第165期——2025年12月5日

You're listening to Biotech Hangout, a live and unedited weekly discussion of all the latest news in our industry with a group of biotech insiders. Although I often think of myself more as an outsider. I'm not sure about you guys. I'm Josh Schimmer. My co-hosts today are Paul Matteis, Brian Skorney, and Graig Suvannavejh. Graig, did I get your last name right? Yes, Suvannavejh. Thanks. Perfect. Okay. For more information about our hosts and guest speakers or to listen to the most recent episode, please go to biotech hangouts.com. Also, disclosures for companies we cover can be found on the Biotech Hangout page. Any commentary we provide should not be construed as investment advice, as we all know how volatile and risky biotech investing can be. It is great to be back on Biotech Hangout. I've been out and about for the last few weeks and haven't been able to participate, and boy, there's been a lot going on. I thought we'd start off, as we're getting to the end of this year, with an outlook for 2026.

1. Biotech Carries Momentum Into 2026

Biotech obviously started this year with a lot of pain that turned around midyear into one of the strongest bull rallies, I think, on record for the industry. I'd love to hear how everyone's thinking about 2026. Are we going to sustain this momentum? If not, why not? Paul, why don't we put you on the spot first?

Yeah, sure, man. I feel pretty good. It's interesting, Josh. I read something that someone posted on Twitter that was said by the Canaccord biotech team, which I thought was actually a really good point: The success of a lot of drug launches in the past year from small- to midsize companies, I think, marks a different phase of where we are with biotech today versus 10 years ago.

A lot of the exciting stuff that's going on right now is not propped up on a dream, but on certain drugs that look great in Phase 2 and Phase 3 becoming realities. We're seeing young companies like Intra-Cellular Therapies, Madrigal, and many others just being able to grow up, so I feel like that piece is really, really healthy. I feel like the drug-pricing piece, from a threat perspective, continues to seem relatively minimal.

I think there's going to be more M&A, so if we just list off the factors that drive strong biotech performance against the backdrop of an XBI that still is nowhere near its all-time highs, when things were frothy, I feel relatively good. We'll talk about it more, but it's hard not to be somewhat nervous about this FDA stuff as it relates to timelines, efficiency, and predictability.

In general, for drugs where the data are fairly unequivocal and the endpoints are validated, I still feel like the FDA is going to be mostly fine. I'm most worried about it in the rare-disease realm. I don't cover vaccines, but of course, that's its own animal.

In general, it's hard to make a call that the sector is going to be up 30% or 50%, but I guess I'm not worried about us entering another bear market imminently. I'm curious what others think.

Yeah, maybe I'll add that I'm a huge baseball fan, and with that in mind, I try to think about analogies relative to baseball. I'm frequently asked, given the rally in biotech, where are we? I'm curious what others might say, but I think it feels to me that we're in the third inning of what this rally is looking like.

I will say that I'm a bit concerned about how quickly the XBI has gone up so far and so quickly. Again, we know that's an imperfect proxy for biotech, but I wish it had been a little bit more gradual. Every market is a new market. We always look to the past, obviously, but you just never know.

I do agree with you, Paul. I feel pretty good. We've got J.P. Morgan coming up in San Francisco next month, and I think the sentiment there is going to be incredibly positive and bullish. Obviously, the markets are dynamic. The FDA is the FDA, but I think the outlook for 2026 is very good.

Awesome. Brian, how about you?

Yeah, I would say I'm generally in the same camp, I think. Look, maybe to counter Graig's argument about how fast it's come, you could also say, likewise, how fast it went down. It took a while, but the COVID peak—we saw a pretty tremendous drop from peak XBI, frankly, while a bunch of other things were working really, really well.

We've all struggled through these 4 years of just horrific divergence between the XBI and the S&P. I would argue it's been an aggressive move since this summer, but it depends on what chart you're looking at. If you're looking at a 6-month chart, XBI looks like it's in bubble territory, but if you look at the 5-year chart, it doesn't look that way at all. It still looks relatively cheap on a performance basis.

Charts are charts, so they don't necessarily speak to the fundamentals. But whether you're using large caps, historical acquisition premiums, or historical acquisition prices, we're not really in bubble territory. I think the large-cap pharma sector is trading at an average of about 15 times. You have all sorts of sectors that are trading at a significant premium to that.

I thought there was a really nice tweet that summarized it by Rod Wong earlier this week, saying, “Unfortunately, the FDA is now the major remaining source of policy uncertainty. Tackling reshoring and MFN tariffs took a lot of creativity and was hard because there was no blueprint.”

The FDA is, as Paul said, the one remaining concern. A lot of those concerns have really dissipated here. I'll make an argument later, as we go through it, that maybe even there, we're creating more noise than what could actually be fundamentally meaningful.

The one thing I would keep note of, because it's had such a big impact when it starts changing, is interest rates. We're still in this dynamic of fighting over whether inflation is totally under control and the economy is slowing down, in which case interest rates should continue coming down, or whether we're going to see a point where people worry about interest rates. The XBI is very much tied to Fed interest rates because of the long investment cycle. I'll stop with that.

