第148期 — 2025年7月18日

You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry. I'm Josh Schimmer and my co-hosts today are Chris Garabedian, Sam Fazeli, Yaron Werber, and special guest Adam Feuerstein. For more information about our hosts and guest speakers or to listen to the most recent episode, please go to biotechout.com. As well, you will find our disclosures on the Hangout page. Please note that our commentary should not be construed as stock investment advice.

Investing in biotech is as challenging as ever, even for experts, and I'm actually going to start on this topic: Is biotech too challenging to ever be anything other than a domain for real experts and specialists? Yaron, I'm going to pick on you first for that one.

This is going to be a spicy one. I would say it depends on what we're talking about and which time in history we're talking about. If we're going back to the bubble, everything was going up, so you could also invest in ETFs. If you're talking about large caps, they're pharma. They're not any different from investing in a pharma company.

We all know—Josh, you remember the days when mid-cap biotech was becoming large-cap biotech, and the call was, “You don't need to invest in the S&P; just invest in these large-cap biotechs as they innovate,” because these are amazing businesses. But let's face it: we're in an environment where smaller and mid-cap companies are really volatile. We obviously have more concerns with the FDA—we'll talk about it with Ultragenyx—and some concerns about where the agency is going. It's tough. It's volatile. This is not for the faint of heart, so people need to be careful, unquestionably.

Can I chime in on that question, Josh?

Absolutely.

I think the sector has a serious credibility and accountability problem. Until the industry as a group—and that includes analysts, investors, and industry people—addresses this and self-polices, this is unfortunately going to be an industry that is mostly ignored by the larger investment community.

I see it, and we can tie this into the Sarepta situation today. We all thought, “Maybe there is a bottom here. Maybe they've cleared the decks.” Then, literally 12 hours later, we find out about another death that was not disclosed. If you're looking at this from the outside, what you're seeing is a raging dumpster fire attached to a clown car.

The only way this changes is if analysts call out some of this, and investors say, “Enough is enough. We're not going to take this anymore.” Boards and executives have to be held accountable for these things. Until that happens, I don't see us being anything more than some niche curiosity that people laugh at.

Anyone else? I love having Adam on these calls.

How can you follow that, Josh? My perspective on this is not so much that biotech is tough. Some other things are easier, right? You can get really good returns these days, and you have been able to for a long time, whether it's a bubble or not, by investing in tech.

It's a little bit more understandable. You can hold it. It's tangible, unless you get into quantum and some new LLM. But even then, you can try it out. You don't have that here. So you add that to what Adam said, and it makes it tough.

I'll just add that biotech has always been hard, and that's why it's such a specialist investor domain. But I think the biggest challenge, as Adam alluded to in terms of generalist investors, is that if you look at the XBI—and we can debate whether that's the best index or not—but whether you look at the 3-year, 5-year, or 10-year returns, people are going to look at that and say, “Why should I invest in this?”

Whether they try to understand it or not, or whether they can clean it up, I think that is one of the biggest challenges we have. This sector has not really moved in 10 years, and I think there aren't a lot of signs for hope and optimism.

We can talk about it insularly—about how the FDA is signaling something positive, or it looks like tariffs might not be as bad, or most-favored-nation pricing is going to go away. But at the end of the day, investors are capital allocators. Especially with interest rates remaining high, how can you justify putting a lot of capital to work in this sector when it just hasn't delivered? I think that's a big problem.

I just think it's the self-inflicted wounds that are so frustrating. It's not like everyone doesn't understand that biology is really hard, that there is so much risk, and that bad things are going to happen. Of course, everyone knows that. But it's the self-inflicted stuff—the stuff that just doesn't need to happen—that keeps happening all the time. That's what needs to be cleaned up.

Let's move to that. I just want to—Josh, if it's okay—give some context, because not all of our listeners have necessarily had time to follow the last 24 hours. We'll lead off with this. Adam, you know, kind of light the match on this a little bit.

Earlier this week, the market was surprised that Sarepta announced a restructuring and refocusing of the company, laying off more than a third of its employees and really moving away from gene therapy. We've all talked a lot about the 2 deaths in the DMD commercial product. Everybody thought, “Okay, the revenue guidance has come down, there's a black-box warning, and there have been some major communication updates from Sarepta.”

That sent the stock up because investors thought the company had addressed its debt overhang and was doing the right thing to get to cash-flow positive. Sarepta said there was a floor of $500 million for the gene therapy business that it could count on, so everybody was reacting to that. That was going to be the news of the week, which is still the news of the week.

But then, as Adam said, 12 hours later, they announced a death in limb-girdle muscular dystrophy, their second limb-girdle program using the same rAAVrh74 vector. Limb-girdle is not like DMD; these are patients who live longer lives. This was an adult.

The question came up—and I think the reporting from STAT and others has been great on this—it sounds like the company knew about this death for maybe upwards of a month and did not disclose it in the press release or on the call. They were even asked by a specific analyst whether safety had anything to do with jettisoning limb-girdle and moving it aside—whether there was a signal there. They didn't deny that, but they didn't answer the question, as I recall. I'm trying to piece all this together, but that's the setting of the table, Adam, for anything you want to add.

