第157期｜2025年10月3日

You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news on our industry with a group of biotech insiders. I'm Eric Schmidt, and my co-hosts today are Sam Fazeli, Brian Skorney, and Yaron Werber. For more information about our hosts and guest speakers or to listen to the most recent episode, please go to biotechout.com.

All right, guys. Quite the wonderful week it feels like in biotech, with the XBI breaking out into new ground and maybe the beginnings of a true bull market–type rally here. The news flow, as we’ll talk about, was a little bit more mixed, at least on the fundamental side. We didn’t have the best of data releases, but let’s start with the macro, which I think is the bigger news of the week. Sam, perhaps you can introduce everything that’s going on with Trump, the White House, MFN pricing, tariffs, et cetera.

1. Trump’s Pharma Pricing Deal

Yeah, thanks, Eric. It was quite an event that I’m sure pretty much everybody has watched. We had Albert Bourla, all the key health care figures within the administration, and, of course, President Trump. The CEO of Pfizer and President Trump presented essentially the first of what is expected to be many, or at least several, deals between pharma companies and the administration, and the likelihood is that they’re going to have pretty much the same template.

We characterized this at our end as a win-win and a lose situation, and I think we’ll probably almost certainly talk about all of that. The win pretty much comes from the pharma industry and the president, although, of course, all of these things depend on the absolute details that we get to. But a couple of things that we pretty much put to bed were a very draconian most-favored-nation pricing strategy, which was good to see didn’t come to fruition, and also the 100% tariffs that the president had announced would come into force on October 1, which were obviously put to bed because these deals are starting to roll out.

That’s great news, and, of course, as you can see from the share-price reactions, in general, the market and investors have seen this as positive for the pharma industry. So what did we get? President Trump got essentially 2 key targets of what he was looking for. One is that all drugs sold in the U.S. should be made in the U.S. I think a lot of pharma companies were already going down that route, so that’s great.

I think a vast majority of drugs are already manufactured in the U.S. Of course, we can all then discuss what that means to be, in inverted commas, manufactured in the U.S. Where does that decision get made? Is it fill and finish? Is it the final product? Where is it? Let’s leave that to discussion later.

We get some job increases, and all of this has culminated over the past few months in what we’ve totaled up to be about $432 billion of pledges by pharma companies and some large biotechs, which, of course, include ongoing R&D, ongoing capex, and some new manufacturing facilities. The U.S. gets a possibility of at least aligning non-U.S. prices closer to the U.S., although we’ll see how that will work.

Interestingly, I was just on a call with a U.K. physician earlier today, and I asked him, “If I gave you a survey of drug prices in the U.K., would you be able to fill it?” He said, “Well, no, because nobody really knows what the prices are, and each area has got its own situation. In fact, a lot of pharmacies aren’t allowed to give out the net prices that they pay.” So that’s interesting as to where these calculations are going to be made.

Nevertheless, that is a positive, and I think pharma companies are almost certainly going to end up launching every product, not the majority, first in the U.S., because you want to set the price there and hope that the Europeans and other countries pay their fair share. It seems like the majority of the impact is going to be on Medicaid and Medicare. I wouldn’t call it an impact, because I think what we’re going to end up with is actually potentially more volume going through these various channels, or particularly the direct-to-consumer channels. Let’s see how that all pans out.

Lastly, those are wins for the administration and wins for the pharma industry. I’m sure there’s a lot more detail people are going to talk about in a minute. The loss is Europe. The loss is that if you have launched your product in the U.S. at a price of X, you go to Europe and say, “I’m very sorry, but you have to pay at least the net-price equivalent of X.” So let’s say that’s a 30% discount—not 70%, not 70% to 80%, not 60%.

Europe goes, “Okay, fine. I’m going to increase my drug budget,” which is great for pharma. “No, I’m going to tell you what I’m going to do. I’m not going to increase my drug budget. I’m going to accept your price, but I’m going to have to restrict the drug even more.” So that’s another loss, right? And that’s again good for pharma, because they get the higher margin even if the volume is lower, and then they get the same revenue.

Of course, the other one, which is the worst-case scenario—it doesn’t really count as a win for pharma, but it’s certainly a loss for the European system and patients—is that they say, “No, actually, we don’t want the drug.” In some cases, I think that might happen. I’m not particularly picking on, say, oral GLP-1s, which come along with essentially a major convenience factor that will translate to better patient adherence and, of course, longer-term better outcomes.

But let’s say that’s welcome, and the companies are going, “Well, you know, the competition is essentially generic, so we’re going to have to have a much higher price.” I think that’s the sort of situation where we’re going to have to think about how we model that going forward. So let me leave it at that, and, Eric, you can bring in everyone else and see how they want to respond.

Yeah, wonderful recap. Thanks. And I should have also introduced Brad Loncar. I didn't realize Brad was going to be joining us as a speaker as well, but welcome, Brad. Following Sam’s terrific recap, is this a win-win-win? Are we done now with this massive macro overhang around drug pricing that’s really been weighing on the group, or are we still worried about something else coming into the fourth quarter?

Well, I think in these days, you should always expect the unexpected, so I wouldn’t say it’s a guarantee of smooth sailing going forward. But I do think it was a genius move by Bourla. If you see some Wall Street Journal reporting, it seems clear that this is something he and Pfizer did on their own. This wasn’t a coordinated negotiation by the industry, so to speak, with all the other major companies.

