第141期 - 2025年5月9日

You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry with a group of biotech insiders. I'm Grace Colón and my co-hosts today are Josh Schimmer, Eric Schmidt, Sam Fazeli, Yaron Werber, and Tess Cameron. For more information about our hosts or guest speakers or to listen to the most recent episodes, please go to biotech hangouts.com.

We have a lot to cover, as usual. We’re going to go around the group to comment on some of the policy issues that are really top of mind for everyone in the industry and creating a lot of uncertainty and volatility. There was some interest in talking about the Celtics and Knicks, but we’ll save that for the end if there’s any time. There’s quite a bit of trash-talking going around in our group.

Just as a reminder and to set some context, I’m sure everybody knows the XBI was down over 20% at one point in April, year to date, trading under $70 or so, but it bounced back up with the early, cautious optimism about new FDA Commissioner Marty Makary’s comments around expediting preclinical and clinical drug development and accelerated approvals, especially for rare diseases, as recently as last week.

1. Washington Shakes Up FDA

Then this week, we had a number of things go on. On May 6, the decision to appoint Vinay Prasad as the next director of CBER, previously headed by Peter Marks, drove the XBI down 7% on the first day of the announcement. As of this morning, it’s nearly down 14% for the year.

I think everybody knows Prasad’s background by now: hematologist-oncologist, UCSF professor, author, and social-media influencer. He’s been sharply critical of the agency and the pharmaceutical industry, particularly around COVID-19 issues. Initially, his appointment created quite a bit of uncertainty and concern, particularly around vaccines and gene therapy, based on some comments he had made about, for example, Sarepta’s products’ use of surrogate endpoints and particularly the accelerated-approval pathway in oncology, where he cited low overall-survival statistics for newly approved drugs.

However, a lot of reporting came out yesterday about his first speech to staff on Wednesday, where he really struck a more conciliatory, open tone. He was a bit more humble and open to reconsidering his prior comments about randomized controlled trials always being necessary. People were very pleasantly surprised by that, and it sounds like the staff received his opening comments really well.

Then on Wednesday, we also saw President Trump withdraw the nomination of his prior nominee, Janette Nesheiwat, a Fox contributor, to be surgeon general, and then appoint Casey Means, a physician with close ties to the Make America Healthy Again movement. Means is a Stanford-trained physician. She didn’t quite finish her residency, then pivoted into functional medicine and founded the glucose-monitoring consumer health company Levels. She also doesn’t have an active medical license and is a proponent of things like raw milk and a number of other things that the MAHA movement supports.

That’s the context for some of the things that happened this week. Let’s go around the room and get some comments about these appointments. I know, Tess, you had some thoughts specifically on CBER related to this, but let’s talk about the overall comments on these appointments, and then we can dive into the CBER news. Tess, why don’t you start?

Maybe just adding a couple of things to what you said, because I think we saw the same general reaction in the stocks. The reaction that investors had was, “Wow.” What I thought was interesting is that it wasn’t just CBER-related stocks that were down, which is going to be Vinay Prasad’s primary role. We saw Sarepta, uniQure, Capricor, and Tessa down. It was also accelerated-approval stocks that aren’t within CBER’s purview.

I think that relates to the comments that you cited, Grace. I’d note that there were also a number of comments he had made previously just around the value of medicines. When I would look at those tweets, I’d think, “Okay, here’s a clearly very smart man. Does he care about the hard work that so many people in our ecosystem are doing to develop innovative drugs?”

Similar to you, I was very encouraged by his commentary in the interview that he and Makary held yesterday. He reiterated his appreciation for the value of innovation and the entrepreneurial spirit that drives it forward. He emphasized rare diseases and flexibility, as well as the really hard work that the FDA does and the quality of the people the FDA has recruited, which is really important. These are incredibly smart people doing very important work.

Vaccines, I don’t know. We’ll have to see what unfolds there. He shared that he plans to be very data-oriented, and being data-oriented can include reasonable things. It can also include some things that can perhaps be pretty unreasonable or just make it really difficult for vaccines to be commercialized. I’m curious what others are thinking.

I think we’ve heard very positive things from the FDA so far. I’m still very much in wait-and-see mode to actually get a few more approvals through. It was certainly reassuring to see the first stem-cell accelerated approval the next day. It was like, “Okay, things are still functioning.” The accelerated-approval pathway is perhaps still open, but I think we’re going to have to see more of that and see more great things like the AI drug review. Talk about a fantastic application for AI.

Hopefully, in the next couple of months, we’ll really start to see some of these words turn into action and get a little more certainty around how the FDA is going to behave.

Great. No, fantastic additions. Sam, do you want to comment next?

Sure. I’ve been following Vinay Prasad for a while from a multiple-myeloma perspective because, obviously, he’s a hematologist-oncologist. He has lots of views and lots of ideas, and he’s very interesting to listen to.

The whole thing will end up being: words are fine, but what we need to see is what the actions are. Let me give you an example of one of the things he’s been opposed to. I’m not taking sides here on whether that’s right or wrong, but the FDA has recently said that minimal or measurable residual disease can be an endpoint for filing.

