# Episode 126 January 10, 2025 Biotech Hangout · 2025-02-23 · 59 min · https://www.youtube.com/watch?v=ovtQ_Ouikug ## Transcript Chris Garabedian You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry with a group of biotech insiders. I'm Chris Garabedian, and my co-hosts today are Brad Loncar, Yaron Werber, and Sam Fazeli. For more information about our hosts and guest speakers or to listen to the most recent episode, please go to biotech hangouts.com. So, first, this is probably the busiest Friday news day of the year because a lot of people wait to make sure they've disclosed everything before the week starts. We're not going to be able to cover everything in detail, but I'll highlight a few things that came out. There were a bunch of mega-private deals announced. In fact, 4 of them amounted to over $800 million. Three of those 4 involved licensing China assets, which we're going to talk about more as a trend a little later in this session. One of them was from the former CEO of MyoKardia, Tassos Gianakakos. He started another company called Cardigan—a bit of a play on MyoKardia—doing it again. Perceptive, not the venture fund I manage but another one managed by Doug Gordon and Konstantin Pukalov, along with Arch and Sequoia Heritage, launched the company with $300 million. There was also an announcement that Lilly and Andreessen Horowitz collaborated on a new fund. This isn't the first time that pharma has come in to support a large amount of investment in an independent fund, but it's definitely a sign of the way pharma is looking at getting better access to the venture world. I have to say, Endpoints has this thing called Peer Review, which talks about appointments, executive changes, and additions, and it was the longest list of executive movement that I've ever seen. I encourage people to check that out. We also heard about the departure of Patricia Cavazzoni, who was head of CDER, before the new administration takes over. This is a move that came following Robert Califf's prediction of departures and his salvo about what we might expect with the new FDA. Bruce Booth also highlighted something I wanted to call out, and he and I agree on this: it's not about a lack of science or a lack of money. There's more dry powder to invest in private investments than we've ever had. They're not spreading it, as he calls it, like peanut butter across many investments. Instead, they're giving hundreds of millions of dollars to single, proven management teams, as we saw in these morning announcements. With that, Brad, there have been a lot of reports that come out around this time before JPMorgan. John Norris at HSBC, formerly SVB, still puts out his report, and Tim Opler had a great kickoff with the Stifel report that he's been doing for many years. Maybe start us off with what you see going into JPMorgan in 2025. What are some of the things our audience should know about? ### Biotech Underperforms the Market Brad Loncar Yeah, all those reports were really great. I would highly recommend trying to get your hands on all of them. It's too bad that Tim couldn't be with us today; his was excellent as well. The theme was basically biotech's underperformance. Over the last 5 years, biotech is down 5%, tech is up almost 200%, and the S&P 500 is up 80%. In just the last 2 years, the S&P 500 has been up basically 25% each year. The reality of our industry is that if you just invested broadly in biotech over the last 2 or 5 years, you left a lot of money on the table, as opposed to buying SPY, sleeping at night, and never thinking about it. The question is, why is that happening, and will it ever change? I would point out that I don't think the 5-year number is relevant because the reality is that we were in the COVID bubble. I always use that word “bubble.” I don't think enough people do. I sometimes hear people say, “When are IPOs ever going to be the same as they were 3 or 4 years ago?” Or, “When is the sector going to be as strong?” I think it's important to be realistic and look back on that time as an aberration that, arguably, hopefully, will have been a once-in-a-generation thing. I would not use that as a baseline for anything, but our underperformance has been significant. One thing Bruce pointed out in a couple of really good tweets is that interest rates have been coming down—the Federal Reserve has been lowering them—and people have often hypothesized that rates were one of the big things that held our industry back because our timelines are so long. But as rates have come down, you've seen tech's outperformance, and we really haven't benefited from that at all. Obviously, going into JPMorgan, everybody is going to be talking ad nauseam about the changes in Washington, whether RFK is going to get confirmed, what that means, and all of those changes. On the venture side, like John Norris's report, I think—you know, Chris, you're really the expert in this—but some of the key takeaways were that a lot of VC firms raised mega-rounds last year despite the public markets being so difficult. ### China Drives New Deals In terms of deploying the capital, one thing that John pointed out was that there were a lot of really large Series A rounds, so that seemed to have been a trend. The other issue, which was covered by both reports and which you mentioned earlier, Chris—we talk about this every week—is how China is impacting our industry. Tim Opler had an incredible set of slides on this, and the statistic that was really the “wow” statistic was that last year, one-third of the new molecules big pharma in-licensed came from China, compared with 0% 5 years ago. We've talked about this a lot. China biotech literally wasn't a thing a handful of years ago, and now it's in the news every single day. From a venture standpoint, Chris mentioned a lot of those deals, like the Verdiva Bio obesity news from the UK yesterday. That's a classic example of what's going on. They raised a few hundred million dollars, in-licensed obesity assets like oral GLP-1s and an amylin analog, and are creating a company out of it. I would also point out that we've seen layoffs from U.S. companies over the last week, and I don't think those 2 things are unrelated. I think smaller discovery companies and smaller biotech companies are in big trouble if this trend continues, and