An important clarification here is that you said they announced this death. Sarepta did not announce the death. This was a death first reported by BioCentury and then followed up very quickly by Endpoints. We were pursuing the same story, but our competitors beat us to it. Good for them, and hat tip to those guys for getting the story before we did. We had also heard about this, but the company did not disclose it. Unless reporters were pursuing these kinds of stories, there wouldn't have been a disclosure here.

I think that's a really important point to make. On today's call, Doug Ingram, their CEO, didn't back down. He said this was not a material event. He kept talking about the decision to close down most of the limb-girdle programs as an NPV-based decision—a financial decision—and not a clinical or safety decision.

That may be so, but when you are asked point-blank on a call with analysts whether there were any safety issues related to these programs and you avoid the question, that's a lie by omission. From a credibility standpoint, how do you evaluate a company like that, or a management team like that, going forward? Again, it's a self-inflicted thing, because they could have been fully transparent and this wouldn't have happened.

Adam, I also want to highlight that you commented on X that this may have been exacerbated by the fact that there were promotions and pay increases, and that there was a little bit of tone-deafness in doing that.

Oh, yeah. On the same day that you fire 500 employees, or 36% of the workforce, you announce promotions and pay raises for the top executives. I'm not a PR guy, but that just does not sit well.

I can tell you that we've spoken to quite a few of the laid-off Sarepta employees in the last 24 hours or so, and that really angers a lot of people. They are asking, “How do you do that?”

Josh, Yaron, Sam, do you guys want to chime in on this?

Well, I was going to ask you, Chris.

At Sarepta, you used to be the CEO, and it's a company that does have a fairly lengthy history of controversy. Why do you think that is?

I can only speak to going back to the history of eteplirsen, where it all started. People don't appreciate this fully, but the FDA is not a monolith, right? There are raging debates and disagreements, different opinions within the hierarchy, and between the hierarchy and the divisions. During my tenure alone, we went through 3 different division directors. CNS is arguably known as one of the more conservative and challenging divisions, and there's a long history of that.

We had really good interactions and a good signal with the first division director. Then there was an interim director who came in and kind of reversed all of those decisions. That's when it became controversial, and they brought in a third one, Billy Dunn, who kind of got it back on track. But then there were the protests that kind of happened after I left, after the first advisory committee.

I think part of it is that this has just been a highly visible, charged story that's a little bit of a lightning rod for industry trends. There was a period where people thought Sarepta was getting too much favor, or had gotten too much favor, from the FDA. I think it's just one of these stories that is not always clear.

Exondys 51 was controversial because it was arguably a small data set that was not unequivocal, and you could have arguments on both sides, right? As CEO, I felt that it was doing something. I didn't think it was a cure-all or the best technology that was ever produced, but we thought it deserved to be approved.

What I tried to do as CEO was really be as transparent as I possibly could. Back then, we were putting FDA letters—quotes from FDA communications—into our press releases. Not many companies have ever done that, right? That was just to say, “Look, you can disagree with my interpretation of it, but here's what they told us, and this is how we're interpreting it.”

I think transparency is the issue, and I think that's what Adam hit on. I think it's the credibility: Do you believe what the management teams and the CEOs are telling you? This is what I know, having been a CEO: Every buy-sider, when they go to these investment conferences—and I had stacked meetings with people—they're asking me the same question 8 different ways to see if my expression changes or if I answer it a different way. It's all about how much we trust this person, and whether we can believe what they're telling us. That credibility is a really important part of buy-siders investing in and trusting the story they're being told by a management team.

One of the things the FDA is talking about is now beginning to post the CRLs publicly. I cannot—I think we're all going to agree—we need that badly. There's going to be an element of information that will have to be redacted for confidentiality and legal reasons, but as much of it should be unredacted and left public.

I actually think that this is a governance, board, and general counsel issue. Some of you might know that I spent a few years in a company as an officer. One of the things I always thought was that when you leave Wall Street and become a Section 16 officer, someone like a Gandalf would show up with a book of 3,600 pages and give you the rules for public disclosure. That book does not exist. It's all a question of how much risk management, the board, the general counsel, the CEO, and the CFO are willing to take. Ultimately, it's risk-reward, and there are obviously guidelines, but so much of it is up to discretion. That's absolutely not okay. This is really a governance issue, in our view.

Yeah. And, Adam, to your point, it's an integrity issue that I think our industry, almost more than any other industry, owes to the patients, if nobody else, who often get forgotten. Lack of disclosures and lack of integrity cost the industry and cost patients, on whose backs and lives our whole industry is built.

Any other comments on Sarepta before we move on?

The only other thing I'd say—and Adam, I think you also wrote an article about this—it was about a year ago, where there was that conference where it was taken off the PPMD website. There was a mom in the audience who was just saying, “We need more disclosure. We're putting our kids at risk.” It almost felt prophetic in terms of what was being suppressed and the raising of the patients' voices.

