last week's deals didn't do so well, I'm going to need more of a discount this week. I don't want to take that risk into year-end. Why would I give up performance? I know others aren't going to outbid me. So, I'm going to leverage my standing as one of the few people who are willing to buy and take an ounce of pain from the company.”

That's just the environment we live in and probably always will live in.

2. The IPO Window Reopens

The follow-on market usually has to strengthen before any IPO market opens up, and I do think, in general, the fourth quarter has been very positive for follow-ons. People often ask, “How come we haven't seen IPOs come around?”

The reality is, by the time you commit to going down the path of an IPO, it's a 4- to 5-month process when you add in the lawyers, the SEC comments, the accounting, and so on. If things heated up—let's just agree that post-Labor Day people started to feel this might be real—anybody who wanted to go public or was working on it then wouldn't be able to get public until January or February.

In the next 3 weeks, we're going to see a lot of companies flip their S-1s from confidential to public, and we're going to see a bunch of companies trying to go public in the first quarter of the year. I'm curious: if you were betting, how many companies do you think will flip their S-1s? Both of you? I'd love to put you on the spot with numbers.

I think last week or a couple of weeks ago, there were some predictions that ranged from 25 to 60 or something like that. I have no idea, but what we're hearing is that there's a lot of activity.

I was going to say, Eric and Daphne, one of the interesting things from Atlas's vantage point was that we have, whatever, 40-something—45 companies in our portfolio.

Over the last 10 years, at almost any given time, there were always a couple of companies with confidential S-1s on file. For most of this year, after Sionna went public in the first quarter, we didn't have any on file. I think that was a bit of capitulation—like, the IPO markets aren't turning around anytime soon. I think that may be changing now as we start to think about financings for 2026. But it's been a lot of retrenchment in the private venture world around just raising money privately, doing more partnerships, and not thinking about the IPO market. Now that it appears to be opening, I think you're going to see a lot of companies trying to access the markets.

Yeah. I think we were also dealing with a lot of policy uncertainty. I'm not saying we're past that. Actually, I'll touch on a few points in a second, but it seems like people are used to that uncertainty at this point. Then you've got positives like M&A and other things like that, which have been driving—

The positive sentiment, yeah.

Yeah. I wonder whether it's desensitization on the part of all of us to the volatility and macro drama, or whether it's a legitimate view that some of the bigger risks are fading away?

I'd like to hope it's the latter, but I think it might be more the former.

Yeah.

I'm just going to touch on that point you made, Bruce, about the number of IPOs that are coming in January. I'm sure you're right. I'm sure Daphne's right. There's going to be a lot of them. I don't know the number either. In any normal year, about 25–30 IPOs would be a pretty good haul for a full calendar year, but we may see a good number of those—10 or 15, even—in January. I don't know.

My concern honestly isn't so much about the quantity as it is about the quality. You mentioned that there had been a bunch of companies gearing up in late 2024, but certainly in early 2025, that kind of got stuck when the markets turned down, when some of those early 2025 IPOs didn't perform that well out of the gate. I worry that maybe some of those names are going to be recycled and will be some of the first to come back out—be the first to regain filing status and flip. They already have existing syndicates. They already have S-1s that just need to be updated.

So, we've talked about this in other forums, but it's really critical for our industry—all players involved, including analysts, bankers, VCs, and so on—to make sure that the bar is very high. Otherwise, we are going to see a potential repeat of the past.

Yeah. I mean, this is where—

I was just going to say, Eric, you and I and Josh spoke about this before Thanksgiving on your podcast. The trouble is that the animal spirits take over, and everybody is incentivized to take companies public. It's bankers making 7%. It's accountants, lawyers, and the D&O insurance provider. Everybody wants you to go public.

Management teams can start their 10b5-1 plans. VCs have a path to starting to trade out of stocks. Everything works in favor of irrational exuberance when windows open, which is why, for the first 35 years of biotech, it was feast or famine. The window would open, you'd have a couple of quarters with lots of companies, and then it would shut down for 3 or 4 quarters.

