Biotech Beat NVIDIA in 2025. Can It Do It Again?

0:04Is biotech getting unfairly ignored? You're listening to Motley Fool Money.

0:21Welcome, Fools. I'm your host, Tim Byers. And with me are two of my longtime Rule Breakers teammates, Carl Thiel and Tom King. Thanks for being here, guys. Yeah, it's great to be here. Good to be here. We're going to preview some biotech earnings. We're also going to check in on one that reported this morning. We're going to paint a picture of an industry that probably deserves a little bit more love, a little bit more attention. Get your coffee ready because it's biotech time. Let's talk about biotech approvals, Carl, and what's going on at the FDA because it does seem as though things are a little bit, let's call it turbulent.

0:59Let me just paint a little quick background here, which is that 2025 was an absolutely tremendous year for the industry. I don't know if many people realize this, but biotech as a whole, the XBI, for instance, outperformed NVIDIA in 2025. It was a very strong year after a very, very long, bleak period. And so, I do think there's actually a lot of enthusiasm continuing into 2026. But I don't know what it is about me, Tim. I got to throw cold water on stuff. I just want to sound, And, you know, there's there's a few alarm bells or a few flags out there that I think, you know, are interesting and that people need to be aware of.

1:37And one of them is the sort of continuing chaos, I guess, that we're seeing at FDA, for want of a better word. Well, and it does seem as though there is a there was a warning from one of a former senior executive here. I think this man's name is Richard Pazdor, who is the former longtime head of the oncology division. I've often heard you talk about the J.P. Morgan Conference, Carl, and how important it is to the biotech industry. But it sounds like he had some spicy things to say at that conference. Yeah, he did. And this is just a couple of weeks ago in January, mid-January. I mean, he wasn't just the head of oncology.

2:18He is one of five people who headed up CEDAR, the main drug approval division. So, you know, extremely senior position at FDA, one of five people who did that during 2025 because there was so much turnover in the role. And, you know, one of the things that he told the big pharma people at the conference was that he was worried that the firewall between political appointees and drug reviewers has been breached, was his quote. and that the pharma industry is continuing to underestimate the damage that's already been done. Now, you know, you can certainly dismiss that as the thoughts of a long-serving bureaucrat who doesn't like the changes that he's seen at the industry.

3:00But, you know, what he called chaos and whether that's the results of just turnover or politics or anything else going on, It does seem to describe some of the seemingly contradictory approaches that we've been seeing to regulation recently. I mean, what's interesting here is that, and especially when you say that, it makes me wonder that some of the companies we would look at for the biotech side of the scorecard and rule breakers that are dependent upon the FDA for fast approvals of promising drugs that are in clinical trials. And then suddenly there's a bit of maybe some extra risk here. So can you talk me through, when he's talking about that, is he talking about longer approval cycles?

3:54Is he talking about inconsistent approvals? What's the risk here for companies that we follow? We can think about it as just trying to read the tea leaves on how the agency is going to regard various submissions. And I think one area, so I think you have these two different sort of themes going. And one is that under Martim Kari, the current commissioner of FDA, he has been very, very forward-looking about how he wants to speed approvals, how he wants to make this easier for industry. And that's something that industry is super enthusiastic about. And so that includes everything from, you know, there's been talk about doing less animal testing.

4:38There's been talking about having easier standards for rare diseases where you can basically get on the market for with a single study, as long as you have some confirmatory evidence, which would make that faster and easier. There's been talk about a, quote, plausible mechanism pathway, basically, where the agency could approve drugs based on limited clinical data, basically, if the biology makes sense. So, you know, think about it's like if you have a disease that's marked by an enzyme deficiency and you give them the enzyme, that kind of makes sense that that would work. So, you know, that when you have that kind of plausible mechanism, you can take basically less data to support it.

