第159期——2025年10月17日

It’s always good to kick off with a discussion around sentiment. I feel like we had an incredible streak, at least with Eric and me on the show a while ago, where every week we were lamenting how much of a bummer it was. But it feels like the XBI has been strong, and I’m sure we all get asked, “Do you think this is sustainable?” There are always the same kinds of risks out there, right? There’s still some noise around drug pricing, but it feels to me like we’re seeing a bunch of tailwinds: more M&A, good stock reactions to positive data, and smaller and midsize companies successfully launching drugs.

There’s noise about interest rates coming down. The list goes on. So I guess not only can we all talk about the factors, but it would be good to hear—maybe Graig, you can start, and then we can go around the horn—how we feel about this market and how sustainable it’s going to be over the next 6 to 12 months.

1. Biotech Sentiment Turns Positive

Thanks, Paul, and thanks for having me. It’s been really interesting to see, particularly as I’ve been able to do marketing meetings. For those of you who are on this podcast, for sell-side analysts, when we go on marketing, we travel throughout the country to visit with buy-side investors to get a sense of what they’re interested in.

In the past 2 or 3 weeks, I’ve been able to market in Boston and Dallas. I’m actually doing this podcast from San Francisco right now, but I was visiting with investors in San Diego and even Los Angeles. Yes, there are some in Los Angeles.

That being said, it does seem that sentiment in biotech is very positive right now. I think it’s caught a lot of people by surprise. Certainly, if you look at the stock charts, and as imperfect as the XBI may be as a proxy for sentiment, I think there’s also another ETF that’s relatively new to me that someone pointed out. It’s called the BBC.

We’re talking about more than 40% performance for the XBI in the past 6 months, and it’s even closer to 80% for the BBC ETF, which tracks more early clinical-stage companies. This has been happening clearly off the lows of 6 months ago, after the tariff announcements by the current administration. Obviously, the comp is quite easy, but it really feels to me that in the past month or so, it’s become very tangible. People are asking, “What has changed, if anything has changed?”

I do think that sets up an interesting conversation we could have in terms of whether anything has really fundamentally changed. Certainly, there were macro factors, as Paul pointed out earlier, with regard to the uncertainty earlier in the year around Washington, D.C., policy and its approach to health care—whether it was RFK Jr. and what he might have brought forth, changes at the FDA, and obviously the noise around potentially forcing lower prices for the pharmaceutical industry.

I think where we are today is that it’s not really as bad as people think. There’s still the uncertainty of what may come out of Washington, D.C., every day, but from an investor perspective, worst-case fears have not materialized. We have positive data sets being reported, stocks are moving higher, smaller companies are able to raise significant amounts of capital, and you do see follow-through performance.

We’ve got an administration that’s generally trying to lower interest rates, which I think is good for the biotech sector’s narrative. There are lots of different factors. How sustainable this is, I think, is the key question, and we’re always trying to figure that out.

We’d like to see a very gradual, sustained increase, at least from my perspective, versus some very meteoric, rocket-ship-like performance for biotech, because that sets up the potential for a crash sometime thereafter. But I’d love to hear what my other panelists think about where we are in biotech sentiment and how long it may last.

I’ll maybe just jump in real quickly. I saw a statistic yesterday that I thought was encouraging. This is now the 2nd straight week of positive net fund flows into the sector, which we haven’t had in quite a while.

I do think sentiment is getting stronger. I think it’s probably driven by the interest-rate cuts that we saw and expectations for more of that, the numbing of the Washington policy risks and environment, and obviously the continued drumbeat of M&A. It’s all coming together in a way that’s good.

I do think it’ll be sustainable—maybe more gradual over time—but it is going to be a sustainable recovery. It’s been a long time. It’s been a super long time. It’s been a very cold winter.

I know. I feel like 2021 was just a couple of months ago. Eric, what do you think about the sustainability of this? Maybe you can also comment on the regulatory environment for biotech right now and how much of an opportunity or risk that is for the run.

You and I have talked about how, on the one hand, the FDA is communicating a lot of rosy, flexible, sweetheart deals to a number of companies, but on the other hand, you’ve been dealing with the Scholar Rock situation, and we’ve seen other signs of maybe reduced FDA productivity. Let’s hear your overall thoughts, but I’d love your perspective there.

2. The FDA Faces Fresh Friction

Thanks for that, Paul, and I loved how Graig set up this discussion. I think he did it extremely eloquently in terms of, “Okay, what’s going on out there?” He’s right, and John, you’re right, too. There’s no doubt that an influx of funding is coming in.

Paul, you and I were on the Hangout a couple of weeks ago. We talked about how, for the first time, we were really starting to get a few calls—or maybe now more calls—from generalists, and that’s certainly continued for the last 2 or 3 weeks. There’s a deluge of interest right now from folks we really hadn’t talked to for months or years.

That’s the driver for why the XBI has outperformed. I think the XBI has now outperformed the S&P 500 by a whopping 17% since the beginning of September. That is a crazy amount of outperformance relative to the broader index in a very short period of time. That can only be one thing: money coming into the sector, as John mentioned. We should enjoy it while it lasts. It’s been a long time.