I really think that he’s in a unique position. I think Albert Bourla is arguably the only pharma CEO who really has name recognition and gravitas with the general public, given how visible he was during COVID and just the way he literally tweets and continues to speak publicly these days. I think that most people don’t know who the other big pharma CEOs are.

So I think it had a little bit of an element of gravitas to the announcement because of who he is. I agree with everything that Sam said, and I think that he basically gave away almost nothing and gave Trump the political victory that he needed. I think that’s really the definition of a great deal.

Now Pfizer—and arguably our industry, if all the other companies sign similar deals—has a little bit of pressure off for the next few years and can worry less about legacy products and focus on investing in the revenue streams that new products are going to have. I think it was a good deal for our industry. I think he was the right person to do it. He was arguably the only person who could have gone first in this way.

My biggest reaction to all of that was, “Thank you, Albert Bourla,” for basically doing all of us a big favor and also scoring our industry a PR win with the public, making us all look like what we should be trying to look like: that we’re trying to do things to help people out there. I thought it was a truly great news item for all of us.

Yaron, you wrote about the impact on biotech. We mentioned that the XBI is breaking out into new levels we haven’t seen, I think, really since 2001. Are we in a biotech bull market? Are generalists going to be interested with some of this news flow behind us?

2. Biotech Rotation Gains Momentum

I think we’re in a rotation to biotech. It just seems like over the last couple of weeks there’s been this awakening to health care being a very valuable, undervalued sector among a lot of overvalued sectors. That’s bled into biotech, which has arguably been one of the bigger underperformers in health care, one of the biggest underperforming sectors over the last few years.

So it certainly feels like, at a minimum, somewhat of a reversion to normality. It’s hard to say “bull market,” right? It’s definitely a 2-month bull market relative to where we were, but it’s still a relative bear market to where we are on a performance basis if you screen back to 2020, of course.

But it does feel different, right? To Brad’s comment, I tend to agree. You always expect the unexpected, particularly with this administration, but it does seem like we’re in an environment where good news is good news and bad news is good news.

And people are using any reason to be at least a little more invested in the sector. How durable is that going to be? I think there's a long way to go just to revert to more of a normal valuation basis across a lot of these names. So will we go into really the fanfare of a bull market? I think that remains to be seen, but there's still a lot of upside even if it doesn't go into that type of dynamic.

Yeah, I totally agree. And I'm sure you guys can all back me up. I'm happy to announce that we're getting generalist inbounds, which is unusual. These are real generalists—not the biotech fringe generalists, but real generalists who are calling without knowing a lot about the sector. The feedback we're getting is that interest rates are going to come down. They're getting a little bit worried that the tech cycle is going to start ending sooner rather than later, or that it's on the horizon now, and they're rotating to the next risk level and the next alpha generator. For them, that's biotech, and they're looking at interesting names like Ionis, argenx, and UCB. They're sort of fresh, new names for people to look at now.

To your point, Brian, I'd argue that—I remember when I was growing up under you, right?—we had to be stock pickers. We wanted to be in an environment where we were useful, and what we mean by that is that companies that had good value actually went up, data that didn't work out caused companies to go down, and things actually acted rationally.

I would argue we're finally back to that level. It's hard to say that we're in a bull market. I think we're just—we're finally back to value recognition, and we're still underperforming. Our trackers at the beginning of the year said we're going to underperform the market and should be flat for the year. So I think we're tracking back toward that flat year-over-year, which is sort of where we think we should be for this year. And then hopefully next year is a better year.

It's funny you said that, Yaron. I still get a lot of chiding from my friends who read that Wall Street Journal quote that you just referenced of mine from 20 years ago, where I said, “Companies that had good news had their stocks go up, and those that had bad news had their stocks go down.” It was a genius piece of insight on my part, and I'm glad you remember it as well. It still works.

I think you're right. Go ahead, Sam.

Yeah, sorry. I don't want to take that particular conversation away, but in terms of what is still yet to be worked out, I don't know whether you guys have got this sorted or not, but I'm not quite sure where specialty drugs sit in the middle of all this, in terms of even the new launches having to be priced at whatever MFN will be, which is kind of decided by U.S. pricing. I don't know.

I also wonder—just a throwaway comment here—now that RFK has shaken hands with Albert Bourla, do we think the heat is off mRNA vaccines, or is that too much wishful thinking?

Those are great points, things that we need to keep in mind as we look forward. From where I stand, Yaron, you must be a more popular guy than I am, because I haven't gotten a lot of generalist calls. We've gotten a couple, I will say, and even that is a sea change in optimism. Getting any calls, I'd say, from generalists is something that we're not used to in the last 6 to 12 months.

Brian, you made some really perceptive comments. I hope that we're in a glass-half-full environment, but I also worry that things are changing so quickly that we may start to see even aggressive posturing, where datasets don't only receive the benefit of the doubt, but they get all of the doubt, where buyers start believing everything that management teams tell them, when markets—trees grow to the sky in terms of market opportunities—and all political headlines are dismissed as just being that.

There's a fine line, I think, between optimism and pessimism, and unfortunately I don't know that we've handled that line very well historically in our sector. I feel like we're always on one side or the other of it, and we just can't help ourselves due to other factors. But hopefully this time will be a little bit different.

