# Episode 149 - July 25, 2025 Biotech Hangout · 2025-08-11 · 59 min · https://www.youtube.com/watch?v=cKLrhFEwXDI ## Transcript Eric Schmidt Brian, Sam, Paul, welcome, and congratulations on surviving a wild and wacky week. I guess the news of the week has to be, once again, the Sarepta drama. I know we covered Sarepta in quite a bit of detail on last week’s Biotech Hangout, but it seems like it’s a whole new can of worms again this week. Maybe, Brian, you could take it away and inform our listeners about what happened in this crazy situation. Brian Skorney Absolutely. It’s funny—I was listening to the Biotech Hangout last week, and as interesting as the Sarepta news had been up to that point, I think the real sparks started flying just as the Hangout was finishing up. ### Sarepta Faces A Safety Crisis To recap what happened last week, there were a couple of events in sequence on Wednesday. Sarepta made a big announcement about a restructuring plan. There had been 2 deaths this year in the commercial experience with Elevidys, its gene therapy for Duchenne muscular dystrophy, both in nonambulatory patients. This was leading to concern about what Elevidys sales were going to look like. There was clear hesitation among physicians and parents to continue using it, although there was still demand and they were still seeing hundreds of millions of dollars in sales in a quarter. There was concern that these safety events were accelerating. Sarepta had stopped shipping to nonambulatory patients but was continuing to ship to ambulatory patients. Talking to investors, I know there was a lot of concern about whether they would be able to meet debt payments over the next 2 years and some of the milestones related to their partnerships. They had this big call to investors and provided a lot of information, although a lot was not said on that call. A debate started on Friday about whether any safety events were driving the decision to stop the programs in the limb-girdle muscular dystrophy indications they had been targeting. They had also been talking about similar indications potentially addressable with a DMD approach using an AAVrh74 vector and a gene to reconstitute the missing protein in these diseases. They didn’t provide a direct answer. I think the assumption, because they didn’t announce anything, was that there wasn’t anything else going on. Then, Thursday night, reports emerged that there had been a death in one of the limb-girdle muscular dystrophy studies. It was a study of only 4 patients. There was a damage-control conference call Friday morning to explain that they didn’t think this was a material event. I was on the call and asked pretty starkly where their threshold for materiality was. There’s certainly disagreement on the Street and within the company about what constitutes a material update. That’s where we left off last week. As that was finishing up, it started breaking that the FDA had asked Sarepta to voluntarily stop shipping Elevidys, even to ambulatory patients. Essentially, the FDA wanted to stop all shipments of Elevidys to any DMD patient while they worked out what the outcome was going to be. Friday night, Sarepta said that it was refusing to follow this request for a voluntary halt to shipments. Of course, a lot of people who advise in this industry would say that when the FDA asks you to voluntarily do something, it’s not necessarily a request—it’s more or less a demand. By Monday, Sarepta had relented and agreed to halt shipments of Elevidys. Now we’re in this limbo phase of trying to understand what it will take to get the drug back on the market. Almost every 6 hours, new information was breaking. Someone high up in the FDA had essentially positioned this as potentially an insurmountable hurdle for Sarepta to ever get Elevidys back on the market. Not too long afterward, it sounded like someone within the FDA was relenting a little bit and saying that if Sarepta could demonstrate a better safety profile through a different manufacturing process or a different dosage in 10 to 12 patients, maybe there would be a path to a market. I think that’s where we sit right now. The debate is really about what constitutes a hurdle for getting this drug back on the market. Is the hurdle going to be insurmountable? Vinay Prasad, prior to his appointment, had been a very outspoken critic of Sarepta’s Elevidys approval and of Peter Marks, his predecessor, and the decision to approve it over the objections of the FDA staff. What will he do? So far, he’s been fairly active in his role as CBER director and chief medical and scientific officer of the FDA, and we’ve seen a number of decisions come out of CBER that represent a totally different tone. It’s hard to say that approvals have been moving forward since he’s been appointed. I think there’s a big question about whether we’re in a new regulatory state where you’re setting a really high bar for getting a drug approved. This may also be a problem for the sector for a long time. It’s going to be politically difficult. If the FDA is really setting up an insurmountable hurdle to get this drug back on the market, they’re certainly going to receive backlash from the DMD advocacy groups, which are very vocal and powerful. To some extent, the DMD advocacy groups had a diminished enthusiasm for Sarepta. But there’s something to be said about a regulatory agency saying, “No, you cannot have this product anymore.” Even if there’s agreement among physicians, parents, and advocacy-group members that the risk-reward doesn’t make sense, there’s still the question of denying parents and physicians an option of choice here. Eric Schmidt Brian, your connection is going in and out just a little bit. You might want to check that. I don’t know if you’re near a Wi-Fi connection, but we’re having a little trouble hearing you. Thank you for that—there’s a lot to unpack here. Maybe I’ll open it up to the broader team on what the FDA did right or wrong here. Sam, it sounds like you’ve got some views on how this should have played out or could have played out differently. I’d love to hear where your head is. Sam Fazeli Eric, I think quite a few of us around this conversation—I don’t know the details, but we’re