Christine McSherry wrote a blog post that I highlighted on social media recently around this same idea, just after the second death. But this is not something that wasn't discussed within the Duchenne communities: transparency around safety and risk-benefit.

The Duchenne community—patients, patient advocates, and families—is not a homogeneous community, just like the disease is not, right? There are people who are very much in support of Sarepta and like what they're doing, and there are people in the community who don't and have concerns. That's healthy, right? There shouldn't be unanimity on everything.

One of the problems that's coming up—and you raised it in that story that I wrote about a year ago, a little over a year ago—is that at these forums, in this case the PPMD conference, a mom—someone who has a son with Duchenne—gets up and raises concerns and wants to criticize Sarepta in a public forum, as should be her right, and is kind of harassed afterward. Then her comments are censored. The video, at Sarepta's request, was edited, and her comments were edited out and deleted.

That's a problem. That's not good for debate, and it's not good for the community. There are knock-on effects to that, and I think that when we see what happened last night, you can draw a through line to that.

Let's move on.

Yeah, Josh. I was going to say, you mentioned the CRL and maybe we can cover the rare.

No, no, hold on, hold on, Chris. Hold on.

Yep. Yep.

Thank you. What I want to get to now is an interesting juxtaposition. Amylyx hosted a webinar at ENDO for its post-bariatric hypoglycemia program and its GLP-1 inhibitor. It seemed to be very well received by investors, based on the stock move afterward.

Post-bariatric hypoglycemia is a very underappreciated potential complication of bariatric surgery, where patients actually struggle with significant hypoglycemia that requires a very restrictive diet. Ironically, they're having bariatric surgery to control their diet, and then they wind up almost being forced to adhere to a nearly impossible diet.

What's notable is this management team—Josh and Justin, about whom I'd heard such great things before I had a chance to meet them earlier this year. As you recall, talking about integrity, when the PHOENIX trial in ALS failed, they were very quick to pull Relyvrio from the market. They're 2 young co-CEOs who I do think bring a tremendous amount of integrity to the job.

I think it's really interesting to compare and contrast. We need Amylyx to be the type of leaders—and young leaders—that Josh and Justin are: people who really care about doing the right thing for patients, who care about appropriate integrity and disclosures. I just wanted to put that after the conversation we just had.

Now, moving on to regulatory: It feels like Washington and the FDA are in the news every single week, which is something very new because they were rarely in the news. Adam, you and your colleagues at STAT have been doing an absolutely incredible job helping us understand what's happening at the agency, and it feels like there are mixed messages.

We have messages from the top telling us everything's okay, but then we have these little squeaks from time to time that maybe things aren't quite so okay. Maybe morale is not quite as good as they'd have us believe, and maybe the drug approval process is being slowed down in ways that they wouldn't want us to believe are resulting from stresses on the agency.

We've seen a couple of CRLs, so we'll get to that particular one, Chris, in just a second. I'm curious to hear folks' perspectives on the FDA. Are we on stable ground? Where do we expect this to go, Adam? If you've got some views yourself, that has again been so exemplary here.

I really appreciate the kind words, and I will share those with my colleagues, who have done a tremendous amount of work. Lizzy Lawrence is our reporter who specifically covers the FDA from D.C., and she's done a great job. What a time to be covering the FDA, right?

If it's okay, I actually don't have a ton more time to be here.

I've got to get back to work. But with respect to what you're saying, Josh, I think we can talk a little bit about the CRL. We talked about Ultragenyx on our Readout LOUD podcast yesterday. We interviewed Emil Kakkis, who's the CEO of Ultragenyx, and as you guys know—and you probably talked about this—they did receive a CRL for their gene therapy for Sanfilippo syndrome, and it was based around CMC issues and manufacturing issues. There wasn't anything clinical; there were no clinical shortcomings in the package that stopped it from being approved.

It was really interesting to talk to Emil yesterday. What was really interesting was that it ties into a lot of the themes that I think you guys have been talking about on this show and everyone has been writing about: the bureaucratic red tape and some of the things that seem to get in the way of getting drugs to market as fast as possible.

Just logistical things: he talked to us about one instance that was in the CRL—a deficiency in the CRL—where there was a disagreement about the number of thermometer probes needed in the shipping container for their drug. I don't know if it's frozen or refrigerated; I don't remember that off the top of my head, but they've got 5 temperature probes monitoring the temperature of this package, and the FDA wanted 7. That's one of the reasons why this thing got rejected. It had nothing to do with the drug, nothing to do with safety or efficacy, and it's stuff like that that frustrates a lot of people in the industry.

People have called for assays or other common-sense changes that could eliminate some of these roadblocks and hurdles. That would go a long way toward streamlining drugs. Emil was careful to say that he isn't blaming Marty Makary or Vinay Prasad for this CRL. It's more that these things are built into the FDA right now and really need to be addressed. If the current leadership could do that—and they have talked about that, right? I think you've heard current FDA leadership talk about wanting to remove some of these obstacles—people would be very pleased.

