Episode 151 - August 8, 2025

There’s a lot going on this week, especially on the policy side. Why don’t we jump right in with one of the big—shocking, maybe not so shocking—pieces this week, which was the cancellation by HHS of major BARDA projects related to mRNA vaccines: 22 projects and $500 million in total. John, I know you had some comments on this.

Should we start with the other news and then go back to John on the BARDA stuff?

That’s a great point. Why don’t we jump to the other policy issue, where there was a lot going on with tariffs and MFN? After the initial announcement in May about MFN, that move was lambasted. There were a lot of warnings about what it would do to the industry, and the news continued. There were estimates that this would have a $1 trillion impact on the industry.

Last year, there was a trade deal announced between the United States and the EU, including a 15% tariff on pharma. Then, of course, last week there were letters sent to top pharma and biotech companies about MFN. This week, President Trump said pharmaceutical tariffs will be announced as soon as next week and could reach up to 250% after the next year and a half. Paul, please help us understand all of this.

Sure. The short answer is that there’s still a very, very wide range of potential outcomes here. If taken literally—250%, or a scenario where companies have to give Medicaid the lowest net price they get across a collection of countries—this is objectively bad for the industry. I think Eric would agree that these worst-case scenarios are nowhere near priced into stocks.

The flip side is that, if we learned anything from all of the other tariffs, what we have here still looks probably like negotiation tactics. This is a first offer that might be more draconian, and ultimately pharma is going to have to give up something. How much they’re going to have to give up remains open for debate and remains to be seen.

I think the tariff piece is the harder one to value into companies. I’ve been surprised by the number of companies I cover who say that tariffs would have very little impact on them, even companies that have key parts of their supply chain outside of the United States. I’m not an accountant, but I have to believe there are some really smart lawyers and accountants working on ways to play around with COGS, transfer pricing, or things like that to mitigate the impact. I think that’s what certain companies are alluding to.

From talking to some of my companies as an analyst, I’m at least a little bit less worried about the tariff side, especially if the number comes closer to something like what we saw in the EU deal. On the MFN side, I think that’s the far scarier thing for the sector. But there’s still a wide range of outcomes. Maybe this ends up like the IRA, where it’s a few drugs at first. Maybe this ends up being for newly launched drugs, which might actually have pros and cons.

I’m thinking of this purely from a pricing-power perspective, not from a public-health perspective. That’s a separate topic. From a stock perspective, there are a lot of ways this could play out. I’m a little nervous because I don’t feel like this has been weighing on the XBI as much as it could be. A lot of people are almost jaded at this point by the Trump news cycle. I’d love to hear other people’s perspectives.

I’ll jump in. I generally agree with everything Paul said, and in particular, I think it’s MFN, and less so tariffs, that are the industry’s sore spot right now. On tariffs, we got conflicting news. On the one hand, Trump was on CNBC’s “Squawk Box” and talked about how he’s really got pharma in his sights, and he’s hoping potentially that tariffs could reach as high as 250%. But that’s probably a lot of bluster. It’s probably a way to leverage the pharmaceutical industry toward his goal of reducing drug prices and maybe even having them play a little more on the MFN side.

I totally agree with Paul that the accountants have already figured out how to game the system with regard to tariffs, such that they can import drugs at price points in their supply chain that are relatively modest and low, and therefore have relatively modest and low tariffs on those importations. They can subsequently either fill-finish or do other things in the United States to maximize the sales price and the step-up potential, and get around those tariffs.

The other thing that happened this week was that Trump also suggested he could exempt some of the technology companies from tariffs. One hundred percent of chip tariffs might be exempt, for example. I don’t know quite what’s going on there, and I’m certainly not a tech analyst, but some of my colleagues in pharma have thought that maybe, if chips and semiconductors can be exempt from some of this, pharma can get an exemption too.

My strong suspicion is that would only happen if the industry comes to the table a little bit more and strikes a deal on MFN. We heard from multiple large pharma companies that reported earnings in the last week or two that they are having those types of negotiations with the administration. We’ll just have to see where that lands.

Eric, should we talk about this Prasad news and the continued FDA saga? You kick it off.

1. Prasad's FDA Comeback

The other topic we had out of Washington this week was the seemingly strange possibility that Dr. Vinay Prasad might make a comeback. This came from an HHS interview around the MAHA efforts to revolutionize health care. Dr. Marty Makary was asked by someone from the audience—presumably someone in the press—whether Dr. Prasad had left, and under what circumstances.