2. The IPO Wave Takes Shape

Yeah, it feels like a very different industry than we've seen in the past. I think the biggest divider between the old biotech and the new biotech is the idea that you can actually be long product launches. There's almost no bigger red flag for an industry when stocks can't perform as they go from that hope-and-dream phase into the execution and launch phase.

It's not surprising that the sector struggled for a while, up until it figured out the algorithm for successful product launches. Of course, one component to that is premium prices, which may be a topic we come back to at another point, either today or another week.

With that, we have a maturing industry, an increasingly cash-flow-positive type of industry, and strong momentum and fundamentals. I get asked a lot whether, as we enter 2026 and anticipate a wave of IPOs, that wave of IPOs might impair the biotech rally by adding more speculative names and diluting the quality of the industry, as perhaps we've seen in some of those prior, very speculative years.

I'd love to hear everyone's thoughts about the setup for IPOs in 2026, how you're feeling about private companies and their prospects, and whether they put the broader sector at risk by being overly speculative.

Maybe I can chime in to start, Josh, because I know from your email that you have a view that there's a backlog of high-quality companies out there. From my seat, I've been involved with 3 IPOs this year, I think: Sionna, MapLight, and LB Pharma.

Not to say that these 3 are emblematic of all IPOs in the future or private companies broadly, but all of them are midstage- to late-stage companies. I remember back to 2020, when companies were putting in an S-1 and one of their IPO catalysts was getting an IND accepted.

I still feel like, when I look at the private companies that we're vetting and that could be companies that go public in the next couple of years, we're still a really long way away from that. Companies that are thinking of going public are not taking it lightly at all. It's not a YOLO, “Let's go public because we can” kind of thing.

It's a question of whether we're ready to be a public company, whether we're ready to have events that can be value-creating in the public markets, and whether it makes sense for us to be public. If we're public and our data are good, we can raise more money because public investors will value this type of data.

You never say never. Things can get out of hand if you have a handful of IPOs that go well and then people start looking at IPOs less as an emerging-company investment and more as just the IPO product—the concept of an IPO that pops.

But I don't think we're there at all. I still feel like, because of how tough the IPO market has been, we've been in a world where there's been a lot of compelling private companies that have been able to mature and raise a lot of private capital. I also want to hear what you have to say too, but the private investing world has changed a lot over the past 10 years as well, right? There's a lot of public investors now with deep pockets that do privates, which I think has allowed private companies to sort of better incubate themselves and be more than just a 1-drug story.

So at least if I think about the first 6 to 9 months of next year, and I think about just the companies, high level, that I think could go public, it feels like they're companies that are going to be institutionally relevant, not just sort of illiquid, publicly traded venture investments, if that makes sense. Do you agree, Schimmer? How many IPOs do you think we see next year, Paul? What's your guess?

That's a good question. 15.

15.

What do you think? Over or under?

Oh, I think the over-under is closer to 50. Graig, what are your thoughts?

50.

There are so many high-quality private companies with really de-risked products and platforms, right? I mean, we've been accumulating them with a closed IPO window for 3 years, right? I've never seen a crop of such mature, de-risked companies that really deserve to be public when they're ready. As long as the bull market continues into next year, we hit the peak with over 100 biotech IPOs a few years back. 50 is just half of that.

I would definitely take the over. Paul—

I guess my number was stupid, but, yeah, keep going.

I feel dumb. Yeah.

No, but I don't have as good visibility into the IPO pipeline. I talk to a lot of private companies. I think they're very hopeful. I would agree generally with the sentiment that we are seeing, at least at this stage, more mature, more de-risked companies that are being teed up, and I think deservedly so.

Is that over-under 50? Maybe I'll be on the under of that 50 number, but I'm certainly hopeful that we get to the 40s and 50s, and maybe even 60. If Josh is right, what I do think is different this time—and look, that IPO period that we had from, let's say, 2020 to 2022 was incredible, right? We've all been around the business for a while. I mean, that was just remarkable, and it got silly, quite honestly, in retrospect, right?

I remember being at a prior shop. I think one day, 4 of my names launched on the same day in terms of the IPO, and I was there doing investor education and didn't know who wanted to talk about what. I'd have to remember, like, “Oh, yeah, this company,” right? So that was at the heyday. I don't foresee that 2026 will be like that, where there were just so many in any given week.

But if we have a strong 2026, that could set up a condition for maybe a very healthy 2027. I think what we want is sustained performance, right? The crash that we saw from the XBI going—what was the peak, like 174?—and we're only about 30% away from that peak, but that was just such a massive crash that I think this time around, companies, VCs, and, I hope, on some level, bankers—the whole system—will be a little bit more disciplined about how we go about things.

Totally disagree. I think that the system will absolutely start pushing out preclinical stuff eventually. Probably not next year or 2027, but it's happened every time—I mean, it's just the cycle, right? I'm going to go with 23 IPOs next year. Josh, I'd love you to send me the list of 50 private, quality companies that you think are going to come out.

Paul, I totally agree with Paul's sentiment. I think what we're seeing in the IPOs that are getting out right now—and I hope it just stays this way—is development-stage programs making it to the public markets. I do not believe that at any point the public market has been able to sustainably analyze preclinical companies. Every 5 or 10 years, when the cycle goes to a peak, the public market tries to do that. I think it's total FOMO and opportunistic financing, and it winds up being the signal of the crash.