Do you think there's more fear of retribution than in the past for anyone potentially speaking out against the FDA or its leadership?

There might be. It's hard to say. There have been some things that definitely make you say, “Wow, are you going to stick your neck out?” I think some of the ousters and Nico Dunn's[?] departure internally may be part of the reason. Or the KalVista situation.

I don't know if you guys talked about that on a previous show, but again, I think these are really in-the-weeds kinds of things. There was another example Emil gave us about the way a certain assay is being developed and the sterilization procedures being used. He says it's so dense, and it just seems like, why are we wasting our time debating whether this thing should be sterilized this way or another way?

But again, these all contributed to the fact that this is now a gene therapy for Sanfilippo patients that, instead of being approved in August, may not be approved until 2026. For patients like that, that's a significant, meaningful amount of time.

Yeah. Radical transparency—but radical. Yaron, please.

Maybe I'll just jump in, too, because that was an amazing podcast. Thank you. We cover Ultragenyx. Let's zoom out, because there are 2 other things going on here related to the FDA.

Recall that this is 1 of 3 drugs up for accelerated approval using biomarkers at CBER. This is the Peter Marks program. The CRL talks about how the totality of the clinical data is supportive; they just ask the company to update the clinical data when it refiles.

But Emil talked about how he's definitely detecting that what's going on is a move now not to use heparan sulfate potentially as the biomarker underpinning the approval, but rather the neurocognitive clinical endpoints. So there was a shift at the FDA on the clinical side. That wasn't the reason they had the CRL, but that was pretty important.

The other question is, why issue a CRL 5 or 6 weeks ahead of the PDUFA date, when the company is technically still able to resolve these issues and submit data that apparently wasn't even reviewed by the FDA? It almost seems that there was a political discussion or political reason that they gave him such an early CRL.

That's interesting, because on one hand, an earlier CRL lets you move faster to respond. But on the other hand, an earlier CRL that winds up in a second CRL because they didn't review the full package the first time is devastating.

I think this is still an important one to watch. If you look at it on its face, it's a single-arm, small, open-label study on a biomarker endpoint. When you listen to Vinay and his questioning around accelerated approval—and his obvious disagreements with Marks—I think it will be interesting to see if this easily gets approved when they resolve the CMC issue, or if this delay enables them to recast how they think about it.

This was a priority review before the new administration came in, right? I presume Marks was supportive of that. I think Emil probably managed this communication perfectly, but I still want to see that this gets ultimate approval based on this smaller data set.

Sam, are you back with us? I know there was the ODAC panel on Thursday—a bit of a surprise for GSK's BCMA ADC, which had a string of positive Phase 3 trials in myeloma. It seemed like they were starting to get some momentum back, but the ODAC panel was not thrilled with the risk-benefit profile of the product, particularly some of the ocular toxicities.

Sam, if you're back with us, I think you had dropped. Do you have any thoughts on that? Or, as we're waiting for Sam, I think you're on. You had some views of—

Oh, there we—

—are. We're on to ODAC.

Yeah, we are. I just teed it up for you.

Right. Thank you. I've been listening to all this until this weird situation where I got thrown off.

Talking about CRLs, there's another one coming here. I'm pretty sure of it. We basically had the ODAC meeting for GSK's belantamab mafodotin, or Blenrep. This is the second time this drug is trying to come back to market. It's been on the market before. They had a post-approval trial that they were asked to do, and that didn't work out as a single agent.

They've come back with 2 trials in combination, and I have to say it was a bruising ODAC meeting, as far as I'm concerned. It was pretty much the FDA saying, “Look, we don't believe that they've got the dosing right. We don't believe that the tolerability profile, which is related to the dosing, is right.” And then, of course, they had a big problem with the lack of U.S. patients.

During the meeting, it was pretty obvious that they were telling the company along the way, “We need you to come up with a different dosing regimen. Don't start with this 2.5 milligrams, et cetera, and go for a lower dose.” GSK obviously didn't follow their advice.

For these multiple myeloma patients in the second line, I'm pretty sure this drug would not be available in the U.S. They voted on 2 trials, DREAMM-7 and DREAMM-8, and both of them were voted down essentially: 7 to 1 and 5 to 3 for the 2 different trials.

What's interesting is that Peter Marks came along and said, “Look, why did you not increase your patient recruitment in the U.S.? Five percent of patients came from the U.S.” He said, “You're asking us to approve the drug here for use in the U.S.” The company said, “Well, other trials have only had about 5%.”

Then, of course, you look at CARTITUDE-4, which Yaron surely knows a lot about, and I think I'll pass it on to him in a minute to comment on what this means for other companies. That ended up with 15% of patients in the U.S.

The only one that I could find very recently that got approved with 5% was IMROZ from Sanofi, Sarclisa. But that's a CD38 drug with a pretty well-known side-effect profile and already approved in later lines, so it's much easier to shepherd that in.

