The Catalyst
The risk-off pattern of recent weeks broadened. A hotter-than-expected September CPI report pushed the 10-year Treasury yield to 5.33% midweek before an AI-led tech selloff sent investors into bonds, and the Nasdaq posted its worst week since April 2025. This time the XBI fell too, down 6.1%, but the selling again concentrated in smaller and earlier-stage companies: the median micro-cap biotech fell 12.1%, and development-stage biotechs fell a median 11.5% versus 4.8% for commercial-stage companies, a gap that held at every size. Medtech showed the same size gradient. In our conversations, investors described waiting until next year to make their next major investments. That caution showed up as selectivity rather than a closed window. Verastem Oncology raised $250M the same day it reported new clinical data, and Iambic Therapeutics and City Therapeutics completed IPOs at the midpoint of their ranges, not above them. Among single names, Liquidia rose 25% after settling its litigation with United Therapeutics but remains about half its value before a September 30 ruling that cost Yutrepia its PH-ILD indication, and Contineum Therapeutics fell 47% after Bristol Myers Squibb reported Phase 3 results for a drug in the same pathway.
Sector Performance by Market Cap
September headline CPI came in at 3.7% and core at 2.6%, both above expectations. The 10-year yield reached 5.33% after the release, then reversed to roughly 5.1% as an AI-led tech selloff drove demand for Treasuries, and Fed Chair Kevin Warsh signaled an October pause (Nasdaq, 10/16; Yahoo Finance, 10/16). The Nasdaq fell about 5% for the week, its worst since April 2025 (CNBC, 10/16). In biotech, every tier fell, and the smaller the company, the larger the decline. In medtech, micro-caps fell 10.6% while mid/large-caps edged higher.
Top Gainer & Laggard
Gainer
Settled all six pending lawsuits with United Therapeutics for a net $380.7M through 2027, which the company said it will fund from Yutrepia sales and cash on hand, and disclosed preliminary Q3 Yutrepia net sales of $222.7M (Liquidia 8-K, 10/13). The week's gain came against a much larger loss. The stock fell 57% on September 30, from $70.69 to $30.26, when a federal court ruled that Yutrepia infringed a United Therapeutics patent covering PH-ILD, and even after this week it closed about 51% below its pre-ruling level. The settlement keeps Yutrepia on the market for pulmonary arterial hypertension but gives up PH-ILD, one of its two approved indications: Liquidia will not appeal, has asked the FDA to remove PH-ILD from the label, and has stopped promoting it there, and United Therapeutics says new PH-ILD patients should not be started on Yutrepia, effective immediately (United Therapeutics, 10/14).
Laggard
Bristol Myers Squibb reported that its Phase 3 ALOFT-IPF trial of admilparant in idiopathic pulmonary fibrosis met its primary endpoint. Admilparant targets the same LPA1 pathway as Contineum's lead candidate, PIPE-791, now in a Phase 2 IPF trial. Contineum shares were indicated up 27% before Monday's open (Yahoo Finance, 10/12), then closed the day down about 30% as investors weighed that the higher 120mg dose of admilparant missed statistical significance (Benzinga, 10/12).
This Week's Financing Activity
| Company | Stage | Amount | Type |
|---|---|---|---|
| Verastem Oncology (VSTM) | Public | $250M | Follow-on Offering |
| City Therapeutics (CTY) | Public | $200M | IPO (upsized) |
| Iambic Therapeutics (IAM) | Public | $150M | IPO |
| Soufflé Therapeutics | Private | $135M | Series B |
| Estuary Biotherapeutics | Private | $103M | Launch Financing |
| Altay Therapeutics | Private | $37M | Series A |
| Acta Pharmaceuticals | Private | $24M | Seed |
| Undecimal Bio | Private | $18M | Seed |
The Week's Narrative
Risk-Off Continues, and the Pattern Sharpens
Last week we described funds lowering healthcare weightings and de-levering for risk, with the median clinical-stage company down 19% since June 30 against 5% for the XBI. This week the risk-off broadened, with rates, inflation, and a tech selloff all in play, and the index fell too: the XBI dropped 6.1%. The pattern underneath held and sharpened. Smaller companies fell hardest, with the median micro-cap biotech down 12.1% and the median small-cap down 10.0%, versus 5.4% for mid/large-caps. Medtech showed the same gradient, with micro-caps down 10.6% while mid/large-caps rose 0.8%.
Stage mattered as much as size. Biotechs with a commercial product fell a median 4.8%, versus 11.5% for companies whose lead program is still in development, and commercial-stage companies fell less within every size tier: 8.9% versus 13.0% among micro-caps, 5.9% versus 11.3% among small-caps, and 1.5% versus 8.1% among mid/large-caps. That points to rotation toward commercial names rather than indiscriminate selling.
In our conversations with investors this week, a recurring theme was waiting until next year before making the next round of major new investments.
Selective, Not Shut
The same caution that drove the selling shaped the financing that did get done. Three public deals raised about $600M during the Nasdaq's worst week since April 2025. Verastem Oncology priced a $250M offering on October 14, the same day it reported new data for its KRAS G12D inhibitor VS-7375, including a 50% confirmed response rate in 4 of 8 patients with second-line pancreatic cancer, and said it had reached alignment with the FDA on a first-line Phase 3 trial (CancerNetwork, 10/14). Iambic Therapeutics priced a $150M IPO at $16, the midpoint of its range, with certain investors indicating interest in 40% of the deal (Renaissance Capital, 10/8; Iambic, 10/14). City Therapeutics upsized its IPO from 9.7 million to 11.1 million shares and priced at $18, also the midpoint, raising about $200M on October 15 and beginning to trade on October 16 (Renaissance Capital, 10/16).
Each deal came with something specific: the follow-on was paired with new clinical data, and both IPOs priced at the midpoint rather than above their ranges, one of them with investor indications for 40% of the deal before pricing.
At Every Size, Commercial-Stage Companies Fell Less
Median weekly change for biotech companies by market cap tier, split by the stage of each company's lead program.
The gap between development-stage and commercial-stage companies was roughly 4 to 7 percentage points in every size tier, and about 7 points overall. Size and stage each mattered; companies that were both small and still in development fell the most.