第168期｜2026年1月9日

You're listening to Biotech Hangout, a live and unedited weekly discussion of the latest news in our industry with a group of biotech insiders. I'm Sam Fazeli, and my co-host today is Brian Skorney, who's here. We are still waiting for Paul Matteis and Tess Cameron. For more information about our hosts and guest speakers or to listen to the most recent episode, please go to biotechout.com.

Happy New Year to everybody. It is my pleasure to open the first session of the year. We're looking forward to enjoying a whole new 2026 full of energy, hopefully at the same pace at which it started.

1. Biotech Starts 2026 Strong

Normally, we start with politics, market sentiment, and so on, so let's just do exactly that. XBI is up for the obvious reasons: there have been M&A deals, and we've had an IPO that, by all intents and purposes, is successful, which is great news. We talk about the M&A, and we're close to being on the eve of JPMorgan, from a working-day perspective.

Brian, did you want to quickly catch us up on how you feel the year has started in terms of what you've been seeing, the data you've been seeing, and the news you've been seeing?

Yeah. I think it started off a little bit manic, as one is kind of used to with the biotech tape. You had some big underperformance days and some really big outperformance days. We're one week into the year, and we see some modest outperformance for the XBI. But you could have looked on another day, and you would think it's a slow start to the year, at least in terms of where the market is going.

I think sentiment is good overall. We had a really monster last 4 or 5 months of the year, and I think people have a mix of hope and confidence that we're going to see some continuation there. We've spoken a lot about this. I'm pretty bullish on 2026 as a whole. The sector certainly isn't an expensive sector relative to a lot of other parts of the equity markets.

I think we've seen a lot of data catalysts, a lot of M&A, and a lot of enthusiasm really play out here. You talked a lot about drug-pricing reform. We have our sector preview out today, and we go through a lot of these themes. I know I particularly have a very unique view, but I think my view—and, call it, the average consensus view among investors—is that it's going to be a good year for outperformance of biotech.

We've seen a pretty busy week. One of the comments we had internally is that it seems like things get pulled forward earlier and earlier in the year. Obviously, JPMorgan is the pilgrimage that we all make to start the year and get updates. It was probably a few years ago that people started announcing things earlier than JPMorgan, but this feels like the first year—and I haven't put together data on this specifically to say this—that, at least from an observer's perspective, you're seeing a lot more deals occur.

We used to see a lot of follow-ons get priced after JPMorgan. In addition to people feeling that they want to be early on the curve with the news, it seems like companies are also looking to be early on the follow-on front. Certainly, I imagine we'll continue to see a lot of deals over the next 2 or 3 weeks. At some point, there will probably be a level of investor exhaustion. Talking to the buy side, I think they're pretty much busier this week than they traditionally are.

That's great news. As you said, XBI is trading at—what are we at now?—125.53 on my terminal. The last time we were around this level was November 10, 2021. That was us still coming off the excitement of COVID and the idea that COVID was going to make everybody really appreciate the pharmaceutical industry, which didn't quite happen. It kind of went in the opposite direction.

Tess and Paul, very nice to see you here. I was beginning to sweat under the collar a little bit. Do you two want to take turns, or ladies first, Tess, and then Paul, on the general topic of how you're feeling for the year? I mean, January 9, Tess.

Yes, absolutely. Happy to. I think we're feeling relatively positive. We've seen a lot of really strong fundamental progress in 2025 that drove valuations. Our team is going to be coming out with a report over the next day or two that summarizes some of our overarching thoughts about the sector.

What you'll see in that report is that, if we look at the returns for 2025, M&A certainly contributed to returns. But the returns are actually really strong even if we take out M&A, which is obviously really important and encouraging. Companies that made strong fundamental progress were rewarded.

I'm hopeful that that theme continues this year. Maybe hopeful is a better word than necessarily optimistic for me. We do have continued policy overhang, right? We saw the CMS memo come out with MFN. I'm sure that's probably going to be litigated. We'll likely have to see how that plays out to determine whether that is introduced and really comes into play as a pricing risk.

I think that likely impacts companies with existing products more than companies that are launching new products and really have yet to make a pricing decision. I think that is probably the major continued unknown variable in 2026: what could pop up from a policy standpoint that could surprise to the downside? Progress is very encouraging, and companies are really well capitalized to keep advancing.

What's interesting is that stock prices didn't bat an eyelid to that. I've gone on record saying that I think the MFN dust has settled. Maybe that was premature, but nothing happened. The market just moved on. I found that interesting.

It really is, and it makes me wonder. Maybe other people have different perspectives. I think that could be for one of 2 reasons. One reason could be that people look at that and they're like, “Yeah, whatever. It's not actually going to happen and not actually going to get implemented,” which is a bit like the TACO trade—the TACO trade thesis.

Then I think there's another perspective that I don't think is the right perspective, which is, “Oh, well, if this gets implemented, it's not really any problem because maybe companies in the U.S. are just going to raise their drug prices in the U.S. to compensate for the fact that they are no longer going to launch in Germany because the German price would have too much of an adverse impact on their price in the U.S.”