This is very important for GSK because we estimate it's about 30% of their growth through 2030 in terms of sales. That's why the stock's taking a bit of a hammering today.

So I don't know if Yaron wanted to add anything.

Yeah, this is actually important because we're beginning to see a definitely new posture from the FDA and ODAC. Historically, oncology—I don't want to say—has been more lenient on trial design. And, by the way, for the audience, as you remember, DREAMM-7 and DREAMM-8 actually showed superiority against the comparison arms, statistically significant, with survival trends, which is pretty robust in myeloma.

The challenge is twofold. Recently, recall, the FDA rejected Columvi for second-line DLBCL from the STARGLO study because the control arm was outdated, and again, very few patients were in the U.S. This is the same situation. Companies are increasingly continuing, and there are actually examples that are up and coming even now where companies are running outdated standard-of-care arms that are no longer the standard of care. They're showing superiority or good data relative to that, but then the clinical importance of that is totally questionable because that's not at all what's being used, especially when you're enrolling ex-U.S. patients.

Again, we talked about credibility earlier today, and what's the issue with biotech? A lot of the issues in biotech are that companies are not really trying to innovate. They're trying to manage risk, and they're not really trying to develop drugs that are going to be transformative, worth the price, and really make a difference. This is exactly the issue, and I'm glad they're not getting approved.

No, Columvi just got a CRL literally now.

Exactly.

Which was as expected. It was an 8:1 or 7:1 vote. No, I think 8:1. And the other thing is, it sounds like they went to pains to say, “We told you all along in the conversations. We told you.”

It seems like GSK wanted to run with a dose and a schedule that gave them the best opportunity to see a benefit. At the end of the day, the reality is, if they'd done it, physicians would have found a way. A lot of physicians I've spoken to said, “Look, we know how to manage this drug. We want it on the market.” They just didn't. I just wish they'd done a better job with it.

Yeah. I'd also note that GSK has been struggling a little bit with its R&D engine for some time now, so another setback for them. But this may also reflect the extent to which the standard of care in myeloma has completely transformed, really since the IMiDs came out. It used to just be a mishmash of toxic therapies, transplants, and very heterogeneous, almost voodoo-type medicine that was not serving patients well.

The number of options that patients now have, and the survival of patients with myeloma, are a testament to the incredible work that our industry does when it's really firing on all cylinders.

All right, let's move to market sentiment. Chris, I think you had some thoughts on second-quarter and first-half reports on venture investing.

Yeah. So first, before we go to the markets, I wanted to reinforce what you said about Amylyx. To remind the users, this was the same group of co-CEOs of Amylyx that pulled the ALS drug from the market after they promised they would do that if their clinical studies failed. So, again, going back to the theme of transparency and credibility, we need more management teams like that.

The other thing I want to highlight on the FDA sentiment—and it's similar—is that I see Matt Herper in the audience, and he has written about FDA communications. I attended a management and CEO forum that had about 80 private and public CEOs participating, and we all heard an update from people who were in the Makary room. They all spoke, and we heard from New York, Boston at BIO, San Francisco, and D.C.

These are not people who are necessarily sympathetic to the politics and the administration, but they universally walked away with a real feeling of encouragement. They said that, even as they came into the room, people were really listening, taking active notes, and repeating back what they heard. We were able to compare notes across the different forums, and they were consistent in those 4 areas and would build on what they had heard at a previous one.

What was very interesting was that the CEOs came out very encouraged, with cautious optimism but a real sense that they were reading the headlines, paying attention to what people were saying, and seemingly really committed to proving the naysayers wrong. I do think we need folks like Matt and STAT News and others to be maybe more skeptical: Can we believe what they're saying?

But I can just tell you that the CEO forum earlier Monday morning, which was a debrief on all of it, came out with a pretty positive feeling that this FDA wants to make changes. Obviously, we all agree with the CRLs being transparent, and we would even want more transparency.

I think it relates to the market conditions because we need to get rid of some of these overhangs of concern and uncertainty around policy. Are we going to be able to do drug development the way we know how to do it? There was also particular interest in bringing more of those early studies back to the U.S. More and more VCs, including myself, are moving them outside of the U.S. because we feel that the FDA has been too conservative about getting drugs into clinical testing. There did seem to be a commitment to make it easier to do early studies in the U.S.

Anyway, the markets. We had a pretty good Q1, and people had some pretty good signs of venture investing. But Q2 really ticked down again. One trend that really changed was the appetite for early investments, defined as seed or Series A, and that really shifted in Q1.

For biopharma, we still had more money going into Series A and seed in Q1 than we did into Series B and beyond. That really reversed in Q2, where you saw Series B and later rounds dwarfing—by more than 2×—the amount that went into seed and Series A. That's what I'm seeing on the ground, too. It's really, really hard to take a new company and get that seed-to-Series A round.