it will have a real impact on jobs and money. Over the last year, the number of upfront payments that went to Chinese companies was $6 billion. Going back 5 years, when that number was 0, that $6 billion—or maybe even more—would have gone to XBI companies, and therefore the XBI's performance would have been better than it was. I think this is going to be an issue that's talked about a lot more. I've noticed that when people, including myself, tweet about it lately, the engagement on those tweets is off the charts. It's clear that this is an issue a lot of people are starting to feel and think about. My personal opinion is that something is going to happen in Washington. In fact, there was a letter today from members of Congress saying that the U.S. biotech sector shouldn't conduct clinical trials at military hospitals in China. I think you're going to see a lot more headlines like that over time. My opinion is that we're eventually going to be where the semiconductor sector is, and it's going to be really hard to partner with Chinese companies like we're seeing in the news every day. But we'll have to see what happens. Chris Garabedian Yeah, it seems there's a confluence of factors driving this. One goes back to circa 2017, when China's investment in developing products was really starting and began in earnest over the next 3 to 4 years, before the market dynamics changed in China and turned into, “Hey, we have all these products and multiple targets that you can go after.” The other factor is the confluence of the market downturn in the U.S., where it's all about whether we have good management teams to license these good assets because the quality work was done, and that continues. I think there's a little bit of scarcity value where people want to move quickly on these assets rather than try to do de novo drug discovery or develop products that are in the U.S. but maybe don't have the same advantages. Sam, if you want to expand on that, I know we were going to talk about it a little later in this session, but do you have any perspectives on the China deals? You follow the XBI closely—any other comments on the market dynamics that you're seeing going into JPMorgan? Sam Fazeli Yeah, Chris, thank you very much, and I apologize for my voice. It's gotten quite croaky. Brad and I are going to be on different sides of this—not locking horns, but taking different positions. I'm a citizen of the world, not the United States. Of course, I'm a citizen of the UK, but I believe in science. At the end of the day, if the science is good somewhere and you can go and access the assets, why not? If politicians get in the way of people doing deals in China, then so be it. That is how it's going to be. China started investing heavily in its basic science. They lead massively, particularly in areas outside of our area, which is materials science and engineering. You'll find that they have the biggest share of the top 1% of published papers. If you look back at Nature magazine over the past few months, they've had quite a good exposé, or series of articles, analyzing the trends in publication and funding. If we want to get this sorted, we need to look home and get rid of this anti-science attitude. So, let’s put that away. We did see, just around—we haven’t had this call for about 2 or 3 weeks now—a couple of deals, both on DLL3, so ADC deals for DLL3. One of them was Roche with Innovent, and the other was Hengrui. Both were about the same sort of size: $80 million up front and then some milestones. I counted about 10 DLL3 assets on the go now. Obviously, Amgen was one of the first. AbbVie tried years ago, and it didn’t work out with their acquisition of Stemcentrx. But you’ve got 4 ADCs, 4 T-cell engagers, and a couple of others: 1 radionuclide therapy from Novartis and another one, which is a CAR-T from Legend. So that’s a busy space, and yet people are going out there and licensing these assets. What happens in the DLL3 world in the future, I don’t know, but it’s certainly happening, and some of the latest ones came from China. I think quite a few of the others may have, too. Now, back onto XBI. Look, rates today—or at least the prospects of no more, or fewer, rate cuts—are impacting the entire market. So it’s not just biotech that’s selling off today. We’ve also got the tech sector selling off with the 256,000-jobs report that just came out today, and that exceeded the forecast. A whole bunch of people are saying, “Look, this really does support the case for a halt in rate cuts.” There are some folks who are even talking about 2026 being a year where rates might go up, including our own interest-rate analysts. We can’t ignore that. It’s not about rates or not rates. It’s about the cost of money and where you can get an easier and cheaper return. When rates are at 5% or 6%, that’s a very easy way to just park your money and not put it into risky assets. So that’s what we’re going to have to deal with going forward as well. Yaron Werber Yeah. And the XBI is going to deal with that. Chris Garabedian Yeah. And I wonder, Brad, if you can comment on this. Interest rates have not come down the way everybody was hoping they would. Is the issue that, as investors start to move money into higher-risk sectors, they’re viewing tech as less risky or as having a better risk-reward profile than biotech? Maybe it’s the large language models, AI, machine learning, and quantum computing, where they feel that those technologies are going to be translated more easily. Or maybe it’s a better narrative for investors to understand, versus biotech innovation and investing in biotech being perceived as higher risk than tech. Is that part of this dynamic, where we’re seeing money flow into tech from a downtick in interest rates versus biotech? Any thoughts on whether there’s more discernment between these sectors? ### Structural Headwinds Hit Biotech Brad Loncar I said this in Tim’s report, and I believe it strongly. We’re so focused on our own jobs that I think sometimes we’re missing the important big picture. The big picture, in my opinion, is that our industry is going through true structural change. Every politician and the entire general public would prefer that the size of our industry be smaller than it is today and that the prices our industry charges be lower than