Well, it's probably, Yaron, in response to your comment. There's no way I'm more popular than you. I think it's purely probably a function of what we cover, perhaps, and the names that are resonating. Maybe that's what's getting traction. And look, this is the new tranche of innovators, right, that are frankly, at this point, not even new. So we're talking about argenx and UCB. Ionis is sort of the new kid on the block now that's resonating with people.

Yeah, terrific small-cap innovative growth stories that are just turning that cusp into profitability as well, which really will, I think, help the XBI going forward. But let's turn our attention to maybe some of the other headlines from the week. There was a little bit of chatter and controversy coming out of the FDA. Brian, you want to start us off on that?

3. The FDA Surrogate Endpoint Fight

Oh, yeah. This is kind of a fun story to follow. Earlier this week, Dr. George Tidmarsh, who was recently appointed head of the FDA's CDER—the Center for Drug Evaluation and Research, the center that really reviews most of the drugs that get approved by the FDA—put a posting on LinkedIn indicating that CDER will be looking at surrogate endpoints used for FDA approval and criticizing some failures to confirm benefit.

He cited the exon-skipping drug, Sarepta's Exondys 51. I think we all know at this point that this has been one of the biggest sources of criticism for accelerated approval—this drug in particular, but the other exon-skippers as well. But he also, interestingly, took specific aim at a drug called Lupkynis, or voclosporin, for the treatment of lupus nephritis, saying that it has significant toxicity and has not been shown to provide a direct clinical benefit for patients.

This is kind of odd because voclosporin actually has full approval based on a 52-week randomized placebo-controlled study. I guess one could reach for an argument that a complete renal response is not a direct clinical benefit, but a measure of UPCR and eGFR improvements together. But in the world of approved drugs that really haven't confirmed a clinical benefit, I would say this is very far from an egregious case study for a very senior FDA official to be citing, at least from the information that's publicly available.

Adam Feuerstein at STAT wrote this up. It was definitely going around through the biotech channels this week because Tidmarsh was once the CEO of a company called La Jolla Pharmaceutical Company, but resigned in 2019 when Kevin Tang from Tang Capital, who was the largest shareholder and chairman of La Jolla at the time, was quoted in the press release announcing Tidmarsh's departure.

Notably, the largest shareholder of Aurinia, at least in the last filing, is Tang Capital as well. Once this all started to blow up, Tidmarsh wound up deleting the post, saying that it did not reflect the views of the FDA or HHS. Aurinia also issued a press release titled “Aurinia responds to now-retracted LinkedIn post,” and that press release just reiterated that it had received full approval from the FDA.

So those are kind of the facts there. In the background, everyone's scratching their head at what the relationship was back in the day between George Tidmarsh and Kevin Tang at La Jolla, and whether there are any implications to such an odd citation from his LinkedIn profile as a critique of accelerated approval here. This obviously has implications for the scientific rigor at the FDA. I know we all have differing opinions on the level of chaos that this current FDA has, but we'd love to hear any thoughts from you guys on that.

Yeah, we can go on the chaos in just a moment. Yaron, did you want to also note the IO Biotech news?

Yeah. So IO Biotech is also a cancer vaccine that's fairly unique. They had amazing phase 1/2 data. They're targeting IDO and PD-L1 and, admittedly, it was not a controlled study out of 1 center in Europe, but it was really sort of knock-your-socks-off data.

They did a phase 3 that just read out. A lot of the feedback is that the study was a little underpowered, and it looks like that was probably right. They just missed—it was 0.06 on PFS, obviously underpowered but trending in the right direction. There are some interesting tidbits in the data as to which population it works in. This is frontline melanoma, by the way.

And so they went to the FDA. It was very safe, by the way, on top of Keytruda, and showed better data than you would have expected on Keytruda alone. Obviously, it's a controlled study. Remember, this was an important case study given some of what CBER has said in the past. Admittedly, they were more skeptical about PFS as an endpoint in vaccines, but it was more on the mRNA vaccine. And there was a question about whether they'll be able to file because they literally just missed, and whether there'll be flexibility.

And the answer from the FDA was no: You need to run another study. The next test case is potentially going to be—and we're going to talk about this shortly—at ESMO, where we're going to see data from zanzalintinib in CRC, as well as phase 3 data from Exelixis. That's going to drive questions about what to expect from studies where most of the patients are coming from ex-U.S.

The FDA is continuing, and we're all trying to figure out what this new flexibility is going to do. It's not necessarily going to be that easy to call, which is what we're seeing on our side. There's flexibility, but it's not always what you expect.

Yaron, real quick, I just want to echo what you said and say that my personal take, for what it's worth—which is nothing—is that I think the FDA made the wrong call here. I've visited this company in Denmark and also interviewed her shortly after the data came out, and the person running this company, Mai-Britt Zocca, is a very serious researcher.

This is definitely not a case of a hype-y CEO whipping up investor fervor to get something approved that should not get approved. This barely missed, as you said, and I think this is an example of p-value worship that's not in the best interest of science or patients. I understand why the FDA might not want to set precedents or vary widely in how different things are treated, but to me, this would have been a classic example of looking at this and asking, “Is there a signal going on here?”

Maybe this deserves an accelerated approval while we take the years it takes to run another study to see whether it could confirm the result or not. To me, it's a great example of the utility of something like that.