I think we're still not out of the woods yet. HSBC put out a report, and DealForma did some earlier data work that was reported in Endpoints. HSBC is getting better and better. I have to say, this is the former SVB report led by John Norris. They're digging into even seed investors. They're looking more at specific therapeutic areas in more depth, and they're looking even on the device side. They're really going to the next level down in trying to provide some exposition.

One thing that they saw was oncology. We've kind of heard this for a while: That trend is dropping. The good news is that there does seem to be an embrace of a broader array of therapeutic areas. They're looking at neuro and CNS and at ophthalmology. We know I&I has been big, and that's continuing. Cardiometabolic has obviously ticked up. We've made several respiratory investments.

I think you're seeing a lot more diversity in the types of investments, while still being product-focused and trying to get enough money to get to that elusive clinical proof-of-concept data set. Every VC I know is looking across their portfolio, and they'd better have enough money to get to a clinical data-set readout, or they're worried they're not going to be able to finance it. They may not have enough money to do it themselves as insiders.

Generally speaking, that's what we saw. We saw no IPOs in Q2, but we did see M&A tick up, so I think that's encouraging. I'll stop there and let anybody else weigh in on the market.

Let's go to Sam on M&A, because I think that's up next.

Yeah, perfect segue. Chris, we've just done our M&A analysis for the first half, and this is data that I specifically focus on in large biopharma—not just large pharma taking out biotechs.

In the first half, although the number of deals involving larger biopharma taking out small companies was fewer than in the same period last year—12 deals in the first half—the value was a lot higher: $30.7 billion. Of course, 2 of those we know very well: Blueprint Medicines and Intracellular Therapies. Those together come to $23 billion or so. If you add in the Verona deal that happened just after the close of the first half, that takes us to about $40 billion.

That could put us within reach, depending on what happens in the second half, of being the second-best year. 2022 was $73.6 billion, and 2023 was the monster year at $121 billion. It puts us on a possible trajectory, if we get 2 or 3 bigger deals this year, to at least meet or beat the same number that we had in 2020.

The reason this is worth looking at is because everybody wants their companies, at this end of the spectrum of their evolution, to be a target for M&A. A lot of people look at it that way, and that's how they see a big exit—the best exit for them.

In terms of the oncology angle, our data shows that in this type of deal analysis, oncology took over in terms of the number of deals from I&I, after it had lost out in the first half of 2024.

So I would say that a third of the deals were oncology. The trend is looking good, and maybe that will eventually start reflecting a bit more in the market as a whole.

So the biotech tape will often trade up after a deal like this is announced. Is that the right move? Because, essentially, Merck has chosen its company in Verona. They've allocated $10 billion of their capital, which means $10 billion less of Merck for anyone else in terms of M&A, in theory. One might suppose that every other stock should trade down a little bit because the probability that it's going to be acquired by Merck just went down a nudge.

Any thoughts on that? Let's try to be glass-half-full about this. At the end of the day, these companies have got massive firepower because we're only looking at the $10 billion, and when we do an analysis looking at their debt capacity, this is into several hundred billion dollars when you look at it, assuming how far they would go on a debt-to-EBITDA multiple. So there's plenty of room there, and $10 billion isn't that—it's about a year's, or just under a year's, Keytruda cash flow. So, you know—

And Keytruda just got an extra year with the IRA, right, from 2028 to 2029. So this gives them that much more chance to be able to—

To potentially manage that eventual patent expiration and IRA-related issues.

Let me maybe chime in with a comment. Last question: The sector feels better, right? In the last month, we're actually up 6% or 7%. We're still down 10% overall this year. The question starts becoming, when this happens, you start hearing a lot of debates about whether things are better now among investors or whether things are going to turn the corner and sort of crap back down.

In the beginning of the year, we put out a report, “What do we learn from history?” Based on how the sector started trading, it suggested that the sector is going to underperform the market but will basically be flattish. If that's the case, then the sector needs to move up 10% by the end of the year. I'm in that camp, to be honest. I kind of feel like most of the bad news is already priced in. I'm incrementally more worried about the FDA, but I don't think that's going to come to fruition, and I feel like, by and large, things are getting a little bit better.

There are better drug launches and great earnings. It's going to be a selling season, with a lot of M&A. So I'm definitely a little bit more bullish—or constructive, I should say. How do you all feel into year-end?

I'm not going to comment on the public markets, but in venture, there's still a lot of dry powder on the sidelines, and that's why you don't see—like, you've seen downticks, but VCs have to use that capital. Whether it's in a Series B or a Series A, they have to deploy that. They have an investment period, and so we're still going to continue to see private investment.

When I see a deal like Verona, everybody gets excited about that sector, understanding that you might have taken a specific acquirer off the table for that specific target or that specific disease area. But I can tell you everybody gets very excited: “Okay, wow, we have hope that the investors will want to come in,” because this is a sector of interest. So I think M&A has kind of an overall positive effect. I think the positives outweigh the negatives that you're highlighting, Josh, which I think should be the right way to think about it, right? There's less money to acquire, but I think it's a boost to a disease area or a category where people want to invest more, hoping that there'll be a future target.

