Tesla’s Robotaxi Milestone & Biotech’s Big Opportunity
Taking a Look at Tesla (TSLA) & Biotech (XBI).
This week we took a look at two major developments at the forefront of tech & markets: Tesla’s launch of a robotaxi service pilot in Austin, & the prolonged “biotech winter” that may finally be thawing. These stories could mark significant turning points for their respective sectors — one showcasing a breakthrough in autonomous mobility, & the other highlighting a contrarian investment opportunity in beaten-down biotech stocks. Here’s what we’ve been tracking (& what premium readers get the full breakdown on):
TSLA’s Robotaxi Launch in Austin: A Foundational Step Toward Autonomous Mobility
On June 22, Tesla officially rolled out its first robotaxi service pilot in Austin, Texas. A fleet of 10 fully autonomous Model Y vehicles is now offering rides within a limited geofenced area of the city, at a flat fare of $4.20 per trip. Notably, there are no drivers in the driver’s seat — marking a true driverless operation — though a safety operator rides in the front passenger seat for oversight during this early phase. Elon Musk hailed this as a “foundational moment” for Tesla’s vision, and the market seemed to agree: the successful pilot launch sent Tesla shares up nearly 10%, as investors embraced the company’s breakthrough in autonomous ride-hailing.
Tesla’s approach differs from rivals like Waymo. Rather than using LIDAR sensors, Tesla relies on its vision-only FSD (Full Self-Driving) AI technology powered by the vast data from its vehicle fleet — a strategy Musk argues will be more scalable and cost-effective. In theory, robotaxis could drive down transportation costs dramatically; Musk has suggested operational costs might reach as low as $0.20 per mile, undercutting traditional ride-sharing and taxi services. If realized at scale, this would enable very attractive profit margins for Tesla while offering cheap fares to consumers. It also positions Tesla to transform from a one-time car seller into a recurring mobility service provider, generating income per ride much like Uber or Lyft (but without drivers). Musk even mused that a successful robotaxi network could someday push Tesla’s valuation to $5T (from about $1T now) – reflecting the enormous potential he sees in this business model.
Why this matters: The Austin robotaxi pilot is an important proof-of-concept that solidifies Tesla as a frontrunner in autonomous driving. It’s a tangible step toward unlocking a new, high-margin revenue stream that could fundamentally reshape Tesla’s financial profile in the long run. However, it’s still early days. The service is limited in scope (small fleet, constrained routes, fair weather only, and a human overseer onboard), & no meaningful revenue is flowing from it yet. Tesla’s team – and its investors – will be watching closely for safety data and regulatory feedback before expanding. In short, this launch validates Tesla’s technology and vision, but the real financial impact will only come once the company can scale this robotaxi network and monetize it. We’re encouraged by the progress, yet we’re holding off on changing any valuation models until Tesla demonstrates that robotaxis can operate broadly and start bringing in cash. It’s a huge opportunity on the horizon, but turning that promise into reality (& profits) will be the next critical challenge to watch for in 2025 and beyond.
Biotech’s Depression Persists into 2025: Opportunity Amid the Gloom
Biotech stocks have been mired in a prolonged slump — a “biotech winter” — over the past few years, and 2025 so far hasn’t broken the trend. Investor sentiment remains near rock-bottom. In fact, roughly a quarter of companies in the Nasdaq Biotech Index now trade with market caps below the value of their cash holdings. In other words, the market is valuing their drug pipelines at zero (or even negative). It’s a clear sign of extreme pessimism: traders are assuming most experimental drugs will never pay off, and even genuinely promising clinical trial results have often been met with indifference. As one veteran biotech portfolio manager put it, “there’s not a lot of tolerance for these small biotechs that are going to be burning cash for years… [investors aren’t] willing to give anyone the benefit of the doubt.” Such despair in the sector is painful for current investors — but for contrarians, it can scream opportunity.
History suggests that when valuations hit these kinds of historic troughs, the biotech sector may be near a bottom. Despite the dour market mood, scientific progress hasn’t slowed: new breakthrough therapies are still emerging from labs and clinics. Indeed, we started seeing glimmers of optimism last year — in 2024, small-cap biotechs collectively added nearly $30B in market value on the days they announced positive trial results, indicating that good news can move stocks again. With dozens of biotech companies now trading at or below the cash on their balance sheets (essentially pricing their science at $0), any sentiment reversal or successful drug trial could trigger outsized gains. As Fidelity’s biotech team recently noted, “This could prove to be an excellent time to invest in biotech.” For investors with patience & strong stomachs, buying quality biotech names during this valley of despair could set the stage for significant upside if/when the sector rebounds.