parents. First of all, as I tweeted earlier this week, my heart goes to any parent who had this hope and is now facing potentially not having that hope. But let’s get back to the situation. From a regulatory perspective, the job of the FDA is to approve drugs with proven efficacy and a risk-benefit profile that favors approval. When we went through this approval, I remember it so well. I also tweeted about the episode where Brad and a couple of you guys were on and we discussed this, when the FDA first expanded the approval to include a variety of children where the data was perhaps a little bit more sketchy and the drug was approved on the basis of perhaps not the strongest efficacy signals. We’ve all had our conversations about that, and it did give us all a memory, or a recall, of what happened with the Alzheimer’s drugs, although there you’re not dealing with very young children, which is even more emotive, I suppose. At the end of the day, from a hard regulatory perspective, it is the FDA’s job to decide whether a product should be marketed based on the efficacy we know about and the side-effect profile. If it can be proven that the side-effect issues are entirely in nonambulatory patients, which seems to be the case, maybe there’s a way to keep the product on the market. This is not an ordinary side effect, right? This is a Grade 5 event. These are deaths, which are awful. As Brian very clearly said, this is going to be a political hot potato. What’s the right thing to do here is very tough. You do always come back to the question: If there’s absolutely no choice, should the parents not be given the choice of making that decision for their offspring, if it doesn’t affect anybody else at all? It’s very hard. I really can’t put myself in the parents’ or the regulator’s shoes and make that decision, to be honest. Eric Schmidt Paul, what are your learnings from this mess of a situation? Paul Matteis I actually feel like you and I, and others, may be more critical of the FDA on other topics today. I give them some credit here. They acted relatively quickly. There’s been reporting around Sarepta, including the STAT reporting, about whether the company had been sharing all the side-effect data with the FDA. We can look back at what Prasad had said about this approval from the beginning and debate whether there were biases here. But the FDA acted quickly when there was a severe safety issue, and they might not have been getting all the safety information. This all happened really quickly. The only thing you could maybe fault them for would be the impact on the community. A lot of the details have come through really good reporting, but maybe a lot of this stuff shouldn’t be coming out that way and trickling out that way from a pure public-health perspective. But I guess the way I've always seen it is—and again, this is my bias—from the perspective of covering many other rare disease companies, I've always felt that Sarepta has benefited from a confusingly lower regulatory standard dating back to Exondys 51, and then ultimately not doing confirmatory work there. I think hindsight is obviously 20/20, but I don't feel like this whole saga is informing my view of how I'm looking at other biotech companies in the space. I do think there is this nuance going on in gene therapy where we're seeing a lot of companies get breakthrough designations or accelerated paths forward, but some of the recent regulatory headlines, as Brian was alluding to, have maybe been more negative and less flexible on the margin. But I've always viewed the Sarepta plight as a little bit of an outlier in the context of the rare disease space. So, thinking about it from the investment view, I just don't really know how I would extrapolate this into anything else. It's a really tough decision, and I totally understand the patient side, but I can definitely understand the FDA's perspective here. Again, I commend them for moving quickly. Eric Schmidt Let me just pick up on one thing you mentioned, which is the communication channels that the FDA has used to disseminate its views. I think you're right that there's been communication through the media, through the great reporting at STAT News, Endpoints, and other channels. It is certainly unorthodox and probably not ideal. Initially, I guess I was quite critical of this senior FDA official who seems to be spilling the beans to the media before, say, patients or their families—or, most important, even investors. We like to think we're important, but we're less important than the patients and their families, and I hope, honestly, that that communication channel is cleaned up and doesn't continue. On the other hand, the more I think about it, I kind of understand that the FDA has been in a difficult place, right? It did go to the company and ask for the drug shipments to be paused and was refused, and clearly the communication between Sarepta and the FDA has broken down. That might be another whole topic of discussion: why it's broken down and who's at fault. As Brian mentioned, it's pretty unusual for a company to refuse to do something that the FDA requests. Having been put in that situation, it may be that the FDA had no other choice. It wanted the drug off the market. Essentially, it had to use the court of public opinion to force that, and maybe the most expeditious way of getting what it wanted was to go to the media. So this is starting to all make sense now from a communications-pattern standpoint. But I have to say, I don't think it's ideal. It is a very, very messy situation for all involved. Paul, I think you're right. I hope it's contained, right? The worry here is that this further puts generalist investors off our sector. It's pretty rare that we see a company that was going to have a $4 billion or $5 billion top line now, weeks later, become a potential bankruptcy risk. That is stark and unfortunate for everyone involved, including the investors, and really puts a pin on just how much risk is involved with our sector, even for those companies that seemingly have it made. But Brian, you're closest to this situation. I think you get the last word on Sarepta and Elevidys. How do you think this should or will play out? Do you think