So I don't know. I don't want to say I'm optimistic, but I do think that the more of these headwinds that get behind us, I think the better off people are going to feel, more comfortable. At the end of the day, you guys know this better than I do: The public valuations have to be healthy, and that has a trickle-down effect. Until we see IPOs and healthy valuations in public biotechs, I think it's really hard to climb up that hill.

Chris, Josh, let me just add one other thing. One of the things that's not included in this calculation is all these big licensing deals, too: Bristol Myers Squibb, BioNTech, Pfizer, and so on. I'm going to do that analysis with our data in the next few days. So there's a lot of all that money, too, and clearly somebody thinks something's going on with Summit because the share price has been jumping up for no apparent reason.

People have been trying to find reasons. Was it something that happened to the Chinese label for Akeso's drug? Of course, nothing happened. So there's all that coming, and let's see how much money they've been pouring into biotech that way. Hopefully, we can talk about it next week.

Well, I think with Summit it was the expectations for a deal with AstraZeneca.

Yeah, but yesterday it was up 16%. Was it the day before? And, of course, nothing happened. But—

I mean, look, let's see. Maybe Monday.

If I had a nickel for every time I was optimistic about the outlook for biotech and was proven wrong, I would at least have a dollar. So I will—

I'll send you $10. I remain hopefully optimistic but also realistic, given the track record of the XBI over pretty much the last 10 years. And a reminder of where we started, right? Is the sector just too volatile and complex to really attract generalists? And can it work if you don't get generalists? Is there ever going to be enough M&A to lift that XBI?

But at the end of the day, that sets it up for great potential stock-picking. You just have to be an excellent and sometimes lucky stock picker.

Let's move on to some data updates. We got a data update from DiaMedica for the treatment of preeclampsia with its protein therapeutic, and they showed a notable reduction in blood pressure and dilation of the uterine artery in pregnant women. I don't think we've ever seen a data update in preeclampsia—a significant unmet medical need—and for a number of reasons, it can be very, very difficult to develop therapeutics for pregnant women. But it looked like a good start for the DiaMedica team and will be an interesting program to follow, in part because there is such limited innovation for anything that may affect pregnant women.

There's another private company, Comanche Biopharma, that also has a very interesting approach. They've been a little bit quiet as of late, and again, I'm not sure if that just reflects some of the challenges that there can be when it comes to enrolling patients with preeclampsia, or really any pregnant women, because, as you can understand, that's a time when prospective parents really want to do anything and everything they can to make sure their baby is healthy. Sometimes the idea of something novel or experimental can lead to recruitment challenges, but nonetheless, Comanche Biopharma has been able to enroll their trial thus far. Sam, let's go on to the lung cancer survey.

Yeah. We did the lung cancer survey with endless questions, mostly for our own model building and education, but in there we squeezed in a couple of questions about which ongoing lung cancer trials physicians expected to be practice-changing in the coming period. This was a U.S. survey of 53 physicians.

Of course, Summit's ivonescimab, the PD-1/VEGF bispecific, was there. AstraZeneca's TROP2 ADC, the AVANZAR trial, which everyone's focused on, was the most anticipated in terms of being practice-changing. 49% of respondents said they expected that.

But surprisingly, another one crept in there, which got me a little intrigued, and that was Bristol Myers Squibb's relatlimab. You remember, this is relatlimab—it got there in the end—plus Opdivo in combination. This is not the fixed-dose combination in lung cancer.

We know that there have been quite a few of these hoped-for TIGIT and TIM-3 combinations, among others, trying to extend the response rates, survival, or progression-free survival of PD-1-treated patients, and the promise hasn't quite come through yet. We all know everyone's saying, “Why PD-1 and LAG-3?” So I was a bit surprised that that turned up as a hoped-for trial to read out.

That, of course, also fits in with—we put that note out on Monday—perhaps some of the excitement around a PD-1/VEGF for Summit. Around 40% of physicians said they expected it to be practice-changing. Interestingly, BioNTech's BNT327 trial in non-small-cell lung cancer didn't score very highly, but I think that's because currently it's only, like, 5 or 6 or 7 U.S. centers. So familiarity is an issue, and I'm hoping—and I'm pretty sure—that they'll try to expand that recruitment. The Bristol Myers Squibb relatlimab result was surprising. Maybe we need to make sure that we're ready for that data outcome whenever it comes.

Excellent. All right. We also got an important obesity update from Hengrui and Kailera. Ron Renaud, the CEO of Kailera, who's, I think, one of the most successful former sell-side analysts around, looks like he may be on the verge of even surpassing all the successes he's had to date. Pretty incredible track record. Sam, I think you're going to talk about that.

Yeah, he's got a good drug.

That's what it looks like at the minute. This is the drug called HRS-9531. It's developed by Hengrui, and then Kailera in-licensed it. It's a very similar idea to tirzepatide, or Zepbound from Lilly: a GLP-1/GIP agonist, once weekly. They had Phase 3 data in Chinese patients, which is pretty much in line with what we saw with Zepbound in Chinese patients, both using the same method of analyzing efficacy.

