Is It Time to Buy Biotech Stocks?

In this podcast, Motley Fool analysts Tim Beyers and Karl Thiel discuss:

• The rise in biotech funding from venture capitalists and wealthy individuals.
• The key attributes of an investable biotech.
• Which is the better biotech: Viking Therapeutics or Eli Lilly?

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A full transcript is below.

This podcast was recorded on July 21, 2025.

Tim Beyers: Is it time to buy biotech? You're listening to Motley Fool Money.

Fools, welcome to Motley Fool Money for Monday, July 21, 2025. I'm your host, Tim Beyers with me, Carl Teal, from the Rule Breakers team. Welcome to your Rule Breakers podcast, Carl, how you feeling this morning? Ready to talk biotech? Caffeinated, I hope.

Karl Thiel: Absolutely. I've plenty caffeinated.

Tim Beyers: Plenty caffeinated. I can't ever be too caffeinated. We want to bring this up because we have recent data from LACA that the total VC funding in biotech increased year over year for the first time since 2021. This is last year, reaching 21.4 billion versus 16.1 billion in 2023. That was a significant increase. Now, that surpassed pre pandemic levels. Furthermore, 2024 recorded the strongest quarter since early 2022. This has seemed to continue, Carl. Like, 2024, we ended really strong, but then just recently, the Narcan maker, which is an anti narcotic. I don't really know how to describe it here, but a company named Antheia raised 56 million in Series C capital. We also have some data that family offices are committing in bigger amounts to biotech and early stage biotech. Here's my question for you, Carl, before we get into the opportunity in biotech, how are you feeling about this? The private market seems to like biotech more than it has in a while. Is that something we can look forward to as public market biotech investors?

Karl Thiel: I guess my overall feeling, and this may come through a few different ways to a lot of things we talk about today. It's guarded optimism with lots of caveats, basically. I'm glad to see venture capital. I have to say, to me, when you look at it, it's more like it's stabilizing than that I really see a lot of things going up. If you look ahead of the 2024 data, the second quarter of this year looks like it's actually going to come in at a five quarter low. It dropped back down again. I'm not terribly worried about that. But I think what you're seeing is this stabilization and this waiting. But you brought up family offices, and that's a really interesting. For people who don't know, these are very wealthy private investors. I would say that in the past, family offices, they've often been passion projects when they invest in this sector.

Maybe somebody in the family had a particular disease and they want to put money into that disease, something like that. These days, the investments are getting bigger, and they are often different family offices are working together or sometimes they're working with a general partner. I feel that they're stepping into the void because they have even longer timelines than a traditional VC. Their timelines are as long as they want them to be. They're stepping into the void to take care of some of the really early seed stuff. Antheia is a really interesting company. Eric Schmidt from Google is involved in that one. But that's a fascinating company, just the perfect thing for a family office to be involved in.

Tim Beyers: This is super interesting. Let's pivot to the opportunity, because, again, we said that biotech has been really hit or miss. It's a big part of the the Motley Fool Rule Breakers, Scorecard has been just short of forever, really since the beginning of the service over 20 years ago. I want to talk about this because it has been hit or miss. We've twice recommended the XBI, which is a biotech themed ETF, and both positions have lost to the market by 35% and 60% as our recording. Why is now a more interesting time? In addition to all of this activity in the private market, and we're starting to see more IPOs, why is now an interesting time for you as a biotech investor, what should get the public market investors more excited about this?

Karl Thiel: Well, I think our XBI positions are reflective of what's going on in the broader market, which is that in absolute terms, those positions aren't down sharply. I think last [inaudible] .

Tim Beyers: They're losing to the market.

Karl Thiel: They're just losing to the market. That's exactly what you're seeing, which is as with the VC funding, biotech moving sideways right now, and for a while, the markets were moving sharply higher. There's been some more volatility around that. But the question, why is this a good time to be investing in biotech? Let me first briefly say why everything continues to be so negative. The reasons to be negative before were high interest rates, lack of M&A this overdraft of companies that came public when they shouldn't have early on that the market was still digesting and just the slop that needed to get out of the system. Some of those are getting a little bit better. We actually have seen some really interesting M&A this year, a lot of multibillion dollar deals, and that's super bullish. But at the same time some of those are still in place, and then we've got a new collection of worries around what's going on at the FDA and how are they going to regulate things?