Dr. Makary quickly came to the defense of his friend, which was nice to see. He suggested that Dr. Prasad was not pushed out at all, that it was Dr. Prasad’s decision to leave the FDA and CBER. Some of the other media reports we’ve seen around the MAHA efforts to move him aside might not be true.

What really caught our attention, Paul, was that Dr. Makary went even further and said that he’s in almost daily conversations with Dr. Prasad, has invited him to come back to the agency, and is trying to convince him to do just that. That’s the news from earlier in the week. I was honestly flabbergasted by the statement that there’s potentially an avenue back for Dr. Prasad.

I know that Dr. Makary and Dr. Prasad are good friends, and I’m sure Dr. Makary feels the loss of his partner at the FDA. But for everyone’s sake, I can’t imagine that would be a good turn of events. Paul, your thoughts?

Yeah, I agree. Whatever you think of Dr. Prasad, given the controversy with him at the FDA, internally with some of the things he had said about the FDA and externally, it feels like if he left because he was worried about being a distraction—that’s the way it’s been described—this would create a much, much bigger distraction.

It would be tough on any organization to have this huge change in leadership and philosophy, then have one person leave and now come back. We’re going to be talking about companies and asking, “When was your meeting with the FDA? Was it during the first tenure or the second?” I just feel like it would make our jobs too complicated. Already, I think it’s hard as an analyst or an investor to be right more than 50% of the time.

We were having a conversation internally this week with one of my colleagues at Stifel about whether Prasad really was that much more strict. I think that had obviously been the narrative: given everything he had said historically on social media, this guy was going to be much tougher on industry. Like you were talking about last week, Eric, we saw the Ultragenyx CRL, Replimune, and—I’m forgetting what—oh, Capricor too.

I do still feel like the jury on what the Prasad FDA looked like was still out. We had this article, and you’re closer to Replimune than I am, Eric, about how maybe it wasn’t at all Prasad who drove that CRL. With the Capricor situation, I wonder if that was something that might have been pushing the FDA’s flexibility side a little farther than usual.

Without opining as much on that company or stock, it was maybe a little bit less traditional of a mechanism and a data set.

And then with Ultragenyx, we had something related to manufacturing. I still feel like a lot of my companies in the rare and gene therapy space felt that, when Prasad was at the FDA, their dialogue—and getting things like breakthrough or pivotal trial sign-offs—had not changed.

If he came back, it feels like it would be such a big distraction. The hope is that we get someone who's maybe a little bit more down the middle. But I feel like it's unpredictable. We haven't seen any sort of short list of who his replacement could be.

Yeah, those are great points. I think what you're anchoring around—and I don't want to put words in your mouth, Paul—is that it's hard to know whether, from a review standpoint, Dr. Prasad was good, bad, or indifferent. Did he really come down harder or easier on reviews? I don't know. I'm not sure we'll ever know.

But I think one thing that we did see was a little bit more drama, for sure, and a little bit more unpredictability in his 84 days at CBER. It seems to me that we need to return to normalcy. We need almost a little bit of healing at the FDA and, hopefully, a stabilizing presence at the FDA.

We've talked about how potentially Dr. Prasad and Dr. Makary are more externally oriented than the internally oriented managers. I do hope that whoever comes and takes his place— it sounds like George Tidmarsh is going to be filling in, at least temporarily, for CBER's role—can bring more expertise in organizational leadership and maybe a calming presence.

It seems like Dr. Tidmarsh might be just that person, given his past. We just need the review staff to do their job. This day and age, where it comes down to a single personality—whether that's Dr. Prasad at CBER, or, as you alluded to with the Replimune situation, maybe ODAC leadership was relevant there—is not where we should be.

Are you surprised by that? You're a lot closer to the oncology space than I am.

Well, if the reports are true—and STAT News has done a great job here—I have no reason to doubt that they're not true. Dr. Prasad was in all these discussions, right? CBER sent the review letter to Replimune, the CRL.

Everything I've seen about Dr. Prasad tells me that he is someone who wants to grab the microphone or the pen and make decisions, not be a fly on the wall. So suggesting that Dr. Prasad was the one who did that, honestly, is probably semantics more than anything else.

I think Prasad probably does have a view and, knowing what the Oncology Drug Division has done historically, it was probably quite consistent with Prasad's views: They thought the trial design here may not have been optimal. But at the end of the day, this happened on Dr. Prasad's CBER watch. The review was done by CBER, and I've got to think that if Dr. Prasad had wanted the drug approved, he would have done it.