I do think biotech was oversold. I do think we were being punished for reasons that we had no business being punished for. But then the question is, what has really changed? Honestly, I’m not sure that things have changed that much. I don’t think they were ever as bad as folks thought back in March or April, and maybe we need to be a little careful that today they’re not quite as good as the stock performance might have you think.

You brought up the FDA, Paul. I’ll pick at that a little bit. I think we’ve still got an agency that’s very politicized. We know that coming off the Tylenol and leucovorin debacle of a few weeks ago, we’ve still seen some misadventures with regard to the FDA being able to get its work done on time—not just inspecting facilities, but also pushing out new PDUFA dates here and there.

People have brushed some of this under the rug, but I think it’s quite real. Stat News did a nice piece earlier this week on how the environment, in terms of the culture and organizational abilities of the FDA, still seems to be under distress. They were noting the leucovorin approval in particular and talking about how that had come top-down from the agency brass to the review staff. You can imagine it was forced upon the agency in a way that ruffled some feathers.

I think we need to be careful. There’s a lot of great innovation going on out there, but our government may not be operating with the best efficiencies right now. That would be my thought, but I’d love to hear your thoughts, Paul.

I mean, in general, as long as these concessions we’re seeing from some of the leading therapeutic companies, really in the pharma space—as long as the ways that they are, for lack of a better term, kind of kissing the ring to the Trump administration and moving manufacturing can stave off the worst-case scenario of true, tangible MFN or some other policy that’s going to impact a broader array of companies, I feel like the sector’s in an okay spot.

M&A continues to seem inevitable, right? I think that’s going to be there to maybe buoy things or raise the floor. So I’m feeling okay. I think—and look, maybe COVID is not the right sort of benchmark to think about whether or not the XBI is “expensive.”

Because that was a little crazy, but we're still so far from that. Does anyone want to comment on how they think about the IPO market? I'm going to step aside from this conversation, but does anyone else want to chime in on the IPOs, or do we want to go to news?

3. The IPO Window Reopens

Yeah. I'm happy to comment. It comes from the perspective of recently visiting with some private biotech companies, particularly some that are later stage in their cycle. By that I mean they're either running a phase 2 or phase 3 program, with prospects of data coming out sometime over the next 12 months.

One in particular had just had an update that they wanted to take to their existing investors, so they visited with investors in Boston, New York, and the Baltimore area. I think the view is that people feel good about where we are. Clearly, we're at the end of the year, and with the end of the year comes the big party of the J.P. Morgan Healthcare Conference just a few months away.

This year we've seen a few issuers file. I think MapLight Therapeutics filed recently, and LB Pharmaceuticals went out and had a decent IPO. But I do think that, in speaking not only with private companies and what they're hearing from investors, but also with friends I have in health care banking and contacts I've spoken with who are working at law firms, there is a lot of excitement and activity happening.

I do think we're looking at a potential new window opening up that would be coincident with the first or second quarter. I'm not an investment banker, so I'm not the smartest person to be talking about these things necessarily, but based on what I'm hearing and given where we are, particularly when looking at the XBI, I do think there is a lot of positive energy right now in terms of how people feel about the biotech IPO window opening up again.

Sorry, John. Go ahead.

No, go ahead. Go ahead, Eric.

The quality of private companies that we're seeing is extremely high. These companies have not had an opportunity to go public for several years, and honestly, the best ones don't want to test the water. They don't want to be first to put a toe in.

So they've been waiting very peacefully—building, creating, innovating—and I can't believe how many wonderful companies we're meeting with week in, week out these days. As Graig says, they are all sort of gearing up and thinking about going public, and it's going to be an amazing crop of companies.

It may be one of the best-quality years we ever see in 2026. At least I am hopeful that these inflows continue, the XBI continues to move in a positive direction, and we could see a very, very great year for IPOs. So, from my lips to God's ears.

That's really the point I was going to jump in on, Eric. Thanks for starting that side of it. I do think the consequence of a very long, dark winter here for biotech, and on the private side, means that the companies that have made it through to this point are by far road-tested and stronger than what you normally would see.

They're also more mature because they've had to stay private longer. So they're not coming out with preclinical ideas, but they're coming out with phase 2 and phase 3 programs with strong proof of concept, very promising therapeutic areas, and real differentiation.

I do think the vintage 2026 IPOs are going to be about as good as it gets in the winemaking of biotech companies. I think we should all be excited about that, because it will hopefully create a more solid foundation for the years to come as more companies mature and get ready to go public.

Makes sense. All right, glass half full. John, do you want to comment on the CNPV decisions? What do you think of the list? Any patterns you're noticing here, and how do you see the implications?

4. The Voucher Program Takes Shape

Well, thanks. Look, the Commissioner's National Priority Voucher program was introduced earlier this year by Commissioner Makary, and I think there were some mixed feelings about it at the time. Adam Feuerstein had a very negative feeling about it, as I recall. Maybe it was Matt Herper; I'm not sure which one. But they worried about it being very political, very driven by the whims of RFK, if you will, or other drivers in the whole thing.