So I feel like we're in a safe place on the IPO side of things because I truly do think what is coming to market are mostly development-stage assets, which the public market is constantly capable of evaluating and coming up with some reasonable valuation on, even though we all will dispute those specific valuations. Yeah, I guess the question is whether we lose discipline or not.

I think so far things have been very disciplined across the industry, and that's actually been a real tailwind for the industry. It's disciplined spending and, importantly, different, disciplined capital allocation, perhaps forced upon the industry after years of being somewhat capital-starved. Companies are vaulting to profitability at paces we've never seen before.

Once you're profitable, I mean, companies used to do everything they could to avoid being profitable up until a few years ago, which is kind of bizarre and baffling. Now that companies are actually hitting profitability and sustaining that momentum, we're starting to see the return to that in the industry more broadly.

3. Washington Reshapes FDA Risk

All right, let's go to probably everyone's favorite and least favorite topic to talk about: Washington, D.C., policy, the FDA, HHS. It's like Groundhog Day meets The Twilight Zone. Brian, why don't you kick things off with some of the latest in terms of the leadership changes going on?

So, look, I have said since the beginning of the year just to expect chaos at the FDA or HHS. I don't think direction is hard to pick here. I would argue that there are just totally different, conflicting views coming out of HHS and the agency, and it makes it very hard to predict a lot of things, right?

The one thing that I would say is pretty easy to predict is that HHS is going to be pushing back against vaccines. That has clearly been the case. I mean, we're seeing a negative vote from ACIP on at-birth hepatitis B vaccination right now. That's receiving criticism, but beyond that, is this a flexible FDA? Is this an FDA that's going to be extremely rigorous? It's really, really hard to tell because they sort of talk out of both sides of their mouths.

What we've really seen is a pretty substantial breakdown in terms of the institutional memory here. There is very little left of the old guard, at least on the senior leadership side, from the FDA. I'm not just talking about the FDA commissioners. That's an appointed position, so more of a political position. I'm talking about people who were 20- or 30-year employees of the FDA who rose into leadership roles. Almost every single one of them is gone at this point.

The most notable one just happened this week, and that is Rick Pazdur, who has been with the FDA way longer than I've been in this career, and we've all sort of followed him. He's been one of the most prolific voices in the FDA, running the Division of Oncology and taking over the Oncology Center of Excellence a number of years ago.

We were all really happy to see, after George Tidmarsh controversially left the CDER position after just a very brief stint, Pazdur wind up taking over the CDER position. But basically, 3 weeks later, he is out. There are numerous reports as to what's sort of driving that decision. It could be his counterpart in CBER, Vinay Prasad, who was also the CMSO and CMO, issuing some internal emails that have been very controversial.

If you believe media reports, he was sort of not being given leeway in terms of who to hire within CDER, and maybe he felt that whatever he was promised going into taking the job was not coming to fruition. So news of his resignation has hit in the last week, and I think we all sort of felt like he was kind of the last adult in the room at the FDA.

Tracy Beth Høeg has taken over as, at least, the interim CDER director. She was sort of Marty Makary's chief adviser before that, and she's also had a somewhat controversial role in the FDA. Going back to Dr. Prasad's email and some of the criticisms of the COVID vaccine, including the 10 childhood deaths due to the COVID vaccine that they're talking about, she was the person credited with the analysis that came up with that.

So it is definitely installing someone who is more along the lines of this new MAGA-RFK mentality than sort of the old guard of Pazdur. I think pretty much across the board, people are concerned about the potential impact from Pazdur leaving and the state of the FDA right now.

But I'd love to start with that and chat through what everyone thinks the impact is going to be. Paul or Graig, any thoughts on that specifically?

I feel like the public health—that piece of it—is, to me, the more depressing part, right? I just don't understand why these guys are also obsessed with COVID vaccines.

I mean, gosh, Operation Warp Speed was probably one of the biggest achievements of the Trump administration. There’s a lot of hindsight stuff with COVID that people can argue about, but I just don’t get it.

Outside of that, like I said earlier when we were talking about the sector outlook for next year, it still feels like if you’re an investor and you’re looking at good science, trials with well-understood endpoints, regulatory precedent for what’s happening, and significant unmet need, I think 80% to 90% of the time you’re probably fine. We’re going to talk about uniQure, which feeds into other things in gene therapy where companies are running single-arm trials, and that’s the hardest thing to predict.

I just don’t know how you reconcile some of this commentary about speeding up drug approvals and a plausible mechanism or pathway with, conversely, all the other news that’s been confusing, involving companies that thought they had alignment and then didn’t. From an investor perspective, I don’t want to be so cynical and boil it down to stocks, but that’s our job. I do think you can probably invest around this theme and generally be okay.

No one who’s listening to this cares about what I think about public health. I’m not a public health expert, and we all have our own personal views. But that piece of it, as someone who’s followed the industry for a long time and has kind of venerated the FDA, is a bummer. I’ve never seen an FDA leader mention a president’s name in a memo. Pazdur was under a number of different Republicans and Democrats, and that has never mattered. To see that matter, I think, is kind of a bummer.

But from an investment perspective, I still think it’s probably going to be fine for the most part, outside of certain cases that are more complicated.