So, obviously, that was a close call—a tough decision that the FDA had to make. Brian mentioned the chaotic LinkedIn release from George Tidmarsh. It's good to know that I'm not the only one in here who doesn't know how to use social media.

There was also a case of a drug being rejected—a Fortress Biotech drug for Menkes disease—based on another CMC issue. They received a CRL. By my count, we've had Ultragenyx, Biogen, Scholar Rock, and now Fortress getting relatively recent CRLs, all in orphan pediatric indications. These are all drugs that probably should have been approved.

The bigger question is, how are we feeling about the FDA? How would you guys rate this leadership team and its ability to execute?

Well, can we double-click? We've talked about this in the past on Ultragenyx. This is UX111, a gene therapy for MPS III Sanfilippo syndrome. Remember, this was going to be the first test case under CBER's, really Peter Marks's, accelerated approval pathway. They got a CRL because of some idiosyncratic manufacturing-related issues involving the number of temperature probes they need to use in shipping. The FDA actually came out and said that, on the clinical side, the data looks really good and is acceptable not for accelerated approval but for full approval, based on single-arm data not controlled against a historical control and on the benefit from baseline. So they skirted the whole question of accelerated approval, showed flexibility, and potentially proved them down the line in efficacy, but they have to work through the manufacturing issue. So it's kind of equivocal how to read that.

Yeah, I guess my point was we got 3—sorry, 4—CRLs, all due to CMC. Again, Biogen, Ultragenyx, as you referenced in detail, Scholar Rock, and now Fortress. It seems like a lot. It seems like we're not getting through the workflow that needs to happen from a CMC standpoint, which really shouldn't be that hard for some of these indications. Biogen's drug, Ben Roz, is already approved, for God's sake. I was just referencing maybe some execution missteps there, but again, the bigger question is how you guys feel about leadership.

Good point. Good point on that. Yeah, especially on Spinraza. No one wants to pick up that potato. Go ahead, Brian.

Not great. I think this is sort of a top-down issue. There just seems to be chaos and inconsistency. There seems to be a huge gap between these idiosyncratic decisions on safety and efficacy in applications, where sometimes there's an enormous level of flexibility and other times there just seems to be no flexibility at all. It just doesn't seem consistent.

I think it's complicated by the different views in HHS. We've talked about Vinay Prasad before, but he seems like such an odd duck to have in this administration. Classically, he's perceived by most people as an overregulator—someone who would be all in on having a very powerful FDA to demand high-level safety and efficacy studies. At the same time, Marty Makary goes out there and talks about looking at just preclinical data and maybe approving things based on AI.

There is this disparity, and it's very hard from an industry perspective to hone in and say, “This is the level of evidence that one needs for an approval.” Because of that inconsistency, it becomes quite hard. This is not just a criticism of this administration, but of the prior administration and the administration before that. There's more and more of a demand to characterize who has ultimate power to sign an action letter, what their opinion is relative to the review division, and what their boss's opinion is relative to theirs.

These things have mattered more and more, where one person will feel fine overturning everyone else's decision below them. I think that's been a concerning trend going on for a decade or more.

I think you're right. This administration and this leadership team at the FDA did not start that top-down inclination to overrule senior staff members. That trend has been ongoing for a while, but it does seem like it has potentially accelerated in the last few months, if not years.

We're seeing more and more two-tiering of systems at the FDA, where the top brass have an idea of where they want to go and what they want to do. Maybe it's more politically motivated; maybe it's higher-level policy stuff. But they haven't spent the time to bring the senior staffers underneath them along to their view.

The senior staffers are continuing to conduct reviews. They're continuing to be rigorous and conscientious in their workflow, but often it doesn't really matter, and that seems to be somewhat problematic. Yaron, you referenced just how hard it is to read this agency. I sense that may be part of the problem.

4. Genmab Buys Merus

Okay, well, let's move on to some of the big company news of the week. We had yet another meaningful merger and acquisition this week. M&A has now seen 5 straight weeks of meaningful deal flow in biotechnology.

In this case, it was one larger biotech, Genmab, buying a midsize biotech, Merus. The acquisition was valued at about $8 billion, an approximately 41% premium to where Merus had been trading. The asset here, of course, is Merus' petosemtamab. It's a bispecific candidate that targets EGFR and LGR5 in patients with head and neck cancer.

Petosemtamab is in 2 phase 3 studies, 1 for first-line and 1 for second-line head and neck cancer, and Genmab has talked about also doing additional trials in earlier stages of the disease. The other derivative impact here is that the company we're involved with, Bicara, was up even more than Merus week to date. Bicara is up almost 50%, and I think Merus is up about 37%.

What's interesting about that is that Bicara is Merus' chief competitor. You might want to ask how the competitor that didn't get acquired can perform as well as or outperform the company that did get acquired. I think there's a lot of sentiment from investors that there's heated strategic interest in head and neck cancer, a tumor type that really hasn't seen much innovation before.

I think there's now some discussion that there might be other interested parties and strategic transactions that Bicara can benefit from. Even before the Merus news, Bicara was getting the short end of the stick from investors. It had about 1/8 the valuation of Merus, so maybe it's not surprising to see that disparity in valuation close at least a little bit.

I don't know. Sam or Yaron, did you guys want to add to this discussion?