they are today. That’s a real headwind, and you’re starting to see actual movement on that for the first time ever. So, of course, we had the Inflation Reduction Act. It’s unprecedented—the first time ever that price setting, at least from the government standpoint, has entered the picture. If you look at the rock-and-roll years of the XBI, it was 2010 to 2015. I think, if we’re being honest with ourselves, those were the peak years of drug companies. On January 1, you always saw that list of drug prices that had been increased. Back then, some companies would raise prices by 15% or 20% on big drugs every year. It was just out of control. Also, in terms of the IPO market, back then there were a lot of story stocks, and it was a lot easier to IPO. I’m a very strong believer in the future of our industry, but in terms of our society trying to keep a lid on us, that’s a really big headwind. Then we have all this uncertainty with what’s going on in Washington. Certain things about our industry could be totally rewritten. As we’re talking about this China issue, again, it’s a totally new factor that didn’t exist 5 years ago: We have this world competitor that’s apparently doing things faster and cheaper than we’re able to do on the discovery side. I think it’s underappreciated, the structural changes we’re going through. Speaking of the tech sector, I do think that some people want to see the same thing happen to the tech sector. You hear a lot about breaking up big tech and everything. If those types of things ever start to happen there, if that gets real movement, then I do think sentiment can swing back to biotech, because they would be going through the same thing that we’re going through now. Until then, I think we’re living in a different world today than we were 10 years ago, so I’m not surprised to see the challenging environment. Chris Garabedian Well, I’ll add one other headwind on this: the lack of M&A. I think even going into J.P. Morgan, where we expect to see some deals of significance, that is usually a bolster for people getting a little bit more sanguine and excited about valuations in biotech. That’s been another one, despite the FTC overhang kind of going away a little bit with a change in administration. Sam, please add to it. Sam Fazeli Just a little plug here. We have a Bloomberg Intelligence podcast from our tech team called Tech Disruptors. The one at the beginning of the year is about what’s going to happen in 2025, and the conversation is with John Chambers, the ex-Cisco CEO. He’s the guy who took the company, of course, with a big team of people behind him, from a $70 million business to a $45 billion business. So we should listen when he speaks. It’s a review of what he thinks is going to happen in the next year and then 10 years with regard to AI, tech, machine learning, et cetera, deepfakes, et cetera. I think it’s very easy to dismiss tech in terms of thinking that there are possibilities of breakups or pressures on the tech sector in general because of the same reasons—more expensive money—but we’re only at the very beginnings of the impact of AI on anything, even including drug discovery. So I think we should be cognizant of that fact. We should think about the possibility that there’s lots of money to be made in that sector, and potentially quicker, and not turn a blind eye but be cognizant of it, so that we don’t forget that our sector competes for money with others. Yaron Werber Yeah, I think being too insular in how we look at our industry—we need to understand the broader context of tech, the broader geopolitical dynamics, and the broader macroeconomics. I agree with Brad that we’re going through some structural changes. I also think the patent cliff has been talked about in pharma, that they’re going to need to fill that, so that’s an issue to watch. Of course, the themes of cardiometabolic and CNS and some of these new therapeutic areas are getting a lot of attention, and there is a lot of dry powder, as Bruce Booth pointed out. We’ve got more money to invest in private biotech. So, exciting stuff, but I think I’ll be remiss if I don’t just plug in a couple of things here. Chris Garabedian Yeah, please. Yaron Werber One of the things we do every year is look at how the sector trades through J.P. Morgan and then through the Cowen conference—the first 2 big conferences of the year—as a predictor of what’s going to happen for the rest of the year. Usually, believe it or not, history does repeat itself. It feels like this year has already been a really tough year. Both the XBI and the IBB, thankfully, are only down 1%, so they’re actually pretty much in line with the S&P, the SPY, and the QQQ. It’s very important to see what’s going to happen next week. If we still finish down next week, history suggests we’re going to be down for the year. If we manage to get back up next week, hopefully we’ll be in a better place. Look, I do want to say one other thing to Brad. I hear you, but we’ve all done this for a long period of time, and we’ve all been saying that the fundamentals of this industry are going to go down. In bear years, it feels that way. To me, the fact that China is actually innovative is not the end of the world, as long as we can license those drugs, launch NewCos, bring in that IP, and then own the global commercial market. U.S. companies, or potentially European companies, will be the commercial enterprises, because this is where you generate the vast majority of returns. The way BIOSECURE will end up going down—and it’s not over—those companies and the Chinese companies won’t win out. They’re not going to come here. I can live with the fact that we can license their IP. Chris Garabedian I hear you about pricing. Typically, when access is questioned, the sector is under stress, and that's exactly what we're going through now. But I think the IRA has handled that. I agree with what we've been through: These were the bull, frothy years, but that's not normal. I do think the fundamentals of the sector will come back. We just need to deal with the next year or 2 on interest rates. Yeah, Yaron, on that point, we're heading into JPM. This is usually a little bit of a signal of how the market responds to the news and all the activities, and, like you said, how the market is going to react. So let's