Episode 181 - May 1, 2026

You're listening to the Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry with a group of biotech leaders and experts. I'm Eric Schmidt, and my co-hosts today are Sam Fazeli, Graig Suvannavejh, Matt Gline, and Chris Garabedian. For more information about our hosts and guest speakers, or to listen to the most recent episode, please go to thebiotech hangout.com. We've got a ton of content this afternoon, so thanks, everyone, for joining. We're going to cover the broader market dynamics and IPO trends in the biotech industry. We'll talk a lot about deal flow, both M&A and collaborative deal flow. We'll discuss many of the key data sets and upcoming conferences, and then hopefully we'll have time to end with some regulatory developments and maybe even a little bit more company news. We'll try to squeeze that all into the broader hour here.

Before we kick off, let me start with a quick shout-out to 2 scientific luminaries who unfortunately passed away in the last week. The biotech industry is worse off for sure. I'm specifically referencing Craig Venter, who was a key figure in the Human Genome Project, a former CEO of Celera Genomics, and the first person ever to not just invent shotgun sequencing, but to use it to analyze the whole genome of H. influenzae back in the 1990s. And then also Eugene Braunwald.

Dr. Braunwald was recognized as the founder of modern-day cardiology. His textbook and his presence in the cardiology world were pretty much unmatched resources for many of us. I personally got to know Craig a little bit when his Celera days were front and center to many in the industry. He was certainly a force of nature, a true character. Dr. Braunwald consulted with many Wall Street firms and was revered everywhere he went.

Both will be missed, so just a quick shout-out to each of them. But let's get on to some of the more relevant news in our industry and the market dynamics that continue to be hard to put a finger on. Graig, I think you're going to help us understand what's going on in the markets these days.

1. Biotech Market And IPOs

Thanks, Eric. It's great to be back on the Biotech Hangout. I thought we'd start with a review of where things are in the biotech market. I'll speak on sector performance and then provide some commentary on the capital markets and deals we're seeing.

At a high level, I think things overall are still very healthy in biotech. Year-to-date performance is still in positive territory. The XBI is up about 8% year to date, and that's still about 300 basis points of outperformance versus the S&P 500 and about 100 basis points of outperformance versus the Nasdaq. Within healthcare more broadly, using the XLV as a proxy, with the XLV down 6% year to date, the XBI is outperforming by 1,400 basis points.

That said, since I last reviewed how biotech was doing about 3 weeks ago, the gap between biotech and the S&P and Nasdaq has tightened considerably over the past month. The XBI is up 1%, but the S&P and Nasdaq have had huge rebounds. They're up 10% and 14%, respectively. We did see a recent 52-week high for the XBI of almost 139 a couple of weeks ago, but since then, the XBI has retrenched about 6%.

I've tried to dig up some information and dig into what's going on. I'm not exactly sure. I'll point out a few things, and this is color from our trading desk and also my healthcare sector sales specialist, Jared Holtz. First data point: Trading volumes for the XBI have come down a little bit this past week versus the 30-day average. Secondly, and this is an alarming statistic that I got today, April 2026 was the worst relative month for healthcare versus the S&P 500 since 2009.

I'm not really sure if there are good reasons behind this. It could purely be an apathetic response to healthcare versus perhaps more interesting segments of the market, like tech. Who knows? Later in the podcast, we might have some time to talk about the recent phase 3 data for Revolution Medicines. I think that, combined with the recent media coverage of former U.S. Senator Ben Sasse and his battle with pancreatic cancer, did get biotech a lot of broad attention. With that now in the past, perhaps people have moved on. I do think this is something we'll have to monitor closely.

That said, I do think sector fundamentals are still quite good. In the past few weeks, we saw the $719 million upsized IPO for Kalera Therapeutics. That's an obesity-focused company. Just this week, we saw the upsized IPO for Avlinger Pharmaceuticals. That's a respiratory disease company that raised $300 million. That deal priced at $18, and in real time, as I'm checking my Bloomberg, it's almost at $29, so a very nice performance there for Avalyn.

Today, we're seeing 2 companies making their debut on the Nasdaq. That's DeepPort Therapeutics, a CNS company that many of us here on the podcast are familiar with and know well. They had an upsized IPO that raised $255 million, and also eMab, which is a blood-disorder company with an upsized IPO that raised over $300 million.

As a great sign for biotech year to date, we've now had 10 companies IPO, raising collectively about $3.2 billion. Given this positivity, I like to think the window for private companies to consider an IPO remains pretty open.

Just quickly, to review other recent capital-markets activity and deals, I'm going to highlight 2. First, Revolution Medicines announced excellent phase 3 data for its pan-RAS inhibitor in pancreatic cancer last week. It subsequently raised a total of $2.2 billion in a mix of equity and debt, and that was upsized from an original $1 billion target.

Second, we had an emerging biotech company called Aruka Therapeutics, which is in the I&I space. They raised $700 million, up from an original $500 million goal. All in all, I still think these are very encouraging and bullish signs for biotech, at least from a public-market perspective. With that, I'll stop here and pass the mic back to Eric.

Great. Thank you for that. I'm actually surprised by that underperformance in healthcare relative to the broader market. Certainly, a little bit of the bloom seems to have come off the rose in biotech in the last week or 2.

But Sam, what are you seeing from the larger-cap pharma names, Lilly and Novo in particular?

2. Lilly And Novo Set The Pace

The companies have all reported pretty decent numbers. Some clearly beat, some a lot more significantly than others, particularly if you look at the share-price performance. Lilly is up another 3%. It was up about 5% today, after having been up 9% or 10% yesterday. Most of large pharma is doing okay. Some of the beats are better quality, for want of a better phrase, than others.