the drug will ever make it back? Brian Skorney I think the whole situation is, frankly, tragic. I understood why Exondys 51 was approved. I understood why Elevidys was approved. If I were a regulator, I probably wouldn't have approved them myself. One of the issues with approving drugs with low levels of evidence is that you get into this situation where removing things from the market is a horrible, horrible decision to have to make. You read these anecdotes from parents who have kids who have been treated with the drug, and they think it's enormously effective. Parents who have been trying to schedule their kids to get this drug and now don't have that option—it's really a horrific thing to go through, whether it gets on the market again or not. I almost think it's going to be a political decision, right? I think you have, again, Vinay Prasad, who is a very stringent regulator. This goes way beyond just Sarepta. I think the world of Vinay; I think he's one of the smartest people I've ever met. I've learned a lot from his analysis, but he is a much more stringent regulator than a lot of us would be. When you read what he says and the way he views clinical trials, it's certainly a higher hurdle if he is the primary decision-maker at the FDA. But I also think he is pushing on something that he may regret opening up, and there is going to be a battle here. It's going to be one of public opinion, and it's going to be messy. I just think back to when Avastin failed in breast cancer and the drug was pulled. Despite the evidence, it was a very, very tough battle. Even Makena, which really did not have advocacy-group support the way that DMD treatments do, was a big fight. So what the fate is, I think, has yet to be written. Eric Schmidt Okay. Well, certainly not the last time we'll be talking about Sarepta on Biotech Hangout. Brian, you already alluded to another topic of discussion, which is Dr. Prasad's rigor in terms of new drug approvals. We'll speak about the situation and circumstances with Replimune's RP1 for melanoma in a bit, but before we get there, the other FDA topic of discussion this week has to be the new CDER director, Dr. George Tidmarsh. Sam, do you want to introduce this concept? ### Tidmarsh Brings Industry Experience Sam Fazeli Yeah. I think what's really good here is that George Tidmarsh, who's just been appointed and put in charge of the Center for Drug Evaluation and Research, is different from the other 3 folks—Jay Bhattacharya, who is not obviously with the FDA, and Marty Makary and Vinay Prasad—in that he actually has an industry background. I'm sure that the others had interactions with industry and perhaps advised some industry. I don't know exactly, but certainly here we have somebody who is a veteran, if you wanted to use that phrase—not meaning old, but meaning somebody who's got experience at 4 companies, from what I counted: La Jolla, Horizon, Coulter, and Threshold Pharmaceuticals, at different times and with various types of products that he brought to market. He's replacing Jacqueline Corrigan-Curay, who was in the position and actually resigned and announced her retirement last month. It's one of the top positions to be in. This is after Corrigan-Curay was in charge as acting CDER director since January, after Patrizia Cavazzoni stepped down. So I see that as a positive: somebody who's actually been in the industry and understands what it takes, certainly at smaller companies, to get drugs through to a point where they get to the regulator. I would say also that he's, in many respects, of the same mind as Prasad and Makary. I always get that wrong—in terms of the way that they think about things and the ideologies they've had, the policies that they thought were wrong previously, for instance, with the COVID-19 pandemic. Those are things that I think are relevant, and I think it could be interesting to see what happens when we come to discuss direct-to-consumer advertising, prescription-drug advertising, et cetera. What would be good to see is some kind of alignment between CDER and CBER, because one of the problems with the FDA—and I think folks are going to talk about this now—is that it wasn't immediately obvious that the 2 branches, or 2 divisions, actually thought the same when it came to drug approvals. Some had lower standards—or a lower bar, let's put it that way. Sorry, not lower standards, a lower bar—and others were really holding drug companies to account for everything that they could possibly do. So that's the way I see it. I'd love to hear from others. Eric Schmidt Yeah, I think you summed it up well, Sam. On the one hand, Dr. Tidmarsh is coming from a very industry-centered background. He's run biotech companies. He's founded biotech companies. He knows the industry and he knows investors, so that's got to be a positive. He'll be the first of these 4 HHS leaders—Bhattacharya, Makary, Prasad, and Tidmarsh—to have really spent time in our industry, which has to be a positive. As you also laid out, on the other hand, he's coming to it from the same perspective that those outsiders have in terms of being very critical of the agency. I think he actually met Dr. Makary at Dr. Bhattacharya's anti-COVID conference, at which point these academics were criticizing the prior administration's establishment for having stifled scientific discourse, right? So that's kind of how they all got their jobs. They were all outsiders looking in, critical of the censorship of free speech, and it’s going to be really interesting to me now that they’re insiders, now that they are the establishment, to see how they’re able to operate. It’s maybe a little bit easier sometimes to criticize than to do. We just talked about a situation around the Sarepta Elevidys from either side. It isn’t necessarily easy to become the establishment and then still embrace those ideals—transparency, debate, openness, and so on—when you’re running a large organization like the FDA. I’m really curious to see how not just Dr. Tidmarsh, but also Makary and Prasad, continue to adjust their ways, as they already have, but will need to in the future if they want to maintain control and operation over such a large, established group of scientists and