I don't necessarily agree with that perspective. I don't think that any U.S. pharmas or biotechs are really leaving a lot of pricing room on the table in the U.S. I think they're trying to price what works efficiently from a market perspective.

So I think that has yet to be seen. If MFN actually becomes a thing, I think we might see some surprises. Perhaps the lack of market reaction just indicates that there's little expectation that it would actually be implemented.

Right. Paul, you're having a go at the start of the year. You came back with major excitement all around.

Yeah. Great week. Good to see everybody. Sorry I had to redownload the X app and then go through a forgotten-password process. It's always pleasant to do that at 11:59. My bad.

But, yeah, good to see everybody. It's hard not to feel mostly optimistic for the year, right? It feels like we're in a good place of strength in the sector. We're going to see more M&A. I sound like the cliché sell-side analyst, right? Bullish, more M&A. But in general, I really feel that way.

Tess, what you were talking about is interesting because I think at this point investors, right or wrong, have become so jaded to drug-pricing headline risks that that probably is a real risk to the downside. It takes a lot now to get people to take something like that seriously. But if something significant comes along, I think that really could take the wind out of our sails.

Separately, I feel good about a lot of companies in my coverage. I think we're continuing to see strong commercial launches from the big guys. Data resets are getting rewarded. We'll see how JPMorgan Monday looks. Maybe the RevMed deal takes some pressure off needing some big M&A.

But, yeah, I agree with what everyone said.

I just wanted to add a couple of other data points that are going to be coming out in our report. I think something else that's really important for performance in 2025 is that it was not indiscriminate performance, right? It was not consistent across the whole sector. It was really driven by strong companies.

We often do this analysis where we compare companies that had specialist investors versus companies that didn't. You assume that maybe there's a bit more selection: specialists are doing a lot of fundamental diligence, and maybe that's a way that you can have some indicator of quality. Obviously, there are some companies without specialist investors that have performed well.

But when we look at the performance of those that had specialist investors versus those that didn't, there was still a lot of discrimination in the market. A lot of companies really didn't perform, and fortunately, the companies that did perform really drove the outperformance of the sector. But I think that again speaks to overall sector health.

Yeah, of course, we'll get to talk about the rumored deals. I have to choose my words very carefully. Of course, we all do: Revolution Medicines, Merck, et cetera. So, before we go there, on the policy side of things, Tess, I think you wanted to raise the subject, which I'm very passionate about myself, but you start losing the will and the energy to keep talking about this. That's the pediatric vaccine developments in the U.S.

Absolutely. Yeah, so this was an update from the CDC, where the CDC removed 6 vaccines from the recommended list, and they did that without any ACIP discussion or recommendation. That was rotavirus, the COVID vaccine, influenza, meningococcal, hepatitis A, and hepatitis B. All of those got removed. HPV was reduced to a single dose. It's kind of like, where did this come from? Is ACIP doing anything?

Fortunately, there are a couple of ways where you could say, “Wow, okay, this is going to have a negative impact,” certainly on what parents are actually seeking for their children, but also on insurance coverage. Importantly, I don't think there's any change—or at least we don't anticipate any change—to insurance coverage for those vaccinations. But this could absolutely have an impact on vaccination rates and what parents are getting for their kids.

As you say, and as Paul has said, it seems like everyone's just kind of like, “Oh my gosh, another vaccine recommendation that isn't scientifically based.” Maybe we're getting a bit immune to that. But it does really cause me to question: What does it take for us to remember that these are real risks, right? These are real risks not just to our sector, but to public health.

So, yet another change introduced. From a stock standpoint, you saw Vaxcyte, I think, actually go up on the day because it kind of removed a worst-case scenario of pneumococcal potentially being in that list—that was going to be taken off the schedule.

Yeah. Yeah, I mean, the one thing I think is at least worth saying is that it's not the worst set of recommendations in the world. It's pretty much in line with what happens in Denmark, although I haven't done a line-by-line comparison. Denmark is a very different type of society, and access to health care is very different from that in the U.S. So, if that's the intention—to try and equalize it relative to that particular country, for whatever reason—then I think it's missing a whole bunch of other aspects that are important from the perspective of public health and how public health is administered in the different countries.

We'll wait and see. Of course, the states in the U.S. can have their own rules, and I think there are groups that have taken over, like the American Academy of Pediatrics, from essentially ACIP, because I think a lot of people feel that the physician members of ACIP are not delivering what they used to be doing.

2. Aktis Reopens The IPO Window

Let's move on to deals and fundraisings. I'm going to start with the IPO of Aktis. I think the folks on this call weren't on the book, so feel free to chip in.

What's interesting, of course, is that it's a great start to the year. I was a little bit surprised, thinking we've got a company that has no clinical data yet. I mean, they have a clinical product. They're in Phase 1b, with data expected possibly at the end of this year into 2027, I think, is the target. But their radioligand therapy is a very novel approach to radioligand therapies.

So I was a little bit worried when it was coming up, and I thought, “Do we really want to start with this? Should we not have a company with a bunch of data in hand?” But hats off to them. They've done a great job.

