第137期——2025年4月4日

You're listening to the Biotech Hangout, a live and unedited weekly discussion of all of the latest news on our industry with a group of biotech insiders. I'm Eric Schmidt, and my co-hosts today are Brad Loncar, Yaron Werber, Paul Matteis, and Nina Kjellson, who I think is able to join. For more information about our hosts and guest speakers or to listen to the most recent episodes, please go to biotechout.com.

It’s been a long week already. I’m exhausted. It’s been a tough week, too, right? The macro factors are certainly flying against us on a number of different fronts, whether it’s the FDA, vaccines, the overall biotech community, or the markets.

I know this is a troublesome topic and not a lot of fun to discuss, but I feel like we’re going to have to spend a lot of time on it, as some of these institutions—in particular, the FDA—seem very different than they were even a week ago, when we were last gathering. We’ll get there.

Brad, I hope maybe you can first start us off on what’s potentially the least of our concerns in biotech, which is another macro headwind: the tariffs that are being discussed and are at least affecting the broader marketplace, perhaps to a lesser extent biopharma. What are you hearing and what are you seeing there?

1. Pharma Tariffs Are Coming

I saw a press gaggle that President Trump had on Air Force One last night. There’s a YouTube clip of it if anyone wants to watch it, but basically a reporter asked him directly what’s going on with pharmaceuticals, and he said they’re “working on it,” also with semiconductors. So it’s clear that we’re not part of, at least on the U.S. side, the broader tariff plan that was implemented yesterday.

But it’s also pretty clear that there are going to be tariffs on pharmaceuticals. It’s just a matter of when and how much. Our industry has built so much manufacturing capacity in places like Ireland, where there are both low taxes and low wages. Remember, we had the whole redomiciling controversy about a decade ago, and there are still a handful of really important companies domiciled there.

I think the ultimate goal of the tariffs is, number one, to do what we wanted after COVID: bring manufacturing home so that, from a national security standpoint, we’re never caught unprepared for another pandemic, particularly from an API standpoint. But I also think Trump really wants to drive a lot of those companies and manufacturing back to the U.S. to fit with his broader theme of “Made in the USA” for everything.

It sounds like sometime next week there will be something out on this. For now, there’s really no point in speculating on what it’s going to be.

Yaron, Paul, you guys cover a variety of larger and smaller-cap companies. How great an issue is this for either cohort? I guess the XBI is down about 8% week to date. Is that because of the tariffs and the general stock market weakness, or do you think it’s more to do with the specific challenges that we’ll address in a moment—the FDA?

Let me chime in quickly. I think it’s a combination of both, because it’s been a volatile and sadly eventful week for the FDA, and we’ll talk about that in a second. The tariffs are a big issue. The question is, what does this really mean?

Eric, I think you alluded in our previous email exchange that you’ve been talking to investors all week about this. I think what’s so hard is teasing out what the impact is really going to be, because it’s going to depend so much on intercompany transactions, where the IP sits within a company, and how they shuffle, literally, the profit margin between subsidiaries.

So it’s really not that transparent to us. We’re all going to be a little bit in the dark to really understand what the impact is going to be. The tariffs are the bigger issue right now, as far as I can tell, but I’m curious to see what everybody else thinks.

Can I just jump back in real quick and offer one more quick opinion? Obviously, tariffs are important, and they’re going to affect companies, costs, bottom lines, and everything. My personal opinion is that, in the grand scheme of all our industry’s problems, this is not the most important thing or even in the top 5 on the list.

My thesis for the last handful of months—and really, if you go back years—is that, sadly, pretty much everybody but us, meaning the general public and every politician out there, wishes that our industry were smaller, that our products were used less, and that the companies made a lot less money. That is the central headwind that our industry faces.

Until we fix the PR problem, where we’re all viewed as “big pharma” and everything is evil and profit-oriented, until we start getting the public and legislators on our side and do something about that central problem and headwind, I think tariffs are going to be issues for individual companies and cause chaos as they figure it all out and build plants.

But I do not think tariffs are the biggest issue for our industry.

It’s sort of lesser-of-evils news rather than bad news or good news. Brad, I 100% agree that, as an industry, we have a significant PR problem. But some of that PR problem is a real disconnect from the reality of innovative research: really well-intended, extremely dedicated people working in all aspects, from discovery all the way through to manufacturing and commercialization.

What I worry about with respect to tariffs is that we do have an incredible, incredibly global supply chain. We don’t need to go into the details of that, but whether it’s starting materials, intermediates, or final product, almost every single important drug is manufactured all over the world.

So there will be effects for companies on revenue and EPS, but also on mindshare. I think we’ve evolved into an industry that is very short-term-minded. We have a lot of leadership in revenue-positive companies that naturally need to collaborate with the buy side to deliver next quarter’s and next year’s sales and earnings. That’s going to be a huge distraction from focus and investment in discovery, R&D, enlightened innovation, and development.

I think we’re going to see layoffs. I think we’re going to see struggles to rapidly insource manufacturing. We don’t have the skill base in the U.S. to really support a lot of the innovative medicines that we use. So I think there are a lot of dominoes that will follow tariffs, even as we hope there will be some grand bargaining that reduces the financial impact.