review staff. But, Paul, Brian, what do you guys want to add on this? Paul Matteis Yeah. One of the things I’d just like to talk about—I talk about this with clients—is the odd bedfellows that seem to have been made through disagreements on COVID. What’s really striking is, like you said, we sort of see this uniformity from Trump to RFK Jr., Makary, Prasad, Tidmarsh, and Bhattacharya, all being very critical of the COVID mandates and the way the prior administration handled the pandemic. Not to understate the societal impact that COVID had on the entire world—it was really tremendous—but when you get beyond COVID, there’s not that much uniformity in terms of a world health care view among a lot of these guys. I kind of mentioned this in the discussions about Vinay. But you already see it, and one of the things I thought was interesting on Monday was seeing Laura Loomer go all out to criticize Prasad’s appointment. He does seem like a very odd choice to be in such an activist role as a CBER CMO/CSO appointee to the FDA. When you hear, tonally, the GOP and Trump being very pro-flexibility, and even Makary saying things like, “If we just have biological plausibility, we could approve things on that,” that is the essence of how an Elevidys would get approved, right? Biological plausibility: You show it in rats, and you could approve it. Makary sort of made those statements about ultra-orphan drugs. But it’s very dichotomous with a lot of the framework of clinical design and the approach to regulation that I think he’s been very clear about over his entire career. If you read Ending Medical Reversal, it does seem at odds, and I just wonder how long they can play nicely. Yeah. I think from my perspective, we’re still really figuring out who this FDA actually is. There have been a lot of paradoxes so far. On the one hand, what you just alluded to, Skorney—Makary’s commentary on biological plausibility—that sounded like Peter Marks 3.0 from the perspective of flexibility and industry-friendliness and gene therapy. We’ve seen a lot of companies in the rare space continue to get regulatory agreements that look very favorable, like small pivotal, open-label trials and things like that. On the other hand, you have this whole piece with Prasad, with all the past commentary he’s had, and then some of the recent things, like what happened with that DMD cell therapy for the cardiac component and also the CRL last week. Eric, the other thing you were saying about this concept of transparency and discourse—I can hit it quickly because we don’t have to spend a ton of time on it—but there was this panel this week around antidepressant use in pregnancy. I cover a lot of stuff in psychiatry, and my background before being on Wall Street is in neuroscience, so I think a lot of these questions are really interesting. It’s a laudable goal to question certain medical decisions that are made by default without great clinical data. There haven’t been incredible randomized controlled trials of antidepressants in pregnant women because those studies have ethical issues. Holding an open discussion to talk about risk-benefit sounds very interesting in a vacuum. But when you look at that discussion and how it played out, you have a number of people on that panel who have a reputation for being against antidepressants in general. Again, I point people to the STAT article this morning. Some of the quotes from that are just wild, particularly when I think about the depiction of mental health. When I take a step back, was that an open discussion, or was it a discussion geared around a seemingly preset conclusion to just question the orthodoxy? That’s my long-winded way of saying that we were talking about this with one of my colleagues internally today, and I still feel like we’re really figuring out who this FDA actually is. When we think about stocks and drug approvals, my FDA meter—on the degree of flexibility and the degree to which this will look like the old administration versus the new one—feels like it’s changing every week. I’m leaning maybe a little bit more cautious now. I still feel like there’s going to be flexibility, but it’s hard. We’ve got a lot of countervailing points of evidence about who these guys are and what their governing philosophy is going to be going forward. Do you guys agree? Eric Schmidt I do, and I’m going to come back to something Brian mentioned when he was talking about the Sarepta circumstances: Some of these decisions are increasingly coming down to a single person, a single leader—either Dr. Prasad or Dr. Makary, we presume, or maybe someone who reports directly to them. We don’t know, but they’re not seemingly being made with the rank-and-file constituents, the review staff at the FDA. There was another report out this morning on how those rank-and-file review staff are increasingly heading for the exits. Maybe the decisions are being made out of necessity by individuals in higher-up functions. Or maybe the fact that the senior leadership team is willing to overturn so many different decisions by the rank and file is causing that exodus of talent. I don’t know, but it’s another trend, and one that I’m very mindful of. ### Replimune Hits A Regulatory Wall I think it’s one that we’re about to talk about as we segue into what happened with Replimune. For those of you who are not aware, Replimune got a complete response letter, or CRL, earlier in the week. It has a drug called RP1 for refractory melanoma. Unfortunately, there are no good therapies for second-line-plus melanoma patients, and response rates for the standard of care are somewhere in the single digits. The data that Replimune was able to provide in support of its BLA was fairly good. The drug has a response rate in the low 30s, and the durability of response is actually quite prolonged. It’s an immunotherapy, so it does benefit from long-term tumor control. What the drug did not have was a randomized controlled study. It was well known for many months that they were going to try to get approval from the single-arm study. As we all know, that’s not something Dr. Prasad has been in favor of, either in his written work before coming to the FDA or in some of his quotes through his FDA