They priced at $18. The range was $16 to $18. Good tick, number 1. Tick number 2: They raised more than they expected. $318 million in the end is the number I've got, at least, and it opened up at about $27. It's now settling down around $22 to $23. Remember, $18 issue. All of that is a great sign, and the investors are a good set of investors bringing the company to market.

Of course, $100 million or so has come from Eli Lilly, given that they had a deal with the company. So Lilly has a deal with the company and puts money into it. I think that tells you a lot. Apparently, the book was 10 times oversubscribed.

Very quickly, the company's last raise was in September 2024: a $175 million Series B from RA Capital, RTW, and Janus Henderson. Then, of course, they were already alongside existing investors Third Rock, Avidity, Lilly, and Bristol Myers Squibb. So there's a very good set of investors here, including Merck Venture Fund.

The approach is different. It's a radioligand therapy, but it's not just any radioligand therapy. They're not using existing known peptides. They're using miniproteins, I think they call them, and they have a discovery platform for these miniproteins.

They had a deal with Lilly signed on May 21: $60 million upfront and $1.1 billion in milestones. We've seen that the split is about 50/50 between development milestones and commercial milestones. So that's pretty good. It's an area where they've shown already that, in patients, they get the right distribution into the tumors, et cetera.

The first one they've got in the clinic is Nectin-4, which we know that if you attach a drug to it in the form of Padcev, you get really good-quality results. It was a revolution, essentially, in bladder cancer when it first reported out. So everything's good here. Let's just hope that the data continues to be good.

One little thing that I've been looking around for is anti-drug antibodies. These are designed proteins, novel proteins, 50 to 75 amino acids, apparently. I couldn't find any information on that, but the banks on the deal, I'm pretty sure, have done the due diligence and were at least comfortable with what they've seen so far. Given the investors going in, it gives me hope that that's nothing to worry about.

Then, of course, we have a bunch of M&A. But before I move on, did anybody want to say anything about this IPO? I take silence as a no. I'm going to carry on.

3. Revolution Medicines Fuels M&A

And, of course, we've got Revolution Medicines. It's a company that we've held in high regard in our BI research. As you all know, we don't do buy, sell, or hold recommendations, or any price targets or anything like that. But we've done a very deep analysis of the KRAS data set. RAS is Revolution Medicines' focus, and they have a very powerful engine in terms of developing these novel agents.

Their drugs and the other drugs that are coming up from Roche and Merck are potentially better—well, they are better, in terms of the evidence and data that we're seeing, efficacy data, and safety profile—than the first generation, I would say, from Bristol Myers Squibb, which was Mirati, and Amgen.

The news was that AbbVie is looking to buy, and I think that was The Wall Street Journal a couple of nights ago. Remember, I'm in Europe, so things tend to end up being nights for me. That came from The Wall Street Journal, and I think Bloomberg then phoned them up, and they said, “No, no, we're not in discussions.” Those are the phrases. I don't know what that means.

Then, the next day, the Financial Times reported that Merck is in discussions. The price they've mentioned is $28 billion to $32 billion, which is a pretty hefty price, looking at EV-to-sales multiples of recent deals and oncology deals going back to Loxo and Array a long time ago. Whatever method you use to compare the valuation, that would be a rich valuation if that ends up being the case.

But as enthusiasts for the biotech sector, if Merck is prepared to pay that, then that would be great, because there's a pile of cash coming into the sector. The history and story of Revolution Medicines is interesting because, remember, there was a deal they did with EQRx, where they took the cash from that company, merged, and funded their pretty hefty R&D efforts here.

So, before I move on, does anybody want to comment on that? I can't imagine anybody would disagree that this would be good for the sector.

Yeah.

No disagreement.

No disagreement.

But that's good. Can we just keep it like this? [laughter]

What's interesting, of course, is that one of their key assets is a pan-RAS inhibitor called daraxonrasib. Then, just a couple of weeks before—or a week before, I can't remember exactly; it's been such a hectic week—AstraZeneca announced that it had done a deal with China's Jacobio: $100 million up front and up to close to $2 billion in milestones for a pan-KRAS inhibitor, on which we haven't seen a huge amount of data. But I'm assuming that there's data in-house and that they've seen the same thing as in these M&A deals.

So that's looking pretty good. But then you have to say, okay, RevMed is obviously a lot further along. They've got drugs in phase 3, particularly for pancreatic cancer, that could be on the market in a couple of years, where there is massive unmet need.

And then, of course, the last deal that happened was Eli Lilly–Ventyx, which actually happened. This Revolution Medicines deal is a rumor, whereas Lilly announced the deal. I guess this goes to what Brian or Paul said—that things seem to be coming forward. The deal was announced before JPM, but I think that might be because there were some rumors in the market about it.

I meant more on the secondary-offering side, but the point probably holds on M&A, too.

Yeah. Usually they wait for JPM to give it a bit of an extra boost, right? Anyway, does anyone else want to mention anything on the deal side? I think there's been quite a lot of follow-on, as you said, Brian. Is it possible it's going to end up being the strongest first week of January in follow-on land? I don't know.

