# Episode 136 - March 28, 2025 Biotech Hangout · 2025-04-18 · 60 min · https://www.youtube.com/watch?v=c6BrNxlaNvI ## Transcript Chris Garabedian So let's start. After each month, we get an overview of how the markets are doing. Everybody looks at the performance of the hedge funds and the XBI, and February was not a great month for specialty investors. We're approaching the end of March, so let's talk about the state of the markets right now. Tim, why don't you kick us off? Tim Opler While we're speaking, the XBI I'm looking at on my screen is at 84.45. It's actually down 4% this week. For whatever reason, biotech just has not been performing well this year. If you talk to people about what's going on, you'd hear 2 things. The first is that there's been tremendous uncertainty about the Trump administration, what its intentions are, and what it all means for the economy and for the biotech ecosystem specifically. The second thing going on is that I think it's pretty clear that certain funds are struggling to keep their LPs in line. Yesterday, I spoke to 2 different fund managers who both cited rumors, but no specific admission, that certain funds are in forced-selling mode. It sure feels that way, right? The actual fundamentals right now are not that bad. In fact, I would say they're pretty positive. Yet the desire of people at the margin to buy biotech has not been good. There's nothing different about the market today than there was a year ago or 5 years ago, fundamentally. We still have lots of great innovation and lots of good management teams. It's easy to point to zombie companies, companies that waste money, and all sorts of reasons not to want to invest in the sector, but there are also a lot of good reasons to invest in the sector. Those haven't changed. It's really the macro, external factors that are accounting for where we are at the moment. Chris Garabedian We're going to touch on both the public markets and the private markets. I want to go to Bruce in a minute, but do you think the hedge-fund outflows are much a function of LPs who invest in a lot of different sectors and have been looking at the last 4 years of sluggish or nonexistent returns? Even if a specific hedge fund might be outperforming the XBI or other sector indices, they're looking at this versus other sectors. Is that one of the phenomena that's going on, even if within our circle you might have a hedge fund that's overperforming? Tim Opler There are a couple of things that I've heard. The first is that the endowments, university funds, and large sovereign funds that are behind so many of the hedge funds in our industry are generally not that optimistic about the prospective returns. That's driven largely by fears of what the Trump administration might do. I did speak to 1 fund manager who got very specific, and I was worried that he might just be spreading rumors or saying something that wasn't true. This was the guy who told me Armistice was in trouble 6 weeks before it showed up in The Wall Street Journal, so he was right. That doesn't mean he's right this time, but what he was saying this morning is that there are a couple of funds that have been strong performers over the last couple of years. Some of these hedge funds, while everyone else is hovering around the average, are doing really well. There are also a couple of funds that have significantly underperformed this year. They essentially went long the market and ended up being wrong. Those funds are getting hit with requests from their LPs to take money out. As those funds are liquidating—and it sure felt like people were liquidating this week—there just aren't enough buyers in the market to absorb that flow. Chris Garabedian Bruce, I'd like to go to you. First, I want to give you a shout-out. You did a nice interview on the state of the markets with Brad Loncar for BiotechTV, and you were on a panel at MassBio this year. From the venture side, you've got a portfolio across the spectrum of maturity, from clinical-stage to preclinical. How are you viewing the current market dynamics, and do you have any perspectives on where we go over the next 6 months? Bruce Booth Thanks for asking me that. Let me make a couple of comments on Tim's remarks, which I fully agree with, and then I'll comment a little on the venture side. I just looked at the last 5 years of returns in the XBI, even 10 years, and it's amazing. The S&P has outperformed by about 10,000 basis points. It is just remarkable. Most of that is because, as we peaked in February 2021 and dropped, the S&P has been on a tear over the last couple of years. If you're a mutual fund or you're being benchmarked to the S&P, or to any particular non-biotech sector, whatever biotech allocation you have has been a drag on your returns. You're seeing a lot of people shifting their allocations. For the prior 10 years, if you weren't equal-weight biotech or overweight biotech, you generally underperformed your index. I think that has a lot to do with where we are. You mentioned zombies and people pointing at zombies and saying how horrible IPO performance has been. It makes me think about 15 or 20 years ago. In fact, I think it was The New York Times—it might have been The Wall Street Journal—that coined the phrase “zombie biotechs” when they were talking about these IPOs from 1991 that, in 2010, were essentially trading at or below their IPO prices but were still around. This idea that, in the public market, some of these zombies can live forever is not new. The IPO class of 2005, 2006, and 2007 was almost universally trading below its IPO prices within a few short months of the IPOs. Certainly by the end of the decade, the vast majority of them were below their IPO prices. This is not outside the normal cycles that we face. I think Tim is exactly right: There are a lot of great teams and a lot of great innovative assets out there today, so there are reasons to be optimistic. But it does feel pretty bad, right before the darkest hour of the night. It doesn't feel great out in the marketplace today. On the venture side, we primarily focus on the very earliest stages of venture creation, and we're going to start the same number of companies that we've started over the last handful of years. It is interesting to look at some of the numbers. I had a chance to peek at what the first quarter looks like in terms