第143期——2025年5月30日

So why don't we start with the breaking news that I think social media's abuzz with: the biotech group chat on the Summit data. Summit, last I checked, was down almost 25% for missing overall survival, but the trend was in that direction. They hit on PFS, but it's raising a lot of broader questions about this drug, the target, and the competition. Tim, do you want to kick us off on that breaking news?

1. Summit Misses Overall Survival

Good news, bad news. The good news is that this drug is associated with a 20% reduction in the risk of mortality in Western patients. If you ask me, would you pay money to take this drug? The answer is, heck yeah. If I had cancer, I'd be very interested in this drug.

This should be a big drug. The bad news is that they missed statistical significance on OS, but just barely—it was 0.0575. The trial was underpowered, that's all. You don't know till you know, and you have to remember this drug went very quickly into Phase 3, that Summit was very aggressive in pursuing its Phase 3 strategy, and, as often happens, you're probably going to have to go back and do some more work. They have a bunch of studies underway, so that's going to happen naturally anyway.

They communicated that they're not stopping in terms of engaging the FDA on this. I think the bigger question is: Does this make the product less competitive if they don't have the claims? There's been some question about whether the FDA is going to set a higher bar with overall survival and need to see that, and the idea that it opens the door for some of the competitors to argue that this isn't as special as what they might be developing. Any thoughts on that, or does anybody else want to weigh in on this?

I think there's no question that PD-1/VEGF is going to become the backbone standard of care in oncology. It's going to be a huge category, and it's going to be competitive, as one would expect, and we're going to see a lot more innovation. We're not done with this area. I would expect a lot of the evolution now is going to be how this new backbone therapy gets used in combination with various types of emerging ADCs, like TROP2.

Mike, Josh, do you guys want to comment on just the stock movement?

Hey, it's Mike. Hopefully you can hear me. First is that there were super-high expectations going on, so we have a disappointment there on the P-value. Tim's totally right: It didn't hit. Call a spade a spade. Unfortunately, that presents a decision for the FDA to make—a tough call—because they've been pretty clear that they do require OS. You can say it's close, but technically they didn't, so that's a tough spot they're in, and I think they've emphasized that.

I would point out that I don't recall what the expectations are, but AstraZeneca's datopotamab deruxtecan, Dato-DXd, has a July PDUFA date. In 2 months, they do not have statistically significant OS as well, so that's going to be interesting. But let's also take a step back and remember that part of the read-through here is that the Western and non-Western Asian populations basically align. I think that's also an important point. Although 1 million people have gotten it by now, the non-Chinese population was important.

It was pretty identical, right? 0.80 in the Chinese label versus 0.79 here.

Tim, I'm going to move up 1 topic that you were going to touch on, because it's somewhat related: the Pfizer deal, another China deal with 3SBio. They're getting a PD-1/VEGF asset. Again, we just talked about the competition. You said this class is going to be huge. I just want you to speak to that before we go into some of the market dynamics.

Interesting, right? Remember, Pfizer had partnered with Summit, and then they turned around and licensed in this 3SBio asset. Some people were a little surprised by the high price, but actually, if you think of what I just said—how big the market is—maybe the price was low. Who knows? 3SBio actually had really good data for its PD-1/VEGF bispecific. It's not the same structure.

Pfizer bought Seagen, and now they have a backbone therapy they can use. They don't have to rely on someone else's clinical development for how they're going to develop all those Seagen ADCs with this new backbone. I think it's a very astute move by Pfizer. It's frankly surprising to me that some of the other players have not entered this space yet. Maybe this new data will accelerate that.

2. The Deal Drought Continues

Absolutely. This was a big deal. But overall, I'd say that over the last several years, M&A and these bigger deals have been pretty anemic, and I think we've all been waiting for it. There generally is an inverse correlation: When the markets are down, pharma and big biotech start to go shopping, and you start to see more M&A. But that hasn't really materialized. I know you study this week in and week out. Tim, what's the state of M&A? How do you read the tea leaves? Everybody's expecting we're going to see more in the rest of the year, or in the second half, but every time we predict that, we fall short.

I was on Biotech Hangout in January or February, with the benefit of being on the investment banking side. Obviously, I have some visibility—not full visibility, but some—into what big pharma's plans and intentions are. I was saying we're going to see a lot of M&A in 2025. Well, now it's almost June, and it hasn't been nearly the level that I would have expected.

There's a very simple explanation, and that starts in the White House, right? Liberation Day, plus MFN, plus overall uncertainty in the macro environment—I think that has caused pharma to say, “Hey, wait a minute. This is not the time to take our balance sheet and spend it.” So there's incredible uncertainty, and I hope that uncertainty will start to get resolved as these tariff conversations get resolved in July. But, candidly, at this point, I don't know. We're just going to have to see.

We had actually done an analysis of pharma M&A trends and patterns. If you look at the filings and the projected revenue numbers that the acquirers are laying out as part of the deal, those tend to be about 25% above the sell-side consensus numbers as these assets run their course. And, by the way, those sell-side consensus numbers tend to be 25% above reality, right? So basically, pharma is, on average, paying or attributing 50% too much success on a revenue basis in its projections.

