Episode 164 - November 21, 2025

Okay. Well, a busy week. Maybe not quite as busy as we've had in the past, given that we're past earnings season and I don't think there are any major medical meetings, but still plenty to talk about. Who better to talk about this stuff, of course, than Sam, Yaron, and Tess? Thanks, guys, for being part of this week's hangout.

We're going to start with a little bit of discussion of M&A. Obviously, mergers and acquisitions are something we've talked a lot about on this show, but boy, are things heating up. Another few deals to discuss, and, of course, coming off the heels of Merck's major acquisition of Cidara Therapeutics, or CDTX, last week, they then laid out their guidance surrounding what the acquisition means to them.

But, Yaron, maybe you want to start off with the latest salvo in the bid for Avadel.

Yeah, absolutely. So this is interesting. I've got to tell you, even for me personally, because I spent about 3.5 years or so in a biotech company, and we were looking at orphan drugs, trying to license things. We actually found these sorts of drugs under development a long time ago—years ago—and we were trying to license them, but of course it was impossible because they were already looking so good that people didn't want to sell them to us.

Avadel is focused on narcolepsy, and the drug specifically here is approved. It's called LUMRYZ. It's a once-nightly, extended-release sodium oxybate for narcolepsy. It's the only once-at-bedtime oxybate versus Jazz's Xyrem, which is twice nightly. It was approved in 2023 and then got a pediatric expansion in 2024.

So we're talking about year 2, 1 or 2 years into the launch. This year, it's going to be doing between $240 million and $260 million in sales, up 50% year over year. So, pretty interesting.

Alkermes actually agreed to acquire Avadel on October 22 for $20 a share: $18.50 in cash and a $1.50 CVR. If they get FDA approval for what's known as idiopathic hypersomnia by the end of 2028, idiopathic hypersomnia is actually very important. Eric, you remember a lot of this market back in the days when you were covering Provigil and all that kind of stuff.

Alkermes wanted it specifically as a beachhead because they do have an orexin-2 agonist in development as well. There was actually no-shop and superior-proposal language in the deal, including a matching right, which was obviously prescient and fairly wise.

Well, 3 weeks later, Lundbeck showed up unannounced with a $23 bid. The way it was structured, funny enough, it was $21 in cash and a $2 CVR, broken into 2 specific things, but those were $1 each on sales-based milestones. The board found that it was obviously a superior proposal, and that triggered a 5-day, I believe, matching right for Alkermes.

Alkermes came back and said, “We'll match the $21 in cash, but we'll only give you a $1.50 CVR, so it's $0.50 less, but it's only tied to approval again—the same approval of idiopathic hypersomnia by 2028—with no sales threshold.” So the board said, “Yep, that's good enough, and we'll take it.”

Alkermes seems to have won out. They're going to close it out by Q1, is what's expected. So, great to see it. Alkermes said it's going to be accretive immediately.

Just to put it in context, I mean, we're talking about a $2.4 billion deal for a drug—let's say that's going to do $250 million. So it sounds expensive, 10 times current-year sales. But remember that $250 million is probably going to end up being—I don't know; I don't cover this area—but a lot higher. So if it's doing $500 million to $750 million, it's a deal that's, you know, 3.5 to 5 times, which is pretty sensible and accretive in year 1. So kudos to Alkermes for getting this—it seems to be getting this—done.

Did we lose Eric?

I still see him.

My bad. I'm here. Thank you, Yaron. Thanks for that.

I was gone for just a few minutes at least, Sam. [laughter]

Thanks. Terrific recap. Thank you, Yaron. I guess the significance of this in the biotech world is this is now the 2nd of 2 transactions that were very competitive, very publicly competitive, and with a lot of maybe even animosity across the parties. This follows, obviously, last month's discussion around Metsera and whether Pfizer and Novo Nordisk were going to want to grab that deal.

These types of publicly competitive auctions are things that we rarely see. I can't actually remember the last one. Maybe you guys have better memories than I do, but it certainly speaks to a pretty heated M&A environment.

And I know we also had a fairly remarkable transaction in the private sector, Halda Therapeutics being bought by Johnson & Johnson for about $3 billion. I believe this is the largest-ever Phase 1-stage company acquisition: $3 billion for a Phase 1 company. Sam, I don't know if you want to introduce the transaction or I can, but go ahead.

I'll take it. The one thing I do want to highlight is, don't forget, the 2 bidding wars involved Danish companies. I don't know if you say it's got anything to do with Greenland or not, but I'm guessing, of course: Novo for Metsera, and here, Lundbeck.

But the J&J deal is very interesting. Is it the largest? I think the data that I've looked at suggests this could be, but I'm pretty sure one of our listeners following up on Twitter will probably tell us, “No, you missed this one. That was $3.1 billion or $3.2 billion.”

What is interesting, of course, is that this is J&J, i.e., the king of prostate cancer, at least in the small-molecule world. And how times have changed. J&J paid $1 billion for a Phase 3 asset, which ended up being called Zytiga, back in 200-something. Was it 2009, from Cougar Biotech? I'm sure you all remember that. And, yeah, it was 2009; I've just checked. And that was Phase 3. I said about a billion dollars.

