382: Biotech's year in review

What It Covers

The Readout Loud reviews biotech's 2025 performance with venture capitalist Bruce Booth, covering market recovery data, CEO performance rankings, GLP-1 drug pricing dynamics, FDA stability concerns, and venture capital trends. Clinical stage biotechs gained 62% year-to-date while zombie biotech numbers declined significantly.

Key Questions Answered

• •Biotech Market Recovery: Clinical stage biotech companies surged 62% year-to-date, with the XBI index beating the S&P 500 by 200 basis points. The sector jumped 180% from April lows through December, driven by merger and acquisition momentum, positive clinical data, and perceived reduction in regulatory risks under the Trump administration's second term.
• •Direct-to-Consumer Drug Programs: Eli Lilly and Novo Nordisk's direct-to-consumer GLP-1 programs paradoxically reduce access by enabling employers to drop insurance coverage. HCA Healthcare, the largest US hospital system, eliminated Zepbound and Wegovy coverage for 2026, directing employees to manufacturer programs where costs increased from $100 to $449 monthly for some patients.
• •IPO Market Outlook: Biotech IPOs will increase significantly in 2026 after two barren years, but quality concerns persist as the entire ecosystem incentivizes public offerings regardless of company readiness. Historically, 60-75% of biotech IPOs underperform within two years, making careful stock selection critical for investors navigating the reopened market.
• •Obesity Drug Valuations: Obesity-focused biotech companies face pricing to perfection risk, where any clinical data falling short of beating Eli Lilly's tirzepatide triggers massive selloffs. Viking Therapeutics lost 40% market value in one day despite promising results, while Lilly dropped $60-70 billion on imperfect oral drug data, demonstrating extreme investor expectations.
• •Venture Capital Shift: Biotech's share of US venture capital dropped below 10% to approximately 7% for the first time in decades, down from 12-14% historically. Tech sector AI investments exploded the denominator while biotech stabilized at $5-6 billion quarterly. This creates overcapitalization risk for AI-native biotech companies backed by inexperienced investors making inflated valuation assumptions.