第147期｜2025年7月11日

Thanks, everyone, for joining. We've been away for a couple of weeks, and a lot has happened. I think we're going to start off with some of the M&A news in the space. It's always welcome to see deal flow on the tape.

This week, of course, we had the Merck-Verona deal. That was a $10 billion transaction. It was actually the 2nd-largest transaction of the year. While we were away on holiday, AbbVie bought the private company Capstan for $2 billion.

As Daphne Zohar noted to us, this is actually the 3rd takeout in 6 months of a company led by a female CEO, following Intra-Cellular Therapies and Blueprint Medicines. Congratulations to Laura Shawver and the entire biotech sisterhood. Very well done, ladies.

1. The Biotech M&A Wave

Taking a step upward and looking at where we are, now a little more than 6 months into the year, by our math there are now, in terms of M&A deals, as many takeouts thus far in 2025—18 in total—as we pretty much had in all of 2024: 20 total. The value of those transactions in 2025 is already eclipsing the total value of deal flow in 2024. There were about $30 billion worth of deals done in 2024 versus over $40 billion year to date.

We also have 3 large deals—3 deals of $5 billion or more—versus 0 in 2025. By most metrics, this year is shaping up to be a very good year for biotech M&A. Again, welcome news anytime you see a transaction. But let's open it up to the team here to discuss whether there's actually something going on that's a little bit more than just rote chance. Is this a biotech wave? Is there even such a thing as a biotech wave? Who would like to start on that? Brad.

Yeah, I'll jump in. I think of the deals that you named, the most interesting one to me is the Capstan deal because Verona was priced for a buyout. It's a commercial-stage product that's having an awesome launch, and pharma companies have future revenue gaps to fill. That's kind of expected. ITCI is another great example of that: an awesome commercial product that's doing well. Blueprint is another case of that.

2. Pharma Starts Buying Science

What's been missing in action for a long time is companies buying science, so to speak. That's what especially people who invest in XBI-type stocks hope to start seeing, because that's the vast majority of biotech companies out there. The Capstan deal is an in vivo CAR-T company, and they just entered the clinic in January. It's practically a preclinical company.

We also saw Lilly buy Verve about a month ago. I think it's a positive sign that you're starting to see pharma companies do those types of deals again, where they're buying science for the long term. If we start seeing more of that, those are the types of deals that matter. Verona isn't going to lift the XBI and make us feel like biotech is back, so to speak. But when you see companies start buying a gene-editing company, there are dozens of other gene-editing companies out there that might benefit from it. To me, that's a really positive sign that we're starting to see that.

Tim, what's your take?

I think what we're seeing is expected. I've said on a few previous episodes that there's a lot of latent M&A demand. What's happened is the Trump tariff moves and the MFN conversations have just created tremendous uncertainty, and now that uncertainty has cleared to some degree, I think they're sort of back in business. They were planning on being in business all year, and they're going to be in business for the rest of the year.

We're headed for what I would describe as a normal M&A year. There was a really nice article this week in the Financial Times on patent cliffs, and that article just made it clear how severe the upcoming patent cliffs are. Pharma has no choice. They've got to go out and do inorganic expansion.

What we're seeing is, I would describe, almost workmanlike steps by AbbVie and Merck and so on to do what they need to do to prepare their companies for the future.

Tess, your thoughts on where we're going with M&A?

Yeah, I think it's really positive to see. I'm with Brad on this. It's very positive to see that companies are not just looking to fill near-term patent cliffs, but also really thinking about 2030-plus. What are the technologies and sources of differentiation that are really going to matter in 2030-plus? I think Verve and Capstan are both great examples of that.

Brad, I want to come back to you and Eric. You've heard what Tess and I have said about how M&A is normal and we're all starting to go a little bit early. Do you see any changes coming up in M&A patterns? Is there something that we're looking for that we haven't seen yet?

Yeah, I don't know what to say to that. I'll pass that one to Eric.

That's very kind of both of you. I think Brad's right. It would be wonderful to see M&A just for the sake of science. I'm not sure we're going to get there, to be honest. That only happens typically in a very frothy environment and typically when there's scientific disruption ongoing that seemingly challenges the normal state of drug development and distribution.

At least, I don't know of any science that folks are going to feel like they need to acquire, though Brad's point about Verve and maybe in vivo cell therapy from Capstan is well taken. I'm just not sure they're going to be anything more than one-offs.