Here we are with a Phase 1 asset at about $3 billion. Should we take a signal there? I don't know. All I'm saying is that here's a deal with a company that knows the space, and they're going to pay this number.

It is HLD-0915. It's a first-in-class oral small molecule with a hold-and-kill mechanism. So it binds the androgen receptor together with a key transcription factor, and the complex then results in cell death. I think it's via apoptosis, but I'm sure Eric will correct me if it's not apoptosis.

But I think the data that we saw at the TRIO meeting for late-line, pretty much end-stage, heavily pretreated prostate cancer patients was pretty impressive. This is an area where bispecifics, radioligands with a million different isotopes, and ADCs—which are not convenient—we haven't really seen much evidence that they are particularly super effective. They are, of course, to a degree, but here you come with a potential small molecule that you can combine with the rest of the assets that J&J has.

I know they have a very active prostate cancer research space, at least. So this would have gone under the nose of—I'm pretty sure—Chuck Drake, who runs the research on prostate cancer there at J&J.

And I think it's an attractive asset, and it really does fit very well with the possibility of maybe even doing—I don't know if it's going to be possible to do—a fixed-dose combination with another of the small molecules that J&J has. But it certainly helps with the patent expiry that's coming up again for another of J&J's assets soonish. So those are the things that I picked out of this, Eric.

Yeah. No, that's terrific.

I did actually have those stats. So this was the most expensive acquisition for a company at that stage. I think the one after that was VelosBio, which was back a couple of years ago, where Merck acquired them for $2.75 billion. So we did look up those stats. And, indeed, it's an impressive M&A for a company at that stage.

That's great. I think it speaks to exactly the point that Eric was talking about earlier, which is we're seeing, in the public market, certainly, more competition. Looking at the statistics, I think this was up through 2024. Most deals didn't have multiple first-round bidders, right? If you look at the 5 years before 2024, these are stats that we got from Centerview. I think only 35% of deals had multiple first-round bidders, right? So it was really like, hey, you have your shot, and probably the party that puts in the bid is going to win.

We do seem to be seeing heightened competition very publicly in a few cases, which is also showing up in the SEC filings that are coming out post-deal. So that's a real shift. It may be that they see they have a bit of a window where the FTC might be a bit more lenient on some of these deals, but also, if they see their peers getting very active, they get more concerned that they're going to have to be competitive as well to win the deals that they want.

Tess, do you know if this was a competitive bid? I mean, the numbers suggest it might have been competitive.

My assumption for these private deals that happen is that they're typically competitive processes. I can't speak to this one because we were a holder here and had team members who were involved, but whenever I see a private deal on the order of a few billion dollars or over that—over the $1.5 billion mark—my assumption is that those are typically competitive processes.

I have heard from others involved—I’m not involved, of course, so I can speculate—but I’ve heard that this was a nearly 10× return for the VCs who were involved. So, congrats to RA and others. We saw the promise here.

Sam, you were right to point out that, relative to what J&J paid many years ago for Cougar—I know that's a name that Yaron and I had some involvement in back then—we were quite thrilled at the time for a $1 billion acquisition for a Phase 3 asset. But one thing that maybe makes that a little bit of an apples-to-oranges comparison is not just the price tag, but also the fact that Halda has a really cool technology platform, which, of course, Cougar never did.

Halda, I think it means “hold,” maybe in Danish—I don't know—or some Old Norse-type language. But the technology itself means that you do hold and kill cancer cells specifically by sequestering tumor antigens to an essential cellular protein and sequestering that essential cellular protein from the cell's essential biology. It's a really cool methodology.

Obviously, it has been shown to have some proof of concept in terms of the data that you referenced from, I think, the Triple Meeting just a few weeks ago. So, again, congrats to all involved. It's nice to see so much M&A in this space.

Yeah, my perspective here is—and I'll start with just a huge congratulations to Jeff Stein and the Cidara team for really having the conviction to move this program forward very aggressively. I think there are several interesting learnings here. I think Merck certainly saw the promise of the drug, a very unique drug that can basically be flu prevention, and they came out with some pretty aggressive peak-sales numbers.

What was really interesting is that, in addition to talking about peak sales as being over $5 billion and going through the details of what supports that $5 billion market, there are 2 things to highlight. One is that they really emphasized, “Hey, we're initially looking at these patients who are high-risk patients.” But they also recognized that this could be relevant for a broader population as well. Obviously, they'll focus initially on that high-risk patient population.

The second point—and, Eric, we've had conversations previously about the importance of companies doing work on cost-effectiveness and looking at cost-effectiveness broadly from a generalized cost-effectiveness standpoint—is that Cidara had actually done a lot of that work and published some of it. We shared some of that work on Rapport, and Merck actually talked about that. They talked about Cidara's pricing research and said that, at price points up to $600 per course, this was very cost-effective and had the potential not to be subject to access restrictions.

I think that comes back to the importance of every company doing that, right? It doesn't matter if you still have a couple of really big Phase 3s in front of you that you're going to run. Cidara really had the foresight to do a lot of this commercial work and think about the opportunity very thoroughly around the time of proof of concept, when they had a good understanding of what the product profile could be.