5:15These are all things that industry is super excited about. The thing is, there's sort of an operating reality on the ground that seems to be coming out differently than that. And that's where I think there's a lot of confusion right now is because in some ways, the FDA actually seems to be raising the bar on rare disease rather than lowering it. And we've seen that come out in a few different ways. Well, let's talk about those. I would love a couple of examples here of where this is, because what we want to understand as investors is, do we need to be more careful about the types of biotech companies we're looking at here because what we thought would be a reasonable approval cycle is no longer.

5:59So what are some examples of what we're seeing in the industry right now? Yeah. And you said what types of products or what types of approvals. And I think that's a very good point right there. A lot of controversy seems to come particularly around things that go through the CBER, the biologics division, so gene therapies and cell therapies, things in that space seem to be particularly unpredictable right now. And so we just saw that this past week, a company called Regenex Bio was expecting approval of a drug on February 8th for a disease called Hunter syndrome. That's almost certainly not going to happen now.

6:43And what's interesting is that it's because a different drug, a different gene therapy, had a complication come up in clinical trials that basically they found a tumor that had developed in somebody that had been treated with the drug four years ago. And so they put it on clinical hold to investigate that further. Now that's, and I want to point out, these are bad, fatal diseases, right? So you have some, there's some tolerance for side effects and bad outcomes and stuff with therapies when you're addressing a fatal rare genetic disease, right? And so this was a benign tumor, but a tumor nonetheless, it developed in somebody who'd been treating four years earlier.

7:30Unclear if it's related to the gene therapy itself, but certainly a red flag and putting it on hold to investigate that is called for. That's the right call. What's weird is that they put another drug that is just about to get approval, supposedly, on hold because it's similar. There was no evidence of problems in that. It uses a somewhat different vector. I mean, all these things use slightly different vectors, even if they're all technically in the same class. It seems to contradict what FDA had been saying previously, which is that they were going to be more tolerant of these fatal rare diseases.

8:09And that's not what we're seeing. Last point on this, or last question, I guess I should say before we move on to our next section here, but does this make you raise the bar for what we would consider a reasonable biotech investment and say like rule breakers? Do we need a bit more a bit more development, like a biotech company that's more mature before they make it to the scorecard? Or does this really not change anything? I think that you have to realistically put extra risk around anything in the gene therapy, cell therapy space. We're just seeing that. We've seen it too many times at this point to not recognize that.

8:59I still think there are some really, really interesting possibilities in that space, but you have to maybe build in extra timelines for more questions, for things being delayed and stuff like that, unfortunately. On the other hand, we may finally start to see some things get sped up and we can talk about that a little bit maybe in our next segment. Okay. Tom, any thoughts on this? Does it make you more or less interested in biotechs to bring to the scorecard? I think Carl said it pretty well. I think we've seen the current skepticism around vaccines and mRNA-based therapies. I think Carl put it pretty well.

9:42You just got to factor that into your risks when you consider the sector and those particular subsectors within the biotech industry. All right. Still like biotech, maybe lengthen your timeline for how long you're going to stay invested in these companies. Up next, we're going to do some biotech earnings predictions. Stay tuned. You're listening to Motley Fool Money. In January of 1915, Ernest Shackleton's ship, Endurance, became encased in the ice in the Weddell Sea. Through determination, grit, and savvy, Shackleton would lead his men through a brutal winter, then over hundreds of miles of Antarctic ice, followed by 800 miles across some of the roughest waters in the world.

10:24It is one of the most extraordinary and inspirational journeys in the history of exploration. Find this story and many others at the Explorers Podcast, available wherever you get your podcasts or at explorerspodcast.com. All right, we are back with Carl Thiel and Tom King. I'm Tim Byers, and let's start with some earnings predictions here. We've got some big names that are reporting this week, guys. And I'm going to start with Eli Lilly, ticker LLY. And I'll give you some of the background on this. This is a big company and they have, like for some others, we're going to get into another one here, but weight loss drugs.