That creates all sorts of issues and distortions, because one might look at that and suggest that the companies that may be most worried about hitting the sell-side consensus numbers are the companies that may be most willing sellers and most likely to be acquired. But that is completely antithetical to every investor's general approach, which is to try to find those companies where you think the consensus numbers are actually too low. So we always fall back into: When is the M&A going to happen? When is the M&A going to happen?

I can't even remember the last time M&A occurred in such a substantial wave as to impact the sector more broadly, as opposed to just being a very lucky handful of companies every year that get acquired. And even if you try to limit the parameters and focus on some of those typical target-profile companies—for example, oncology, small molecule, late stage—that is the most common profile of an M&A target. The problem is, there are just too many of those companies out there to anticipate which one is going to be bought. So we keep falling back into this trap of, “When's the M&A coming? When's the M&A coming?” My point is, it doesn't matter.

Yeah. I want to share a couple of factors that might be driving this. When I used to analyze M&A targets for Gilead and Celgene across my career, there were 2 factors that we would consider. One is scarcity value: Is this the only game in town? I wonder whether we'll touch on a little bit the crowding around targets—whether it's cardiometabolic, PD-1/VEGF, or just the idea that, in the China trade, you're able to access other similar drugs for the pipeline. The scarcity value is few and far between.

And then you also have to consider: Is this going to run away? Are valuations going to get too rich, and we'd better strike now? Is it possible that there's just less concern about scarcity value and also less concern that valuations are going to start ticking up very quickly and become overpriced? I wonder if that's creating a little bit of this pullback—this lack of urgency—around M&A from pharma and biotech. Any thoughts?

What about the idea that in the past month or 2 we've seen early, promising signs from the fact that small companies that don't have a lot of money ultimately did get funded? You had a couple of private financings in the last 2 weeks, including a billion-dollar private company. Yeah, that's a nasty billion dollars. And then you had the rumblings of a takeout last week.

So, I'm not sure necessarily someone was thinking Blueprint or something bigger, but you did have some early things going on and some early rumblings, which I thought was promising because it does take a couple of months for things to settle out. You have the earlier, more desperate companies that are willing to go first, and I thought that was promising.

And then how many companies have been rumored to be M&A targets that just have not materialized as M&A targets? So, again, it may happen, it may not happen. It doesn't matter, because it can't shape your investment decision process.

Yeah. I do think the bright spot is that looking at deals that are earlier, maybe even preclinical proof of concept, these companies have huge balance sheets. They can use their currency, and I think it's a smart strategy to do a little bit of a land grab and help their early pipeline, knowing that everything may not work.

And, Nina, I know on the venture side, we all are hoping for more of that to potentially exit some of our portfolio companies or programs before you have to read out the clinical data. Any thoughts on that?

Well, not just read out, but finance it, right? Phase 2s and Phase 3s are still not the easiest, although there's so much more capital on the private side now than, say, 10 years ago. It's still a long timeline and a large nut to be able to run those studies.

But I still think the point about scarcity value and competitive pressure is the one that rules the day, because I think the reason for pharma to come earlier is if they believe they'll be outcompeted or outbid if they wait. I think that's a good strategy, but you don't necessarily want to be the only bidder for that Phase 1 or preclinical asset. You can spend a lot of time doing diligence, getting to know it, and then still decide to stay on the sidelines until the next card is turned over.

And in an environment where the capital markets are so tough, where the crossovers have basically left the early clinical to preclinical space, and where the IPO window is, for all intents and purposes, closed, there's really no pressure forcing urgency or forcing pharma's hand. So I can understand why there's a wait-and-see.

3. Biotech Funding Hits Bottom

Yeah, we still see the most elusive deal right now is the Series B to get through a clinical proof of concept, even though there are many programs that might be deserving of that. And it is a trickle-down, right? The crossovers were filling that gap for many years. Tim, we know venture lags what's going on in the public markets and the hedge funds. What are you seeing in terms of the dynamics of this downturn and when it might end?

No, it's a great question. And, just to touch a little bit more on M&A, I don't know how encouraging this will be, but it reflects the reality coming into this year. Again, I'm a practicing investment banker. I'm one of many, so I don't want to exaggerate anything about my own perspective, but I would say that I had a pretty balanced book of M&A projects—some for big pharma, some for smaller and midsize pharma. At the moment, I'm working on a record volume of M&A deals.

But they're all commercial. Every single change-of-control transaction I'm working on—and there are a lot of them—they're all commercial-stage. Buyers right now are looking at the hundreds of commercial-stage companies. There are so many biotechs that got their drug approved and they're just not trading at very good prices. So, from a buyer perspective, why would you buy the Phase 2 when you can go and buy the commercial asset?

For the R&D-stage companies, especially the quality companies that are in your portfolio or Nina's portfolio or others, they really have to have something exceptional that's going to change the standard of care in some important area of medicine. By definition, there just aren't that many of those companies. I think that's part of the explanation of what's going on on the M&A side.

And, Chris, for as long as you and I have been in the business—the 25 years that I've been in it—the mantra has been, “Buy the news, sell the launch,” right? Or, “Buy the approvals, short the launch.” I think the fact is, aside from perhaps orphan and rare diseases, we in biotech and small- to mid-cap companies are notoriously terrible at commercializing our assets. So often, we'll trade or be valued at even less than our Phase 2, post-POC stage. So it's also a nice value-de-risking, value-shopping opportunity for pharma.