of new first financings of biotech companies, which is a good proxy for startup venture creation. Back in 2018 and 2019, there were roughly 100 brand-new companies getting financed for the first time each quarter. That spiked to about 180 at the peak of the bubble, in the first quarter of 2021. It's at 50 right now—a little bit above 50. Maybe when all the data comes in, it'll end at 70 or something like that. This is a far cry—a 60% to 70% reduction—from where we were in 2021, and it's well below where we were if you consider 2017, 2018, and 2019 as some sort of prepandemic normal. There has been a huge contraction in the number of new companies getting formed. I would highlight that when those contractions happen, it's actually a great time to start companies. I mentioned in the BiotechTV interview that Nimbus was started at the bottom of the market, in spring 2009. Kymera was started when the markets were a mess in 2015 and 2016. This is a great time to start new, innovative companies if you can build them with discipline and capital efficiency. Chris Garabedian Bruce, you've been attributed to Booth's Law, which held true when the bullish markets came. It wasn't necessarily that there were a lot more companies being established, but you were seeing more money going into those first financings, or into those companies that were started. Now we're at a point where we probably have more venture biotech dry powder than we've ever had. Help me square the circle. We already know the phenomenon of more money going to proven management teams, but when you see a contraction in the number of new companies being created—not necessarily at Atlas, but across the sector—yet you have all of this money that ultimately has to be deployed, where is that money going, or where's it going to go? Are we going to see more of the Series B, Series C, and Series E financings? Help us understand that. Bruce Booth I think it's a great question. Right now, there are a lot of people sitting on their hands. If you look at quarterly flows from venture firms into biotech, it's running at about $5 billion, and it's still at $5 billion. It peaked during the bubble, but $5 billion is way more than it was 10 years ago. And so, it’s clear that there are a handful of companies raising lots and lots of money, and that is part of what’s driving this. I think I commented on it at the end of last year: The skew between the median and the average is the largest I’ve ever seen it. Having looked at that measure of the distribution toward the haves relative to the have-nots, it’s massive. So we’re definitely seeing that. I do think the Series B, C, and D folks are finally showing a lot of capitulation on price. You’re going to see Series Bs repricing, As and Ds repricing these companies, because it’s been, A, a challenging place to raise money, and B, you have a constrained market and a bottleneck around getting public. This huge backlog of companies that would much rather be raising public equity are stuck raising private rounds. Chris Garabedian Yeah. I want to come back, Tim, to the public markets. There’s been a lot of chatter. Daphne Zohar posted some data that a bank, not to be named, compiled on PIPEs, registered directs, and wall-crossed PIPEs. Then STAT did an article that was kind of a retrospective of a year ago. The PIPEs were in the news because you would see confidential information shared with insider biotech investors to do a PIPE, and then a week, 2 weeks, or 3 weeks later, the data comes out. They’re locked up, of course, and they get a deal. But now the retrospective on the performance is middling, right? I mean, it outperforms the XBI, maybe outperforms the small- and mid-cap bucket, but it hasn’t been a boon to the investment strategies for these funds. Any thoughts about the PIPE phenomenon? If you were able to read the STAT article or see some of the chatter, there was a take—I think Daphne posted this, or was it a Substack?—that it was a dark take on the industry. One of the key themes was that, because of this insider-ish phenomenon of PIPEs, it’s moving the generalists further away. They’re looking at it as, “Hey, this is just an insider game. I don’t want to touch it. I don’t like how we’re seeing these deals come together.” That’s one reason people are not comfortable coming back into the sector. Any thoughts on the PIPE phenomenon? Tim Opler Chris, it’s a great question. I did see Daphne’s post. I didn’t read the STAT article, and I’ll give a point of view in a moment. But I did want to make a comment on Bruce’s remarks. I posted some data in our weekly last week from DealForma. Bruce, indeed, the number of venture rounds happening this year, on an annualized basis, is down quite significantly versus 2 or 3 years ago, and is certainly down from last year as well. The average amount raised per venture round this year is $65 million. Last year, that was $56 million. The year before that, it was $46 million. So you’re seeing a dramatic increase in the concentration of investment. I looked at that and said, “I bet you that’s just Bain and ARCH.” So I took those guys out of the data set, and it wasn’t. The whole industry is essentially concentrating its bets into fewer and fewer companies. On the PIPE question, I saw Daphne’s post. I thought it was really interesting. I had never run that kind of data myself. What she showed was that most of the money the funds are making is between the moment they receive confidential information and the moment that confidential information is released to the public. Obviously, that can’t make anyone feel good, right? It does feel like—let’s call it—legal insider trading. You’re getting a peek at data, and you get to essentially be induced to buy a stock at a price that’s a little bit too low. Then what her data showed was that there was very little money made after that. Most of the alpha from doing these PIPEs comes from the information that you gain. That sort of feels right, but it’s not great. Just to repeat, I think sometime in the last 6 to 9 months we had this debate on Biotech Hangout. The pro for doing these PIPEs is that it’s a necessary evil. It’s a way that companies can get money in, and right now getting money in is really important. If you’re the CEO of a biotech company, ideally you’d have at least 3 years of cash. So many do not have that. We’re