If he didn't want the drug approved, he would have sent the CRL, which is obviously what happened.

Fair enough. Thoughts?

No, I think that makes sense. Again, I don't doubt STAT either. STAT is probably the best source we could have right now on what's actually going on at the FDA and on the policy side.

But, like with anything, you never know who the source is or who's saying what and why. I think the jury was still out on what Prasad's tenure might have looked like. From a stock perspective, hopefully we don't get to rerun this hypothetical twice, because it feels like that would be pretty destabilizing for the market.

2. Manufacturing Drives New CRLs

So, before we leave the FDA, Paul, I guess we ought to talk about some news, either from late last week on Regeneron or from this week, which bled into Scholar Rock. In both cases, we've had some CRLs—one issued and maybe one in the future threatening to be issued—around manufacturing considerations.

Are you close to those two? Not really. But from your perspective, how do we, as outsiders in these situations, get a sense or a true gut check on whether the FDA is actually being more conservative? Sometimes there are overt scenarios, but I always feel like with this kind of stuff there's so much informational asymmetry. It's a little bit like who said what, but you cover Scholar Rock. Do you feel like there's actually something here that's eyebrow-raising and that we should all be thinking about?

Well, yeah. It's hard to have perfect visibility, and honestly, having spoken to Scholar Rock, they themselves, at this stage, don't have particularly good visibility on how this is going to play out.

For those of our listeners who are less familiar, maybe we should take a step back here. The reason that Regeneron and Scholar Rock are connected is that both have programs under review whose CMC fill-and-finish work is being done by a facility that used to be owned by Catalent and is now owned by Novo. This facility is based in Indianapolis.

That facility has been troublesome for a long time. I think there are 43 Form 483 observations going back several years that seemingly have not been remedied. As far as I understand it, one of the leverage points the FDA has to force an owner to remedy a facility is not approving new drugs through that facility.

The Catalent-now-Novo facility can ship drugs and is shipping drugs on a regular, day-to-day basis. Products are coming out of that facility and being sent to patients. The issues do not seem to be related to drug safety, drug purity, or contamination. There are probably a variety of other issues that we don't fully understand or know about.

So products are leaving the facility, but when it comes to approving a new drug that's being finished at the facility, the FDA is really able to throw down the hammer and force the owner of the facility to make corrections. That's exactly the situation that both Regeneron and Scholar Rock find themselves in.

I feel for them because they're caught in the middle. They obviously don't own or control the facility, and to some extent they're completely dependent upon Novo to fix its issues. We had 2 CRLs issued to Regeneron last week, and this week Scholar Rock made the very transparent statement to its investors that it may also have problems with the same facility.

Yeah, good question, Paul. I don't think we understand how we can possibly calibrate the severity of this concern right now. The good news from Scholar Rock is that its drug is seemingly approvable from a safety and efficacy standpoint.

The drug obviously affects kids. These are patients with spinal muscular atrophy, a very severe disease. I would hope that the FDA might err on the side of providing access to a potentially game-saving drug for patients with great unmet need.

So we're hopeful, but their PDUFA date isn't until September 22nd. Maybe there's time to remedy the situation or to have some kind of alternative process.

Interesting. Okay. Something to watch. Before we move on with policy stuff and start talking about companies, do you want to briefly talk about the BARDA topic that you proposed?

3. BARDA Cuts mRNA Funding

Yeah, I don't think anybody's surprised that our HHS secretary is not particularly enthusiastic about vaccines. We don't have to go into the merits of that, although I think most of us would agree that vaccines are critical.

The BARDA decision to basically cut the knees out from under quite a bit of funding is really unfortunate. The mRNA platform was fundamental in helping us get out of the pandemic, and we're not done with pandemics or emerging threats, or even epidemics that could be challenging for society.

So not investing in that platform as a rapid-response mechanism through BARDA is concerning. Obviously, there are companies that independently do work in the space, but BARDA should be active in the public-health funding aspects of that platform.

It's concerning, and unfortunately I don't think things will change on that front until there's a change in philosophy. Other countries may begin to get stronger in those spaces with mRNA vaccines, which would put us at a disadvantage from a national-security perspective.

I think it's a concerning change. I'm sure BIO is doing what it can on this topic, but we're dealing with a set of views here that we all recognize are very firm, albeit misguided.

Yeah. John, can I just mention an interesting personal anecdote that is somewhat related to this? My wife and I just had our second child about a month ago. In the hospital, when your child is born, they offer you the hepatitis B vaccine, and the approach to offering it was different this time. We were checked on 3 times in an “Are you sure?” dynamic, and you can almost get the sense that, at the institutional level, they’re so worried about doing something that someone then freaks out about later.