Yeah. No.

There are ways to leverage existing commercial infrastructure with nice little tuck-ins.

Yeah. There's just a lot of it going on, and some of it is pretty chunky, so I think it's going to be an interesting year. In the past, I've likened the current period to when Reagan was elected. Of course, Donald Trump is not Ronald Reagan, and Ronald Reagan isn't Donald Trump. But there are a lot of similarities and parallels between the macro situation—the end of inflation, a recovery of the economy, this tremendous uncertainty, and a very divided country.

What you saw from, like, 1982 to 1988 was a ton of commercial acquisitions. Those commercial companies don't get fully valued until the markets have really recovered for quite a while.

Chris, I didn't answer your question on hedge funds and macros. Look, sentiment is not good. I'd love to hear what others, like Mike and Josh, have to say. The XBI is under 80 today, and investors are really freaked out about the macro picture. Before, people were worried about inflation and rates. Today's inflation number was fantastic, actually, but now people are just very worried about what's going to happen to this industry with President Trump in office, his ideas, and RFK and his ideas. I do hope that this gets cleared up in the next 2 or 3 months and things start to recover.

Yeah, I want to go to Mike in a minute, but before we do that, I wanted to highlight that Endpoints has this biannual survey on sentiment across a lot of variables. They have a pretty consistent question around market conditions, both private and public. I just want to share some of the latest survey, which was posted a week or so ago. They also did a video analysis that was posted the other day.

They had the worst sentiment around the market financing environment in the history of the survey, and it goes back many years. I have participated as one of the survey respondents. To share some of the data, the question about how respondents would rate the flow of investments from venture groups today had 59% rating it poor, and 90% saying it was poor or fair. They had the lowest percentage of respondents saying that the VC flow of investments was good or fair.

On the IPO front, it was also the worst in the history of their survey: 94% said the state of biotech IPOs and follow-on markets was poor, 6% said fair, and nobody said anything positive about the state of accessing capital.

And these are specific CEOs who may have some favorable response to their specific company. Basically, the worst ratings they had previously were in 2022 and the first half of 2023, when about 10% or 11% said they were not at all confident. This was 3 times the “not at all confident” sentiment compared with the worst ratings they had previously. Again, well over 50% were saying they were not at all confident or somewhat confident.

The last one was biotech valuations, which were also rated the worst, with the fewest respondents stating that valuations were average, high, or very high. Almost 90% said they were low or very low in terms of valuation.

Just to give that snapshot, from a survey done a couple of weeks ago, it feels like sentiment has capitulated. We see stocks, and hopefully that's a sign that we truly have hit rock bottom and have only one way to go: up. Michael, how do you see this? I think you also saw those survey results.

No, I did see those results. We start with the context, since we're supposed to be investors, right? If the valuations are low, although they've been low for a while, and everybody's very negative, that has been largely reflected, and everybody knows that. Quite honestly, I feel like every Hangout is more about when things will start to turn, not necessarily get worse, when things start to turn up.

And I do feel like we've just been bouncing around. Although, again, I think at the start of the year, guys, we did have a nice rally, and we just sort of came down mostly because of the tariff stuff, the markets, and really the FDA and CBER. The day Vinay came in, I think the XBI was down 7% that day, right? And so that has been a real hit to us.

I just wanted to say that, in reflecting on that survey, I'm hopeful that, at least in SMID biotech, while things are tough in the market, people have definitely been quite bearish on the regulatory environment and what's going to happen with all these innovative companies that Vinay and Marty are going around trying to potentially ease people and make people feel better about things.

Marty Makary is going to be at the Jefferies Healthcare Conference next week for a fireside chat, and Vinay Prasad was at the Goldman conference last week. They're trying to ease people's concerns a bit. Obviously, the rubber needs to hit the road, and we need to see PDUFA updates and things. People are very nervous about the environment, and I would like to see that part get better so people feel a little bit better about SMID biotech. I don't know what to think about.

I would say a couple of things. Even before the macro uncertainty around the administration's MAHA, FDA, CDC, and NIH agendas—and even with the backdrop of inflation and rates in the latter part of last year and coming into the new year—I do think that we had some more iatrogenic issues in biotech. We had an awful lot of companies that got funded with perhaps not enough substance to build long-term, sustainable companies versus really good trades.

I like the point that Tim made earlier about crowding around targets and the challenges—I think that was Tim—of picking a winner. When you're not so flush that you can just build your basket around every kind of target or a novel checkpoint, and you have to be more selective, it's awfully hard to tell companies apart. But one of the things that strikes me is that we're also going through a bit of a shakeout.

We were going to talk a little later, perhaps, about iTeos, which was on the agenda to touch on a couple of weeks ago after they got their TIGIT program back from GSK, and with it the future prospects of additional cash milestones. Within 2 weeks of that announcement, and of the board declaring that they were going to undertake the requisite exploration of strategic options, they decided to wind down the company and divvy out that cash, following the path of Allakos, Kronos Bio, and Third Harmonic Bio.

These are companies with exceptional management teams. In the case of iTeos, with over $600 million in cash, the boards really voted with their wallets to say there is nothing of adequate value, public or private, to acquire or merge with in order to try to create a better return on investment than simply distributing that cash. That's a pretty interesting statement and probably some necessary pain to reduce the denominator of the number of publicly traded biotech companies that investors have to choose among. There were a handful of VCs or crossover investors that were still in iTeos, for example, so it wasn't just a matter of mutual funds.