talk a little bit about what's ahead this next week at JPM and what we can expect. What can our audience expect to happen over the next week? Yaron, you can kick off, and Brad and Sam can weigh in. ### JPMorgan Sets the Year Ahead Yaron Werber Yes. I'll do a quick, high-level survey. Here's what, sadly, I don't think we're expecting at this point: a lot of deals or mega-deals. IPOs have all been getting pushed out. What we're also seeing is that we're back at those markets that, sadly, many of us have swum through many times, where if you have data, the stock goes down, and it doesn't matter if the data are positive or not these days. It's a question of how much the stock is going to sell off or whether you have a catalyst. I think it's going to be a little bit of a muted JPM. Argenx, we think, will preannounce and beat. VYVGART is doing very well, and they'll give an update this time on their early pipeline. I'm starting with argenx because that's one of the bellwethers, so I think that one continues to look good. Amgen doesn't really do a lot around the conference, and this year, frankly, what we're hearing is that their biosimilar Eylea is going to do well. That's probably going to be a tailwind for them, but the big question is MariTide, and we're not going to have a real update until midyear at ADA. Even that is not going to be in a position to really clarify some of the concerns. So Amgen is probably going to be a little bit under pressure in general. People are obviously looking at BioNTech for the VEGF/PD-1 updates and Summit. Those are probably going to be from Phase 2 later on this year, and those are going to be driving momentum on both of those. We might start getting some of the Phase 3 data out of Summit in the second-line, EGFR-mutated setting late this year. We'll need to see. I think ClinicalTrials.gov talks about data in 2026, but it depends on survival, obviously, in that study. Exelixis, which was hoped to get acquired—we don't think they'll get acquired. We think Cabo is going to be sort of in line, and their guidance is going to be in line, and then it's going to be up to the early pipeline to perform. So, obviously, like I said, a huge year last year. We're probably not expecting the same strength, absent M&A, this year. Ascendis is a big one. Ascendis announced on their growth hormone, the weekly growth hormone, Skytrofa. Remember, last year was a tough year for that brand because of competition from Novo and a lot of pricing pressure now that Novo launched, and, frankly, even Pfizer. We think Skytrofa is going to be mostly in line, given that they guided down already in Q4, and 2025 is probably going to be sort of okay in terms of where they guide. The big one, obviously, is going to be their launch of Yorvipath. That's their once-daily version of the PTH replacement. We think that launch is going to go well, but they literally just launched in the middle of December. Another big one that people are looking at is Ultragenyx. As many of you know, they're developing a drug called setrusumab, which is a sclerostin antibody, not dissimilar from Amgen's Evenity, which is approved for osteoporosis. It's the only bone-building drug, and recall that if you have osteogenesis imperfecta, you have a congenital, essentially genetic disorder where your body doesn't make bone properly. Based on the Phase 2 data with Ultragenyx, they did a very nice job building bone and reducing fractures. Now we're all waiting for that Phase 3 data. Ultragenyx is our top pick. What we're all trying to figure out is whether the study will work on the first interim analysis, which is expected to take place imminently, probably in January, or whether it will be on the second interim analysis, which we think is much more likely to be powered correctly to then stop at that point. That's going to be around May or June. If that doesn't hit—which is going to be the most likely one to hit—then they have to go to the final one, which is around October or so this year. Ultragenyx will probably preannounce after the close today on Crysvita, which is their other drug for X-linked hypophosphatemia. But that's not so important; everybody cares about setrusumab. We think they're just going to say that they're continuing to be bullish, and it's probably going to stop at the second look. So that's kind of a survey of some of the important companies that we cover. Chris Garabedian Yep. Great. Brad, I know you usually plan some interviews, video interviews for Biotech TV, with the newsmakers of the week. I don't know if you've announced that yet, but what are you looking for and looking forward to over this next week? Any highlights for who you're going to be talking about? Brad Loncar Yeah, I have 16 interviews scheduled, and we'll put out the roster a little later today. Actually, now that I'm on the journalism side, I actually know stuff. So I'm going to pass on this one. I don't want to comment on anything. Chris Garabedian Sure. Great. Well, let's go, Sam, if there's any other thoughts you have for the week ahead. Otherwise, we can start on some of the news flow that's been happening over the last couple of weeks since we met last on Biotech Hangout. Sam, if you have any other comments on what you're looking for over the next week, otherwise we'll start with Pfizer's year-end comments and the Part D issue to kick off the news. ### The IRA Reshapes Pharma Sam Fazeli No, nothing for next week. I'm happy to kick off on Pfizer. So, again, it's been a few weeks since we've had this. One of the things that Pfizer did, which was quite nice, was to actually talk about the IRA that Yaron talked about. This is the year that large pharma is going to get it squarely in the face with regard to the impact of the Part D redesign, and they actually took the initiative to tell us how much it's going to hit them. They worked it out at about a $1 billion net: a $500 million boost and a $1.5 billion drag. So that's a 1.6% hit to the top line from the Part D redesign. Now, all the other pharma companies are going to get hit, too, but our expectation is that most of them will not tell us how much. We've checked that with a couple of companies, and they've told us, “We don't think we're going to go to the same granularity as Pfizer did.” That's quite interesting, and we're going