Tim, I wanted to come back to you on this LOE thing because we have all read some of the same articles, though I missed the Financial Times one that you cited. I've seen statistics that suggest there's something like $150 billion in LOE approaching. You noted that they don't have any choice. What choices do they really have? Walk us through how you think a pharmaceutical management team considers potential capital-reallocation strategies.

Maybe I'm cynical. I've been a banker for 30-plus years at this point, and you just watch organizational behavior year in and year out. You'd like to think that most organizations are focused on maximizing shareholder value, and certainly there's that element of it. But every organization, at the board level, the CEO level, and throughout management, has one overriding goal, and that is to survive, right? To live for another day.

You don't want to be the CEO who was the last CEO Bristol Myers Squibb ever had, or something like that. Companies do what they need to do to survive. Survival means keeping your revenue in place, and that means M&A or some type of organic growth. But most companies in our industry don't have enough organic growth to get there.

Maybe something to call out, and Eric, I'd be interested in your thoughts on this: the premiums for Blueprint and Verona were good, but they were not astounding. We'll obviously get more information as some of the documents come out for Verona, but I thought that was interesting and noteworthy. It made me wonder a little bit what that means in terms of just the competition for some of these commercial-stage assets.

That's a great point, Tess, and you could throw in maybe the SpringWorks acquisition into that trend also—a little bit smaller, but not much of a premium. But I think if you go a little bit smaller-cap, we have seen some very significant premiums paid for the likes of Regulus or Chimerix earlier in the year.

I guess what we're probably seeing is the market being a little bit more efficient. Verona certainly is a company that's already up multifold in the last 12 months, and the marketplace was pretty good at sniffing out the fact that its drug was selling quite well and likely to be quite substantial.

Maybe the same could be said for Blueprint, where the company was putting out some very aspirational long-term guidance that would be hard, I think, to come on top of and pay much of a premium for. We've all read the documents on SpringWorks, so we know how that's played out as well.

But good point. I do think Brad's view that the XBI would really get a jump if we started seeing more meaningful premiums paid for development-stage companies is a good one. Brad, do you want to add on?

I was just going to say congratulations to Capstan, and no offense to them, but I was shocked at the buyout price: $2.1 billion.

Not to say anything about the quality of their science, but just the valuation again of a very recently clinical-stage company that's being bought for science. If that was a publicly traded stock right now, I just can't believe that it would be a multibillion-dollar situation in the public markets. I think that says a lot about how challenging the public markets are right now. So to me, that deal was a fantastic sign of big pharma being willing to pay a lot for very early-stage science.

I'd love to see a lot more of that. My guess is that the fact that it was a private company was a factor. I don't know what its private valuation is. I think Tess would know a lot more about that than I do, but that number blew me away when I saw it. That would not be the case if it were a public company, for sure.

I think I said on Biotech Hangout maybe 4 to 6 weeks ago—I don't remember exactly when—that I'm a practicing investment banker, and I'm working on more M&A right now than I ever have. Since that time, the amount of M&A I'm working on has gone up. It's all commercial. Buyers are shopping commercial now, and there's a very simple reason: You need revenue, right? You can buy revenue.

There are so many commercial-stage companies that got their drug approved but didn't get taken out when they were in Phase 2 or Phase 3. So it's a buyer's market, and almost universally, the clients that I'm working with, whether they're on the buy side or the sell side, have 1 bidder. The median number of bidders is 1. It's not 6. That's why the premiums are low.

The reason we're in this market is that the population of targets has grown so much over the last 3 or 4 years. There are so many commercial-stage companies. There are so many biotech companies available, and that reflects the capital that's been pouring into our sector over the last decade. It's a very interesting moment for M&A, I'd say.

Great insights.

I just want to say one last thing about the Verona deal. Verona is a UK company founded there, and it's kind of become a US company. It's Nasdaq-listed, and a lot of the people and all that are here, but it's both.

One thing that I think is interesting about it is that it's both a mega-success for the UK life sciences ecosystem, but it's also the age-old thing there: Right when a company succeeds and hits the big time, as they've been doing, it gets bought up and acquired, and then you're back to square one again. It'll be interesting to see how the UK biotech ecosystem both benefits from this and whether it's able to bounce back and have more Veronas, and more companies that are lasting and stay there as cornerstone companies that help the whole ecosystem.