The one that really stood out for me was, of course, Lilly, because I think there had been some hyper-focus on this new launch that they have, which is the true small-molecule oral pill for obesity. It has been on the market for just a few weeks. Some analysts had downgraded it, saying the expectations were too high. Of course, Lilly came and beat, not because that drug was doing particularly well, but because the obesity drugs are flying off the shelves ex-U.S.

The $2 billion increase in their full-year guidance, from $80 billion to $82 billion on the low end of the guidance, is pretty much all driven—or at least a lot of it is driven—by ex-U.S., which is quite interesting because it's, I think, mostly an out-of-pocket market. They talked about Foundayo, and they've now got this new route they're going to be working on. It's not going to be immediate, but it's a new way of getting these drugs to patients through the employer direct-to-employer work that they're doing, which is quite interesting because we're seeing this pharma company in this space disenfranchise the PBMs to a degree. I'd love to hear what others think about that, because that's an interesting evolution.

Usually, what's good for Lilly is bad for Novo. The flip side of this was that the Foundayo drug isn't doing that great at the minute, and I think Lilly was saying, “Look, it's going to take a while.” Of course, Novo was up because the drug that's out there and that people are taking is oral Wegovy, which is the oral peptide. It has some issues—not issues, but you need to take it half an hour before breakfast, et cetera.

Those were the biggest moves that I saw in the market. Otherwise, it was a relatively ordinary set of results for large pharma so far.

Thank you, Sam. Maybe Matt, for you: I know Graig gave us a few statistics on the IPO market.

What are you seeing from where you sit there?

Yeah, perfect. And Graig took care of the capital markets stuff, which is great because I’m just a CEO. It is fun to see the IPO market working generally. I’ve had lots of private companies come to me over the years, asking for experience in going public and creative ways to go public, because frankly, it’s been hard. My hope is they’re all pushing the button now because what’s the expression about feeding the ducks when they’re quacking, or whatever?

Oh, and by the way, Seaport—I think those of you who know Daphne know she’s been involved with this program. Congratulations to Daphne. It’s not a space that I follow very closely, but it seems like an awesome deal. Avelin, which went public yesterday and had a great outcome, is one I have just a couple of comments on, because I think that space is interesting.

First of all, the company is focused on inhaled therapy for respiratory disease, especially IPF, which is a space that’s been, up until recently, I’d say, dominated by Boehringer Ingelheim with a couple of older systemic drugs. I think you’ve seen a trend in the pulmonary hypertension space, where pulmonary hypertension patients with lung disease have increasingly been treated with inhaled versions of classes that have been very successful in PAH. So you’ve got Tyvaso, for example, and the prostanoils. We have a drug in development of a different class, an sGC modulator—or activator, in our case.

I think you’re seeing something similar with Avelin and IPF here, where they’re taking some of the very same drugs that are multibillion-dollar blockbuster drugs as systemic therapies in IPF and developing them in targeted inhaled formulations, with the idea of delivering either similar clinical benefit with better safety and tolerability, or maybe even better clinical benefit because you can dose higher if you get the therapy locally. I think it’s an interesting thing to watch them succeed so much in the capital markets here, given that these are older drugs, but with some interesting novel science pulling them forward. Lynn used to work for one of the Royvan companies, so again, congratulations to Lynn and the Avelin team.

What a great outcome. It’s a cool one to watch, and IPF is a space that’s developing quickly, including some of the PHLD drugs I mentioned, where, for example, Tyvaso has put out some data now in IPF directly. So I think IPF, which has, as I said, been a pretty concentrated space historically, is really going to explode in opportunity over the next couple of years, and certainly we’re watching it closely. I think it’ll be an interesting one to follow.

Sorry, I keep getting kicked off, so hopefully you guys can hear me okay and that I’m still on. VCs really need the IPO market to be working. Like Matt said, we’re looking for a healthy IPO market, one that’s not too exuberant. We were private investors in Avellin. We co-led the Series C, so it’s always good to see a liquidity event for any portfolio company in the venture space.

We also have a private company that’s in stealth, and we’re going to be coming out of stealth probably in the next year, in the IPF, ILD, and PH markets as well. So we’re really excited about all of that, and obviously the other IPOs in the queue look good. I think the reason I’m less concerned about this moving into frothy territory this year with the number of IPOs is that we’ve had so many years of companies that have gotten extended private rounds and got into the clinic with clinical data, really waiting for the big pivotal value inflections or large Phase 2 value inflections. So I think this is a different profile of company that is going IPO, and from my vantage point, I think there are a lot of them out there.

We might have a big year, but most importantly, we want to see them trade well. We want to see good aftermarket performance. It does seem like Avellin at least had demand there, and it traded well in the aftermarket. So I think we’re going to be watching that pretty closely on the venture side. I’ll also mention that venture firms change their behavior if there’s a thriving IPO market, and we’re starting to see maybe a little more looking at earlier-stage VC and startups and all of that.

I’ll highlight 2 things. First, NPM has a company called K2. They announced 3 products out of China. This is a little bit of a Nimbus-type model, where they’re going to have each of them in its own kind of subsidiary underneath the K2 umbrella. They expect to do this a lot. They’re calling it complementary and synergistic with their other strategies.

But they wanted to keep all of these China assets under one roof, and the thesis is, if they can even go after newer targets—not me-too targets—but test out novel targets more quickly in China, this can add a lot of value. It’s more formalized. A lot of VCs have moved into the China space, but often in a one-off manner. So this is a more formal and clear mark in the sand of this China strategy by NPM.