Yeah. Let’s set aside the rare disease stuff and uniQure. We’ll come back to that in a second. Just to close out the vaccine discussion, Graig, anything to add on this one?

Yeah. Big picture, again, I’m not going to comment too much on public health. I do think it’s important to remember that the FDA’s job is to protect the safety of the American people, whether it’s new technologies, new drugs, or new medical devices. There is a view that maybe we should take a closer look at some of the things that are either in development or have gotten approved, but I do think, bigger picture, whatever is happening with the FDA can only be negative for the American public. I do see the potential for long-term consequences.

I won’t comment much more. As it relates to stocks, which is closer to what we do, biotech is still obviously a very investable sector from a long perspective. I do think that you can continue to find very strong and capable companies that are developing hopefully transformative medicines for patients. With that said, I do think that we will continue to see positivity.

But again, this yo-yoing of what’s happening with FDA policy is a bit ridiculous. Hopefully, if we have this conversation 3 months from now or a year from now, we’ll still feel good about what’s happening at the FDA. It’s just really hard to make sense of what’s happening.

A potential topic that I think we’ve tossed around is the idea of potentially lowering the number of trials required for approval. I think that can be a net positive for the industry and for the American public, but I do have some issues with that as well. Let me stop there and see if we want to tackle that topic.

Well, let me tell you what Paul’s point about COVID vaccines made me think about: Why has this become the flash point for all this drama? As I’m thinking about it, it’s a few things. Vaccines are one of the very few products that will literally touch every human being in the country, number 1. They’re touching people at a time when they’re generally healthy, number 2. And number 3, they’re not water.

We saw with the COVID vaccine that there are potential risks, such as myocarditis, that have to be considered. On top of that, we know science is imperfect. Anyone who’s been in the industry for a blink of an eye knows the limitations of science. We don’t have answers to all the questions that people may want answered.

On top of that, in this realm of social media, anyone can have a voice and a pulpit to highlight the deficiencies and the questions around vaccines and rally some antivaccine sentiment. It’s probably this confluence of forces that are coming together at this point in time and putting vaccines, unfortunately, in a very difficult position.

One thing that’s actually evolving, coincidentally, is passive-immunity approaches. Companies like Cidara and Invivyd are potentially going to offer, instead of vaccine-protective immunity, monoclonal-antibody protective immunity that may be able to accomplish everything vaccines can accomplish and more, but without some of the baggage that’s accumulated with the space. So, kind of a very interesting time.

I’m sure we could spend a lot more time on this discussion point, but why don’t we go beyond vaccines and talk about how the FDA may be impacting the industry more broadly? Let’s come to uniQure. I think it sounds like we’ve kind of agreed that it’s going to be more on the margins for some products that are not as obvious in terms of offering clinical benefits that outweigh the risks, and hopefully that represents a minority of products going through the FDA and, as such, won’t impact the broader sector.

But let’s come back to uniQure. Paul, I should say, give us the lowdown on what’s been happening there.

4. UniQure Exposes FDA Uncertainty

Yeah, thanks, Josh. They basically updated this week that their meeting minutes are consistent with the meeting they had with the FDA on November 3, where it was said that their Phase 1/2 study is not well-suited to support the basis for a BLA filing for AMT-130, their gene therapy for Huntington’s disease.

I’ve been saying this on this forum and others: Whatever you think of their data, whatever you think of this whole idea of comparing to natural history, these guys got Breakthrough Therapy designation in May and had a meeting around a statistical analysis plan that was agreed upon for their Phase 1/2, year 3 data, which came out in September. For the FDA in November to suddenly say, “Okay, you can’t file on this,” I guess you’re supposed to believe that this May meeting was a sham. Everyone’s trying to make sense of this.

There are a few questions that are uniQure-specific and a few broader questions for investing going forward. The uniQure-specific question is: Is this going to somehow be reversed, or will there be a compromise? The compromise could be that maybe they follow these patients for longer. There are some patients who hadn’t reached 3 years; maybe they can include those patients. Is there even going to be a path for this study to file? I think—who knows? We don’t know.

Separately, what does this mean for other rare-disease companies? Josh, you cover some of these stocks too, and Brian, you and I both cover Lexeo. There are a number of gene-therapy companies that are running single-arm pivotal studies. A number of them have consistently met with the FDA, have had Breakthrough Therapy designations, and have had dialogues with CBER under Prasad.

Should this uniQure situation lead us to question the reality of those regulatory alignments? With the uniQure situation, it seems like in the spring, when they had their meeting, Nicole Verdun was at the FDA, and it seems plausible that she or others who were more senior at CBER and are no longer there may have been champions of this, and now they’re not there. Whereas if you’re meeting with the FDA right now and aligning on a single-arm pivotal study, hopefully you’re meeting with the folks at CBER who are the decision-makers.

I’d also say, with uniQure, it’s been said before, but the original goal of this study was not to be filing-approvable. It was originally a placebo-controlled trial. This was a pivot to a natural-history control.

From my perspective, every case is nuanced. The other complicating factor with some of these rare-disease companies that are doing single-arm pivotal studies is that you can have alignment with the FDA, but that still doesn’t tell you exactly what the bar is for approval. How good does your efficacy have to be?