From 2012 through the pandemic, we didn't miss a single quarter. There were always some companies able to get public during that period. We obviously went through a pretty prolonged dry spell in the last couple of years, but I suspect that if the markets do open, there will be a mixed-quality group that investors will have to discern and pick which companies to really back. There will be a lot that don't work out for the best.

I think that's the nature of the way capital-market cycles always work.

Yeah. So, Bruce, I want to ask you: everybody's incentivized, but those that have already been through these cycles—management teams that have taken a company public and had it be very thinly traded and trade down while waiting for milestones, and companies and investors that put in money and then can't get out because of liquidity, having to write down the investment again, and so on—how much do you feel like the positive incentives are offset when you have a very experienced group of people around the table?

I'm talking about companies that aren't the top-tier companies. I'm talking about the companies Eric was referring to earlier that are sort of struggling and then had to do another round. Maybe that was a down round, and now they're waiting and they're going to push out.

Yeah. Certainly, tired companies that can't get capital privately—we've seen some of those try to get public in the past. Back in October, when I was doing some of those 20-year reflections, I had the reflection that if you can stay private, my advice is always that you should stay private.

If you can raise capital, if you can do deals, if you can continue to advance your medicines without having to deal with the public markets, you're much better off for it. When it comes time to negotiate an M&A deal, you're in a much better position when your public stock is not anchoring you at some valuation that you really don't want to start from. There are a lot of reasons not to go public.

The unfortunate thing is that there aren't really growth-capital providers in the private world in biotech. We don't have private companies like on the tech side that go public at—or are private companies at—$10 billion, $20 billion, or $30 billion valuations. That's just not a thing in our space.

These companies, if you really want to scale into big clinical programs, need to drop $300–500 million into single clinical programs. You have to go public. There is no private market for that. There are a lot of incentives that push companies into the public markets, rightfully so, around funding those later-stage things.

For earlier-stage companies, if you're in Phase 1 or Phase 2, you're asking yourself, "Do I really need to be public?" And only in the scenario where you can raise money—and raise money without the headaches—am I generally more cautious about going public than not.

3. Policy Threatens Biotech

Yeah. So, we wanted to touch on this. In your annual review, you talked about macro and policy and the impact there. So let's talk about a few policy updates and then come back to the question that you asked earlier: are we just desensitized to it, or do we have more comfort with the risk level? I'll go first with a few updates, a few things I'm hearing from D.C.

The White House is set to announce more MFN, or most-favored-nation pricing, deals with major drugmakers, similar to the earlier agreements we saw. What I think is a little concerning is that we're hearing the White House would like to use these deals as a framework for a blanket policy across all biotechs. Obviously, this would be disastrous for all of biotech, even those companies that have negotiated deals and emphasized that MFN remains a serious threat to them.

The deals don't have as much teeth, and they're not as concerning, and that's been, I think, reassuring to people. However, if deals that were done with large pharmaceutical companies then get spread across the industry, small and midsize companies might have completely different considerations, and they would potentially be harmed much more. The impact on our industry, on patients, and on our leadership in biotechnology could be quite massive. How big of a threat is this? We don't know yet.

The other policy thing that I think is a big concern is FDA staffing. We all saw the BioSpace piece where they talked about the heads of divisions, but FDA staffing in general is at 2016 levels. 4,000 employees, or 20% of the agency, have left. DOGE fired the agency's HR department. What we're hearing is that there have been no new hires in 2025, actually only transfers. The FDA has been trying to get contract HR, but that's being held up at HHS. For context, it usually takes 1 year to hire and 2–3 years to train FDA staff.

How does that impact our industry? Obviously, companies are saying that the FDA is delaying or denying meetings. Regulatory experts are also concerned about what I think you could call a policy-by-podium or policy-by-press-release approach, which has been taken by the FDA. They've been changing the framework and then announcing it through press releases. They don't appear to be following the previous process that involved rulemaking and input from industry, and so on.

I'll just touch on a couple of quick positives. The U.S. secured trade deals with Japan and South Korea that lower tariffs to 15% in exchange for a combined $900 billion from Japan and South Korea in investments targeted toward strategic sectors. Initially, that was AI, infrastructure, energy, and semiconductors, but now biotech and pharma supply chains are included in that.