Yeah, I mean, it's a lot of money that's gone around, and it's notable. I think they're all meaningfully up from the offer price. Looking at the names on my list that had deals this week, they're all up double digits. All of the names were able to upsize, and I imagine the greenshoes were exercised on all of them.

I think follow-on performance is a great indicator of the level of enthusiasm that's out there. Certainly, there's capital to put to work.

Yes. Since you've got the mic, we're going to move to data, and you've got Crinetics Pharmaceuticals' nice share-price chart I'm looking at here—a big jump in the new year. Tell us what's going on there.

4. Clinical Data Shape Winners

Yeah, I think this is one of the interesting case studies to prove my point that there is both data pulled forward and follow-on pulled forward. They announced early metrics from their Palsonify launch. This is a new drug that was approved in the second half of 2025, so this is really the first quarter of sales. We had only a couple of weeks of data when they announced the third quarter, so fourth-quarter sales, the first quarter of launch, really outperformed the consensus number.

We had written up that, probably more importantly, we thought it really outperformed in terms of the number of enrollment forms—200 enrollment forms—which is very robust for this size of indication right now. You're seeing people revise their models upward. Outperforming launches are always a way for stocks to go up, but they also topped it off with some pretty impressive data from an additional cohort of a phase 2 study they're running in congenital adrenal hyperplasia.

The data looked really impressive on both biomarkers and reduction of glucocorticoids, which are the standard of care and obviously carry, at high doses, very significant side effects. Part of this disease is that the goal is to get patients to lower levels of glucocorticoids.

Part of the story here is that Neurocrine has a drug, Crenessity, that's launched really well in CAH, also outperforming expectations by a meaningful amount. People are looking at this data and saying there's really good competitive data in an indication that seems to be larger than people expected.

Crinetics used the opportunity to raise additional cash. Right now, it's trading about 21% up from the offer price. So, in 4 days' time—3 days' time—that's a pretty good response to a follow-on.

Yeah. Well, it's not all been a bed of roses, right? Tess is going to talk to us about Zenas. Then, at the back end of last year, we had Ultragenyx. Zenas is interesting because the press release had a positive headline, and then the share price collapsed. Talk us through that.

Absolutely. Maybe just starting with Zenas and a bit of an overview of what they have. There was a lot of excitement coming into the readout that they shared at the beginning of this year. They had a drug for IgG4-related disease. This is essentially a CD19 × FcγRIIb bispecific drug.

The pitch was that you're actually targeting CD19-expressing plasma cells, but also some of these earlier cell types, like plasmablasts. The idea was that this co-engagement could potentially make the drug more potent than a drug like Uplizna, which is really just focused on CD19.

I think the cross-trial comparison ended up not looking as great. When you looked at flares, which is what a lot of people were focused on, Zenas' drug, obexelimab—sorry, I just want to make sure I pronounce it right—obexelimab showed about a 56% reduction in flares, but Uplizna had something closer to 87%.

I think that's where a lot of the disappointment came from: this focus on flare reduction, and what this means from a competitive-landscape standpoint. Once the baseline characteristics came out, there wasn't anything that really stood out as explaining why that would be meaningfully different.

The company is moving forward, and it has a filing coming up. It's going to be filing with the FDA in the U.S. and with the EMA. They're excited to bring this forward, and it will be a question of what they point to and how they compete in the marketplace.

They are focused on just weekly subcutaneous dosing, and that's certainly a differentiation from Uplizna. That will certainly be worth watching.

Sorry, I couldn't find the mute button. Yeah, so did you want to also just talk about Ultragenyx? Then I'm going to ask you to talk about some positive stuff.

Yes, absolutely. This probably feels like ages ago for everyone because we had the Christmas break and everything like that. But over the holidays, Ultragenyx released highly anticipated trial results for setrusumab, which is their drug for osteogenesis imperfecta.

If you recall, their whole thesis for setrusumab was based on some pretty phenomenal data that they had observed in a phase 2 study, showing pretty impressive fracture-risk reduction as well as changes in BMD. What was really a surprise from the setrusumab study was that, if you recall, the study was structured with a number of interim analyses.

There was an interim 1 that was maybe going to read out in the first part of the year, and an interim 2 that was around midyear. This was really the final analysis. They actually had 2 trials going, and they were sequenced depending on the interim and final analysis in the 1 trial, and how they would look at the other trial.

One was a trial that compared with placebo, and the other was a trial where they were looking versus bisphosphonates, also in different osteogenesis imperfecta patient populations. The first interim did not hit, and the second interim did not hit either.

Expectations were certainly lower going into this result, but nonetheless, I think there was a surprise just to see that the endpoint on fracture rate did not materialize. There was no statistical significance. There were improvements in the secondary endpoint of bone mineral density, and the safety profile looked pretty consistent with what they had seen before.

I think it'll be very interesting to better understand these data and understand what the path forward is in terms of Ultragenyx discussing with FDA. I think we're anticipating—we're hoping for an update around J.P. Morgan just to get some more details on the potential path forward here. And so now on to something good, where the share price direction went in the opposite direction.