But I guess for rare disease, I’m still cautiously optimistic that if you’re prespecifying everything and you have an agreement, I think we should believe it. I do.

But you know, this uniQure situation—I’m really close to it, right? I covered this company for a long time. I’m a believer in their therapy. It threw me for a loop. I felt like their regulatory alignment was pretty strong. They had a number of meetings, Breakthrough Therapy designation, and everything.

But I do think maybe what happened is they were having these meetings with the FDA in the spring, which was a very transitory time, right? We know that just weeks or months later, there were significant changes. Again, I think the broader implications are hard to say. I’m curious what others think.

I mean, I think one of the things that’s notable on the CBER side—and I would argue pretty much everyone I’ve talked to going through CBER has said this—is that no one has explicitly stated that they’ve had a meeting where Vinay Prasad spoke or was present.

I’ve heard the same thing. I haven’t talked to anybody who’s had that meeting, Brian. I think that’s a little scary because I know he goes online and says, “Oh, I’m not micromanaging things,” but all the signals are that he is inserting himself into decisions all over the place.

I mean, Tim Marsh[?] made that assertion. Some of the initial press around Peter Marks’s resignation made that assertion. He certainly wrote this email that was spread over the weekend. So he’s really taking a very active role, which I’m not surprised at all by. I think that is Vinay’s nature.

But that’s a problem because if you have a reviewer who was there under Nicole Verdun and Peter Marks and is used to this way of management, I don’t know that they’re rocking the boat. Some of these things are probably places where they would have gotten approved—certainly probably would have gotten approved—under Peter Marks’s tenure.

If I had a drug that was going to be up for a CBER-based approval—almost any approval at the FDA right now, but certainly through CBER—I would try my hardest to talk to Vinay Prasad and get a very, very clear indication from him. I would want him to write or sign any minutes that come out.

That doesn’t feel like it’s doable, though. Again, with uniQure, it’s 1 company. The FDA has so much to oversee, but they made this announcement on November 3, and they’re hoping to have another meeting sometime in the first quarter.

You wish they could have a conversation sooner. They have Breakthrough Therapy designation—what’s Breakthrough for? I thought you were supposed to have a bat phone to call the FDA.

So, yeah, it’s tricky. What’s interesting here is that the facts are the facts. We’re just seeing different interpretations of those facts, different applications, and decisions around regulatory prospects.

Obviously, things are very different from Peter Marks. I think many of us appreciated Peter Marks’s very patient-friendly approach to approvals. He even acknowledged that under his framework, the FDA was going to approve drugs that didn’t work. They’d have to figure out how to withdraw them from the market, but they wanted to err on the side of caution.

And I think we’re now in a place where, for many of us, that might have been a little bit too lenient in terms of the caliber of products approved. I don’t think it’s controversial to say that if the uniQure data set were far more definitive in terms of offering benefit to Huntington’s patients, this wouldn’t even be a discussion point. It would be approved.

We’re looking at a data set that’s prone to perhaps more interpretation than other data sets that we often see. It’s perhaps not necessarily surprising that this product is getting pushed around a little bit, given the leadership changes at the FDA and perhaps a bit of a philosophical difference.

But again, this certainly seems to be more of an isolated event because of the immaturity of the data, in the sense that it’s not definitive.

Hey, Josh—

Can I ask you a question? Do you cover the next crop of gene therapy companies, and Brian too, because I know you cover Lexeo? How are you guys thinking about the next crop of gene therapy companies, like in the Rett syndrome space or in some of these genetic cardiomyopathies, where they have alignment on running a 15- to 20-patient, open-label pivotal trial?

Do you take all that at face value, Josh? What do you guys think? I mean, look, the FDA put out guidelines in September that read as if—read with significant Peter Marks vibes, right? So are we not supposed to believe that? I think it’s just interesting.

Yeah, go ahead, Brian.

Yeah, I was just going to say, look, I look at these names and I think—and I’ve said this again and again because Vinay says this again and again—that this is where you get to the heart of going to just 1 single study or single-arm studies, right?

In a case of Parachute, you don’t need a 500-patient, placebo-controlled study, right? For something like Lexeo, I think you’re dealing with endpoints that obviously are not going to be occurring on placebo. I would say that across the board for all indications. That’s what I want to see.

I want to see something that’s really needle-moving on an endpoint that is either reasonably likely to predict clinical benefit or is clinical benefit in and of itself. There’s no doubt about it, right? I think where we get into these problems is when you have these slowly progressive, changing diseases with functional endpoints that are highly variable over time.

You say, “If we do a natural history study where we select the patients based on some database and compare our open-label experience, where we’re bringing patients into a clinical trial and giving them all the care associated with the clinical trial, and then compare it to this natural history study,” you run into a lot of potential issues around some level of overstatement.

To me, that’s where I worry. If you’re trying to make a case where, “Hey, if I look at 2-year progression of this disease and 100 patients on natural history, I see a 10% detriment, and in my open-label study with 30 patients, I see flat,” I don’t know how to realistically interpret that.

When I’m looking for single-arm studies, if you have a 60% RECIST response rate in oncology in a relapsed/refractory patient population, that’s not chance, really. That’s what I think.