leadership. But through his listening tour, we did get a sense of the flexibility you were mentioning, Paul—that he might be more willing to accommodate industry in cases where there was significant unmet need, plausibility of mechanism, and certainly some evidence of activity, all of which RP1 had. The company really was expecting to get approval. They were acting in ways that would lead you to believe they thought they were going to get approval. Their mid-cycle and late-cycle review meetings went well, they had breakthrough designation for the drug, and they were all teed up to announce what we thought would be good news this week. Unfortunately, the CRL threw them for a spin. It does seem like, in this case, it was someone higher up at the agency—we presume Dr. Prasad—who made the call not to approve the drug, saying that a single-arm study was not adequate to support approval in oncology despite the unmet need here. I’ve got many thoughts on this, but I’ll pass it on to others. Maybe, Sam, you want to speak? I know you follow oncology very carefully as well. Tell us how you think this should have played out. Sam Fazeli Yeah. So, look, when you look at the data, first, they had the accelerated approval designation. That usually helps you get through the process, even though you’ve got a single-arm study. When you look at the data, the overall response rate was, as you rightly say, in the 30% range. It did deteriorate a little bit from one readout to the next, but it was still above 30%. Pretty decent complete response rates. Half of that—basically, half of that ORR—was from complete responses, which is great. It's an off-the-shelf product. A bunch of patients had stable disease, and you're rightly saying this was a group of patients that don't have a lot. But what happened in the intervening period is that Amtagvi was approved. Now, that's not an off-the-shelf product. It doesn't have the same rate of CRs. Although this is not a head-to-head comparison, there are lots of reasons why you would be very careful in making these kinds of comparisons, but that's just what we have to do. Yet it was approved. So, to a degree, you could say—in the FDA's defense—that the standard of care changed a little bit. But in reality, oncologists are good at dealing with these situations. This is the same story as Blenrep, and I'm sure we can talk about that again, because last week we thought it might get a CRL, and they didn't. That's a multiple myeloma drug. Oncologists are good at dealing with these situations. You give them a product, and they find the right patients to treat with it, which is why it's so hard sometimes to model an oncology product in these relatively niche settings. If it were me, I think I would have had the opposite view from what Brian said about Sarepta. I would have probably approved it and let the physicians decide how to use it. Again, Dr. Prasad knows how discerning oncologists are. Maybe the worry was that in the community they would be a bit less discerning, but I'm not sure these patients end up in the community at the stage that they arrive at. So that's my thought process. It's unfortunate, and I don't think it has any read-through to anything else. Bottom line, it's possible that the FDA can say, “Look, the standard of care has changed. You should have had a control arm. We know that Opdivo is active generally, or checkpoint inhibitors are very active in melanoma. You should have had a control arm.” But they could have told them that a year ago, just in case. Eric Schmidt Sorry. Yeah, no, I think you're right, Sam. I think it is that kind of last-minute change in tone, that arbitrary nature—maybe that singular individual driving the change—that is potentially so disruptive to a company like Replimune. The unfortunate thing here is that they don't have the resources to do a randomized controlled trial. If they are unable to successfully lobby for accelerated approval, which I assume they will not be able to succeed in doing, this drug's never coming to market. It's going to die. And I think if you had taken this product to KOLs, they would have supported the efficacy here. Obviously, it is an imperfect study, but most of the opinion leaders that we've spoken to believe the drug does work and should be offered to their patients who don't have other choices. So it's a little surprising to me, the way this played out from a decision-making standpoint. We never went to panel. We didn't get the opportunity for KOLs to weigh in and provide their expertise, which I would have liked to have heard. But Brian, Paul, any thoughts again on the nature of this decision? Paul Matteis To me, it's just like we're still figuring out what the deal is, for lack of a better way to say it. I keep having companies tell me over and over, “Nothing has changed,” or you see this or that agreement that appears bullish at face value. I'm not saying I don't believe what certain companies are saying they got in writing from the FDA. But I'm very, very interested in how the rest of this year unfolds when we see a number of these other products that are coming to the FDA with some element of flexibility required for approval. I think we need to see, for lack of a better word, some wins in this kind of arena to again help us stay comfortable that, for small biotech, the FDA is as open for business as a lot of investors hope they are. Eric Schmidt Go ahead, Brian. Brian, we can't hear you. Okay. Hopefully we'll get Brian back somehow. Brian Skorney Can you guys hear me? Speaker 2 Yes. Speaker 3 I can hear you. Eric Schmidt Okay. All right. Oh, there you are, Brian. Go ahead. I think we need to all chip in and buy Brian a new phone. We'll see if he's able to come back in. But Paul, I agree. It's very well said. It seems like almost anything that was agreed to in the past needs to be agreed to again today under the new administration and leadership of the FDA. There's going to be a risk of surprises going forward, and a risk of uncertainty for sure. We all know that investors hate that. When it comes down to increased uncertainty in our industry, that means increased cost of capital, and that means something that's not directionally where we want to be for