Tess was obviously on Monte Rosa with their data and one of those high flyers that Brian was talking about. So do you want to just touch on that before I move on to Paul to talk about Neumora?

Yes, absolutely. I think Monte Rosa came out—Monte Rosa data came out—they were pursuing an NLRP3 degrader, and this was in healthy volunteers. But the potential market opportunity is pretty big because it would essentially be going after cardiovascular risk, right? ASCVD—a very big market.

You can think of this as a drug that would compete with Tourmaline's drug, right, the IL-6 drug. Novo Nordisk also has an IL-6 drug. I think we're expecting outcomes data for IL-6 potentially later this year from Novo Nordisk, and it was really impressive to see some of the biomarker impacts of their NLRP3 degrader. They had an hsCRP reduction that came in around 85%, and I think the IL-6 reduction was something around 65%.

So this was quite interesting. And then, speaking of CRP reductions and deals, Ventyx showed a CRP reduction that was also in that range. I think this was obviously a really big positive for Monte Rosa, which has clearly found a really interesting and attractive market for its technology here.

Thanks for that. Do we have Paul on?

No, it doesn't sound like it. I was going to be all nice and not go straight to myself again, but he's not on. Let me just check again. Paul, are you there? No, he's having trouble with his X today, so never mind.

Can you hear me now?

Here you are. Yes. Yes. Neumora and GH Research.

I don't know what the deal is, man. Okay, thanks. Yeah. Well, Neumora had an interesting week because of the Ventyx takeout, and the stock reacted well to that, as you would expect, because they have an NLRP3 program as well, with some data later this year.

But earlier this week, they put out data for their V1aR program in Alzheimer's agitation that, from my discussions with investors, I think has been seen from a couple of different angles. Some view it optimistically; some view it skeptically.

Essentially, the study showed a small trend for their drug versus placebo on an agitation scale. Alzheimer's agitation is a huge unmet medical need, which probably goes without saying. It's super tough to treat, right? It's hard to have a drug that can help patients feel less agitated but also thread the needle on side effects like sedation and things like that. So the opportunity here, if they can get it right, is enormous.

But on the primary outcome—and again, this wasn't powered, and the effect size wasn't huge—the data as it was shown was not totally an intention-to-treat data set with all patients. They did talk about a subset that they were excited about in patients with elevated levels of anxiety, where the effect size is potentially bigger. They talked about that aligning better with the mechanism.

As someone who's followed a lot of these psychiatry readouts over the years and has gotten excited about things that look promising early and don't hold up, I almost feel like, in neuropsych—and I would include agitation in that bucket—you kind of want data in a Phase 1b study that is super clean, because you have to bank on there being some meaningful level of regression in your effect size in future trials. So our interpretation here was somewhat more cautious. But given the upside opportunity, it's certainly understandable why they'd try to pursue this signal further.

Then I think the other interesting news this week—and I can probably also comment on another psychedelic's name as well—came from GH Research, which has one of the best data sets we've seen for any psychedelic in treatment-resistant depression. They are developing an inhaled formulation of 5-MeO-DMT, and they put out their data about a year ago that had a 15-point difference between drug and placebo on the MADRS. For context, the average drug has about a 3-point difference.

Certainly, that study comes with some caveats. It was not a huge trial, placebo effects were modest, and I think people wonder with a lot of these psychedelic trials about functional unblinding. But the data looked really, really good. From an efficacy perspective, it looks fairly de-risked.

They had run into this very odd situation involving an FDA clinical hold. They had already run multiple clinical trials outside of the U.S., including this large Phase 2b that even had an open-label extension. And yet the FDA kept holding them up from filing an IND due to this rat toxicology issue, where there was a lot of precedent that this may have been a rat-model-specific issue. They did a dog model that looked clean, and so they finally got this off hold and are ready to advance into Phase 3.

As if it's not already clear, we think this is a super-promising approach. I just think, broadly speaking, for psychedelics, we're seeing now Spravato from J&J move toward being a $3 billion to $4 billion drug in the next handful of years, and I think that really validates the market more broadly. But good setup here for GH to advance into Phase 3 later this year.

The next catalyst in the space that we're watching is going to be the COMPASS data this quarter from their psilocybin product, from their second Phase 3 and also from their long-term durability study. I think that durability piece continues to be one of the biggest questions for these next-generation psychedelics from 2 angles.

One, I think—not to imply that the bar is high—but I still think it's a little bit gray on exactly how the FDA is going to be interpreting durability data for these drugs. If you look at Spravato, it's given on a fixed interval, right? But these other next-generation psychedelics are trying to explore this idea of PRN, or as-needed, dosing, right? And I think that gets into a really interesting question from the FDA: What data do you need to see to be comfortable with maintenance of benefit, and how open-minded are you to just totally leave this up to physicians?

But I think we're positively biased going into this COMPASS data because we already have decent enough durability evidence for psilocybin. And I also think, in the real world, a lot of these TRD patients will probably be getting a psychedelic on top of another medication, like an SSRI. But certainly a really big year for this space.