to have to figure out—I'm pretty sure they can absorb it—but I'm interested to hear from the others. Is this particular year and that impact going to affect their M&A appetite, certainly not licensing, because that's easier to do than meaningful M&A? Or is it actually going to change it for the positive? That would be interesting—or not at all. I'll be keen to hear the thoughts here. One last thing I wanted to say about that IRA-type impact for the year is that our Washington analyst thinks the next list may be announced before President-elect Donald Trump is sworn into office on January 20. So that could be an interesting list: 15 drugs to come. We think Ozempic from Novo will be on it, Januvia from Merck, which, of course, not many people care about that much, and some of the cancer drugs: Xtandi from Pfizer, Eliquis, and then Pomalyst. So it's going to be interesting whether they rush that out—bring it out a bit earlier, just ahead of the presidential swearing-in. This year is another IRA story. Chris Garabedian Yeah, Sam, let me ask you about that. Since we're transitioning from one administration to the other, do we know how much of that process can be influenced, either positively or negatively, by political appointees? I haven't really thought about that. Sam Fazeli You mean the new incoming folks, such as RFK, et cetera? Chris Garabedian Right. Everything in government is—civil servants do the work, and then you have political appointees at the top of it. I'm just wondering how much of the whole IRA process can be influenced. There is a process of selecting the drugs, right, Brad? I mean, there is a choice that's made that needs to be brokered. Might the new administration have different views on it than the old one? Brad Loncar Well, I think the biggest headline, exactly—and also, I think the biggest headline from the IRA last year was that the government didn't go as deep as it could have. That was a choice that somebody made. And so I guess the question is, now that we have a new administration, can the leadership of the new administration for this round either choose to go deeper with cuts or not as much? Who's making that choice, and is there any reason to expect variability from one administration to the other? Now, I'd love to hear what Yaron thinks of this, but I think from our perspective, it's very easy for President-elect Donald Trump to just roll with it. It would just be optically odd to go against something that's supposedly good for the provision of health care in the U.S., in terms of that particular aspect. Chris Garabedian And I think by the time a lot of these folks are actually sworn in and take charge, a lot of this would have happened already. What we're interested in is whether they can fix the other side of it, which is the small-molecule exemption period from 7 to 11. There is a bipartisan bill. We don't see a very high chance of it passing this session, but the next session could be. That is the sort of thing I think he could focus on, saying, “Look, we leave the negotiation side alone; let that happen, but we're going to actually equalize the world as regards to small molecules and biologics.” That's where I think there are… Brad Loncar It'll be an important thing to watch, for sure. If we see any kind of change in that. Sam Fazeli One thing that I'm sure you've all noticed is—I don't want to call it a mass exodus—but it's beginning to feel like this is not a good cadence of exits from the FDA at the senior positions. That's something that we're following very, very closely because, at the end of the day, there are the political appointees. Even Bob Temple is retiring. The FDA commissioner and the head of CDER are leaving, and we think this is going to be the beginning. These are things that are actually very important, as we all know. Yaron Werber Yeah. And I mean, look, Patrizia Cavazzoni was kind of supported by Janet Woodcock, who was the steady leadership for a long time, along with Bob Temple and others. But, again, I think the jury's going to be out. If we were to be honest, I don't think that anybody would agree that there isn't some inefficiency, some inconsistency, and uncertainty that has always been present between hierarchy, policy positions, and the divisions. There's always been this battle between the divisions and hierarchy in terms of their policy and platform presentations, and what the FDA is trying to achieve versus what the divisions are willing to do—the lifetime civil servants who are really making the decisions. There could be some positive aspects that come out of this for drug development in the industry. It'll be interesting to watch, for sure. Chris Garabedian Let's move on to some other news. Yaron, you want to highlight Stoke's announcement this week, and Jasper as well? Maybe you can highlight those. ### Good Data Still Sells Off Yaron Werber Yeah, absolutely. I think the one commonality on both of them has been the markets that we're in right now. Stoke announced their phase 3 plans for their drug called zorevunersen, which is an ASO for Dravet syndrome in patients with an SCN1A mutation. They've updated their data in December. This is their phase 1/2, showing a tremendous 70% to 80% reduction in seizures and cognitive and neurocognitive benefits. So now they've presented what the phase 3 is going to look like. To many people, there were some concerns: Can they even move into phase 3 after a phase 1/2 and, let's say, 70 or 80 patients? They got a breakthrough designation right before that, and so it looked like the phase 3 trial design was in line with or better than expected. They were able to move into phase 3. The primary endpoint is actually going to be seizure reduction at 6 months. So everything looked good, and then the stock goes down fairly precipitously, presumably because they said they were going to start the study midyear. We all know it takes 4 to 6 months to start a study, so I think that should not have been new. But they're not going to have data until probably the end of 2027. Any company that then presumably will need to raise money gets penalized. Then you had Jasper releasing their phase 1/2 data with their c-KIT antibody. They're sort of a fast follower to Celldex's drug called barzolvolimab. Celldex is already in phase 3, and the BEACON data—this