Paul, how are you seeing the impact of tariffs on your revenue-generating companies? Is this more than a few cents of earnings? Is this something that, given our margin structure and cost of goods, we really need to be worried about?

It’s a good question. I guess it depends on the company. I was going back and forth with Neurocrine about it, and Neurocrine runs a 99% gross margin on Ingrezza. So if the costs there double, it doesn’t really seem to matter for the broader narrative on that stock.

For anything that’s not a large-cap company, it feels like the narrative is often more about topline growth, whether there’s a key pipeline asset, and whether the company is an M&A target. Every debate feels like it’s within 3 variations of those questions.

This isn’t a hot take, but both of these things are super, super relevant. For my conversations this week, though, it’s been much more about the FDA. Maybe that’s somewhat due to my coverage, because I cover some large caps, but also a lot of small- and mid-cap companies. I cover a lot of companies that work on rare genetic medicines—not just in gene therapy, but also CDx companies that have agreements around biomarkers.

I keep hearing the refrain that people think X or Y drug will probably be fine as it relates to its regulatory agreement. But how can I have the ability to make high-conviction bets or size investments here when there could be another shoe to drop with the FDA at any time?

I think people generally believe—and we’ll talk about this—that Dr. Marty Makary, as an FDA commissioner, has a lot of incentives that are still somewhat aligned with industry. He’s going to be judged mostly on, putting vaccines aside for a second, how many drugs get approved. He doesn’t want to look inefficient, right? That would be against the whole premise of all of this.

But over the next handful of months, even if we do still see drugs getting approved, I think there’s so much concern about what sort of shuffling is going to happen at the FDA, whether more people are going to leave, whether they’re going to miss deadlines over time, and what’s going to happen on the policy side next year. I feel like that’s a huge overhang for hundreds of stocks, theoretically—not to be hyperbolic.

2. The FDA Enters Crisis

Okay. Well, you've sent us down this pathway of our FDA discussion. I guess I would agree with you. My call volume is more slanted toward FDA concerns than tariffs at this stage. I'm sure Brad would put a functional FDA as a top-three consideration among his fears about the industry. Why don't you, Paul, recap for us a little bit of the news flow, just for those listeners who may not be as aware of some of the changes—Dr. Peter Marks, the layoffs, the restructurings, et cetera?

Sure. I'll keep it super brief. This all started when I woke up Saturday morning—or I guess it didn't start then; it started Friday night—but I woke up Saturday morning. We all did, right? We saw that Dr. Peter Marks had resigned. He has a resignation letter that's pretty eye-opening about concerns around FDA transparency. He talks about vaccines.

Going into this, I think there had been a concern from a lot of investors that Dr. Peter Marks might not survive this administration, and no one really knew how it was going to play out. I hear very different things from different people. Some people were convinced that he was going to be around and maybe they'd merge CBER and CDER, while others said, "You can't buy any gene therapy stocks until we know what's going to happen." So, there were a lot of different views from investors on the topic going into it.

Ultimately, this was a big fear, right? And then, as you mentioned, Eric, we had been hoping, after seeing some things at HHS and changes over the past few months, that the FDA might be protected. But then the FDA was subject to broad layoffs, and the layoffs were done the same way, where people were waking up and finding out that they'd lost their jobs. From our perspective, there's opacity around who's actually losing jobs. It sounds like, Eric, you've had some more insight into that, which I'll be interested in hearing.

And then we've seen more senior people leave, including Peter Stein and some senior ODAC folks. I think the broader question that people are going to be asking all of their companies on a week-by-week basis—or, in development-stage biotech, is: Have your FDA conversations been consistent? We'll talk about Denali, and one thing that was interesting was that they did file for accelerated approval on Tuesday, and they said they talked to their FDA review team on Monday. So, that was the most real-time feedback I heard from anybody. But I think we're all kind of wondering: What does this look like next week?

There's discussion, Eric, around restructuring the agency. I don't know. I feel like I could report all the news, but I also feel like the news is changing every 12 hours. What would you add? What did I miss?

Maybe every 12 minutes. I agree 100% with you. It seems like the number one question we get asked is: What direction is the FDA going? We are really at a fork in the road. On the one hand, there's some concern that the agency is already broken—that we've destroyed the culture, ruined the staff and leadership to the point that there's no return, and that now we're busy putting the pieces back together.

On the other hand, a more bullish outlook might be that this organization needed some change. It was a little bit inefficient. Dr. Marty Makary is coming in, and he's a bit of a libertarian who's going to continue to facilitate new drug approvals and usher them through in a pro-business fashion. I know I have a very strong view on this, but I'd love to hear from the group. Brad, why don't you start us off on which direction we're going?

I think Bruce Booth had a long tweet yesterday or the day before. I think he really said it best. As big as the layoffs are and as much as they're making headlines, I think the biggest issue is that we don't know whether the FDA is going to get more stringent or less stringent. It could go in either of those 2 polar-opposite directions. Depending on which way it goes, it's going to have huge implications for all of us.

I think that's the biggest question mark right now: There's really no policy guidance on literally which direction—left or right—things are going. That's what concerns me the most. I have the highest respect for Peter Marks, and I feel terrible for all of the people who've been laid off and whose lives have gone through upheaval.