What we've been hearing about is a few very large proposals coming in from industry and investor groups—investor syndicates plus industry experts—for U.S.-based contract manufacturing that could be funded through this mechanism.

And then one last positive is that H.R. 1262, or the pediatric priority review voucher, passed the House and will likely cross the finish line in January. This could renew the PRVs for rare pediatric disease research through 2029 to incentivize the development of treatments for childhood cancers and other conditions that otherwise would not be addressed.

So, I'm going to go to the discussion, but I want to frame it in the midst of this backdrop. The New York Times had a very good piece this morning, which we'll share through our posting, that suggests there may have been a coup attempt against Makary led by RFK.

Perhaps as a counter to that criticism, Makary shared a post this morning highlighting what he views as wins of the FDA under Trump, including a few undeniable steps they've taken, like removing food dyes, HRT, incentivizing domestic manufacturing, and publishing complete response letters. Then he has some other statements in there that are more questionable, or have been press-released but don't really seem to be happening, including, quote, “meeting all target date goals,” “reducing decision times from 1 year to 2 months,” and “eliminating animal testing.”

I mean, clearly, these are not things that have been done. They've maybe been talked about. We're going to share the post, but I want to turn it back to the 2 of you, perhaps on the decision timing—he's referencing the PRVs. I'm curious to get your thoughts, Eric, on everything to do with the policy environment, but in particular the political nature of the FDA and how that's impacting investor sentiment.

Well, you were very kind and professional, Daphne, in your synopsis of what's been going on in Washington. I probably would have had a few more choice and maybe combative words.

In addition to everything you mentioned, I think the commissioner's vouchers have also come under a little bit of scrutiny this week. I proposed this topic for discussion before that STAT News piece came out today, but as you know, there were a few other Commissioner's National Priority Vouchers that were handed out to drugs like Merck's oral PCSK9 and J&J's bispecifics. A lot of us have been scratching our heads: Why that drug, and what's in the national priority scheme that has to do with those handouts?

My take is that Makary is under a lot of pressure. I don't think he's done too many things right, to be honest. One of the few things I think that he's gotten some credit for are these commissioner vouchers, which seem to appease everyone. It's almost like just handing out candy to people who have been treated harshly otherwise.

I think it is very political. I think the rationale for the CNPVs is a political one. There doesn't seem to be any rhyme or reason in the science. This seems to be coming top-down from the commissioner and maybe Vinay Prasad.

And let's face it, this just isn't the same FDA that it used to be. This is an FDA where the senior leadership team has gotten extremely involved with drug reviews. At the end of the day, you either please Vinay Prasad with your drug review or you don't. We have a stock today in Disc Medicine that's down about 15% from when I last looked, because STAT News was reporting that Prasad may not like their drug, even though it was granted one of these commissioner's vouchers.

So, again, there is no more FDA as we knew it. The place is in shambles, as you laid out. The teams have turned over at both the senior and junior staffing levels, and I think, unfortunately, it's going to be hard to resurrect that until we get rid of not just Dr. Makary and Dr. Prasad, but others who might be protecting them.

I didn't see the New York Times article. I'm surprised to hear it called a coup, because I would have thought that Makary would be out as soon as RFK wanted him out, but maybe that's not the case.

I've been talking with colleagues, and people have been critical of Makary. I'm not defending everything he's done, but I think it would be worse for our industry if RFK stays and Makary's out, because who would he replace him with? That would be my biggest concern. At least Makary seems to understand the industry, is willing to engage, and has done some things that are reasonable. I don't think he's perfect, but I think it could be much worse.

Yeah, I would just say this on the FDA front: separating the noise and all the chaos at the senior leadership levels from the day-to-day functions of the FDA, our portfolio—45-ish companies—I’ve talked to heads of R&D in pharma, and a lot of drug programs that are interacting with the FDA are getting the feedback they need within the time frames they need.

We haven't seen material delays across the board. There are always case examples where the FDA is changing the goalposts, moving them, or doing things that are different. Right now, we blame that on political chaos, but even in prior administrations, you had the FDA approving drugs that hadn't shown they worked or not approving drugs that clearly worked.