Yeah, great point. Sad for the UK environment, for sure. I want to come back to Tim's comment and insights here as a banker. This median of 1 potential buyer per transaction might influence a more modest premium being paid here. Of course, the seller doesn't have to sell, and boards and management teams can choose not to sell for a more modest 20% or 30% premium. Are we seeing any entrenchment on their part? This has been a market that's been very favorable for companies launching products, and I wouldn't think there'd be a strong need to sell if the premium weren't more substantial.

Most companies get very few offers. We advise, as you can imagine, a whole roster of companies. You sit down when you get a new client and say, "How many times have you been approached in the last decade?" The answer often is never, or maybe once or twice. Boards learn that when you get approached, you need to pay attention, unless your long-term intention is to just keep running this company independently.

The reality is that most commercial-stage pharmaceutical companies don't have enough products, right? When you look at the P&Ls of these companies, you don't see many companies with a blueprint where the company is just going to go into EBIT-positive territory forever. That's really the driver of these acquisitions. Typically, a company is better off in the hands of a larger organization that can spread the overhead expenses over more than 1 product.

3. Washington Reshapes Biotech

Well, very fair point. Thanks for that discussion, guys. Maybe we'll change gears here and talk about some of the macro stuff that's come out of Washington. When we last sat down for Biotech Hangout, I think there was a lot of uncertainty about whether Trump's Big Beautiful Bill would even make it through. Last week, of course, things picked up a lot of steam, and that bill was signed on the July 4 holiday.

We also had some headlines this week about the reemergence of Trump's thinking on tariffs. Maybe Brad could introduce the first topic of the Big Beautiful Bill, which is now law, and Tess might chat with us a little bit about the latest on the tariff front.

Yeah. On the bill, there were a few things that were relevant to our industry, but to me, there was only 1 that really stood out, and that's how rare-disease and orphan drugs are handled through the drug-price negotiations from the IRA. Basically, if you had a rare-disease drug and it was only approved for 1 indication, before this bill it was exempt from having to go to drug-price negotiations.

As everyone in our industry knows, depending on what the mechanism is, you might eventually succeed in multiple rare-disease indications. This rectified that. Now, if you have multiple approved indications for a rare-disease-type patient population, you're exempt, which of course is the right thing to do. So that cleaned that up a little bit.

The other things include some Medicaid spending reductions and some changes in how certain types of hospitals that service lower-income communities and patients are handled, which may affect our industry. But for drug developers, I think the biggest thing to know about is that rare-disease exemption.

Thank you. Tess, do you want to handle the tariffs?

Yeah, absolutely. Maybe I'll just make 1 point on the rare-disease exemption. I think it's certainly positive to know that our representatives were aware that the construction of the IRA was creating a disincentive for orphan-drug development, especially small-molecule orphan-drug development for multiple orphan indications.

Of course, a more impactful, full fix would have been to really just remove the small-molecule penalty and have that be 13 years. My view, at least, is that would have certainly had more of an impact on drug development and kind of removed some of these R&D distortions. We need drugs that are for multi-orphan conditions. We also want more drugs for Alzheimer's and cardiovascular conditions, heart failure, and other things that affect an elderly patient population that may not benefit from this broad exemption.

So it's a good step and a good indication that there's awareness of this issue. In my view, it's certainly better than nothing, but not quite what I would have hoped for in terms of a more permanent fix to what I see as the major challenge with the IRA.

Do you think, Tess, this makes it more difficult to neutralize the pill penalty in the future, or is that just something that this administration wants to kick back to the latter part of the year and hopefully trade for some other concession from the industry? Of course, I'm thinking drug pricing.

Yeah, we'll see, right? It was clear in the executive order that came out on drug pricing that there's awareness of the distortions of the pill penalty, right? I think that's positive. The fact that it didn't happen in this bill is a bit unfortunate.

But we'll see. I don't know if it necessarily—I mean, it removes 1 tool, I guess, that was a bill that was moving for actually getting things done. Maybe it decreases the probability somewhat, but I don't think it necessarily changes it drastically over time. Part of the reason for that is that it does show an acknowledgment of some of these distortions. So we'll see if it can come up at a later point.

Okay, maybe continue on with tariffs.

Sure. At a cabinet meeting last week, Trump brought up tariffs and talked about pharma tariffs potentially going up to 200%. We're going to give people about a year, a year and a half to come in. After that, they're going to be tariffed if they have to bring the pharmaceuticals into the country, the drugs and other things into the country.