Some companies have—for instance, Arcellx just very recently said, or Gilead said—that they’d moved one of their trials to use MRD as an endpoint to fit with what the FDA had said. Dr. Prasad is very much against this. He thinks it’s not the right way to go forward. You’re bringing in a drug whose absolute clinical benefit you don’t know, and he has some very solid arguments to support his view that are openly available to listen to.

What’s going to happen now is what I’m very interested in. I’m sure everybody who covers Arcellx and Gilead is interested in whether CBER—because CAR-Ts are under CBER’s banner—will say that endpoint is no longer acceptable, and therefore companies have to change their endpoints. That would make some clinical trials extremely long relative to just measuring MRD, which is a lot faster.

Let me give you another wrinkle. If that ends up being the case, then if companies go to CDER with a bispecific antibody that looks at MRD, do they end up getting the same rule, or do they continue to have, under CDER, an acceptance of MRD as an endpoint?

It would just be nice to know how these things evolve, and of course it creates uncertainty. Nobody likes uncertainty in the investment world.

On the vaccine side, very quickly, on April 29, there was commentary that Dr. Prasad was in favor of the idea of doing COVID-19 boosters following randomized trials measuring clinical endpoints. I recall that when we do flu vaccines, they’re not based on clinical endpoints. They’re antigenicity or immunogenicity studies. That’s not a clinical endpoint, right?

Perhaps by the time you do the flu, you’ve got some evidence of efficacy in the Southern Hemisphere. If that’s acceptable for COVID shots, then good. The only thing is that COVID currently evolves much more quickly than flu does. You get the strain in the south and use that for the north. For COVID, we don’t know what’s going on.

Is it possible to actually do a randomized trial? Getting data from populations in the Southern Hemisphere is fine, but to do a randomized trial, organize it, and set it up—by the time you’ve done it, your strain will have changed. We end up in a situation where I don’t see how these companies are going to be able to do that for boosters.

Let’s see if that remains a view that Dr. Prasad has. It was obviously as of April 29, so only a few days ago. Again, it creates uncertainty, and of course the FDA will set the rules and people have to follow them.

No, those are great points, particularly around the nature of seasonal strains and pandemic strains as well. I ran the flu alliance between Gilead and Roche back then, and we did all this pandemic planning around influenza, never thinking coronavirus was going to be an issue.

So I mean, it’s just going to be compounding, right? I think those are some of the real fears here, and also with cutbacks in public health, not only in the U.S. but in our support globally. It’s very, very concerning. I agree with you, and it’d be good to get some clarity on that. Josh, do you want to go next? Oops, I think you’re on mute. Okay, maybe we’re having issues here. Eric, do you want to go next?

Well, I’ll give it a shot. Thank you, Grace. Thanks all. It’s a pleasure, as always, to be with everyone today.

Maybe 3 quick things on this appointment. Number 1, nobody should be surprised by it, right? We’ve seen this administration—whether it’s Trump appointing Casey Means as surgeon general or RFK Jr. appointing Vinay Prasad to head CBER. This is all MAHA. This is all RFK Jr. So I know the markets took it on the chin, as you mentioned, Grace, but really, we should by now all see this coming.

Number 2, my question is: Which Vinay Prasad is going to show up to work at CBER? Will it be the internet troll, the iconoclast on X, the maverick, the contrarian, the outspoken critic of pretty much anything that’s contrary to accepted mores in society these days? Or will it be the smart, engaging, gentlemanly guy we saw quoted in some of the articles around his CBER introductory meeting? I hope it’s the latter, but it’ll be very, very interesting to see which Vinay Prasad we get.

And number 3, I think you have to put Dr. Prasad’s appointment in the context of Dr. Makary’s leadership of the FDA. Sam, I hear you, and I too am very concerned about some of the comments he specifically made around accelerated approval pathways. But I do take some comfort in the fact that Dr. Makary has most recently been very open and engaging and vociferous around wanting to speed drug approvals. In fact, there was a press release from the FDA just this week on incorporating AI into the review process, and again, Makary used that as an opportunity to talk about how we need to accelerate the review process.

So when you have a boss in Makary who is setting out a more favorable environment for rapid review processes, I take some comfort and consolation that some of Dr. Prasad’s policies maybe won’t see the light of day. Let me pause there, and maybe—Josh, can you hear us?

Yeah. Can you hear me now?

Yep.

All right. Yay. Unfortunately, I missed some of that, but I think I kind of know where you were getting at with Vinay, seeing that at least so far we’re getting his podcast personality and not his Twitter personality.

I’m very excited to see what he’s going to do. He is wicked sharp. You kind of see it in his writings and his deeper analyses. He’s not going to let anyone slip anything by the FDA that is not a good and important therapy for patients.

We see, from time to time, some game-playing around drug development to get drugs approved and commercialized, perhaps in ways that intentionally overstate their value to patients. Best we can tell, he does not seem to be someone who’s going to tolerate that. It seems clear that he’s going to raise the bar at CBER. I think many of us did feel like that bar had tipped a little too low to be healthy for the industry and for patients in the long term.