Yeah, sure. One of the questions that I immediately ask myself is, why didn't any of the larger pharma companies do this? Of course, it doesn't matter from the sell-side perspective. The dollars that Genmab is paying are just as valuable as the dollars that a large pharma company would have paid.

The interesting thing here, of course, is that I'm sure you've got your view of Bicara and Bicara's data.

We do view the Merus data as more broadly applicable in the patient populations, looking at the HPV-negative and HPV-positive patients, et cetera. But the question therefore ends up being: What happens if somebody with deeper pockets or broader shoulders does come out and take up Bicara? What does that mean for Genmab in terms of marketing this product in the longer term? Those are questions that I'd be interested to see what you guys think.

The data—we could debate the data, right? At the end of the day, they're not directly comparable: different follow-up periods, et cetera. So it's harder to make a hard judgment on this. Of course, Genmab could have gone and taken out Bicara, but I think the calculation they made is that they need something that's going to be on the market by 2027. I'm not sure that that is the case for Bicara.

That's the read I've got. And, of course, the sense that we got from our valuation analysis—and that's what the company also said—is that the colorectal opportunity here is not really in the calculations, and that's an upside, as are probably some of the earlier uses of the drug. So I'd love to hear what Yaron and you guys think on that comparative efficacy and the risk to Genmab now that it's going to have a competitor to whoever takes Bicara out, if somebody takes Bicara out.

Yeah, yeah. Go ahead.

Well, we cover Genmab, so we give them a lot of credit. They're a smart team. The challenge in biotech is—you know, it's like The Incredibles, right? Remember when the son runs and he's like, “First,” and then the dad yells at him to be second? In biotech, when you're so successful—in this case, it's Darzalex—eventually that party will end, and it's very hard to offset that royalty stream.

And so they're really trying, and they're getting aggressive. The deal is definitely not cheap, and our colleague Tara was extremely bullish here on Merus, and she had a great call. On the Genmab side, they're taking on a tremendous amount of debt. Just between the interest expense they're accruing and the loss of interest income from cash, it's about $430 million annually. So it's fairly dilutive because you're taking opex on top of it.

It's going to be meaningfully diluted for 2 years, and then the data looks really, really strong. As you said, Yaron, there's the question of why Bicara is undervalued, because the data doesn't look necessarily that different. It sounds like we're both bullish on this area. On the Genmab side, it's a huge bet because at this point they are fully levered, and there's no room to do anything else. It just tells you that for good assets, you still have to absolutely pay top dollar. This, plus the other things that they've done, really starts moving them away from that Darzalex cliff, especially if it works, but they took a lot of risk, which we'll see if it pans out.

Very quickly, I'll just add that I give them credit for being aggressive, but I do think it's riskier than is being talked about because nobody knows definitively what the response rate of pembrolizumab is in this setting. We've never seen real randomized data, and until we see a randomized phase 3 study with this asset or other assets, this is a classic example of where IO has really surprised people once you actually do randomized trials. So I think that's a risk.

And then commercially, maybe why did a big pharma company not step in here? This is a classic case where, in today's day and age, there are literally 100 Chinese companies that will sell you one of these for pennies if you are a little more patient and have the scale and all of that—not having to worry about being first to market and eventually making it further down the line. So I think it's risky for those 2 reasons as well.

Good points, Brad. What about the broader theme here, guys? We have seen substantial M&A each week this fall, for 4 or 5 weeks running. Is there something underfoot here—a real trend—or is this just dumb luck and random clustering of news releases? Brian, do you have a thought on that?

I have a tendency to think it's a little random, but I think people will really push back on me on that and say it's pharma sort of waking up to the valuations starting to move and trying to take the opportunity to get in before they move too much. But I've always found it kind of hard to find more than just a little bit of an idiosyncratic nature to when M&A occurs, outside of when it's a particularly big area that pharma has acute demand for.

I remember ADCs; there were just a lot of M&A deals going on there. Maybe in the GLP-1 space you see a little bit of it now, but outside of that, call me one of the more skeptical people that this is an open door of M&A that's starting to occur.

Let's not forget, though, I mean, I'm not going to disagree with Brian because I'm not sure there's a crystal ball that anyone has. Every year when we start, I think Tim or any banker would tell you, “I have a great book of M&A coming up,” and of course, this is the third year that the first half was slow, and then it really picked up. The first quarter was slow, and then it really picked up.

But you do have people looking into the horizon at lower rates, right? So the opportunity for refinancing down the road can be meaningful at a lower rate, and of course nobody knows what that rate would be. At the same time, Genmab can't just keep waiting until rates actually hit 2% or whatever it is they're heading to, because they have this cliff and they had to do something. Was this the right asset or not?

Brad's point is good, although I'm going to try and get that answer for you, Brad. Are people paying just pennies for assets out of China? I doubt it. I've got the numbers. One day I'll add them up and send them to you. The point is that it is a risk. But at the end of the day, the cost of capital should be getting lower. You can't wait for the day that it happens, but at least you can plan forward like that. So there's one element there that could be driving some of this.

And, of course, more certainty is coming back into this pricing environment. The tariff situation, which I think as time passed people got more and more comfortable with, and the conversation between Albert Bourla and the administration kind of put a cap on that. So perhaps there's some of that, although Genmab I'm sure had made up its mind way before the announcement from Pfizer and the administration.