And then Deerfield did something that I think is really a service to the industry. It’s always hard to try to reach into academic centers for early projects to start companies around, and they launched a database this week that’s accessible to really evaluate different academic institutions and the programs within them. They have different parameters that you can screen by. I haven’t tested it out fully yet, but it was nice to see somebody in the industry, in the VC space, stepping into that.

Thanks, Chris. I think you’re right with regard to the IPO market. It certainly has started with some very good-quality companies that have been incubating for lengthy periods of time in the private markets. But maybe to play devil’s advocate, isn’t that always the way that we start these IPO windows? When people make a little bit of money on the good-quality companies and the stocks go up, it’s hard for venture investors and others, even investment banks, to really police the quality, and things seem to slip. Eventually, we end up maybe swallowing or biting off more than we can chew. Is there any reason to think we’re going to be different this time around?

Eric, you’re absolutely right, 100%, and I don’t think anybody’s figured out how to stop that. I think we saw it in the last bubble, where we kind of knew this wasn’t going to end well, but you can’t be an investor in the space and not try to take advantage of that, right? I don’t want to call it a Ponzi scheme, but it’s kind of like, as long as it’s working and no one’s getting hurt, you’re going to see that behavior continue.

I think you’re right. If there were a mechanism—a governor on that—that we could implement, I think that would be helpful. But when the markets are good, everybody’s—I think Matt said it, the ducks, right? They’re going to try to get their money. They’re going to try to get their liquidity. I’ve always seen these cycles.

What I’m hoping for is that this one is sustained, that we’re not going to see this escape velocity and that we’re going to be in a problem 2 years from now. But I think it’s a worthy discussion to have, and I don’t know that you can convince a company or a board not to go public if the markets are working.

I mean, I feel like the answer is these IPO markets stop working when people stop buying deals, right? That happens for one of 2 reasons. Either it happens because the IPOs themselves are not working—because you’ve worked through the good companies and you start taking less-good companies public, and deals start breaking and investors stop buying them—which is maybe what happened in the last so-called “bubble.” Or it’s like early last year, where you had a couple of IPOs. I don’t know if there was anything specifically wrong with the companies that went public, but the biotech market just didn’t do well enough, so there weren’t enough buyers for deals and they went away.

I guess I feel like this will end one of those 2 ways, right? Either the biotech market will get weak and good companies won’t be able to go public anymore, or we’ll get through the backlog of good companies and eventually too much will go public and deals will start breaking.

I think you're right, Matt. I mean, I think maybe the only other thing to say here is that many of these IPO markets seemingly have this undercurrent of generalist investor interest that drives the IPO window to open, and things are good for a period of time as generalist funds are flowing into the sector. And I don't think any of us as specialists quite understand how and why generalist money comes in or out. But unfortunately, when the faucet turns off and the drain opens up, we're left holding the bag. So maybe there's nothing we can do. As Chris said, there is no governor on the system. But Sam, Graig, either of you want to chime in on the IPO topic?

I will just simply add that it does seem that, from period to period, we do get this exuberance that seems to be unstoppable. I think we do want to see a rational market. We've talked about the volume that we're anticipating in 2026, and I think, without being able to predict the future, it is going to be a good year for IPOs. Let's just see how market participants are able to be somewhat rational during this period. Hopeful thinking, maybe.

My question, Eric, is how much of this is… I mean, there has to be some generalist money coming in, although even the big one from Revolution Medicines—sorry, the follow-on from Revolution Medicines—apparently didn't have particularly a lot of generalists. But you guys tell me: Is generalist money coming in? That's what we're always looking for, right?

From where I sit, absolutely. You can't do a $2.2 billion follow-on or a $700 million IPO, as Graig was pointing out earlier, without that kind of money. Specialists just aren't that deep-pocketed and don't have that kind of new capital put to work.

So I think, again, Graig, I'm interested in your views, but from where we sit, we don't talk to a lot of generalists because, honestly, they don't want to talk to us. But you can kind of sense when an analyst at a plain-vanilla mutual fund calls you up and asks you for new ideas, that he's not necessarily asking for his specialized fund within that investment group. He's asking for his PMs who, right now at least, see biotech as potentially the best-performing subsector of the marketplace. But Graig, your thoughts?

I think that, at least based on my conversations, I am getting generalist inquiries about names that I cover. But I do think that they are still very much into de-risked names and that they already have clinical data in hand. Sometimes they're looking at commercial-stage companies that I cover because they screen well.

I don't think we're at a place—and I could be wrong—but from my perspective, I don't think we're at a place where we're getting generalists coming in and playing earlier-stage, riskier names. We'll see how the next 12 months works and how biotech performs, but I think we're still in the very early days of a wide swath of generalist money coming into biotech.

One comment about that as a CEO: We had a ton of shareholder rotation last year as larger long-only institutions came into our stock. I'll say there's nothing more confusing or difficult to predict or understand as a company than that, if you're used to dealing with biotech specialist investors.

I don't know how many of you have pitched biotech specialist investors as an issuer, but it's basically a terrible experience, right? You go and spend months and months or years and years getting grilled by the same people on the same specific questions, much of which is competitive diligence for other things they're doing. And when they come in, they come in. Most positions held by specialists are $30 million to $100 million or something, so they can own a decent amount of stock, but whatever.

My experience with generalist investors, long-onlys, who are phenomenal shareholders and have some really smart people, is they don't meet with you, and they don't meet with you, and they don't meet with you. And then one day you meet with their analyst a few times, and then you get invited to a room with 15 PMs who you've never met before, who don't ask any questions. And then the next time a 13F comes out, they own $400 million of your stock, and it's just this weird, transformative mystery that's very hard to predict. So it's a totally different animal from our perspective.

