第139期｜2025年4月25日

Welcome everyone. 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 Josh Schimmer, Tim Opler, John Maraganore, and Paul Matteis. For more information about our hosts and guest speakers, or to listen to the most recent episode, please go to biotech hangouts.com.

We're going to start by talking about the macro and current biotech market environment. Biotech stocks have been up in the last week, except for today, a little bit. Since bottoming on April 7, the XBI is up about 15%, and the BBC, which tracks small- and mid-cap biotech stocks, is up 30%. Those indices are still down around 12% and 24% for the year, respectively.

The recent rally has been attributed in great part to recent comments from our new FDA commissioner, Marty Makary, which I'll talk about in a few minutes. But the sector has underperformed for years, and the last few months have been very tough. I was pleasantly surprised to see that even Adam Feuerstein, who has been writing about the gloom in the sector, wrote a positive piece called “Sunshine Days” yesterday, where he quoted Tim on M&A. We also got another takeover rumor yesterday: Merck KGaA to acquire SpringWorks in a $3.5 billion deal. That is a slight premium but well below what they were trading at in February.

Let's kick it off with Tim and then go around. Tim, what do you think? Do you see some green shoots for biotech? You're on mute. While he's getting off mute, maybe Josh, do you want to start it off?

1. Biotech Finds Green Shoots

Sure. I mean, it's hard to call them green shoots when the XBI is struggling to get back to its highs from earlier this year, its highs from last year, or its highs from 5 years ago. We are a sector that's consistently optimistic about the future and hopeful for the future, and proud of all the innovation that's occurring in the sector.

On the other hand, there are powerful forces acting to constrain spending on biopharmaceuticals, which in turn act to constrain investor interest in the sector. I guess the shoots are less green than they've been lately. Again, it's hard to be overly optimistic in the context of an XBI that's been so sluggish for so long.

The XBI is a very good gauge of generalist interest, and generalists just don't find this space appealing. That's a topic I think we may get to a little later.

Thank you, Josh.

Tim, can you hear me now?

Yes, you have a little bit of background noise, but we'll try to ignore it. Go ahead.

Okay. Sorry about that.

I think things are never quite as bad as they seem, and maybe never as good as they seem when times are good. The bottom line is that we've got plenty of fundamental innovation going on, but we've had a backdrop of a president who has been unpredictable and created a lot of uncertainty, and an FDA that's gone through some cuts at a time when we're facing competition from China.

Not surprisingly, the XBI has been down, and a number of hedge funds in this sector have been under a lot of pressure. You're seeing some pressure selling at the same time that all of this other stuff is going on. The reality is that the FDA situation, I don't think, is going to be nearly as bad as we think. In fact, I personally think the FDA is going to be a positive tailwind for this sector.

We saw a very good inflation report. Our president is clearly playing a game of poker with tariffs and doesn't actually intend to impose these insane tariffs. I think that, in the last week, things have just been improving, and that's why the XBI is up. It doesn't mean that everything is great and sunny—I agree with you, Josh—but I do think we're seeing very positive signs in the last week.

Maybe I can add, Tim. I think the big difference in the last week is just some of the names that have been trading better in the space. Biotech trading well in and of itself is risk-on, but you can even see a lot of the micro-cap names. We've got some that are up 40% or 50%—names with early-stage technologies and very little data, names that are more levered to a more lenient FDA.

In my investor conversations, I felt like for the past month there was a very high concentration of interest in 5 or 6 stocks that I cover. They're all de-risked asset names or commercial companies that clearly have no financing overhang, and it feels like the interest is broadening a bit.

Granted, this is with specialists. I'm not saying generalists are trying to buy the next gene-therapy story, but as much pain as some specialist funds have been in, I do feel like there's less defense on the investing side and maybe a little bit more offense right now.

Thank you. I'm going to summarize the Makary interview, and then I'm going to ask John to comment.

2. Makary Resets the FDA

I watched the Makary interview on Megyn Kelly on Sunday morning. That was what I did on my Sunday morning. I thought there were some important positives, including a commitment to expediting the drug-approval process. He questioned why it currently takes 10 years to bring a drug to market in the U.S. and expressed urgency about shortening the timelines because of patient needs.

Makary also gave a few examples of what they plan to do, including—and I think this was the part that was probably viewed as very bullish—requiring only 1 randomized controlled trial and then following that with intense postmarketing surveillance based on EHR data. He made the distinction of calling out V-safe and VAERS as being unreliable because they're based on self-reporting, and talked about EHR data and the ability to mine that better. He also acknowledged that there are privacy issues, which they're going to address.

With regard to rare conditions, he noted the potential for conditional approval based on a plausible mechanism, even without a randomized study. There would then be monitoring afterward based on health-record data. He also talked about reducing animal-testing requirements by using technologies such as organ-on-a-chip, predictive in vitro modeling, and AI in the review process.

The FDA, under Makary's leadership, recently announced a plan to phase out animal-testing requirements for monoclonal antibody therapies and other drugs. He noted that they plan to improve the bureaucracy by reducing red tape and eliminating internal silos and fiefdoms.