Now, that’s always going to be subjective. Peter Marks made very good cases for why he was okay with approving drugs that may not actually, at the end of the day, benefit patients, but he wanted to give them the chance. I’m not sure Vinay is going to be as sympathetic for drugs that haven’t really shown a meaningful benefit to patients.

From what I’ve read from him, aside from some of the cantankerous and inflammatory comments that he’ll shoot from the hip at times, in ways that you wish he didn’t, he really is looking for those drugs that are adding value for patients in a tangible way. And that is what our industry is about, for the most part.

I look at the names that I cover and the names that we’re following. We generally don’t support products that we don’t think are going to have important value for patients. So if he’s going to set the bar a little bit higher, it would benefit us. I’m going to see what he brings, hoping that he leaves that Twitter personality at home.

Well, I mean, I think that, in the end, what we’re going to get—my sense is we’re seeing 2 different personalities and, a little bit, 2 different ideologies against a backdrop of major change coming from Kennedy, even with a goal to expedite at the same time.

So I think it’s not going to end up being a simple package. It’s not going to be a gift where we’re going to know exactly what that toy does. It’s going to have a lot of variability.

We talked about 2 different examples. One of them is MRD negativity, and it’s probably going to end up being in the context of how validated that therapeutic endpoint is, given that some of the other therapeutics in the class have survival data.

In COVID vaccines, I think we’re beginning to see, also with Novavax, that things are going to become a little bit more bifurcated. Perhaps, maybe, Josh, what you’re alluding to is that the bar is going to get ratcheted up with the way they look at things scientifically, and the agency is going to become less predictable. That’s probably going to make our lives a little bit more complicated.

But in the end, I also don’t believe that we’re all going in one direction that’s negative. I think there are going to be positives and there are going to be some setbacks. I’m just hoping that 4 years from now, there’s obviously a lot more positive than not. I’m staying optimistic.

I’m a little bit more concerned about the overall change at the FDA than the change in its specific area.

Great. Thank you. Why don’t we dive into what this means for particular companies? Obviously, this is earnings season, and on top of that, we’re having all these other added uncertainties. A good example of that is Sarepta, and I know, Tess, you’re covering them. Why don’t you give us your thoughts on how this is all impacting them and what’s going on with the company?

2. Sarepta Faces A Double Whammy

Yeah, so I think Sarepta had things doubly hard that day. First, there was the news of Vinay Prasad being nominated. He’d really questioned whether Elevidys, their gene therapy drug, should have been approved. The stock was down 25% on his nomination, and then on earnings it went down even more—another 12% on earnings that came out that evening. So really, a double whammy.

At earnings that evening, they reduced guidance from 2.9 to 3.1 billion for the year to 2.3 to 2.6 billion for the year. I think the first thing everyone probably looked at when they saw that earnings guidance was, “Oh my gosh, this is all because of the really unfortunate patient death that they shared earlier this year,” involving a non-ambulatory patient who had been dosed with the drug, had a concurrent CMV infection, and unfortunately passed away.

But it turns out it’s actually quite a bit more complicated than that. As always with these gene therapy launches, there’s a lot of complexity. It was not only this safety event, which certainly did have an impact on the prescribing of some physicians, but there was also flu season.

What I thought was really interesting is that they talked about their top prescribing physicians, and one issue impacting guidance was that their top physicians are fully booked and don’t have any capacity to administer the drug to more patients. So it’s really the broader physician community that they need to spend more time with. That’s perhaps the physician community that maybe doesn’t have the same capabilities as the top physicians to explain the risk-benefit to different patient populations and talk to families about what that could mean.

As always, it sounds like there’s more complexity than exactly what meets the eye, and a lot of execution issues, as is not atypical for a gene therapy launch.

I did think—and I’d be interested in other perspectives on this—that I do give credit to Doug Ingram and his team for just being very upfront and very direct: Here’s the change in guidance, here’s why, and here’s what we’re doing about it. I think they were very straightforward and direct, and put a plan in place that’s really focusing on higher-touch support for a broader group of physicians. That makes a lot of sense, and it’s something that we don’t always get when we have these guidance revisions or a weak quarter.

So while it was certainly a challenging message to deliver, I thought they delivered it quite clearly.

Great. Thanks. So let’s dive a little bit more into what’s going on at the FDA, and I think, Tess, you stated it beautifully earlier.

3. FDA Delays Spread

I think we are all in awe of FDA staff, both current and former—just incredibly experienced and dedicated professionals. They are doing their best. We're hearing a lot of good things about the way they're engaging in meetings and the way they're doing their best to respond quickly. A lot of this is outside their control.

So, when we talk about problems at the FDA, I want to remind listeners and everyone that this is not specifically about FDA staff. It's really about the nature of the uncertainty—not only around what's happening with specific staffing vacancies, especially in leadership positions, but also just in terms of the process and some of these potential changes that may come into play with new leadership at HHS and all around.