That included thinking about patient populations, thinking about pricing, and really doing a robust generalized cost-effectiveness analysis. I think it just reinforces the importance of every company doing that, right? That is obviously something helpful for you and something helpful for your investors and prospective investors.

But that's also really important for strategics, right? Everyone's working on tight timelines, and for you to have really thorough research supporting the opportunity and supporting a potential price point, that can really help a potential acquirer gain conviction in a market opportunity.

Thanks for that recap. Let's open up this broader discussion on M&A just to put some perspective on it. A few weeks ago, we had Novartis buying Avidity for $12 million. That, I believe—and again, maybe one of our listeners will correct us—I believe was the largest-ever dollar amount for a pre-Phase 3 company.

This week, we mentioned J&J—thanks to Tess for fact-checking—at $3 billion, which is the biggest-ever Phase 1 transaction. I believe just a couple months ago, the AbbVie–Capstan deal, at about $2 billion of valuation, was the largest-ever preclinical transaction. So we've been setting some records in biotech M&A left and right for the past few months.

Tess, you mentioned that these deals may be more competitive because the FTC has been playing nice in the sandbox, and maybe also because there's more competition in terms of getting pharma up off its seat and into the game. But I'm curious as to the broader team's thoughts here on what's going on, what might be truly creating this wave, and what pharma might be looking for next. Yaron, do you have any thoughts?

Well, the one thing that immediately jumps up is the cost—the price—of drugs has gone up a lot, right? Back in the day, Eric, in 2009, no one thought Zytiga was going to be that big. Now, as you said, Merck is putting a $5 billion figure on flu-vaccine, flu-prophylaxis-type drugs. So I think that the cost of drugs is probably one of the drivers.

I'd point to another driver: I think a lot of companies have actually sorted through 2026, or at least it's priced in, right? They've asked, “What's going to happen in 2026 and 2027 in terms of the patent portfolio and patent cliff?” and have a bit of a longer view about what they want to build to be competitive, without having this, “Oh my gosh, can we just solve next year or 2 years from now?”

That was really the tone, if you recall, a couple years ago. It was kind of like, “Are you not going to get bought unless you have a Phase 3 and are fulfilling an immediate need?” [laughter] I think that is a really positive development because it creates space for some of these more strategic platform transactions and more strategic portfolio and franchise deals that may be longer term.

That's really helpful and important for biotech because it means that there's an understanding that strategics could jump in at an earlier stage, right? You're not going to have to wait and necessarily commercialize everything yourself. I think that, combined with the fact that the past year or 2 years have seen several biotechs come out and commercialize exceptionally well themselves, is also a very helpful fact pattern to point to.

Yeah, I'll just add that the clarity we've got now from the administration, I think, has been very helpful. The lack of worry about FTC issues, unless you're Novo trying to buy Metsera against Pfizer, is another element.

But I would say, because we keep thinking that it's all about LOEs, and Novartis, for instance, did this deal, which of course was in the sweet spot of what they're looking for with Avidity. Everyone talks about Novartis's Cosentyx going off-patent. Our patent team at Bloomberg Intelligence has just done an analysis that suggests that Cosentyx can be protected—not easily, but can be protected—for way beyond this molecule's patent expiry, which reminds me of the Humira days.

So I don't know how much of it is driven by that necessarily anymore. Every time I look at these LOEs—and they're also looking at Keytruda—I'm not quite sure what will happen there and what the outcome will be. But it would be interesting if none of these big drugs for these companies actually end up going off-patent on the dates we're looking for, and then these acquisitions will be quite significant in terms of the accretion that they give the companies on top of what didn't expire. So we'll wait and see.

Interesting point. What about the role that M&A is playing in terms of promulgating this biotech rally? It seems like we're almost growing accustomed to waking up on a Monday morning and having a nice, splashy deal on the tape. I wonder: are we getting too addicted to M&A? What might happen when this M&A trade starts to deteriorate?

Of course, we are biotech analysts, so we like to take a glass-half-empty view of things. Does anyone have thoughts as to whether the industry is dependent upon M&A at this stage for the rally to continue? Maybe I'll let Yaron chime in.

I personally don't think so because I think the valuations are coming off trough valuations. Look, large cap, as we know, is the tale of 2 cities. They're the ones that are looking really good, and they're trading based on growth. In the mid-cap, there's always going to be concentration toward M&A names, but people are, I think, willing to pay up for good growth, good prospects, and a good probability of success.

Small cap is in a recovery mode. Valuations have gone up, but valuations are still not bad at all. I mean, we're looking at—we have names. All right, Eric, chime in as well.

They're up 4× or whatever it is, up 3×, but they're making it up. They're trading at a $1 billion market cap now with $400 million in cash. They were trading below cash before, and we think they're going to have a $1–2 billion product. If you do the proverbial 4× multiple, it should be a $4–8 billion company. Trading now at $1 billion, definitely up fourfold, but it was so distressed previously. So I would say valuations are still early in a recovery.