What's going on with pricing and the political environment? All those things are still hanging over the sector. To be a real bull right now, you do have to be a little bit contrarian and look at a wall of worry that you think this market can climb. There's still plenty of reasons to be cautious that you can point out. To the XBI in particular, I guess the reason I've been a little less personally focused on the XBI, it is a proxy for the whole sector, that's the commonly used tool to say, how is biotech doing? Let's look at the XBI. But it's a very broad index. It's got this equal weighting formula so that it's getting rebalanced all the time and doesn't favor the large cap companies. I think it's a better time, honestly, for taking very careful picks within the sector rather than just broad market exposure. The broad market exposure pays off when things finally turn around. I do think that happens eventually. But I think you can maybe do better picking carefully individual companies that can not only get a general industry lift but also have some of their own specific things going on that are underappreciated.

Tim Beyers: There's two things I've heard you say to me about when you're talking about biotechs that you want to maybe focus in on that might be an interesting play like ones that we want to add to the Rule Breakers Scorecard, for example, two things that I have heard from you. One is, if the science is really good and the capital that the company has is good enough, that's a company that's giving itself runway to maybe get to scale and develop a blockbuster drug. That may be a worthwhile risk. That's one I've heard you talk about. The other is when there's enough there, there that the vulture that could come along and acquire this company at a premium might be salivating a little bit more. Those two things create the conditions for really good potential biotech returns. Do you think we're seeing more of those types of situations right now?

Karl Thiel: I think you're seeing a situation in which in terms of buying out companies, in which big pharma has been a little bit sitting on the sidelines, but they can't really afford to keep doing that. There's companies like Merck has been very open about that they are out shopping, the wallet is open. They can't put off for ever filling in pipelines. There are a lot of big patent cliff situations going on at most of the big pharma companies.

Tim Beyers: A patent cliff, meaning, like a drug that is under patent but going to be forced to become generic.

Karl Thiel: Exactly. You see companies that have 20, 30, 40, 60% of their revenue is going to essentially open up to generic competition and largely disappear over the next few years. It's a big deal. That's one thing. But I guess the other thing I'd say into what you just said is do they have the science, and do they have the cash? Yes, I would add to that right now, I think you have to be even more picky, which is, do they have the science? Do they have the cash? Are they pretty close to market right now?

Tim Beyers: Through to approval, almost.

Karl Thiel: You've got to see a through line. I just think there's enough opportunities like that that you don't need to play the hero with earlier stage science. Obviously there's going to be some great payoffs there, but risk adjusted. I feel like there are a lot of very late stage companies that are near market, on the market, or even on the market and already seeing sharp sales ramps that you can more focus there.

Tim Beyers: Fair enough. We're going to talk about two of them. Up next. Which is the better biotech? Viking or Eli Lilly? We're going to battle it out next.

Karl, let's talk about two companies that you mentioned not playing the hero companies that have drugs that are either on the market or very close to on the market. We've got a mixture of both. On the market, Eli Lilly has done exceptionally well with a weight loss drugs, Mounjaro and Zepbound. They are the strong rivals to one that Fools you certainly have heard of called Ozempic. But Viking has a late stage drug, actually, more than one late stage drug that is interesting and competing in this space. Carl, break it down for us here. When you look at these two, give me one advantage and one disadvantage of each. Or if you want to, just tell me which of these two do you favor?

Karl Thiel: Look, if you're oriented toward safety and stability, Lily is plainly the better company to go with here. They're not only winning in the marketplace. Mounjaro and Zepbound have surpassed Ozempic. They also have a tremendous follow on pipeline. When you look at who are developing the best next generation GLP and related drugs, often they're more than one mechanism. It's GLP plus other mechanism. Lily is not necessarily at the top in every category, but they're always near the top. They've really done a great job in this area. Not to mention the fact that they are a diverse pharmaceutical with lots of other things going on in other areas. That said right now, the market is essentially a duopoly between Lily and Novo Nordisk and largely about two products, even though there's a few brand name floating around, it's really just two compounds, tirzepatide and semaglutide. That is not always going to be this way. The discontinuation rates of these drugs over, like, a one and two year period is horrific. People just, no, they're not staying on them, which tells you something about the long term wear of the side effects of these drugs. There's a lot of room for improvement, and there's a lot of companies buying to do it.

I think Viking is a super interesting pick in this space. I will say when I talk about companies that are like, on the verge of going to market, this is not one of them. They've got a lot of work ahead of them. They are late stage. They began their Phase 3 in their injectable formulation of their drug. Their oral drug is a little bit farther behind. We'll see data in the next couple of years. But it still remains to me a relatively speculative bet. That said, it's one where if you're looking for maximum returns, Viking is tiny compared to Lily could see absolutely massive returns. This would be one that to me, you would slot in as a speculative bet in a larger portfolio.