I will say, though, that early in my life I worked somewhere that went through a 50% layoff. At that moment, it was devastating, and you would have said there was no way this place would ever bounce back; it was impossible. Think of all the knowledge that went out the door. It was a pretty rough 6 months to a year, but ultimately it did bounce back. So, as sad as it is for good people who got wrapped up in this and lost their jobs, I wouldn't discount people's ability to step up and get the job done ultimately over the long term.

Anything that has to do with politics, given how polarized we are, the shouting as this news comes out makes it even worse. I'm more concerned about the policy direction and the lack of any clarity on that than I am—as bad as I feel about it—about the actual numbers. I would say that, over time, people will step up if there's good leadership there.

I love the idea of that hopeful note, and I truly hope that it plays out that way. I also agree that the lack of an overarching master plan across many fronts right now, but certainly at the FDA, is a critical concern. What troubles me about the departures—and it's not just Peter Marks; it's Hilary Marston, the chief medical officer of the FDA, and folks who have 15-plus years of tenure in national public health and FDA regulatory work departing—is that we always talk about how markets hate uncertainty, but we also hate delays.

It has been very difficult over the last decade to see that buildup. It has been encouraging, but it has taken time to build up the technical acumen to deal with novel modalities and more complex conditions, including conditions in the setting of multiple baseline therapies; to demonstrate effect; and to develop a greater understanding of the use of biomarkers and surrogates. I think the fear I have is the loss of that institutional memory and history, and how to lead in the context of that complexity.

Also, when you have mass layoffs—and we know this from investee companies—it's difficult to recruit into organizations that have undergone a lot of uncertainty and flux, because people don't know what the future holds, and they don't know whether that new position will be secure. So, I worry that we're going to have significant delays and some real backtracking in places of innovation, whether that's NCATS, orphan drug, or cell/gene, et cetera.

I'm kind of agreeing with both of you because, at the end of the day, many of us remember the 2005–2007 timeframe. Remember when it almost felt like no drugs got approved? Companies wouldn't even hear back on PDUFA dates, and the FDA at the time was fairly dysfunctional. We've had an amazing 15-year run with a very functional FDA, for the most part, certainly in the last decade.

My dual thinking is that once you actually look underneath who left—and let me just run through a few names—it goes much broader, literally at the division level. We all heard about Peter Stein at the Office of New Drugs, but it's much broader. The head of cardiology, Norman Stockbridge, left; in the Division of Diabetes, Pat Argian [?] left; in endocrinology, Naomi Lo left; and Farrell [?] left. I mean, this goes broader.

Obviously, we've heard about Bob Temple. I don't think I've mentioned Dr. Throckmorton, deputy director of regulatory programs. A lot of those people, some of them historically, were criticized by biotech. Some of the divisions were historically criticized—cardiology and endocrinology. Remember, we all used to say back in the day, "Don't ever go through endo, because you'll never get through." Neuro is actually having a change as well now.

But a lot of these divisions have gotten a lot better in the last 10 years, and they've been very functional. To your point, Nina, a lot of those leaders have been there when those divisions were virtually impossible, and they've now shepherded those divisions to being very reasonable, progressive, and innovative. So that institutional base is an issue. Some of the people who've been there for a long time are leaving. Hopefully, it's going to be important to recruit—or have—talent that can take on the reins again and maybe be innovative and press forward. Maybe, in the end, this is going to work out okay, but no matter what, we can't go back to the 2005–2007 timeframe. That was a very, very tough time for the industry, and I think that's what we're going to have to work on now.

Well, let me just jump in here. Paul, I'll let you have the last word on the FDA topic since you started this discussion, but Brad, Nina, Yaron, I agree with everything you said. We've certainly got a lot of turnover that we need to correct. We've got a lot of lost information and know-how. We've got a dearth of leadership, but maybe one thing you guys haven't talked about is new leadership.

I actually think that may be the biggest concern for the agency right now: the lack of a positive tone from the top, if you will. Imagine you're a stock analyst, a biotech TV guy, or a venture capitalist, and you show up to work one day and your boss or your boss's boss says, “You know what? I don't believe in equity research anymore. I don't believe in the media and biotech anymore. I don't believe in private-company investing anymore.” What do you do?

That's unfortunately what's happening right now with the FDA. There is this tone from the top that, if you believe Peter Marks—and I have no reason not to believe him—is politically driven and anti-science in its agenda. We know that people at the FDA are analytical and scientifically driven to separate the truth from the facts they see. So, to me, I think we're unfortunately in for a huge cultural change until something different happens. But Paul, why don't you jump in?

Yeah, that's well said. I don't really have much to add on that point. How can you really debate the meaning of Dr. Marks's letter? I think it was pretty clear. The one thing I'll just say, and we can leave it at that, and it feeds into the Denali mention, is that we're trying to look ahead and say, “Okay, what are some of the catalysts that are coming up that will tell us how the FDA is functioning?”