No, I actually agree with you, Yaron, and I like the point that Tess made: many biotech companies are not dependent upon M&A because they're showing that they can launch these drugs themselves and have good success in doing so, with a relatively quick ramp to profitability. Of course, Yaron, the point you made earlier—that drug pricing is much higher than it ever was—is facilitating those launches and that ramp toward profitability.

In some ways, you could argue the converse of what I just suggested, which is that M&A is bad for the sector. In losing Cidara, Halda, and Avidity, we may be, in the future, depriving ourselves of some wonderful mid-cap success stories that would only strengthen the quality of the companies that we have to follow, strengthen the components of the biotech index, and be viewed as strengthening our sector for the long term. I know that, at least, that's my biotech partner Josh Schimmer's view on occasion.

Let's wrap up our M&A discussion and move to a little bit more of a discussion around Washington policy. Sam, you picked up on some very interesting changes to the CDC website with regard to vaccine safety. Unfortunately, this issue was in the news more broadly this week as well, but why don't you start us off?

Yeah, I think, Eric, this also ties into our conversation later, if we do get to it, about Moderna and their guidance, forecasts, and hopes. So this is what we didn't think would happen. Well, maybe we all did think it would happen, but it wasn't supposed to, because Secretary Kennedy's comments at the Senate hearings he had before being given final approval to be the HHS secretary said that we're not going to do anything to undermine vaccines, et cetera.

And here we have the CDC page, “Vaccine safety,” looking at it and saying, “Autism and vaccines,” November 19. The claim “Vaccines do not cause autism” is not an evidence-based claim because studies have not ruled out the possibility that infant vaccines cause autism.

So we've got at least 16 well-controlled, population-based studies that show that there is no association between vaccinations, particularly MMR, which is the one that everybody keeps going on about, and autism. Even thimerosal, which was something that they discussed, is not necessarily linked.

What I don't know is, what is the CDC expecting here? Are they going to suggest that somebody do a prospectively designed clinical trial that takes a group of newborns and gives them no vaccines and a group of newborns and gives them whatever vaccines, and then looks to see what happens over the next 5 years to the risk of developing autism? What is that—the proposal? And if that is the proposal, who's going to do it? Who's going to fund it? How ethical is it? Which pediatrician would agree to do that? How do they enroll these subjects, et cetera?

And so that becomes a major issue, and I don't really know where to take this beyond what I've just said. What I do know is that the more this happens, the more you're going to get that negativity around vaccines. And I think even clear-minded folk are becoming a little bit worried, thinking, “Oh, maybe there is a link. Maybe I should worry a little bit here.” Of course, all that does is increase hesitancy toward vaccines. So, not a good step forward, again.

And I want to repeat: this is not a U.S. issue. This is everywhere. How is it that in Canada we have such a massive rise in measles this year that they lost their WHO designation as having gotten rid of measles? They don't have a Secretary Kennedy there or a CDC with a website like this. So this is a problem everywhere. I think it's something that's not U.S.-specific at all.

Yeah, great point, Sam. Just a great point on having to prove the negative in order to maybe satisfy the MAHA critics around vaccine safety and this link to autism. It's impossible to do. You could create any conspiracy theory and put it out there and say, “Well, prove me wrong.” Of course, a lot of wasted resources would be spent doing so, but the answer probably is an obvious one.

The other thing about this CDC webpage is—I think you mentioned this to me in an email—this is exactly what RFK Jr. had promised Senator Bill Cassidy that he would not do during his confirmation hearings. I think this was very explicit as part of his confirmation process: that he would not remove the CDC statement on vaccines and autism.

So that webpage that you're looking at does still say, I believe, that vaccines are not associated with autism. Those words are there, but they now, I think, have an asterisk next to them that says that this claim is not evidence-based. So there's a lot of wordsmithing going on, playing with, I'd say, semantics.

It's the footnote, Eric. It says, “The header ‘Vaccines do not cause autism’ has been removed due to an agreement with the chair of HELP, Senator Cassidy.” So it's just incredible.

Yes, absolutely. You would think that the MAHA movement would lose some credibility by going through that type of tactic, but we'll see how long this lasts and what Senator Bill Cassidy's response might be. I don't know. More vaccine non-science.

There was an article in Scientific American this week just calling out some comments that RFK Jr. made earlier in the week on peanut allergies. Apparently, he's now throwing out the rise in peanut allergy prevalence as potentially tied to vaccines and aluminum. This is despite a lack of any indication of a scientific link. So I guess in RFK's world, any type of increased incidence of disease could be associated with vaccine usage. And again, you need to prove the negative.

I found the article in The Wall Street Journal last weekend to be quite interesting as well. I don't know if you all read that, but it did report on some increased tension between RFK Jr. and Dr. Makary, and some of that was stylistic about how Dr. Makary might be running the FDA. But I think a little bit also was potentially oriented around their different philosophies around drug development.

I don't know, Tess. I know you and the great people at No Patient Left Behind certainly believe adamantly that a stronger FDA is critical to the success of our industry. The No Patient Left Behind group has done a wonderful public service for all of us in biotech by trying to, I'd say, harness the people within our industry and fight for that strong FDA. Maybe I'd just like you to recap your latest initiative, but also, where are you in thinking that we can have a scientifically driven CDC or FDA, or any set of government agencies, under this HHS secretary, RFK Jr.?