in this down market where things are really tough. The price of poker is, you’ve got to show some leg. Well, then you’ve got to show some leg. I’m not the one to say that what’s going on is wrong or irrational, but it was a very revealing post that she had. Chris Garabedian Yeah, and STAT did a good job of highlighting an example of where the PIPE worked and one where it didn’t work. What was interesting to me is that when you looked at the mean, there was a positive gain for all those PIPE investments. But if you looked at the median, it was negative. About 2/3 of the PIPEs didn’t work out. Now, this has been a tough tape. Somebody—I can’t remember who—also posted this, I think, on Biotech Hangout. They looked at publicly traded small- and mid-cap biotechs from $5 million to $2 billion in enterprise value and looked at enterprise value and stock return. It was really depressing, and it was over the last year. We’re not talking about the last 4 years, just the last year, which emphasized for me that we are still in a challenged environment. Again, I agree with Bruce that there’s a lot of reason for optimism. I’ve been wrong multiple times predicting that uncertainty would leave after the election, so we’ll have to see. I think interest rates have a big part of it, and I think administration changes do as well. Let’s pivot to that. We had approvals for Marty Makary for the FDA and Robert F. Kennedy Jr. for HHS, and HHS announced cuts. That was one of the first points of order. There’s been a lot of turnover and change in the administrative ranks. That’s somewhat unsurprising. It’s kind of like when you get a new CEO who’s orchestrating a new vision for a company. We don’t usually follow which VPs, directors, and SVPs are switched out for new management, but that’s what’s happening. Clearly, as we’ve talked about, I think Brad Loncar coined this: The establishment crew is being replaced by the anti-establishment crew. That’s definitely in full force. There’s a lot of debate over whether this can work or whether it’s going to do more damage than good, with all these departures and discontinuity. The one thing I’ll say is that, at the FDA, it seems they have protected the division reviewers and are focusing on cuts that I think were about 25% to 30%, up to a third, of the HHS cuts. So, about 2,500 or so cuts to the FDA, but they’re apparently saying that’s not going to touch the reviewers. They’re signaling that it’s not going to disrupt PDUFA, but that’s a debate. Anyway, Tim, let me go to you. Any thoughts about what’s been happening? Every week there’s some new change and turnover here. What’s your latest thinking? Tim Opler Yeah, I mean, let’s just talk about the facts. There are 10,000 cuts from HHS. There are also 10,000 voluntary retirements at HHS. According to what’s been put out there, there were 82,000 people, so that implies 62,000 people at HHS. They’ve actually been pretty open in the Trump administration about where they’re hitting. They’re going hard after the FDA, CDC, and NIH. More than 2/3 of the cuts are coming out of those 3 organizations, which are far from the majority of the workforce at HHS. Just to give you some statistics, which I looked up: In 2019, the FDA had 19,000 employees. At the beginning of 2024, the FDA had 19,700 employees. With the voluntary reductions—and they haven’t told us how many of those voluntary reductions came out of the FDA—let’s suppose that it was 3,000, plus an extra 3,500. That means the FDA is going from 19,700 people to 12,200 people. That’s a huge reduction. If you say you’re protecting your reviewers, where’s the rest of that going to come from? The FDA inspects all of the plants around the world that make drugs. The FDA inspects food supplies. The FDA is involved in tobacco regulation. It’s not like there’s one division of people twiddling their thumbs. Somewhere along the way, there’s going to be a significant change in the number of personnel. How that maps into the actual effectiveness of the FDA, I have no insight, but it doesn’t sound good from where I sit. Chris Garabedian Yeah. Again, I just read a little bit about the areas that they are cutting, but it doesn’t address the voluntary departures. So you could be absolutely right. It was more in policy, administration, communications, HR—that kind of thing, all of which I would call back office—and less on the front lines. These people have important jobs, so it’s not to suggest that those are easy cuts. But it will definitely be interesting. Bruce, I want to come back to you: How do you, as a venture investor, view this? Have you gotten any insights recently that you’re willing to share about whether the FDA is in working order from your portfolio companies? I’ll just share that we’ve had a little bit of a conservative stance, and we’re trying to figure out if that’s division-related, if it’s because of newer reviewers who are being overly cautious, or if this is a real trend. Any thoughts from the venture side as it relates to the FDA? Bruce Booth Yeah, look, I’d say on a practical level, of the 50 or so portfolio companies we have, everybody interacts with the FDA to some degree. Over the last 4 or 5 months, since the election, we haven’t seen any material change in the FDA’s ability to interact with us, provide feedback, and work collaboratively. That said, that was before the news of a couple of days ago that a huge number of people are going to leave. They said they were going to protect reviewers, which is, of course, great for companies that are engaged with reviewers. But I’m with Tim: that’s a huge reduction in what the FDA’s mandate is supposed to be. It’s hard to imagine that it won’t have real consequences for timelines, quality of engagement, and the type of interactions we need to be able to bring innovative medicines forward. So it’s definitely concerning. I haven’t had enough time in the last 48 hours to really process the magnitude of those changes and what they mean. Tim Opler And Bruce, just to jump in, we are sitting here at a moment when, for the first time, the U.S. is facing real competition in drug discovery and development from China. I can assure you that the Chinese FDA isn’t reducing its staff by a third right now. I mean, this is the time in China when they’re investing in their pharmaceutical infrastructure. My gut instinct is that, if