第127期｜2025年1月17日

You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry with a group of biotech insiders. I'm Daphne Zohar and my co-hosts today are John Maraganore, Mike Yee, Sam Fazeli, and special guest John Crowley, the CEO of BIO. For more information about our hosts and guest speakers, or to listen to the most recent episode, please go to biotechout.com.

Despite some deals, highlighted by Johnson & Johnson's $14.6 billion purchase of Intra-Cellular Therapies, market sentiment was muted, with poor performance from some companies like Moderna, Eli Lilly, and Sanofi, as well as smaller companies like Viking and other small biotechs that were down 20% to 30% on no news. We're going to dig into the deals soon, but Mike, what are your thoughts on the week and overall sentiment?

First, thanks for having me on. It's great to be on again after quite a busy week.

My thoughts coming away from the long week: Number 1, as you were saying, I am not sick. I feel great. The weather in San Francisco was phenomenal, and that was echoed by everybody. It was a really great, refreshing change to the conference.

1. Sentiment Sits At Five

More importantly, I felt sentiment among the client base there and companies, in my opinion, was about a 5 out of 10. I look forward to everyone else's opinions, but I'd call it a 5 out of 10. Daphne, stocks were hit pretty hard going into December and into January, and then I believe Monday and Tuesday were pretty rough again. Wednesday had a little rebound, but despite the M&A that you just mentioned, it was pretty rough, and so you have that side of the equation: It feels like, here we go again. That was a bit challenging on one side.

The other side is also, I think, people looking forward. There is a bit of a debate about the optimists, who would say things are already bad, a lot has already been priced in on the negative side with RFK, and valuations are actually pretty cheap these days. I think there was a good and healthy discussion among a lot of investors and clients about where we go from here.

As I said, it feels like a 5 out of 10. I do feel we're a bit on the upswing, but I'm certainly not calling it a raging bull market. I feel like people are pretty optimistic about the rest of the year, given that the overall broader markets are doing well. People feel that the administration is probably not going to come down too hard on the industry, and that RFK may dial back some of the rhetoric.

I think there was a Wall Street Journal article commenting about at least 2 people in the administration who are maybe getting pushed out because of too much negative rhetoric, and hopefully the administration will be a little bit more common sense as we go forward. I felt it was a pretty good start to the year, Daphne, despite the stocks going down, and I am fairly optimistic about the rest of the year.

2. The IPO Window Stays Shut

I want to come back to you on the IPO window, because I've been hearing it's pretty tough, that it's going to be a while until we see a bunch of IPOs price and do well in the aftermarket. Until then, it's going to be rough going. Any thoughts on that? I'd love to hear from John Maraganore about Metsera and just generally what's happening in the private investment community.

Let me comment about the start of the year without going into too much detail. Obviously, at Jefferies, what we're working on here is a huge pipeline of things that are expected to come through, and I would say there was a bit of a foot off the gas pedal in December and in the plans for January. You saw 2 private biotechs get taken out on Sunday. I'm not sure how much is publicly disclosed, but of course, it would be reasonable to think that those 2 companies were trying to go public and therefore, given the state of the conditions, took a nice number up front to get acquired instead.

So I think that's pretty interesting. In fact, there are a number of private companies—we have a whole list—that got acquired over the last 6 months, as a reflection of the fact that the capital markets are a little tough. There has been some foot off the gas pedal. That said, I think, to my comments at the start, people do expect that we will get back going here. I do know that Metsera and some of these others—I’ll let John comment—but we will get back on track here, and I expect some deals to start getting underway.

Yeah, maybe, Daphne, to follow up on the Metsera question, but maybe first more broadly. I just came back from that meeting and, look, I agree with Mike: A rating of 5 out of 10 is probably right. I think people entered the meeting with a lot of uncertainty around the policy environment. We're going to hear from John later, which is super great.

Actually, we bookended the week with, first, news about Patrizia Cavazzoni resigning, and then some positive news about Crowley being invited to be part of this discussion group around the FDA for the future. To some extent, on the FDA side, we'll wait for John to talk, but maybe we should pause before we panic, and maybe there's reason for optimism.

Markets, of course, are still jittery around interest rates, and that's factoring into things, but there are green shoots. Metsera has filed to go public, and they presented some data last week that may support this concept of a once-monthly GLP-1. That story was very dynamic during the meeting as well.

I'm reasonably optimistic that we'll see high-quality, good stories get out. We did have some good IPOs last year. Bicara is one that I've been involved with that I'm really super excited about. It's been a tough capital-market environment, and it will almost certainly remain discriminating and more challenging until we get better visibility on interest rates. But I'm excited about where Metsera is going to go, because that could be the first one that goes out this year.

3. XBI Misses The Biotech Average

It's important that the first ones that go out do well. One question I had: I bumped into Josh Schimmer, Tim Opler, Brad, and a bunch of others at our Biotech Hangout party, and we were talking about XBI and how XBI has underperformed now for 3 years in a row. It's down about 3% so far this year.