I, for one, felt, “Hey, this is great. We need more accelerated-approval pathways. We need more ways of recognizing the apex of innovation and getting these drugs to patients faster.” So I've always been constructively positive on the program in principle.

I was delighted to see the list come out yesterday. There were 9 programs put into the CNPV bucket. Just as a reminder, the CNPV program is aiming to get NDA or BLA reviews within 1 to 2 months of submission—a pretty remarkable acceleration in getting a drug approved compared with the normal 9- to 12-month, if you're lucky, type of process.

I had a couple of observations about the list of 9 drugs. One is that there were definitely some very innovative—highly innovative—drugs that I think anybody would say should get recognized and should get this nomination. DB-OTO, Regeneron's Decibel acquisition for hereditary deafness, is one of them. Bitopertin, which is Disc Medicine's drug for erythropoietic protoporphyria, is another. The other notable one to me was Revolution Medicines' RMC-6236, the RAS drug for pancreatic cancer. Those 3 are drugs I know about and have high regard for, both for the science and for what's behind them.

The other part of the list, which was quite curious and interesting but makes sense, was Augmentin for U.S. manufacturing supply and ketamine for U.S. manufacturing supply. Those are 2 drugs used in patient care and for hospital needs that are subject to shortages and clearly reliant upon manufacturing outside the U.S. So that was interesting.

It was a bit of a mix. As much as I love the innovative products, I don't know how they really fit with what we read about the mandate of this program when it was first initiated—being somehow involved in the national interest or national security interests of the country. It's sort of hard to make that case for these, but they are really, really innovative drugs.

My net on this is that it's good. I would like to understand the process and the criteria a little bit better. I have companies in my landscape that have thought about this program, but it's unclear to most of them, if not all of them, what really merits consideration under the program. I do think and hope that there's more transparency around the process from the FDA on this program going forward.

But look, I'm happy with the list. I'm happy to see these things happening. I'm happy to see drugs get to patients faster. That's what matters at the end of the day. Sure, I'm sure there are reasons to be critical of anything, but this is a net positive. It was also good to see some of the market reaction to these products and the companies that had them, which is what we've seen historically with breakthrough therapy designation as well. I'll pause there and see if anybody wants to add anything to it.

I mean, great introduction, John. I think that we, too, are hopeful. We have to be hopeful, and shorter review times, as you say, can't be a bad thing. I do think a little bit of the proof is in the pudding here: We're not quite sure that the FDA is going to be able to hit this 1- to 2-month review cycle and make the right decisions coming out of that review cycle, but this is a good start.

It also sounds like there's another tranche coming. Dr. Makary was very clear that even within weeks, we could see a whole other second tranche.

I'm with you. We could use a little more transparency into the process, but the more, the merrier here if he continues to choose reasonable things.

There's 1 drug on this list that caught my attention, too, from Senti, which actually failed, I think, in a trial. So I was scratching my head on that one. I guess that was the oddball to me.

There was also a very interesting comment. I'm sure you picked up on this, too. Dr. Makary, when he was referencing Regeneron's DB-OTO for deafness, the gene therapy, said it could be priced at a very, very low price point or even given away for free.

That had to catch all of our attention. If pricing is part and parcel of the bargain here, that's just something to consider—that you're paying to play and that you may not be able to get the return on your innovation that you otherwise might.

Now, Len Schleifer has always been interested in fair drug pricing, going back to, I think, his Roy Vagelos days, and how this industry ought to be very citizen-minded in its approach.

But we’ll see whether that product made the list because of the very low price point at which they aim to provide the drug. I guess one other thing to consider, Eric, is that we’ll have to see over time how these products with this rapid approval are viewed, either from the standpoint of public trust around their safety and efficacy. We’ll also have to see over time how programs reviewed through this Commissioner’s National Priority Voucher program are viewed from a payer perspective as well. I’m going to stay optimistic on those 2 for now, but that is something we’ll have to see as this evolves.

Great points.

Go ahead, Graig.

I need to get much smarter around this new program, and I’m curious, for those who know a lot more than I do, about the process. Clearly, we had the list that came out last night, but I don’t have any good visibility or knowledge as to how many other applications are in. If you’re a company and you apply for this, do you get a rejection as well? Do you know the status of what happens, or is there another batch of drugs that will be added to this list at some point in the future? I think for companies in particular, as this is all relatively new for many of us, it would be interesting to see how this all plays out.

My sense, Graig, is that—and you know what? I have 1 company I cover that I probably should hit up today and say, “Hey, did you get a rejection or not?” because I’m pretty certain that they applied. But I’ve heard anecdotally—I don’t know if others have heard anything differently—that companies that applied for this were a little bit in the dark. I think there were well over 100 applications. I don’t know if there’s a more up-to-date number, but there were a lot who applied.

