第171期——2026年1月30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 leaders and experts, and in my case, posers. I'm Josh Schimmer. My co-hosts today are Sam Fazeli, Brian Skorney, Yaron Werber, and we are thrilled to also be joined by special guest John Crowley, president and CEO of BIO. For more information about our hosts and guest speakers, or to listen to the most recent episode, please go to biotechhangout.com, where you'll also find our disclosures. And as always, noting that our commentary here should not be construed as investment advice since biotech investing is typically quite volatile and not for the faint of heart.

Why don't we start with your letter to the editor at The Wall Street Journal on the battle versus China and what the U.S. can be doing better to keep pace?

Yeah, great. Thank you. Thanks for having me. I think that letter and these opening comments on the competition vis-à-vis the United States and China will help frame a number of the other issues because an important concept is that every policymaker and every lawmaker we meet with, we start with why they need to care about biotech. And they need to care for three reasons: for public health, for our ability to make newer and better medicines, vaccines, and therapeutics; secondly, for biotech as an engine of economic growth; and third, for our national security. The notion that a strong, healthy, safe, prosperous workforce and population is vital to national security and ultimately to everyone in the world, and also is an instrument of soft power for the United States and our allies, resonates very well in the administration and Congress, bipartisan. I think we've made great inroads over the last year or so with getting everybody to understand what biotech is and why they need to care.

A lot of this is with respect to the competition with China. Our view there is that we're all familiar with the facts and figures of what's happening, the rise of Chinese biotech. When I first started going to China with our manufacturing facility at Amicus there probably twelve or thirteen years ago, there were about a hundred or so, we think, true R&D Chinese biotech companies. Today, as we zero in on it, we think there are about at least four thousand. Of course, you've all seen the number of medicines coming out of it and the move from basic manufacturing and medicinal chemistry to really advanced therapies and advanced manufacturing.

If you look at the National Security Commission report on biotechnology that came out last April, a couple-year project, Congress stands up these national security commissions every so often. They did on AI and cyber, and they've done it now in biotech. It was a seminal document, bipartisan, to highlight the need for the United States to win in biotech. I think that's something everybody agrees: we need to win in biotech. It doesn't mean necessarily that we stop science elsewhere. There is a big argument in the policy world, and frankly within our industry, about how we win. Is that by trying to stop research, development, and deals in China? We don't think that would be the right approach. The stick approach would be incredibly difficult and probably not very fruitful. We don't need to out-China China, we keep saying. We just need to outcompete China. So let's look at how we can be better.

Right now, we still have the lead. Our universities, the academy, the NIH, our startup companies, midsize and large companies, we still have the lead, so let's not lose it. This is where we get to modernization and reform. Underlying it all is the notion that the world and everybody living in it is a better, safer, healthier, more prosperous place if we continue to lead in biotech, realizing that much great science will continue around the world. That was the premise and the basis of the letter that I wrote that was published in The Wall Street Journal. It's a lot of what underpins our arguments and discussions, whether it's reform and modernization of the FDA, the clinical trial paradigm that we have here, all the way to the policy issues in Washington, MFN tariffs that I'll touch on as well.

Let me pause and see if there's anything on that China or the letter that was in the Journal last week that you'd like any more comments on.

Great. No, that... Thanks for framing that. John, when you say we need to win in biotech, what does winning look like to you?

1. Winning Requires Innovation And Access

Winning is twofold. One is innovation. We need to continue to make the most state-of-the-art science and medicine, and be pro-science. That involves what we describe as this virtuous circle of innovation: everything and everyone that it takes. So, strong universities, research, NIH funding, startup companies, capital flowing to our businesses, private and public markets working in the most efficient way to bring capital to our companies, a regulatory system that's reformed and modernized, and ample contract manufacturing capabilities for our small and midsize companies.

The second part is access. We not only need to make sure we're able to do everything we can—everything that it takes—to make our great medicines, but once we have them, we need to make sure, frankly, everybody ultimately in the world has access, particularly here in the United States.

Where are the barriers to access? We're focused on 2 areas. One is what I'll call the systemic barriers, largely medical insurance plans. When you look at medical insurance now, particularly with the best, most state-of-the-art newer medicines that we have, there's so much inconsistency and so many barriers to access. It's almost like now a doctor writes a prescription for their patient, and then it's a recommendation to an insurance company. We need to get past that step, including prior authorization and the whole utilization-management practice.

There's really strong interest in the White House, and you're starting to see the president zeroing in on insurance companies. We think that's a good thing, and that's a key part of our policy work. The other part of access, of course, is out-of-pocket payments. Coinsurance, deductibles, and copays have gotten out of hand as well.

Ultimately, we talk to the president and everybody in the administration and say, if we really want to address affordability of medicines, let's look at what people pay out of pocket, because for most everyone, that's the cost of medicine. They have no idea what list price, wholesale, average rebate, PBM, or any of that means. They want a simpler system. We've done all the polling and focus groups, and we've shared it with the White House. People know that they want the middlemen cut out, but ultimately they care about what they pay out of pocket.