One thing Josh said, which I thought was pretty interesting, is that the XBI is not a good litmus test for biotechs. He was saying that the average biotech was up last year. I think he actually mentioned you, Mike, and said he got that data from you. Do you know what he's referring to?

I will say that we and our client base continue to look for a great indicator that reflects the biotech sector well. There are not great baskets or index funds. XBI was created, for many years, as an equal-dollar-value index, so everything was weighted to, for example, 1.0, and therefore that takes away market-cap weighting. What was also interesting is that every, I believe, 90 days, the whole index got rebalanced again to 1.0 for every stock. So you have a constant, every-90-day rotation of about 130 stocks getting rebalanced irrespective of size.

Recently, they shifted, I think just a few months ago, to much more of a market-cap and liquidity weighting. It's a bit of a complex equation, so here again, it's not a perfect indicator, but it leans now more toward larger caps rather than, say, the 200 small- and mid-caps that we might focus on and discuss here. Again, I think it's 130 if you want the exact number of stocks.

I agree with Josh. I guess he was referring to my data, which does suggest that, again, it's not a perfect indicator. Here was an interesting one, though, Daphne, because I think the XBI ended at, what, plus 1% or something like that, so it was right on the border. It was definitely a basket of haves and have-nots. There were a bunch of winners, Daphne, but also a ton of losers, and so when you weighted it all out, it came to about 1%. We're still looking for a good one, and I guess XBI is still what we have.

Thank you for that. Sam, any thoughts on the general vibe for the week?

I've been watching it from a distance, not on the ground with you guys. We do have a very active client chat, and at one point somebody said, “Why don't they just stop the conference? It's killing a whole bunch of stocks.” I think that was late Tuesday afternoon or early Wednesday.

A lot of that was just on the back of the downgrades and the guidance that folks came out with. Obviously, right out of the door was Moderna and then Lilly, which didn't help, and it dragged a whole bunch of stocks down. But in terms of sentiment, I'm going to have to defer to you guys because I wasn't there to take the temperature.

Sometimes I think those watching remotely get more time to actually read up on all the news and follow what's been happening. But I felt generally that the vibe was—I agree with Mike's 5 out of 10.

On the one hand, Monday started off with some deals, which we'll talk about in a moment. I think people were excited about the science and the fundamentals. But you could probably juxtapose that against the last few years and ask how it translates into general sentiment, stock performance, and so on. I felt like that part of it was a little bit more negative.

4. Obesity Becomes The IPO Test

Just before you go ahead, given that we spoke about Metsera, how do we feel about the first IPO test being an obesity name with a GLP-1, given what we've heard at the conference from Pfizer, say, and a variety of companies talking about it? Then, of course, there are questions with regard to all the other biotech companies that are around. How do we feel about that? Is that a good start?

I would love to hear from Mike and John. I think that the obesity space has definitely seen the bloom come off the rose a little bit in terms of the level of competition, but I still think there are going to be some big opportunities. John, you know this company specifically, so do you want to comment on that? Then we'll go to Mike. We might have lost John.

He's there.

Yeah.

Right. Mike, do you want to go first?

I want to make 2 comments. First, I do believe that the challenges you're seeing with the performance of the group starting on Monday are absolutely, in part, due to the higher-for-longer interest-rate environment and the macro. I use the term that the macro has the steering wheel, and I think that a lot of the volume and all of the week-to-week and month-to-month trading is just biotech funds, specialists, and hedge funds, with much less to do with all of the bigger money that we wish was involved in the group.

What happens is, on Monday and Tuesday, you had some deals, but there was no follow-through. You'll actually see—we might get to some of this—Madrigal sold off hard, Viking's been selling off hard, and a number of companies that were supposedly takeouts all traded significantly down because, I guess, they're not getting taken out, and there's no support. I do believe that the interest-rate environment and the lack of generalist support are important dynamics.

Generalists continue to be much more focused on tech, certainly in the large-cap space—the Magnificent 7 and a whole bunch of other groups that are benefiting from the rising tide of the market under the Trump administration—and much less focused on biotech. As it relates to Metsera and the general appetite for obesity as an IPO, I would say that the bloom coming off the rose is real. You've obviously just had 2 straight quarters of Lilly disappointing, and so it's down 20% to 25%. You're going to take a foot off the gas on that group. Amgen is down, and a whole bunch of stocks are all down on that.

But nobody believes this isn't going to be a huge and massive market. If a small company with a GLP-1—or whatever version of a GLP-1 they have in some cases—has a successful drug that moves forward into phase 2 and phase 3, then that will create value. It's just all going to come down to whether they're going to be a $1 billion market cap, $600 million, or something else. What is the valuation to start? That will be the most sensitive part, certainly in the first year or 2.

I could just jump in, and I missed the first part of this. I think there's no doubt that this is going to be a massive market over time, and the quarters and the ups and downs—I mean, even Nvidia has ups and downs in quarters. We just have to be conscious of the long game here. The penetration of these drugs is still a fraction of where it can go, so I think there's no doubt that this will be a very big and dynamic market for many years to come.

