Adam May on investing in biotech $NKTR $ABVX

Episode Summary

Executive Summary: Andrew Walker interviews physician-investor Adam May about his biotech investing approach and two major winners, Nectar Therapeutics and Abivax. May explains how he sources high-conviction biotech ideas, why small details in trial design can create huge edge, and why both names still look mispriced despite large run-ups. The conversation centers on clinical interpretation, buyout potential, and the importance of maintenance data, safety, and unmet medical need.

Main Topics: Adam May’s background and path into biotech investing (Priority: 5/5): May describes training as a dermatologist, starting biotech investing in med school, building a track record with a friend, launching a small hedge fund with Tiger Management seed capital, and later returning to personal investing and consulting. How biotech alpha is found (Priority: 5/5): May argues that edge comes from understanding trial data better than the market, identifying what others are missing, and diligencing competitors and market context rather than relying on company presentations alone. Abivax thesis and trial interpretation (Priority: 5/5): May explains why he was bullish on Abivax’s ulcerative colitis drug despite an unknown mechanism of action, focusing on maintenance data, severe patient population, and a hidden enrollment-based inference from the trial design. Nectar Therapeutics thesis and reanalysis of data (Priority: 5/5): May details why he believed Lilly misanalyzed ResPeg’s eczema data, how the corrected analysis changed the investment case, and why maintenance data and dosing convenience strengthened the story. Market mispricing, sector beta, and post-data upside (Priority: 4/5): The discussion emphasizes that biotech stocks can remain mispriced even after positive readouts because sector sentiment, liquidity, and buyout expectations can overwhelm fundamentals. Buyout dynamics and commercialization strategy (Priority: 4/5): Both companies are discussed as likely acquisition candidates, with May arguing that big pharma would value their differentiated mechanisms and that management’s hiring decisions can signal strategic intent. Alopecia areata as the next catalyst for Nectar (Priority: 4/5): May highlights upcoming alopecia areata maintenance data as a potentially major catalyst, arguing the market underestimates the value of a safer first-line alternative to JAK inhibitors.

Key Arguments: Biotech alpha comes from correctly predicting trial outcomes and understanding why the market is wrong, not just from reading company decks. Unknown mechanism of action is not fatal if the clinical data are strong; what matters is whether the drug works in patients. Small trial-design quirks, like one missed visit or endpoint timing, can materially distort efficacy readouts in small-cap biotech. Maintenance data can be more important than induction data because they reveal durability and commercial viability. A safer but less efficacious drug can still win a large market if the current standard of care is dangerous or poorly tolerated. Sector-wide biotech weakness can leave even strong data underappreciated, creating post-readout upside. Abivax’s ulcerative colitis drug looks especially attractive because it is differentiated, late-stage, and potentially attractive to multiple pharma buyers. Nectar’s ResPeg may have a remittive effect, meaning it could create durable immune changes rather than only temporary suppression. Alopecia areata is a large unmet-need market where a safe first-line option could be highly valuable even if efficacy is below JAK inhibitors. Commercial strategy matters: a company may preserve buyout optionality by delaying commercial hires, but that can also be a bargaining tactic.

Data Points: Biotech portfolio concentration: 5-10 names - May says he runs a very concentrated portfolio at any given time. Track record during 2020-2021: 1400%-1500% return - May and a friend documented their biotech theses and performance during the low-rate biotech boom. Tiger-backed fund AUM: ~$12 million - Rare Life Capital reached this size before closing. Fund launch timing: Q2 2021 - The fund launched near the biotech peak before the sector drawdown. XBI drawdown: ~55% peak-to-trough - May cites the biotech index decline after the fund launch. Abivax stock move after readout: ~500% initial move; later ~2x to 3x from post-readout levels - May describes the market reaction to Abivax’s positive data and subsequent rerating. Nectar stock move after readout: ~200% initial move; later ~3x from post-readout levels - May notes the stock rose from about $25 to about $75. Nectar cash valuation at one point: 0.36x cash on hand - He says the stock traded below cash before the positive readout. Nectar phase 2/phase 1 corrected efficacy: Low 20s delta; potentially ~43% with visit adjustment - May explains how Lilly’s misanalysis and a missed visit distorted the apparent response. Nectar maintenance dosing: Once every 12 weeks vs once every 4 weeks - He says the 12-week regimen performed similarly to the 4-week regimen, a major commercial advantage. Atopic dermatitis market size: ~$40 billion - May frames eczema as a massive immunology market. Dupixent response rate: ~50% - He says only about half of patients respond, leaving a large unmet need. Nemluvio efficacy vs Dupixent: ~13% delta vs >30% - Used as a comparator to show that lower efficacy can still support a large market if safety is better. Alopecia areata dropout rate: 40% discontinued before 36 weeks - May argues this obscured Nectar’s slow-onset efficacy signal. Alopecia areata market potential: $2 billion peak sales - May believes ResPeg could be a major first-line option if phase 3 succeeds. Abivax maintenance enrollment: 600 patients; ~80% of trial complete - May cites a corporate deck slide as evidence of strong pooled response and durability. Abivax buyout precedent: Prometheus/RxDx bought by Merck for almost $11 billion - He uses this as a comparable for ulcerative colitis M&A. Potential Abivax buyout range: $15-$20 billion - May suggests the company could command a very large acquisition premium.

Pivotal Quotes: "you have to have a reason to explain why other people don't think that" — Adam May: Explaining how to find biotech alpha and why a correct thesis must identify market misconceptions. "what matters is that it works" — Adam May: On the importance of clinical efficacy over fully understanding a drug’s mechanism of action. "I think it's the most obvious buyout candidate of any stock I've seen" — Adam May: Describing Abivax’s strategic value after strong ulcerative colitis data.

Implications: The episode suggests biotech investing rewards deep trial-level analysis, not just headline reading. For investors, the biggest opportunities may come from durable efficacy, safety, and buyout optionality in overlooked names. For the industry, unmet need and trial nuance can create major reratings.