Yeah. Maybe to the second question first: low confidence until we see something different. So I think we'll have to—what's interesting is to kind of contrast the decisions that we've seen on the non-vaccine side, right? So let's separate out vaccines and everything else.

On vaccines, I think we're seeing a lot that is really not scientifically driven. For everything else, when we look at the actual decisions that have been made, look, there have been some more borderline decisions that you could argue either way, but there isn't any drug that we've seen where it's like, “Oh, this is a total home run. This should obviously be approved,” and it hasn't been. It's more these cases where there is debate.

So that is kind of interesting from a decision standpoint, but I think going beyond that and just hearing what companies are going through—and we've heard some of this publicly—where uniQure was like, “We have alignment,” and then it's like, “Oh, wait, actually the FDA said something different.”

And that is what really comes out in the FDA survey that we did. We did an FDA survey of companies in April, and we did another survey more recently. I think the April survey was interesting: We were seeing a little bit of, “Hey, there were some companies that were having challenges getting the right people,” and there were a lot of DOGE impacts that the FDA was still working through.

But overall, I’d say there were also several companies that were really impressed: “Wow, the FDA has actually continued to provide us with really important advice as we move forward in our clinical development path.” But in this November survey, it was, “Oh my goodness,” with 82% of respondents saying they were worried about the FDA’s ability to function.

Some of the examples and case studies that we heard about were really challenging. Companies had requested meetings and couldn’t get meetings. Everything was just written-response-only, and none of their reviewers had any background in the therapeutic area that they were looking at. Or the entire team had turned over, or they didn’t actually review the package properly and missed key data.

This is a real challenge, and it makes me worried about when we’re actually going to see this play out. This can affect a company that is going through its Phase 2, and they thought their Phase 2 design was okay. Maybe they couldn’t get exactly the feedback that they were looking for from the FDA, so they had to take a chance and go forward with something.

But how is that going to impact them down the road when they have to come back and talk about their registrational trial and inform what the trial design should look like? These are real challenges. This uncertainty and the challenges getting quality feedback, I think, are a real issue, and confusion about what counts and where the bar is are really a challenge for companies at every stage.

It can hamper the development path for any drug that is not incredibly straightforward and has a lot of precedent for what the clinical trial design should look like.

Wonderful insights. Thanks for sharing that survey result. Yaron, your thoughts on whether a scientific organization like the FDA can operate and thrive under RFK Jr.’s leadership? If not, what do you think is going to give next?

Well, yeah. I’m not sure I can contribute a lot that hasn’t been said. We’re seeing the assault on science in a scientific way, in a traditional way.

What’s even more surprising at this point about the Wall Street Journal article—I believe it was an Endpoints or a STAT article—was that it talked about how tight RFK Jr. and Trump are. Of course, most of us didn’t expect that. We were actually proven to be incorrect.

What’s also becoming pretty evident is that this is not just coming from RFK Jr.; it’s also coming from the president directly. This is going to have legs and long-term consequences, which are concerning. I think it’s also tied, to a certain degree, to the overall administration and what the outlook of the next administration is going to be, because this is going to have decades’ worth of connotation.

Things are getting done in the meantime. Things are getting a little bit harder to call. What’s probably more concerning is the early programs that are not getting reviewed and the long-term implication. When you have delays there, that’s not going to be a CRL with a 6-month delay; it could be 2- or 3-year delays.

This is going to be a new dawn for us. We all remember the times when the FDA was not so functional, and that did have connotations for the sector. Again, I think the good news perhaps is that we’re coming off trough valuations. Some of that is probably incorporated to a certain degree, but this is going to be something that we’re going to have to sort through with time.

Sam, anything you want to add on this topic?

Oh, sorry. I was just going to add that I wanted to make sure I highlighted a positive, which is Rick Pazdur—definitely a positive, a big positive. Sorry, Sam.

So, let me leverage a few things there. The only thing I’m worried about is a STAT article from Adam saying Rick Pazdur is fighting with Vinay Prasad. Remember, Vinay Prasad still has the chief scientific officer title, I think, unless that’s changed too.

But we still have this issue, and I think Rick Pazdur is not somebody you can just steamroll over. I’m going to assume that I’m right that he has a very, very clean background, with none of the issues that eventually ended up causing a problem for Peter Marks, et cetera. That’s the one thing I’m worried about: the Adam article, or one of his colleagues, on a Tuesday or Wednesday saying, “There’s a massive rift here.”

Okay. Well, hopefully we’ll cross our fingers and cooler heads will prevail at the FDA, including for the benefit of science. Let’s turn our discussion to a couple of news items from the week on drug pricing.

Yaron, you noted the Arrowhead approval for FCS and the substantially lower price point at which they’re going to be introducing their drug relative to Ionis. Sam, I know you’ve been following the GLP-1 pricing wars, so maybe you can just start off with a quick recap of what happened over at Arrowhead and why they chose to do what they did.