Companies will have to differentiate with what they bring forward, and they'll get rewarded if they do so. That's the bottom line. That's why Metsera is going to be an exciting story in the first part of the year, but there'll be others, too. Even the entrenched leaders, like Novo and Lilly, will have enormous success in this category.

And John, just to cap this, David Ricks said it very succinctly. I can't remember in which conversation—either in a presentation, on Bloomberg TV, or with the STAT team—but he put it very succinctly. Somebody asked him about CagriSema, and he said, “Look, anyone who tries these incretins, you're not going to get magic, but you're definitely not going to get disappointed.” I don't want to—I’m paraphrasing here. I don't know exactly the words that he used, but frankly, it's just going to be a game of, “I want a piece of the market share.”

Yeah.

So, yeah. I think I couldn't agree with David Ricks more. It's a question of how one plays in this sector right now, in this growing space. It's really just the beginning innings of this story, which is what makes it exciting.

Yeah. It's such a big area that affects so many people. Somebody was commenting that a lot of their colleagues have looked like they've lost weight and have mentioned that they're on some of these new obesity medications. It's a big area.

5. J&J Buys Intra-Cellular

Let's move to the deals. We'll start with the major deals, beginning with J&J's $14.6 billion purchase of psychiatric drug developer Intra-Cellular Therapies. First of all, I'd like to say congratulations to the team and CEO Sharon Mates. If you were out and about, you would have seen a lot of people wearing pink, and that was the Biotech CEO Sisterhood out in force.

There were, I think, about 500 people in a group picture. It's a big change from a few years ago, when I think there were more men named John—or something like that—presenting at J.P. Morgan than women. I don't know if you remember that.

Well, I remember it because I'm named John. I do remember that. But, Daphne, are you still wearing your pink?

I'm not, but I did wear it. I wasn't wearing as bright a pink as everybody else, but I was there in the crowd. This is a great group, the Biotech CEO Sisterhood, which was organized by a couple of colleagues. Maybe we'll mention them afterward. Go ahead, John. What were you going to say?

No, I wasn't going to say anything other than ask if you're still wearing your pink. But if you guys plan on doing it every year, which I hope you do, that's good news, because then we supporters can all go out and buy some pink attire to join the event.

I think every Tuesday at J.P. Morgan from now on is going to be pink. That's fantastic. It's a little bit less boring to look out on Union Square.

I think we might have John Crowley joining through a Hangout. Is that you, John?

It is, Daphne. Hi, everybody. Sorry I'm a little late, with technical issues logging in, but it's great to be here. Thank you.

Welcome. We were just about to go to Intra-Cellular Therapies, but before we do, any thoughts? How did you spend the week at J.P. Morgan, and any thoughts on general sentiment?

For the first time in a couple of decades, I actually did not go to J.P. Morgan. I was out—I had a couple of speaking commitments around the country, one in New York, one in Florida, and then some time in Washington.

Okay. Well, we're going to come back to you, because we're very eager to hear your thoughts on the administration and all the concerns around China.

We'll come back to that in a moment. As I mentioned, J&J announced that they're going to buy Intra-Cellular Therapies for $14.6 billion. Intra-Cellular's lead asset, Caplyta, is approved in the U.S. to treat schizophrenia and bipolar depression. The company also recently asked the FDA to expand Caplyta's label to include major depressive disorder, which affects about 10 times as many people as schizophrenia, and they had some really good data recently.

This would be the largest acquisition of a biotech company since the Karuna-BMS deal and the fourth multibillion-dollar acquisition of a CNS drug developer in the last year or so. 2024 was a bit of a roller coaster for companies in the neuroscience space, with the M&A, Cobenfy's approval, and interest from pharma companies being very positive, juxtaposed with some setbacks in the data for a number of companies in this area. I'll pause and open it up to the group for comment.

Daphne, let me ask you: you're obviously a CEO of a neuropsychiatric—or neuro, if you want to call it—company. How do you feel about the challenges and opportunities in the space in general, having had a hand in Karuna and now a new company, and having seen this deal? How do you feel about how this is going to shape up? Some folks have told me they think this will be the neuroscience decade.

We talked about obesity, and similar to obesity and hypertension, neuropsychiatry and neuropsychiatric disorders affect a major part of the population. There are hundreds of millions of people across the world affected by just depression and anxiety. If you look back, you can see that these have been among the most commercially successful and widely prescribed drugs of all time.

So, you know, pretty much every drug approved for depression has been a commercial success, with some reaching mega-blockbuster status. At the same time, clinical studies in this space are very difficult. They're challenging; you have to have experience with the issues that come up.

For example, patient selection—making sure that you have patients who actually have depression and that you're not enrolling patients with inflated ratings, or what are called professional patients. Then there's dose selection and high placebo responses, which are a huge issue. If you're intervening with patients too much, you're going to get higher placebo responses. We've heard a number of studies reporting issues with compliance.