There have been some high-profile PDUFA dates that have not been met, such as Stealth BioTherapeutics' Barth syndrome treatment, Novavax's COVID-19 vaccine, which we'll get to in a minute, and then, even as recently as this week, GSK, where they were looking for an additional approval for an additional indication for their IL-5 antibody for COPD. They were hoping it would compete with Sanofi and Regeneron's Dupixent in that indication, for which Dupixent got approval in September. So, GSK's stock took a little bit of a hit because of that.

We are likely going to see more of these. But let's talk specifically about what's going on with the vaccine companies, starting with Novavax. I know, Eric, you're covering them—not officially—and we also had comments from Sam and Yaron on what's going on with these companies. So, go ahead.

Yeah, thanks.

Thanks, Grace. I'm not covering them officially, but certainly paying close attention to this drama, like everyone else is. I think our listeners probably know that the COVID-19 vaccine that Novavax is trying to get approved—the PDUFA date earlier this month, or actually earlier last month, came and went, and still no word. The company, of course, did its earnings call this week and continued to put forth the view that they think they've satisfied all the approval requirements for Nuvaxovid, and at least they're hopeful that, once they agree with the FDA staffers on a Phase 4 commitment, they can move forward here and get the vaccine approved.

What puts that all at risk, of course, is the comments that senior leadership at the FDA has made. Dr. Makary, in particular, has been out on X and various media outlets saying that we need to rethink the approval process for COVID vaccines. What's maybe most worrisome here is that the one thing that unites RFK Jr., Dr. Makary, and Dr. Prasad is antagonism toward how we treated COVID and how we vaccinated individuals against this infectious disease.

You could argue that Makary and Prasad essentially owe their jobs to the fact that they were outspoken critics of COVID vaccination. I don't believe that, and it definitely does not sound, by the way, that Dr. Prasad is an anti-vaxxer. He certainly doesn't seem to believe that MMR causes autism, et cetera. But again, he and Makary have been very critical of this vaccine.

What I think is going to be very interesting, and is the reason we're all paying so much close attention, is: should Novavax be able to gain some alignment with the review staff at CBER on Nuvaxovid, what will the higher-ups at the agency do? Will they let this go through or not? I'd just like to comment that, unlike some Peter Marks decisions that were judgment-based—you called out earlier, Tess, the issues that we had with Elevidys and Sarepta—this is not really a scientific judgment call. This is unfortunately a political call.

So, it'll be very interesting to see what happens. I don't believe there's any scientific basis around which this protein-based vaccine should not be approved. It's been proven safe and efficacious. It obviously has saved many, many lives historically, so there's no basis that I'm aware of for why we shouldn't have Nuvaxovid. But we may not, and that'll be a very interesting point in time in our regulatory system. I'll turn it over to others if they would like to comment.

Yes, thanks, Grace. Just to add a little bit to the very nice way that Eric put this, I was thinking: These folks aren't particularly fans of the mRNA vaccines, so therefore maybe a protein vaccine will have more opportunity—until, of course, the conversation turned to, first, how you do the trials, and secondly, the comments that I've heard against single-antigen vaccines.

The idea is that we want to move back to a technology—I don't know, guys, help me—how old is the killed-virus vaccine, which supposedly provides a whole bunch more antigens? That platform, of course, takes the rug away from under the feet of all of these vaccines because they're all single-antigen vaccines.

So, if you put those 2 things together—the idea being not in favor of approving COVID vaccines without a randomized clinical trial and not liking single-antigen vaccines—if those continue to be the view of the FDA, then we have a problem. I think what I've been hearing is that, at the end of it—or at least the way that I'm reading it—they're not going to get in the way of getting these shots for people who are at risk. It's more the under-40s, or kids, or babies, et cetera.

So, the hope is that the at-risk population is still a big enough market, at least for the mRNA vaccine folks, Moderna and BioNTech, to continue to generate the revenues they've been doing. But Novavax, I don't see it. I think they're stuck between a rock and a hard place at the minute.

I would agree on Novavax. I would just set aside, Grace, what you talked about regarding a couple of different approvals, one of them being Stealth BioTherapeutics, and the other 2 both being COVID-related. I'm not necessarily worried yet about a PDUFA date for something perhaps more complex being delayed, right?

Rewinding back a couple of years, if you remember the drama around Sarepta saying we don't need an AdCom for Elevidys and then we do need an AdCom for Elevidys, or the CAR T therapies, which were kind of marching toward approval and then, all of a sudden, I think the Abecma PDUFA was pushed back and there was going to be an AdCom. Even for very well-published data sets, we've seen question marks come up throughout the approval process that have caused some anxiety and shifted things around.

So, I think that's not too unusual to happen once or twice or 3 times for reviews that are more complex. But if we see that happen as a pattern, I think that's where it would start getting more concerning. This is talking outside of the infectious disease space, which I think is now being subject to what is really a different set of rules. We don't know yet whether rare disease is going to be subject to a different set of rules, and we'll have to— we're hearing some good words, and we'll want to see some action.