I think that’s spot-on, and it’s consistent with what Vinay Prasad has been saying, particularly about those neurodegenerative diseases—that it’s very hard to really prove a treatment effect without a properly constructed randomized clinical trial.

But in many other settings, we’re seeing signals of the RECIST equivalent of whatever the disease may be. In Rett syndrome, gain of function may appear to be unprecedented for kids. For cardiac-targeting therapies, a change in left ventricular mass is something one would really not expect to see outside of an intervention.

I’ve got my own views in terms of that broad field, which is actually probably a good segue to the phase 3 Capricor data for their cardiac-derived—I’m trying to get the product characterization right—cardiosphere-derived cells for the treatment of muscular dystrophy.

It’s a very controversial mechanism, a very controversial application, and a very controversial path through the FDA that culminated this week in positive phase 3 data. Even that data has been subject to very intense scrutiny on Twitter and among investors around the statistical analysis, but we do seem to be seeing a fairly consistent signal here across trials, certainly on cardiac function in patients and stabilization there, as well as some signs of effect in peripheral muscles.

Probably one of the most controversial names of the year is winding up now in December with a positive data set. The stock is up about 400% this week. I want to flag that it’s a San Diego-based company, so I’m always excited when we see San Diego-based innovation thriving.

They do have a partnership for this program with Nippon Shinyaku. They get a very meaningful, 30% to 50% tiered royalty on sales—an extremely high royalty. So again, it’s a really interesting setup as we go into what will likely be an FDA review next year and apply the rigor and scrutiny of Vinay Prasad to this data set.

It’s one where the mechanism doesn’t necessarily jump off the page, but there are some really interesting possible explanations as to how and why this therapy is working to deliver benefit to patients. I’m not sure if everyone else has been following this name and data set, but it is a great segue from the conversation about UniQure’s approach, the FDA’s approach to UniQure, and whether there are going to be issues for this data set.

Personally, I think it’s going to be very hard to reject this after a series of consistent signals. Yeah, we don't understand the mechanism fully, but that shouldn't necessarily preclude providing this very important option to patients with a fairly unprecedented data set.

Gosh, I don't have anything else to add on Capricor. I do think it's interesting that you have drugs where perhaps the mechanism of action hasn't been exactly elucidated. Should that be a reason for a treatment not to be made available to the public?

I'll just remind everyone that we have a ton of neuro drugs that we really don't know how they work. Whether these are more on the psychiatry side, we have lots of drugs that we don't know how they work, but yet they work and they're approved. So I hope, for patients in the Capricor situation, that it ends up being a positive.

I mean, Josh, this is the first therapy to hit cleanly in an RCT in this population, right? How do you not approve it, understanding the other things that are approved?

Yeah, right. And to get it right, allogeneic cardiosphere-derived cells—that's what deramiocel is, specifically. So, to continue this stream of thought, which I think is really important: when we have a very solid understanding of the biologic pathways and the mechanism by which a therapy is working, and a high degree of a priori confidence, we're even seeing the telltale signs of this from the FDA—the plausible mechanism pathway, right? When everything lines up a priori, you have a very high probability of clinical success.

There's probably less onus on that data set to be definitive, right? Because perhaps a smaller sample size, if it aligns well with the underlying biology, will be given the benefit of the doubt. But when you wind up with a therapy where you just don't necessarily believe in the mechanism or feel like you understand it, Graig, to your point, it doesn't mean that you don't approve the product. But I think it's reasonable in that setting to have a higher bar of data.

That's, I think, in some ways what the FDA wound up doing. They said, “Look, we don't necessarily understand how this works. With that lens and framework, we're not necessarily comfortable approving based on the data set that you provided. However, if you can replicate this in a well-controlled, prospective clinical trial, then yes, we will grant approval.”

It seems like that may be playing out, and it's great for patients and great for biotech because now we do have perhaps a much more solid foundation of data to consider this product and really have a lot more confidence in terms of how to manage it. That said, there's still a lot of controversy—just nitpicking around the statistical analysis plan. I thought the company did a very good job on its data review, addressing all the questions. Kudos to my colleague Kristen Kluska, who set up a great call on this one. At the end of the day, great for patients.

5. Neuro Readouts Drive The Next Debate

All right, we've got a bunch of public data updates to cover, so let's try to cover them as best we can. Why don't we go back to Cobenfy, a data set we were supposed to get but turns out we're not going to get? Graig, do you want to kick us off on this one, or Paul? I forgot.

Yeah, no, I'll be happy to. I'll make my comments brief. Cobenfy—I think Paul and I know the muscarinic mechanism pretty well. Cobenfy was the first of these very novel drugs to get approved, and it is approved in schizophrenia. It may have had, or be having, some hiccups in terms of its launch in schizophrenia, but I think there's a fair degree of interest and excitement around the potential to expand the label.

We were supposed to be getting Phase 3 data from the ADEPT-2 study by the end of this year in a condition called Alzheimer's disease psychosis, or ADP. With some irregularities that were cited by the company and identified early on, they elected to add more patients to the study. They're going to exclude data from the troubled sites, and they pushed out the readout until the end of next year. So I guess we'll all have to stay tuned about what's happening there.

Can I add anything real quick on that?