Absolutely. Actually, maybe I’ll go on a very quick point here because that’s relevant and maybe put my own earlier comment into perspective. We just hosted a call yesterday with a Harvard professor who’s done an analysis of overall drug costs—branded drug costs over the last 10 years or so. I think the analysis showed that gross prices went up 11.9%, while actual net prices went up 1.9%.

It’s one thing that’s important to keep in mind: Overall net pricing is not going up so quickly. But let’s talk about Arrowhead versus Ionis here, and this is really interesting.

Recall that these are both APOC3 drugs. They are both looking really, really good. The one from Ionis is an ASO; it’s injected every month. The one from Arrowhead is an siRNA; it’s injected every 3 months. Ionis is ahead.

Ionis got approval in FCS, in familial chylomicronemia syndrome, in patients who have a genetic abnormality. They have high triglycerides, or fats, in their blood, and it can cause acute pancreatitis. This is an ultra-ultra-orphan indication, with about 1,000 patients in the US, and they priced it at $595,000 for an ASO.

In the meantime, they just read out the data for severe hypertriglyceridemia, which is the same condition; it’s just not genetically confirmed. That’s a much bigger population. They’re talking about how they think the price will go down from $595,000, because it’s the same drug and the same dosing, to, let’s say, $10,000 to $20,000—perhaps $15,000 to $20,000.

Eric, your own signal keeps deteriorating.

Oh boy.

Yeah.

Can you hear me? Why don’t you go ahead, Sam? We can hear you well enough. I’d continue. Yaron, are you there? No, we can’t hear you. Sam, do you want to follow up on Arrowhead and Ionis, or would you like me to? Where do you want to go?

I’m suffering. I’m not hearing you very well either. I wonder if it’s a system problem. Can you guys hear me?

I hear you fine, and I hear Eric fine. It was just Yaron for me as well.

Okay. Well, I’ll keep going, and then I’ll see if I can switch my feed.

Novo obviously dropped their price again for semaglutide, or Wegovy, now starting at $200 per month through the first quarter, after which it goes up to $350 per month on average versus $500 a month previously. This is similar to the GLP-1 pricing out of TrumpRx.

What’s interesting is that I suppose you could read this as trying to compete for new patient starts as we go into the back end of the year and in what’s clearly a price-sensitive market. Novo is playing catch-up in this space, and this was clear if you listened to their third-quarter results, which were night and day compared to Lilly’s.

Of course, we’ve known all along that Lilly’s Zepbound, or tirzepatide, does have an arguably better weight-loss profile. I think they’ve shown that in a head-to-head trial, and it also has a sleep apnea indication. So we could maybe also now see that Lilly is going to do the same thing and bring down the price, or at least try to compete, or maybe they just sit back and believe that their profile is sufficiently strong that it would withstand this.

I just want to highlight that the multidose pen is going to be available at the lowest price, around $299. That’s a pretty significant, hefty discount that Novo is offering, at least in the short term.

Now, obviously, you’ve got the Medicare and Medicaid action coming in, and the $350 price for Wegovy, Zepbound, and orforglipron from TrumpRx. The oral GLP-1s are now on a starting dose of $150 per month, and yet nobody is changing their models with regard to the massive potential for this market, because everybody believes—and we concur—that the lower the prices come, the more likely you’re going to get volume compensating for it over time.

So I think the point that Yaron was probably likely to make—Yaron, you're back. Go ahead. Can you hear me?

Yeah, if you can hear me.

Yeah. So, Eric, chime in.

So I don't know where I left off, but the price for Ionis will go down from $595,000 for the genetically based ultra-orphan indication to the same drug, same dose, obviously, in a much bigger market. They're going to file and get approved late next year. That price is going to go from $595,000, they're saying, to, let's say, $15,000 to $20,000, and most of us are thinking it will be incrementally more.

Arrowhead is behind. Because they're behind, they're running slightly different studies. They just got approved for the ultra-orphan indication, and of course, the eye on the prize is the bigger indication, severe hypertriglyceridemia, or SHTG, where Arrowhead isn't going to have its data until, let's say, Q3 or so next year. Because they were behind, they ran slightly different studies, which are geared to inevitably looking at higher-risk patients.

So, keeping an eye on the price, they're already pricing it now for the high-risk population only of the bigger market. They ended up pricing it at $60,000, or a 90% discount to the current Ionis price. So, they're pricing it at $60,000, and Ionis is talking about pricing ultimately for the big indication at, let's say, $15,000 to $20,000.

It's an interesting situation, and people are now asking, “So what does this mean? Does that mean that Ionis now has a quote-unquote license to price it higher, up to $60,000?” On our calls with management, publicly, they're saying that they think people are asking about the Rezdiffra price from Madrigal, which is around $50,000, and management is saying that's too high because they're not thinking it's just going to get used in high-risk patients. It's going to get used very broadly. So they're continuing to index toward $15,000 to $20,000.