stock-price movements. So we can hope for the best, but we need better clarity and transparency. Paul Matteis Eric, one of the topics we talked about earlier was what does this mean for investors? It creates uncertainty, et cetera. But when I look at one particular story that's running with a single-arm trial, and as a result, actually, that stock price has been fine, it didn't suddenly seem to be a massive decision by investors that anybody with a single-arm study is not going to make it. And you have to admit, in that particular case, there is a standard of care that has changed. It's Carvykti. There are other agents here, but you have a drug that potentially has a better side-effect profile. This is contested, I know, and there are a lot of moving parts there. But perhaps investors don't just jump to a final conclusion after such events every time, which is hopefully healthy to see. Eric Schmidt Well, I know you want to talk about Blenrep as well, speaking of myeloma, Sam, so maybe that's a good time to just mention what happened there? ### The FDA Sends Mixed Signals Sam Fazeli Yeah, very quickly. Basically, they had a pretty bruising outcome last week. Was it last week? I can't remember now. There's so much that happens in a short period of time. The FDA's ODAC basically voted against the approval, and it was a pretty clear vote, right? It wasn't like a 4-to-5 or 3-to-4. In one of the trials, it was 7-to-1. So the vote was very clear. What's interesting is that it would have been an obvious thing for the FDA to do to give them a CRL, which they didn't. They've extended the PDUFA date. We have looked at a whole bunch of other data sets that the company has, which do show an opportunity to come back perhaps with a modified dosing request to the regulator—maybe 1.9 milligrams, et cetera. But just to summarize the issues they had, they said the side-effect profile at the dose that you're talking about—especially the eye-side-effect profile—we don't like that. There was also this question about why they only had 5% of their patients in the US. I don't think the company can deal with that in 3 months, but they can certainly go back and talk about lower doses and longer times between dosing, based on other trials they've had, such as DREAMM-14, with the regulator. Again, the multiple myeloma community has endless numbers of drugs that they deal with. They have so many options and so many permutations to choose from. They know how to deal with seriously toxic agents from some of the older drugs that they were using. Now we're a little bit better off. I think they should allow it. What's interesting, of course, is that a whole host of other countries have approved it since then, the latest being the European Union. So let's see if that happens. Maybe Prasad, with his hematology hat on, has been the opposite influence from what we think he might have been on some of the other discussions. So, fingers crossed. This is a drug that I think needs to be out there for the types of patients who can't access or can't take some of the other agents. Eric Schmidt Well said, Paul. We also had another FDA decision in your neck of the woods: GH Research and its clinical hold. Is this more garden-variety, or is there some read-through to the FDA environment from this news? Paul Matteis This was really weird. There might be some other read-through. As an analyst in this situation, there's such a level of informational asymmetry. It's not like I haven't looked at meeting minutes or correspondence, so it's hard to opine with any level of 100% conviction. Essentially, these guys have so far been unable to get their product off clinical hold. The context here is that it's an inhaled formulation of DMT, a psychedelic for treatment-resistant depression. They have phase 2 data from a decently sized randomized controlled trial in Europe with an unprecedentedly large effect size. Certainly, there's a debate on how big the effect size will be in phase 3 and whether that will totally hold up. But regardless, the data look very, very good. The safety profile was considerably better than expected, and there's been a decent amount of phase 1 work, too. So there's actually a pretty good human safety database here. This was put on hold in the US, and they ended up doing development in Europe and the UK. The FDA, I think it's almost a couple of years ago now, essentially had issues with a rat finding that was a lung-toxicity finding. They wanted the company to show and justify that this was a rat-specific issue. At the FDA's request, the company reran a rat model and also ran a dog model. The dog model, being the non-rodent model, essentially showed that this didn't appear in dogs. There's also this meta-analysis of inhaled drugs that shows that this finding is not uncommon in rats. But for most drugs, the majority of the time, it's a rat-specific issue. So there's good justification here. It looks like they did what the FDA asked, and they have human clinical data. The FDA essentially asked them to provide further justification for why they believe it's a rat-specific issue—or something else, right? And what that something else would be is TBD. I think our view is that, just based on the fact pattern and everything we know, it's almost hard to believe that maybe one more correspondence will get this off hold. Maybe it was something where they were responding to a number of FDA questions, and it wasn't just going to be waving a magic wand. But it's a little bit confusing, right? You can speculate in a whole number of ways. Is there a bandwidth issue, or are teams within the FDA talking to each other? Is the nonclinical team communicating with the clinical folks who've looked at the clinical data? Because the clinical data don't show any respiratory issue, and the company even did spirometry in its phase 2 study, which is kind of going above and beyond. It's a little bit confusing. I think, again, extrapolation here is TBD. But if we think about some of the actual underlying themes within this IND, this agency is geared up to potentially be bullish for the psychedelic space and more accommodating there. They're also talking about not wanting companies to do clinical work ex-US just