11:02Oh boy, that has been a big driver for Lilly. Earnings per share consensus estimate, a range of$6.99 to$7.86. The consensus estimate is$7.48, revenue of$17.85 billion. Roughly, I mean, this is over 30 % relative earnings growth year over year. So big numbers here. Tom, I'll start with you. Are you expecting a beat, a raise, or a miss for Eli Lilly in its upcoming quarter here. They're going to report, I believe, on the 4th, so Wednesday this week. What do you think? I'm going to go with the beat because I think that guidance is always arranged so that it's possible easy to more likely to beat.

11:52So that would be my guess. Yeah, so low bar, set the low bar and leap over it. Carl, I mean, when you look at the Lilly business, I mean, I assume it's way, way bigger than just weight loss drugs. But is this still like, is this the weight loss trade? Is that what Lilly is? Yeah, it effectively is. And first of all, I just have to say, by the way, I love that you're referring to Lilly as a biotech company. That's such a victory for biotech. It's like a century old big pharma company. But it's true. I mean, it's like these GLP-1 drugs, they are biotech drugs, and they are in the driver's seat right now.

12:35Yeah, I would put Lilly down for a beat. I think they've beaten in the last three or four quarters. I think they're in a super strong position right now. The only thing that could, yeah, they're probably a decent candidate to raise, too. The only sort of question mark right now is that CVS pharmacies took terzepatide, which is the active ingredient in both Zepbound and Monjaro. They took that off their formulary last summer. And you saw a little bit of a ripple of it in the third quarter. But this fourth quarter is when we're really going to see if that makes a difference or not. Because there were some people switching over to semaglutide after that happened.

13:16And that could have some impact. but I think they'll be able to drown that out. Okay, fair enough. So we've got two beats for Eli Lilly. Moving on, we're going to move on to Novo Nordisk, another one I think that's in the weight loss trade, for lack of a better term here, ticker NVO. They're also reporting on Wednesday the 4th. So Tom, I'll come back to you and give you some numbers here. So the earnings per share expectations are between 89 and 90 cents a share. That's versus 91 cents in Q4 of last year. So flat to slightly down revenue of 11.96 billion. And there is the possibility of a dividend coming into this quarter.

14:04So what do you think? Beat, raise, or miss? And I will ask you, what do you put the odds for a dividend from Novo Nordisk coming into this quarter? Do you have any thoughts on the odds? Well, in terms of the possibility of a miss, I would probably put that a little bit higher than for Eli Lilly. Novo Nordisk has been on the back foot a little bit the last couple of years. They've got a new CEO. They've been having some struggles with various things. So just for that reason, I would rank the possibility of them as slightly higher. And the same sort of logic applies to the initiation of that dividend.

14:48I'm guessing that in a time of uncertainty for them, they'd rather hang on to the cash. So I would say that's probably unlikely, but there may well be more to it than that. So less than 50 % is what I hear you saying? Yeah, sure. Yeah. Okay. Carl, to beat, raise, or miss, and I'll put the dividend question to you this way, given that Novo Nordisk has been a little shakier, as Tom points out, is the dividend what you do to stabilize things amongst the investors, or is it like, let's conserve the cash and go again? I think they would frame it a little bit differently. They have a new CEO, the first non-Danish CEO in their company's history, who's already signaled that he's going to go big on acquisitions.

15:41Oh, boy. Which to me is, which also, by the way, I think they need to do that. Like Novo Nordisk has been traditionally very, very shy about doing M &A. And I think this is a good, that would be a good move for them. But it does, that does make the timing of introducing a dividend make a little more questionable to me. So I would lean towards no on that. And then for the earnings, they've already cut guidance twice, I think, in the last year. So I'm looking for them to hopefully meet. It'd be great to see them beat. I do think they're kind of due for relief at some point. But yeah, I'm a sort of a meet or maybe slightly ahead.