Very well said, Matt. That's my experience as well. Well, let's move on from IPOs and generalist investment to deal flow and M&A activity in particular. And Sam, yet another deal from Eli Lilly. What do you want to tell us about that?

3. Lilly Leads The M&A Wave

Lilly's done, to my count, 6 deals—M&A, not licensing. Of course, there's a longer tail of licensing deals. That's $14.5 billion upfront so far, from the numbers that I've added up, there or thereabouts.

If you think about the number of weeks that we've had in the year, it feels like every couple of weeks they're doing a deal. Now, that's about, I think, half of the large pharma deals in terms of M&A that we've seen. So they're helping our sector quite nicely, although many of the companies they're buying are private companies, and they're in all sorts of areas.

Everybody's jaw dropped a little bit, I suppose, when we saw the Colonial deal, in terms of the upfront payment of $3.25 billion. We all saw the data at ASH in terms of an in vivo CAR-T for myeloma. They already had a CAR-T deal earlier, which was Orna Therapeutics, also this year, more for INI.

And the latest one they've done, which is Ajax, is also in a very specific space, with a JAK inhibitor that's in the myelofibrosis and polycythemia vera space. So they're really fanning out there, and many of these are in phase 1 or maybe very early development. Some areas that they've never been to, like sleep disorders and myeloma—they're not in those spaces.

So it's interesting how they're building this portfolio. Fast-forward 10 years, and we'll all be sitting here thinking, “Oh my God, what's going to happen to this—I don't know, whatever the number is—$70 billion, $80 billion drug that they have.” Whatever the number is, right? It's going to be a big one, and it's going to be bigger than all the ones that we've had so far: Keytruda, Humira, et cetera.

And the portfolio of Skyrizi plus Rinvoq—let's not forget that. That's doing magically in the hands of AbbVie. So they're going to have to be feathering that nest, and I think that's what they're doing. It will be interesting to see how these things pan out. But thank you, Lilly, for helping our sector. Over.

Thank you, Sam, for covering that. Now maybe to Graig or Chris, I'm not sure who wanted to cover Ajax in more depth, or do you want to move on to the KalVista acquisition?

I'll just briefly talk about Ajax. Lilly's dry powder continues to seemingly grow every day off the success of its GLP-1 franchise. This week, it announced the acquisition of privately held Ajax Therapeutics for total consideration of up to $3.2 billion.

Ajax is developing a novel, potentially first-in-class type 2 JAK inhibitor, and it's currently in phase 1 for rare blood cancers known as myeloproliferative neoplasms. These include myelofibrosis and polycythemia vera, as Sam mentioned.

The interesting thing here is that, while there are approved JAK inhibitors already in these myeloproliferative diseases, as well as in autoimmune diseases, the older ones that are approved bind to the type 1 conformation of JAK2. But Ajax's lead asset is a type 2 JAK inhibitor, and that gives it the potential to improve on efficacy and, perhaps more importantly, improve on safety and tolerability.

Recall that there is a black box warning for all JAK inhibitors on higher rates of all-cause mortality, so I think this could be a really exciting class of compounds. I'll be interested in seeing whether there are other companies that are going to interrogate these type 2 JAK inhibitors for perhaps autoimmune and inflammatory diseases. I guess we'll have to wait and see.

And then, just quickly, I'll comment on another deal, and there have been several in our space this week. We saw Chiesi, which is a private, I believe, Italian pharmaceutical company, acquire publicly traded Calvista in a $1.9 billion acquisition. In acquiring Calvista, Chiesi will get a drug called Ekterly, I believe it's called, and this is approved for hereditary angioedema, or HAE.

The HAE space has become quite the commercial market since I first took a look at it some 20 years ago. We've got multiple drugs approved, so an interesting deal in this space. With that, Chris, did you want to comment a little bit more on Chiesi, perhaps?

Yeah. Well, first, we had an HAE company acquired by BioCryst earlier this year, or maybe late last year. But it is a space—I think $1.9 billion for an oral drug in this space that did about $60 million, I think, last year seems rich, which is good. You get high premiums for commercial-stage products. Ours was a clinical-stage product that was acquired for not quite a billion.

But I really want to give a shout-out to these deals that are not Lilly. Lilly is becoming a little bit of an outlier, and I almost feel like we should look at the M&A market excluding Lilly to see how healthy it is, because they've got so much cash, and they are definitely doing land grabs, early and late.

Chiesi is one that I really didn't have too much on my radar. They have 3 franchises: Air, which is pulmonary; Rare; and Care, because they have neonatal drugs and prophylaxis for transplant. They're doing over $4 billion in U.S. dollars. Their pulmonary franchise is over $2 billion in U.S. dollars, and the other 2 franchises are a billion. The billion-dollar franchises are growing in double digits.

They're very active out there because, in our portfolio, we have companies that fit into each of those categories, and they're always at the table. They're always wanting to meet. So I just get the impression that, at least in their verticals, they are really doing it. This is a private European company, like most European companies are, but to write a check for $1.9 billion for a single asset—KalVista didn't really have much of a pipeline beyond that, besides maybe some preclinical work—was notable.

I just think it's good. We need to see more of this M&A outside of Lilly. We want Lilly to keep being aggressive, but I thought it was important to make that distinction.

Remember that we had another one of these deals about a month before that, in which Servier in France bought Day One Biopharmaceuticals. It's quite interesting that these smaller, private European companies are active in this M&A. I don't think I'd seen this before, so it's good to see, as Chris says. Sorry, Eric.