There were a lot of words in that statement, but I think the general idea was that pharma is going to get a tariff if companies don't bring manufacturing into the U.S. We've heard a lot of announcements from companies that had the intention of bringing manufacturing into the U.S. One to 1.5 years is not enough time to do tech transfer and move a lot of these processes over to the U.S. So we'll see what actually comes out of this.

There was absolutely no market move. I mean, there was a market move for a very, very short period of time that almost instantaneously corrected after this statement. My interpretation of that is more the belief that it's unlikely that something really serious happens, rather than the belief that any tariff that does come in is already priced in. I'd be interested in other perspectives on that.

That was very much my view: The absence of a stock move was more a reflection of the belief that any ultimate policy was unlikely to be harmful than the belief that, if such a policy happened, it would be fine and was already priced in. But I'd love other perspectives on that.

Yeah, I was also surprised by the market shrugging off not just the tariff headlines but, to some extent, the spending bill details, too, which did have the potential, as Brad noted, to negatively influence the biopharmaceutical industry in terms of less coverage in Medicaid for health care, let alone for pharmaceuticals. But it was a bit of a head-scratcher, right, that the markets have been so strong this week.

While we're giving back a little bit of that strength this morning, we were up nearly 4% through the first 4 days of the week, and we've recovered fully from those April lows and seem almost like we're breaking out. Maybe all of us who operate in the public markets have been beaten over the head so many times that we just expect the knee-jerk reaction to anything coming out of Washington to be negative.

Perhaps we're just growing a little bit numb to the headlines, and Trump is potentially—I don't know—losing his ability to influence the investment world. I actually hope that's the case. I think we need to naturally mature and navigate to a position where people care a little bit less about everything our new administration and our new president say, but I'm not sure we're there yet. Tim, what do you think's going on?

I'll make a few comments, Eric. I think, in terms of the overall upswing or downswing in the market, it is driven very much by fundamentals, and those fundamentals are M&A, right? We're seeing a lot of M&A lately. I think the thesis that this might not be a great M&A year has been disproven at this point. That's influential, I think, to a lot of funds that are on the sidelines that have discretion about where they put their money.

But specifically this week, I think there's been a lot more short-term trading that's been impacting our market. Rumors began to circulate in the market the day before yesterday that there were changes coming to the MFN rules. I believe those rumors are true, but I don't know. I'm not a Washington insider at all.

The story that was going around was that the approach to resolving MFN is going to mainly take place through the Medicaid system, Medicare system, and that it will be carrot rather than stick. So that's very good news for industry, and I don't know how this information gets leaked out of Washington to some fund, but as that information got spread around the various funds that play in the market, you could just see the XBI popping up hour by hour.

Today, there has not been an announcement on any changes in MFN, but we did see this FDA announcement this morning, where the FDA came out and said, “Hey, by the way, if you make your drug more affordable, we may consider granting you a voucher to speed up your approval.” To me, that was certainly surprising.

Some people are like, “So, is that it? Is that what this MFN thing was?” And I think the answer is no. I think there's something else coming, probably going to hit next week. I would just add, to put all of this in context: I hate to say this, but the strength for us, let's face it, is like a poor man's strength.

The Nasdaq and the S&P are at all-time highs—literally, all-time-ever highs. The reason we're so excited is because our industry, 4 months ago, was literally priced for Armageddon. We were going away, and there would be no drug sector. I think some of the excitement is that we're starting to feel like some things are normalizing: M&A is normalizing, and certain drug launches are doing well, even in the context of everyone bashing us on pricing and all of this stuff. And so all we're really hoping to go through right now, when it seems like there are green shoots, is that we're being priced from pure Armageddon and destruction to something that looks a little more normal, so that at least segments of our industry can invest and run normal businesses.

Well, that's great perspective, Brad. Before we get too optimistic about the green shoots that you referred to, are there macro or other concerns that folks have that we still need to get past before we can truly feel able to breathe easier about biotech's future? Anything you guys are worried about?

I think Tess said it. I can't remember. The one thing that's important about the tariff issue is that there's going to be a report that's finished at the end of this month, and there should be good clarity on all of it, whether it's positive or negative. The guessing game should get a lot clearer.

I don't know if it's going to be released on the last day of the month or if the report was ready and it'll be weeks later, but there should be a lot more clarity on that within the next 30 to 60 days.