anything, we want to make it easier for the FDA to do its job, not more difficult. Bruce Booth Yeah. No, Tim, I agree with that. What is interesting is that the FDA, as a gold-standard regulatory organization, holds a pretty high bar. When I think about generating that early human data, most of our companies—the vast majority—do not start their clinical work in the United States. We start work in Australia, Europe, or the U.K. because those regulatory agencies are more conducive and collaborative very early on, enabling us to get to clinical data faster. China today—its FDA is working aggressively to allow Chinese companies to get patients really fast and generate those early data packages that are so accretive from a value-creation perspective, reducing their cost of capital, allowing them to do partnerships with pharma companies, or allowing them to spin out assets into venture-backed companies. The FDA is generally a much harder regulatory organization. I don’t know if this is going to be the case with the new administration and where that bar goes, but I think it is instructive to think about the comparative regulatory posture toward early clinical testing. The FDA has been the toughest group in the world for that, for sure. Chris Garabedian Yeah. And Bruce, I have to echo that with our portfolio companies, too. We almost always, if we try to move through pre-IND with the FDA to do a SAD/MAD in the U.S., are almost in parallel always ready to pivot, because as soon as you run into a conservative stance or they don’t let you dose-escalate, even if you’re not on clinical hold, it really can be a challenge. So, yeah, I think there’s definitely room for improvement. The wishful thinking is that they realize we need to be more competitive. As Makary says, we need to make it easier to do early safety studies and get into patients sooner in the U.S. Really great comments. Let’s move on to some of the other topics at hand. Sam, you were covering the European Lung Cancer Conference. A lot of updates across the industry. You want to start with that? Sam Fazeli Yes, yes, I do. But do you mind if I just make a very quick comment on this whole conversation you guys had? I’ve brought up on my Bloomberg screen the 5-year performance of the S&P, Nasdaq Biotech, and XBI, as Bruce highlighted. In the past month and a bit, both the S&P and the Nasdaq Biotech are down. The Nasdaq Biotech is down about 14%. Sorry, not biotech—the Nasdaq 100 and the S&P are down about 8%. Our sector, of course, the XBI, has kind of dwindled down. There wasn’t one big drop. So here’s the question I think a lot of people would ask themselves: Having seen the performance of the XBI, or the sector, over the past 5 years, if I have money today, where would I put it? Would I go buy the bottom, or the next low point that I’m happy with, when it comes to the Nasdaq-listed stocks or the S&P 500-listed types of stocks? Or do I want to put it in biotech? If we just keep it as simple as that, and add it to what you guys just said about a generalist sitting there looking at all these PIPE deals, thinking, “Well, I get a clear signal here that I shouldn’t be playing, because this is obviously something that needs wall-crossing to understand,” I think that’s part of the issue. It’s so much easier just to go into another cash-flow-generating company at a low point than try to figure out what biotech to buy. I don’t know how you come out of this dark night, or how long this dark night is. I have no idea. It’s very hard. I think every time we’ve tried to do it, we’ve burned our fingers. I just thought I’d add that. It’s not exactly a positive comment, but— Chris Garabedian —but an important comment. But Sam, why don’t we go to the cancer conference? Sam Fazeli Yeah. We have 2 things that I want to touch on. One is the battle that’s going on between Johnson & Johnson and AstraZeneca. As you all know, AstraZeneca has one of the leading drugs in the treatment of EGFR-positive lung cancer, and that’s called Tagrisso. When it succeeded, I’ve heard some companies had EGFR inhibitors in development and decided, “No point carrying on. We can’t possibly beat this, and if we do, it’ll just be by a margin.” Tagrisso is the standard of care for treating non-small-cell lung cancer driven by EGFR mutations. So, of course, others have wanted to play here, and I think Johnson & Johnson is now trying to stake a claim that it is the new standard of care. This is not the first time we’ve had data; earlier on, it was at the World Conference on Lung Cancer about a year or a year and a half ago. It’s quite important because this is one of the biggest drugs, and, of course, that makes it super important to the continued ability of the company to generate the cash it needs for the significant R&D investments it’s making. J&J is coming at it from a different perspective. They say, “Okay, well, we have a combination antibody drug, which is Rybrevant, a c-MET-targeting antibody—you could call it bispecific if you want—and something that is similar to a TKI that inhibits EGFR.” So, of course, you’ve got the issue that you’ve got an extra mechanism of action. That clearly does give you some benefit. It gives you a benefit in progression-free survival and about a year extra in overall survival. So the question is: Why isn’t this going to be the standard of care going forward? Of course, it’s the side effects. Side effects are one of the main issues, and some of those side-effect issues can be dealt with by switching to subcutaneous Rybrevant from IV, which is very helpful because the drug you’re competing with is just a daily oral drug, Tagrisso. The subcutaneous switch is going to address some of the side-effect profiles. The troublesome one is the skin disorders that it causes. That’s something that I think the company has to continue to work on. I heard from my colleague who’s there that a special session on this was specifically focused on that, which, of course, suggests that even they see it as a major issue to deal with. The other angle is that AstraZeneca isn’t sitting still. They’ve got data for Tagrisso plus chemotherapy, which, of course, then takes you into IV chemotherapy. That also isn’t likely, in our view, to match the survival benefit of Rybrevant or the data that J&J is providing. There’s another element they’re after, and that’s a combination strategy