Well, it's interesting because this is an example that tells you again and again that stocks are all about expectations, right? This announcement reads badly, and yet Bristol went up, and MapLight, a recent IPO with a muscarinic drug, went up over 20%, right?

I think the concern here was that this study had essentially completed at the end of July, and we still hadn't gotten the data. Investors over time were thinking, “There's no reason to hold back announcing if the study works, so what's going on?”

What was interesting is that there was a group, like a DSMB or IDMC, that reviewed the data from ADEPT-2 and recommended adding patients to it to fix whatever the powering deficiency might be from these trial-site conduct issues. Bristol engaged with the FDA around it. It's a little bit like reading tea leaves. We don't know the criteria by which the IDMC was giving Bristol advice on increasing the sample size.

One read of this situation is that a group reviewed some of the data. Bristol may remain blinded, but the group reviewed the data and saw some sort of signal, right? They gave them a recommendation: “Hey, get the sample size to this point. That might restore your power.” We've seen this a number of times in psychiatry studies.

My interpretation of this event was that the probability of success of this trial arguably goes up versus how everyone was feeling a week ago. Graig and I have both covered Cerevel and Karuna. There's a lot of reason to think that muscarinic should work in this population.

The question has always been the therapeutic index, right? Cobenfy is a great drug in schizophrenia, but the dosing in ADP is 3 times a day. There's a food effect you have to navigate. It's a population that's more sensitive to side effects, especially with psychiatry drugs. That's always been the question, but I actually thought this update, which might have read badly on the surface, was a net positive versus how everyone was feeling.

Interesting takeaway. Let's go to Praxis. Brian, you're going to give us the update on this one. Brian, you're muted.

Sorry. So it's actually 2 updates, and I think it's sort of in the regulatory section of the discussion, which never seems to end on these Fridays.

The first update they released was that they had a pre-NDA meeting regarding the potential submission for approval of their drug ulixacaltamide, which had a positive Phase 3 program the other month in essential tremor. Anyone who's been following the essential tremor space knows that there's basically nothing approved in the modern era of drug approvals for essential tremor. It's pretty much been a graveyard of failures.

This Phase 3 program does not have a traditional history. They were actually recommended for futility earlier this year by a data monitoring committee. They wound up not following that recommendation and continued the study. When they unblinded the final, full data set, on the surface it's an overwhelmingly positive data set. They have very strong P-values on the primary endpoint and across secondary endpoints.

There are 2 studies within the Phase 3 program, so it meets the metric of having 2 separate clinical studies. It also very much reflects the data that they saw in their Phase 2 study, so I think it's very, very consistent. But the pushback has really been on the idea that, because of this nontraditional occurrence, the FDA may not be open to reviewing this, or through the review at the end of the review, the data wouldn't be as positive as we see in the initial topline.

This is sort of the first step to getting there, right? I think the worst-case scenario would have been that, even through a cursory review of what the data was, the FDA would say something like, “You didn't follow a DMC recommendation. You changed the timing of the primary endpoint, or your analysis is totally flawed, and we will not accept an NDA submission.”

That's not what happened. It seems, and I talked to management last night, that they had a very positive, encouraging meeting with the FDA, with really no major issues to talk about. They've reiterated that they're basically going to file in the very near-term time frame, early 2026, and it doesn't seem like there are any other additional asks for the filing.

I think it meets that first hurdle, and next year it'll certainly be a hotly debated name. This is a company that's trading a little above a $4 billion market cap, right? The potential opportunity in ET, even at peak, could be something much more substantial than that. I think that's the debate we're going to have next year: Is this going to get approval? Can you see a big move on the upside, or are they going to run into regulatory issues?

The second data point that they had, I think, was certainly less controversial. It had some component of the stock move, but it wasn't very surprising. They had a positive readout—this time, an interim readout—but the study was stopped due to overwhelming efficacy for 1 of their 2 epilepsy drugs. This one was in 2 subgroups of developmental and epileptic encephalopathies.

We're going to see that data tomorrow. They just announced that it hit at interim. We're going to see the data at AES tomorrow, but I think we already have an earlier cohort of this study. Mechanistically, this is a mechanism of drug that works very well for these types of seizures. So, I think you're going to have 2 NDAs under review at Praxis next year. I know a lot of us here follow neuro names, and it's pretty rare to have 2 totally different NDAs under review at the FDA for neuro indications.

Hey, Brian, just to double-click on the whole Praxis controversy: There are some investors out there who are worried about this thing where the study was stopped for futility and then overwhelmingly worked—that there's something that doesn't pass the smell test. Then you have a really substantial imbalance in dropouts between the drug and placebo in that study. Praxis is one of the small handful of neuro names I don't cover. Do you feel like your conversations with them, and what they've disclosed publicly, have satisfied you around those 2 issues and any regulatory risk there?

Yeah, I mean, the nature of the recommendation to stop the study and then have overwhelming efficacy—it seems like they've indicated that the point estimate at interim and at final analysis is the same. You just had greater variance. They only had a little more than 40% of the patient population they ultimately enrolled at the interim analysis. So, I think it was just massively underpowered. I don't know what the specifics were from the data monitoring committee that set the futility threshold, but they've indicated that the data itself doesn't change, just the variance, and therefore the expectation around what you would get for statistical significance.

