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Biotech iQ Recap for the Week Ending May 9, 2025

Welcome to the BiQ Weekly Recap #16!

I want to welcome the new Biotech iQ members who joined this past week--thank you for joining the BiQ Community. I've been a biotech investor for over two decades, but BiQ is a new service, and I'm humbled and grateful for its warm reception from the biotech community.

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While I publish several articles and updates each week, please remember that Biotech iQ is much more than a newsletter service. BiQ's most valuable tools are found on the Biotech iQ website (www.biotechiq.com). These include:

  • The Active Portfolio displays a list of all companies currently included in Active Coverage, together with their outlook and ratings.
  • The Catalyst Tracker & Events Calendar displays a quarter-by-quarter list of upcoming catalysts and a calendar of forthcoming events.
  • The News Feed displays an RSS feed of all press releases from companies covered at Biotech iQ (if the company provides RSS services).
  • BiQ Community Chat

Weekly Overview

The index closed last Friday at 83.47, opened Monday at 83.19, and closed Friday at 76.37 for a weekly loss of 8.5%. It reached an intra-week high of 83.38 and a low of 75.68 for an intra-week range of 10.2%.

XBI 5-Day Chart. Click image to enlarge.

Zooming out to the one-month chart, we can see that the first week of May has reversed the gains from the last week of April. As I've been saying for several weeks, I believe markets still face significant headwinds from ongoing trade negotiations and uncertainty regarding the future direction of the FDA. Now, I expect we can add anxiety over the implications of MFN (Most Favored Nation) pricing to the list. We still have a long way to go before we're clear of these headwinds. It will take time to work through these uncertainties. I continue to maintain elevated liquidity levels and sell Call options where they make sense.

XBI 1-Month Chart. Click image to enlarge.

Zooming out further to the five-year chart, we can see that the index bounced on high volume from the 66-ish level, almost reaching 5-year lows near 64. However, the market turned sharply lower this past week, and the RSI continued its downward trajectory.

XBI 5-Year Chart with RSI. Click image to enlarge.

Biotech Industry News & Commentary

As I write this, it appears that FDA anxiety has been mostly replaced by MFN (Most Favored Nation) anxiety after President Trump's tweet regarding his Executive Order requiring drug companies to offer Medicare MFN pricing. I'm sure most everyone has seen the tweet by now, but for anyone who's been lucky enough to have escaped it (until now), here it is (you can thank me later):

First, the big question. What does this mean for the XBI tomorrow morning? Honestly, I don't know. I view this as mostly rhetoric for now, at least until we have more information about whether this will become an actual policy, and if so, how it will be implemented and enforced. But that's the logical side of me talking. As we all know, in the short term, markets are driven by sentiment rather than logic.

So, I'm going to put this question aside for the moment, primarily because I don't know how to answer beyond just guessing--and honestly, your guess is probably just as good as mine. What I will say is that I am continuously surprised by the market's ability to surprise me, so why tempt fate?

Instead, I'll talk about all the things I don't know.

  1. I don't know if this is something the President can implement with the stroke of his pen on an Executive Order (EO). Issuing an EO and enforcing it are two very different matters. At the very least, I expect substantial legal challenges from the pharmaceutical industry, which I anticipate will take months, if not years, to resolve.
  2. If implemented, I don't know any details about how it will be implemented. It's completely unrealistic to think that pharma companies will suddenly start selling their drugs in the US for the same price they're selling them in Sri Lanka or Sub-Saharan Africa--no matter what the tweet says. The devil is in the details, and we don't know any details.
  3. I don't know if this policy, if implemented, will have a greater impact on pharmaceutical companies or pharmacy benefit managers (PBMs). Today, drug costs to Medicare are artificially inflated by PBM markups and rebate programs. If we strip all of these out, which I would view as a negative for PBMs, I'm unsure what the net effect will be on pharma company profits. Personally, I think one potentially positive outcome of this policy could be to pressure the PBMs, rather than the pharmaceutical companies. This is a similar argument I made regarding the IRA Drug Price Negotiations. I saw those as more aimed at PBMs, not drug manufacturers, and for the most part, this has turned out to be the case.
  4. I don't know if the net effect of any potential MFN legislation would be to raise drug prices abroad or to reduce drug prices in the USA, or some balance somewhere between the two. I would expect pharma companies to be savvy in how they implement any actual legislation (if it happens). When the pharma companies were required to offer the same prices to Medicare as they did to private insurers, they promptly raised prices for private insurers. We could see something similar happen as a result of MFN. Ultimately, a downside of this would probably be to reduce access to these drugs in poorer nations that can't afford first-world pricing.

Regarding the impact on the Biotech iQ Active Portfolio, I anticipate minimal tangible impact on the bottom lines of BiQAP companies. Very few of the companies in the BiQAP derive a meaningful portion of their revenue from ex-US sales, and for the few that do, those drugs are mostly available only in the US and EU markets at prices comparable to US pricing. But again, that's the logical side of me talking. Sentiment is another thing entirely.

BiQ In-Progress

I was busy trying to keep up with earnings reports this past week, so, except for adding one new name to the BiQAP, I'm afraid I didn't make as much progress as I would have liked on my BiQ to-do list. Here are some of the writing projects I'm still working on:

  • Deep dive analysis of Gossamer Bio (GOSS). I have been working on a comprehensive report on Gossamer Bio and hope to have it published over the next two weeks. Gossamer management has been great about answering my questions; however, I am still awaiting responses from other companies in the space. Once complete, I plan to make the report available to BiQ Premium Members first and release a version for non-Premium subscribers approximately two weeks later.
  • In addition to the feature article on GOSS, I am also planning informal BiQ Journal articles for several early-stage names that I find interesting, but which perhaps aren't derisked enough to add to the BiQAP.

BiQ Service Updates

  • No BiQ service updates.

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