So, I think that it's an area that's very challenging for clinical development. There's something like a 93% failure rate going from preclinical to clinical proof of concept.

I won't comment specifically on my company, but I will say that one of the areas that I'm very encouraged by is that there have been a number of drugs advanced that could make a major difference for patients but have some issue that we can now solve with today's technology. I think Xanomeline was a perfect example of that, with the advancement of KarXT. I think there are many other examples like that, and that will be helpful because you're starting with clinical data.

As a side note, someone was joking that clinical development in neuropsychiatry is tough, but when you have a success in late-stage clinical development, it's worth about $14 billion. So that's a joke.

So, $14.6 billion.

Yeah, $14.6 billion, right. So, any other comments on this deal before—

Well, I have a couple of comments. One is, I think Bruce Booth, as he often does, is such a great historian for the industry. But he did a very nice tweet this week congratulating Sharon, of course, which is terrific, but also commenting on the value-creation story.

I found it striking that they raised a grand total of $1.22 billion privately and publicly, at the end of the day, which is an incredibly capital-efficient story. They've been around since 2002. They were originally funded by Mosha Alafi, of all people, going back to those of you who are old enough to remember who he is.

It's just an amazing story—13× in less than 12 years, at the end of the day. So, congratulations to Sharon Mates. As a founder CEO as well, I think that's also particularly special in these circumstances.

Just one other comment: I was really happy to see the guys at Jefferies participate in this deal as well. Centerview was involved, of course, too, but it wasn't just them. There were others involved, too, which is always a good sign for how the field and the M&A banking lineup is evolving over time.

So, I guess I get to comment on that.

You do.

All right. Yeah, I guess that brought Jefferies into the conversation. First, more holistically, Daphne, look, it's great to see a large transaction get done. The headline was the biggest transaction above $5 billion since, I guess—correct me if I'm wrong—would that have been probably Karuna and Cerevel, right?

The 3 biggest transactions, generally speaking, were in neuropsychiatry. It shows you that big pharma is engaged in this space and highly interested. Those molecules—I guess Cerevel to a lesser degree—were derisked in 2 of those transactions. That speaks to the commercial opportunity, and it speaks to pharma being engaged and doing deals. So it's not like, “Where are the deals?” There you go.

I did also get a lot of public press in the Financial Times about Jefferies' involvement there, which had in part to do with Phil Ross, who had come from JPMorgan. So, that was quite an entertaining article in the FT.

Yep. Congratulations. By the way, somebody was pointing out that Eric Tokat from Centerview has stopped tweeting all his deals. I don't know what happened there, but that was always fun. We looked for his tweets in the morning of J.P. Morgan, saying that there were some good deals happening.

So, let's move to the other—there were a couple of other M&A deals. As you pointed out, Mike, they were private companies, which is probably viewed as a bit of a bummer for the public investors. There's been a big number of biotechs that were private and have been acquired over the last few months, and you had mentioned that a couple of these companies were set to IPO.

Let's talk a little bit about GSK and IDRx, and then Lilly and Scorpion. Do you want to kick it off, Mike, and then Sam?

Well, yeah. I just wanted to say, again, starting high-level first, that it speaks to, right off the bat on Sunday, 2 private companies that, for all intents and purposes, without getting too specific, were slated to go public. And what happened, right?

If the capital markets were great, they were going to be heavily subscribed and it was going to be a huge IPO performance. Then, typically—and maybe John could speak to it—you would pass on the M&A perspective because they're going to get a great valuation and go up, and can raise more money.

That speaks to what I said: the IPO market is a little bit challenged, and therefore they look to the exit of M&A. Pharma has been all over this. Maybe it's a comment about how pharma believes that a lot of the other public companies have either been picked over, or, as I like to say, everybody knows the M&A targets and they're all overvalued.

Pharma has a tough time going after those because everyone's picking and looking at the same ones. So, they end up going smaller, tuck-in, less risky—I’d say smaller tuck-ins—and therefore can pick those up on the private side, where they don't have a public valuation. That speaks to the conditions of the market.

I'd also say, because I know it's on our agenda to talk about a whole lot of other licensing deals, that this has also been a big topic. Gilead specifically has not only done 1 deal, but they've done a couple now on the small side. AbbVie, J&J, and a bunch of others are also doing that, too, in the inflammation space.

The 3 themes I saw coming out of the last week and the last couple of weeks were: 1, private companies getting acquired; 2, a whole lot of licensing deals getting done instead; and 3, a whole lot of China-founded companies.

Whether that's a China NewCo coming over to the U.S., or China assets being found or licensed and then brought over to pharma, either as a new standalone company or through pharma, I think that's really interesting. That is definitely a big trend that's happened in the last 3 to 6 months.

6. China Reshapes Biotech Competition

Well, let me pick up on that, and we'll go to China, and then we'll come back to the other deals that happened this week. I'm really interested in hearing from John Crowley here.

China has been a major topic of discussion. I would even say concern. Pharma is now sourcing nearly 1/3 of external molecules from China. Over the last year, $6 billion of licensing upfronts went to Chinese companies.