In addition to GH going to Phase 3, you've got this COMPASS Phase 3. You've got MindMed Phase 3 readouts. You've got Spravato crushing it. So it's an area where, for me, back when COMPASS went public and a lot of the data were from these academic studies with poor placebo controls, there were just so many reasons to be skeptical. And I think the tide has shifted.

I'm not even talking about the kind of RFK bull case. I mean, I think even outside of that, let's just assume these have to go through a psych division that is stringent by the normal standard. I still think there's a lot of reasons to be optimistic on this category.

That's a perfect segue to Brian to talk about DRUG. Brian, do you want to go on that? I have to say, from a ticker perspective, I think it's got the best ticker out there: DRUG, I suppose, Brian.

Yeah. Bright Minds Biosciences had new data in 2 different epilepsy indications: absence epilepsy and a basket study of developmental and epileptic encephalopathies, or DEEs. It's a Phase 2, open-label study, so we're not looking at placebo control.

I know Paul wants to comment a little bit on the consistency of open-label data in epilepsy and decreases in seizures on an open-label basis. But I think we thought it looked really good. There are certainly a number of programs that have gotten approved on open-label data from large data sets in DEEs specifically.

We saw very good mean reductions in these DEE patients. It's a small study, but 63.3%, which is certainly on the upper end, if not the highest end, of open-label seizure reductions that we've seen. Again, this is sort of a basket of different DEEs, and what's also interesting is we saw very, very good reductions—73%—in absence seizures, which really hasn't been an area that people have been focused on in drug development.

It doesn't quite have the same patient numbers or the same unmet need that you hear about when you talk to doctors, but these studies seem to enroll pretty quickly. So I think, given the relative dearth of new drugs in absence seizures...

They’re planning on moving into 2 pivotal programs here. I think it’ll be 2 studies for each of the indications, so probably 4 Phase 3 studies. But certainly, the mechanism makes sense. It’s another mechanism that has seen recent approvals.

We think this looks better than fenfluramine, which is the most recent one to get approved in epilepsy indications. They did another financing on the back of it, and it’s sitting here today 37% up from the offering price of $90. So it was well received and continues to be well received in the market. I don’t know if Paul wanted to comment a little bit. I know we both follow the seizure space.

Yeah, Brian, you know this name a lot better than I do, but I know the drug, and I’ve been following the category for a while. I just thought it was interesting. Can everyone hear me, by the way?

Yeah, you sound brilliant.

It’s just so annoying. I don’t know what’s going on, guys. Sorry.

You’re good. Well, now you’re not. [Laughter.]

You were doing so well.

Yeah, I have to say Paul’s sound is the best amongst all of us. I literally have to turn the volume down when he’s speaking. I’m sure he’ll be back. But Brian, you’ve got another one, which is yet another positive news item and yet another fundraise. Do you want to talk us through that?

Yes. There’s another name I’ve been really excited about. I’ve been talking a lot about it, especially throughout last year, really. Alumis is a company developing a novel TYK2 inhibitor called envuditinib. This has been a really interesting process to follow.

TYK2 really came into the spotlight from Bristol Myers. They were developing a drug that’s approved now, deucravacitinib, branded under the name Sotyktu. When Bristol acquired Celgene, they wound up having to divest Celgene’s Otezla, and Amgen famously purchased it. Amgen has really been absolutely smashing it with Otezla in plaque psoriasis. I think a lot of us thought Otezla would never really be a big drug before it was approved, even in the early days of commercialization, and it’s really done remarkably well for a drug that I would say is not very effective.

It’s oral, so it has a convenience advantage over a lot of the other I&I drugs that are used in the space. Biologics are sort of the mainstay of post-oral therapy. Otezla doesn’t work anywhere near as well. Bristol chose to divest it. They had to do so to satisfy the FTC and focus on TYK2. Everyone thought TYK2 was going to be a huge drug because they did head-to-head Phase 3 studies against Otezla and showed that it was superior to Otezla.

I’ve got to say, it’s now been on the market for a number of years, and it’s been commercially very, very disappointing. I think there are a variety of factors there, but it sort of led to a lot of skepticism about TYK2 inhibition as a class. I’ve remained very bullish on the potential of the class and thought there were some liabilities that Sotyktu has that hopefully second-generation TYK2 inhibitors would avoid. But people really had their doubts, and I think these were compounded last year by J&J, which put out really great data for an oral IL-23 inhibitor showing efficacy on par with biologics.

Injectable IL-23 antibodies are really the mainstay standard of care in psoriasis right now. J&J put up this really fantastic Phase 3 data, and the big selling point here is sort of the high hurdles of PASI 90 and PASI 100. You’re talking about over half of patients getting to PASI 90 on icotrokinra, and 30% to 40% of patients getting fully to PASI 100 scores, which you really just don’t see with oral drugs at all.