because they think they have to, and a predominant amount of the clinical work here has already been done in Europe. It's surprising for all of those reasons. I still feel like the fact pattern suggests this should get resolved in the near term, but I also feel a little silly. What else can they really say to the FDA? I think that's something investors are grappling with: Do we even really know what else the FDA needs to hear, given the case that's been presented so far? Eric Schmidt All right, more mixed signals from the agency. I'm getting wrapped around the axle myself just thinking about all this stuff. Let's leave the FDA, if we can, and move on to some of the clinical news from the week. One of the better readouts, Paul, I guess, was Alkermes. Would you like to tell us what we learned there? Paul Matteis Yeah, sure. Better readout—I agree. Although the stock sold off, I think that's more about the market and tactical trading versus the drug itself. ### The Clinical News Turns Positive Orexin agonists are a class of drugs for wakefulness promotion in the narcolepsy space and potentially other indications as well. Alkermes' trial was in narcolepsy type 1, and the data were positive. The full data are going to be presented in September at World Sleep. The stock sold off, and I do think that ultimately gets at what the setup is here for this class and what investors take for granted and what they don't take for granted. It was widely expected that this drug would work in narcolepsy type 1. That's because the phase 1 data there were great. Takeda had multiple positive trials there, and the biological rationale is very strong. So, in that press release, we know the drug hit on almost all the clinical endpoints except for 1 in a study that really wasn't even that well-powered. So, strong data. But the controversy here relates to safety. Alkermes, in its phase 1 study, has seen a few cases of “mild visual disturbances,” which largely have been described as light sensitivity. A few other companies have reported these as well. As we get more data for this class, everyone's trying to figure out what this is. Is this a benign, modest overstimulation issue that's self-resolving, or is it a harbinger of something more severe? Our view, from digging through certain FDA regulatory material for CNS drugs—like the requirements for doing driving studies, and looking at other drug labels and labels around monitoring and driving—is that if this remains a mild issue for these drugs, it should be of no real clinical or regulatory consequence. I think that's really the main question here. You can see a number of stimulants have this kind of issue. Migraine drugs, antibiotics, even some antidepressants. We've been bullish on the stock, and we've also been bullish on the category because, in the grand scheme of the standard of care in this space, which is oxybates, the safety profile of orexins looks very, very differentiated. But Alkermes didn't really give us any color on this piece in the press release and essentially said to wait for the full data and the full safety update. Opacity is often discounted even more than a mildly negative reality when it comes to stocks, and so hence the sell-off. Now we'll wait for World Sleep and see what they show us. Eric Schmidt No, great summary. I don't think we have to wait too long, if I'm right. The data will come out in September, so a little patience may be a virtue here. The other big news we had from a clinical standpoint was Abivax. ABVX is the ticker. I don't cover the name, but it was a big win in the IBD field. They have an oral drug. It's a miR-124 enhancer, and it read out positively in ulcerative colitis. A lot of us had discounted the likelihood of success based on the mechanism here. It's a very strange, maybe even unclear, mechanism as to how exactly a miR-124 enhancer might go about having an anti-inflammatory effect in the colon. But that's exactly what happened here. The phase 3 data were really solid. We had about 15% to 18% clinical remission rates, which compare relatively favorably to the injectable agents, the IL-23s—Skyrizi and Tremfya—that are used in this indication. So, really solid efficacy for a drug that's oral, and the safety looked good too. This could be a big seller. The stock had a wild run; it was up over 500% this week. Its market cap is now $4 billion-plus. I think they raised nearly $700 million just last night. So, really great success for an innovative product, even if we don't fully understand the mechanism, and one that's going to serve patients well. Congrats to the team at Abivax. I wanted to take the discussion in a little bit of a different direction. Something that I found quite interesting, having served a little time in industry myself, relates to some news flow from Prime Medicine last week and Prime's decision to replace employee options. I can imagine that this is something that many in the industry are concerned about. ### Prime Reprices Underwater Options What Prime has done is take its underwater options. The company went public about 3 years ago at $17 per share, so most of the options held by employees, executives, and board members are now underwater for sure. I think the stock is trading at around $4 and change today. This creates a problem, right? If you have underwater options, you feel like you're not participating in the success of the company, especially if those options are way underwater, as I'm sure many Prime options are. It prevents the options from doing what they're designed to do, which is aid employee retention and get buy-in from employees, directors, and executives so that the group is aligned with shareholders. I know that we in the investment world hate when options are replaced. We feel like that misaligns the incentives that investors have and maybe even creates some disincentives to properly perform on behalf of investors. But, Brian, do you want to start off with any views on whether Prime's decision is a good one and what else we could have done to further address employee retention for all of these companies that are seeing their stocks crushed, maybe through no fault of the teams themselves? Brian Skorney Yeah, I don't have great thoughts. I