There are some really obvious ones, right? Are they meeting timelines? But some of the interesting ones are going to be companies that are filing now or just filed with regulatory agreements that were pushing the bounds of precedent on flexibility. I think of Ultragenyx with its Sanfilippo gene therapy, REGENXBIO with its Hunter gene therapy, and Denali with its enzyme transport vehicle in Hunter syndrome.

All 3 of these are programs being filed for accelerated approval based on a biomarker—a CSF biomarker, in this case, heparan sulfate—in the backdrop of a disease area, lysosomal storage disorders, where historically you've largely needed clinical data to get FDA approval: placebo-controlled clinical trials. They're not going to have a perfect read-through to the broader sector. Everything is nuanced, and a lot could change between now and these decisions later this year, but I think it'll be interesting to see how these play out.

A lot of these companies in the rare genetic medicine space—you were mentioning cell therapy, gene-editing cell therapy—are going to face this open question: Is what you heard from the FDA in the past year still ringing true? I can think of a few other companies I cover, like Dyne or Neurogene, that have plans to engage with the FDA to reaffirm what they've heard on potential regulatory paths. What they had heard was not that long ago, right? These meetings could be soon. I think there will be a lot of stuff coming up that will tell us not just whether the FDA is working on time, but whether its philosophy on flexibility is consistent with what we've been seeing in the past year.

Well, great stuff to look out for. Nina, why don't you take us to another unfortunate topic of discussion, if you will: the measles outbreak?

3. Measles Outbreaks Are Spreading

Sure. This is an interesting development over the course of the last 2 or 3 months. The reason we care about measles is that it's a highly contagious viral infection that's preventable through vaccination, but it is highly infectious and does have morbidity and mortality associated with it. It mostly affects kids. You get a cough, conjunctivitis, a rash, and white spots in your mouth, but severe morbidity and mortality are associated with pneumonia and encephalitis.

The seriousness of this as a public-health concern dates back to the turn of the 20th century, and a measles vaccine was first introduced in 1963. We've had a pretty long history of vaccination, but before then, you had 400 to 500 deaths per year. I pulled a Lancet study that showed an estimated 93.7 million deaths were prevented by the MMR vaccine between 1974 and 2024, which is pretty compelling.

In the last couple of years, we've seen a resurgence because of the growing incidence of vaccine hesitancy, combined with global travel bringing infected individuals into contact with unvaccinated or under-vaccinated Americans. We know about measles epidemiology because it's a mandatory-reporting disease. If you have a suspected case as a clinician, you have to report it to your state or local health department. Once it's confirmed by a viral titer, it is mandatorily reported to the CDC.

What's been going on in the U.S., due to a cluster in Gaines County, Texas, mostly associated with conscientious or religious objection to vaccination, is the start of several outbreaks. An outbreak is when you have 3 or more cases. We now have about 500 confirmed cases of measles, which is a gross underestimation, likely because contact-exposed people and people who don't actually get a viral titer wouldn't be counted in these CDC data.

That's across 20 different states, but heavily concentrated in Texas. Ninety-three percent of the cases are associated with those outbreaks. There are 5 outbreaks, largely in Texas and adjacent New Mexico and Oklahoma. The concern is that this is twice as many cases and significantly more morbidity than we had all of last year.

The trend toward less vaccination and less immunity is increasing, and measles is super infectious. Twelve to 20 people are likely to get infected if exposed to a sick individual, so it spreads like wildfire. The concern that brought it to heightened attention, other than the status of and attitudes around vaccination, is some commentary from the administration, specifically from HHS Secretary Kennedy.

First of all, he made some recommendations for treatments that are completely inappropriate. He also went on Hannity to say that the vaccine is very risky, that it has the same symptomatology as having measles itself, and that it has a fatality rate associated with it. That is concerning misinformation and potentially contributes further to vaccine hesitancy. Those are my thoughts on what's going on with measles and what's to be expected.

Well, that's a great recap. Thank you, Nina. Brad, Yaron, Paul, I'm going to put you all on the spot a little bit here. Nina mentioned RFK Jr.'s reaction to the outbreak. What does it mean that a secretary of HHS is performing as he is, and what are your thoughts on whether he's the right guy for this job?

Well, I think that, given what we know about science, he's not the right guy for the job at all, given what we're seeing so far. I think there is hope that with change, positive change will happen too. Maybe the organization does need to get streamlined, maybe it needs to get more efficient, and I'm talking about HHS more broadly, but there's a lot of change happening really quickly in multiple divisions and multiple offices.

It's not coordinated at all, and there doesn't seem to be a plan for how to staff and reorganize. That's going to have long-term implications on the food side. Maybe there are going to be some positive changes. The whole concept of making America great with a different way of thinking—there's got to be good there. But there has to be a plan for how you reduce that to practice and make it work. We'll have to see.

If I can jump in with a quick footnote to your point, and to your question, Eric, I think this is not just about the FDA. It's also about oversight of the CDC and public-health institutions, and the importance of tracking so we understand what's going on—not just tracking cases of preventable infectious diseases, but also accurately and thoughtfully tracking vaccination rates so that we can track the population's level of protection.

For MMR, or for measles, you need a 95% vaccination rate to get to herd immunity, which is pretty darn high. We need that data as well. I'm thinking about the collateral effects of an HHS secretary who is skeptical.

I don't have any comment on this.