So it looks like, at the end of the day, they'll have similar, potentially, labels—Coke and Pepsi, with slight differences—but they're probably going to contract very differently with payers. Maybe Arrowhead, because of its studies, is going to contract for the higher-risk portion of the big market, whereas Ionis, because its studies were broader and it has data on everybody, will inevitably contract much more broadly.

I bet you—my guess is that Ionis prices at north of $20,000. I don't know if it's going to be $25,000—that's away from the model—or maybe $30,000. Maybe eventually Arrowhead discounts a little bit, and that's kind of where equilibrium is going to end up. But these are great drugs, and it should really be a big market. As a firm, we like both stocks a lot.

Well, it's such a fascinating scenario analysis that's playing out here with 2 pretty similar drugs that'll have fairly similar labels, at least. Maybe there will be different pricing and a different strategy for going after, as you say, Yaron, the severe end of the market versus perhaps the more common and generic form of hypertriglyceridemia. We'll see.

But I guess the broader theme here is that we're starting to see drug pricing come down, not up. Historically, we used to say that drug prices only move in 1 direction, and that was up, and we rarely, if ever, saw companies cut the price of their drug on a net or wholesale-adjusted basis. So, I don't know, are we seeing a change here? Are these therapeutic categories becoming so dense and competitive that we might see more of this sort of thing? Tess, do you have any views?

I think a lot of it comes down to what the incentives are for PBMs and for coverage. If we start seeing more companies come out, like Cigna is doing, saying, “Hey, we're going to take a new approach to rebates,” and Cigna has talked about eliminating prescription drug rebates for some private health plans starting in 2027, this is going to be a gradual thing. It's not all in 1 shot.

But I think you take out—you get rid of rebates—you take away 1 of the top reasons for pricing high, which is leaving room to rebate, knowing that those rebates are only going to go in 1 direction, which is up, after the drug is launched. I think it's great to see competition in categories where, look, when you have something that is just so clearly best-in-class, I think there's recognition that it's worth it to pay for that premium, depending on how much.

But this is why having some similar drug competition can actually be really helpful. It brings us back—we were talking, I think, a few weeks back about me-too drugs, and whether me-too drugs are useful and have merit. Yes, [laughter] they have merit because they can actually help bring down price and inform another important part of competition.

Sam, your own—any other broader thoughts on the topic of drug pricing?

The only thing, to Tess's point, that I would say is we do track gross-to-net, and we have a database for that. The average price-to-net discount right now in Part D is in the 30s, and in Part B it's around the high 40s. So, as you said, the list price is not the real price.

And what's interesting, I think, about drug pricing in general is not that the list prices aren't going up by a dramatic level. I think you're right—your analysis, I'm sure, is spot-on. We haven't seen huge growth in list pricing. We've certainly seen limited growth in net pricing, but what we have seen is new products come in at premiums higher than what we've ever seen. So if you try and factor that into the drug-pricing discussion, maybe on a net-patient basis or average-patient basis, the prices are probably going up.

Let's shift our discussion to yet another potentially difficult decision that's going to be coming down the FDA's way. That has to do with Agios, which had very mixed data, I would say, in sickle cell disease from its drug mitapivat, a pyruvate kinase activator, earlier in the week. Tess, did you want to give us the background on this one?

Yeah, absolutely. Just backing up and sharing some context, sickle cell is an area of huge unmet need and a really, really challenging disease. I think we all remember Oxbryta, which was a drug approved—this was Global Blood Therapeutics' drug—and essentially what they saw is that they didn't hit on VOCs, which are the actual vaso-occlusive crises that these patients have, but they did hit on hemoglobin, right?

The drug was approved, and if you recall, Pfizer bought the company. Then they read out the confirmatory study that was looking at VOCs, which had been a postmarketing commitment for the company, and they did not hit on VOCs. I think this was a real upset for the community because the drug was also pulled very quickly without really a lot of support for the patient community, or at least it was perceived that way by many in the patient community.

I think everyone was hoping that mitapivat would be different and that there would be a VOC benefit in addition to hemoglobin. What they reported is that there was not a hit on VOCs. There was a trend, including when you looked at the hemoglobin responders, and they will go back to the FDA and do a pre-sNDA meeting, since mitapivat is currently approved for beta thalassemia.

They'll talk about the data package and discuss it in the context of sickle cell being an area with an incredibly high unmet need. That is going to be a really, really challenging decision for the FDA. We'll await commentary after they've had that meeting with the agency.

Yeah. Yaron, you mentioned some inconsistencies and difficulties that investors were having in handicapping some of these rare-orphan approvals, maybe in part based on the changing FDA landscape. In this case, it is going to be a tough decision. Our heart goes out to the sickle cell community. They're in dire need of new therapies. The standard of care for these patients is still extremely poor.

I think the life expectancy of a sickle cell patient in the United States is still hovering around 40 or so years. There are a lot of these patients. Yes, it's a rare disease, but there are an estimated 100,000 or so such patients in the United States, and they have very little in terms of innovation.

So, in terms of the mitapivat study that you've very kindly summarized, Tess, it hit on 1 of 2 primary endpoints, and it's going to be hard to, I think, squint and see, in terms of actual data and analysis, any true clinical benefit this drug brings. But Agios, at least, is indicating that it's going to send this down to the FDA and hope for the best.