No, thanks for that. And then Matt, speaking of non-Lilly buyers, I think you wanted to highlight the deal between Sun Pharma and Organon.

By the way, I also want to echo what was just said. I think it's fun and interesting to see other buyers showing up. Sun Pharma is a cool company to see out there buying. Historically, I would've thought of them as an Indian generics company that had been working on building a branded business in the U.S., or at least a business in the U.S., for a long time.

Organon is a reminder that biotech companies never die. It was acquired by Schering-Plough, then became part of Merck, then got spun out again, and has now been acquired by Sun. The total deal value was $11.5 billion. Obviously, a lot of that was not equity. Organon was a relatively levered specialty pharma company that had a rough couple of years in some ways, but it has some interesting things.

One of them is a skin drug called Vtama, which Roivant sold them a couple of years ago. It's an interesting business and should significantly further Sun's objectives of having a U.S. presence. That'll be an interesting one to watch.

Sun is a sneaky great operator. They're a $45 billion company, and they've grown a ton in the last little while. I think they're effectively founder-led out of India and are just an incredibly strong operator. It'll be interesting to see what they do with Organon. Bluntly, I would not be that surprised to see them continuing to acquire things in the U.S. as they look to grow here. I think this could be a bit of a beachhead to another regular acquirer in the U.S. So that's been cool to watch as well.

Thank you for that. We had one other deal on the tape this morning: Aspireon Therapeutics, a company that's been around for a while and probably has seen better days, being acquired by ArchiMed, which is an investment firm, for about $1 billion. I think the acquisition price is a little over $3 per share. Back in the day, many of us will remember that Esperion was a high flyer, once a $100 stock.

It's certainly well off those highs, but nonetheless a decent premium to the last few months. It's a bit of a smaller deal. Again, a private equity firm coming in—a bit of an off-the-beaten-path type of acquisition.

I guess that brings up the broader question. We have seen some of these smaller, cats-and-dogs-type transactions lately, and we've seen a bunch of private company transactions. Some were at good premiums or at least good valuations. Outside of Lilly, we really haven't seen as much of the blue-chip, plain-vanilla, $5 billion, $10 billion, or $15 billion large pharma acquisitions, and I would love to hear the group's view on what's going on here with that trend.

Are we past the window of pharmas acquiring biotechs for $5 billion, $10 billion, or $15 billion? Obviously, Revolution Medicines didn't get acquired. There's been some speculation around a few other names. We haven't seen a more substantive deal in a while. Who would like to take that?

I'll just comment. This goes back to my Gilead days. We always felt we were sitting on more value internally than the external pharma audiences believed we were worth. As valuations have ticked up in mid-cap and large-cap companies, honestly, as someone who used to do corporate development for Gilead and Celgene, I think a lot of times they can't get to the justification to pay a premium on these companies.

We know a lot of deals are done where they can never recoup the cash flow. The cash flow doesn't work on a discounted present value basis. But I think there is this idea of, are we going to put that much money in? Lilly has enough currency where, again, they're in a kind of rarefied air to be able to do some of these things. But for a lot of the other pharma companies, I think there's a challenge of paying a premium on very high valuations, even in growing businesses.

So, Chris, you think the public-market valuations have escaped the range that pharma might be comfortable paying a premium on top of—

That's what I'm suggesting.

—at least for now.

I'm not saying they're undervalued. I'm saying that pharma might believe they're overvalued.

It's Graig. I'll comment on where it's really hard, as we all know, to predict when deals will get announced. Remember at J.P. Morgan, we had a sell-off, I think, in the XPI and biotech names because we didn't really see a high level of—or any real consequential—deals announced during J.P. Morgan, and people started to question, like, “Oh, is this going to be a bad year for M&A?”

I don't think that's turned out to be the case. We're only in May now. Our diligence, talking to different folks within the industry, especially those that have portfolio companies, suggests that when they speak to bankers, this is going to be a record year for M&A. I could be wrong, but we've got these LOEs that are coming for all these companies.

They do have good balance sheets. They do have access to debt capital at relatively lower interest rates than perhaps other companies. So I think it's just a matter of timing. As we look through the balance of the year, I think we're going to see steady M&A continue.

Turn's got acquired for almost $7 billion about a month and a half ago. Santaso, which—I know we're pretending Lilly doesn't exist for this conversation—but that was pretty recent too. It feels like it's hard to call.

And to be clear, I was thinking really north of $20 billion. $7 billion isn't exactly a bolt-on.

Yeah.

But the $20 billion, $30 billion, $40 billion, or $60 billion deals—that's what I'm saying might be tough.

Yeah.

And Terns wasn't quite the premium that many of us had hoped or expected either. But point well taken, Matt. That was certainly a good company being acquired for a good asset. Sam, anything you want to add?

No, just to say that we should celebrate when the cash comes back into the market. A lot of the specialists are the ones who are holding these smaller biotechs, which are the ones who are going to be financing the next round of early biotechs.

The big names, I think it's much harder for a pharma company to do that unless their back's against the wall when it comes to thinking about their revenue growth or earnings profile in the next few years. According to our analysis, quite a lot of these patent expiries aren't as bad as they first look. Keytruda is a particular one. We don't think it's going to go in 2029; we think it's going to keep lasting until 2033, at least in the U.S.

Then you've got the Lillys of this world, who have the time to wait or at least start doing things at an earlier stage, which by definition would be smaller. So, back to Graig: Did you think it's going to be a record year volume-wise or dollar-wise?