I think there’s still a question for certain types of drugs about what this means as it relates to regulatory de-risking broadly. If you’re a company and you think you could be ready to file for approval, but that’s not 100% certain at the division level, and then you get a CNPV, is that an endorsement that this now does look approvable? I can think of a couple of scenarios like that as well. To me, it still feels like it’s going to be very case-specific in how you interpret this. Does anyone know how this is communicated to other companies that didn’t get chosen?

Not yet. And I think you’re right. There were well over 100 applications that went in for this program, but there was a lot of uncertainty around what the standards and criteria were. Let’s see how it evolves. Maybe we’ll experientially get to the right types of guidelines and approaches here as things get selected, but more to come, I’m sure.

Yeah, because I just have a quick follow-up. I cover a few companies that have seen the remarkable success of Revolution Medicines, and certainly, if you look at the stock and the market cap, it’s clearly well liked by investors. But I cover a few smaller companies, in the less-than-$500 million market-cap range, that are trying to do a fast-follower approach. I’m curious as to whether, because Revolution Medicines now has this for its RMC-6236 program, those companies are automatically not eligible to pursue the same thing. There are just lots of questions, which it’ll be very fascinating to see how this all develops.

Again, I don’t want to be the glass-half-empty guy, but the other consideration is that, with all the resources going into potentially supporting rapid approvals for this list of 9 programs, and presumably another list of some odd number of programs coming—I think Dr. Makary said within the next few weeks—we just hope that the FDA has the resources to keep its eye on the ball with regard to standard-review applications. We know, again, that there are some chinks in the armor here, and the FDA isn’t necessarily operating at its full potential pace. I hope that we’re not robbing Peter to pay Paul in any way with regard to the resources.

Very important point, Eric.

Absolutely. Eric, do you want to talk about the GLP-1 pricing comments that came out of the White House? More broadly, what are you saying to investors around drug-pricing risk for the sector right now? I guess the way I’m looking at it—and you can tell me if you disagree—is that, for the most part, it feels okay. I don’t think rhetoric ever goes away on the margin, but I agree with the consensus view that some sort of broader MFN selecting a bunch of drugs is not something I’m losing sleep over. I am ready for any given tweet at any given time that can move a stock or 2. But what’s your perspective on this GLP-1 stuff and where you think we’re going on pricing?

5. Drug Pricing Fears Ease

I generally agree with you, Paul. I think what you said was well said. First, we should recap, since this program is recorded earlier in the day on Friday, that last Friday we had the second announcement of an MFN deal between AstraZeneca and the White House. That seemed pretty straightforward and boilerplate, right? It wasn’t nearly as surprising or innovative in the wake of Pfizer a couple of weeks earlier, but it certainly gives you a pretty good road map for what’s likely to happen for future pharmaceutical companies as they come and cut their deals. Hopefully, it doesn’t seem like it’s particularly costly in terms of the drug-pricing hits these companies are going to take.

I would be encouraged by the track record we’ve seen thus far. Then, just last night, we had another wacky tweet come out from the White House. It was almost immediately corrected or rephrased by Dr. Oz, who said, “No, President Trump doesn’t really mean that we’re going to bring down the price of these GLP-1s to $150 out of pocket. They may come out a little bit higher than that.” I guess we’ll all wait for Lilly and Novo to cut their own deals with the White House and see where this comes.

My guess is that if these pharmaceutical companies, with all their sophistication and financial-planning-and-analysis powers, are cutting a deal with the government, it’s probably going to be an okay deal economically for them. Of course, a lot has been made of the fact that Pfizer hasn’t had to restate guidance or refile any SEC paperwork, including changes to its financial condition, in the wake of its deal with the White House. So, I’m with you. I think we can live with what seems to be happening. I don’t think it’s the end of the day by any means, or the end of the road for drug-pricing discussions. Unfortunately, this is going to be a tense topic for probably as long as all of us are alive.

And John, I’m very interested in your views on just that.

I would just hate to have the kneecaps of one of the pharma CEOs right now. That’s all I could say. [laughter]

Right. I mean, the interesting thing that we’ve seen with these deals is that companies are benefiting, in my opinion, from the opacity around the true cost of a drug. I can’t say I’ve done the math on everything, but with some of these deals where it’s, okay, this drug is going to be sold direct to consumer or through TrumpRx for this discount, you look at it and you’re like—in my head, at least—“I wonder how different that really is to the gross-to-net?”

These companies are smart, and I think there’s a dynamic with this that is not dissimilar to the dynamic with the IRA, where there’s a sticker-price-cut number or a political-price-cut number, and then there’s the true underlying impact to the business. I’m sure there’s a drug or 2 that has gone through this so far where an estimate might need to be rerated, but generally speaking, these deals feel very benign to me. John, do you have anything to add?

No, I do think that they’ve been cushioned in their design by the pharma companies to mitigate any meaningful impact on the business. And I think you’re exactly right, Paul. It’s all caught in the sausage-making between gross-to-net, discounts, rebates, and the whole 9 yards. I think the net impact is really quite small of what we’ve seen so far.