There were also a few areas to keep an eye on. He said he wants American pharma to do well, but that scientific analysis should be independent, and said that they're going to be replacing pharma representatives with patient and family representatives on advisory committees. I'm not sure how big of a change that will actually be.

He spent a lot of time talking about areas that are less relevant to us, like food and the environment, and their plans to eliminate ingredients, including banning food dyes, which we just heard about. He also talked about microplastics, seed oils, and the microbiome, as well as reducing the overall administration.

He claimed that no cuts were made to reviewers, scientists, or inspectors, and that cuts were made only to communications staff, FDA lobbyists, and outdated IT staff. But that doesn't necessarily gel with what we've been hearing from some biotech CEOs. I have to say that my own personal, n-of-one experience is that the groups we've been interacting with are functioning well and meeting timelines, but that hasn't necessarily been the case for other CEOs in biotech.

John, you've talked to some of the CEOs who have had issues following the recent changes at the FDA. Can you comment on that and also on the very well-researched article in BioCentury this week?

Yeah, I also found the Makary interview to be encouraging, net-net. Megyn Kelly made me cringe, but what Makary said was encouraging. He used some really good words. He wants pharma to succeed, and he used the word “innovation,” which is always great to hear from policymakers.

To some extent, he sounded a lot like Peter Marks in some of the things he was saying, which I think is good. Obviously, it's encouraging, but we need to see that, whatever this rebuild and all these new provisions look like, they maintain scientific standards and independence from political influence. I think that's going to be something to watch for.

To your point, I am involved with a lot of companies and I see a lot of different things. It's a bit of a tale of 2 cities across my universe. I see some companies that are experiencing delays, while others are even experiencing accelerated responses. I had one friend who runs a company that submitted a protocol amendment and received a response within 24 hours, which is amazing.

It's a bit all over the place right now. There was a very interesting issue regarding the Vanda CRL appeal, where the FDA itself said that the delay in the appeal was related to staffing, the recent reorganization, and the recent disruption. It's obviously indisputable that the FDA acknowledged that point, so I think we have to take note of that as well.

As for the BioCentury article that came out this past Tuesday, it really focused on the proposed reorganization of the FDA. It was a very well-researched article, as is often the case with BioCentury, and it talked to former leaders such as Janet Woodcock and Rachel Sherman. I think the key message was the important need for thoughtful consideration around some of these changes, as well as change management in how these changes are implemented.

Hopefully, the commissioner will take note of these in terms of the actions that he takes.

Yeah. Another area that has been a little bit of a headwind is the threat of pharma tariffs, which remains uncertain. We heard some announcements from big pharma companies about expanded investments in US manufacturing sites, and the topic of tariffs came up in adjusted earnings and revenue predictions during recent earnings presentations. Industry lobbying groups, some of which you and I, John, are involved with, are advocating for other nontariff incentives for onshoring manufacturing. So we'll see how it all plays out.

I'll open it up to the group to comment on what you're hearing about the impact of tariffs. Let's maybe start with Tim, and then the rest of the group can comment.

Look, I think pharma tariffs, in theory, could be a pretty rough thing, and I think it's very much an atmospheric issue that we're watching. In other words, Trump is using the threat of pharma tariffs to encourage onshoring. He's also very focused on pricing differentials. For the same drug, it sells for one price in the US and another price in Germany; he would like to see that narrowed.

I think you're going to see some onshoring take place, and you're also going to see actions take place on prices. I fear that it's going to be bad for drug access in countries that are not as wealthy as the United States, because pharma companies are going to be raising prices in other countries.

From what I'm hearing from my friends at large pharma, I did want to comment a little bit on what John said about the FDA. This is the big driver of stock prices right now. Biotech just took off this week, and it was driven, I think, very much by the FDA comments.

I was specifically on a panel yesterday with Naomi Loeb, who was recently the associate director of CDER, and she spoke extensively about what was going on. It sounds like she still has many contacts inside. Her comments, I think, were incredibly relevant to the article and very much at variance with the message in the BioCentury article.

To summarize some of the things she said, first of all, the reason that 25% of FDA reviewers essentially recuse themselves from reviewing things—which is obviously what's behind these companies that are experiencing delays—is because they were told that they needed to be in the office 5 days a week.

She said, “At the very moment this happened, all of these DOGE people started showing up at the FDA who obviously had no knowledge or qualifications to actually look at this as an organization.” And she said, “Oh, and by the way, the FDA has 2,000 reviewers who are physicians. They chose not to be physicians; instead, they work in the regulatory agency for the public good in general. It's not like these were the washout positions.”

She said it was very offensive, and so people just said, “You know what? I'm going to look for another job.” In her own case, she was required each week to send in a list of the 5 things she accomplished that week. So, in her last week on the job, her fifth thing was, “I found another job”—accomplishment for the week.

Wow.