Either one. I don't know if I'm going to commit to one versus the other, but I do think that, generally speaking, when we look back, 2026 is going to be a very good year for biotech M&A.

4. Patent Settlements Shape Drug Lifecycles

Well, let's leave patent expiries to patent settlements. Matt, I know you wanted to comment on this week's news.

Yeah. We were in the news in March for our own litigation on patents, sort of unrelated to expiry, which is an interesting one to watch.

As somebody who’s developing a JAK inhibitor, we watched AbbVie get a 2037 LOE for RINVOQ and thought that was interesting. And then to see Pfizer in these deals—there’s been a bunch of speculation around what was going to happen here. This was on tafamidis, which is their ATTR drug. Obviously, there was a bunch of speculation, especially as people followed BridgeBio, and there was a debate about whether it was going to be 2031 or 2033 or whatever.

It feels like a reasonable outcome, and it’s sort of interesting to see these setups where there’s a biotech company that’s affected by the LOE negotiations of a pharma partner that sort of brought it to the fore. It turns out the chairman of our board is the CEO of one of the ANDA litigants. So I didn’t have a particularly close seat on it—he didn’t talk to me about it—but it’s sort of interesting to watch and hear about it from his perspective as well. I think he was obviously happy with the outcome and felt like it was a fair deal for everybody. So it’s an outcome that moved BridgeBio’s stock. It may have moved Pfizer’s stock a little bit, but it’s interesting just to see all that play through.

Matt, we always used to talk about how it was always favorable economically for everyone to find middle ground and settle—

Yeah.

—and no one was ever paid for breaking a patent. Is that still the case?

Yeah. I can’t say I’ve been in an ANDA litigation settlement personally. I think the truth is that these generic companies—we don’t talk about or follow the generic space very closely in the biotech world—but these companies are really good at what they do. They’re creative, they’re aggressive, and they’ve built real businesses. These are as real as businesses get. They are low-margin businesses. They’re manufacturing-oriented and very operational. These people know what they’re doing.

I think it’s very good for the industry and for the health of the U.S. population and innovation generally that we have a system where these drugs become available inexpensively. It’s sort of weird that the way it works is that really smart lawyers figure out how to sue each other, then get in a room, settle, and pick a date. But ultimately, watching amazing drugs like tafamidis go generic even in 2031—you know, my neighbor has ATR amyloidosis and is on tafamidis—and thinking about the fact that that’ll be a much less expensive drug 4 or 5 years from now, it’s an amazing thing to see. So I think in that sense, everybody wins. Obviously, there’s a lot of reapportionment of dollars as the dates are chosen—exactly when and who gets what—but I think ultimately it’s for the good.

Thank you for that. Let’s move on to some of the data updates for the week. It seems like pancreatic cancer is kind of the new hot area of biotechnology, maybe even eclipsing GLP-1s in terms of some of the data sets and the visibility we’re getting there. Graig, did you want to start with Revolution Medicines and Erasca, or Sam?

5. Pancreatic Cancer Raises The Stakes

Yeah. I’ll go ahead and put things into context. Eric, you’re right: pancreatic cancer is certainly a high unmet medical need. We’ve seen a lot of progress in terms of data coming out from biotech companies on hopefully getting drugs into not only the second-line setting but also the first-line setting. We’ve talked about Revolution Medicines a bit on this podcast today, but just to put things in perspective for everyone, recall that in the middle of last month, Revolution Medicines reported positive topline results for its lead drug, deruxant rasib, which is a pan-RAS inhibitor. They reported Phase 3 data in a second-line pancreatic cancer trial. Again, this came concurrent with some media interviews with Ben Sasse and his battle with pancreatic cancer, and he is on that drug.

In any case, on progression-free survival and overall survival, we saw very, very good data. On overall survival, there was a 60% reduction in the risk of death, with median overall survival of 13.2 months for deruxant rasib compared with 6.7 months for chemotherapy. So basically, a doubling of overall survival.

With that said, this is what allowed the company to go out to the markets and raise over $2 billion in equity and debt. Then, the following week, they followed that up with a first look at data in the first-line pancreatic cancer setting. Again, the data were very promising as a monotherapy. We saw an overall response rate of 47%, a 6-month progression-free survival rate of 71%, and a 6-month overall survival rate of 83%. The numbers were even better when they combined it with the standard of care, or one of the standards of care, which is gemcitabine and nab-paclitaxel, or GnP.

That kind of set the stage for another company called Araska, which is a biotech company out in San Diego that I used to cover for a short time. We’d been waiting for the very first clinical data for its RAS inhibitors, and we got data for one particular compound called ARAS-0015. This was in-licensed from China. This is an interesting company in that it used to have a different pipeline several years ago that was in mid- to late-stage clinical trials. Then, in a strategic shift, the company just shelved that portfolio altogether and pivoted to 2 preclinical assets that were in-licensed from China.

We’d been waiting for over a year or so for the first clinical data. In that time, especially if you take a look at the stock run for Araska ahead of this first data, which came out, I believe, Monday, Erasca had become a $7 billion market-cap company with no clinical data. There was a lot of anticipation for the data. I think many investors were betting that the data would be as good as what we’d seen for Revolution Medicines. We all know that Revolution Medicines has become one of the hits of the year. It’s now a $30 billion market-cap company. So I think investors were looking at Araska as maybe a cheaper way to play this space.