Now we’ve had 2 data points from 2 TYK2 inhibitors over the last 2 months: one from Alumis, which I thought was really great data, and one from Takeda with its drug TAK-279 last month. They basically showed what I would argue is very much on par with J&J’s oral IL-23 inhibitor. I think it kind of reframes the whole market opportunity here, where we’re now seeing these really potent TYK2 inhibitors, or oral IL-23 inhibitors, showing efficacy that’s on par with biologics. I think that’s creating a lot of enthusiasm here.

One of the additional benefits of all these mechanisms is that they’re implicated in a lot of I&I diseases and have the potential to expand well beyond just plaque psoriasis, which we understand they’re very efficacious for now. Psoriatic arthritis could be another indication, potentially moving into IBD with ulcerative colitis. Bristol has Phase 3 data with Sotyktu in SLE this year, and Alumis has Phase 2 data with envuditinib in SLE this year. This has really become a story that I think people are starting to get excited about as we see not only that it’s matching the potential of biologics, but that it really has the opportunity to be classes that have a pipeline and a drug. More than just the potential, I think it’s becoming very clear that they’re going to expand to multiple indications.

Hey, Brian, with these next-generation TYK2s, is showing better efficacy enough, or is the problem with these drugs not taking off really more on the safety and tolerability side? Otezla is less efficacious, but it’s seen as oral and super safe, and the branding is great.

Yeah, I think there’s an element of that, and I guess I would argue that efficacy is probably what really drowned out Sotyktu: You just have so much better opportunity to go to high-efficacy biologics. TYK2, certainly from the historical investor perspective—I would argue less among treating physicians—has this association with JAK inhibitors, which have had more significant safety issues.

But as we’ve seen more and more data, not just within the TYK2 class but within the JAK class, you look at Pfizer’s first-generation drug and its commercial performance. You could follow that for years and be like, “Oh, it’s doing terrible.” But now you look at AbbVie with Rinvoq, and it’s one of the biggest oral drugs in the world, right?

I think over time the data has borne out that when you get to more selectivity for just TYK2, you really do get away from a lot of these safety issues. Nothing across the Alumis data or the Takeda data so far would indicate that there’s some sort of safety issue to really be concerned about. As we get more and more exposure to that, you’ll see that dynamic shift, where people will look at the class and say, “No, this is a really, really effective class, and safety is not something to be concerned about with these more selective agents.”

And Paul, now that we’ve got you back, did you want to go back and comment on the epilepsy side, or are you good to go?

Well, yeah. I wanted to ask Skorney a question, just what he would say to this—not pushback, but more of a question. From following some of these open-label data sets in epilepsy, I cover GW, Zogenix, Rapport, and Xenon. People look at the products as competitive, and it does seem like, depending on the sample size of patients, with open-label versus placebo-controlled studies, you can have a pretty big regression in effect size.

I remember Zogenix had this 55% seizure reduction in LGS in an open-label study that was something like 12 patients, and then it was, I think, around 25% in an RCT. I understand the mechanistic validation, but how do you, or how do other investors, get comfortable that the drug product is actually better—especially something like absence seizures, which are so subjective to quantify? I don’t know how you really can tease that out in a small N like that. I’m not as close to it.

Yeah, but I think taking open-label data and then trying to figure out the point estimate for the placebo-adjusted effect size is really hard. I guess I would argue that if you get into very specific subgroups where you have better historical data on understanding baseline seizure frequency, what those patients look like, and how many different anti-seizure medications they’re on, you can get a little more consistency.

That’s why I think we’ve seen more and more focus on not just going after a broad set of seizures, but saying, “We’re going to go for CDKL5, we’re going to go for Lennox-Gastaut syndrome,” and really targeting this more and more. Certainly, I’m not going to look at this uncontrolled data and say, “Oh, in absence seizures, there’s a 73% seizure reduction. That’s what the placebo-controlled study is going to show.” Absolutely not. It’s going to be even hard to look at what you think the placebo control will be because, to your point, there’s a lot of subjectivity here.

But I guess I kind of look at it, and you could say, well, you certainly can predict whether or not it’s efficacious.

So, at 73% in OLEs and 63% in DEEs, this is a really high number. We both see this—I get this to some extent in debates on some of the Praxis data as well—but it's not a question of, “Does it work?” I think we answer a big part of the question: Is it reasonably probable to hit in a Phase 3 study? You get into a more nuanced debate around how robust it's going to be—a 45% delta between placebo and treatment. I don't know that I'd be reasonably comfortable saying that there's going to be a static delta. What would you power for? Would you power for a 30% delta? Maybe, probably. I'd probably say be a little more conservative.

But I think at this point, what you're really looking for are drugs that are safe, convenient, and very clearly show efficacy on top of multiple anti-seizure medications. But, yeah, I hear you. I'm a big advocate for always randomizing placebo patients in every study one ever does, if it's not unethical. Sam Fazeli

I think this conversation that you guys just had proves the real reason why this Twitter Spaces, this podcast, or whatever you want to call it, is so valuable. That sort of detail that you guys went into is gold dust, so thank you for that. Well done.

5. Obesity Moves Beyond GLP-1s

I didn't want to end the first session of 2026 without a comment on obesity, because I think that would be a very bad thing to do. We've had the biggest fundraise come from Arrowhead, which had some safety data in the space—early-stage data. The drug is ARO-INHBE; I don't know how to call it.