From a vaccine perspective, this is just a default medical decision generally in newborns. In talking to our pediatrician, she was so psyched that we had actually done it because they had been seeing a lot of families who hadn’t—and this is in Massachusetts. I have a control group, which is essentially where my son was born almost 4 years ago. None of this in the acute setting was even remotely a dialogue. I thought that was, again, a one-off thing, but it was just really interesting how you can see the attitude being so different 3 to 4 years later.

Well, there was a fascinating interview this past week between Matt Herper and Bill Gates, where Gates commented on the global emergence of vaccine hesitancy and the implications of that for broader aspects of global public health. This stuff has ripple effects that are profound and absolutely contradictory to ensuring a healthy society. Definitely far from MAHA, I would say. So it is unfortunate, and, Paul, what you’re recounting there is really telling about a broader sentiment that’s emerging and gaining a lot of traction—not just here in the country, but globally. It is a point of concern.

Yeah, love the personal anecdote, Paul. Thank you for sharing. I guess just one added comment for me is the stark irony here: how we could change so much in 5 years. There was a press report out this week saying that Donald Trump had been nominated, I think by Cambodia, for a Nobel Peace Prize. The basis, believe it or not, of that nomination was Operation Warp Speed and the terrific job that the Trump 1.0 administration had done to bring mRNA vaccines to the world on a record timeline, distribute them effectively, and really change the course of the pandemic. I believe that the Trump 1.0 administration deserves a lot of credit for that.

They do. Yet somehow we got so wrapped around the axle politically. I guess politics just came in and completely took over this debate, which should always have been a scientific debate.

And now it’s made it such that we’ve got antagonistic sides on both sides of the aisle, and it’s a battle zone. The science, unfortunately, has taken a huge backseat in all of this, and I guess that’s just a comment on what we’re left with in society today. I know there are a lot of scientists on this call and a lot of scientists listening in, and we can all just hope that we can get back to a day and age when science gets to lead and not follow the politics.

Well, maybe we need Laura Loomer to intervene here to help educate people about the subversion of Trump 1.0 vis-à-vis Operation Warp Speed. I do think—I’m joking—but I do think the Trump 1.0 administration deserves a huge amount of credit for Operation Warp Speed, and a big part of that was mRNA vaccines. So it does seem counter to a step forward that was materialized during that time in that crisis. It’s unfortunate.

Should we move on and talk about some company news? Maybe I can start with Vertex, and then Eric, you can do Aiolos, and then, if we have time, I can do Praxis too. Does that sound good?

Let’s do it. Can everyone hear me? Yeah. So this week, Vertex—there’s a broader conversation here, too, about “love stocks,” and I actually want to ask Eric after this if he can think about analogues in the large-cap biotech world. For everyone in the call room, I’m sure everyone knows Vertex well, but from an investor perspective, this has been a love stock for years now based on the perceived scarcity value of a company with a $10-billion-plus drug franchise in cystic fibrosis that’s very high-margin, with no real imminent competitors, and then, separately, a pipeline doing real drug development, an impressive scientific team, and a lot of different shots on goal.

The most compelling shot on goal there has been their pain portfolio of sodium-channel modulators, which, in a dream case, could be applicable to a wide array of pain etiologies with no real abuse potential because they work on the transmission of pain and not on the physiological or neurological awareness of pain. The setback this week, though, is that the acute launch—or the hospital launch—for their drug suzetrigine, not just in the hospital but sort of in a hospital outpatient-care setting, has gone okay. It’s gone decently, but it’s slow. It’s a market they have to build.

They had a setback for their next-generation pain product, which failed in a trial and was discontinued. They also had a meeting with the FDA where they were trying to pursue a path in chronic pain to a broad indication for neuropathic pain. The FDA basically said the door wasn’t open for that based on looking at a couple of specific indications and generalizing.

I think the interesting takeaways here are a few things. One, I actually feel like before these earnings, there wasn’t really a lot of credit in Vertex’s stock for that broad pain dynamic, just because one of the studies that it was based on—lumbosacral radiculopathy, or sciatica—actually failed. So this was a disappointment on the FDA feedback. On the other hand, though, the data was never actually that overwhelmingly positive that supported it in the first place, and investors knew that.