Yeah, I was going to say, we have tiny slivers of windows into what's going on at CBER. Ultragenyx continues to say that the review of their filing for gene therapy for MPS III, Sanfilippo syndrome, based on heparan sulfate as a biomarker, remains absolutely on track. Remember, they're 1 of 3 who were going into this accelerated pathway with surrogate markers.

They're getting very constructive feedback, at least from the reviewer team. Again, I guess the question is: What is actually going to happen when someone at the top needs to sign it? But we are seeing signs that at least rare-disease innovation continues to be on track.

Again, it looks like, Sam, to your point, it's getting very bifurcated. Most likely, the mRNA vaccines that are approved—the next-generation version probably will be authorized, but with a potentially stricter label, without new data requirements. That's at least the latest thinking.

But at the same time, to your point again, they're not even going to bother going for a new vaccine in the under-50s. So, the bar is raised, but that was also partially because they couldn't show that great efficacy. The bar inevitably is going to get raised for vaccines. I think that's pretty clear.

4. MFN Pricing Threatens Innovation

Great. Thank you, everybody. Very thoughtful discussion. The key word here is some uncertainty, although we're beginning to see some trends here.

One more big policy topic before we get to some data and some other earnings and other tidbits, and that's, of course, some of the announcements, fear, and discussions going on around potentially incorporating a most-favored-nation policy as part of this package coming up. I don't think it'll have the votes, but the goal was to tie Medicaid drug payments to the lowest prices paid in other wealthy countries, which, of course, would be a huge disaster for the industry.

It's been estimated it would have up to a $1 trillion negative impact on the industry over the next 10 years. Even The Wall Street Journal had a sharply critical op-ed by its editorial board on Wednesday and pointed out, I think appropriately so, that savings from the plan would be negligible. It would have a huge negative impact on innovation.

I think there’s been a lot of reporting and discussion that not enough key members of Congress on both sides understand this, and that it’s going to be a nonstarter in reconciliation. However, there is very real fear, reported by a number of sources including Politico, that there will probably be an executive order broadly addressing this as soon as next week, maybe even early next week. I don’t know whether we’ll have time at the end, but there’s a lot of advocacy going on. It’s really important that they hear from us, and if we have a few minutes, we can talk about that.

Of course, these challenges are coming on top of some of the uncertainty around tariffs. Based on that, we’ve had even more pharma announcements this week regarding increasing manufacturing and R&D investments in the U.S., including BMS with $40 billion on top of all their aggressive cost-cutting. Gilead mentioned an additional $11 billion and 3,000 jobs on top of a prior commitment of $21 billion, and Teva promised a $30 billion investment. I know we touched upon this last week, and there was some discussion around how much of this is really additive to what they would have done anyway versus brand-new investments. I know several of you—I think all of you—had thoughts on all of these issues. Why don’t we start with Tess?

Yeah, absolutely. I think it’s been a whirlwind, Grace. Let’s actually step back and talk about the first Trump administration. In the first Trump administration, this MFN idea is not new. This was introduced originally in July 2020, I want to say, and it was for both Part D and Part B, basically saying, “Hey, we’re going to look to a certain set of OECD countries, and whoever is the lowest in those OECD countries on a GDP per capita-adjusted basis, that is going to become what Part D and Part B pay.”

It was further revised. There was a second executive order that came out a couple of months later that was basically just for Part B. There was actually a CMS interim final rule that came out a little bit later, which was focused on how this would be implemented. The way that the executive order was drafted was to make it a CMMI demo.

What is CMMI? CMMI is the Center for Medicare and Medicaid Innovation, and CMMI does these demos. They’re usually looking at things like, “Hey, let’s see how value-based care works. Let’s go to this one region and we’ll do this value-based-care pilot, and we’ll see if it’s good. If it’s good, we’re going to encourage legislation or something that would actually cause this to roll out more broadly.” That’s the classical way that CMMI has been used: for these pilots.

Now, that’s a pretty darn big pilot if you’re saying, “Well, the pilot is that we are going to cause the whole country to have price controls coming in from Europe. Whatever is the cheapest European country is basically going to become the price.” It’s not just Europe, actually. It’s also Canada, Japan, New Zealand, Australia, and a whole bunch of other countries that really use health technology assessments and other ways that use math that I think Americans would be very, very uncomfortable with, because it includes a judgment of the value of a patient’s life that many Americans would not necessarily agree with to price those drugs.

That’s kind of the history. I think the fear has been, “Okay, is MFN for Medicare going to come back?” Then, a few weeks ago, “Oh my gosh, is it going to be MFN for Medicaid?” Medicaid is not just Medicaid—the, like, 10% of drug volume. Medicaid is like, “Oh gosh, Medicaid best price.” Best price has flow-through to so many other things, including 340B, which has totally exploded and is now a very substantial portion of actual volume of branded drugs in the U.S.