Well, this is nothing new, right? Deals get done when there are derisking events, when the buyer is comfortable and the seller has gotten remunerated. And I think we also can't ignore the fact that the market is finally remunerating companies, so they're much more comfortable selling now. That seems to be our thinking here.

Yeah, I agree with everything you said. I do think there is some stochastic nature to deal flow, and nobody really can time their release or their transaction to anything else. On the other hand, Sam, you're right: The macro has changed dramatically, and with MFN and tariffs and some of the other issues behind us, we are finally coming out of a nuclear winter, not just for biotech stocks but also for pharma transactions. So I would hope that we would see some more of these.

5. Clinical Data Tests Biotech

Let's continue to move on to some of the clinical data sets from the week. I guess the big disappointment this week was the MoonLake Immunotherapeutics news. I'm not sure if others cover this company. I don't, but we do pay some attention to the hidradenitis suppurativa space, the HS space, and MoonLake and its drug were thought to have potentially a best-in-class opportunity here with an IL-17A/F inhibitor.

Unfortunately, sonelokimab failed to differentiate itself versus the incumbent UCB's Bimzelx, but also failed to achieve statistical significance on 1 of 2 phase 3 studies. So that really puts the drug's approval in jeopardy in a way that I don't think anyone would have predicted. I think there were a lot of folks trying to game how differentiated sonelokimab might have been versus Bimzelx into this data set, but no one expected this disastrous result.

The stock is down over 85% this week, and looking forward, it's really unclear how this company gets out of it and gets moving forward. This was a pretty major binary for the industry. I think a lot of us woke up on Monday morning not sure how the XBI was going to perform around it because there was so much capital and interest in this event, and yet we shrugged it off and moved on. Again, maybe we saw a bigger picture that was more favorable in terms of other companies doing other things at valuations that are reasonable. But Brian, why don't you introduce the Larimar news? I know that was also an interesting situation.

Yeah. Another interesting situation, regarded as negative on the day of, but it has been climbing back pretty strongly. Management has been doing a good job with investors, getting them over the line here. Larimar is developing a drug for Friedreich's ataxia. Their update was on their clinical study, which is potentially a study that's approvable under Subpart H. I think that's the thesis here. The drug is a recombinant frataxin, which is the protein that's deficient in FA.

The endpoint of this study is frataxin levels in skin, and they've already shown good levels in earlier data cuts. This week, they showed that, in 10 out of 10 patients who had 6 months of nomlabofusp treatment, frataxin levels in skin measurements were more than 50% of normal. They also showed a median improvement from baseline in mFARS of 2.25 points. This is a primary clinical endpoint in Friedreich's ataxia studies. It was the basis of approval of Biogen's Skyclarys following its randomized controlled study. But this is an open-label study, so it's not an RCT, and it's showing a similar effect size to Skyclarys from baseline.

This is all good, but they also announced that, out of 39 patients dosed in the study, 7 of them, or 18%, experienced anaphylaxis. The stock closed on Friday at $5 and change and was in the low $3s when it opened earlier this week. But, as I said, management has been doing a good job getting investors comfortable. It's climbed back to the mid-$4s right now.

I think the debate here is really whether skin frataxin is a surrogate endpoint that's reasonably likely to provide a clinical benefit, and how much evidence Larimar is generating to make that case. I think most people would agree that, if you could get functional frataxin levels in the tissues of interest, this would be a no-brainer for Subpart H approval. But skin frataxin isn't a direct measurement of a tissue of interest; it's a surrogate tissue for a tissue of interest. We don't have measurements of the tissues that would ideally be measured for this study. But it's a very good marker in terms of the amount that they're showing in skin.

The question becomes: When you introduce this very real risk of anaphylaxis, how confident can one be that the skin frataxin measurements and an improvement from baseline in mFARS scores in an open-label study are enough to support the argument that this is reasonably likely to predict a clinical benefit? I fully expect this is going to be another big FDA approvability debate as we get closer to their final data cut, and they're talking about submitting a BLA for Subpart H in the second quarter of next year.

So, one to watch closely. It's another name that's on the margins of whether they will or won't get FDA approval. The Friedreich's Ataxia Research Alliance, the advocacy group here, is very powerful. A lot of people think they had a very significant role in ensuring that the FDA approved Skyclarys itself, which was the subject of a lot of controversy on the Street back in the day, before Biogen bought it. I look forward to following that one over the next year or so with the FDA debate.

Great recap. Brian, did you or Sam want to cover Enanta as well and their RSV program?

Sure. I'd love to cover Enanta. I've been following that one for a large part of my career, since they were one of the main players in hepatitis C.

They press-released data from their respiratory syncytial virus study in high-risk patients on Monday. This is an antiviral for RSV. We've had a couple of recent vaccine approvals for RSV, but this is for the treatment of RSV. In premarket trading, it was down because it missed the primary endpoint, which was the reduction in lower respiratory tract symptoms.

Generally, we look at phase 2 studies, and when they miss primary endpoints, people throw them out. It certainly started to look that way—it was down 20% premarket. Then it started rebounding and has been way up since about midday on Monday.

While we were reviewing the data premarket, I was telling my associates, “I kind of actually think this data is pretty good. Am I crazy?” My associates were smarter than me. They said, “No, no, you're right. This is pretty good data.”