So, that’s good, because I think it means that innovation will get rewarded, and maybe the things that get less rewarded are the middlemen who might get squeezed out of something. So, that’s good.

6. Biotech News Tests Conviction

Makes sense. So, maybe we’ll talk about some news. I thought an interesting deal this week was BioCryst’s acquisition of Astria Therapeutics. It was an interesting deal on a few levels. One, BioCryst isn’t that big of a company, right? To do a deal for the better part of $1 billion is a pretty significant acquisition for a small company.

2. It's a consolidation of 2 players in the HAE space. BioCryst has a product for the prevention of hereditary angioedema attacks. These are intermittent swelling attacks. Astria was developing another product for attack prevention that's sort of a next-generation version of Takhzyro.

Just the therapeutic-area overlap there—I mean, to me, it feels like a fairly smart deal, right? BioCryst's stock reaction was not initially positive. But in general, I think one thing I've thought about—I cover CalVista and have covered a number of smaller rare-disease companies in the past—is that investors are looking at market opportunities that are in the hundreds of millions, not the billions.

I do think it's hard for small companies sometimes to get full credit for an asset that might not meet that critical mass for some investors. I think sometimes in small-cap biotech, investors can be blockbuster hunters, and they're less interested in a company that might trade at an attractive multiple of something that's in the sub-$500 million range.

I wonder if we'll see more of this. There's also the FTC question, right? These companies are directly overlapping, but this FTC seems—this isn't a hot take—far less strict than its predecessor. I'm wondering if anyone else has any views on this deal or just what you think about small companies doing business development like this. It's not common—not common at all.

Well, I love this deal, Paul, for the reasons you said. This is a company in BioCryst that knows exactly what it's buying and how it's going to fit in the market. Companies sticking to their knitting and doubling down on an indication, getting stronger—that's what M&A should be about.

The only potential concern might be, as you said, the FTC. I had the same thought you had, and maybe because there are just so many new players in this HAE space, it's much less likely that we see any one transaction trigger its attention. You're right—the political environment is more favorable here. Hats off to both companies.

I know Astria used to be Catabasis and has been surviving for 15 or 20 years now.

They finally had their little exit, and congrats to Jill DeSimone and her team. That's a throwback, Catabasis.

I feel like in the HAE space it's become crowded enough that it can be—I mean, it varies company to company, stock to stock—but I think it's hard for individual companies in this area to get full credit for what they're doing because of the theoretical uncertainty around what the 5-year competition outlook looks like.

I know CalVista so far has had a promising first quarter of its launch in the acute space, but it's still, to some investors, a show-me story. If anyone else wants to comment here, please feel free. But I guess if not, Eric, do you want to run through some more news? I think you wanted to talk about Legend and Scholar Rock, but maybe we can have you hit these one by one and see if others want to chime in.

I mean, maybe I'll just add, before we turn over to Eric, just on consolidation in the biotech space.

There is a view amongst investors that the denominator, in terms of how many companies we have, is very high. I do think that, given the capital needs of all of these companies, it's going to be very difficult for every company to raise the financing they need to advance their programs.

While it could potentially be sad on one level if one company is no longer able to stand alone on its own and merges or gets acquired by another company, I do think, bigger picture, it is quite healthy for the industry. Clearly, we all talk about the—let's call it—excesses of 2020 and 2021 in terms of how many companies came out as new public entities and whether they were ready for prime time.

We made a comment earlier about how—and I would agree—we feel that the 2026 class, and hopefully there is a very nice class of new IPOs, is likely to be very high-quality names. I do think that this natural evolution of our biotech industry, even though it could involve job losses, which we don't like to see, is very healthy.

I like seeing deals that are strategic and hopefully not deals that are just what we used to see in large-cap pharma, I think, way back in the 2000s. I always felt that it was almost like 2 struggling companies that simply decided to merge, and there were lots of synergies that you could ring out. Hopefully, putting 2 ugly companies together made 1 somewhat prettier company. I don't know if that ever really worked out, but I hope we do see a lot more M&A in the space.

Makes sense. Eric, do you want to run through some news in your space?

It sounds like you're giving me my pick of the litter, so thank you for that, Paul. I thought maybe we'd start with the Scholar Rock-Regeneron news, as it more broadly impacts a few companies. One of these companies, of course, is up in your and John's neck of the woods in Boston.

Scholar Rock is a company that I'm close to. For those who missed the news, this company and Regeneron are sort of coupled together in terms of being derailed and delayed in the approval of new drugs due to a fill-finish plant that's now owned by Novo. It used to be owned by Catalent, and that plant got what's called an OAI letter earlier in the week.

That means that, in order for the plant to regain compliance, it's going to need to go through a reinspection. That reinspection is almost certainly going to take some time—months—before they can schedule, complete, and validate the reinspection and regain compliance.

The net result of all this is that patients are waiting for drugs. In Scholar Rock's case, they're waiting for what I would say is a very important drug for younger patients and children with SMA, or spinal muscular atrophy, a terribly debilitating genetic disease.