There's always some drama around selected case examples, but I would say the underpinnings of the FDA are all the FDA reviewers. I am just really happy that they're doing their jobs, and kudos to them for being able to keep their heads low enough to avoid the chaos in the senior leadership, which is clearly distracting to those of us who are watching where the industry is going.

From a day-to-day R&D perspective, I haven't seen wholesale delays in the way we're advancing our medicines into the clinic and through end-of-Phase 2 meetings and such.

Yeah, and maybe that's the reassuring part—that things are still functioning. I think BIO and No Patient Left Behind did a survey of biotech companies, and it was something like 25% were seeing delays and things like that. But I am hearing that there's definitely an uptick in denied meetings and things like that. So, we'll see. I agree with what you just said.

I was surprised to see that tweet this morning, which also caught my eye. It said that they're onboarding 1,000 new scientists. That was one of the—

The checkboxes, you know. My understanding was it was nothing but shrinking over there. So, if they're really onboarding 1,000 new scientists, that's a surprise piece of news to me.

They've reduced their staff by 4,000. I don't know how many of those are scientists. I think the 1,000 refers to the fact that they got approval to hire 1,000 new scientists. I'm not sure if they've actually hired them, but that would be good news, I think, if they had.

I mean, you mentioned, Daphne, just coming back to some of the macro points you made on MFN. This could go in so many different ways, and I hate to be too pessimistic about it.

The optimistic view is that big pharma is really exposed, with legacy products, to the MFN challenges, where you've already established prices in Europe that are much lower than in the U.S., and they become the reference price. That's challenging to navigate for your legacy portfolio.

But on a go-forward basis for new medicines, which is where biotech generally plays, the damage from MFN—while, of course, it'll ripple through if pharma is in pain, biotech generally is in pain—but the idea of new products being able to set a sort of GDP-adjusted global price, and you just won't launch in countries of Europe that don't give you a reasonable GDP-balanced price relative to the U.S. price—

I actually think that's probably a good thing overall. We have a messed-up global drug-pricing regime and have for 40 years, where the U.S. was essentially subsidizing prices everywhere, and that can't continue.

So, I'm in favor of making sure that new drug launches in the developed world do have a relative MFN, meaning GDP-adjusted. We should be launching drugs in the U.S. for the same GDP-adjusted price in France, Germany, Spain, and all of these relatively developed countries.

Yeah, I agree with you. One thing I've seen is that some of the industry organizations and the large pharma companies have taken the tack of, “Let's fight this via the lawyers.” The lawyers in those companies and organizations don't want to appear to be agreeing.

But at the same time, I was in Washington meeting with both administration folks and legislators, like members of Congress and others, and I feel like there's a lot of openness. We all agree that this problem exists. Why not put forth some solutions, some ideas?

The reason that hasn't been a proactive move by the larger companies and the industry organizations is because they're still trying to, I believe, ensure that they're protecting their legal rights. But at some point, it would be good for us to put forth a proposal to solve the problem, as opposed to, “Here's the problem. We're going to do MFN pricing.” There are other ideas that have been floated that I think are much better.

Yeah, no, I agree with trying to find solutions to this problem, not just fighting it.

Okay, so let's keep moving. Eric, you have a couple of items to talk about: another one related to RFK Jr. and the American Academy of Pediatrics, and then let's talk a little bit about the new Vivek Ramaswamy company.

4. Vaccine Policy Raises Alarms

Well, yeah, I’m not sure I can do this other topic a lot of justice. The vaccine and antivaccine issues continue to plague this administration and RFK Jr. I actually saw some headlines, even from Fox News, saying that some of this antivax rhetoric was hurting the population and American health. I think we’re at risk of losing our vaccination status against measles and other diseases like that. The headlines continued to be very vicious with regard to this aspect of MAHA.

I think the article you referenced, Daphne, was about the American Academy of Pediatrics losing its funding after criticizing some of the antivax statements and activities on the part of RFK Jr. Yeah, no surprise—par for the course. We know that RFK Jr. is going to do everything he can, honestly, to weaken the arguments made by the scientists who support vaccines. Another article that was kind of interesting was about Paul Offit, who’s a professor at Penn. He had been asked to debate the science behind vaccines, pro and con, with some antivaxxers, and I think he had even been offered $1 million.