She said, “Right.” So she said, “Those guys are all gone.” Marty is there. Marty's a reasonable guy working with the leadership teams, and people are coming back to work. The first thing Marty said is, “You don't actually have to be in the office 5 days a week. You can come in 3 days a week, but please don't make it Monday and Friday—in other words, don't give yourself a 4-day weekend, please.”

Morale is changing very rapidly at the FDA, and there are some very big changes coming, which were hinted at in Marty's interview. We're under some confidentiality obligations, but just watch out for what happens in the next 2 or 3 weeks. We're going to start to see companies getting approvals with relatively small data sets, as long as those data sets are decisive and involve rare disease situations.

So it's going to be a very interesting time for the biopharmaceutical industry, and I'm very bullish on what's happening at the FDA.

Yeah. One other positive thing that I forgot to mention was the recent executive order that addressed the pill penalty, and I think that was viewed as positive because there's a belief that it might address the 9-versus-13-year issue—the 9 years for small molecules in the IRA.

Anybody else like to comment on tariffs, the FDA, or anything like that before we move to some data?

Well, just to follow up on Tim's comments, it's great to hear that. As we all know, journalists are fantastic at what they do, and they're important, as always, but they also will talk to certain people and maybe get a perspective, and it may not be the complete picture, if you will. That's just natural.

I, for one, am feeling positive about the FDA as well. I just want to make sure that the net benefits of some of these forward-leaning policies, as long as they're science-based, will accelerate innovation getting to patients, while the potential impact of these changes in staffing and so forth doesn't slow that progress down. That's all. Let's see where it goes.

I'm net-net optimistic, but I think we have to see how it plays out for the rest of the year.

Great. We're going to move to some data, but we'll come back to some of these bigger themes, including short selling and tips for CEOs and things like that. But let's start with some data.

Paul, you cover a range of neuropsychiatric companies, and you had a very good KOL call this week, which we listened to, where you talked about a number of them. Can you touch on any notable items from that? We'd also love your thoughts on the Cobenfy study results and how much they impact the potential for the drug?

3. Psychedelics Gain Clinical Credibility

Yeah, sure. I think the most interesting thing from this KOL call to me—and it almost requires you to zoom out—is that there is just a lot more optimism that psychedelics in psych are real drugs. Some of the KOLs have experience with Spravato from J&J and talk about how that's not fully a psychedelic because it's a safer drug.

But if you just zoom out, Spravato is a really challenging product to use. It's an every-other-week antidepressant. There's dissociation and inpatient monitoring. The efficacy of it is okay; it worked in half its studies, and yet there are 50,000 people on it, right? It's growing very fast. J&J has made a lot of investments in building out the infrastructure.

And so, just as we think about psychedelics as a class, I still think investors are looking at a lot of the companies in this space with real caution and real skepticism. There's the whole stigma around it, right? But at the end of the day, we had someone from MGH who has a psychedelic center. The physicians are getting ready to use these drugs, and even though there are nuanced differences between them and certain complexities, I keep coming away from some of these KOL calls thinking that the backdrop, Daphne, is that a number of these companies in the psychedelic space are not trading that much above cash—maybe 2 times cash or things like that. It just continues to be super interesting to me.

As it relates to Cobenfy, the context is that Cobenfy is off to a nice start. First-quarter beat numbers were reported by Bristol this week. We had covered Karuna, covered Cerevel. I follow Neurocrine. Our expectation had been that this muscarinic class could be a blockbuster class easily in schizophrenia, with upside in other indications.

But there was a setback that has nuanced implications. Bristol reported that the adjunctive trial—combining Cobenfy with another antipsychotic—failed this week. When you look at the data, there's a signal, but it's a pretty modest signal, and it's not entirely clear why the study failed. Bristol did an analysis excluding patients on 1 atypical antipsychotic, and when you look at that, there's a bigger effect size. But in general, the benefit is just not that big.

When we had covered Karuna, our view was that this study could have a pretty significant positive ROI because this would have been the only drug that has a combination label in all of the schizophrenia space, right? Being able to have that marketing angle as a novel mechanism could have a lot of power.

Conversely, though, I still think—and the physicians corroborated this—that Cobenfy is going to be widely used as a combination product. I still think that when push comes to shove and psychiatrists think through the options that they have for the tougher-to-treat schizophrenia patients, what other choice do you have other than to try multiple medications in someone who has failed 2, 3, 4 drugs?

Right now, about a third of patients with schizophrenia are on 2 atypical antipsychotics, even though those types of drugs have overlapping side effects and overlapping mechanisms of action. So the actual biological rationale to combine those drugs for additive efficacy is so-so.

And so, I think for Cobenfy, the headline here looks negative—and it is negative—but this isn't like other areas where you've removed an indication-expansion option. If you look at the depression space, for example, I think Axsome's combination study was negative, but what you hear from most doctors is that they use it more often as a combination therapy than as a monotherapy.

So I still feel like the bull case for Cobenfy is intact, and I thought our physician panel this week echoed that.

Yeah. I think they needed to run this trial for several reasons, primarily to establish that Cobenfy was safe to administer in combination with a traditional antipsychotic, since in the real world this is how the drug will be used: in combination before the traditional antipsychotic is tapered off.