The only negative side of that silver lining, of course—the tragedy, other than the disappointment on the science side—is that, in the case of iTeos, almost 175 people will be looking for work, and we will need to have open doors for opportunities, ideas, and support.

So, Nina, is it a bad sign that they decided to return the money rather than merge with another company that needs the money, including companies that those VCs were already involved in, too, because you can't really go public right now? Or did they say, “Hey, we can do that, but we don't want to be public because it's not good to be public right now,” and so they did not? How do you think about that? Is that good or bad?

I think we would have had a number of potential candidates lined up to knock on that door and others, because it's not so much a desire to be public as it is a desire to access tens to hundreds of millions of dollars of balance-sheet capital to advance our private companies' pipelines. I think the target universe is sizable.

I think the challenges are that, to the extent that there needs to be a coincident PIPE, that PIPE market hasn't been there. There hasn't been any interest in that piece. And if you don't feel confident that you're going to get shareholder support, and there's a constituency among the holders saying, “I would rather have my cash and decide myself where to put it, place it elsewhere, sit on it, and wait for greener pastures,” then you're not going to get that deal done anyway.

From our vantage point, that's been the truth in a number of reverse-merger efforts. There's been interest by the acquirer and by the board to do it, but there hasn't been conviction in the PIPE.

Right. Everyone has to agree and be behind it. If it's not, it's not a deal.

Exactly. Exactly.

Well, I still think there's also this sentiment that it's not great to be public right now. As you said earlier, there's a lot of dry powder in the private-equity markets that can support the right programs. You've got a lot of companies that are legacy public, and they're challenged with market cap.

But I think iTeos is a good poster child, at least this week, for the exuberance around certain targets that don't fully play out. TIGIT is another example of this. I think Bruce Booth had a really good blog post called “The Wisdom of Crowds,” in which he's basically saying that crowding around certain targets is a feature, not a bug.

He draws parallels to tech, where a good idea gets crowded around, and people realize that there's only going to be 1 or 2 leaders that emerge. He's suggesting that biotech is very different. You're going to take a lot longer to figure out whether the excitement around certain targets is going to play out in the clinic, who's going to be differentiated, and what those data sets look like, versus finding that out in a much more accelerated fashion in tech.

It's kind of a good idea, and I guess a defense of the crowding around targets. He gives a lot of examples of specific targets where there are literally 150 programs going on. Not all of those are going to be winners.

I think that's a really good point. I would just say, with some of these targets—and much appreciation to Bruce for constantly generating such thoughtful content in our sphere—but with iTeos, it's sort of like it went the way of the PD-1s: it's an obligate combination asset. It's not expected to have monotherapy efficacy, and it's about disease control.

Unfortunately, in our industry, the good news is that sometimes 2nd- or 3rd-in-class can be quite big. But in some categories—combination chemo, combination IO—you've just got to have control of your own destiny.

Brilliant.

Well, he does reference the whole first-in-class versus best-in-class distinction. Essentially, you call anything best-in-class if you're not first, and the higher risk-reward that comes with that. We're all guilty of going after the better ones. I'd also suggest that public-market investors are going to have a very different view than venture-capital investors about that same topic.

Yeah. They're complementary and somewhat at odds in terms of how they behave.

And to be fair to Bruce, it was actually a very balanced dialogue. He wasn't just saying crowding is an amazing thing; he recognized the deficiencies that arise from overcrowding. Absolutely. It was a thoughtful piece.

When I look back, Bruce has been doing these since 2011. Again, credit to him for constantly being thoughtful and writing these pieces well. Definitely, anybody who's early in their career in biotech should be consuming those blog posts.

4. Policy Reshapes Biotech

All right, let's move on a little bit more to the policy. Nina, Mike, there's been more coming out of HHS: COVID vaccine recommendations and cuts to mRNA work on pandemic flu. Some of the policy positions are playing out in terms of real action here. Nina, you want to start?

Yeah. Obviously, we touch on the policy stuff because it speaks to NIH funding available for early-stage research, regulators' focus on various modalities and indications, and, obviously—and very significantly in the last couple of weeks—for vaccines. That all circles back to Tim's earlier point and also influences generalist sentiment and public-market sentiment about our industry.

We had 2 and a half major things come down. One I'll touch on super quickly is the release on May 22 of the MAHA, or Make America Healthy Again, report by RFK, flanked by Jay Bhattacharya and Marty Makary, signaling significant mutual support there for the thesis. This is really following on the executive order, but the striking thing was a very singular focus on the root causes and strategies for improving the health of American kids.

It was particularly concerned about chronic illnesses—obesity, diabetes, and, of course, RFK’s focus on autism as well—as well as mental health disorders, depression, anxiety, and a real focus on overmedicalization and inadequate surveillance of postmarketing experience with medications. But it also really wanted to look at the study of nutrition and diet, environmental toxins, PFAS and GRAS excipients, which is where it really touches FDA, and concern about gene-environment factors.

