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During Episode 27 of Biotalk, Geoff Meyerson, CEO of Locust Walk, steps back to examine the macro forces shaping the biopharma landscape. After holding a bearish outlook since 2021, Geoff explains why he’s finally shifting his stance and what could signal a true turnaround for biotech.
He unpacks the “big three” market headwinds—regulatory hurdles from the IRA, FTC deal scrutiny, and high interest rates—and outlines how recent shifts, including rate cuts, new FTC leadership, and potential IRA reform, could spark renewed momentum, especially in M&A and rare diseases. Geoff also highlights previously underappreciated risks like HHS cuts and aggressive tariffs, which could stall progress if unresolved.
With a balanced, apolitical lens, this episode offers candid insights into why policy matters for biotech investors, operators, and dealmakers—and what to watch for as 2025 unfolds.
Tune in to understand the key inflection points and why Geoff sees the second half of 2025 as a potential breakout period for the industry.
Full Transcript:
Welcome to Biotalk. My name is Geoff Meyerson, CEO and Co-founder of Locust Walk, and you are listening to Biotalk, our podcast for biotech deal makers. In this episode, I want to zoom out and talk about the bigger picture — what’s really driving the biotech market right now.
In almost every meeting the past few months I have been asked my views on the market. I decided that I am going to share my thoughts publicly. I fancy myself to be a free market limited government champion across all aspects of life. I do not comment politically nor believe it is my job to criticize or promote any politician or party. That said, the macro policies enacted by both parties directly impact the biopharma industry, and I believe it’s important to analyze and comment on areas related to the life science industry. For all other issues, I subscribe to the University of Chicago’s institutional neutrality, and it is my (and Locust Walk’s) policy to not comment publicly.
First a recap of why I was bearish starting fall 2021 when Locust Walk ran a webinar titled “Has Biotech Peaked”. Throughout 2022, 2023, and until September 2024, despite many market analysts predicting a turnaround, I maintained my bearishness because the 3 underlying headwinds that started blowing hadn’t stopped or reversed, namely:
Regulatory headwinds because of the IRA
Transaction headwinds from an openly hostile FTC
Monetary headwinds via high interest rates caused by high inflation
Until these 3 drivers reversed, I didn’t believe the market would improve beyond incremental changes. When in September 2024 the US Federal Reserve dropped rates by 50 bps, the rate tightening cycle had not only stopped but reversed. My changing perspective was independent of the pending election since the largest factor interest rates was starting to shift.
In January 2025, Lina Khan exited the FTC and a new era of antitrust enforcement began. While far from perfect, it has been markedly more pro-business with a much less aggressive effort to block transactions. Locust Walk’s Quarterly Market conditions detailed a 47% uptick in M&A by value and 35% by volume showing signs of life in this market even though I didn’t anticipate any material improvement until 2H25 because it takes time for deals to come to fruition after the changeover in policy. I predicted M&A had the potential to transform the industry this year after years of suppression. I stand by this prediction and for everyone’s sake I hope I’m right.
The IRA pill fix is being discussed and because President Trump has come out in support, some form of it is likely to make its way into the reconciliation package of tax and regulatory cuts. I hope small molecules move to 13 years of exclusivity but bigger price discounts thereafter to remain budget neutral rather than meeting in the middle at 11 years, which I think would be quite problematic. This has the potential to be a major win for the biopharma industry, spurring additional investment into small molecules and peptides. If the tax cuts are extended and regulatory reform across the board is enacted, that would be very pro-growth and a big positive for the broader market and create more of a risk-on mindset.
The two forces that I didn’t anticipate as large a negative for the market were the impact of DOGE / job cuts on the functioning of the FDA and the degree of aggressiveness with which the tariffs were rolled out.
First. While the HHS cuts were not unexpected, the speed and potential to impact day-to-day functioning of the agency was/is cause for concern. I predict that calmer heads will prevail, and the right people will be rehired/retained and this will be a short-term blip rather than a long-term negative change at the agency. The whole point of DOGE was to reduce government waste, fraud and abuse and to make government more efficient. If these cuts make government less efficient, then that directly contradicts the administration’s priorities including getting drugs to patients with severe disease and to end chronic disease. Since one thing the administration does well is solicit feedback from industry leaders, I suspect this will get the President’s ear if not fixed.
I believe the RFK fight with Peter Marks was limited to vaccines, which while quite unfortunate that fairly settled science around vaccines for diseases like measles is being relitigated, it is still a small minority of the industry. The industry didn’t do a great job in transparency related to the COVID vaccine rollout related to adverse events, which caused a significant loss of credibility and trust in the industry. Between when I originally wrote this text and recording, FDA Commissioner Marty Makary announced a new head of CBER, Vinay Prasad, who based on his own writings and commentary appears to be much more hostile to the biopharma industry than I would have expected or hoped. While actions always speak louder than words, I am troubled by the pick and hope his worst ideas don’t come to pass. In the good news department, I put more weight on recent comments made by Makary around speeding up drug approvals for severe conditions (again something that might contradict Vinay’s views). I stand by and double down on a prediction I made right after the election (minute 21:36 for specific prediction) around a resurgence of interest in rare disease drugs. If rare disease drugs are fully excluded from the IRA (currently you can only have one indication approved to avoid the IRA), I see the market surging for rare disease drugs even further.
Lastly, but likely most importantly, the drag on the industry from tariffs has been material, not because of the direct impact on biotech, which has limited exposure to imports (that’s really pharma companies who parked their IP in Ireland or other territories to avoid US taxation), but because of the potential for stagflation and the Fed keeping interest rates higher than anticipated. If this piece doesn’t get resolved in the US’ favor and within the next 3 to 5 months, I predict this will be the story for 2025 and drown out all other factors which are mostly a net positive for the industry. My prediction, however, is that Trump did major damage to his brand and approval ratings due to the trade war and needs some wins. Countries like India will announce major deals and create much better conditions for American companies and workers to bring back jobs including for export to other countries. If that happens for several deals in this window, I think the markets will react in a very positive way and will minimize the damage of the China trade war. Regarding China, I’m hopeful these two co-dependent frenemies can work it out, but it might not be necessary if many other trade deals are announced.
So, where does that leave us? With tremendous uncertainty, which is why the XBI has crept back to where it was before “Liberation Day” excluding yesterday’s collapse and still 18% below where it started the year. Politicians and policy do impact our day-to-day biotech lives and it’s important everyone in the industry understands the dynamics at play. I’m bullish that the second half of 2025 on balance will be a stronger recovery, once we put most of the first 100 day turbulence and tariffs behind us and start reaping the benefits of net positive changes to policy and personnel. Let’s hope for all our sakes that I’m right.
I want to thank everyone for listening to this episode of Biotalk. We look forward to a productive dialogue and hope you join our next podcast. Please share with all your friends and colleagues to help us grow the audience. This is Geoff Meyerson for Biotalk signing off.