This competition didn't seem to exist in the same way before. I think the sentiment is that in prior years, the money would have gone to XBI companies. The concerns for U.S. biotech were highlighted when Merck bought an oral GLP-1 in December from Hansoh for $112 million upfront, and that caused the shares of Structure Therapeutics and Viking Therapeutics, which had both had multibillion-dollar market caps, to fall sharply.

We've seen this trend in other areas like oncology, where China-sourced compounds are now going beyond me-too to me-better. It was also interesting to see an item in the news this week with the Roche deal: $80 million upfront and $1 billion in biobucks for an ADC from China's Innovent.

You'll recall that China was very much out of favor after Lilly returned rights for a PD-1 inhibitor to Innovent in 2022, after it was rejected by the FDA due to FDA criticism of China-only data. This had blowback on EQRx, which was pursuing a strategy of cheap drugs from China at the time. That basically crashed the company.

I was really interested to see that Alexis Borisy, who founded EQRx and, I think, IDRx, by the way, is now at Curie.Bio. He's now warning companies not to publish any data on new-mechanism drugs and to be very ambiguous in patent filings to protect against really fast-following Chinese competitors, who can move faster at a lower cost.

Apparently, clinical-trial enrollment is speedier, and supply-chain and staffing costs are lower. I want to go to John Crowley. What are your thoughts on what policy initiatives are in play that could protect U.S. biotechs?

I know the BIOSECURE Act is still potentially on the table for March, but that's not necessarily going to address this concern. I'd love to hear your thoughts on China in general and any policy-related initiatives that you guys are pursuing or that you're aware of.

Sure. I'm happy to comment. I think maybe, to begin, we can just start with—there is, of course, broad geopolitical tension and competitiveness between the United States and China, and we play into that. Our industry isn't unique in this regard.

I can tell you that in my now nearly 1 year in Washington, including my day 1 working on the BIOSECURE challenges and opportunities, I've not in quite some time—if perhaps ever—seen such bipartisan focus on a particular strategic issue. The guiding principles for us and our industry are that biotechnology is incredibly important.

It is a national security asset, and you need to care. And when I say “you,” that’s from the general public to policymakers and lawmakers. These are the points I continue to hammer home in all of our conversations on anything touching our industry: You need to care about biotechnology for public health.

Of course, you need to care as a matter of national security and as an instrument of national security, and you need to care about the economic and economic-growth aspects of a broad, strong bioeconomy. I think another broad principle that we’ve tried to emphasize is that this is not xenophobia. This is not unfounded fear. There is strong strategic competition.

China has stated for many years that it intends to become the world’s center of excellence in biotechnology. The United States and our allies continue to lead in biotech. China plays a really important role in this ecosystem, but we have to maintain and advance our lead.

The last guiding principle that I use in both private and public discussions on these issues is to state that, again, we believe the world is a better, safer, healthier, and more prosperous place when we continue to lead. So then you get to: What are the policies now? You’ve got BIOSECURE, and you’ve seen where we’ve come from on that. I think the position that we took back in March gave us a voice in the conversation and gave us credibility on the issue.

With that, we were able to shape it so that another key principle for us is that we do no harm: no harm to patients and no harm to the biomedical research establishment. I think, as you saw the final versions of BIOSECURE come out, we all agreed that, if it does become law, it’s something we can live with.

With respect to BIOSECURE, I would expect to see pretty strong, overwhelming bipartisan support in the House. The Senate is much more of a challenge, as we’ve seen before. Senator Rand Paul in particular, and a few others, have been opposed to it for a variety of political reasons and, in Senator Paul’s case, libertarian principles.

While we might see it come up again, likely here in the next few months in the House, it seems that, with respect to the BIOSECURE law, the Senate will still be a roadblock. The only likelihood of it actually becoming law, I would think, is if it gets tacked onto probably a year-end defense appropriation. It fell off the last NDAA a couple of months ago.

Whether BIOSECURE becomes law or not, in its current form or anything near to it, it would likely have a pretty limited effect on our industry and on the things you guys were just talking about—the emerging biotech advantages in China. You highlighted one, Daphne, in particular: The pace at which they can begin, enroll, and complete their clinical studies is really remarkable. It’s a major strategic advantage for them and something we need to think about as we think about our whole ecosystem and changes.

Briefly, from a legislative standpoint, I think we will see tariffs. We believe that President Trump will issue many, perhaps up to 100 or more, executive orders on day 1 when he comes into office on Monday. There is the potential that he could issue an order declaring a national economic emergency. If he does that by executive order, he then has the authority to invoke what's known as the International Economic Emergency Powers Act, and that could give him pretty broad authority to enact new tariffs. What that would be and the impact on our industry broadly, we'll have to see. We're prepared for a whole variety of outcomes.