There was 17.7% weight loss with the Hengrui drug and 17.5% weight loss for the Zepbound drug at about the same sort of time point—48 weeks and 52 weeks—with similar types of baseline weights for the patients. What's interesting, though, is that the Kailera-Hengrui drug seems to be—the curve still seems to be continuing in terms of weight loss—whereas for the Zepbound trial in China, it kind of started plateauing at 44 weeks. Is that just statistical randomness? Time will tell.

At least in the Phase 2 trials, discontinuations were similar. The side-effect profiles are supposed to be similar, and they haven't even got to the highest doses there. There's still an 8-milligram dose being tested, and we'll see where that goes. But very clearly, at the very least, it's similar to Zepbound.

Where is this going to go? How is it going to fit? Maybe somebody will need to partner with Kailera for the U.S. I don't know what their plans are.

Yeah, I think they're cognizant of the massive capital requirements for what they're planning on doing, and at some point, they need that partner. Yaron, what were you going to say?

Yeah, let me say a couple of things. Sam, you're spot-on. Recall, the GLP-1-to-GIP ratio is slightly different here than with tirzepatide, and that probably explains the higher potency. It's got a little bit more GLP-1 potency and a little bit less GIP potency.

The adverse-event profile is distinctly—you mentioned wisely, Sam, that it's low. I would say it actually definitively looks better than Zepbound across many studies. There is no plateau, and what's really remarkable—recall, the FDA requires 52 weeks of dosing at the target dose—they're not even close to that because it took about 5 or 6 months to dose-escalate the way they're doing it. The efficacy here should continue to get better with time.

Sam, to your point, I think they're even going to go high. There's an 8-milligram dose, and they're going to go even higher than that in Phase 3. I think they're going to start soon—potentially by year-end is our view—their 4,500-patient Phase 3 program.

They're well capitalized. To your point, they'll probably need more capital. That's just a generic statement for anybody running a study like that. But the drug is looking pretty good.

Again, another sign of great innovation coming out of China, too, and kudos that this is a Bain deal with Atlas to spin this out. Great management team. Scott Wasserman developed Repatha, developed at Amgen. This is really a head of commercial—ran operations, ran commercial operations at Lilly. This is an A-list type of team here. I think they should do great.

Yeah. Amazing. Their cumulative track record—to think that that's going to get even better.

Pretty amazing.

Sam, do you want to close this out? Talk about some of the earnings. J&J seemed very strong. Pharma, not so strong—maybe MedTech—and then Novartis, which was a little bit more mixed.

Yeah. As for J&J, they had a very good day on the results. Basically, when you look at the numbers and how they did in the first half, they're being very conservative about the second half, so there's plenty of room for better performance. Of course, I think one of the things that people were worried about was the medical-devices side, and that came through quite nicely.

They dropped the tariff impact from $400 million to $200 million. Questions were, of course, asked: What's going to happen with tariffs? I can't remember if MFN was in there, but MFN probably was in one of the two. And of course, there are no answers, right? Everybody's having constructive conversations with the administration. I bet you that if you did an LLM summary of all of the results, that's what would come out.

We'll see what rate of tariffs the administration is going to come out with—low percentages—and allow people a year to put a shovel in the ground, then say, "Okay, we're starting manufacturing," and don't hit them with a tariff. Hopefully, that's what's going to happen.

What was interesting with Novartis, which did the opposite—although they beat and also raised operating-profit guidance a little bit for the year—was a little bit of worry about Cosentyx, which is 12% of 2024 sales. So it's one of the biggest drugs for them, and they reduced the 2025 sales forecast for that, which is not a good place to be when you've got a drug that's aiming to be a big drug—$8 billion peak sales before it hits 2029 patent expiry, at least on paper.

The question ends up now being: What's the growth rate from 2026 to 2029? They also went in for a $10 billion buyback. So, Josh, I'm convinced they have enough money to go and keep doing M&A. Hopefully, you'll see them as an M&A player going forward still, because they'll need it as they're going to hit into this patent expiry.

Yeah, I would note J&J's Spravato was up 30% quarter over quarter, and a big wave of psychedelics is coming. So, nice to see the traction with that.

Took a while, didn't it? It took a while to get through all sorts of reimbursement challenges that they didn't anticipate, which I think the rest of the field has taken note of. Now we're going to close out where we started. The other shoe that we were waiting to drop just dropped. Reuters noting that the FDA will request Sarepta Therapeutics to voluntarily stop all shipments of Elevidys. So, not necessarily surprising after some of these updates, and it looks like Sarepta shares were halted for volatility. So, we closed where we opened.

Thanks, everyone, for a great discussion. I think the emphasis from today's overview is integrity—something that's so important in our industry. Those who have it and deliver it, folks like Josh and Justin at Amylyx, get tons of respect and credibility for doing so. So, let's make sure that we do what Adam chided us to do more of at the start, and make sure integrity is an important theme to our industry.