The data came out, and I won’t go into all the minutiae of the qualitative or quantitative data, but the data were actually quite good— even better than the data that Revolution Medicines had presented several years ago for its drug at a similar stage. This should have easily been a big win. That said, the stock sold off considerably on the data announcement, and that’s because the data disclosed that there was unfortunately 1 patient death. So the efficacy was good, but the patient death put a damper on how people were thinking about the totality of the data. Obviously, it’s just 1 patient. The company will look to do larger trials, and we’ll see whether those safety data repeat. They’ll also assess safety and tolerability.

Unfortunately, the stock did not participate in the efficacy data. Then there was a second double whammy for the company: later that day, Revolution actually filed a lawsuit against Araska. This was a lawsuit claiming that the ERAS-0015 compound was substantially equivalent to certain formulations that comprise Revolution Medicines’ drug. So, with this patent infringement suit, it just created another bit of an overhang for Araska. Good clinical data, I think, on efficacy, but now you’ve got 1 patient death and a lawsuit from its biggest rival. It creates a really interesting situation when looking at these 2 companies in the pancreatic cancer landscape, or just the RAS inhibitor landscape more generally. We might have time to talk about that landscape a bit. I’ll stop here.

Thank you for that recap. Sam, do you want to add on?

Yeah. I’ll just say that it is possible that that unfortunate Grade 5 patient death due to pneumonitis may at some point also be seen in the Revolution data, because they do have Grade 4 pneumonitis under axovarigene. The interesting angle is that the dose Araska is using is roughly one-tenth of the dose Revolution is using, and yet Revolution hasn’t seen a Grade 5 event. So maybe it might have just been bad luck.

We do have patent lawyers in our group, so I’m very proud of that. I asked her, “What is the situation with this?” Her direct response—which I’m going to quote because I’m not a lawyer—was: “RevMed probably just wants to get them to license their IP, get them to the negotiating table. Unless RevMed takes them to court, wins, and gets the judge to permanently enjoin them instead of awarding damages and royalties.” I don’t know if I cut off there.

Yes.

Can you hear me? We’re back.

We lost you, but we can hear you now.

Yeah. So basically, unless they can prove that there’s been malicious intent, stealing, and other bad stuff, a judge would be unlikely to allow Revolution Medicines to get the whole thing stopped now. So it’s going to be interesting to watch whether this is a tactic to get Erasca to come and license the IP, or whether they genuinely believe that Erasca stole their IP.

What Erasca can do is continue to develop. It’s not as though they can stop that from happening. So that’s what I’m hearing from my colleague.

Certainly, we have safe harbor to develop drugs pre-commercially in the States. So, as you say, unless there was some untoward, underhanded activity, they can develop.

I’ll just chime in. I’m biased, admittedly. I used to be on the Revolution Medicines board, so congrats to my friends Mark, Peg, and Jack. You guys have done an amazing job developing this drug.

I actually don’t think it’s all about the death. I think investors are—I don’t know—maybe a little bit more savvy than we’re giving them credit for. They can put that death into context. These are pancreatic cancer patients. They’re obviously going to have bad outcomes, and deaths in clinical trials are not that unusual.

I just thought the setup and Erasca’s data, as you described, Graig, were a little bit juiced, a little bit overheated, and that there was probably no data set that was going to satisfy investors. Given that once the news was out, we’re waiting another 12 months or so for another update from Oraska, and they won’t be starting a pivotal trial anytime soon, they’re years behind Revolution Medicines.

I think it’s just going to be hard for a drug that’s not clearly differentiated. You could squint and look at the Erasca data and say, “Well, maybe it’s a little bit better in lung,” but I don’t think it’s any different in pancreatic cancer, which is where most of the money is likely to be made here. Given that lack of differentiation, why do we need a me-too?

I’m sticking with the pancreatic theme. I’ll just throw out the PRMT5 inhibitor class. Tango and Bristol Myers Squibb are leading the charge here. They’re both collaborating and combining their PRMT5 inhibitors with KRAS inhibitors, with Revolution Medicines in particular, but others too. I think that’s where the excitement should be: in combination therapies with novel targeted therapies that could potentially obviate the need for chemotherapy.

We’ll see how this pancreatic cancer market develops. It’s amazingly robust and amazingly large. Maybe for the group, do others think that we’re a little bit overheated with the excitement here, or could this be the next GLP-1-type marketplace that gets people excited?

That’s the big one, Eric. GLP-1.

How do you size it, Sam? Do you have an estimate?

We’re in the $8 billion to $10 billion range for a post-approval, second-line and risk-adjusted first-line opportunity. It all depends on how they get priced, so that’s where we’re at. I think some people want it to be $15 billion in pancreatic cancer, right?

But, Eric, what about the AEs? Isn’t that where folks are looking? I mean, you’re not really going to get so far with beating the efficacy, but AEs do play a role here. There are dose reductions, plenty of them, and there are some dose holidays. Wouldn’t AEs be an angle where they can differentiate?

Possibly. I guess the thought is, is there a wider therapeutic window with this next-generation Oraska compound? It’s certainly being dosed much lower than the Revolution Medicines doses, but we’ve also seen that they can’t go much above 40 milligrams. That was the top dose, and they backed off and went, I think, to 32 milligrams.

That top dose of 32 milligrams is still 10 or 20 times lower than Revolution Medicines’ dose. So, yes, are they more potent? Yes, I would agree. Are they safer or do they have a better therapeutic window at that lower dose? I’m not sure, Sam. I think we just need more data. Time will tell.

The mechanisms are pretty similar, and the drug compounds themselves are pretty similar. Well, let’s move on. Sam, you can take the HARMONY-3 interim analysis, which I think is the other big news, at least of today and maybe even this week, that a lot of people are talking about, both in my space, where biotech investors are following Summit and Crescent Bio, and maybe more your space with Merck and the PD-1s.