they’re pursuing, which is an oral c-MET inhibitor that they’ve partnered from China’s HUTCHMED. That has been in development for a while and is showing very decent, very exciting, deep waterfall plots in terms of RECIST response rates and so on. That’s why we think anyone who writes an article saying, “Yep, here we go, Johnson & Johnson’s claiming the crown,” needs to see how physicians actually do this. So that was one that was mostly reported. The other one is BioNTech. It was a relatively highly anticipated update from them: 2 posters, both of them in small-cell lung cancer, not non-small-cell lung cancer. It’s for one of these VEGF bispecifics. Their VEGF bispecific is BNT327, a PD-L1/VEGF bispecific, unlike Summit’s and Akeso’s, which are PD-1/VEGF bispecifics. There are some differences there, and you could argue one is better than the other. Clinical data will show. In the second line, I think there were some folks who didn’t really like what I would say was a decline in the overall response rate that we saw—from what people had expected, which was around 60%, down to 42%. Given what I’ve heard from a few clients, that’s something that unnerved folks. But we believe that, in the second line, the change between that first readout of around 60% and this readout of 42% is the fact that they started recruiting more pretreated patients. If you’re treatment-naive, you’re more likely to have a better response than someone who has had immunotherapy before. So that's what we believe has been the driver of this drop in overall response rates. Nevertheless, the second-line data that we've seen in terms of median OS, median PFS, ORR, and DCR still looks pretty decent to us. Then, of course, there was the update on first line. In first line, again, I just saw an Endpoints article calling it a potential win. It does look good compared to the current products that are on the market, either the ones that contain an immune checkpoint inhibitor or Imdelltra, which is from Amgen. But there's one thing that I don't like, and that is the spider plot that we've seen in the ELCC poster. There are lots of patients who are progressing really quickly—2 months, 4 months after the start of therapy. The spider plot looks really nice to start with, but you don't like seeing all those arrows or lines that start jumping back up again. Other than that, it's really good data and really promising, and I believe that it supports them going into a Phase 3 trial, which I think they're either in or about to enter, for first-line small-cell lung cancer. Of course, there's an opportunity here for combinations. I think the company's thinking about B7-H3, their own Trop-2 inhibitor, a B7-H3-specific bispecific or ADC, and so there's quite a lot of opportunity here to do better. These were the 2 data sets that I thought were worth highlighting at ELCC. Chris Garabedian Look, very important. With one of the big 4 cancers, lung cancer is one of those that's a little more elusive in generating good data sets. Many drugs have failed in lung cancer where they've actually succeeded in other cancers, so this is an important meeting to really differentiate who are the winners and losers and how these new drugs are being positioned. Sam, I'm going to come to you in a minute on the obesity space, because there was a big deal with a China-based biotech. But before we do that, Tim, I know we started the hour by saying you're working on a China report, and I think you visited there recently. Before we go into that deal with a China-based biotech, we'd love to get your perspective. There's been a lot talked about over recent months and the last year about where China is in our ecosystem and how it's influencing what's happening in U.S. investment. What are some of the early insights that you're seeing? Tim Opler Yeah, just a couple of things that are a little bit new on China. First, as I think is pretty clear from the news, there's been a lot of China cross-border deals this year. Chris from DealForma sent me the latest data this week. He and I reported in January that 31% of all large-pharma molecules last year were from China. That wasn't a surprise to me, but it did appear to be a surprise to a lot of folks in our industry, because that statistic caused a lot of buzz. This year, the number is 41%. If you look at the dollars—in other words, upfront dollars—it's even higher. China is becoming ever more important. I spent a week in China not last week, but the week before that, and it was an eye-opening experience. I had just been there in November 2024, so there's only a 4-month difference, and you could see that the country had changed a lot in just 4 months. Maybe to highlight 2 or 3 years ago, all of a sudden the Chinese started to matter in ADCs and bispecifics, but we all sort of said to ourselves, “Well, you don't have to worry. They're not going to get into the new stuff. Whatever Bruce Booth's starting a company around right now is probably not facing a lot of Chinese competition. Chris, probably the same is true for you.” I was very struck by some of the conversations about the newcos that are being formed by Chinese VCs. For example, one of the hottest areas right now in the U.S. would be IgG extracellular degraders, so-called ASGPR degraders. I met with 1 Chinese investor and company, and the guy was making several valid points about weaknesses of those ASGPR degraders. He said, “We've been thinking about this really hard, and this is what we're going to do,” and then spelled out a strategy to essentially overcome the weaknesses of those strategies. All of a sudden, this is an emerging technology area where a Chinese company is going to be out in front. I would say that I had 5 or 6 conversations like that in 1 week. For example, another sort of holy-grail topic in our industry is getting rid of HIV—a functional cure for HIV is something we've all been looking for for a long time. A number of people have been saying for a while that maybe CAR-T is the way to go. I just met this Chinese scientist, and he said, “Everyone's been saying CAR-T is the way to go, but let me tell you why it's not going to work.” He went through all the technical problems with CAR-T achieving a functional cure for HIV. The problem is that these cells that have the virus become quite hard to hunt down. He described an in vivo approach to do