He said, “I’m not going to do it,” and published his rationale for why you can’t debate science with people who don’t believe in rational scientific hypotheses and don’t understand the difference between causation and association. So, I don’t know—just more of the same. I know we’ve been talking about this on this program now for many, many months, and apologies for rambling on here, but I guess it’s just fatigue again, and maybe sadness on my part that we’re going to end the year—a full year of RFK Jr. in charge of continuing to take apart our vaccine industry and our public health efforts.

Yep. Did you want to talk at all about Vivek Ramaswamy’s company?

Why don’t you cover that, Daphne? I know you’re very familiar.

5. The Best And Worst CEOs

Oh, yeah. I’m actually not. It was just on our list of news from the week, so we can skip that. Actually, let’s do this: We have data, and then we have the best and worst CEOs. I would suggest we jump to the best and worst CEOs because I think that’s a really interesting topic, and we’ll end with the data.

STAT put out this best and worst industry CEOs list. The best list highlights big deals and good data, followed by stock-price appreciation, and they even gave kudos to companies or CEOs of companies that acknowledged a setback and returned cash to shareholders. The deals in particular were notable: Nearly $240 billion in acquisitions were announced or closed by November, and this is one of the most active M&A environments since 2019.

I also like the fact that women CEOs who led many of these M&A deals were highlighted. In addition, STAT put out its worst CEO list, where it highlighted CEOs who made choices that ended up being less favorable for patients. I’d love to talk to you about how you could just pick a point in time and might have the same people on opposite lists, just based on luck. Obviously, there are some people who are executing well and outperforming, and others who are making poor decisions.

Eric, you guys put out a really interesting piece, so why don’t we start with you and then go to Bruce?

There’s so much to talk about on this topic, so thank you for bringing it up. We could probably spend a whole hour on just this. First, there’s this celebration of the best CEOs. I think there’s a lot of luck involved, and you mentioned people who were on last year’s naughty list and made it onto this year’s nice list. I’m pretty sure the same people wouldn’t change that much in 12 months.

Should we be celebrating good fortune and luck? How much of a drug’s success truly relates to the singular individual who’s running the company versus the CMO or the chief scientists who are making and developing the drugs, or just Mother Nature, who at the end of the day decides whether a particular molecule is going to look a little bit better or worse than another?

Success is great. It should be given its due, and we should all bask in the glory that our industry is producing on behalf of patients. That’s critical to our industry. But I think some of these year-end lists sometimes overdo the appropriate accolades.

And, in particular, M&A is an interesting story. Should we be celebrating when a company achieves an M&A exit, selling itself to a larger company? Well, maybe. It’s a good outcome for investors, and most deals are done at a premium. But, on the other hand, we’re losing a lot of great companies through the M&A process. Some of the companies that were acquired this year could have become biotech leaders over the 5-, 10-, or 20-year future.

I don’t know that M&A in and of itself constitutes a success. I think it constitutes a financial outcome in the short term. Getting back to that short-termism in the marketplace, I’m just not sure we should be applauding all M&A events. You know what? Let me pause and bring Bruce in, because I know he’s taught and written a lot about the role of luck in this.

Yeah, I mean, look, I think the role of luck is a force that a lot of us don’t want to recognize, but it is just true. Science and biology, and bringing drugs through that challenging, especially middle, part of the clinic into the market—luck plays a huge role. We end up worshiping the winners in this, and sometimes they’ve just gotten really lucky. That holds for both operators and investors, I would say.

I think you just have to be super humble. I like the celebration of the best and worst, but you could kind of predict, I think, 7 of the best this year were all in the dealmaker camp because we’ve had a gangbusters year for M&A. There are a lot of people on there who deserve credit for having driven those deals. But in a world where deal activity wasn’t happening, would you still put them all up there as fantastic CEOs? There are a lot of other things that make a great CEO.

Can I push? I want to follow up on this M&A point, because both you and Eric touched on it. This idea of M&A—if you think about incentives, coming back to what we talked about earlier, for a CEO and probably for investors and others—it’s like the gold medal. There’s almost nothing else you could do that would satisfy everyone and make everyone happy. Investors are going to be happy, and patients are going to have the drug. You’re going to know that the drug is going to get to patients and be commercialized well, depending on what stage of development it’s in.