It was interesting. I was looking back, and there was a Jefferies analyst who asked them on the last earnings call, “Why wouldn’t the probability of success for this trial be more like a 50/50 coin flip, since these studies are pretty hard to run?” I was also reading a little bit about some of the sales assumptions, which I think are very much in line with what you’re saying.

Citi actually removed adjunctive schizophrenia completely from its peak sales assumptions, and that brought the sales estimate to $2.8 billion from $3.4 billion. But they noted that Alzheimer’s psychosis could bring it back to $5 billion in peak sales, and William Blair analysts estimate peak sales of about $3.7 billion without the Alzheimer’s upside potential.

But anyway, it was, I think, in many ways a disappointing result, but not entirely unexpected, and it sounds like it’s being viewed as incremental. Paul, you’ve also been following the uniQure breakthrough therapy designation announcement. Do you want to talk about that?

4. UniQure Reopens Gene Therapy Upside

Yeah, sure. Aligned with what we were talking about in the Makary interview, this was a really interesting update, and it has implications, I think, for the broader gene therapy space.

If you take a step back, gene therapy has been out of favor for a variety of reasons. One is that I think there are a lot of investors who are becoming more skeptical of the launch model for these products, although in our view, it’s really disease-dependent. Nonetheless, one of the overhangs for this space has been that under Peter Marks, we saw a bunch of gene therapy companies align with the agency on pretty favorable regulatory setups. You can look at Rocket, which is doing a 12-patient pivotal study, and you can look at how Sarepta got approved in DMD on pretty mixed data. There are a bunch of other examples as well.

uniQure had been talking about being able to potentially file based on a comparison of a phase 1/2 study for its Huntington’s gene therapy versus natural history. For context, that study did have a placebo arm at 1 year, but there wasn’t much separation. We can debate why. It might be because the drug isn’t working that well, or it might be because patients with Huntington’s progress pretty slowly in year 1, and you can’t really, realistically, improve people that much on the drug arm.

The natural-history comparison that they show at 2 years—and we’ll get 3-year data this year—looks pretty promising, with 80% disease slowing. But I think the Street was pretty heavily discounting this after Peter Marks left, and I think we’ve seen a greater discounting of other gene therapy regulatory alignments and things in rare disease, like Denali.

This uniQure breakthrough therapy designation is a big deal because breakthrough essentially shows that the FDA views the data as promising. They also announced the designation after Peter Marks left, which aligns with what uniQure had been saying: They believe their regulatory alignment was not Peter Marks-dependent. They believe it was deep within CBER and the division. So I think it’s a big deal for them.

The next catalyst there is that they’re going to have 3-year data. They’re also going to have an update on the exact statistical plan and how they’re going to do this sort of primary registrational analysis between phase 1/2 and natural history. But for me, it makes me more confident that, for other companies in the gene therapy space, the regulatory-flexibility bull case may still be on.

Daphne, are you on mute?

Oh, yeah. Sorry. Thank you. So, Josh, you’ve been tracking the American Urological Association conference this weekend, as J&J and CG Oncology are facing off in non-muscle-invasive bladder cancer. Can you tell us more about it?

Oh, it looks like we might have lost Josh. All right, we’ll skip to the next topic and come back.

So let’s actually talk about the—Tim, Stifel had shared a biotech market update that included details on what’s happening on the buy side, and you were talking about a Cantor-associated piece on short selling. Can you share more about that now? I’ll try to figure out what happened to Josh.

Yeah. Eric Schmidt from Cantor put out a really interesting report on short selling on Monday, and unfortunately, he couldn’t be on, but Josh is going to be his representative once we get him back. I’ll talk a little bit about the Stifel study.

Once a year, what we do at Stifel is look at the buy side in biotech fairly comprehensively. There are 2 types of data that we look at, and I want to be very careful in identifying what they are. Once a year, if you’re a registered investment adviser—which almost all biotech hedge funds and long-only funds are—you have to file a report with the SEC in which you disclose your assets under management, or AUM.

Assets under management could include cash, long positions, and short positions. By the way, you could even go buy dry cleaner stocks or whatever, so whatever you do is going to be in your AUM. At the same time, we also looked at biotech holdings: how much in long biotech positions these funds have.

A couple of very interesting things came out. The first is that, as of last year—2024—the net biotech holdings of specialist funds went down. That is, the long positions went down, but the number of funds actually went up, and the assets under management of those funds was essentially unchanged. So, if you will, specialists went a lot more short last year.

Then, if you look at which funds actually lost AUM and which funds gained AUM, this is where it gets interesting. It’s very relevant to Eric Schmidt’s report. What we saw was that the funds that were able to do long-short or multistrategy either stayed the same or gained assets on average last year, whereas the funds that were long-only, not surprisingly, on average lost assets. That’s, of course, because it wasn’t a great year last year.

So, you think about all the shorting activity. Is it a good thing? Is it a bad thing? The other thing that was interesting—and I don’t want to dwell on the companies that lost some assets—is that there were a couple of them. In the past, we’ve talked about Armistice, for example. It had a massive asset outflow, which was very visible in all these data.