Yeah, sure. Let’s see if I can do this in 2 minutes.

6. HARMONY-3 Misses Interim PFS

HARMONY-3 is ivnisimab, which is a PD-1/VEGF bispecific, in combination with chemotherapy versus Keytruda with chemotherapy in squamous-cell non-small-cell lung cancer, with about 600 patients. Phase 3 trial data had always been expected in terms of final PFS and interim OS in the second half of the year.

What we heard about 2 or 3 months ago is that Summit Therapeutics, which in-licensed this drug from Aikiso from China a few years ago, decided to do an interim analysis for interim PFS. You look at the Kaplan-Meier curve for PFS from the China trial, HARMONY-6, and you know that they hit a positive, statistically significant interim PFS result on HARMONY-6, with a very wide dispersion between the treated arm and the control arm, if that’s the right phrase.

The key differences were that it was China, and that tislelizumab was used in the combination, or comparator, arm. They did that. My theory was that it was there to help them, as they said, start discussing with the FDA and give them an opportunity to raise money, because this is expensive work.

Unfortunately, after hours last night, they said that they didn’t hit the interim, and they’re continuing. Logical conclusions here can be that there just wasn’t enough statistical significance because they didn’t want to spend a lot of alpha on that. Maybe the difference is there, but it just wasn’t enough.

The next conclusion is that the difference in the Kaplan-Meier curve—the distance between the 2 arms—isn’t as much as one would have expected from HARMONY-6, which of course then has ramifications as to how much you can translate China data to Europe and the U.S.

If the HR, or hazard ratio, for PFS in the final read doesn’t come up to 0.60, which is what it is for HARMONY-6, what does that then mean for the OS hit? The expectation is that OS will be lower than PFS because of the VEGF angle there.

That was amazing. Not only was it short, sweet, clear, and to the point, but it had all the facts that anyone could possibly want to know.

I’ll just add that this is obviously a disappointing update from Summit’s standpoint. Any PFS benefit is likely to be lower than what was observed in HARMONY-6, so the hazard ratio is likely to be higher than 0.60. Any PFS benefit is also likely to be less strong than Summit had hoped when they concocted this interim analysis. So that’s disappointing.

You also mentioned, Sam, that they do need to raise some capital, so that could be an overhang going forward. The one silver lining here, though, is that we have survival data coming at ASCO from HARMONY-6. That’s the China-only study you referenced, and it sounds like it’s going to be very good. That’s a late-breaker presentation, one that Akeso is really promoting aggressively.

If there’s little diminution between PFS and OS in HARMONY-6, that could bode well for future HARMONY-3 results. We’ll have to see.

Let’s continue to move on. Is it Graig who’s going to start with some of the obesity trials?

You know what? In the interest of time, I was actually going to skip the obesity trials, just because we talk about obesity all the time. But I just want to briefly mention that I’m going to switch to the Alzheimer’s disease space, and I think we might have some other comments as well.

7. Alzheimer's Data Tells Two Stories

I wanted to highlight that there’s a small biotech company called Elektor, which had a partnership with GlaxoSmithKline, or still has a partnership. They had a Phase 2 trial outcome for a very novel target, progranulin, with an antibody called navisnavart. This was in patients with early Alzheimer’s disease. There was a futility analysis announced this week. The drug did not pass futility, so they’re going to discontinue the trial.

But I think from an Elektor perspective, this will perhaps allow the company, as a silver lining, to pivot to its blood-brain barrier technology efforts. They’ve got a proprietary platform called ABC. That’s where I think most of the excitement is in the Alzheimer’s disease-modifying therapy space.

There are lots of companies we’ve talked about on the podcast in this space. Roche is in the lead with gantenerumab; a Phase 2 trial started last year. So I do think this is kind of a small piece of data, but at the same time, I didn’t want anyone to think that there’s nothing promising in Alzheimer’s.

In fact, just yesterday, another company that I cover called Akopeon got FDA approval for a drug for agitation in patients with Alzheimer’s. This drug will not have a black-box warning, as the only other drug, Rexulti, does.

So I do think that we still have good progress in the Alzheimer’s space.

And let’s stick with Alzheimer’s. Sam Fazeli, you get the last word today because I think the analysis done by a third party on anti-amyloids was certainly noteworthy.

I mean, noteworthy. To be honest with you, Eric Schmidt, I’m surprised that anybody looked at it. It made the front pages of some newspapers, and this was a meta-analysis that put together 14 trials, 12 of which had failed with some of the older antibodies. I have to say, I was shocked that anybody even looked at that because it’s just wrong. You can’t mix those kinds of data up.

It’s unfortunate that happened, but what was also nice was that we then saw Lilly report and Chrisla, and it really knocked the cover off the ball. The consensus was $76 million for 1Q, and they reported $124 million. That’s pretty close to what Leqembi from Biogen is reporting. It’s subcutaneous, and I think that really helps.

We’ll see if these amyloid antibodies continue to get to a point where they make a huge dent in the disease and get used a lot. It’s tough because of the biomarker testing, et cetera, so there’s definitely a lot of room to improve here. But it was really interesting to see that Chrisla print. Over.

Thanks for that. And yes, Leqembi from Biogen also had a pretty good print, so maybe these things are finally catching on. We all know there’s a ton of unmet need. We had a few other topics we wanted to get to today. My apologies to all for poor moderation. We just had too much to try and fit into a very, very busy week in biotech.

You did a great job, Eric.

We are out of time, and this ends our call. But thank you, Graig Suvannavejh, Sam Fazeli, Matt Gline, and Chris Garabedian for another wonderful session.