it using in vivo cell therapy and started to show me data that he's generating. I was just like, “Wow.” That is so awesome, and it's coming out of Hangzhou, China. I visited Hangzhou. It was so exciting. This is the city that came up with DeepSeek, and the number of brand-new tall buildings that have been put up for new ventures—it looked just like Kendall Square, to be candid, and maybe better. I met entrepreneur after entrepreneur who was energized, and they were talking about first-in-class innovation, not, “I'm going to be a lot better at doing Joe Blow's bispecific.” It was a very interesting trip. Chris Garabedian Yeah. It's a little bit of the dynamic where, when you have competition like that—whether in the U.S. we joke a lot about the Bay Area and Boston-Cambridge, or the second player, the Avis versus Hertz, is always chomping at the bit to do a better job—it feels like that's happening on a global scale with China. Bruce said it earlier with regulatory agencies: There are a lot of ways that they can move levers to gain a competitive advantage. Bruce, let me quickly ask you: Has it changed how you think about company creation, knowing there's a lot of available drugs in China that might be better characterized and might be able to be licensed, versus working with a U.S. company? How has this influenced the way you think about things? Bruce Booth Yeah, look, if you're a venture investor today and you're not thinking about China and sourcing innovation from China in some way, shape, or form, you're missing the boat. As Tim said, the place is transforming, and as a global source of innovation, it's going to be an important contributor. We have to acknowledge that, embrace that, and rise to the challenge. Whether you're starting companies out of those assets—we've done a few of those—or you're in-licensing some of them into existing portfolio companies, it's going to be important. I would say innovation has lots of forms. Innovation around molecule origination is 1 piece, but then how do you think about developing it? How do you think about the translational medicine approaches and the early-development approaches? There's lots to innovate around where I think the talent pool in the U.S. is particularly well equipped. I see it as more of an opportunity. I do think, for companies that are working on new things today, the whole way you disclose what you're working on will change, with companies keeping a lot more as confidential trade secrets. There'll be fewer early filings. Typically, biotechs try to file patents early as a way to say, “Hey, I have issued patents. That'll help me raise money.” I think there'll be a lot more behind the scenes—confidential, undisclosed—and companies will wait until the last moment, when they might be back in the clinic and dosing, before disclosing the targets they're working on and the things they're doing. I do think, in general, that lack of transparency around what folks are doing is a bad thing in the global sense, but it's going to be an important way for companies to protect themselves from super-fast followers showing up in China quite quickly. Chris Garabedian Yeah, no one's going to bet against a China fast-follower strategy, so you want to go as far as you can. Well said. Sam, let's come back to you. Obesity is still in the news—deals, dealmaking. There are 2 deals that we'd love for you to cover. Sam Fazeli Yeah, sure, Chris. Of course, 1 of them is with a China biotech. But if you permit me, 1 of the things that China has suffered from in the AI race, DeepSeek aside, is its lack of access to NVIDIA-type chips. If you wanted to make them yourself, you need access to the sort of machines that ASML produces—the double-decker-bus-sized lithography equipment. Pretty much nobody else can make those because of the detail that you need to think about when it comes to the lithography part of it. Here, they have no barrier. The barrier here is how many people you have, how much money you throw at it, and how good your scientists are. I've thought this for the past 10 or 15 years; I've been going on about China. Having gone to China, I think they're doing an amazing job, and I'm pretty sure that the output of research from there, along with publications and funding, is just going to continue to get pretty close to what the U.S. does, especially if the U.S. starts entrenching a little bit on that front. Novo Nordisk did 2 deals this week, which is interesting because they’re both in obesity. You would have thought they had everything they possibly needed in obesity, but one thing they’ve got is the deal they did with United Laboratories for UBT251, which has just completed phase 1, for ex-China rights, basically. This deal involved a $200 million upfront payment and up to $2 billion in total contingencies or milestones. It’s a triple agonist. From what I understand, it’s 1 molecule with GLP-1, GIP, and glucagon, so it’s similar to Lilly’s retatrutide. Now, Novo has something like this, but we don’t really know the details of exactly what the 3 elements are. It might be GLP-1, GIP, and amylin, or whatever, or it might be 3 separate molecules. I don’t know exactly whether they’ve ever disclosed whether it’s 3 separate molecules or 1 molecule in terms of 1 large peptide of 40, 50, or 55 amino acids. The company has data showing 16.6% weight loss at 12 weeks, which is pretty much in line with what we’ve seen from competitors. It’s an injectable, of course, so it does look like it gives Novo quicker access to this triple-agonist world if they want to go down this road. Lilly is in phase 3 with retatrutide, and we should start seeing data for this beginning in late 2025. They’re a little bit behind, but honestly, this is such a fast-moving field—it’s almost as fast-moving as AI in the obesity world—in terms of the snakes and ladders that we’re going to see here. One thing I just want to keep reminding everyone of: Lilly’s CEO, Dave Ricks, used a phrase once that I loved. He said, “Look, if you have the same mechanisms, you’re going to get the same efficacy. There’s no magic here.” I don’t think there is any magic here. You might be working on the margins in terms of 16%, 17%, or 15%, but they’re all going to work. The question is how you’re going to manufacture them, get them to patients, and cut yourself a market share, which, of course, for Novo