Episode summary
Biotech Just Had Its Big Reset - Here’s What Comes Next (Dan Rasmussen, D.A. Wallach & Meb Faber)
The Meb Faber Show
· · 1 hr 13 min · Hosts: Meb Faber · Guests: Dan Rasmussen, D.A. Wallach
Summary
Dan Rasmussen’s biotech work argues that the sector behaves unlike the rest of equities: value, quality and momentum only work after they are redefined for a world where most firms are unprofitable, cash balances matter, and spending is the closest proxy for scientific output. He says the best signals are market cap relative to spend, specialist ownership, and peer momentum built from clinical-trial similarity rather than simple price trends. That framework points to a market with extreme dispersion, a very large shorting opportunity, and a strong rebound setup after biotech’s long drawdown.
D.A. Wallach added that China has become a real force in biotech, with big pharma increasingly sourcing early assets there and with both US and European companies using China for cheaper, faster early-stage trials. He said the industry is watching for a better IPO window and for private companies to exit into public markets after a strong 2025 for M&A. He also argued that biotech still looks under-owned by generalist capital, even after the recent surge.
The conversation then widened to whether US equities are broadly overvalued. The host and the guests contrasted a high CAPE ratio with a more moderate implied equity risk premium, and debated whether recent US returns reflect technology, rising corporate profitability, or deeper structural changes such as deficits and global participation in equities. Japan came through as the other major anomaly: a market with huge cash-rich companies, low payouts, corporate governance reform, and room for dividends and buybacks to rise further.
Key takeaways
- Dan Rasmussen says biotech’s best signals are market cap-to-spend, specialist ownership, and peer momentum, not standard value or quality factors.
- The host says biotech’s big drawdown and rebound resemble a classic washout that can create strong forward opportunity.
- D.A. Wallach says China is now a major source of biotech innovation and a cheaper venue for early clinical development.
- Wallach says 2025 M&A was strong enough to recycle capital back into specialist biotech funds and may reopen the private/public conveyor belt.
- The guests disagree on the source of high US valuations: Dan emphasizes profit growth and structural forces, while the host stresses high starting valuations and low future returns.
- Dan says Japan remains attractive because payouts are low, balance sheets are huge, and governance reforms still have room to run.
Notable quotes
“biotech is the most uncorrelated sector. It's the sector with the most dispersion internally”
“the best thing to use is spending because these companies aren't generating any generally any revenue”
“if no biotech specialist fund owns a name, it's a really bad signal”
“the Chinese government decided several years ago that biotech was going to be a focus area for them for decades to come”
How the episode opens
Welcome to the Met Favor Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Met Faber is the co-founder and chief investment officer at Camry Investment Management. Due to industry regulations, he will not discuss any of Camry's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Camri Investment Management or its affiliates.
For more information, visit cambrianvestments.com.
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Welcome back, everybody. Happy 2026. Our episode with these two guys was so popular last summer, they got invited back.
I don't know how this quick, but we're going to do another fun radio show today. DA Wallock, Dan Rasmmanson, welcome back to the show.
Thanks, man. You guys came on and you marked a kind of inflection point. We spent about half the time last time talking about the opportunity and also the decimation in biotech and then the other t half the time I feel like dunking on private equity.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- biotech reset
- china biotech market
- ipo and vc trends
- valuation tools like cape
- japanese stocks and home country bias
Companies and tickers mentioned
- Verdad Advisers
- Time BioVentures
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