The second piece is that this second-generation drug that failed in acute pain is another thing where it’s not totally clear whether there was really anything explicit in investors’ models. I mean, the debate around the acute product and pain was less about efficacy and more about whether you can build that market. I feel like this is a scenario of a company that has had this halo effect and has been remarkably resilient for a number of years, where they had this failure in alpha-1 antitrypsin deficiency. The stock traded off a lot, then really came back again on that scarcity-value thesis.

There was a failure in pain last year in lumbosacral radiculopathy, or LSR, sciatica. The stock went below $400, then came back to almost the high $400s. I think the interesting conversation here is when and how does the halo effect that buoys the stock get removed, and what does it take? The other nuance here was that they did not raise their revenue guidance for the first time in multiple years, and they haven’t done that in a second quarter, Paul.

I think there’s some concern that maybe the cystic fibrosis business is getting to a more predictable phase. I’ve always felt like the valuation with Vertex—and John will talk about Alnylam’s valuation to some degree—can be more subjective than with other big-cap companies because it’s been one of the unique companies with this sort of feasible blue-sky case. When that kind of went away, I think more firmly on pain, you saw a much bigger reaction in the stock—down over 20%—than I think almost anyone would have anticipated.

So it’s an interesting situation here. There’s nothing really imminent to reconcile it, but I’d love to get others’ perspectives either on Vertex or just on how we should think about the implications for companies and stock sentiment in general.

Go ahead, John. Eric, you should start, Eric.

No, please go.

Yeah, I was just going to say, Vertex is such a great company, but I think there’s always a struggle when they propelled so remarkably on cystic fibrosis. Everybody wants to see Act 2, just like with Regeneron, obviously Eylea, but then Dupixent, and even there, there’s been some pullback on Regeneron.

Investors just want to see that Act 2, Act 3 that propels and fuels future growth once you get into these high valuations for these companies, because they’re up there because of growth potential. That’s true with Alnylam right now. They’re swinging big because of prospects for growth with Amvuttra. But it does get challenging if you lose one of your big potential winners, like people are fearing with the pain franchise.

Yeah, I don’t have a ton to add here, and Paul, you’re much closer to the sentiment and the stock dynamics on Vertex than I am. What’s interesting, actually, is that both the pain franchise and the cystic fibrosis franchise originated from the same source within Vertex. I think, John, I know you’re old enough to remember the acquisition they did back in 2001 of Aurora Biosciences, but that was where all these ion channels started. Wow, what a great acquisition that was. I think it was about a $600 million total

Acquisition.

They got the CF franchise, and boy, if you're looking for a halo effect, there's nothing better than a CF franchise. They're just so dominant in this space. It's hard to imagine that there's a more valuable franchise almost anywhere in biotech these days. And it's going to last a little bit longer, right? So, the good news is there's no real urgency here, but certainly they do need another act.

And pain's tough. As much as we need new pain drugs, theirs don't seem to be that potent, Paul. I mean, I guess that's my read from all of this. Yes, we've seen failures before, but it just doesn't seem like this mechanism packs the punch needed to really be a major player. And, of course, we've seen pain launches before to know that they're very, very slow and gradual, if they ever take off.

So maybe this is a major transition point in Vertex's progress and strategy, and maybe they need to think about something else. I don't know.

Well, I think what's really interesting with how they've worked on pain, and even some of the work they've done in other things like AAT, right, is—and you can't blame them for this—but they've really leveraged, in my view, the cystic fibrosis approach: these sort of targeted proof-of-concept studies, betting on the science, betting on early successes that they're going to continue.

And I'm biased, right, because I've covered a lot of these small neuro companies, and I've been on the wrong side of things that have blown up on incredible Phase 2 data. I just feel like you can't do that in neurology. And if it were up to me—and the caveat being I've never developed a drug or gotten a drug approved—if I was running that program, there'd be 5 Phase 2 studies ongoing right now across a whole array of different pain etiologies and migraine. Any indication that was advanced to Phase 3 would have 3 studies, but only when needed, because I think that's just the way you have to do things in neuroscience.

I mean, Prozac's the poster child, right? One of the top-selling antidepressants ever failed in more trials than it worked in. And I don't think pain is any different. And so I do wonder if part of the setback was that Vertex's—you know, they deserve all the credit in the world for their innovation engine—but it feels like the CF philosophy was applied to a disease area where you just can't do that. The endpoints are really, really tough. There are no biomarkers. Patients are heterogeneous.

And so, yeah, now they're back to the drawing board. They're in Phase 3 in DPN, but it feels like the program itself could be revamped.