In terms of your investors, you’re going to make all of them really happy. You can take a break if you’re going and building a company. I’m not saying this is how every CEO thinks, but you’re building a company, then you’ve got a launch, then you’ve got criticism: They’re not growing fast enough. So let’s talk a little bit about that and the incentives around M&A.

Yeah, I take a slightly different view than Eric. I think M&A is a great outcome for a biotech company, in part because if you think about where overcapacity exists in our industry, it’s sort of big pharma sales forces that deliver and distribute drugs to patients through the sales channels and such.

The last thing we need is for a young biotech company to think, “I need to build that entire enterprise myself.” In a world where we have overcapacity there, the balance sheets of large pharma are full of cash. It’s very hard to escape the gravity of those balance sheets. I see it as a natural progression of the ecosystem, where great companies with great assets are going to be acquired. Those great drugs are going to make it to patients through the global distribution framework of a large company, and that creates value for everybody.

Sometimes companies have done deals that keep them independent, and they turn out to be great outcomes. You take Regeneron with its deal with Sanofi, and you take Alnylam with some of its deals as well. Those turned out to be fantastic standalone companies, but that’s very, very rare. Most companies end up not being able to escape the gravity of a large pharma balance sheet.

I think that’s actually a good way to recycle capital, teams, and people back into the ecosystem. It’s very different from the tech side, where a lot of these emerging businesses are actually funding themselves because they do have revenues, many of them have earnings, and yet they’re still growing. We generally don’t have earnings for as far as the eye can see.

I’ll generally agree with Bruce, but for the purpose of conversation, I’ll take a slightly different tack here, which is that I think in some cases he’s right. In some cases, I think M&A can slow down progress and be bad for patients. Daphne, you said you thought M&A was always good for patients, and I guess I—

Not always. It could be good.

Yeah. Look, the 2 largest companies in my universe that were acquired this year—1 is CureVac, and the other is Avidity. CureVac fits very well into the basket of companies that Bruce just laid out. They have a flu vaccine, a flu prophylaxis. It's going to be distributed on a mass-market basis to millions of individuals, and their acquisition by Merck, I think, will help the commercial rollout, the manufacturing, and the distribution, and benefit society in a way that little CureVac could never do.

The other company, Avidity, was focused on rare muscle diseases. They had an absolute execution, get-stuff-done kind of mentality: a very aggressive approach to development and a very aggressive approach to regulation at the FDA, going in with biomarker data in indications like FSHD and really holding the agency's feet to the fire to get this product approved as quickly as possible for patients. You know what's happened since Novartis has taken over? Timelines have already shifted. The base case is no longer to get approval based on a validated biomarker, but to potentially wait for clinical data that could come 12–24 months later. So, just 1 quick example of how sometimes patients do lose out in some of these transitional periods.

That's a very fair point. There's no doubt that that does happen. Big pharma bureaucracies do make trade-offs around getting approval with a full clinical package versus an accelerated approval on a surrogate endpoint, and the marketing ramifications of that. Those are all real issues.

But Daphne, you mentioned something else—a piece that my colleague Josh Schimmer had written earlier in the week. Maybe I'll touch on that: celebrating the losers here. We're a winners' culture. Winners get so much praise and limelight and, again, for good reason. Oftentimes, winners have shepherded their products through to de-risked endpoints and financial success and deserve some of that praise.

But on the other side of the coin, there are a lot of wonderful people in our industry who have pioneered new pathways that didn't necessarily lead to success in the end. Maybe they got a little bit unlucky. Maybe the markets weren't quite as receptive, or the drug profiles didn't quite match what was needed at that point in time. Nonetheless, they laid the groundwork. They were trailblazers, creating a route—a possibility in the future that others may more successfully tread down and succeed upon.

I've got a couple of people in mind, but let me give a shout-out to the guys at bluebird bio who developed this drug for sickle cell disease, Lyfgenia, a very complex, invasive cell therapy. I think they have probably known for some time that the drug that was approved in late 2023 was not going to be a particularly strong commercial success. It's too complex and invasive, and reimbursement continues to be difficult. But the unmet need in sickle cell disease is about as meaningful as you could see in any indication these days.