What was interesting was looking at the companies that gained assets. We tend to focus on the bad news in our sector, especially these days, but there were so many groups that gained assets. Some of them were smaller, high-performing hedge fund groups, like Catalio, 8VC, SilverArc, and Darwin.

The other thing that was interesting to me is that some of these groups that play in the public space but are more private equity- or venture-focused did really well. Forbion gained a huge amount of assets last year. Sofinnova Partners, a French company, gained a lot of assets. Patient Square gained huge assets last year.

You hear the message, which is, “It feels like we’re in this existential moment. Is biotech viable?” Actually, our sector is doing just fine on the asset-manager side. It’s just that a lot of folks on the specialist side are struggling. This has nothing to do with Q1, which is what we’re living through right now in Q2. Q1 has been kind of bumpy, although it feels like things are turning, but the specialist investor was in good shape on average coming into 2025.

Josh, can you comment on this report on short selling?

Yeah, sure. I think Eric kind of goaded me into taking a very different position and conclusion. He kind of pointed his finger at the hedge funds, saying that their short selling was a powerful external pressure on an already fragile industry, one that the industry might be better off without.

For me, though, the hedge funds are basically doing their job. That’s what hedge funds do. They long and short, and that’s part of the capital markets. In biotech, we don’t get to pick and choose which parts of the capital markets we want to apply to us because some may be inconvenient.

There is a reason why the XBI hasn’t gone anywhere in 5 or more years, and there’s a reason why many companies trade below cash: It’s not like they’re ever really going to give that cash back to investors. It’s more like prepaid expenses. So maybe instead of referring to it as cash, if we just referred to it as what it really is for the most part—prepaid expenses—we wouldn’t really look at that as any relevant metric whatsoever.

The reason the industry is struggling is that literally everybody’s at fault aside from the hedge funds. The sector is very complex. It’s very volatile. It’s full of failure. It consumes a never-ending amount of capital in fairly inefficient ways. It almost never returns that capital to shareholders.

Very few companies have a truly sustainable business model over the long term beyond 1 or 2 product successes, and few have a business model that can account for patent cliffs and now the IRA as well. On top of that, now we have competition from China.

We’ve created this wonderful industry of innovation, but we’ve created it in a very vulnerable, fragile way that does attract short investors and does not attract generalist investors. That’s okay. The sector is what we make it to be, but we can’t necessarily lament how the capital markets may be working against this sector, and we cannot lament that generalist investors aren’t coming along to save us.

And we can't lament that pharma companies aren't coming along to save the entire industry. It's an industry of some winners and a lot of losers. If you're a very skilled, thoughtful, and experienced investor, you can do quite well in terms of generating returns. But, again, it requires either a lot of skill, experience, and a little bit of luck, or less skill and experience and a lot of good luck to thrive in this world.

So it was kind of a fun back-and-forth to write with Eric.

And Josh. Eric was really saying, “Hey, some of these companies are so vulnerable. Maybe the shorting really is destroying companies.” I don't doubt that there's a biotech or two that's been crushed by short sellers. But your point is so well taken: There is a free-market process that attracts capital, and sometimes that's on the short side.

Yes.

Yeah. And I'll comment as well on a couple of points. The point about generalists and not having as many generalists attracted to biotech recently: I think there are also some practices, like wall-crossed PIPEs, which tend to make it even harder for generalists to understand the industry and do well.

If a wall-crossed PIPE happens and the financing happens before the data are announced, you don't get that sort of big stock appreciation that you would get in the absence of that. Obviously, what would happen then would be the financing would happen after the data, and that also creates some downside once the financing is announced. But in general, I think the wall-crossed PIPEs have been very negative, and there are other examples like that.

As a CEO, I've always felt like short sellers are actually kind of a positive influence in some ways. If they come into your stock and then you have positive news, you basically get some really great appreciation for the stock when they have to cover. In general, I think they keep people focused on what the downsides are.

So, if you're running a company and you're doing well, I don't know that they have that big of an influence. They can manipulate highly illiquid stocks. Does anybody else have any comments on the short-selling phenomenon and the comments that were just made?

No. All right. Well, we're at the risk of touching on a third-rail topic. John Maraganore and Tim, in the email thread leading up to this, mentioned that this topic of Trump versus universities like Harvard has some implications for our industry. John and Tim, do you want to kick it off? John first.

5. Academic Research Faces a Reckoning

Yeah, let me—yeah, let me kick it off. I think everybody's seen the news reports of government actions toward universities like 388-year-old Harvard, actions toward academic research institutions, and we're now even seeing reports, again in the media, of actions toward venerable research journals like the New England Journal of Medicine.

In some cases, or maybe all these cases—I may be wrong—these actions are purported to be linked to intolerance of anti-Semitism, which I completely agree with, and also to DEI practices, which are grossly disfavored, unfortunately. Some of us may question whether those are really the reasons these actions are going on, and I don't actually think we should discuss the reasons for these actions. It's, I think, outside the scope of a Biotech Hangout discussion, and people on this call probably all have very personal views on this matter. I don't think we should talk about it.