When you look at it, the question is: What is an antiviral supposed to do for this disease? It seems like it's doing all the things that you would want an antiviral to do. You're showing a very clear reduction in viral load, with good separation from placebo across the study. They're showing improvement in a number of metrics across the overall study beyond just the 4-symptom lower respiratory tract symptom endpoint. Most importantly, perhaps, the prespecified subgroup they were looking at—higher-risk patients, such as elderly patients 75 and older or patients with comorbid COPD—showed much more robust results.

I think RSV—and, look, Enanta has had a tough run. I think they're really good at making drugs; they've just gone after indications where it's been really hard to define a true clinical benefit or move the needle since their days in hepatitis C. I think we'd all agree that respiratory viruses are a hard indication to chase, because so many of these diseases resolve in most people so quickly. It's hard to ever pick up a benefit unless you're running huge studies.

Here, I think what they were successful at was finding a high-risk population that you would truly be worried about with an infection. It was not statistically significant, but there was a pretty significant number of patients in the control arm who wound up hospitalized for RSV versus those on treatment. That may just be random noise, but I think, with all of the other data points, it's pretty supportive that they have a real antiviral here for this infection.

Now the question is whether the data is good enough to find a big pharma partner who would be interested in developing this as a product to put in hospitals or nursing homes to try to intervene in higher-risk patients who come down with an RSV infection. I kind of think it is.

6. ESMO And Earnings Preview

Thanks, Brian. Awesome recap. It really wasn't that busy a week in terms of news flow, and I think we covered all the major data releases. That'll give us an opportunity to do something we don't often get to do on Biotech Hangout, which is look forward a little bit and see what's coming down the road later this month.

We've of course got major medical conference season kicking off for the fall, and I know a bunch of us are going to be going over to Berlin to see what's happening at ESMO. We'll talk about that. Right around the corner, for better or worse, is earnings season as well. I thought maybe we could all chime in on what types of prints we're looking for and maybe who's most at risk of seeing a performance reaction around their Q3 earnings results.

Let's start with the Q4 conference season. Sam, I know you're going to Berlin. Yaron, are you going as well?

I'm not going to miss going to Berlin.

All right. Maybe we should do a version of Biotech Hangout from Berlin on the ground in a few weeks' time.

Just the 3 of us.

I love it. I love it.

But what are you guys looking for? What are you most excited about seeing?

Yaron, go.

For us, it's 3 things, to boil it down. I think they're actually all late breakers, interestingly enough.

Amgen bought a company called Five Prime to get their FGFR2b antibody for gastric cancer, based on that promising phase 2 study. We're going to see the first phase 3 study, called FORTITUDE-101. These are patients who are overexpressing fibroblast growth factor receptor 2b in gastric or gastroesophageal cancer. This is the combination; this is the doublet. Remember, they said they hit the interim analysis on survival. They continue to follow patients, and it looks like the latest cut on survival doesn't look as good as the first cut.

Then there is a second study, which is the triplet. So it's chemotherapy, bemarituzumab, with immuno-oncology. I think they're both probably next year.

The next one is zanzalintinib in combination with atezolizumab in colon cancer. This one is controversial and important because they did hit survival in all patients with refractory colon cancer. That's really good, but we don't know what drove the benefit. Was it across all patients? They also had a specific subset of patients with liver metastases who don't do as well.

The one thing to keep in mind—and this is important for the FDA these days—is that most patients in the study were enrolled outside the U.S. There's also a question of whether, okay, great, you beat regorafenib, which is no longer the standard of care. It was approved 12 years ago. It's sort of the weakest kid on the block, but how do you do relative to the standard of care across studies? The standard of care is 2 other drugs that do a lot better.

That's going to be really important to figure out with the new FDA. Is just having a survival benefit against an old standard even relevant when the study is conducted ex-U.S.?

Finally, Brad, this is your turf. We follow BioNTech; you obviously follow Summit. They have the data with ivonescimab, their PD-1/VEGF bispecific, with chemotherapy, head-to-head against Keytruda plus chemotherapy. Remember, this is HARMONi-6. They beat it in China. This is squamous non-small-cell lung cancer. They beat it on PFS, and now we'll see the data.

And again, the question is, okay, great: are you actually going to show a survival benefit or not? But I’m not sure the data is mature enough, and hopefully we’ll be able to at least look at trends. So all 3 layers are important.

So I’ll pick up from where Yaron left off. Both of those 2 other studies are quite interesting for us, too. But here on HARMONi-6, I think what’s going to be interesting is the comparator arms.

Of course, for the ivonescimab arm with paclitaxel, nab-paclitaxel, and carboplatin, we have data in China. When you look at it comparatively with the KEYNOTE-407 data, which of course is Keytruda, it did look better there. Median PFS seemed a little better at the same follow-up period—early, 7.5 months or so.

The interesting thing would be how the control arm performs in this trial. That’s the one we need to look at, because that was the rationale for the RATIONALE 307 trial. But PFS, as Yaron rightly said, is quite interesting.

And remember, this is squamous cell carcinoma, so a non-small-cell carcinoma. This is a group of patients where normally you would avoid a VEGF inhibitor. In all the studies that we’ve seen in the subsets, from even the 3SBio famitinib drug and the variety of other ones that I’ve tried to dig up, we don’t see the usual problem of hemoptysis, which is bleeding in those patients and would be the result of VEGF activity.