was a small study, still with multiple arms looking at dosing, and we all know we're going to get the early doses, so there are still going to be higher doses. Efficacy already looks good, in line. The bottom line there is that they're not differentiated, which, frankly, we didn't think they were going to be. They're trading at one-seventh of the market cap of the competitor. So the data, because it's not differentiated, and because they're a small cap and they need to raise money, and they're about 18 months behind or so—well, that stock is down 60%. Even though the data, I would say, looked in line, they had the same sort of class-specific side effects as well. So I think we're just in a tough market right now where companies are probably going to think twice: Do they really need to raise money? Do they really need to release data unless they're legally obligated to do so? They might as well wait. Chris Garabedian Yeah. And it's interesting—and I don't know, my experience, going back to when I was a public company CEO, is that stock movements are always more pronounced, whether on the upside or the downside, when J.P. Morgan news is released, and then they'll stabilize at some point. But it'll be interesting to see how stocks respond if there are news events through the week at J.P. Morgan. Sometimes companies announce before they present formally at the conference. Sam, a couple of news items from Novo. Do you want to cover those? Sam Fazeli Yeah, sure. Obviously, the big news for Novo came just before Christmas, which was CagriSema. That came out, and everybody knows the story. But then it followed a whole bunch of other downgrades, et cetera. People were beginning to worry: Is Lilly competitive? Is Novo going to stay competitive? This year is going to be quite interesting because we're going to see that data. I still have a little bit of hope—a very small amount—because I think what Novo's been saying along the way is that they're going to try to see whether they could push the dosing up on CagriSema. But I was always wondering whether the whole point of something like this, that combination of semaglutide and an amylin agonist, is to be able to maybe get better weight loss and not have the same sort of side-effect profile, which, of course, was something that didn't quite work out. At the same time, amylin is supposed to be something that allows you not to lose as much muscle, but fat. Now, muscle's got a heavier weight than fat. So is it possible that when we see the data, there's actually as much fat loss but not as much muscle loss in these patients who were taking CagriSema? I don't know. We'll see. I don't even know whether we'll get that sort of data when it comes to ADA. But there's a whole host of other stuff that's going to come out this year that continues to be competitive against Novo, if you like, which is Lilly's GLP-1 pill, orforglipron. Maybe Pfizer's pill—we'll see that. Both of them are supposed to come out at some point in the new year, possibly in 1Q. Then, of course, you've got the other element that's quite interesting that we're going to keep watching: what happens with all those anti-myostatin drugs that people have been developing, things to try and help maintain that muscle mass. So, Scholar Rock's data, Regeneron's data, and, of course, Eli Lilly's own bimagrumab sometime this year. All of these things, I think, continue to highlight the news-flow risk for Novo Nordisk. I think the drugs are going to continue to sell, obviously, because it's a market that wants to own these things. I've been having some emails from friends telling me after Christmas, “Do you think we should go on to Zepbound or Wegovy? Because I've put on too much weight post-Christmas.” I think that attitude will continue. Yaron Werber Yeah, just a fascinating sector to watch, especially with the competition heating up. Did you mention Valo? I mean, that's a deal that Novo had before, and they've just expanded it further. It's quite interesting because I just wonder whether Novo is using this as its AI platform, essentially. Valo did have a bit of bad news just before Christmas. That was a product that didn't work out. My feeling is that this is a good way for Novo to have access to any AI capabilities, if that's the way you want to think about it, in the cardiometabolic space, off their balance sheet. It'll be interesting to see how this pans out and whether they get anything meaningful out of it over the next—I mean, it's a pretty expansive deal—10 to 18 assets, I think, potentially. Then, of course, the numbers get multiplied up. Those are the milestones they can get for each, so there are potentially several billion dollars. ### Galapagos Splits Its Future Chris Garabedian Yep. Well, one of the bigger news items this past week was Galapagos, which we've talked about a lot on this forum. Despite bringing in Paul Stoffels, a well-known executive who was part of the founding of the company, they still really couldn't garner a valuation above their cash position. So it culminated in a split into 2 publicly traded companies, or at least that's what was announced. Sam, do you want to describe that? And, Brad, I'd love to hear your thoughts on a little bit of throwing in the towel. I think with a creative structure, that is interesting and might even be the best thing for Gilead to salvage something out of that partnership. But, Sam, do you want to describe this deal? Then I'd love to hear your and Brad's comments as well? Sam Fazeli Sure. I'd love to hear everyone's comments on it. Basically, the company is splitting in 2. One remains Galapagos, with about $500 million in the bank, and all the CAR-T work they've been amassing—the manufacturing and the assets they've got for lymphoma, as well as the trials they've got for it. The other one is SpinCo, with about €2.5 billion. That will have its own new management, and its job is to go and find assets to develop, which I thought was Galapagos in the first place. Gilead holds 25% of it. It seems to me that this is to get them out of what they call the OLA, which is the option, license and collaboration agreement—a 10-year deal they did with Gilead. It suggests to me that, previously, because of the structure of that deal and the opt-in that Gilead had, it became very difficult for them to