John, we can't leave this topic of valuable franchises without having you take a little bit of a victory lap on Alnylam, so go ahead. I'll tee you up.

Yeah, I couldn't be there last week when—you know, last Hangout last Friday—which would have been more pertinent from a timing standpoint, but it's just wonderful to see Alnylam report the second-quarter results, and Amvuttra is on a rip. I mean, it's looking fantastic, and it's just at the beginning. So I'm super proud of the team there and what they're doing and where they're going.

I have a tradition of opening up a nice bottle of champagne for every $50 Alnylam share price, and I managed to cover 2 bottles last week. So I'm still dragging a little bit this week as a result of it. But it's a real credit to the team over there and so forth.

Look, I think the interesting thing—it gets back to the Vertex story and Regeneron as well—is when companies cross threshold value, it really is driven by a mega-product or franchise opportunity: CF, Eylea, Dupixent, et cetera. And then, for Alnylam to get to the next horizon of $100 billion, which I expect it will, it'll require continued growth on Amvuttra and then probably 1 or 2 other major assets in the portfolio.

The good news is, and the interesting thing for all these companies—Vertex maybe less so, but certainly for Regeneron and Alnylam—I mean, these are companies that are sporting their own innovation organically. They're largely doing it on their own as opposed to getting it from the outside. Not that there's anything wrong with that, but it's an interesting feature of what these companies have done over the years.

John, I would love to ask you a quick question. As someone covering Alnylam now who misses you as the CEO, even though I love the current team, too, the quarter was unbelievable, right? It blew out the sell-side consensus number. Maybe that wasn't a real number, but some people were pointing to IQVIA data that pointed to $420 million. It was so much more than that.

If you're running Alnylam in that situation, how do you balance conveying confidence going forward that this is not a one-off bolus of patients, but also you don't want the numbers and the expectations to get out of hand? I just thought it was interesting. The team sounds so confident, and they should be confident, but would you be, if you were still looking at the stock and thinking, "I got to make sure this doesn't get out of hand and we don't set up for some arbitrary disappointment in 2 quarters when we beat consensus by $50 million, but we had to beat it by $90 million"? Do you think that way when you're in that seat?

You do. I mean, you definitely try to dampen enthusiasm. If you have a blowout quarter result, you want to make sure that expectations don't get too far ahead and start creating new sets of estimates that aren't going to be met.

I think Alnylam is super savvy about that. Jeff Poulton, the CFO, is really, really careful, and so is Yvonne. I'm sure they'll do a good job managing this trajectory. It's a great, wonderful event when you have a blowout quarter, but you definitely want to make sure that it's sustainable. Obviously, they have a line of sight on quite a bit of Q3 performance already, so I'm sure they have a good sense of where this is going.

John, I think you muted yourself. Hello.

Yeah, I'm back. Can you hear me now?

Yeah. Jesus Christ.

Yes, we can hear you, John.

Sorry. What I was saying is, I think the important thing to do here is not to let expectations get too far ahead and start creating new sets of estimates that aren't going to be met. I think Alnylam is super savvy about that. Jeff Poulton, the CFO, is really, really careful, and so is Yvonne. I'm sure they'll do a good job managing this trajectory.

Makes sense. Eric, do you want to talk about Agios at all?

4. Agios Faces a Safety Scare

Yeah, we could do that. Why don't we do it quickly? I don't know if you guys have been following the news earlier in the week. The stock was very volatile on Monday. In fact, at one point it was down over 20%. This was on the heels of a sell-side report that called out a potential link in the FAERS safety database that the FDA maintains. This gets updated on a quarterly basis, and in FAERS there were 4 patient reports of potential deaths linked to Pyrukynd.

Pyrukynd is approved for a small, niche indication, PK deficiency, and it's in development, of course, for sickle cell disease. There were multiple patient deaths reported in PKD and 1 death in sickle cell, and news of that report from a sell-side analyst just hammered the shares. It really caught the company off guard and scrambled them to find a response to this.

Fortunately, their response was accurate in terms of trying to dispel the myth or the link between the FAERS deaths and their drug. Specifically, there weren't really 4 deaths. There were only 3, and all 3 of those deaths had seemingly no relation to the product itself. In each case, there was not thought to be a link between use of the product and the deaths. Of course, sickle cell disease patients have high mortality anyway. The PKD patients who died were very elderly or had underlying cancers to boot.