16:19I'd like to see a lot is riding on, obviously, their oral Wegevy launch. And that's very recent. So it's a little hard for it to move the needle too, too much. but it will certainly play into their guidance going forward for the rest of the year. But the numbers for oral Wegevy have been strong. So we've got a miss and maybe a slight beat or meet. Let's move on to Twist Bioscience, which is a company that we've looked at multiple times in rule breakers. And Tom, I'm going to come to you because as we're recording, this is Monday morning, we got results. They did provide some preliminary results, ticker TWST, on January 12th.

17:02And now we have the real results. So let me ask you, were you surprised? Were you delighted? What did you see? Well, for the quarter, it was pretty much what they said it would be. It was$104 million in revenue for the first quarter of 2026, which ended December 31st, 2025, which is pretty much exactly what they had said it would be when they announced their preliminary results on January the 12th. Still unprofitable, but getting better. The bigger picture here is more interesting for me, though, the longer-term trend in Twist Biosciences. So, it's a company that first crossed my radar, I think, in 2020.

17:47Basically, what TWIST does is they make DNA for other people. So you're a researcher, you say to TWIST, please make me this DNA with this code of nucleotides. And they do that, the researcher then puts it into a cell and sees what it does. So they heavily are dependent on research, the level of research activity. And as we know, and Carl has said early in the show, we've been through what you might call a bit of a biotech winter the last few years. There's been a fair amount of pessimism in industry, lack of investment, and so on. But what impressed me about Twist when I looked over their longer-term results is that they've consistently grown revenue through this period of the last, from 2020 through to last year, adding about$60 million in revenue per year.

18:47Their rate of cash burn has gone down. They're still burning through cash, but it's getting a lot less. I would say from a business perspective, it's doing all the right things. It's maintained its revenue growth. It's reduced its cash consumption. It's getting towards profitability. And, you know, the results they released this morning pretty much confirmed that the trend that has played out over the last five years is continuing satisfactorily. So, yeah, it's still an interesting company. It's a lot cheaper than it was. At one point in the 2020-2021 period, it traded an eye-watering 111 times revenue, multiple.

19:34It subsequently reached a low of three times revenue in May of 2023. That would probably translate to a 95 % loss or so decline. And now it's at a more reasonable seven times. So, yeah, interesting company. So, Carl, let me just ask you very quickly on this, and then we'll move to our final segment. But because this is a company that's in DNA research, is some of the chaos you talked about at FDA, does it apply to a company like Twist? Are they caught in that web of chaos? Only indirectly, right? I mean, they're not really working with FDA directly. They're working with companies who are trying to discover new drugs.

20:22So they're insulated from it. And yeah, just tremendous technology. It's a great, great beat and raise quarter. So hopefully they'll continue to have good things happen. There you go. All right. So that's Eli Lilly, ticker LLY, Novo Nordisk, ticker NBO, and Twist Bioscience, which reported this morning a good beat and raise. Up next, we're going to preview tomorrow's show. Thanks for tuning in. You are listening to Motley Fool Money. All right. We are back with our final segment here. Just a preview for tomorrow when Emily Flippen, Jason Hall, and Lauren Hurst will be talking about AI and gaming.

21:00They are going to talk about Project Genie, which, if you have not heard of this, is an AI model designed specifically for creating 3D worlds. That sounds interesting. Honestly, a little bit terrifying. But it'll be Emily, Lauren, and Jason. So, please stay tuned for that. There are also a lot of biotech earnings that are coming this week. So please stay tuned for that at the site. We will have coverage every day for all of the stocks you are following in your portfolio. Carl, Tom, thanks for joining me today. Appreciate it. Good chance to talk some more biotech. Please come back to do this again.

21:38People on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. That's it for today's Motley Fool money. Thanks for tuning in. Our engineer today is Dan Boyd. Our producer is Anand Chakabalu. I'm Tim Byers.

22:15Thanks to Tom King and Carl Thiel for being with me today. Fools, we will see you again tomorrow. Thanks again and Fool on.