They are moving from Phase 1 into Phase 2 and show some interesting benefits, particularly in diabetic obese patients. But there were some angles in here that did make us scratch our heads about how the regulatory pathway would form. The drug as monotherapy in obese patients didn't do anything. I think it's fair to say that—knock me down if you'd like to—but it worked really well in combination with tirzepatide, I think it was, in obese diabetics. It was a brilliant effect, and we've done a full comparison looking at different aspects of it. They showed quite a lot of detail with the visceral adipose tissue, total adipose tissue, and liver-fat content. I mean, it really did a fantastic job. I'm not going to go into the detail of the mechanism of action because it's not a GLP-1, so let's put that there.

It's similar to what Wave is doing, and I think they did a pretty good job here. Clearly, the market loved it because they ended up having an upsized raise of $625 million. Well done to them. I think it's very interesting that more and more of these novel modalities are coming along now. Maybe the story of GLP-1s is last year's story, and this year is going to be more about these other ways of either bringing new additional weight loss or helping weight loss in a situation where you want more fat loss versus muscle loss.

A lot of this still has to be figured out, but clearly the market size hasn't changed. Of course, you've got the other changes on the commercial side, with oral Wegovy pricing at a level that is relatively accessible. So that was a good start to the year from an obesity perspective. Tess, did you want to add anything here?

Yeah. I think the only thing I'd add is that I absolutely agree with you, Sam, in terms of some of these mechanisms that people have been excited about and are awaiting data readouts for. Maybe just adding to Arrowhead, they had the data for ARO-INHBE, and they also have ARO-ALK7. These are both essentially going after the same pathway—different parts of the same pathway—to help obese patients. They didn't report data on ARO-ALK7, but that data is forthcoming. I think we have a few other targets like that where we'll hope to see data at some point this year or maybe next.

Yeah. Yeah, I think this is where we're looking forward to seeing that particular data on the on the improving lipolysis from with the ALK7 target, which is I think really exciting and and these are you know what one what we really want to see is is safety and so far this seems to have been quite safe you know as RNA or or small nucleotide approaches to these things have have do worry you a little bit especially if they're mode of action is the target is deliver itself at some in some of these situations. So um I think we can we can end there. Of course we did have a bad news from Sani under to brutin but I don't think we need to particularly go into that. I don't I don't want to end on a negative. I think we're doing very well ending on a positive. So I was gonna just

Sorry, Sam, I just wanted to jump in because you brought up the oral orforglipron. I think one of the interesting things to follow up on, on the politics side, is that Lilly's oral GLP-1 has been submitted for the Commissioner's National Priority Voucher, and they've been talking about approval in January. I think this is really interesting when we look at the initial set of National Priority Review Vouchers under the CNPV. A lot of us scratched our heads about whether it has any real impact, but this is potentially a really big impact and a really big indication.

When I think of all the things that HHS has done—and I think we probably criticize them a lot—this is actually something that could meaningfully move up present values on things. If big drugs that are of great interest are moving from a 12-month review cycle to a 2-month review cycle, that's kind of a big deal.

It is. It certainly helped Novo's share price, which was on a one-direction slide for pretty much most of the year. What's interesting, of course, is going to be watching the battle between these 2 orals. You've got Wegovy with slightly better weight loss, around 14%, but a problem of dosing in terms of needing to follow the schedule and when you take the drug, versus 12% weight loss with orforglipron. But it's an oral drug, so it's a real oral drug. And, of course, supply—you know, there's 10 times more dose in the 25-milligram oral Wegovy versus the 2.4-milligram injectable. So that's going to be interesting to watch.

I have to say, when I saw the Commissioner's National Priority designation for Tecvayli in multiple myeloma, I was really excited. This is something that you would have thought would take another 9 months. It's an already-approved drug getting to market for these second-line patients in multiple myeloma, and the results were spectacular in the patient groups that were tested. Is it possible that it's going to come in Q1? We'll see.

We're on the hour. Anyone want to close with anything that's positive? No negatives allowed. [laughter]

No, that looks like that's it. So enjoy JPMorgan next week, folks. Do not come back with infections or anything. Hopefully, everybody comes back fully charged with lots of excitement for the year. I look forward to speaking. I think we have another session next Friday.

And thank you very much for joining. I do have one thing that I have to finish with, of course, and that is that if you're heading to JPMorgan next week, Biotech Hangout has an in-person networking event on Tuesday, January 13th, from 7 to 10 p.m. Persona is the place where it is at, which is the same location as the past 2 years. We hope to see everybody there, except I won't be there, and I'm very sad, for a fun night with an open bar, which is dangerous. Thanks to our gold badge sponsors, CFGO and Incubate Coalition, and our blue badge sponsors, FTI Consulting, Catalytic Agency, and Mispro. Be sure to RSVP, please. The registration link will be reshared shortly on the Biotech Hangout social media channel. January 13th, from 7 to 10 p.m. on Tuesday.