Surprisingly absent from something talking about childhood and adolescent health, and mental health in particular, was any focus on social media screen time, which was big under the last administration, and then obviously also alcohol, tobacco, and other illicit substances. The read-through, I think, that’s significant is probably greater scrutiny on childhood vaccines. And that’ll tie into both CDC and FDA, as well as some public health education around chronic-disease prevention.

For NIH, there’s a through line—and this is, I think, a very strong priority for Dr. Bhattacharya at NIH as well—which is sort of the crisis in replication in scientific data and concerns about how much research actually cannot be reproduced. That leads to mis- and disinformation and misaligned funding, as well as NIH pivoting some of its research agendas to chronic health and nutrition. And then, on FDA, GRAS for additives in food and even medication, and then also childhood vaccines. So that’s kind of MAHA, and MAHA will play out.

Yeah. And Nina, I haven’t downloaded the report. How extensive and lengthy was that report that you got through?

Yeah. No, it’s an over-100-page document with citations, many of which have now been shown to be misgenerated by AI. So there’s been a little bit of heat to the administration for that.

Yeah, and I know one of the things, obviously, besides the Moderna-HHS cuts, that’s a clear signal of the regime that was kind of applauded and glorified during the COVID vaccines—the bloom’s off the rose there for a lot of those companies.

Yeah. I mean, there are sort of new FDA guidelines or guardrails as they relate to both COVID and flu vaccines, most notably wanting to see placebo-controlled trials for vaccines that would be commercialized for the under-65 population. Now, this begs a lot of questions about how you will do placebo-controlled trials in healthy and minimally symptomatic flu and COVID individuals. But the other emphasis is looking at endpoints of relevance: not just your viral titers confirmed by lab, or your patient- or clinician-reported symptoms, but actual hospitalizations and deaths as being sort of the only real prophylactic justification for vaccinating in those populations.

And the read-through to Moderna is whether or not, with its combination flu-COVID vaccine, in particular, it’s going to have to do prospective phase 3 placebo-controlled studies in the 50-to-65-year-old population. It withdrew its BLA and plans to refile next year, but that’s a little bit of overhang for the company. And then, of course, the bigger overhang was the NIH’s decision to stop supporting an mRNA vaccine for avian flu, which continues to be a really big problem. You know, 50–60 million chickens have been killed in the last 3 months to prevent transmission, but on the other hand, there have been 70–80 cases of bird flu in humans, and it’s not particularly pathogenic in humans or of great concern. So it may be a decision to say that the juice isn’t worth the squeeze, although it’s about $750 million to Moderna. So definitely some juice-squeezing there.

Well, one thing I saw Makary comment on, which I think is a thoughtful perspective, is that when you do the studies, the actual respiratory pathogen can evolve and can not be as relevant for the way the initial studies were done. And it seemed like he was trying to figure out how to solve for that, which I don’t know is an easy solve, but the COVID that we’re dealing with now is very different from the COVID when the original vaccines and boosters were developed. And so, at least, they’re putting some energy and attention into what is most relevant for the pathogen that might be circulating today.

That’s fair, and that’s fair for bird flu, too. You know, there have been a couple of new strains that have emerged there as well, but I think the rationale, particularly for the mRNA vaccines, is that it can follow a little bit like flu: there’s a point in time where an expert council deems such-and-such strains to be those most virulent, most relevant for a particular season, and there isn’t a requirement to do full—

Plug in the sequence. Yeah, you know, the safety there. Yep.

Yeah. Now, the question, I think—and this is mentioned in the CDC statement—is whether or not the same seasonality applies to COVID as it does to flu, and COVID can be pretty active in the summer months as well. So is there that same sort of opportunity to pick and pivot? Yep. Mike, do you want to comment anything further on the policy side?

Well, from the biotech side, I read over the MAHA report, and I think a lot of it focuses on things that are food, agriculture, et cetera. And so that has been a historic big focus point for them. I’m not too overly concerned about that as it relates to the biotech stuff. Yes, the vaccines part, which is still a bit of a niche area for biotech overall, is definitely under siege.

I think that’s pretty clear. It’s going to continue to be very difficult for the Moderna team and others to navigate that as an executive team and as an R&D investment decision team. How do you make decisions, and where are we allocating capital? And, by the way, Moderna has a PDUFA date, I think, on Monday, or it falls on the weekend. So we may hear from them today, by the way, on the new Moderna mNEXSPIKE vaccine that has a PDUFA date for the refrigerator-stable version. Let’s wait to hear from them, ironically.

And then, yeah, how do you decide what to do with this flu-COVID thing? So this is very difficult in that whole area, and it’s pretty clear that Makary and others are going to make it pretty difficult for the new vaccines. So that’s why I go back to what does it mean for this administration and for us—just how are these things going to shape the regulatory approval for new drugs, new cancer drugs, new rare-disease drugs, and new autoimmune drugs, per se? And I’m hopeful that over the next 6 months we find out that it’s not too abrasive for that area, which we’re primarily focused on.

Mike, the Gilead PDUFA date—is that a signal that we should be looking at?

Thank you. Thank you. So I believe that—well, I would think most of my peers agree that PDUFA dates going well are a good thing and say that we’re along the right track. It’s pretty hard to invest if you can’t even get the PDUFA dates going.