is not an issue, given that they’re one of the biggest players. On the point of drugs in development, we’ve done a quick assessment. There are more than 100 drugmakers pursuing obesity, with 160 drugs in development. That compares with 120 the last time we looked at the analysis, which was in August last year. Over 40% of them were in phase 2, and a whole bunch came from China. Of course, when you look at the deals that were done in China, that includes Merck with Hansoh, AstraZeneca with Eccogene, Novo with United Laboratories, and, of course, Kailera, which I think we call a newco—not just a spinout, but a newco. The deal that Novo Nordisk did today is actually with a company that I hadn’t forgotten about, but I’d given up on, and that’s Lexicon Pharmaceuticals. Lexicon was in the running for SGLT2 drugs, of which there are 2 significant ones on the market: 1 from Lilly and 1 from AstraZeneca. They’re oral drugs for diabetes. They do give you some weight loss, mostly because of the reduced availability of calories in your bloodstream, because they promote the excretion of glucose through your kidneys, and that does have some side effects that it brings with it. Their drug eventually got licensed to Sanofi, and Sanofi eventually gave it back and gave them $260 million, so I’d forgotten about them. Today, of course, this deal comes with $75 million from Novo Nordisk as an upfront payment for a preclinical asset. The mechanism of action is an ACLY inhibitor, so I have to really think about this because I haven’t come across this mechanism before. We’re digging into it a little more to get our heads around what the opportunity is here. It has an effect on the feeling of fullness and also an impact on energy expenditure. It’s a completely novel mechanism, which is interesting in the portfolio, but $75 million for a preclinical asset sounds pretty punchy to me. Chris Garabedian Yep. Absolutely. Thanks for that, Sam. Related to the obesity field, a subset of obesity is a genetic rare disease called Prader-Willi syndrome, for the audience that’s not familiar. We just saw the first drug approved from Soleno. The drug is called VYKAT XR. It’s actually an old drug, but in an extended-release form of an old generic drug. The data was pretty compelling, but this is a company whose stock was trading at $4 to $5 a share about 18 months ago, and today it’s trading over $70 a share. I think a lot of the conventional wisdom was that they would get approved, but the stock still popped this past week on the approval. They’ve communicated the pricing, and it looks like it’s weight-based dosing. It looks like they’re going to be at about half a million dollars for the average weight of a patient with Prader-Willi. Their projected peak sales are about $2 billion. Very interesting development for this company. It just shows you that there are companies that fly under the radar and aren’t getting attention, and when they produce a data set that can get FDA approval, it can catalyze a company very quickly to billions of dollars of value. Prader-Willi syndrome is one of these conditions where you mentioned appetite and suppressing the feeling of hunger. Hyperphagia is the main characteristic: they never feel full. They’re constantly eating, and they have a Hyperphagia Questionnaire used in clinical trials. They showed a pretty extensive reduction, going from about 9-plus points on the scale to less than 3 points on the scale, and a placebo-adjusted difference of 5 points, which is in their label. So they’re approved. That was big for those of us who’ve been in rare disease. I know, Bruce, you’ve done a lot in the rare disease space. Many have attempted to develop treatments, and many knew that this was an important population. It was nice to see the first approval. Sticking with rare disease, Wave announced additional data with its exon 53 drug and its plans for submitting to the FDA. The most compelling piece of the data was a time-to-rise improvement of more than 3 seconds, which is significant. This is called the Gowers maneuver, where they start in a sitting position on the floor and time how quickly they can get up. They also had a lot of biomarkers that suggested creatine kinase and fibrosis reduction. They hinted that they have other clinical data pointing in the right direction, including the North Star Ambulatory Assessment and other measures. They said that the FDA is open to or welcoming their submission. Like a lot of DMD companies, they’re comparing with Sarepta and other approved drugs for dystrophin as a biomarker to show that they’re producing more dystrophin and that they have some clinical outcomes to support that. Again, it’s a small study: 11 patients treated, it was open-label, and they compared with historical controls. It’ll be interesting to see, with this new FDA, whether they go to an advisory panel. Are they still open to these types of approvals on small data sets? Where is that sentiment around DMD? I’ll also add that exon skipping is the same mechanism and technology on which the first 3 drugs from Sarepta were approved, and with the recent death associated with Sarepta’s gene therapy, it still looks like exon skipping has a place in the armamentarium for DMD. Those were the updates there. Bruce, any comments on that? I know you guys look at a lot of rare disease and have invested in both of these spaces, if I recall. Bruce Booth Yeah, that is true. We’ve invested across the board in those rare diseases, and it’s great progress. Zafgen was one of our companies that did the first phase 3 study ever in Prader-Willi and helped validate that particular hyperphagia questionnaire. It’s nice to see some successes in that space for a community that’s never had real medicines made for it. It’s awesome. Chris Garabedian Absolutely. All right, Sam. There was some CG Oncology data released this week. You want to cover that? Sam Fazeli Yeah. Yet another conference, also in Europe: the European Association of Urology. CG Oncology is in the world of treating bladder cancer. They have a drug that I’m going to call CTO. I’m not going to try and pronounce it here, because every time I try, it doesn’t work out. It’s an engineered, conditionally replicating oncolytic immunotherapy that’s delivered into the bladder. It’s very similar to what folks do with BCG and not that different from current