To their credit, they really stuck with it. Despite having a terrible balance sheet laden with debt, and despite not having the profitability that would ever support success at this company, this management team, led by Andrew Obenshain, saw it all the way through to a private acquisition. I don't think they made a lot of money personally, but because of their persistence, this drug will still be available to patients on an ongoing basis. Hopefully, behind Lyfgenia will come other drugs for patients that are a little bit better. So why shouldn't he be 1 of the best CEOs of the year? He, in some ways, deserves as much praise as anyone else on the list.

Yeah. First of all, kudos to you for highlighting these examples and this industry. If you think about it, the success rates are so low that there are many very talented, great management teams that have just had bad luck, or they haven't been able to raise money at the right time. It's just timing issues.

Kudos to you for bringing it up, but I think ultimately the industry is fueled by investors. If the investors lose out, it's hard to celebrate, even when patients benefit. I agree, and I think it's really important to highlight. Were there other people you wanted to talk about?

Well, again, I think we've touched on the theme of randomness and luck, and maybe the issue that we're all circling around with these lists is that it's really hard from the outside—for me in particular, maybe for you, who operate on the inside, or Eric, who sits on a lot of boards—you can go through your notes and say, “This was a good decision. This was a bad decision. This is something we controlled that we could have prevented, or this is something we controlled that ensured the success of.”

But for most of us who operate on the outside, we honestly have no idea who's a good CEO and who's a bad CEO. We have no idea about these decisions and what could have been done differently because we're operating with less than a full set of facts.

Yeah, I do think the decisions point is a really good one. We've talked about public-company CEOs here because that's out in the full light of public disclosure, but there are a lot of private CEOs. I would say some of the best CEOs aren't necessarily the ones who've had successful outcomes. Making the right decisions to shut programs down or shut companies down is a super-tough decision.

But I have to say I've worked with a bunch of CEOs who've come and said, “The tox signal here on the target is on-target, and we're not going to be able to work around it. We should shut this program down, even if it means shutting the company down.” Those kinds of very candid, truth-seeking decisions are highlights to me of great leadership and definitely worth celebrating.

It's very hard because it's done in the shadows of private companies, where these decisions get made. It's easy to look back and play Monday-morning quarterback and say, “Where did we make decisions wrong?” But when you're seeing it happen in real time, there are a lot of great leaders in our industry who are making good calls to shut things down when it might not actually be in their apparent best interest to do so.

Yeah. And that was 1 thing I did really appreciate about the list that Adam put together: he did call out 1 example of a company shutting down and returning cash to shareholders. I think last year he might have talked about—was it Amylyx? I agree with you, and I do think we need to do more recognition of those types of tough decisions.

There are so many people involved, and it's never just the CEO. It's usually many people on the team. Whenever 1 person is taking credit, I always get very skeptical about that, and I think it's usually a negative sign when somebody's putting themselves forward all the time. Anything else on this topic? Bruce, do you want to say something?

Nope. We can move to the next 1 if you want.

6. New Data Shapes The Outlook

Okay. We had a couple of data readouts. I think you, Eric, wanted to talk about Kyverna, and I didn't know if you wanted to talk about Nektar. We touched on that briefly before.

I could, if you want. I think Kyverna is potentially the more interesting clinical data set these days. The Nektar data set is a little bit mixed, but I think the Kyverna data set, at least as far as I see it, is a clean victory for them, for cell therapy, and for this rare condition called stiff-person syndrome.

This is an autoimmune disease. We're not quite sure about all the etiology and biology behind it, but Kyverna has now shown with its cell therapy directed against CD19. So this is an autologous, bespoke medicine.

They treated about 25 patients and compared those patients pre- and post-treatment with their baseline characteristics. I think they saw really compelling, universally positive data showing improvements in things like walking ability.

There aren't a lot of patients with stiff-person syndrome—probably only about 2,000 or so in the United States who have sought out therapy for their condition. So, it's a small market. I'm sure the drug will come at a premium price. I would hope that, despite the relatively small, single-arm nature of the pivotal study, the FDA would choose to review and approve the medicine.