At WCLC, the discussant of the HARMONi-6 data said that all he sees here is VEGF activity. So that continues to argue against the comment that this is just VEGF activity, which of course I think most people thought wasn’t there. That’s going to be interesting to look at. Of course, OS, as Yaron said, will be important as well.

The other thing that we’re looking at is a trial from RemeGen in gastric cancer, and guess what the target is: PD-1/VEGF. It’s an interesting combination, and safety will of course be the biggest question here—a CLDN18.2 ADC plus a PD-1 inhibitor, so RC118 and a PD-1 inhibitor, in this case Junshi’s PD-1 inhibitor, toripalimab.

It’s not necessarily an enormous trial, but we’re very interested to see how this looks. Is this another VEGF that’s going to show up? No one has really talked about this particular one, so that’s 1 we’re looking at as something that’s off the beaten track.

And of course, you still have all the AstraZeneca data. They’re in Presidential Session 1 and Symposium 1, and they have the first 2 presentations. Those are DESTINY-Breast11 and DESTINY-Breast05, where we’re looking for significant efficacy data. I’m pretty sure it’s going to be very good in terms of the readout, because they’ve already said they’ve had statistically and clinically meaningful datasets.

So we’ll wait and see how this all pans out. We could keep going, but I think this is enough for the conversation today.

No, thanks. You guys covered Summit’s ivonescimab—or, actually, Akeso’s ivonescimab—in the HARMONi-6 trial quite well. I think it’s probably going to be a little early to see overall survival, but like the 2 of you, I’m very keen to see what the hazard ratio is on PFS.

We’ve got a couple of other small- and mid-cap names that are going to be at the conference as well. IDEAYA has a drug called darovasertib, which is in ocular melanoma, with a neoadjuvant update of around 90 patients. I think that’s also an oral presentation, so I just want to highlight that as something that has continued to look very, very interesting in ocular melanoma—a tough tumor type with very few alternative options.

I just want to say that was also on my list, but I thought you’d had enough.

That’s going to be a good one. That’s going to be a good product, in my opinion. And then we’re also looking at Verastem in the G12D space. Their partner, another Chinese player, GenFleet, will be presenting a pretty good cohort of data in pancreatic cancer.

This, of course, is looking to try to get a share of a market that’s seemingly dominated by Revolution Medicines. But the efficacy data from their KRAS G12D ON/OFF inhibitor have looked really good. They’ve had some tolerability considerations that they need to work around.

Again, I just highlight that in pancreatic cancer—another tumor type that’s in dire need of innovation—as being quite interesting. We’ve just got a few minutes here. What’s on your bingo cards for Q3 earnings? Are there any companies in particular that have a lot to gain or lose as we start to turn the clock forward? Yaron, you cover a lot of the big guys.

Well, argenx, we think, is probably going to be okay and in line after a huge Q2, so we think that should be okay. Legend—we just published a note today. Recall, they’re making Carvykti with Johnson & Johnson. It’s a BCMA CAR-T for multiple myeloma, and they’re the market leader right now.

There have been capacity constraints, and they’ve been growing capacity between their current sites in New Jersey and Belgium. That’s been taking probably a little bit longer than expected. I just kind of think, if any 1 of us does a renovation of an apartment or a house, how long that takes. Think about building complicated global plants.

They have been bringing on more capacity, but it looks like there’s going to be an incremental expansion in Q3. Because of that, it looks like they’re probably going to be a smidge light—still growing mid-teens quarter over quarter, but not the 20% Wall Street was looking for. It looks like the new capacity is really going to be kind of late in Q4.

They can probably still hit the $1.9 billion consensus, but they might need to round up the numbers to get to $1.9 billion. Anyway, next year is hopefully when they’re finally not going to be capacity-constrained. But we’ve been fielding a ton of questions on Legend, and it’s looking good. I don’t know about the rest yet.

What about BioNTech and Moderna with their vaccines? Have you been tracking them? You go ahead, because I know you’re tracking them. They’re looking down 50%, right? They’re not looking good at all. Go ahead.

No, they’re not looking great. It’s hard to do the week-over-week comparisons because of the different starts, but if you put them on the same basis, I don’t know if I’d say 50%, but they look down.

The difference—what I find interesting, I don’t know if you looked at it—is that Moderna doesn’t seem to have done much with pricing, but based on our data points, Pfizer seems to have taken a price increase this year. So that might mitigate some of the pressure, but that’s what I’m looking at. I don’t cover as many stocks as you do, though.

Yeah, COVID vaccines are sort of a nice-to-have these days, only for certain populations. Brian, you get the last word on Q3 earnings.

Yeah, I would just note that there are some interesting launches underway that people will be very focused on. Gilead will have its first real quarter of launch for lenacapavir PrEP, which has really been the driving force behind the rerating over the last year and a half.

Vertex will get another quarter of Journavx sales. It’s their pain drug that launched at the very beginning of this year. Neurocrine obviously gets driven a lot by Ingrezza sales, but they have their own launch this year that started at the beginning of the year. So I think a lot of eyes will be on that one.

Terrific, guys. Thank you very much. We are out of time. So that brings to a close this episode of the Biotech Hangout. I hope that our listeners will join us next week for another hopefully very educational session.