Another thing—and the last I’ll comment on here with respect to policy—that could be important here is rules and restrictions on outbound investments to China, including in the biotechnology field. That has been a challenge for Congress. There was a member of Congress, Chairman McHenry, from North Carolina, who just recently retired from Congress. He was adamantly opposed to any legislation blocking outbound investment.

On the other hand, Speaker Johnson—this has been one of his key priorities. In fact, limits on outbound investment, including to China, were part of the December continuing-resolution discussions, which fell off like a number of other key parts. We expect that it’ll come back. We think it’ll garner support in the House. Again, there will be stumbling blocks in the Senate.

It’s unclear what Secretary Bessent, with his experience as a successful hedge fund manager, would think about this. I’ve not seen public comments from him on this. Ultimately, I think the bottom line is that it’s relatively limited in terms of what we can do from a policy standpoint in the early days to limit the growth of biotechnology in China.

I think the better way to look at this is: What can we do to strengthen our ecosystem? There, we’ve got some really big, bold ideas, and we’re getting great traction. So I’ll pause there.

7. FDA Reform Targets Slow Trials

Yeah, let’s pick up on what we can do, for example, to address the speed of clinical development and FDA reform. It sounds like you’re going to be more involved with the administration and be able to provide some input. What are your thoughts in general with regard to FDA reform that might be a positive for our industry or a negative? I’m being optimistic. I’d love to hear your thoughts.

I’m optimistic as well. I won’t—or can’t—right now comment on any role I may play advising the administration or any discussions I’ve had leading into a new Trump administration. But look, our basic principle since Election Day has been that BIO is a cross-partisan organization, and our job is to advocate and develop policies that advance biotechnology and find common ground.

I spend a lot of time with Democrats, and I spend a lot of time with Republicans, as does our team. My view here is one of constructive engagement. While there may be some people, some nominees, and others where we have concerns from a policy standpoint—sometimes very serious concerns—there are ways in which we can vet those privately and, if need be, publicly, if they run counter to our beliefs and our core principles. But I think it’s really about constructive engagement.

The one that you brought up—the FDA—we’ve been working on for the last year. One of the things I did last year was a series of listening sessions around the country, hearing where the challenges are for us in biotech. There are many, but also where the opportunities are, and what people would like to see addressed.

We’ve now begun, and Daphne, you’ve been a key part of this, and John as well, with our board and our executive committee. You’ll see that one of my key priorities coming into the new year is a broad template—an initiative we call BIO Advance—with a number of key cornerstones. Two of them are ensuring the resiliency of the supply chain. Again, I think there’s a lot we can do to ensure the resiliency of the supply chain here in the States and among our allies.

But another key component, and probably the number 1 thing I heard from more than 100 emerging-company CEOs in these listening sessions, was that we have to reimagine the clinical-trial and regulatory paradigm. We’ve evolved to a point where it simply costs too much money, takes too much time, and is too uncertain to develop our medicines. So let’s think boldly about how we do it.

We need a strong and effective FDA that has to continue to be the gold standard around the world on safety and efficacy. But let’s think about how we reimagine clinical trials, how we condense enrollment timelines, how we think about IRBs and university contracting, and what the role of the CRO industry is here.

Then, within the FDA, how do we strengthen leadership? How do we reduce bureaucracy? How do we really elevate regulatory science? In many ways, the science and medicine coming out of our companies have leapfrogged the FDA’s ability to digest, process, and evaluate our technologies, and the system has defaulted to a very slow and cumbersome process.

While protecting patient safety and ensuring we understand efficacy, let’s understand how and when it’s appropriate to use biomarkers, accelerated approval, adaptive clinical designs, and Bayesian statistics. Let’s approach this with the same mindset we used in Operation Warp Speed years ago during COVID: We need safe and effective medicines, therapeutics, and vaccines, but we need them as quickly as possible, and we need them for everyone.

Those are the core principles. I’m optimistic based on the discussions I’ve had, including some going back 8 years to the early days of the Trump administration. For us, early on, it was our family’s personal journey in the world of rare diseases, and now it’s much broader than that.

I’m optimistic that this fits in with the priorities of advancing science and realizing the importance of biotechnology. Again, I can’t overemphasize enough that part of what we talk about is the importance of biotech for national security—showing what free, democratic societies can do to promote public health and, again, a more prosperous, secure world.

So there will be challenges. We’ve got to carefully follow how they think about MFN and these tariffs. But I think addressing the FDA and the clinical-trial paradigm, and addressing fixes in the IRA—Congress is now going to look at the IRA—I’m confident we’re going to have hearings on 9 versus 13 on orphan cures. And between Congress and the White House, I’m hopeful that we can find solutions that will really advance medicine.

Other initiatives, like the pediatric priority review voucher, are incredibly important for us, for a number of our members, and for patients. And I'll just end with you there: there's going to be a very large tax bill this year. It's probably going to take some time to pull it together. I do believe that we can address the R&D tax credit in this construct, but also, when we get back to manufacturing and incentives for manufacturing in the United States, I think that's going to be an important vehicle.