Big Pharma is bargain-hunting: Large pharmaceutical companies have certainly noticed how cheap biotech has become — & they’re seizing the moment. After a quiet 2022–2023 (when rising interest rates & falling stock prices stifled deal-making), big pharma is back on the acquisition trail in 2024–2025, scooping up promising biotech assets at a discount. There are a few reasons why pharma giants are especially hungry for deals right now: (1) Many big players face looming patent cliffs later this decade (blockbuster drugs losing exclusivity), so they urgently need new drugs in their pipelines to fill future revenue gaps. (2) These companies are flush with cash from strong earnings in recent years, giving them war chests to spend. (3) The macro environment is becoming more favorable — inflation is cooling & interest rates are stabilizing, making deal financing cheaper, and the regulatory climate for mergers (under the current U.S. administration) is seen as relatively business-friendly on antitrust matters. As JPMorgan’s head of healthcare banking put it, “eventually the dam starts to break” on pent-up M&A demand, and it looks like that breaking point may be now.
Notable recent biotech acquisitions: The past year has seen a string of buyouts as pharma companies capitalize on depressed valuations. A few examples:
Johnson & Johnson acquired Intra-Cellular Therapies (January 2025) for $14.6 billion, targeting the company’s CNS drug franchise (including Caplyta for schizophrenia/bipolar disorder). J&J paid a hefty premium, underscoring it will spend big for the right asset in its portfolio.
Vertex Pharmaceuticals bought Alpine Immune Sciences (April 2024) for $4.9 billion. Alpine’s promising immunology drugs for lupus and other autoimmune diseases broaden Vertex’s focus beyond its cystic fibrosis stronghold.
Gilead Sciences acquired CymaBay Therapeutics (February 2024) for $4.3 billion to gain a Phase III drug for a chronic liver disease (PBC), extending Gilead’s reach into metabolic liver disorders.
Germany’s Merck KGaA (no relation to Merck & Co.) purchased SpringWorks Therapeutics (April 2025) for $3.9 billion. SpringWorks had just won FDA approval for a novel desmoid tumor treatment, giving Merck KGaA a foothold in a rare oncology niche.
Novartis snapped up Anthos Therapeutics (February 2025) for $3.1 billion. Anthos is developing next-gen blood thinners; notably, Novartis had originally co-funded this startup, and decided to buy it outright once the price was right.
Eli Lilly has been on a shopping spree: in 2023–24 it paid $1.9 billion for obesity-drug developer Versanis, and in 2025 it agreed to acquire Scorpion Therapeutics (precision oncology) for up to $2.5 billion and SiteOne Therapeutics (pain/migraine drugs) for $1 billion. Lilly also made a bid of up to $1.3 billion for Verve Therapeutics, which is working on gene-editing cures for heart disease. Fueled by booming sales of its diabetes and weight-loss drugs, Lilly is aggressively using its cash to buy growth.
GSK (GlaxoSmithKline) joined the fray by acquiring oncology biotech IDRx (January 2025) in a deal worth up to $1.2 billion, aiming to bolster its cancer drug pipeline.
Even smaller deals are ticking up: Checkpoint Therapeutics, a micro-cap with an approved immunotherapy (cosibelimab), was bought by Sun Pharma in May 2025 for roughly $355 million — a notable exit in the small-cap space.
This flurry of acquisitions — after a long lull — sends an important signal: big pharma believes many beaten-down biotechs are undervalued, & it’s willing to pay real premiums to acquire them. Every time a deal is announced at, say, a 50%–100% premium to the prior stock price, it reminds the market (& investors) that these companies do have real worth, and it often sparks speculation about who might be next on the auction block. One particularly interesting player to watch is Merck & Co. (MRK). The U.S. pharma giant has been very vocal that it needs to do deals (it faces a huge Keytruda immunotherapy patent expiration in 2028), yet it was oddly quiet in 2024. Merck’s CEO has indicated they’re ready to act whenever the right science and price align. In April 2025 Merck reportedly even made a ~$3 billion offer for MoonLake Immunotherapeutics (a biotech with an exciting anti-inflammatory drug) ahead of key trial data — a sign Merck won’t hesitate to strike early to snag a bargain. Don’t be surprised if one morning we hear Merck announce a major biotech takeover; the company has the cash and the motive, so it’s likely only a matter of time.
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