This is really unfortunate. Maybe in Regeneron's case, we don't necessarily need another high-dose formulation of Eylea to the degree that we need Scholar Rock's apitegromab. But the fact that we're waiting around for a number of months, maybe even longer than that, in order to get approval for a drug that has passed all the other requirements for approval—it's got good safety and efficacy to support it—and this is just a fill-finish facility, with nothing wrong with the product coming out of that facility, is frustrating.

With regard to apitegromab's quality-control metrics, it just happens to be that this drug is being produced in this facility, and this facility doesn't have overall compliance. Therefore, according to FDA mandates and regulations, they can't approve the drug. What a shame for the industry. Maybe we can do something better. Maybe the FDA has to take a look at how it's regulating these processes, because this one seems quite unfortunate for patients.

What do you think?

Yeah, I was going to say the other shame here, Eric, is that here we are with this zeal to domesticate manufacturing capacity within the United States and do everything we can to onshore every aspect of manufacturing. Here's a facility in Indiana where the author of the Biosecure Act, Senator Young, is their representative in Washington, and this facility in his state is running into these issues.

These aren't trivial things to fix, but you'd expect to see a higher level of urgency to get this one done, along with support from the agency and other stakeholders to try to remediate the situation so that there is a comfort level around manufacturing in that facility, as opposed to going someplace else like China or Europe or wherever the case might be. It is sadly ironic in this era that this is happening.

Excellent point.

What do you guys think the read-through is? I know this is a frustrating situation that maybe feels like there are elements of it that could be avoidable, but when you're talking to an investor, Eric, how do you use this situation to gauge risk in other situations?

Well, that's the problem, Paul. Up until this, we had a little bit of lead time and advance warning on this, but up until August, none of us who were covering this company or Regeneron had any idea that this was an issue, right?

Now, 2 months later, we get a little bit more sense of the potential extent of the issue and the timeline delay, and it is a significant one. Yet we had no knowledge of it.

The good news here, if you will—the silver lining—is that it's just a matter of when these drugs are going to get approved, not if. Investors, as you know, always like to buy the delay and sell the disaster. This is not a disaster. Both these companies have kind of hung in. Kudos to both management teams. They've been extremely transparent on a weekly basis about the kind of progress they're making or not making.

So, they've been able to preserve their credibility, but unfortunately, we just don't know what the timelines are, and that can be frustrating.

All right. Yeah, banging your head against the wall a bit. Hopefully, it gets better. John, do you want to talk about the STAT Summit panel you sat on with Chris Viehbacher and Emma Walmsley on pharma and the 10-year outlook? That sounded pretty interesting, and I'm sure it'll spark a number of us who want to chime in.

Yeah, it was—I mean, STAT does such a great job at these summit meetings, and this was no different in that regard. Of course, we had a hard act to follow. We had Baby KJ on the stage before us, so it wasn't easy to be a second act to that amazing story, by all accounts.

It was a panel on the future of biopharma, with a big focus on pricing, MFN, and deals. Between Emma, Chris, and me, we were all generally positive about the future of the industry, even with the policy headwinds that we've been experiencing this year. I think it really highlights the resiliency of the sector to adapt to different legislative or administrative changes that may happen with governments.

At the end of the day, we're treating disease, and our medicines are very important. Therefore, we do have to find ourselves comforted by the fact that we'll always be wanted, and we're needed for sure.

Chris Viehbacher made some interesting points, of course, as always. One point that I thought he was right on was his commentary on all the GLP-1s that are out there right now and under development. He was appropriately saying that he's hoping more of the sector focuses on other aspects of innovation. It seems like people are doubling down and tripling down on different incremental aspects of that category, although there's probably still a lot more to be done there.

The former NIH director, Monica Bertagnolli, was in the audience, and she asked a question about how industry and academia can better work together. That led to an interesting discussion around public trust and belief in the quality of science that comes out of the industry, which I thought was a good discussion.

We obviously talked about vaccines. Emma was very clear that GSK is currently cautious on the U.S. right now as it relates to their vaccine business, but that they are keeping a long-term perspective on it. They ultimately realize that their vaccines are critical for public health and that this too shall pass.

Then, of course, we talked about China. I obviously made the point on this topic to highlight that we really are at a Sputnik moment, where we should address the competition from China with initiatives and policies. Maybe CNPV is one of these, where we accelerate getting our medicines to patients faster in this country, including getting clinical trials done quicker and generating clinical evidence for less money and so forth. Those would be a game changer.

At the end, there was a very fun exchange, I have to say, about Luca Borin[?]. Matt Herper, who moderated the panel, tried to get Emma to comment a little bit about it, and Emma was very clear that, in their view, it was simply, as she called it, an administrative matter. When I was asked about it, I simply said, “I just hope they stay grounded in the science.” I left it at that.

But it was a good panel and a good discussion, and I think there were other good summit discussions this year as well.