I'll make a comment coming back to the big beautiful bill, which for biotech might have been the small beautiful bill. The main big-picture thing that came out of that bill was that we didn't raise taxes, right? We were on a path for taxes to be raised as scheduled. The tax cuts that were put in place in the last Trump administration were extended.

So, unlike in the Reagan administration, where you saw a huge expansion in the markets after the tax cuts that came in around 1980, right now we're just preserving the tax rates that we had. If that bill had not passed—which to me seemed like a possibility at times—it could have actually been quite bad, in the sense that the markets would not have done so well. If the markets don't do well, that does ultimately feed into risk appetite, which impacts the biotech sector.

I do think that, despite some of the damage the Trump administration has done to our sector, taking down parts of the FDA and so on, overall there may yet be benefits coming from impacts on the overall market. We're starting to see those impacts, and they will affect risk appetite. Bruce Booth likes to call it a risk-on environment. We've definitely not been in a risk-on environment. As that happens more and more, we should start to see early-stage biotech pick up, but that's a multiyear process.

And Tim, I have to ask you, because I know you've written a lot about the correlation between biotech stock performance and interest rates. Does the big beautiful bill change the way you're thinking about where interest rates are going to be heading in the future?

Deficit spending.

Yeah, deficit spending is not good for rates at all, and so that's not good for biotech. But the thing that I think we're all watching very carefully is tariffs. Fundamentally, I think Trump views tariffs as a bludgeon to negotiate deals with other countries, and not something that he actually wants to do. In other words, tariffs are not desired by the Republican Party at 50%.

If tariffs went up, that's going to be highly inflationary, most likely. That would be definitely bad for rates, and that would be definitely bad for biotech. So I'm personally optimistic about the course of inflation despite the big beautiful bill, and I think that will feed back positively to biotech.

But again, this is not something that happens next week. The effects of the Reagan expansionary policies on the market took 5 to 10 years to play out. Long term, I think things look really good for our sector. What happens next week, I have no idea.

As you shouldn't.

4. The FDA Faces Scrutiny

Well, let's shift gears again to the third topic of discussion today, which is the FDA. There have been a couple of surprise announcements this week. Tim, you just mentioned today's news on potentially trading faster review times for a fairer price differential between U.S. and ex-U.S. markets.

But really, the big surprise, I think, came out a couple of days ago—or was it maybe just yesterday?—when the FDA released all of these CRLs for products that have since been approved but received CRLs in the 2020 to 2024 time frame. Maybe you could just remind us what happened and give us your thoughts on why the FDA chose to do this.

Such an interesting move by the FDA to publish, out of the blue, 200 complete response letters in a ZIP file, right? Isn't it interesting that the Epstein list got lost this week, and then all of a sudden it's, “Oh, here's everybody's CRL.”

I guess, to me, we should have transparency about regulatory decisions. That's not a bad thing. But to ex post release everybody's CRLs struck me as very odd, and I started reading through the CRLs. It's pretty interesting reading.

A lot of companies were clearly not transparent with the markets as to what was going on. And that's not just little biotech. Some of these big pharmas were getting CRLs that they never mentioned to the market.

I'd be very curious to hear, Eric, what you think, and what Tess and Brad think, about this sort of sudden decision to expose industry by releasing all of the CRLs.

I'll jump in real quick and say, first of all, I think it's a positive thing. One thing I'll say in our hyperpoliticized and political culture these days is that it's not a bad thing to give credit where credit is due if you don't agree with the politics of somebody and what's going on right now.

One thing I will say about this FDA is, number 1, they are master communicators. The difference in communication between this FDA—with all the videos that they do on social media, all the tweets, the TV interviews, and everything they did—on a scale of 1 to 10 as communicators, this FDA is a 9.5.

Whatever you think of the messaging, just in terms of their skill as communicators, they are a 9.5, borderline 10. I would give the last administration's FDA more like a 4 at best, so I'll give credit where credit is due there.

On the CRL issue specifically, a lot of people have brought this up. What they announced and what they put out, I hope, is a first step: they've only made public CRLs for drugs that ultimately ended up getting approved. That's a good step, so I'm not going to bash them over the head for not going all the way with it.

I'm giving them credit for doing this, but the thing that we want as an industry is for this to change people's behavior. We want this designed in a way that, if you're a small or, as you said, a big firm—a company that's maybe not traditionally been 100% honest in how you've communicated those things—this will change your behavior and make you a lot more honest.