I mean, I don't know. Maybe my comment is just: How can I not agree with Yaron and Nina and what everyone has said? To me personally, I have a 3-year-old and another kid on the way. The vaccine stuff spooks me, right? I don't want to have to worry about measles for my kids. There are a million things you can worry about with little kids, and I do think about a lot of things. This was not one I expected to be thinking about.

Even outside of that, I feel like this measles outbreak puts many people at harm who shouldn't be at harm. For everyday individuals, it can reduce quality of life and increase stress. As it relates to the FDA, I feel like it's interesting. A lot of times, when we think about politics and regulation, there's this paradox—or tug—between regulation and deregulation.

Whatever you think about all of that, consistent regulation with the FDA is important. We don't want the FDA to be remarkably strict, but we want it to be super predictable and science-driven. We want reliable regulation in this sector, because without that, we don't really have a sector.

I think, Eric, your point about everyday lives is also what makes it important for us to lean in and speak up as citizens.

I’m thinking of a friend who’s a new mom who’s debating the safety of traveling to introduce her baby to more family and friends because you can’t get your first MMR dose until 12 months. This wouldn’t be a concern 15 or 20 years ago, when we declared measles essentially eradicated. She said it’s a little bit like being back in COVID, where you’re wondering what’s safe and where it’s safe to be, or if people recall Zika as well.

That’s my wife. That’s my discussion with my wife, exactly.

4. Biotech Finds Its Voice

Look, I think what we need to see is some kind of coordination and some kind of master plan as to what this new reality, or what these new offices, are going to look like. In the meantime, Jeanne Marrazzo—she replaced Fauci at the NIAID—was put on leave just 3 days ago. So I think that’s what we really need to see: What is the master plan? In the absence of it, it’s concerning.

Let me ask, while we’re waiting for this master plan—and Nina, you mentioned you think the industry ought to stick up for itself and maybe get a little bit more vocal—I was on a call this morning with Dr. Califf, former FDA commissioner, of course, and he called us cowards. He said, “We’re not doing our job to try to enact change.” The industry lobbying organizations, to some extent, have been criticized in other circles for being a little bit too passive. Do we feel that that is the case?

I certainly have that feeling or perception. But on the other hand, I want to give a lot of smart, earnest, passionate colleagues the benefit of the doubt that there’s a lot more going on behind the scenes than what is visible in terms of trying to negotiate for whether it’s economic policy around tariffs or standards and challenges around the regulatory bodies.

I’m surprised at the lack of a louder outcry about NIH funding to our research institutions because that’s such an essential engine of innovation for the pharma industry. But I’m hopeful that there’s some earnest championing, lobbying, and policymaking happening behind the scenes. Circling back to Brad’s point, it certainly doesn’t help our PR. It doesn’t help us stand out as the champions of public health and human thriving that generally the biopharma industry should be and can be.

Whatever pharma’s messaging is going to be is going to be reversed and criticized by everyone if they start speaking up about this. Everyone—not everyone, but the masses—are going to say, “Oh, they want to protect their monopoly,” and all of that. Whereas if they say nothing, you get called cowards.

The pharma industry has zero moral authority right now—less than zero. It is the most hated industry in society right now, so I don’t see how speaking up is going to score any points or accomplish anything.

That’s a great point. What about the investment community? Yaron and Paul, we’ve got a lot at stake here. Maybe we don’t have any credibility similar to the pharmaceutical industry, but should we be more vocal and more organized?

I don’t think—go ahead. I don’t think we’re empathetic figures ultimately, right? I would worry that if a lot of Wall Street started speaking out, that might embolden the other side. Maybe that’s too pessimistic, but I’m just not sure of the impact.

I also think we have a job to do, which is to help investors understand this stuff, make decisions, make the right decisions, and think through risks. I always get wary of having any sort of written investment research go beyond that. Maybe there’s a time for it, but I just don’t know. If I wrote something like that, I don’t know if people really care what I think more broadly. I just don’t know. What were you going to say?

I was going to say, I completely hear you, and I agree. I agree, Paul, with your hesitation. I think I even try to zoom out a little bit. To me, it sounds like Trump, at this point in the administration—specifically Trump—is really about his legacy and what he’s going to leave behind.

There’s an America First policy, right? There is obviously a policy of change in the government broadly, and obviously tariffs, and he is absolutely aware that this is going to wreck the stock market right now and that it’s going to have profound change. He came in pretty organized this time around, and we all knew that it was going to be organized. That was unquestionable, given everything that we knew was being done.

So I guess I hear you, and I agree, Eric, that we do need to be vocal. We need to be vocal about rights in general. But I just don’t know how much that’s going to change because I think they’ve anticipated this. The question is kind of, what does this game look like in 5 innings?

I think that's a really good point because, speaking of sports metaphors, there is an element of the industry and the buy side sitting a little bit on the sidelines, with the exception obviously of selling shares to try to get a sense of where this is really going to land. How much of the tariff is a pendulum swing? What is the organizational leadership of the agency going to be? Are there going to be collateral effects on PDUFA dates or not? So far, mostly not, except vaccines.