So, let me pause there. While there are still plenty of challenges in front of us, I'm optimistic that we can be in a better place and move the ball forward in a way that'll really help our industry.

Thank you, John, and thanks for all the important work that BIO is doing. It's great that somebody like yourself, who's a drug developer, who's advocated on behalf of patients, including your own children, and understands the industry so well, is the one who's leading this organization.

Let me open it up to others for comments and questions. We also have a question from John Connolly, who heads up the Parker Institute's science group. He's the CSO there. So, I'll open it up. I think Sam and Mike first.

I just want to make a comment, one, thanking John Crowley again, as you did, Daphne. It's fantastic to have him involved here on this issue. John, as you know, I believe that these types of initiatives, done well—science-driven and focused on evidence generation in a very solid, important way to maintain our gold-standard status—are going to be critical.

I do think that these types of changes can evolve the U.S. environment for success in the biotech sector, which really allows us to continue to be the leader around the world in what this industry does. I believe in more carrots and fewer sticks as a way of dealing with or addressing concerns around our standing as a world leader in biotech.

Personally, I have no doubt that we will continue to be the leaders in biotech, even if other countries, like China, come up with some really good solutions to innovation, which should be part of the global innovation economy at the end of the day. But if we have an environment in this country that enables our sector to continue to be the most successful in the world, that policy environment will allow us to continue to be in that pole position. That's what we should strive for, with more carrots, as I look at it.

John, that's very well said. You and I are 1,000% aligned on that. Given that alignment, are you confident that the administration understands that, and that the nominees who have been put forward may understand that despite the rhetoric? Maybe the markets are too jittery, and we will see some visibility and resolution?

I am. I think that'll become increasingly clear with a number of the policies. If you look in the weeks ahead at the Trump administration's approach to the entire drug-development paradigm, I think you'll see it very aligned with how we see the world. Again, for those reasons—public health, national security, economic growth, and security—that's resonating in many discussions over the last several weeks and months. So, I think you'll see that.

Look, I can't—I won't—comment on specific nominations. Obviously, we're very closely attuned to that and are involved behind the scenes in many discussions. But I am optimistic that we can find common ground on a lot of these key areas. To the extent that any nominee or any member of an administration or Congress takes a point of view or tries to implement policies that run counter to our core beliefs, whether it be in vaccines or other areas, we will absolutely be the first to be vocal about how that does harm and to oppose those policies.

That’s been my approach going into this, grounded in constructive engagement, finding common ground, and cross-partisanship. At the end of the day, I think politics is about making friends and finding that common ground. It's easy to be the opposition and just oppose everything and everyone. But we take the world as we find it, and we take Congress and the White House as we find them, and we find a way to work with them.

One of the reasons folks have gone to China for some of the assets they're licensing—CAR-Ts or ADCs, et cetera—is the speed with which they can generate some early clinical data. John Connolly just joined because he and I were chatting a little bit about this issue, and I think there are some initiatives going on, John, to try to address that in the U.S., right?

John Connolly

Yeah, absolutely. I also want to thank John for such a careful analysis of the regulatory environment and its impact on the biopharma sector. I'm also optimistic, and I'm very much looking forward to the opportunities that these changes may create.

Sam, as we were talking about, the speed at which we can do some of these clinical trials in China is obviously way ahead of what we're seeing here. I think a lot of that has to do with regulatory agencies that have come up and looked at the gold standard of the U.S., looked at exactly what the U.S. FDA does, and implemented many of those policies in alignment with U.S. regulatory standards and tolerances. At the same time, they began to look at how we can accelerate things a little bit further.

Many of us are familiar with clinical trials in Australia, but Singapore, Denmark, and many other countries take a more risk-based approach to really speed up the early-phase signal-finding studies. We're in the cancer immunotherapy space, and I think many of you know that a cell and gene therapy trial signal-finding study out of Penn can take about 2 years to really push through. The idea that you have just a small signal-finding study, and in that time, as an early-stage biotech or as an academic, you've got 20 companies in China that have already done that trial, is a real challenge.

Much of this has to do with the way early-stage trials are done in other countries outside the U.S. Those 6-person and 12-person signal-finding studies are done with local IRB approval under a framework that is nationally administered and reviewed. I think this is something that we really have to look at now: What are the responsibilities of the local hospitals, and can we shift some of that regulatory burden for early-phase signal-finding studies onto more of a local review process that may be much more accelerated, including other aspects like shortening timelines?

This is a big, big area that we really need to address. There's a role for looking outside the U.S. at other systems and what works, and then bringing that in and modifying our system. Again, I really am optimistic. This is the time when, as John said earlier, we can use carrots to really incentivize this, as opposed to continually putting up barriers.

Thanks so much. That was John Connolly, CSO of the Parker Institute, who joined us here from the audience. We have about 10 minutes left. I'm going to ask everyone to comment on anything else that's on their mind, and then we will wrap up the show. I'll start with you, Sam.