But we should talk about what it means for our industry, regardless of the merits. I do think we need to talk about that because I am worried about these actions, whether meritorious or not, having implications for U.S. competitiveness and U.S. scientific excellence. There are China implications as it relates to the growing competitiveness of the Chinese biotech sector, which is, I'm sure, surprising all of us.

There are medium- and longer-term impacts. I don't imagine that these government actions will have any immediate impact on biotech companies per se, but there are certainly medium- and longer-term impacts because, after all, academic funding is the top of the funnel for innovation for all of our companies, for the most part. Then there are implications for freedom of speech and peer review, and so forth, and the preeminence of U.S. journals. The list goes on.

I do think we need to be conscious of it just to understand the implications. We should be able to talk about it freely and openly, and also consider how we as an industry need to respond to these types of actions. Tim, I don't know if you want to add any more context to it, but we can go from there.

I mean, John, I think I'm on your side on this one, and probably have even stronger views. I just want to make 3 points.

The first point is that our industry grew up around academic institutions. It's no secret that the biotech ecosystem in Boston came out of Harvard and MIT. It's no secret that the strong biotech ecosystem in San Francisco came out of Berkeley, UCSF, and Stanford. Those institutions are ground zero for our industry and continue to be important sources of innovation. It's nice that innovation is democratizing. It's not all Harvard and UCSF at this point, but those are very important institutions.

My second point is, why is Trump doing this? Does Trump actually think that Harvard is out of control or what have you? I think it's very important, if you look at some of the intellectual underpinnings, if you might say, behind the modern populist conservative movement—and when I say that, I mean a lot more than Trump.

In Hungary, we have Viktor Orbán, who has made a massive assault on academic freedom. What's very interesting is, if you search for a man named Antonio Gramsci, who's actually a Marxist theorist, of all things, he's very well studied and very well liked by the right wing. Gramsci makes a very important point, which is that culture and academics are critically important to controlling a society.

In other words, if you want your party to have influence on a society, you need to influence it through cultural means, which we see in things like social media, and you also need to have influence on the university system. So what, to someone who's grown up thinking about the Enlightenment and liberalism, seems like an assault on academic freedom or freedom of speech, to someone who's focused on political control, being able to cause those institutions to be more compliant is actually very important.

Of course, another very important aspect is that Trump is playing to his base. He is trying to appear to be combating woke people in these institutions. I'm sure there are some people who have points of view that are very different from the majority of our society, but isn't that, in a way, supposed to be the idea of these institutions?

My third point is where this is all going to end up. There are a lot of discussions of NIH cuts. They haven't happened yet, just to be clear, but those could be profoundly harmful to our industry because NIH research is where a lot of biotech gets started.

I do think that it's very noteworthy that Trump's standing in the polls, even with his own supporters, has really plummeted in the last month. Just like we're seeing him back off on tariffs, which has been very good for biotech, I hope—maybe that's wishful thinking—that these conversations about Harvard and so on will end up being more like the conversation we were having about Greenland or annexing Canada 8 weeks ago.

It's really more a conversation with his base than a real intention to restrict academic freedom at Harvard University. That's my hope.

Yeah. Thanks for setting that up. I think that if we look at that Gramsci framework, the counterpoint really is that these elite academic institutions like Harvard have been accepting large sums of foreign funding from governments such as Qatar and China, with limited transparency.

Qatar, for example, has poured hundreds of millions of dollars into American universities, often through unrestricted gifts or targeted research centers. These funds aren't purely academic in nature; they're actually strategic investments to shape ideology. This influence has supported a strong atmosphere of, in the case of one area, anti-Semitism or racism, which, I don't think, would be acceptable to most people if it were targeted at Black or LGBTQ students.

I do think that, with regard to the universities and how they're managed, it raises the question of how these universities are handling the conflict and how they work with the administration, which is a major funding source, just like any other funding source, to try to address concerns while maintaining academic freedom. But I think it's important to note that they're not entirely free. They're taking money from other places as well.

Josh, do you want to comment? Then I definitely want to make sure we talk about advice for CEOs and one other data point before we close the show. Go ahead, Josh.

Yeah, sure. I don't know if anyone's read the actual legal brief that Harvard submitted as part of its litigation process, but it acknowledges how horrible anti-Semitism has been on its campus.

Honestly, my social media feed is filled with this. I’m surprised that the topic of antisemitism is so easily cast aside. The legal brief admits they have a long way to go to be compliant with the laws. It lists some of the actions that they’ve taken to protect Jewish students on campus. Honestly, I’d find them quite laughable.

I suspect if you went and asked Jewish students at Harvard if they feel safe and protected now after some of these responses, they would still say no, as evidenced by the fact that Jewish enrollment at Harvard is plummeting to near all-time lows at an institution that has always had a reputation for not being friendly to the Jewish community. What I would say is, let’s hope Harvard figures out how to get its act together to protect its minority groups—all of them, not just selectively, including Jewish students.