would say I think it's a tough dynamic. I get the need to retain people. I get the need—we are in a much different state than we were 4 years ago, when we were sort of in this big bull market coming off COVID. At the same time, I also see the value in seeing a little bit of the correction here. We probably erred in having too many companies in development across the sector. On one hand, I totally feel the need and desire to try to retain key employees and try to maintain operations, but it's a catch-22. Eric Schmidt Sam, any thoughts? Sam Fazeli No, I agree with Brian. We'll keep it at that. Eric Schmidt Paul, one thing that maybe caught my attention was that board options were being repriced as part of this. I think I could make the case that rank-and-file employees need that incentive, need to feel like they're part of the team, and need to feel that they have a reason to work hard for the equity. They also have a decision to walk across the street and get their options repriced, essentially, if they want to go work for CRISPR or Editas or one of the other gene-editing companies. But the board maybe has more fiduciary duty to shareholders to be aligned and to not take the easy way out. I don't know if you have thoughts. Paul Matteis I don't know. I totally agree with you. I don't want to come off as disparaging them; I'm just not super close to the situation. Eric Schmidt But I mean, I’ve heard of a number of other companies repricing people’s options when there’s been a blowup, right? Because at the end of the day, you can’t double-punish yourself. You can’t have one of your key drugs not work and then have all your key people leave. So I think that makes sense. The board piece seems atypical to me, but someone could also tell me this has happened 25 other times and I wouldn’t know. Do you have experience on the operating side? Have you heard of anything like this before? Paul Matteis Well, we’ve seen it a few times in our industry. It’s not the first, for sure, but sometimes there is an exclusion for the board and senior management. For whatever reason, this time around, Prime decided not to do that. I’m sure they have a good reason. They actually stated that it might be more cumbersome or more expensive to exclude certain people from the repricing, but it is what it is, and we can move on. I know we have other topics we want to cover. Maybe, Sam, I’ll turn it back to you. I think you wanted to talk about some pharma highlights. ### China Drives Licensing Growth Sam Fazeli Yeah, just a couple of things. We have a proprietary licensing dataset that we’ve been gathering for years, and we’ve been looking at it. We look at it every 6 months, and I just want to highlight 1 thing out of it. That is the perennial conversation about China: the share of drug licensing for drugs sourced out of China rose to 14%. There are many ways you could cut this, right? We focus on actual drug licenses. We don’t look at any of those clinical collaborations or commercialization-type deals, in terms of regional commercialization-type deals. So, 14% is quite a hefty jump from the average 9% we had last year, and, of course, close to nothing a few years back. What was also interesting was that the majority of the drugs—that’s close to 90% of them—were biologics that people are interested in. Of course, we all know what they are, like bispecifics, et cetera. That’s in contrast to the ex-China deals, where only 50% or so are biologics, and almost half are preclinical discovery-type deals. The last point I want to make on that is the value perspective. When we want to look at how big these deals are, I’ll simply cut it at $1 billion in terms of deal dollars. That’s where the China deals had about a 40% share of the billion-dollar-plus deals. That’s a pretty chunky number to be looking at. I’m going to leave it at that. The other thing we’ve heard this week, of course, was Roche reporting. Last week, we had Novartis and Johnson & Johnson. The only thing I want to focus on there is that they’re all talking about this direct-to-consumer drug selling that the U.S. is asking them to do. Roche has talked about it a little bit in the headlines. Of course, Bristol Myers Squibb and Pfizer did it—or announced it—with Eliquis. Novartis’s CEO said that it’s the core of all his discussions with HHS, which is quite interesting. So how the whole thing will come through, and whether we need any legislative changes or not, is going to be interesting to see. It’s quite interesting, too, that at the same time we’re getting talk about trying to stop advertising direct to consumers. You can sell direct to consumers, but you can’t advertise to them. Put that together with what AstraZeneca announced, which was a $50 billion, 5-year investment in the U.S. Maybe pharma companies are going to escape the wrath of tariffs. Nothing’s happened yet. Or maybe most-favored-nation pricing isn’t going to come along, because they’re all, at least on the surface, doing things that the administration’s been asking for. Eric Schmidt I also took note of those comments from Roche’s CEO about how the easiest way to bring down pricing would be to go direct, cut out the middleman, and market to the consumer himself or herself. He said that you could take down drug pricing easily by about 50%, right? I don’t know if you guys caught the remarks from our president earlier in the week. Kind of a tongue-in-cheek comment from me here, but apparently 50% isn’t enough. Apparently, we’ve got to bring drug prices down 500%, 600%, even 1,000%. So, I don’t know, Sam, is there any way that the Roche CEO can bring down drug prices 1,000%? Sam Fazeli I mean, he could give them all away. Eric Schmidt I don’t think his HHS secretary wants people to be paid to take drugs. Brian Skorney That’s right. But let’s hope these moves are going to help us escape some of those more draconian approaches that have been talked about. Paul Matteis I think you’re right. Things are definitely looking up for the industry in terms of less of an impact from MFN, tariffs, or any of the macro fears we were so obsessed with. Eric Schmidt Be careful. Be careful. You’re going to wake up in the morning. We have to eat humble pie. Paul Matteis Good point.