My guess is, especially with smaller companies, if they just leave it where it is today—drugs that ultimately get approved—I doubt it will change anything, because if you're a small company, you're just desperate to survive and eventually succeed one day down the road.

It would be nice if they started doing this more broadly. Capricor got a CRL today for its cell therapy for DMD cardiomyopathy. It would have been amazing to see that CRL today, and maybe if Capricor knew that was coming out—maybe or maybe not; obviously, it's just a guessing game—we don't know. Maybe it would have changed how they communicated the result of that CRL to the public.

So, really good first step. Credit where credit is due. It would be nice if this were just a first step, and if it expanded and applied to all CRLs in the future.

Tess, what's your take on what's going on at the FDA, either with regard to this initiative or just more broadly? How do you think things are operating there?

I think this initiative is definitely very encouraging. As Brad says, the more, the better. Getting the CRLs for unapproved drugs is ultimately what would have a bigger impact, I think, on that behavior.

More broadly, STAT had a couple of headlines over this past week about some of the internal turmoil and challenges that staff is experiencing, which sounds really unfortunate, right? I think the FDA is doing an incredible job managing things with a lot of the companies they're working with. Fortunately, many of the portfolio companies that we talk with continue to have constructive interactions.

But it's hard for me to think that's sustainable when I see things like the STAT articles that talk about how groups have really been overturned and just how low morale and everything is. I think it's something where we won't really know until we have more time and understand how some of these early FDA interactions are playing out as well, right?

It's one thing to get drugs approved. It's another thing to respond in a timely way to briefing books on end-of-Phase 2 meetings and pre-IND meetings and stuff like that.

Generally, it seems like the FDA is having really constructive engagement with a lot of companies and really trying to keep things on schedule. I have heard in several instances of senior reviewers being gone, and so maybe not having the quality of feedback that one might have received in the past. That's obviously unfortunate, but we'll have to take some more time.

I think companies are going to continue to work with other regulatory agencies as well, because we can't really have confidence that everything is going to continue smoothly with the FDA until we have more time, and companies can't afford to take that risk.

I'll just pile on to what Brad said earlier. Both Dr. Makary and Dr. Prasad are master communicators. That's kind of how they got their jobs, right? They were internet personalities or social media types, and they're extraordinarily well-versed in getting out there in front of the media and cameras.

Of course, they're part of an administration that features many leaders who know how to communicate through electronic channels. So, no surprise there.

I guess the big question that I have, and Tess, you touched on that, is what type of managers they are internally. In addition to the STAT News article, there was also an article in BioCentury that reported on a leaked internal memo from Dr. Prasad to his staff.

The good thing about that memo was that Dr. Prasad, I think, is at least aware enough to know that he may have some issues with regard to staffing, turnover, and morale. He's trying to address those issues by communicating his urgency in hiring new review staff members and also trying to create an open environment where conflict is able to be brought forth and internal communication is stressed.

I almost got the sense from reading that BioCentury article that Dr. Prasad has a good sense of what isn't going well at the agency right now, and maybe he's focusing some of his efforts more internally as opposed to externally, which might not be a bad thing in order to try and head some of that stuff off before it really becomes a problem for our industry.

But in terms of a problem for industry, we did have this very unfortunate case of Capricor, Brad, that you referenced. Maybe you could walk our listeners through what has happened with regard to Capricor's DMD BLA that was filed a few months ago and got the CRL today.

Is this for me? If you don't mind, I know you're on it.

Sure. Well, I'm kind of not. I guess I'll give it a shot.

This is a cell therapy for DMD. We commonly talk about DMD and think of the Sareptas of the world. This is a little different. This is a cell therapy, and the indication they're going after for this approval is very specific: cardiomyopathy related to DMD.

I actually don't know enough about the history of it, other than to know that it obviously got the CRL because the data was marginal going into this. The other thing that's a really key element here, and maybe makes this decision the right thing to do, is that they have this same therapy in a key trial for a slightly different indication within DMD, in a big trial that's going to read out any day now.

I think it's scheduled for August or September. Even though it's not for cardiomyopathy, I think it's more of a traditional muscle-strength indication. It'll give us maybe a better view into whether this therapy and this whole cell-therapy approach that they have actually works or not.

This is not a situation where it's an accelerated approval and we're not going to know for years and years about a follow-up confirmatory study. We're going to know a lot more about this exact same therapy within the next 30 days.