So I understand a little bit of the hesitation of leaning in—with what message, with what action—but I do think some areas where we collectively, both industry and finance, as vilified as we may be for our self-interest, can lean in are: one, the drumbeat of building and maintaining trust in science—trust in science, medicine, facts; to educate about our industry, including our supply chains; and make visible investments in the skill base that's needed to bring more manufacturing back stateside.

And then I think we're going to see—and this happened in '08, it happened in '13–'14—when you have a dramatic backdraft of capital into early-stage science, public-private partnerships step in, and pharma did a phenomenal job creating institutions and sponsoring research in academia to keep that part of our vital industry alive. That's something that I think pharma needs to be doing and thinking about doing on a pretty short order.

Eric, I also wanted to say—and I’m certain that I’m speaking for everyone on this call and in our industry—I want to give you and Josh credit for speaking up earlier this week. I think, for individuals, that’s the way you should live your life: speaking up and standing up for what you believe in.

In your case, you certainly had difficult circumstances to do that. Not everybody would have done that in your position, and I think as individuals, the worst thing you can do in life is be scared about rocking the boat or not saying what you mean. I thought it took a lot of courage, and I thought it was refreshing that you guys did that. So thank you. I agree.

Yeah, Eric, you guys deserve a lot of props.

Thanks, guys. I really appreciate that. Look, I’ll just say what drove us to write the piece—if you haven’t seen it, we did suggest that Peter Marks was unfairly fired, and we also went so far as to question whether Secretary Kennedy should be kept in his position.

But, Nina, something you said is really relevant to my thought, which is that we have science on our side, and science is always the truth, right? So as long as we stick by that guiding light—that science is indisputable—I think we have stronger ground on which to stand and stand together. I certainly appreciate the support from this group and from some of the others that have reached out to us.

Let’s go from the macro to the micro. Brad, unfortunately, some of the biggest news on the company side this week was vaccine news. Maybe you can refresh us on what happened with Vaxcyte and the very substantial share-price downdraft there.

5. Vaxcyte Misses Its Mark

Yep. This was Monday. This is for the new pneumococcal conjugate vaccine, and they’ve been testing theirs in both adults and children. They had pretty good trial success in adults, and this news on Monday was about children. Everyone’s watching the vaccine space very closely ever since the election outcome.

Sadly, this was a $140 stock in the summer of last year, when nobody was thinking about any of this. It was around $70 heading into the week, and it’s basically been sawed in half. The issue here is that a handful of serotypes missed in this study.

By the way, I’m not a vaccine expert, but a lot of the research that I’ve read basically suggests that this was a Phase 2 study. When they move this into the pivotal trial, they can adjust the formulation and either add more serotypes or boost some up. Some of the analysts’ work that I read on this suggests that this may not be a lost cause and they still might be able to succeed.

I don’t think this has any read-through into the whole debate about whether vaccines are uninvestable or anything like that.

I think this was just a trial result that underwhelmed and didn’t hit its mark. I would say there’s actually been some positive vaccine news and vaccine stories in the news lately. I don’t know if you guys saw the paper about the shingles vaccine and maybe holding off dementia in adults. Hopefully, not everything will get embroiled in the controversies of what we’ve been talking about lately, but in this case, it was a company that was on thin ice to begin with, given the overall sentiment, and it had a disappointing trial result in the pediatric population.

Certainly, a tough environment to report negative data out on. Speaking of which, Paul, the Edgewise data set: Was this mediocre-to-negative data, or was this a market reaction?

Maybe in between. I think there’s also a sort of structural lesson here on certain types of investment setups in tough markets, and I’ll get to that in a second. But essentially, Edgewise, for those who don’t know the story, is developing a drug for hypertrophic cardiomyopathy. This is a space where we have mavacamten, a commercial drug for Bristol Myers Squibb, which is doing pretty well after a slow launch; Cytokinetics is under regulatory review with another next-generation drug, aficamten; and then Edgewise is the third generation.

As you go across the spectrum, the thesis for each of these subsequent drugs is that they get safer and safer and can alleviate some of the echocardiographic monitoring in the real world that are impediments to use with mavacamten. A colleague of mine, James Kandasamy, who was my associate and now has started covering the cardiology space, previewed this Edgewise catalyst. He was a little bit more cautious because the view is that the safety hurdle is really high, especially with Cytokinetics, and that going into this data, it was a small data set. It’s hard to disprove the negative on a safety or regulatory issue in a small data set.

So far, it looks like that rang true. Their initial data showed that the drug looks very active on various cardiac biomarkers. They looked at NT-proBNP, KCCQ, and other echo parameters, but they did see a couple of cases of AFib, which are hard to interpret because this can happen as a background event in HCM, but it also could be drug-related. I think it leaves investors a little bit guessing and needing more data.

Again, I think it’s that broader context, too. My colleague James knows so much more about the stock than I do, but my thought is just that when you have a drug that has a specific safety thesis within a group at the FDA—or at least the FDA as we know it, which is very conservative on safety—and you need a lot of data to disprove the negative, that’s a tricky stock setup. It’s especially tricky in a market that feels like it can be more inclined to be a sell-the-news market right now. That’s what happened. They did a wall-crossed financing, but the stock broke below the price on that pretty quickly.