June 19 is the Gilead breakthrough-therapy PDUFA date for its lenacapavir HIV PrEP drug, the once-every-6-month injection for 99% to 100% prevention of HIV, which I think everyone in biotech agrees is pretty overwhelmingly obviously positive and has a good risk-benefit profile. But it is an important PDUFA date because it’s an obvious one. We want to make sure that there are no FDA delays, resources or otherwise, right? A lot of headcount and DOGE concerns.

Number 2, it was a very fast review within 6 months. So can they do this all within 6 months? Number 3, it’s kind of the only big PDUFA date that I’m aware of this year that impacts up to 1 million people. And kind of that theme, like where Makary and others have been very focused on these big markets: do we have enough safety? Do we have enough phase 4 safety? What does the safety database look like, where you find these other things that pop up, like myocarditis in the vaccine later on?

And so I’m a little bit nervous about whether they make this difficult or not. And so I do think it’s an important barometer to make sure everything’s okay. Add to the fact that I don’t want to spend a lot of time on RFK’s book and the comments about HIV, which sort of adds a whole other realm to this. So I’m looking for positive things, and I do think biotech would like to see that go right.

Excellent. So let’s move to the data front. What’s been happening this week? Josh, Rocket Pharmaceuticals again—some not-so-great news. Do you want to provide an update on that?

Hey, Chris, while we’re waiting on Josh, I wanted to comment a little bit on Mike’s comments.

Yeah, please. Yeah.

Mike, I really like what you just said, and I also like what you said when you were talking about Moderna versus BioNTech on a previous episode, where you noted how different the investment decisions were between the 2 companies coming out of the pandemic. And I don’t think at that point we would have anticipated what has happened with the Trump administration on vaccines, but boy, you really feel for Moderna in a way: they bet the farm on vaccines, and now they’re facing this administration. And I personally just wish them well and hope that they can figure out how to get their pretty interesting portfolio through the FDA.

And I do worry about what's going to happen with that company. The other thing I wanted to say about MAHA is that it is quite striking, right, Tim? We talked about how it was a complete divergence: one company that's all in on respiratory vaccines, and the other company pivots to being all in on cancer, including, by the way, VEGF and PD-1. You couldn't have called a more opposite direction.

I do feel bad, and I hope—and I'm telling you from investor feedback—that Moderna, with all due respect to these guys—everyone's got a lot of respect for them—has to make some tough decisions, right? Because they're burning a lot of cash. Are they going to continue down that path, or are we going to have to make tough decisions given the environment?

Yeah. For a $10 billion market cap company to be burning almost $4 billion a year is—

Thank you. Yep.

It's tough.

It's tough. You have to make some—

Yeah.

Yeah. They're sitting on $8 billion in cash, but who knows what's going to play out there? I mean, if they're not careful, they could end up being the next bluebird bio.

There are probably a couple of venture firms they could acquire.

There you go.

All right. Josh, I didn't realize you'd dropped off, so we'll come back to a couple of topics if you come back on.

And Chris, I wanted to make one other comment, coming back to the very nice comments that Nina made about the MAHA report. One thing that struck me—and this really isn't getting a lot of conversation in our industry—is the focus on autism. For whatever reason, RFK is very focused on autism. I don't know, maybe he has personally been impacted by the disease through his family or something. I don't know.

What I can say is that I've personally been fairly connected to the KOL community in autism, and they are talking to the right people. Sometimes he sounds a little bit loopy when he starts going on about autism, but they're serious. Autism is, as was pointed out in the MAHA report, a very consequential disease. It doesn't get a ton of attention from our industry, and I would hope that maybe all of this will cause more investment to go into that field.

Yeah, it's interesting. With every company facing this kind of regime change and different priorities, many of our portfolio companies are seeing opportunities to engage with the new leadership. Maybe they have a technology in pediatrics. We have a company that's in the NICU, right? The idea is, hey, this might be even more favored, right? If you're safe and all of that, and you can do the right studies.

So, for every company that might be groaning about this being a more difficult pathway, I think there are companies that are seeing this as an opportunity to try to work with the new leadership. Just following on the point about your autism focus—

Yeah. Chris, I think it's very much a both-and. I think it is an opportunity to shine a brighter light on the etiology of autism, hopefully with hypotheses much broader than vaccine or vaccine adjuvant, and to look at improved access to care there.

At the same time, I think it's really important that we stand for the idea that, quote-unquote, vaccines are a pretty good idea: vaccine prophylaxis where appropriate, and building the evidence base that supports that as well. That prompts me to say that I do think the administration, particularly at the FDA and NIH, is very keen to hear feedback.

We as an industry—and this is certainly true of my portfolio companies—are very shy to go on the record with constructive criticism or feedback to the agency, because there's a fear that it might be taken down in a note and come back and bite you later. But there is a very ardent effort underway through BIO to help stakeholders, including private and public companies, find an audience on a listening tour with Marty Makary and other members of the FDA.

So, if you haven't caught wind of that, please feel free to DM or reach out to me, and I can help facilitate. I think it's really important that we provide thoughtful, anecdotal, real, genuine input here.

Nina, I 100% agree with that. Shame on us if we're too afraid to give constructive feedback. The fact that they're asking and going on a listening tour—I think as long as it's constructive and not antagonistic, they really want to understand the perspectives. The companies that lean into that actually have a chance to do better because they give that feedback, and they might be listened to.