Yeah, she had scheduled an advisory committee meeting for this, I think, around this time.

This, by the way, the decision date for this was August 31. So, the CRL actually came a little early. The reporting that had been in the news—I think STAT News, with Adam Feuerstein as the main person who dug this up—was based on his reporting. What he was saying is that Nicole Verdun was really not a believer in this, and part of what led to her departure was that she scrapped the advisory committee and said, “There’s no way we’re approving this” based on this indication and the existing data that they have.

That’s pretty much all I know about it. I’m sure that’s a small fraction of all the details of the story, but that’s my impression. I think we’ll know a lot more about this in a month or 2. Based on what little I know about it, I actually think this makes sense. If there’s some huge trial readout that’s going to give us a clearer picture of the utility of this therapy in a month or 2, why go out on a limb based on what appears to be thinner data for an approval right now, when you’ll know more about it in a couple of months?

Brad, I’ll add: just reading the press release that the company put out this morning, it is kind of interesting reading, right? The company says, “Hey, we had a midcycle review and everything was fine, and now they tell us that we have not met the statutory requirement for efficacy.”

I mean, I’m kind of on the FDA’s side here. I’m not saying that they made the right or wrong decision—I don’t know the specific facts—but shouldn’t the FDA have the right to read all the evidence and then, at some point, make a decision? Just because the midcycle meeting seemed to be okay doesn’t mean that you’re going to get an approval. I thought the implication in the press release that somehow the FDA wasn’t straight with the company seemed to be a little bit off to me.

I agree with that, Tim. Another thing that I think should change about the FDA is just the rigid calendaring of everything. Another good example, especially now that we’ve had controversy about it, is, sticking with DMD, think of Sarepta’s gene therapy program.

It got accelerated approval in the summer, and it had a big confirmatory trial readout scheduled for less than 6 months later. If you didn’t have to worry about, “Well, they filed on this date, so the decision has to be by this date,” and all this stuff, you would think a rational person, if you weren’t confined to all of those rules and regulations, would say, “Should we give this an approval and then 6 months later find out whether this other key follow-up study has succeeded or not?” The right thing to do is to decide on all this once we have the totality of the data in front of us.

But in those types of situations, you have to follow these PDUFA rules, and I don’t think that serves medicine as well as it should. It sounds to me, again, based on what little I know about it, that this Capricor situation is a very similar thing. They filed this thing, they had to get a decision by such-and-such date, and they were going to have this key data a month later. A rational person would say, “Let’s just wait until we see what that data looks like.” That sounds like exactly what the FDA did in this case.

Brad, I’m glad I put you on the spot because you certainly know a lot more about this than you admitted. I think all your points are very valid. The one beef the company does seem to have—and this came out on their call earlier today—is that, in their opinion, they’ve kind of been dealing with 2 FDAs, 2 sequential review staffs.

When it was Nicole Verdun and her team, everything was hunky-dory. They were moving toward approval. They had that midcycle review staff meeting, and things were fine. The FDA had accepted their statistical plan and analyses, even though part of that was post hoc. Obviously, Nicole was dismissed, and the STAT News article came out as to why. As of today, it seems like they’re dealing with a very different FDA, one that is being directed by Dr. Prasad, who obviously has taken issue with the circumstances that we find ourselves in.

Maybe it’s to no one’s fault. I don’t know. But I think it is a little bit unfair that the company has had to go through this turmoil and turnover in staff and has had to deal with the consequences of it. Tess, any thoughts here? It’s certainly a controversial matter.

Nothing I have to add. I think it was a very thorough discussion.

Okay. Well, hopefully, again, as you laid out earlier, Tess, the FDA can sort of right the ship and make sure that things are moving in the right direction. We’re still obviously in a very tumultuous situation with regard to the status of this agency. Maybe we should add the FDA to another potential future risk that we’re not quite sure we’ve got clean sailing on just yet.

5. New Approvals And Data

Let’s move to some better topics. We did have some good news, both on the approval front and then some good data sets that were reported today, too. Brad, do you want to handle the KalVista approval for HAE?

Yeah, and of course there’s a whole underlying FDA saga with that one, too. I may, especially for time, just skip that part of it. But this is an oral kallikrein inhibitor for HAE attacks, and it’s the first-ever oral drug for HAE attacks. There are IV drugs and injected drugs, and now this seems like a really convenient option. Credit to them for getting it across the finish line.