It could potentially be one of the smallest data sets we've seen for a cell therapy approval. Usually, you have to get about 100 patients' worth of safety data, but in this case, there's substantial unmet need, a very modest-sized population, and seemingly quite good data. So, hats off to the Kyverna team.

I think this could be the very first cell therapy ever approved for an autoimmune disease. Of course, there's a lot of optimism and hope that this won't end with stiff-person syndrome, and that we could see Cabaletta, Bristol Myers, and others take on some larger indications as we go forward—myositis, myasthenia gravis, maybe even sarcoidosis. We'll see, but there's a lot left to be done here. This could be a new start to a whole new therapeutic category and opportunity.

Thank you. We touched on it briefly at the beginning, but congratulations, obviously, to Amicus Therapeutics on the deal with BioMarin. BioMarin is going to be paying $4.8 billion in cash for Amicus.

This is a very inspiring story of John Crowley, who started Amicus to develop a drug for his children and his family. I think it's very much in line with the patient-focused and family-driven nature of the leadership in our industry. So, congratulations to them. I don't know if you guys have any comments on this.

I was just looking at the news right now. I didn't see it before the show. No, look, a great company, and the story of John being a parent and starting a company to help address the disease that his kids had, Pompe, is just a tremendous 25-year journey.

Going back to our other conversation, this is one where, you're right, Bruce, this is an amazing story and an amazing narrative about how a family started a company and created multiple drugs to treat unmet medical conditions. And yet, from a pure stock standpoint, if we're going to put on our investor hats and be capitalists, it was not a particularly good outcome, right?

This stock has been range-bound in the $10 to $15 range since it went public about 15 or 20 years ago, almost, and investors never really made much money. So, great outcome for patients, great outcome for, I think, hopefully, the employees and the management team to some extent, but not so much for investors.

Yeah, no doubt. I looked this up this morning. They went public in May of 2007 at $15 a share, and they got bought today for $14.50 a share. And yet the market cap went up 13-fold or 15-fold over that period of time, right?

It was a $300 million market cap at the IPO, and it got bought for $4.8 billion. Really interesting reflection on the dilution to build a story like this over that many years.

Yeah. And there's a movie, by the way, called Extraordinary Measures about John Crowley. It's with Brendan Fraser, Harrison Ford, and Keri Russell. So, anybody who wants to see the full story—that was done in collaboration with John, who's been telling me about it. Sounds like a really interesting story.

So, we're getting very close. Any last-minute predictions for 2026? I know, Bruce, I think you're now in the lead on this XBI prediction contest. I was in the lead for about a minute.

Yeah, Daphne and I had dinner back in October when the markets were just starting to warm up, and it was: Where will the XBI end? Daphne was at 120. I was squarely the overoptimist at 130. We had most of the group between 110 and 120, but we'll see. Fingers crossed for a strong finish here.

I'm rooting for you. Bruce, I want to know what your end-of-2026 number is.

Yeah, that's a much harder question.

All right, we'll give you some time to think about that.

In the meantime, I'll mention that Biotech Hangout will once again be hosting our in-person networking event at J.P. Morgan on Tuesday, January 13th, from 7 to 10:00 p.m. at Persona. We hope to see everyone there for a fun night. And we have an open bar thanks to our gold-badge sponsors, CFGO and Incubate Coalition, and our blue-badge sponsors, FTI Consulting, Catalytic Agency, and Mispro. Be sure to RSVP. Last year we had about, I think, close to a thousand RSVPs and a lot of people cycling in through the night. Sadly, out of all of our co-hosts, Bruce probably won't be there, but many of our co-hosts will. Hopefully, Eric, you'll join Josh with us.

My thoughts will be with you guys.

I still remember that piece Bruce did about the candle and J.P. Morgan and not going anymore. So, sadly, you won't be there, but we'll miss you.

I'll miss not being there. The one part of J.P. Morgan I really liked was the ability to see friends that you hadn't seen in ages.

Yeah.

Any closing remarks, Eric, before we close out the show and the year?

No. Despite some of my curmudgeonly, Scrooge-driven comments, based on maybe fatigue, I'm an optimist. I do think that we're going to have a good 2026 ahead and that the innovation in our industry is almost unstoppable.