I don't think we should adopt the attitude that we might upset somebody and they might come back to bite us later.

Yeah, and we forget sometimes, when we're in it, how complex our industry is. Even people as sophisticated as those who've come into these leadership roles will not know everything about drug discovery and development.

Yeah. Let's move to some data readouts. Nina, do you want to start with Prothena? Then I think Mike and Tim might comment as well.

Or anybody. Nina, you're—I'll fill in on Prothena. I mean, I cover Prothena. I've covered them for maybe a decade, and what a rise and fall, and rise and fall, and rise and fall. Now we're at $4 or whatever.

This was, 5 years ago, a very, very big situation with this antibody for AL amyloidosis—light-chain amyloidosis, not ATTR amyloidosis. They were supposed to be positive, and 7 years ago the study stopped at a futility analysis and failed miserably. Then they found a subgroup analysis a year later, redid the study based on that subgroup, and here again failed.

It's just been a very tough situation for them. It was a major phase 3 cardiac amyloidosis readout—I'd say a wipeout—and it didn't work again. That was big news. Obviously, it's another stock trading below cash, and they've said that they're evaluating all scenarios, because I think they're sitting on about $300 million in cash while the stock is below that right now.

Wow. So, I would just say that it is an unfortunate, spectacular phase 3 setback for Prothena, but I think there is still a fundamental thesis in AL amyloidosis. It may not have been the perfect antibody for that indication. It wasn't quite designed to go after AL, but rather SAA.

That, combined with some patient-to-patient variability in the trial with respect to protein, probably suggests that there's still a worthy hypothesis to test here in going after this indication and this protein aggregate with an antibody.

Yeah. Nina, I want to touch on Spero. We always get these news events that give some hope to those who are focused on infectious antibiotics. Spero was one of those companies formed during the boom times to focus on antibiotics, and it's been a really big challenge to invest in that area as venture. But they had a phase 3 data readout and a GSK deal. You want to speak to that and maybe what it sends a signal for, or not?

Yeah, I'm not sure about the signaling, but as someone who's made some nice returns in anti-infectives and, as a citizen, has lamented the fact that we don't have more development of antibiotics, given the perniciousness of drug resistance, I was happy to see this.

It's neat on a couple of fronts. First, Spero has an oral carbapenem. It might prove to be the first oral carbapenem, which is exciting. They had a partnership with GSK to develop this in complicated UTI. This is a hospitalized population.

One of the areas where anti-infective development is particularly challenged is the hospital marketplace, because hospital formularies make market access so challenging that the ROI for a venture investment is tough. But they've done a nice job here. They actually stopped a 2,000-patient, active-controlled study early and hit noninferiority. The Data Safety Monitoring Board said, “Hey, you guys are good to go,” without enrolling further, which is nice.

GSK will owe them a $150 million milestone for that, and Spero soared as a consequence. I think when I last looked at it, it was up 215%. Good for them, for sure. GSK obviously remains a company that's still in the game of anti-infectives. They have a recently launched uncomplicated UTI drug called Blujepa.

That's a novel mechanism, and they really took that from bench to bedside.

Yeah. Nina, as venture investors, one of the things we have to look at is how many and what natural acquirers there are for M&A, and what the IPO market shows in terms of comparables. That's why I think a lot of VCs shy away from anti-infectives and antibiotics, where people are still pointing to Cubist being acquired by Merck back in the day.

How much does that weigh on the decision not to invest in cutting-edge anti-infectives, even if someone sees a great technology, given the odds of not having many natural acquirers and not having great comps on the IPO market?

I think that is the huge barrier. Anti-infectives have a much higher probability of successful translation once you’re through Phase 1 safety and don’t have anything untoward or unexpected. Your likelihood of in vitro microbiology translating to clinical development is higher than in pretty much any other indication. The actual epidemiology would suggest that the unmet need is quite high.

If you’ve ever had a loved one suffer from an intractable infection and go through second- and third-line antibiotics, go from orals into IV, and maybe even from outpatient to inpatient, you know that we need more armamentarium than we have. But it’s just really tough to make that case. There’s been a lot of initiative historically to make the FDA more flexible on superiority versus noninferiority margins. We also benefited for a while from pretty significant BARDA funding to support development here. Those are intangibles that can make the risk a little bit easier to take.

It also makes you wonder if the new administration, if they’re weighing vaccines less as a preventive vis-à-vis the risk-benefit, is going to start to realize, “Well, we do need therapies and treatments, and we need to incentivize that for when people do contract these infectious diseases,” if there’s going to be less prevention. It’ll be interesting to see their ultimate policy position on this category.

So, Nina, Josh was going to highlight Gilgamesh and the boom in the psychedelic space, and I know you’ve been following that as well and have some comments. Do you want to comment on any of the news coming out of the psychedelic space?

I wish I could say I’ve been following that space. No, I was very keen for Josh to educate and inform us. I had just taken note of recent press last week about the Naurex founders coming at it again with a venture-backed private company, with some strategic Lilly and AbbVie money, to do the next-generation NMDA PAMs. It’s a small molecule with a somewhat analogous mechanism of action to the psychedelics, but I would have to defer to smarter, groovier people to take the psychedelic question.