do anything beyond phase 1, which is where Gilead's option rights were. I'm assuming that's the case because, in the meantime, this company with this enormous amount of cash has been looking for deals, and things like Revolution Medicines have occurred. Remember, that was a reverse merger into a highly cash-positive company with nothing to do after the event. Vir Biotechnology, which we'll talk about, did a deal with Sanofi that has helped it gain $500 million in market cap over the past few days. You've had all these deals—NewCos with Chinese companies. So why did none of this happen within the structure of Galapagos? Maybe that was the issue. I'd love to hear what the others think, and we can talk about the CAR-T and the potential for Galapagos in general if we've got time or we're interested. Brad Loncar One of the amazing things about Galapagos over the last year or so, after the Gilead stuff blew up, is that it's always had this enormous, multibillion-dollar cash balance, and it's had the largest negative enterprise value in all of biotech. So it was only a matter of time, I think, before investors started to apply some pressure. You saw, for example, EcoR1 take out a pretty big stake in them and probably have some influence in this process. I really like Paul Stoffels. I've interviewed him in person at JPM last year, and I have the highest respect for everything that he's accomplished in our industry. He's truly one of the most successful people in drug development out there. I think investors hated the CAR-T acquisition, and it's actually a really interesting story because it's so different. The idea there is, rather than having central manufacturing—as we have with the Kite CAR-Ts, which have a couple of big manufacturing centers across the country and in Europe—the idea is to do personalized manufacturing at hospitals and in cities. Eventually, it's going to require a huge, literally national- and global-scale rollout if this comes to fruition one day. It's a totally different way of thinking about doing CAR-T. But I think because it's totally different, and because CAR-T is just out of favor right now in terms of startups, investors weren't wild about that being the first major acquisition of the company, or about it being the company's operational focus since then. So I'm not surprised to see a CAR-T version of the story going one way and a cash version going the other way. Sam Fazeli Chris, if I may add: getting manufacturing away from central manufacturing to more disseminated manufacturing for CAR-Ts is obviously what we need to do. We can't keep waiting forever to have stuff sent over to a central manufacturer and then brought back. One of the things it achieves, if the theory works out, is that you get essentially fresh cells. Fresh cells are better than frozen cells—I think we just have to assume that, just like in any other part of the world. You also have manufacturing that's really fast: 7-day vein-to-vein. I think that speed is probably going to be matched by pretty much most people in the next year or 2. Putting all that together, and then some ASH data that they presented, particularly in mantle cell lymphoma, looked viable. I'm not going to sit here and say it's the best CAR-T company out there. But what's interesting is that Gilead has its own CAR-T assets and 25% of this one, right? They're in a particularly nice place as far as they're concerned. I'm pretty sure they'll be able to cherry-pick or combine these technologies, efforts or systems together at some point if any of them show good data sets. And if that manufacturing works, it's perfect. Plug it in. So we'll see. I still don't understand why the company needed to split to achieve this. Why couldn't they just renegotiate the deal with Gilead to unshackle the cash balance, essentially, to go and get a whole bunch of other assets? Chris Garabedian I wonder if EcoR1 is onto it—the influence of having a different focus strategy to use cash, to use the right amount of cash, right? Sometimes, with this blended approach, you don't get synergy but antagonism in terms of some of the parts' valuation. Again, sometimes these are just structure changes that don't have a real big impact, but sometimes there's always a hope that they will, to be able to attract different investor bases. This happened when I was back at Celgene, and there was a lot of feeling that they should just stick with heme and not get into I&I. Some investors liked the diversity and some didn't, and that was a big debate back then. I think this is always the case when you have a big pile of money and you're trying to figure out how to use it: you might attract different investors. Yaron, did you ever cover Galapagos? Any comments on this? Yaron Werber My colleague covers Galapagos, and we are involved as an adviser, as a bank, so I would politely decline to comment. Chris Garabedian Sam, you mentioned Vir, but is there anything more you wanted to add in terms of, vis-à-vis, the Janux PSMA program, or do you want to elaborate a little bit more on that? Sam Fazeli No, I think that's fine. I think we can move on to the next topic. Chris Garabedian Okay. Yeah, sure. What else do you have on your list? Sam Fazeli The next thing on the list was the Vir Biotechnology data, which was quite interesting. I'm watching Janux's share price, which is down just over 30% from the peak it reached after the excitement around the data they presented, which was very good in prostate cancer. Vir Biotechnology came out with its version of a masked T-cell engager. The idea is similar to Janux's, but slightly different: you have a T-cell engager—that is, some sort of bispecific antibody or fragment, or whatever—that binds CD3 at one end and a target antigen relevant to your tumor at the other end. What Janux did was to cover essentially one end of it, which is the CD3, the T-cell-binding site. What these guys have been testing, using an asset and technology they acquired from Sanofi, is blocking both ends: the CD3 binding and the antigen binding. When that antibody, or that entity, goes into the tumor, protease activation allows the unmasking and then activation. The data is early. I think the best I would say is that, from a safety profile, it seems competitive—better, with lower CRS and so on. Efficacy doesn't look