treatments. The current excitement is Johnson & Johnson’s TAR-200, otherwise known as the Pretzel, which is a tiny, relatively small loop that’s drug-eluting. It gets delivered into the bladder, has chemotherapy in it, and releases that chemotherapy. It’s shown really good data, and these guys are chasing the same kind of patient population: non-muscle-invasive bladder cancer. You obviously don’t want to go beyond the bladder into the systemic circulation, because you can’t deliver this systemically. Seventy percent of new bladder cancer cases are NMIBC. In their phase 3 trial of 112 patients, they had a pretty decent response, with complete responses that didn’t quite get up to the numbers we’ve seen with TAR-200, particularly on the CR rates at 12 months. CR is what people are after here because that’s what you can get with these localized therapies. There are differences in the patients’ backgrounds in terms of carcinoma in situ, papillary disease, et cetera, so that complicates the comparison. But to us, the data looked pretty decent, and their side-effect profile looks a little bit better. So it really does position them in what I believe to be a competitive position, at least from a data perspective. It would be nice to see further data from other cohorts of this trial, which is called BOND-003. We’ll look forward to seeing some of that. It’s also a good comparison for Protara Therapeutics’ TARA-002 ADVANCED-2 trial, which we’ll be looking at as they report. The problem for all of these folks is, who wants to go up against Johnson & Johnson? They’d need meaningful partnerships or to be bought out in the end to be able to compete. I’ll leave it there. Chris Garabedian Yeah, that’s great. Tim, I’m going to come back to you. I’m always impressed with you—and both you and Bruce—in terms of your bandwidth to do analytics of data and really forge new communications for the industry. I think you guys are really helping our audience and the industry with insights. You also recently participated in a history-of-aging report. Do you want to highlight what the learnings were there? Tim Opler Yeah. The difference between Bruce and me is that I’m a former academic, so my reports just go on forever and ever and ever, whereas he kind of gets to the point. I put out a very lengthy report on aging, and I’ll give you the 2- or 3-minute summary. What we call pharmaceuticals began in 1620 through the work of Paracelsus. Paracelsus’ main goal was essentially to achieve human immortality. If you look at what was called pharmaceuticals before that, which is really things like herbal medicines and various forms of witchcraft, whatever, the main goal was to help humans achieve immortality. What we found as we reviewed the history of work on aging is that it really has been the principal objective of most thinkers about health and medicine for many millennia. What’s so fascinating is that today there are hundreds of thousands of research papers on aging science, and yet if you look at the biotech industry, I would never call you or Bruce conventional, Chris, but let’s just call you guys mainstream investors—there are actually very few mainstream investments made in the field of aging. That’s because I think there’s a widespread view that the science is not translationally ready. The current report I put out was meant to show where the literature is now. If you read the report, it takes a while because it is reasonably lengthy. What emerges is a sense of 3 therapeutic strategies that appear to have substantial validity. One of those strategies is to remove senescent cells. Senescent cells are cells that stop replicating, and it turns out that they do lots of bad things. Another strategy is to reprogram cells to a younger phenotype. That sounds like total science fiction until you read all the papers and see that it’s possible. A third strategy that’s also very interesting is to actually replace cells. We’ve long had things like organ transplants, and it’s also possible to do cell transplants. There’s some work coming out of a lab at Stanford that would suggest that’s also a very viable strategy. It was very interesting to trace the history of this field and why write this long report on aging. The main point I’m trying to make is that this field is going to be translationally ready, and it will make everything else we work on in our field look small. It will make even obesity look like a very small indication. I’m going to be putting out another report shortly that will walk through how it all needs to play out for it to work. I’m not telling anyone, “Hey, I’ve got this pill you can take to make you live to 200 tomorrow.” But the science is moving very fast and in a very decisive and interesting way. Chris Garabedian Yeah. Look, I think Bruce would agree. The science usually precedes the ability to translate and develop drugs. Sometimes we’ll be in 100% agreement on the science of a field but don’t feel that it’s ready to figure out the clinical and regulatory pathway for a given technology. So even if you don’t see a lot of investment in an area, many venture investors will not dismiss an emerging field like that. We’re close to the hour, so let me just wrap by saying we’re still seeing some wind-downs. Lyndra was a high-profile delivery technology from Bob Langer that got a lot of investment, and they announced their wind-down. They couldn’t raise money for their pivotal schizophrenia trial. It seems we have other companies, like Entrada and ElevateBio, that announced double-digit layoffs. Just a postscript on 23andMe: the writing was on the wall, but they’ve officially declared bankruptcy. They couldn’t find the buyer or investor to come in, and Anne Wojcicki, the CEO, says she may still try to buy the company. But I don’t know—that’s a tough road. If you couldn’t find the investors when you were the CEO, and now you come back and buy it, how is that going to change the story? The co-founder of 23andMe, Linda Avey, posted on both LinkedIn and X about the genesis of the company, her experience as CEO when she was replaced, and the lessons learned. It’s worth a read to hear about a very high-profile brand that wasn’t able to make it. Any last comments—Tim, Bruce, Sam—to close us? Tim Opler No. Bruce Booth None for me. Just great conversation. Thank you, Chris. Sam Fazeli Yep. Thank you. Have a great day.