Either of these policies—either MFN for Medicare or Medicaid—would have a very substantial impact on price and on incentives. It would really encourage a lot of companies to think about just doing a U.S. launch. But even if you’re saying, “Look, companies have preserved the right to do a U.S. launch,” you’re still taking away the value that a company could have had by going to Germany and getting a few dollars from Germany, a few dollars from the U.K., and a few dollars from Canada. Those dollars can add up and become part of an NPV that is either positive or negative on a relative basis when compared to other things. Maybe taking out ex-U.S. actually shifts that NPV, and you no longer want to invest in that drug.

MFN would be a policy that greatly contributes to that and really lowers the opportunity size for a lot of drugs. I think that’s kind of the intent, Grace: I think the intent is very much, actually, that other countries should be paying more, right? But we, as America, don’t want to get less innovation in our attempt to get other countries to pay more. Let’s try and use other methods that are available, like trade policy, to try and get other countries to pay more for drugs.

That is maybe just an overall perspective on the legislation. MFN combined with tariffs really creates a challenging setup for pharma. I feel incredibly sympathetic for any finance or investor-relations department of any pharma that has not yet reported earnings and is potentially going to be reporting those earnings after an MFN announcement and potentially after a tariff announcement. We may or may not get updates on those early next week.

Can I just ask, maybe in part to be provocative but part serious: Most lower-income countries use reference pricing routinely. Why would we hold the U.S. to any different standard when it comes to the lower-income part of America—the Medicaid patients?

I mean, Tess, to your point, the United States funds all the innovation for the world, and it’s one of our most important exports: bioinnovation, these drugs that improve and extend lives. For other countries not to put in the same investment for that innovation is an obvious concern. Again, philosophically, why shouldn’t the U.S. institute a most-favored-nation policy as well, in part to incentivize other countries to pay more of their fair share, but also to align with the practices of almost every other country in the world?

So I think that the U.S. absolutely should be pushing other countries to make more investment. It is the kind of defense-NATO problem of, “Why are we paying for all of this great stuff that helps make our world a better place? Shouldn’t others also be contributing?”

I think the intent is a very, very good one. The strategy is good; the tactics are bad. Doing that by essentially instituting a policy that would cause companies to solely launch in the U.S.—okay, we can do that, but that is going to cause fewer drugs to be innovated and created in the first place because the pie is just smaller. The opportunity is smaller because they can’t get those incremental dollars overseas.

Go ahead.

Can I add to the devil’s-advocate aspect that Josh just brought in? This is not my view. I’m not reading the future, but let’s take what Tess just said as, say, it becomes reality: I’ve developed a drug, and I’m going to launch it in the U.S., only in the U.S. Then there’s no reference price. I can put whatever price I want.

This might actually push drug prices in the U.S. higher because you’ve got no other reference. Then, in 2 years’ time, I’ll go and launch it in Germany, bring the price down a little bit, and at that point I don’t mind getting referenced to that because I’ve spent some time building the market in the U.S. So that’s one possibility. I don’t know if it’s a reality or not, or whether I haven’t thought it through enough.

The second point I want to make is that AstraZeneca’s CEO, when asked this question, said, first, “Yes, the U.S. is right to be doing this, and Europe should pay its fair share.” Then he came back and added another layer to it. But the problem that the world has is that they take net prices. They should be comparing net prices to what people pay in the U.S. and in Europe, for example, and in many cases those prices are very similar, or there are very small differences. The problem pharma has is that they don’t publish their net prices.

Maybe they don't even know their net prices. But that's another element that I think has to be taken into account. We always talk about it, but we have no transparency on it.

I think what's driving all of this is the issue of all the middlemen, and we need PBM reform. What's driving the populism on both sides, the left and the right, is what people actually pay when they go to the pharmacy. So it's pricing and access.

The fact that we have copays for life-saving drugs is egregious, right? Nobody's going to be abusing drugs that they actually need to improve their quality of life. And also access, right? We're putting in place all these step edits. So people are rightfully frustrated, and they take it out against the pharma industry because it's an easy scapegoat.

But we've got 340B, which is also egregiously being abused. It's supposed to pay for drugs for people who can't afford them, but it's turned into a profit line for institutions that are important employment drivers for their regions. And so their congressional leaders support it. So it's a big web. It's very complicated, and it's very easy when people have to pay huge premiums and huge copays. That's what's driving it.

It's also clear that in other countries, the way they do health economics does not adequately capture the cost of aversion. And to your point as well, there's also not enough transparency. So there's a lot going on.

I think there's this broader picture where the industry needs to be less reactionary and think of a broad deal along the lines of what we've all been talking about here. But I'd love others to chime in. Sorry, Eric, I think I interrupted something.

Well, you guys are all making some wonderfully lucid economic arguments about why this is a good or bad idea. I just want to interject that there's a whole political aspect to this. This proposal that may or may not come out next week is really a Democratic program, right? It's very progressive, very leftist.

So it's going to be very interesting to see what happens between Congress and this administration when the president does come out and say, “I think we should have MFN pricing.” The first people who are going to slap him on the back are Bernie Sanders, Elizabeth Warren, AOC, and the rest of the very progressive component of the Democratic Party.