This became a fire drill. Unfortunately, it was a pretty nasty fire drill. Maybe the lesson here—the worst part of all of this—was that the company wasn't just caught flat-footed with investors. We're big guys; we can stomach a day or 2 of volatility. But I think it's certainly possible that this news leaked beyond the investment community into the patient community, where I know the company was aiming to be very diligent in its ability to address its most important constituents.

Those patients who have PKD and those patients who have sickle cell would have been terrible if something like this had persuaded patients to come off their drug prematurely or to be skeptical of the product in the future. And I think sometimes the investment community doesn't think as much about the broader implications of what we might be writing.

Paul, you're a sell-side analyst. I don't know if you might have handled this differently. I suspect you would have, but I think it's probably on all of us to think a little bit more carefully before we come up with conspiracy theories and make sure that we kick the tires pretty hard on anything of this nature that could be potentially so incendiary and potentially harmful to our greatest asset, which is the patients who have these conditions.

Paul, can you hear me?

I don't know why. I can hear you, Eric. I don't know why. Can you hear me?

Yeah, we can hear you. I can't hear Paul now. John, I'm not sure you were wrapped up in the fire drill that was Agios, but again, it's nice to see the stock recover, and hopefully they contain the broader issue, too.

Yeah. No, I have been following it. I used to be on the board, and I'm glad things recovered as they did.

So, maybe—I hope Paul is able to join. We still can't hear you, Paul. I see you're off speaker. But, John, I know a company that you and I have followed for a number of years—decades now—was also in the news: Biogen. They put out a release this week saying that they're going to start up a new venture arm, not necessarily for a straight return on investment, but maybe more for corporate purposes, to get a little bit of a look under the hood. Maybe you want to walk our listeners through that and your thoughts. Well, I didn't see the news in detail, so I didn't go through all the details. Maybe you can provide some of the details. Do you want to start there, and then I can certainly come in?

5. Biotech Looks Beyond Its Core

Yeah, I mean, I think the details were fairly plain vanilla.

Yeah.

I think what we've seen from Biogen is a greater interest in resourcing external innovation versus internal innovation. I know you can comment on that, but in terms of the venture group itself, they've been looking for assets from an in-licensing standpoint, from a BD standpoint, now for some time under Chris Viehbacher's leadership. That was, I think, a meaningful change over the last 3 or 4 years.

But this venture arm now will begin to invest in earlier-stage companies and assets, and again, do so with an eye toward corporate priorities as opposed to return-on-capital priorities. I think it's really trying to align itself with Biogen's remaining internal drug-discovery engine to try and get involved at an early stage in programs and products that the Biogen folks think are valuable.

Yeah. Yeah, it's great. No, I thought—look, it's consistent with what I saw briefly, too, Eric. I think Biogen is really going through a transformation. Chris has been leading it now for a couple of years and obviously has a lot of things to turn around, for sure, because he was left a bit of a redo, a remake, in many ways.

It's such a great company. I used to work there for a decade back in the '80s and '90s, so it has a really, really warm place in my heart. Chris and his research chief, Jane Grogan—who, as you know, is a terrific scientist and terrific leader—have a lot of work to do. They know that. They've been doing some collaborations with companies. They partnered with City Therapeutics, where I'm the executive chair, and it was really great to get them involved with that effort.

They've been broadening their effort beyond neurology to include immunology, which I think is smart. I think they probably historically overindexed on the neuroscience space. Paul would be able to comment on that himself, but they overindexed in that space and made it more challenging for them to really grow as a business. Now they're going broader.

They've also got rare disease. They're interested in augmenting their rare-disease presence, so I think the venture side of it is a good move for them. Chris really gets the importance of new companies and the innovation ecosystem. He understands why larger companies can't succeed at some things that smaller companies can do.

This is surely a nod to his own deep-felt belief in all that. He successfully did that at Sanofi with the venture investments they made there, including some really innovative ones like Warp Drive Bio. Not everything is always going to work out, but some of them will. I think it's not a surprise that a new venture fund has been created under Chris's leadership.

I'm looking forward to seeing how they can contribute to the ecosystem here and maybe help support some new cutting-edge companies in a very, very tough private-market environment.

Paul, are you able to rejoin us? I'm not sure we can hear you still. And John, just coming back to your comment about how Chris inherited a bit of an organization—

Yep. You know, I don't know—something's wrong with this room today because my phone's totally fine, man. I just had to leave and rejoin.

I mean, Biogen, I think—yeah, I agree with everything you guys said. I feel like Biogen is one of those things you sent around, Eric: How did they get here? It feels like it was a combination of strategy and capital allocation years ago and bad luck.