On the dropout side of things, that's a big debate: Are you looking at an 8-week endpoint and basically selecting for responders because your dropout rate is so high? They go through a lot of analysis in terms of tipping point, using IPTW with MMRM imputation and COVID imputation, and looking at all the various different time frames for the endpoint. They're all sort of positive. Most of them wind up still having p-values of less than 0.05.

The thing that really sells it to me is that they basically had the full effect size at week 4. Before they had most of the dropouts, they were already seeing the same effect size. I think that reflects what the mechanism is. Again, when you go back and look at the history of this drug and even this mechanism, if you actually look at Neurocrine's data, they did a very small study. They didn't move forward with it, but I think we look back on that now and say, "It sort of had a very similar effect." It just wasn't powered to be statistically significant. I think it's interesting to see if Neurocrine maybe decides to try to reboot that program.

6. Janux Restricts Its Data Disclosure

Yeah, this has been a colorful and spicy name from the very beginning. We'll see what comes. We're probably not going to have time to get through all our other data updates. The one I do want to talk about with the remaining time, because I think it's a good segue to an interesting conversation, is the Janux prostate cancer data update. It didn't go well for the company's stock; it got cut in half and is now trading close to cash.

This is their PSMA × CD3 masked T-cell engager that looks like an active drug. In terms of the investor response to the data, it was probably a mix of disappointment in the data relative to where expectations might have been. But perhaps even more impactful was the company's selective disclosure: what they chose to present to the Street and what they didn't present to the Street.

Talking to the company afterward to better understand it, what they cited was the very intense competitive dynamics in the field. They didn't want to, having gone through the process of learning some important lessons for their own platform, inform competitors and give them a chance to catch up and draft off the hard work that Janux has done. That explanation has resonated with some investors and hasn't resonated with other investors.

It's something that I'm hearing more of, especially with the rise of China biotech and the view that whatever is done in the U.S. will be matched, or quickly even potentially bested, by China-based biotech companies. So perhaps there's a growing need for secrecy around data, products, constructs, and even patents. This probably won't be so much a discussion of the data, which would be a very lengthy discussion, but I'd love to hear everyone's thoughts about this general dynamic and whether we need to be prepared for more selective disclosure due to competitive dynamics.

Perhaps we have to live with being unsatisfied with data sets and having our curiosity not fully addressed because of these competitive dynamics. I'm not sure if anyone has come across this situation in a meaningful way before, but I suspect we're going to be seeing it going forward.

Yeah, maybe I'll just quickly say that, amidst all of our discussions, whether it's with corporates or with investors, the so-called rise of China biotech has certainly been an emerging topic. I do think, on some level, I've always viewed the U.S. biotech innovation-based industry as one of the crown jewels of our country. So I think, on some level, it needs to be protected. But then again, competition is competition.

Josh, I hear you on perhaps how some companies might be approaching disclosure of data. I can understand the argument. I think it makes it more difficult for what we do—to be able to evaluate how strong a data set is for a company and how to advise clients on whether to invest or not. If we're going to have more selective data disclosures that really don't give us a sense one way or the other of how good the quality of the data is, I don't know. Brian or Paul, do you have a view?

I mean, there are only some management teams that have earned the right, in the eyes of investors, to do that. This isn't any comment on the Janux team. I don't know that team, so I don't cover that company. I'm sure they're a great team, but I think it's hard not to give people all the details when investors are keenly focused on those details to compare competitive dynamics in a space where big companies are involved. Usually, opacity is discounted as something that's negative. People are cynical, right? So it's a tough situation to use competitive dynamics as an excuse. Most good spaces are competitive.

Yeah, I think I would agree with that. I think investors have a view that, if we're going to invest, we're investing in the management team, the asset, the technology, and the opportunity. We expect that we can trust you with our capital. To the degree that management teams choose to be less transparent, I agree with you, Paul, that opacity is not usually well received.

Hey, Josh, are you on mute?

There you go. Thank you. I was the one screwing up.

I'm just going to close out by flagging Otsuka's Voyxact for IgA nephropathy, priced at nearly $400,000 a year. So, ultra-premium pricing for these rare and even some of the not-so-rare diseases continues. Probably a topic that we might be safe from for the next couple of years, but I would imagine these very high launch prices are going to be front and center again at some point. Maybe that's what ends the biotech rally. Hopefully not for a number of years, though.

All right, any closing thoughts here? Paul, we'll start with you.

On the spot. Closing thoughts? No, this was a great discussion. I love it when we have a full analyst takeover. You guys are—

Using language. Graig, how about you?

Yeah, no, I mean, I'll just briefly mention that we have the ASH meeting coming up soon. Lots of companies with really exciting data. I just want to flag one company called Terns Pharmaceuticals, which has really interesting data in CML. They've got a big data presentation on Monday. The stock has ripped about 250% since the abstracts were announced. This could potentially be a best-in-class asset for CML, but obviously it'll be data-dependent. So, I'll be there in Orlando, but I'm looking forward to the opportunity to contribute today.

Awesome, Brian.

No, no, I guess I'll just say it was a great session today.

Glad the four of us could be doing this. I, too, love the panelist back-and-forth. Yeah, a lot of fun.