Let’s hope that they do that so that they can not only keep the $6 billion of annual funding they still get from the government, but also the extra $2 billion that was stripped away, in addition to the $50 billion of endowments that they have, the student tuition, and all the foreign funds that they’re happy to accept. So, let’s go, Harvard. Let’s go to all the other Ivy League schools that are tolerating the antisemitism on campus, so that there’s no longer an excuse for the government to strip away their funds.

And I, again, didn’t want to get into the discussion around the merits of all this, and you and Daphne bring up amazingly important points, which I completely agree with. At the same time, we have academic institutions that are central to our industry, and we just cannot—we must find answers here that preserve them, that preserve the value that they bring to our biomedical research enterprise and to our competitiveness as a country. We must get through this without decimation of the amazing institutions of the academy. At the end of the day, I think we all agree with that.

I 100% agree, and I think that there would be nothing better than to see these very powerful scientific constituencies of these elite universities actually stepping up and forcing the universities to protect the Jewish community and, in doing so, protect them as well against these fringe groups that have become so disruptive. I 100% agree. It is time for everyone to really step up and put an end to the tolerance of these activities. So, John, to your point, and Tim, to your point, these absolute pillars of academic innovation for science and beyond can continue to thrive.

Great. We agree. This is a great topic, and you know what I love about our industry is that we can talk about tough topics, disagree, listen to each other, and learn. I really wish that, in general, that was the dialogue that was happening more broadly. So, thank you, everyone, for the commentary on this topic, and I think it was important to touch on it.

Josh, I know that you’re going to have to jump right at the top of the hour. We got a little bit of a late start, so we’re going to continue past 1. But before you go, do you want to talk about the American Urological Association conference, J&J and CG Oncology facing off?

Yes, I would love to, because we’re now a year past the 2024 AUA that set this whole battle in motion. J&J’s TAR-200, which is a drug-device combination that’s inserted into the bladder for treatment of NMIBC, came out swinging a year ago with very strong projections of what their 12-month complete-response rate was going to be. CG Oncology, at the time, presented data that was much more mature.

At the time, it looked like J&J’s TAR-200 product had a CR advantage at the 12-month time points, but it was a bit of an apples-to-oranges comparison because one data set was much more mature than the other. This has been a debate that we’ve basically been mired in. I do cover CG Oncology, and for the past year, the CG Oncology bulls have suspected that, as the data evolves, the CR advantage that J&J has over cretostimogene, CG Oncology’s product, will contract to the point of essentially being irrelevant for clinicians.

Whereas bears have noted that this delta, which is close to 10%, maybe a little lower, actually got narrower at ESMO last year, as the J&J data matured. It looked like they still did have a CR advantage, at least at that point. This has been something that, again, for the last year since last AUA, has been a topic of intense debate: Who’s got the higher CR rate?

So, Saturday, we’re going to put this argument to bed, hopefully, because we’ll have full, mature data from both companies presented in back-to-back plenaries. Hopefully, we’ll be able to move on from that battle and start to think about the vast unmet medical need that these patients have. They do need multiple options to keep their disease at bay for as long as possible before they wind up requiring bladder-resection surgery, which is very invasive.

We may now roll over this “Who’s got the better CR rate?” debate into the 2-year follow-up and play the same playbook that was laid out at AUA last year. We’ll see if that’s something that we do have to deal with. But from my perspective, I’m eager to get past this weekend, so now we can stop this kind of very short-term-focused debate over who has the higher CR and start to talk about what the treatment landscape may look like with 2 really good options coming to patients.

That’s fascinating. Thank you, Josh. We talked a little bit about short sellers. We talked about the industry and how tough it is. I can tell you guys, I’m part of a number of different CEO groups. Obviously, BIO—John and I are on the board of BIO. I’m involved with No Patient Left Behind, which is an excellent organization that I recommend people look up. And then there’s the Biotech CEO Sisterhood, which is a really amazing group of—I think it’s almost 400 CEOs.

It’s a really tough time to be a CEO in biotech. John, you have so much experience and insight, both as a CEO and also as an adviser to many companies. You did an interview with Endpoints on CEO survival tips in this environment. Tell us a little bit more about it.

6. CEOs Learn to Survive the Downturn

Yeah. Andrew Dunn did a nice story to try to get a few ideas out there for CEOs as they think about capitalizing their companies and getting through this current environment, with capital markets being very challenging. Obviously, it was good to spend some time with him and offer some learnings.

The one thing that didn’t come up in that, though, that I think is worth mentioning, since we’re getting close to the end of this discussion, is the important role the CEO and, frankly, other leaders in companies play during these tough environments with their teams. That hasn’t been talked about enough.

I had breakfast this morning with one of my colleagues, and we were both talking about this point. It is amazingly important for those on the call here who are either in a leadership position or CEOs themselves to really reflect on how important it is that they can help their teams through these very turbulent times. Think about what’s important for the business. Think about patience and making an impact, and obviously be the real leader they need to be.