I say bad luck because I must have sat on, I don't know, 75 doctor calls on Alzheimer's in the past 10 years. There were one-off physicians who said the A-beta antibodies would get narrow use. Everyone else was saying, "Oh my God, if we had something for these patients, they'd be used more broadly."

I just feel like I can understand why they allocated billions of capital to those projects. The commercial upside always seemed like it was there, and I don't think anyone anticipated how hard it would be. Maybe they should have, but I feel like it's not fair to say in hindsight that it was obvious these drugs would be niche, right? I understand the benefit is not huge, but no one really thought you needed a huge benefit to have a big drug in Alzheimer's.

I think under the prior board there was maybe a different view of valuation and M&A, and they were a lot more conservative. They watched a lot of good neuroscience companies get a lot more expensive over the years, like Neurocrine and Acadia and the muscarinic companies.

I like Chris. I think he's done a nice job. A lot of investors fixate on a deal, like the Reata deal: Was that an overpay or not? But it feels like he's doing the right things, trying to diversify the therapeutic-area mix, and I think he has a keen understanding of what they lack and what they need.

Yeah, John, I'd be curious—again, having watched this company over decades now and having spent time there yourself, when it was such a scientific powerhouse, I guess Biogen is one of the companies that failed to innovate beyond its very robust and very successful MS first-generation franchise and never developed that second act. Do you think it's luck or bad luck, or do you think maybe something went wrong along the way?

Well, I think—look, historically, the company has been challenged with dealmaking. MS was amazing, and they hit it out of the park and obviously built the company with MS. But going all the way back to Jim Vincent, Eric, there was just a very high level of reluctance to do deals in general—a very conservative approach.

I had dinner with Adam Koppel earlier this week, who used to run corporate development at Biogen, and Adam was joking about—or I was actually teasing him about—Neurocrine and that unfortunate deal that could have been a good deal for them but never materialized. A lot of it is related to the historical board at Biogen, which Chris is changing. Chris has been changing.

I think Chris is going to right the ship. It's going to take some time. It's super tough when you've got a base of billions in revenue that isn't growing and you've got to reinvigorate, reignite growth in that business. It's going to take more than the time that he's been there so far. But I'm optimistic that there'll be a path forward for them.

Hey, can I chime in real quick? I want to hear Eric's perspective on something, and then, John, it would be a lost opportunity not to hear your perspective. This report from the Financial Times on Avidity says that Avidity might be in play.

I mean, Eric, I cover DMD; you cover Avidity. I think you probably agree with me that these antibody oligonucleotide conjugates are one of the more interesting, innovative areas in biotech, with a few indications that are big white spaces.

I was curious, though: Are you surprised by the timing? The FSHD data are great, right? But there are still some questions around the Phase 3 design and some of the regulatory dynamics. In DM1, I think DM1 is not without some level of clinical and regulatory risk for either company.

It doesn't surprise me at all that these companies would be in play. They seem like prime takeout targets at some point in their life cycle, but it was earlier than I thought.

Yeah, I think—go ahead, John.

Yeah, you're the RNAi guy.

No, no, no. Sure. Yeah. No, I mean, look, let me provide some context there. Novartis is on a tear with RNAi, right? They made the acquisition of The Medicines Company for $9.7 billion back in 2019. DTx Pharma was bought a couple of years ago.

They've done some deals out of China in RNAi. They've bought Regulus. So they're big believers in the space, and it wouldn't surprise me if Novartis saw this as something it wanted to grab ahead of news that might make it a lot more expensive.

It's certainly a good way for Avidity's shareholders and board to balance the risk-reward here in terms of the readouts that they've got coming forward. But Eric, what do you think?

Well, like you, John, I guess I don't know what to think in terms of the sustainability of these rumors, but honestly, I hope they're not true. The reason I do is that I'm a huge believer, maybe like Paul, in the power of this platform—the ability to deliver RNAi to muscle.

We're seeing it potentially transform these diseases in real time: FSHD, DMD, and DM1, but also potentially smooth muscle and cardiac muscle. So, Paul, I think like you, we do share the view that Avidity could grow up to be the next Alnylam or the next Vertex, a really important company in our space, right?

And if there is a deal to be had, boy, I hope it's a huge premium because I think there's a lot of value in these businesses.

Yeah.

I mean, there's just very few rare disease markets like FSHD and DM1, and DMD is still pretty open, too. There just aren't that many markets like that that are white space, right, that could actually really move the needle for a company like Novartis. So it'll be super interesting to watch it play out.