If anybody wants to touch on the Gilgamesh news, feel free to weigh in. But here’s the thing: This is one of the areas that RFK Jr. signaled as part of mental health, and part of his platform was highlighting that. We’re seeing the investment kind of follow in that space. It’ll be interesting to see how that sector evolves. Anybody else want to comment on the psychedelic space?

I’ll just make one comment. I had a very interesting conversation last week about all the success that J&J has had with its esketamine molecule. They’ve crossed $1 billion in sales, which is impressive. The way it’s working is quite interesting: They’re essentially working with pain centers, so they’re helping pain centers get into business.

Back in the day, pain centers might have been pushing some of the wrong drugs, more opioid-type drugs. J&J spent a lot of time training outpatient pain centers how to use its molecule to really get good results for patients. The results have really been spectacular.

The way the reimbursement works on the J&J drug is also very interesting. The services that the centers provide and the drug itself are all packaged into 1 payment. That provides those centers a way of capturing profitability, which is one of the reasons the drug has done very well. We all know in our industry that incentives for providers matter, really, in terms of how much a drug actually gets used.

And of course, time to efficacy—or lack thereof—is also very rapid with ketamine and presumably the next-generation analogs. That is also a potential system savings because you don’t have patients empirically going through a number of different oral agents, waiting a couple of weeks to see if they get benefit.

Absolutely. Mike, let’s pivot. A big week—a big few days—ahead here with ASCO, and then you’ve got the Jefferies Healthcare Conference as well. Why don’t you speak to what’s going on over the next week?

I’m at an airport waiting to go to ASCO. Maybe Josh is too, but obviously ASCO—which, I guess, in the relative scheme of all of our years doing this combined, is a relatively lackluster ASCO.

I guess Summit is also hosting a thing, so we’ll see what they’re saying on Sunday, although their data isn’t at ASCO. There’s a lot of small-cap stuff there. Merus was the big one. I don’t know if you guys talked about that. I guess that abstract just hit about their head-and-neck data, which was a big splash. The stock is now approaching a $5 billion market cap on the head-and-neck indication and other indications as well. That was a splash at ASCO.

We’re following the DLL3 space. Obviously, Amgen’s tarlatamab is going to have survival data there. It’s going to be a billion-dollar drug for Amgen, and Zai Lab and I-Mab are also fast-following them with some better drugs. Zai Lab has some DLL3 data there. So, there’s a lot of incremental mid-cap stuff, but a relatively lackluster ASCO from a big-picture standpoint.

Hopefully, the tone next week at the Jefferies Healthcare Conference will be a stepping stone to the second half of the year. I’m sure all of us are looking for a better second half. We’re crossing over into summer here, and Marty Makary will be at our conference on Thursday. Let’s hope that he has some positive things to say to the industry and hopefully relieves some anxiety.

Like I said, they’re on a listening tour, and I think, again, from a stock-performance perspective—which is what our job is—there’s probably only some relief for the second half of the year. So I’m optimistic about that, and hopefully Marty talks a bit about his plans and what that’s going to do with the industry. Let’s hope for a good week.

That’s great. You’ve got to give Makary credit for being out there, and he’s a good communicator. He’s been in multiple forums, and I think the FDA does need someone who communicates with transparency and intention. Scott Gottlieb was really good. We all applauded him as a communicator.

I think it’s good to have a leader who can be articulate and explain things that we might disagree with. I’m encouraged to see what the feedback is from everybody after the listening tour. I’m sure social media will be abuzz.

You’re right that this is one of the most regulated industries, and the head of the regulatory body matters. It’s good that we have a transparent, I’d say collaborative—or at least working—relationship with the industry and with the regulators. They’re out there speaking about what the framework is going to be for the industry, and I think that’s a positive for sure.

Yeah. Hey, Nina, last topic. Do you want to touch on Regeneron acquiring 23andMe? I mean, it’s been a long saga. Any perspectives you have on that for our industry?

I think Regeneron has been a genetics-based drug discovery and drug-development company from inception, so there’s a lot of logic to their interest. I think they prevailed in bankruptcy bidding against Anne Wojcicki, the founder and CEO of 23andMe, who continues, I think, to have a passionate conviction in the ability to build value there and has challenged the sale to Regeneron. So that’s a saga to watch play out a little bit in parallel.

This is the reality for the whole field of privacy and genetic information. There’s a rider in a bill in Congress that’s seeking to provide incremental protections to consumers who may have genetic data on deposit with 23andMe. The goal is to make sure that, in a bankruptcy proceeding—and this would apply, obviously, not specifically to 23andMe but to situations like this—there are protections for the identifiable information.

We could have a separate, much longer conversation about whether it isn’t just about anything in sequence that’s potentially identifiable in today’s day and age. But at least this is name, date of birth, address, and social information that would be protected.

Thanks for that. Before we close, any other final comments from the co-hosts?

I’d just say I’m all for what Regeneron is doing. They’ve really done a nice job of identifying novel targets from deidentified genetic and phenotypic datasets, and hopefully they’ll be able to continue to do that with 23andMe. Bravo to them. I don’t see any particular threat to patients from what they’re proposing to do.

Great. I want to say thank you to my co-hosts—Mike, Tim, Nina, and Josh, who dropped off—for a great session. And thank you all for tuning in to this episode of Biotech Hangout. We’ll see you on the next one.