I guess, again, this maybe brings up the broader question: Does anyone really know where the FDA is going to set the bar in rare disease? The leadership at HHS has been saying for some time, “We want to err toward the side of right to try and give patients access to drugs and do things very quickly,” but do we know where the bar is set?

Sam, do you want to chime in on what you think should be done differently so that maybe the drug developers have a little bit more understanding of what to do?

What do you mean, from a regulatory perspective?

Yeah.

I mean, I don't think we have any idea what the FDA wants and needs right now. No, I'm not going to—I can't say anything of value here, to be honest with you, because it seems to change on a daily basis. But again, where is this going? Is this CBER or CDER? It's CDER, right?

This one will be CDER. So maybe the new boss of CDER, who has done a great job for oncology, is going to be applying his level-headed thinking to take care of these things. This is a difficult one, I have to admit. Tess did a great job, so maybe we can be a bit more optimistic here.

Yaron, anything you want to throw in?

Not on this one. I think you have another topic later on, which is actually super interesting.

Yeah, we don't have it later on.

Okay, you guys, I know.

I'll go ahead. You start with what you want to talk about, Yaron.

Well, I mean, we're seeing a couple of things. So I want to talk about Zymeworks and then very quickly about AnaptysBio, and the whole concept of biotech companies beginning to return cash to shareholders a little bit, as well as the transition to royalty models and maybe monetizing things in a different way.

Zymeworks, with Jazz and BeiGene, just read out their HERIZON-GEA-01 frontline study. This is a HER2 bispecific, and it went head-to-head against Herceptin. So that's 2 arms, and the 3rd arm was zanidatamab plus a PD-1 from BeiGene, tislelizumab, obviously on a chemotherapy background.

The data looks like it's going to be very, very strong, which is what one should have anticipated based on the previous data. We think we're going to see the data at ASCO GI. They're saying it's going to be early next year, which is the most likely meeting, and it looks like it's going to be really, really good data.

Jazz went up, Zymeworks went up, and then, a day or 2 later, Zymeworks came out and said that they're going to shift their business model a little bit. The business model was really 2-fold. 1, they have their internal ADC portfolio, which they'll continue to work on, but they're increasingly going to move now to a royalty-based business model.

Even for their own pipeline, they're going to be looking to partner it. They're trying to diversify risk, and they're going to monetize a lot of future milestones and royalties on Ziihera, and then be very flexible about potentially in-licensing compounds, developing them, and partnering them. They may buy a company or a platform that is undervalued and then monetize it via royalties. They may even be willing to go out and buy royalties that are undervalued and monetize them. They announced a $125 million buyback.

AnaptysBio, of course, recently also announced that they're going to be splitting the company. They do have a common shareholder as well, obviously, both of them. The concept is really to move away from the traditional, risk-heavy, single-program business model to more of a diversified model.

That's definitely something we're beginning to see. The concept is not just to go into businesses and break them up, which is what 1 well-known fund is trying to do, but rather to risk-mitigate and diversify a little bit. It's a slightly different model. I'm curious to see what everybody thinks about it.

Well, thank you for bringing up that model. It's definitely different and certainly seems much more shareholder-friendly in terms of redeployment of capital. I know we only have a couple more minutes, Sam, and you have some topics you want to get to, so it's your choice, and you can wrap it up.

2 minutes, very quickly. Just to add to Yaron, we're also very excited for the data that's very likely, as he said, to come in at ASCO GI. We like the asset, and we like the setup for that particular trial.

Nuvalent had some pretty good data. It took us a little while to get our heads around the different subgroups, et cetera, but this is a 3rd-generation ALK inhibitor. Enterprise value is now about $7 billion. On the back of the data, they raised $500 million.

We have a lot of proprietary cancer models. Our ALK model gives them a very meaningful share—pretty much most of 2nd-line, but certainly in 1st-line also among ALK inhibitors. We've got a drug that has potentially similar efficacy to Pfizer's, what I would call, best-in-class lorlatinib, but of course we need to see more long-term duration of response, et cetera. It has adverse events that are more similar to alectinib, which is Roche's drug, so it's an interesting space.

I don't want to wake up 1 day and find that someone's had a high level of liver toxicity, because the liver toxicity is a little bit higher than what we see with Alecensa today. But it's early days, and we're positive on this asset and this drug, and it could possibly be an M&A target because pharma seems to be buying these kinds of assets and these kinds of companies. I'm not saying that I know anything; I don't want to get myself into hot water.

The next one is Olema, whose share price went up, and they raised some money on the back of data from Roche. The data showed that the oral SERD Roche is developing, giredestrant, actually worked in a 1st-line trial, and it worked in ESR1 wild-type patients, which is where people were worried that it wouldn't work.

So we've ended up in a situation where Olema has one of the better assets here. Is it the best asset in the class? In this approach, I'm not sure, but it is a very viable product, and I think that share-price move suggests that investors think that, too. So we're looking for data in 2027, potentially, whereas AstraZeneca and Roche will have data in 2026. There was a lot more to say, but I'm going to leave it at that.