It's going to be fascinating political theater, and the Republicans in Congress, at least, are going to hate this. So it may really create some political repercussions that will not only be good theater, but are really going to pit, I think, this administration against this Congress in a way that we've never seen before. So I think we can't lose sight of the bigger picture as well. Just throw that out there.

I think we lost you, unless that's me.

I think we can hear Grace. Can you hear us? We can hear you.

Can everybody hear me?

Yeah, we can hear you, Grace. Let me actually, to Eric's point, we just published our podcast with John Crowley, who was fresh out of the White House. Of course, John is incredible and has a public job to do, but is obviously a steadfast believer that the White House is not intending to destroy the biotech industry.

In fact, if we look, there's only been 4 commissions on different sectors of national importance, and biotech, of course, is the 4th. Obviously, the other 3 were chips, AI, and technology. Overall, the goal is not to harm our industry. The goal is to try to bridge things.

I don't think that we're going to be able to entice the Europeans to pay more for their healthcare systems. Not that I don't agree with it, but I'm not sure that's also what our job is. They have their own philosophy, and they've frankly already restricted access fairly severely, as we know.

The biggest challenge, as you've all said, is: What do you index to? If you index to the published price, that's one thing. The nonpublished price, frankly, I believe, is proprietary and confidential. That's part of the challenge: what you're paying the NHS. I don't know how the U.S. government gets access to that to then reference it.

It's probably going to require some kind of political solution. Again, I love how you started, but you don't have the votes. I think this populist proposal is part of a much broader plan to ultimately negotiate a lot of things. I personally don't think this sees the light of day.

Okay. Well, let's jump into some data, because we only have about 12 more minutes, and I want to make sure that we can get to data and earnings. I'm sure we could have several hours' worth of discussion on policy, and there will be more every week.

Why don't we talk about some innovation coming out of GenCure? I think Sam, you wanted to talk about that.

5. In Vivo CAR T Arrives

Yes. I mean, this is an N-of-1 trial—or can we call it a trial, test, or experiment? It's a Chinese company, and it's an in vivo CAR-T technology with a 100% CR rate. But when you only have 1 patient, you're either going to be at 0% or 100%.

The question, of course, ends up being the same thing that we ask of every CAR-T: What's the durability? But it seemed like a very clean result. It avoids all the issues that you have to deal with when it comes to autologous CAR-T manufacturing, and we just have to wait and see what the rest of the data looks like.

I just have to say that I do remember the day that Legend brought a few patients to an ASCO presentation, and I think a lot of people didn't believe it. So I look forward to seeing more data here. We all know that everybody is excited about in vivo CAR-T as the next real big leap in CAR-T therapy, because it will avoid a whole host of issues, including manufacturing issues, preconditioning, et cetera.

That's, I think, as far as I can go, because there's not much else to talk about. It's just 1 patient.

Absolutely. Tess, I know you wanted to talk about PTC and their update on their Huntington's disease program.

6. PTC Tests Huntington Disease

Yes, absolutely. PTC's Huntington's disease program—I mean, this is a disease area that's just been incredibly, incredibly hard to crack, with very high unmet need. There was a lot of excitement around PTC's program, which had shown a positive impact on functional outcomes.

The relevant functional outcome in Huntington's is something called cUHDRS, and PTC talked about a potential path for accelerated approval that would be based on really seeing a correlation of biomarkers—namely, HTT reduction—as well as the cUHDRS. So people were very interested in looking for that connection, right?

Novartis is also very heavily invested in this asset, with a billion-dollar deal that was announced many months ago. The data that came out earlier this week was a bit mixed. They essentially saw that the blood HTT reductions looked good. We saw dose dependency, and we saw some clear reductions in CSF HTT reductions. That was a little less clean, and there was less dose response there.

When we got to the functional outcomes, that was a little bit more challenging. In the Stage 3 patients, we actually saw a fair bit of worsening for patients on the high-dose drug. They also shared some data on z-cUHDRS at Month 24 relative to natural history, and that was interesting and supportive data.

There was some supportive data on NfL, but I think the best reflection of investor anticipation around the probability of accelerated approval here is that when Vinay Prasad was nominated for CBER a few days later, this stock did not move very much, and many other accelerated-approval stocks did.

We'll have to wait more to see what the path is for PTC for this drug, what the regulatory path could look like, and if that's going to take a bigger trial or if there's a potential path with what they have.

Great. Thank you. Let's move now to earnings. Obviously, earnings season continues, and there are some things that we're seeing at the macro level that I know Josh and Yaron wanted to touch upon, and then we're going to go into specific companies. Josh, why don't you start?

7. Earnings Turn Unpredictable

Sure. Hopefully you can hear me, because it seems like sound's been a little erratic today. What's interesting is that we're coming off a stretch where most product launches were actually doing quite well, and the stocks were working around them.