It’s really a moment in time in which leadership needs to shine. It’s an opportunity for all of us in this industry to bring in our best when we come into the office or come onto the Zoom call, whatever it is. I think that is an opportunity for us to help and contribute to the broader enterprise that we’re all involved with.

Hey, John, can I ask you a question?

Yeah.

If you were still the CEO of Alnylam, what would be some of your plans to position yourself relative to some of these potential macro changes, like tariffs, where you want to prepare as a company? Also, changing your supply chain is a massive investment that takes time and is disruptive, and so maybe you don’t want to go overboard if you don’t think tariffs are going to be durably in place.

But how do you stay nimble and prepared and be proactive but not reactive? What would be your perspective there?

Part of it, and specifically to the Alnylam story, I would be thankful that a lot of our API manufacturing is done in the country, and it just happens to be that way. Not all of it, but most of it. I’d be super thankful that the company is close to profitability at this point in time.

It’s a very different case than some of the companies I’m helping build right now that are in very different stages of their life cycle. But there definitely are supply-chain implications even for Alnylam. Raw-material aspects need to be considered, and so forth, because they come from all parts of the world. How tariffs will impact all that is going to play out over time.

I do think the larger companies, like Alnylam, Vertex, and Regeneron, are thinking a lot about how they need to secure greater confidence in their supply chains. They’re probably investing meaningfully in securing that domestic security, and it is a natural reaction.

It wasn’t just through the Trump administration, I would say, but more broadly, the geopolitical risks that exist out there—risks that were exacerbated by Russia and Ukraine and other things that we’ve all been aware of.

It’s a complex world right now, for sure. John, any other tips that you want to share with biotech CEOs? We have a few more minutes because we started late because of that strange music in the background. Maybe we’ll just go around. You can kick it off, and the others aren’t necessarily CEOs, but we’d love to get any tips they have for CEOs in this environment. Then we can close the room out in about 5 minutes or so.

Yeah. In addition to the comments I made around leadership in this period and the importance of all of the leaders in terms of how they show up in the office and how they bring their best to their teams in this environment, I do think that, company strategy-wise, you need to be super focused on balance-sheet preservation while focusing the capital and resource plans on the biggest value-driving activities, which are often the ones that move the needle for patients ultimately. That needs to be the core focus.

You probably have to put some of your aspirational plans on hold for a little bit. Put them either on the shelf or find a way to finance them through partnerships. I’m not a big fan of spinouts. I wouldn’t do that in a heartbeat, but there are clever ways to think about business development more in this environment than before without giving away the company, if you will.

These are all the tactics that CEOs, their boards, and their teams need to avail themselves of in this environment and survive through it. We will get through it. We will get to the other side. There will be brighter days ahead. There’s no doubt about that.

There will be some Darwinian evolution. There will be some companies that don’t make it. That is to be expected. But we will be a stronger industry on the other side of this: better people, better science, more focused teams that have got the experience. We will be stronger. I’ll stop there.

Yeah. Josh, I don’t know if you have a minute before you need to go, but do you want to comment on that advice for CEOs?

No. Paul—

Everything John said—John’s much more qualified to give this advice than me. But I would just say, for development-stage companies, be mindful of the studies you’re running and the data that you release.

What I’m hearing from investors when they’re thinking about catalysts in a market like this, especially catalysts for companies that have cash needs and might raise in the back of data, is that it’s really important for a catalyst or a data update to answer a key investment question—something that actually can materially move the probability of success.

Trickling out a patient or 2 of data, or an update on something where, hey, we think this looks interesting, it’s promising, it’s still early—I think sometimes, especially for earlier companies, companies that have gone public in the past couple of years, you only get 1 or 2 chances to really have a market-moving catalyst where you can actually get the attention of people.

This is a market that is punitive for data that doesn’t really de-risk anything when investors think that a company might raise in the back of it. So you’ve got to hold whatever you’re disclosing to that level of standard.

That’s a really good point. If you put out data that is sort of marginal and not a key catalyst, people might actually punish you because they’re expecting you to raise money on the other side of it. I think that’s really interesting.

Tim, did you want to make any comments or offer any advice to CEOs?

I think the big lesson of the last couple of years, with the competition from China, is that U.S. and European companies can and probably should become much more efficient. I sort of assume that’s obvious and that everyone’s absorbing it.

But I actually saw a presentation this week by a company backed by, say, 5 really good mainstream VCs—maybe some of the ones you’re involved with, John, in Boston. Really great people. They put up a budget showing that, to get to an IND, they were going to spend $55 million.

I was just thinking in the back of my mind, how did this still happen? They have 1 molecule, they knew the target, and it’s $55 million from start to an IND. So I think there’s still a lot of adjustment that needs to happen in the U.S. biotech community, at least from my perspective.

Wow, that’s really interesting. I think that also aligns with some of the comments John made about preserving cash just to be able to see another day.

Overall, this conversation brings up the fact that there are some positive things happening with regard to the FDA and other changes. It’s a very volatile time, and this industry is obviously very important. I hope that many of my colleagues can take some of this advice and that it will be helpful to them.