Excellent, John. That's great. We've got a lot of other topics we can potentially hit on. I'm wondering, Eric or Graig, is there anything that stands out to you guys that you want to talk about next?

Paul, I want to hear you talk about Praxis, if you don't mind, because that was the one stock that this week was at least up 100-plus. It seems like almost every week we have one of these Phoenix-from-the-ashes kind of stories in biotech.

I know. Okay. Well, yeah, let's do it.

7. Clinical Data Reset Expectations

Praxis announced positive data that, needless to say, was a surprise for its essential tremor program. The backdrop here is, first of all, that we've had mixed data for this program all along, including a pivotal trial failure earlier. More broadly, this space has been so challenging from a drug-development perspective. Tremor is a huge market, but from a drug-design perspective, it's very hard.

It's neurological. You need to develop a drug that attenuates tremor, but many of these approaches do this in a nonspecific way. The more you attenuate the tremor, the more you have side effects like fatigue, dizziness, and somnolence, because you're sort of aberrantly tamping down brain activity in a nonselective manner. We see this with antiepileptics to some degree, but tremor is extra challenging because it's an elderly population that may not be as able to tolerate some of these sedative CNS drugs.

It's been a really tough space. Praxis appreciated that it was a big market. The big surprise here was that they had 2 readouts from this: one was a randomized-withdrawal study, and one was an analysis of a parallel-group aspect of the study. They've had this Phase 3 program that's a little bit complicated. I don't need to review it, but it's got multiple trials and ways of analyzing this, and especially the parallel-group data looks very good.

I think there's going to be some debate around what is a clinically significant effect size in this condition. It reminds me a little bit of tardive dyskinesia, another movement disorder, where it's hard to juice out a big effect size and there's a lot of subjectivity around what even is clinically significant.

I don't have any skin in the game here. I follow almost everything in CNS, but this is one I don't formally cover. From my look, this looks like it's likely an approvable product, and it's a huge market.

Praxis has another program in epilepsy that, in my discussions with investors, is a little bit polarizing. There are some who think that program is a potential blockbuster. There are others who are more critical, don't think that it's truly a new mechanism, and wonder where it really fits in an increasingly competitive focal-epilepsy landscape.

I don't think a lot of people thought this tremor data would look like this. There were maybe some who thought that their randomized-withdrawal study could hit, myself included, because I just think in CNS those studies almost always hit. But for the data across the board to be favorable like this is a big win for them.

They're a company that has stuck at this and also made some tough decisions when times were tough, including making cuts to extend their cash runway. That's my take. Anyone else following this closely?

I'm not particularly following it closely, although I have been fascinated by the development of new treatments for essential tremor and movement disorders because, historically, it's been so challenging. We look at our experience with Parkinson's disease, and while we have a lot of drugs, we really don't have any good newer drugs, at least it seems that way. I feel like levodopa/carbidopa is still the long-standing standard of care, which was approved maybe 60 years ago.

I thought it was fantastic to see the Praxis data. I don't cover it or follow it closely, although I've met the company in the past. I do think it's interesting to see two things: first, hopefully it does get approved and we see what the market opportunity is. But I was thrilled to see them raise so much money afterward, which hopefully secures decent funding for them to flesh out the rest of their programs.

I do think we're seeing fairly robust financings on good data. In many cases, companies are able to add cash that gives them sometimes 2, if not 3, years of extra cash runway. That has been the major issue for our sector for the past 4 years now.

Yeah, I'm with you, man. It's just amazing. You look back since Labor Day: MBX, Rapport, uniQure. I'm sure there are 4 or 5 others I'm not thinking of, but there have been big stock-upside reactions on data, in some cases bigger than I think investors were prepared for. It's emboldened people's confidence that you can get paid for taking on clinical risk.

Eric, do you want to talk about any of your other news items?

Well, sure. I always like to talk about my news items. Let's go to Bicara. This is another little Boston company up your neck of the woods, and they really had a very tough first 12 months as a public company. They were kind of the new kid on the block in the head-and-neck cancer space. They had some very interesting Phase 2 data, but the study they had out was a little bit skimpy.

That was presented at ASCO this past year, and what they showed—again, if you believe the data, and the N is small here—was very good response rates, very good long-term survival data, and very good duration of response: really a consistent picture that was all supported by the biological mechanism and a huge area, head and neck cancer, that could potentially be a $4 billion-plus market and support many players.

The problem with this stock up until recently was that they had a competitor. It was kind of the 800-pound gorilla in the space, Merus, which was more established, had a more credible history with investors, a bigger data set, and was telling a different narrative. It’s one of those situations, guys, and we’ve all seen them before, where you have this kind of he-said, she-said between 2 different companies. John, I know you were in many of these in your prior life as an operator, and nobody wins, right? It’s just mudslinging back and forth, and usually there’s 1 loser; sometimes there are 2 losers.