I can go through these deals quite quickly. I'm going to focus on this China-Europe-versus-U.S. issue. Gilead did a deal with LigaChem Biosciences, which is not a U.S. pharma or biotech company; it's private. The thing that makes it interesting—and others can correct me if I'm wrong, and this is the sort of thing where Mike will have all this data in his head—is $125 million upfront for a preclinical asset.

It's an interesting asset. It's a STAT6 oral program as a whole, and obviously STAT6 is downstream of IL-4/IL-13, which is what Dupixent targets. So, the idea is interesting, but that sounds like a pretty big number for a preclinical asset.

The other one, which is also not a U.S. deal, is AbbVie and Simcere. They actually did 2 deals—2 T-cell engager deals. One was with Simcere, which is Chinese, and the other was with AbCellera, which is a company that they already had a deal with. They're both for T-cell engagers.

Of course, AbbVie is in the world of T-cell engagers with a myeloma drug that they're developing. The deal with Simcere is for a multiple-myeloma trispecific targeting GPRC5D, BCMA, and CD3.

These are the deals that I saw. Again, these are just the first few deals of the year, and they involve non-U.S. companies, so I think that doesn't really say anything. I think U.S. biotechs still win the largest share of deals, even if you look at the big rise in 2024. But it's something that we're going to have to keep assessing and analyzing going forward.

Mike, did you have any comments on the Gilead deal?

Yeah, the $125 million is definitely a high number for a preclinical asset. I'm sure we all know that it follows off some of the themes we were talking about, because literally weeks before, J&J did a deal with the Chinese company for the oral STAT6 program, and they paid a much smaller amount. I think it was around $30 million or something like that.

Maybe someone thinks that the drug is better, or maybe J&J just went cheaper. J&J went to China to do theirs, and Gilead went to LigaChem. Whatever they wanted, they paid up for it.

So, that’s good. I do like that deal for Gilead, though, because they have STAT6, and they also have an IRAK4, I believe, from Nurix, too. If you’ve been following, everybody wants an oral psoriasis or atopic dermatitis pill because there aren’t great ones at all.

Good. Any other closing remarks, John?

Yeah, I would just say, look, this is the start of the year, and I think there are reasons to be optimistic here. Despite the uncertainty that we all entered into at JPM, my glass is still half full, and I’m looking forward to some great stuff happening.

Great. Well, thank you. Before we close out the show, I just want to give a shout-out to my friends over at Omega on the Scorpion deal. Congratulations on that. I also want to mention that the founders of the CEO Sisterhood—Julia Owens, Angie You, and Sheila Gujrathi—have done some great things for the industry, so I want to give them a shout-out as well.

We’re about to wrap up, and I would like to thank my co-hosts, John Maraganore, Mike Yee, and Sam Fazeli, and our guest speaker, John Crowley, CEO of BIO, for coming on. Thank you all for a great discussion, and I really appreciate your insights. I’m looking forward to the rest of the year. I think there’s potentially a little bit of optimism. John Crowley, would you like to make closing remarks to wrap up the show?

Sure, Daphne. Again, thank you for having me. I’m happy to join you on a more regular basis. Look, I echo John’s optimism. I think the glass is more than half full and probably pretty clean, too.

It’s been a challenge for 4 years. You look at when we reached the peak of our biotech market and at everything that we’ve struggled with, despite tremendous science and technologies moving forward. I do think, for instance, you’ll see a much more receptive Federal Trade Commission that will understand the importance of recycling capital and ideas in our industry through M&A and large business transactions.

One of the things that we’re going to emphasize—I’ll just note as well this year—is that while we do a lot, and we’re based in Washington for a reason, of course, so much of biotechnology is happening around the country. While we have our epicenters in Boston and the Bay Area and a couple of other places, when I travel around the country, I see so much optimism. When I meet with our governors in particular, everybody wants biotech in their state. They want it to grow.

One of the initiatives we’re going to launch this year is a program I’m calling BIO on the American Road. I’m going to go on an almost monthly basis to spend 2 or 2.5 days in emerging cities and emerging biotechnology centers of excellence.

We’re actually going to pilot this in early February in Denver, where we’re going to meet with state leaders. We’re going to go on morning talk shows. We’re going to tell very human stories of people locally who have been saved through the miracles of our medicine and people who need our miracles for them or their children to be saved.

We’re going to children’s hospitals. We’re going to member companies—emerging biotech companies—with members of Congress to showcase the work being done in their districts and states. We’ll do Denver and cities in that emerging category.

So, I’m optimistic. I rarely, if ever, hear anybody say, “God, I hate that biotech company that made that medicine that saved my kid’s life.” No, never. They need more of it, and they want more of it. I think that’s the background that we will weigh into as we continue to deliver our medicines and hope to people.

I’m optimistic, and I think while we’ll have challenges, no doubt, on the policy front and things we need to fix, like in the IRA, I’m optimistic that with some smart and bold changes, we’ll be in a better place. That’s our job, and that’s my vision. But I ran a biotech company for 20 years, right? I’ve got to be an optimist.

Well said. Thank you, John. We would love to have you on here again on a regular basis.