Tim Beyers: We sometimes like that in Rule Breakers. Actually, before I put you on the spot here, do you think that Viking is a pretty good M&A candidate? Does it fit into that theme of biotechs that are really producing good science, have the cash? Very attractive, somebody to come in and swoop this one up?

Karl Thiel: It absolutely is. There's been a tremendous amount of M&A in the sector. Specifically around the obesity space. Companies have been snapped up. When you look at large pharma that have great needs in the area like Pfizer, for instance, needs products, their own obesity programs flamed out you would think they would certainly be in the market to be buying, and they're not the only ones. That said, Viking has not shown much interest in being acquired so far. I'm sure these conversations are taking place, so I assume that Viking is driving a very hard bargain. They do have really good data to date. It's early data, so I don't want to overestimate it, but it's really good. I think they're very confident in the product, and they are a little bit farther ahead than most people. I think they're going to ask for a big price tag.

Tim Beyers: Who are you going with then? Are you going with Viking, or are you going with Lily? Outperforming over the next five years, who do you got?

Karl Thiel: Outperforming, I will go with Viking just because Lily is nothing, it's quintuple.

Tim Beyers: The thing is it's a monster.

Karl Thiel: Exactly. But it is certainly way riskier.

Tim Beyers: I'm going with Viking, as well. This is a classic Rule Breaker, if it hits, it will be a massive multibagger. Viking Therapeutics, the ticker is VKTX. Up next, a little trivia. Get your notepad ready and let us know in your comments, what company is generally considered history's first biotech? We're coming back with that next.

Carl, as always, I like to end these with a little bit of trivia, a little bit of history, try to help members understand a little bit more about the market we're talking about. In this case, we've been talking about the biotech market. I'm super curious of your answer here, and I've got a little bit of detail that we'll talk about after I get your answer. But fools, go ahead and give your answer in the comments. What company is generally considered history's first biotech, Carl, what is your answer on this? I am really interested to hear what you say.

Karl Thiel: Well, I'm interested to hear what you're going to says. I think there's only two possible answers.

Tim Beyers: What are they.

Karl Thiel: I'm pretty clear on which it is. You could argue that it's Genentech, but I think it's pretty clearly CDIS Corp.

Tim Beyers: Very interesting. We need to hear more about CDIS Corp because when I put this to Gemini, Gemini said, and I'm quoting here, "While biotechnology broadly defined has roots in ancient practices like brewing and fermentation, the birth of the modern biotech industry focused on genetic engineering is generally associated with the founding of Genentech. It founded in 1976 by Herbert Boyer and venture capitalist Robert Swanson." Tell me more about CDIS.

Karl Thiel: Genentech, the argument for that is that they were specifically founded to take advantage of recombinant DNA techniques to make proteins that you couldn't manufacture otherwise. CDIS Corp was founded five years before that in 1971.

Tim Beyers: Yep.

Karl Thiel: It was basically a microbiology company. Initially, what they were doing was more industrial making enzymes and stuff. But they became a biotech giant. One of their products is still on the market today, Proluken. They are the ones who developed PCR, specifically Kary Mullis at CDIS Corp who I got to interview once, Nobel Laureate developed the polymerase chain reaction, which is the DNA amplification technique that is still core today for most gene sequencing. If nothing else, I think that cements them as the first company.

Tim Beyers: Interestingly enough, that Gemini did mention CDIS, but it mentioned CDIS as the runner up. I was super curious about this because I think I've told you this, even though I've learned more about biotech from you than anybody else. My grandfather was a research doctor at Squibb back in the 1950s and 1960s. I thought, I have thought not that Squibb would be the first biotech, but it would be like, Well, surely this goes back to, like, the 1930s or 1940s, but nope, it's the 1970s. This is still a relatively new industry. If you want to count CDIS, we're 54 years into the industry. That makes a fairly young industry.

Karl Thiel: Absolutely. Some of the pioneers are still around. There are companies. I was just looking Sarepta, SRPT is in the news a lot right now, not for good reasons, but for interesting reasons. But that's just an example of a company that its original DNA goes back to 1980. There's a lot, Biogen goes back to 1970. A lot of these first generation companies are still what's cooking today.

Tim Beyers: Still cooking and still going. Karl, thanks for being here. Thanks for talking biotech. Appreciate that.

Fools, as always, people 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 or sponsored content provided for informational purposes only. To see our full advertising disclosure, please check our show notes. For our engineer Dan Boyd, for our producer, and Anand Chokkavelu, for Karl Thiel, I'm Tim Beyers. Fools, thank you for tuning in. See you again tomorrow. Fool on.