Okay. Then, another data set in the cardiovascular space. Nina, I think you were going to discuss Lilly’s lepodisiran, which is targeted against Lp(a), and you had some follow-on comments there, too.

6. Lipoprotein A Gains Ground

Yeah. These are just a reminder that Lp(a) is a similar lipoprotein to LDL, but it’s got an additional apolipoprotein(a) attached to it that gives it a structural alteration that makes it independently prothrombotic and atherogenic. Even with the best statin management and cholesterol lowering, you can still see independent risk for major cardiac events. I personally care about it because this runs in my family; it’s 90% genetically determined. In my case, both my older brothers have had major cardiac events, including one who had a major event following maximal cholesterol lowering, including the addition of Repatha.

There is an unmet need, and there are 3 interesting nucleic acid drugs in development: Ionis/Novartis, Amgen, and Lilly. What’s exciting about Lilly—also, just a shout-out to Doug Fambrough from Dicerna—is that it is a Dicer-substrate siRNA that’s quite different from other siRNA approaches in terms of its penetration activity in hepatocytes. It has shown dramatic lowering in phase 1 in healthy volunteers with just slightly elevated Lp(a), and then they just reported out a phase 2 study in about 380 patients, 140 of whom were given a 400-mg dose, either once or in 2 doses 6 months apart.

It showed, at that 400-mg dose, a dramatic 93.5% lowering of Lp(a). At that 6-month interim time point, they triggered their phase 3 study, which is now enrolling. What’s also noteworthy is the inclusion criteria of the phase 2 study, which really had a pretty high level of Lp(a), about 175 nmol/L, along with best stable management on other cholesterol-lowering medications. So it’s a really good study population to study this in.

The phase 3 is kicking off to do cardiovascular outcomes, which is where Amgen and Novartis, with their phase 3 studies, are looking at MACE endpoints. It’s exciting progress, exciting for siRNA, exciting for people with Lp(a), and potentially a really innovative new cardiovascular target and modality that’s gaining not just genetic validation, but now real clinical validation.

Go ahead. What did you learn about the Ionis-Novartis trial?

Absolutely. This is probably the next major area of innovation in cardio. Lilly, by the way, with lepodisiran, is going into primary prevention. Right now, Ionis—that’s the HORIZON study that we’re about to talk about—is in secondary prevention. Amgen, with olpasiran, is also in secondary prevention, and they said they’re going to start a primary prevention study this year in phase 2. Novartis is testing both pelacarsen for Lp(a), along with Leqvio, their every-6-month PCSK9 inhibitor, for primary prevention. That’s in phase 2, though, and they have not announced their primary prevention strategy, presumably. I think it’s going to come this year.

Lilly, just so you know, also has an oral drug—I always butcher how to say it—muvalaplin, which is an oral small molecule in phase 2 that also showed greater than an 86% reduction. AstraZeneca and CSPC from China, I think, are expected to go into phase 1 soon with an oral drug.

What came out over the weekend is the HORIZON baseline demographics. That’s the phase 3 where we’re expecting the CVOT primary endpoint to hit in the second half of this year. But they said events are happening slower than expected, so it’s going to be in the first half of next year. There are over 8,300 patients. Remember, Amgen enrolled almost 7,000 in 14 months, just to give you some context for what Nina said: This is a huge population out there.

The baseline level—anything over 90 is considered very high risk, and anything over 70 is elevated—they were at 108 at baseline. It’s a very high-risk population, obviously well managed on LDL. 80% had prior MI, 10% had prior stroke, and 14% had peripheral artery disease. Why is that relevant? It’s relevant because the Amgen primary endpoint is only MI, hospitalization, and death. They don’t include stroke. The thinking there was that stroke just does not happen much, so that was the one risk with the olpasiran program.

It’s good to see that only 10% had prior stroke because it’s not expected to contribute much to that endpoint. The study is at 90% power to show a 20% benefit, so it’s a very well-conducted study. The knock on pelacarsen is that it only reduces Lp(a) by 80%, but that’s going to be 80% down from 108, which gets you to about 20. That’s going to be well within the normal range.

It is a monthly autoinjector. The other ones are either quarterly or, as Nina said, Amgen can be even less frequent, and then Lilly can be, I think, 2 shots and maybe even a shot every 6 months or every year. There’s going to be a lot of innovation and a lot of good drugs. A lot of people on Wall Street are skeptical that it’s going to work, but all our consultants have unanimously said everybody’s expecting it to work. We’re pretty bullish. We think it’s going to be a big market.

Hey, Yaron, can I ask you a question about that? It sounds like you’ve spent more time on this than I have, but with Ionis, which I think you also cover, right, there’s this push and pull with Ionis where they have a number of compelling shots on goal, but for many of these shots on goal, there could be a better drug on the horizon, right? If this study works, how are you thinking about that? Do you think Ionis gets the credit, or do you think there’s just immediately the competitive overhang, like we’ve seen in TTR, the transthyretin market? That’s sort of been the structural challenge for ASOs in the liver.

Yeah, really good questions. Let me reverse-engineer the question first, because you said TTR. Well, TTR—the good news is they’re actually going to be the late entrant, with their data in the second half of next year, and they learned from everybody else. Their study, as we all know, CARDIO-TTRansform, is 2.5 times bigger than HELIOS-B, and that’s going to be powered to really look at everything.