And, lo and behold, Merus gets acquired for a nice premium—$8 billion—and the narrative just changes. It flips almost on a dime. So, that’s what’s going on here with this, by now, the last remaining company in the space. The storyline cannot be about comparing and contrasting. It can be about how there may be more strategic interest, and we should pay more attention to their data. The stock’s having a little run, capped off this week by breakthrough designation. The FDA did grant that to the Bicara drug, and that’s another cherry on their ice cream sundae, and hopefully more good times ahead for them.

But I guess the message here is that rarely is health care and biotech and medicine a fight for market share. Almost always, it’s a fight for the size of the pie.

Yeah, I couldn’t agree more, Eric. This happens, and we’ve seen it happen before. It happened with a few of the Eli Lilly programs as well. It becomes an investor he-said, she-said: “I’m right, you’re wrong.” It’s either-or. It’s just not that way with making medicines.

The Merus drug is great. The Bicara drug is awesome, and I have no doubt that both drugs will get out there. Patients will benefit, and there’s a lot of unmet need in head and neck cancer and a big, big pie. It’ll only grow. It’ll only grow. I’m completely aligned with you on this one.

Awesome. Graig, do you want to talk about this upcoming Alector data? I’m going to throw a couple of thoughts of my own at you because maybe we can have a little debate. I’d love your perspective.

So, Alector’s got this frontotemporal dementia data coming up later this year. It’s a program partnered with GSK. This was a program, Graig, that I used to be a lot more positive on because it does have this genetic medicine angle of increasing progranulin levels in patients who are progranulin-deficient. I think over time we felt like the mechanistic story here might be a lot more complicated as it relates to the whole sortilin mechanism, and the Phase 1/2 open-label data on neurofilament or clinical outcomes—it’s just hard to really say much about it, and I don’t think we’ve seen many updates beyond 1 year.

Given how tough this disease is, I certainly wish this would work. It would be great for Alector and great for the space, but I’m not holding my breath. I’d be curious if you have another perspective.

Yeah. This whole neurodegenerative disease space is just so tough. ALS, Alzheimer’s, and now we’ve got this frontotemporal dementia disease, which, for those who don’t know FTD, is the disease that Bruce Willis, our beloved Die Hard and Moonlighting actor, is suffering from, unfortunately.

They’ve got a very big, chunky topline Phase 3 data readout in the middle of next month. We’ve been waiting for the results of this study for a long time. It’s a long trial. And Paul, you’re right: The prior data were probably not as clean as those of us would ideally want to see.

I think the interesting thing, maybe for us to discuss here, is that these neurodegenerative diseases have high unmet medical need. In this particular case, it is a fatal condition as well, and we’re awaiting the results of the study, where, interestingly, there are 2 co-primary endpoints. That was a recent addition to, or change to, the SAP for the study, but there is an efficacy readout, and then just recently there was the addition of a biomarker-based endpoint. There are now 2 co-primary endpoints.

With that being said, it’ll be very interesting with respect to the data. If you look at the market cap of Alector, it’s something on the order of about $300 million, let’s call it, and as of June 30, they had reported about $300 million in cash. Clearly, the market is not ascribing a lot of value or expectation that this is going to work. Again, given the complexities of the disease and that we have prior data that were not necessarily a slam dunk, I think it is prudent to be cautious on this.

But we’re all so attuned to looking at clinical trial outcomes, and you’ve got to hit 0.005 or better to be able to be a win, so to speak. It’ll be very interesting to see what the efficacy data are with respect to this readout.

I do think that you’re talking about a neurology division that in the past has shown a fair amount of regulatory flexibility when it comes to perhaps controversial drugs, right? In Alzheimer’s and ALS, we’ve got 3 such examples: Aduhelm from Biogen, Qalsody from Biogen and Ionis, and the ALS drug from Amylyx Pharmaceuticals, Relyvrio.

It’ll be very interesting to see if they end up missing the primary endpoint, what that p-value looks like, and how close or not close they are to achieving 0.05 or less. I would offer that if they were to hit something like a p-value of 0.07 or 0.08—if they don’t indeed hit the primary endpoint—it’ll be very interesting to see what the FDA does for a disease where there isn’t a lot of clinical trial activity.

This is the first drug that’s been taken to Phase 3 by any company. There are a few other programs on the competitive landscape, but they might be several years away in a condition that is fatal. So, I would say an interesting readout—again, one where the market currently doesn’t expect it to work.

I agree, Paul, that there are many reasons why you can be skeptical. Yes, I’m hopeful as well, and we’ll just see how it all turns out.

Yeah, totally. I’m certainly not pretending like I have an out-of-consensus view here, but thanks for the great overview and setup.

The one thing I would say is that this New England Journal of Medicine paper on the otoferlin story with Regeneron is just another proof point out there that gene therapy is not over. Look at uniQure. Look at this story. Gene therapy remains an important modality for some of these ultrarare diseases, and we shouldn’t lose sight of that. That’s my only last point.

I’m heading to Berlin this weekend, and we’re going to see a lot of innovation in cancer. Sometimes oncology is bashed a little bit by investors these days for being too crowded, too competitive, and too fast-paced, but there’s some great stuff coming out that we’re looking forward to seeing.