as good, but it's early days. There's still dose escalation going on. When you put the charts next to what Janux showed back in February last year, it looks about similar, but these are very difficult comparisons to make on such small numbers. I find it odd that Janux's share price gets hammered so hard, and I don't find it odd that Vir Biotechnology's share price goes up, because it was trading close to cash and now it has some positive data, which might get better over time. One of the things I want to highlight—and I'm pretty sure Yaron will have a thought on this too—is that the dosing is significantly higher here. At the top end of the dose range, it was 1 mg/kg. In an average 80-kg patient, this is 70 or 80 mg per patient, whereas Janux was at 6, 8, 10 and 12, right? Twelve was the top end that they tested. The idea is that CD3 engagers are exquisitely active, because all you need is a little bit of a tickle of that T cell to get things rolling. I was sitting back, scratching my head, thinking, why is it such a high number? One reason could be that, don't forget, the antigen binding is also masked. So how is this antibody going to distribute within the tumor versus anywhere else if it doesn't have specific binding until it gets into the tumor to the target? That's the thing I wonder about—whether that's why they need 1 mg/kg, or possibly going up to 2 mg/kg, to push and get the equilibrium right so that they get enough antibody in there. When you get to the higher end, are you going to have the same safety? There are lots of questions, but it's nice to see another advance here with masked T-cell engagers. Brad Loncar Yeah, but by the way, Sam, that was a great summary. It's possible that Janux is down because it's in the basket of potential takeouts, and I think you're beginning to see a lot of them trading off over the last few weeks, potentially due to the unwinding of expectations into JPM. That might explain some of it. Chris Garabedian Okay. Well, Sam, do you want to highlight briefly any other news items? Sam Fazeli Do we have any more time? Oh, yeah. We have a little bit of time. I think I might just talk about the unfortunate patient who died in Louisiana, having been highlighted by the CDC as a bird flu H5N1 case back in mid-December, late December. Folks generally ignored it, and then the individual unfortunately passed away, with comorbidities, et cetera. What is more relevant, perhaps, is the share-price reaction of the companies that then followed: CureVac, Novavax, Moderna, and BioNTech. They were all up on the back of this and, of course, the news that there's a big flu issue going on. I'm sitting here with the back end of a respiratory infection, of course, and those share prices got all excited. Thankfully, in that individual, the frequency of H5N1 virus with any kind of mutation that would allow it to transmit from human to human was very, very low, and there's been no evidence of human-to-human transmission. Once that happens, God forbid, I think that's when it's time to think about these companies as possible pandemic-stockpile plays. But there are already pandemic stockpiles out there from Sanofi, CSL, and GSK. The first one was approved back in 2007. So those share prices went all the way up, and the next day went all the way down. We're sitting here with our fingers crossed that we never see human-to-human transmission from this H5N1 virus. Chris Garabedian Yep. All right. Thanks for that. I just want to highlight the news that I mentioned at the top of the hour: the Lilly–a16z deal. It brings into question Lilly's cash position—and, you could argue, Novo's as well—and how they might be doing some things differently in the industry and using that cash. But really, there have been a lot of pharma companies doing external innovation and trying to find early-stage opportunities. This is a bigger play to work with an outside venture firm, and Pfizer had a collaboration with Flagship Pioneering. It's not the first of its kind, but probably the biggest and most notable, and it raises the question of how Lilly and maybe other pharma companies might follow that type of model to work with a firm that's just focused on finding the best investment opportunities. I know Bruce Booth couldn't be on this; he highlighted this as an interesting development. So maybe it's a topic for a future Biotech Hangout. But, you know, just look, we know everybody's busy, maybe traveling, maybe waiting for news flow and events. Brad, we all look forward to your plans for the week and who you're going to interview. I've really—it's been an honor to be part of Biotech TV with BioVenture Voices. We've interviewed Alexis Borisy, and that'll drop on Monday for people who have extra free time over this next week to hear his perspective as a serial entrepreneur and investor in biotech. But a lot of exciting stuff we expect over the next week. I hope you've enjoyed these insights. Any final comments? Brad, Yaron, Sam, for the audience. Brad Loncar Yeah, I would just point out, in case people haven't seen our tweets and LinkedIn posts, every Tuesday of JPMorgan is an annual tradition. We have what we used to call the tweet-up and now call the hangout. It's a social event that's open to everybody and anybody. We have a lot of generous sponsors supporting it. All the drinks are free, and we'll have some food and everything. It's the Tuesday of JPMorgan at Persona, which is just a block away from Union Square, so it's easy to walk over. We'd love to see everybody there. There's an RSVP. You can just kind of show up, but there's an RSVP. Chris Garabedian Well, Brad, let me read a formal statement I was provided for everybody. Biotech Hangout will once again be hosting our in-person networking event at JPMorgan on Tuesday, January 14th, from 7 to 10:00 p.m. at Persona, which is the same location as the past two years. We hope to see everyone there for a fun night and open bar. Importantly, thanks to our sponsors, Johnson & Johnson, Mispro, FTI Consulting, PureTech Health, and Cadillac Agency. Be sure to RSVP, and they will share a registration link in the feed, again in case you missed it. I won't be there, but Brad, Daphne, and many other hosts of Biotech Hangout will be there. We'll look for you to tune in on the post-JPMorgan Biotech Hangout next.