Then we kind of ran smack into the first-quarter earnings, and the first quarter is historically one of the most challenging quarters of the year. You had plans, patients transitioning plans, et cetera, and all sorts of headwinds. On top of that, we have some of the IRA headwinds that are kicking in.

So this time, earnings were all over the place, probably a little bit more bearish than bullish. There were some exceptions for companies recognizing that the first quarter can be a difficult quarter, but a number of stocks traded down fairly significantly on their earnings updates. Names like Day One, Amicus, and Septerna took a hit. We talked about Syndax, Fate, and Iovance, which also took a hit with their own revised guidance, while a smaller group of companies traded up significantly around their earnings updates. Some examples were Connect Biopharma and Blueprint.

Yeah. What we're seeing is actually an interesting dynamic. The IRA Part D redesign is a double-edged sword. It's a frenemy—it's a friend and an enemy—in the sense that, for Part D drugs that have been on the market, companies no longer have to pay the copay support. So, depending on how your drug is priced, for many of them it's actually a tailwind.

But for drugs that are very expensive, the companies then have to pay the 20% copay. It depends, but they get a lot of volume, so that's actually a positive. For drugs that have an IV and a subcutaneous component, what we're seeing now is a shift away from IV toward subcutaneous because it's much better for the patients. Then suddenly, the companies have to pay the 20% copay because their drugs are expensive and they hit the catastrophic phase.

So it's definitely early, but we're definitely seeing a dual-pronged approach so far. I agree with Josh: earnings have been a little more unpredictable because of it than they have been in the past. But overall, the Part D redesign is probably going to end up being fairly positive because of volume.

Great. Thank you. Back to Josh on Krystal Biotech and its new gene therapy program and what's going on with some of the things there.

Yeah, I thought I'd flag this one. Not the best print for Krystal Biotech and its HSV gene therapy for dystrophic epidermolysis bullosa. Expectations were fairly high, and they had some headwinds in terms of new patient starts and patients taking holidays, which is a great thing because it means the drug is really working for those patients and they can take a little bit of a break from dosing.

But what caught my eye was that they're announcing a new indication: basically, an HSV gene therapy eye drop to treat neurotrophic keratitis, which is a condition we don't hear too much about. There's a drug approved from a private company, Dompé—I think I'm pronouncing that right. The drug is called Oxervate, but because they're a private company, they don't really report sales. No one pays attention to it. But there are some reports that suggest that product is selling $1 billion a year. It requires 6 eye drops a day, every 2 hours, for up to 8 weeks.

Krystal is trying to basically deliver the same therapy, a recombinant nerve growth factor, using a gene therapy approach. They've got some interesting validation in an animal model. They also have validation from VYJUVEK itself as an ocular eye drop, which looks like it's doing quite well for the DEB patients who have these corneal lesions as well.

I think what's interesting about this, in terms of how it reflects upon the broader ecosystem in biotech and how challenging it can be for companies to get any value recognition for earlier-stage programs, is that we see it time and time again. I know it gets very frustrating for the companies because it can affect the cost of capital and their ability to invest in earlier-stage programs. So there's nothing unique to Krystal about this.

It got very little attention because most of the focus was on VYJUVEK, as one would expect, and maybe some of their later clinical-stage programs. But it is a conundrum that the industry continues to face: How do you get the value credit for earlier-stage programs to lower your cost of capital and continue to invest in those earlier-stage programs? I don't see many great solutions to it.

You're a little bit damned if you do and damned if you don't. If you don't invest in the early-stage programs, even though you're not getting value ascribed to them, then eventually investors are going to come back and say, “Hey, what else do you have for us?” And if the answer is, “Well, we didn't invest because you didn't give us any credit to invest in them,” that's not a fulfilling answer. Or companies have to continue to invest higher capital dollars into those programs, knowing they're not going to get any credit for them for some time. But eventually investors are going to come back and say, “Hey, what else do you have for us?” And you should have something to show for them.

It's a great point. We have about 1 minute left. I know we wanted to touch on Novo and also some related news on Lilly. If we have 1 more minute, maybe some quick words around that. I know that Sam and maybe a couple of others had comments.

Okay, let's see if I can do it in a minute. Novo missed on Wegovy and downgraded guidance, and its share price went up. Lilly met expectations on Q1, didn't change guidance, and its share price went down. The simple answer is that people expected the Novo downgrade, so everybody was positioned that way, the share price went up, and they gave some really positive comments about the rest of the year. Lilly is sitting relatively high on its valuation. I'm not commenting on whether it's cheap or expensive. Of course, when you have a high valuation, you need to deliver constant beats or raises.

There are 2 things I want to highlight out of what Novo said. One is that they think it will take until the 2nd half of the year for the impact of the compounding pharmacies to wash through their inventory and be reduced, and that Wegovy has 60% of the compounding volume that's out there. So they're more impacted.

And, of course, they've got 2 bits of data coming in the 2nd half. One is the Alzheimer's data, and the other is their CagriSema versus Zepbound study, which could be interesting to see. If they turn out to be positive, that obviously is very important for the company.

Wonderful. Thank you.