So while they might end up being 2 years away from coming to market, they might actually come out with a better data set than Amvuttra. We were originally worried because, as you know better than me, with Amvuttra you go to the doctor every 3 months. Wainua, which is their drug with AstraZeneca, is monthly, but it’s an autoinjector, and patients love the autoinjector. It’s a compelling option, so they’re capturing a huge amount of share very quickly in PN, which is already approved. I think they already have 40% of new starts within a year.

So the autoinjector is actually going to be pretty compelling. I think we could also learn a couple of things. So, number 1, to answer your first question, let’s learn from PCSK9. Number 1, it’s going to take a long time for these drugs to be big because it’s going to take time to get reimbursement. But whereas with LDL there were generic drugs, insurers were able to fight back. With Lp(a), as Nina mentioned, this is genetically totally independent of LDL, so insurance won’t be able to fight back much with cardiovascular outcomes. So they are—

To your point, too, all of these Lp(a) drugs are pursuing prospective cardiovascular outcome studies, and that was really significantly lacking with the PCSK9s on initial launch. So it makes it very easy for insurers to push back, despite the validation of LDL lowering.

Exactly. So they’ll have outcomes right away. And then, look, Amgen was the first one out with Repatha. They’re still the market leader. I think they have 80% share, so hopefully being first to market is important. Leqvio is every 6 months. It does lack outcomes, as Nina just alluded to, and they’ve not captured a lot of share. But what we’re hearing a lot out there is that people love the autoinjector, and cardiologists don’t love this buy-and-bill model. So I’m actually fairly positive here on Ionis.

Interesting.

Great discussion.

Thanks for that back-and-forth. Maybe we’ll try and end on a little bit of a brighter note, given how downcast the markets are and how dire a week it’s been. Nina, do you want to talk to us about some deal flow and fundraising bright spots?

7. AI Drug Discovery Wins Funding

Well, a bright spot—but again, perhaps bright by extreme exception—was the huge funding round, the first publicly announced outside financing round for Isomorphic Labs, the Google DeepMind spinout in the UK. They raised $600 million. It was led by Thrive Capital, and GV and Alphabet co-invested as well.

As is the case for many of these computationally driven, deep-science startups, there’s not a ton known when they first come onto the scene and operate a little bit in stealth. But a $600 million war chest leveraging AlphaFold 3—not just for protein structure prediction, but also for protein-ligand interaction studies—is a pretty powerful use case and toolset for drug discovery. The cup-half-full part of me loves seeing that kind of capital put to early-stage discovery science.

You’ve got a team at Isomorphic that, although it was started by a cognitive neuroscientist who’s more of a computational person, has brought in leadership that comes from industry as well. My hope is that that combined outlook, as well as, of course, their scientific advisory board, puts them in a place to be not just advancing technology but really converting that into drugs and giving lift to the whole notion of AI-enabled drug discovery for the space.

Interesting, too, that it’s Thrive Capital that led it. We’ve seen more crossover, or tech-diversified funds, playing more in AI in health care, whether it’s on the pharma side or in service delivery or decision support. Thrive and Sequoia have been 2 major leading check writers. So it’ll be interesting to see what that evolution portends as well in terms of the actual players.

And then, in terms of other bright spots, Paul, you mentioned earlier the Denali filing for I2S, I guess, for Hunter disease. I don’t know if you have any further comments you wanted to make. Yaron, I think you alluded to at least the Amgen Blincyto FDA approval of its new indication. It’s nice to see the progress. Would either of you like to comment further?

Denali’s drug is an important drug, and on Tuesday they filed for accelerated approval. The immediate question is, how confident are you in your regulatory alignment that it still stands? Their response was, “We talked to the FDA yesterday,” right on a crazy Monday. That’s encouraging. We think that’s an important drug and still likely to get through, barring any sort of major structural change at the agency that inhibits the FDA from doing things on time.

And Paul, to that end, the recent conversation with M. L. Caskey at Ultragenyx was also very encouraging about engagement with the agency driving forward and not showing signs of worry there, which I think is positive. And then we had Cabometyx’s neuroendocrine tumor label expansion as well for Exelixis, on time and on schedule.

Totally.

Yeah, and that was actually even early, right? A few days early, which was great. And then—

A few days early, yeah.

Yeah. And then Vanrafia just got approved from Novartis without a black box or REMS. That’s the endothelin A receptor antagonist. This is the Chinook acquisition for nephropathy, and they got a very good label. So, you know, the FDA—I mean, at least it sounds like things that are late stage, they’re very much on top of, and that’s encouraging.

Good. Well, I’m glad we could end on a positive note. Fingers crossed that we continue to see a functional FDA in terms of hitting their PDUFA dates and making the right decisions on new drug approvals. Brad, Nina, Yaron, Paul, thank you all for another wonderful session. I hope we can meet again in a week. I hope we’re still all part of this glorious industry a week from now.

Thanks to you, Eric, and thanks. It was so good to be with all of you friends and to kibitz on the industry we love so much.

Yeah, sounds good.