The science—the way they designed these molecules in order to achieve this—was pretty elegant. Obviously, they’re not the first to have the idea of having an oral therapy, but the way they were able to design this and succeed was pretty elegant. The drug is called Ekterly. I thought there was an interesting backstory behind the name. It’s supposed to stand for “act early.” If you’re an HAE patient and you’re starting to see the initial signs of an attack, you want to act early and get it done as soon as possible.

One thing that I think is interesting about this story, and that also says something about the economics of our industry, is that this therapy is priced per dose at about $16,700—the list price per pill. My own personal editorial on this is that I think it puts patients in a tricky situation. If you’re thinking, “Every time I swallow a pill, somebody has to pay $17,000,” you might use it a lot less, or you might think twice about using something in a scenario where, if it were a lot less than that, it would be an easier decision.

One thing I wonder about over the very long term is whether KalVista had to price it this way because that’s how payers deal with these things today. But I think it would be interesting if a company like that, in the future, were somehow able to have a subscription model where you maybe pay an annual fee, whether you need to take 1 pill or a few a month. You wouldn’t have to worry about the financial consequences of something like that, where it’s an emergency-attack-type situation rather than a chronic disease.

Couldn’t agree with you more, Brad. I feel like for PRN drugs, for several of these diseases, I couldn’t agree with you more. I think a model like that is really the right way to think about it. Tess, would you like to walk us through the kind of wild week that ProKidney has had?

My goodness. Yes. I think maybe let’s start with what ProKidney is developing. ProKidney is developing a cell therapy, rilparencel. This is a cell therapy that they’ve been developing, and they shared an update on their Phase 2 study, where they were essentially comparing 2 groups that received slightly different injection schedules for this cell therapy.

These were patients who have chronic kidney disease. Chronic kidney disease is a really challenging indication to treat. There aren’t a whole lot of drugs that have been successful in actually treating chronic kidney disease. What they showed is that, with these 2 different dosing schedules, in this open-label study, they looked at the eGFR slope before the study and then after the last injection. They saw an improvement in the eGFR slope pre-injection versus post-injection, and for 1 of the groups in particular—the group that received 2 injections—they saw a more dramatic change in the eGFR slope pre-injection versus post-injection.

How do we know this matters? ProKidney is also in a Phase 3 study, which is randomized, where they’re looking at this cell therapy, and that could be the basis for approval. I think that’s expected to read out at some point in 2026.

And so I think there was a very positive stock response. The stock has gone from $0.61 before these data to almost $5 a share, so the company is at over $1.5 billion in market capitalization on these data. It's another reminder that with biotech stocks, it doesn't really matter what you were trading at before. It really is just a function of what your data are, and investors will bid you up to what they think that data means in terms of what your drug might be worth.

Still, there's a lot of debate about what these phase 2 data mean and how they should be interpreted. Questions are: This was open-label, so how would this look compared with placebo? How about SGLT2 use? There are a lot of nuances around the timing of follow-up and when injections were given that I think we'll need more information on, and we'll ultimately find out in the phase 3.

6. Lilly Leads The Obesity Race

Thank you for that excellent recap. Tim, you get the last word. I know you've been thinking a lot about obesity after the ADA meeting a couple of weeks back.

Yeah, this is a long time after the meeting, but I did work on a report, which we put out this week, talking about the obesity market. I would say that when you really contemplate where Lilly is, they have quite a formidable portfolio. It was a surprise to me to see how strong their amylin was. It was a surprise to me to see how strong their muscle drug was. So all of a sudden, Lilly has a strong oral, a strong amylin, and a strong muscle drug. Obviously, they have retatrutide coming in.

When you start to look at all of the competition—all that these biotechs and other large pharmas have in obesity—I think it's going to be much tougher for them to compete against Lilly. There's another thing coming up, which is that semaglutide is going to be generic, presumably sometime around 2030. We don't know exactly when. Generic semaglutide is going to be very inexpensive, and that drug works quite well.

The key point I made in the report was that this market is a little bit less open than it seemed before. I do think there are some companies that look good. I like Structure. I like Kailera. Those are companies that have assets that could specifically compete against Lilly's best asset in that category. It's quite interesting to see how quickly this market has matured.

Fascinating stuff, and congrats on another terrific report. Tess, Tim, Brad, we're out of time, but thank you all for sharing your insights. Thank our listeners for joining us, too, and we'll see you all next time.