So, that's what winning looks like: making sure that we've got a vibrant ecosystem. I'm of the belief—and I kind of take it back to China—that you can't have this vibrant biotech system that we've had for decades now and say simply, “Well, all the research can be done in China, and we'll just manufacture it here and do the late-stage studies, and we're the largest market.” That may work for a time, but over the coming decades, you're going to lose all that competitive advantage. More and more of it will leave the United States, and you'll start to see the withering of American biotech. That can't happen. So, that's what I mean by winning.

2. Innovation Costs Threaten Competitiveness

And John, you talk about the affordability of drugs. What about the affordability of innovation? It seems like one of the advantages that China has is access to low-cost innovation, whether it's the drug-discovery part, development, or even clinical trials, in contrast to U.S. innovation, which has significant barriers to entry just due to the costs of all of that. How is that something we can square and reconcile to keep the U.S. competitive despite the difference in innovation costs?

That's a really important point. We don't need to be equal to China on the costs of innovation and making our medicines. We just need to be much more competitive than we are. We've evolved to a system now where it just costs too much money, takes too much time, and then we layer in the uncertainty of the regulatory process. Capital is perfectly rational.

When I describe for lawmakers and policymakers why companies go to China, why we do research, and why venture money and the like are flowing to China, it makes rational sense today. Rather than trying to stop it over there, let's just be more competitive over here.

For example, the whole clinical trial gig: when I was running Amicus for many years, I knew exactly what we needed to do to open an IND. It was a lot of work, but we knew what we needed to do. Once we had the IND open, it was a year of contract negotiations with universities and separate IRBs. That time and that cost make us noncompetitive.

We're trying to think about what influence the government can have. What can we do to bring key academic center leaders, CROs, and the like together just on that one part of it? I know the commissioner, and we'll talk more about the FDA in a moment perhaps, but Dr. Makary and his team, I think very shortly, are going to put out guidance documents that'll make it much faster and more straightforward to get into the clinic—much more like what they're doing in Australia, for instance.

We've just layered on so many requirements over the years, and there's always been a mindset of, “Well, you have to do that because that's the way we've always done it.” If we keep doing that, we might as well just give the business to China. So there are ways that we can dramatically, over time, take down the cost.

One last comment: you layer in AI, and I've seen some really neat demonstration models of what you can do to accelerate research and enhance predictability, whether it's site selection, patient selection, interpretation of data, or how it's used in the regulatory process. We need to accelerate that work as well. That'll make us more competitive.

3. The FDA Must Right The Ship

John, when you talk about regulatory uncertainty, maybe we can come to that element and dwell on it a little further now, especially as we're seeing, in certain settings—certainly CBER—a bar being raised, and in some cases unpredictably or at the last minute, creating a lot of confusion and frustrating companies and investors. That actually seems to be going in a very different direction than what we're hoping for. Do you see that improving at all? And if so, how?

Yeah, it's a major part of our focus as well. I won't go through all the changes. We've all lived through it over the last year. We've all felt better coming out of the summer that there was finally stability, that we were heading in the right direction, and then there was a whole lot of turmoil in the fall.

You saw, I think, in December, The New York Times did a very large piece, including a focus on the commissioner's leadership. I was interviewed for that, and toward the end of my quote, it said, “It's time to right the ship.” I get a lot of questions about that, including from the commissioner: “What do you mean?” I'll be clear: I support Dr. Makary. I think Marty is trying, and continues to work, to do the right things. He wants to see a reformed and modernized FDA. He's got a lot of headwinds he's dealing with.

What I shared with him, when he and others asked what I meant by “right the ship,” is that I think it's probably 4 things. First, we need stability at the FDA in staffing, both in leadership and in the rank and file. The FDA is down 20% in its workforce from where it was just 1.5 years ago.

The good news is that the FDA got an exemption last summer from the federal government's hiring freeze and is allowed to hire 1,000 new scientific reviewers and inspectors. The commissioner says they've got about 400 offers out right now. It's just part of the Byzantine nature of HR in the federal government, particularly HR. It's going to take a while to bring them on board, and then you have to train them. But I'm cautiously optimistic that they're starting to fill a lot of the gaps we've seen.

In terms of leadership, we all saw the crazy turmoil, particularly with CBER in the summer and then CDER in the fall. We finally have some stability in leadership, and I think that's a good thing. Again, I'm cautiously optimistic that we can start to right the ship on the workforce.

The other 3 things are pretty straightforward. Consistency: we need consistency coming out of the agency and consistency across review divisions. Marty and his team have heard that loud and clear, and I think you'll start to see some guidances coming out to make it a more consistent regulatory process.

Third is transparency. We need to understand what the goalposts are and what game we need to play. I think it's been very frustrating in CBER, and particularly in the cell and gene therapy space, rare disease, oncology, and psychiatry. We need to make sure that we're moving it forward.

The last point is broadly around modernization and reform. Marty and his team were all out at J.P. Morgan. Many of us attended some of their talks or had private visits with them, and you're starting to see some positive signs of change.

I always hate the word “flexibility” because it's inherently going to bring up inconsistency at the FDA. Put in policies and guidance documents that are truly modernizing and reforming, and I think we're starting to see that.

At the end of the day on the FDA, I think we're seeing stability. I think we're starting to see some positive change. The next 6 months, candidly, are really going to tell the story. But we continue to engage deeply with the FDA and its leadership. We're supportive. The FDA needs to work. We need a strong FDA, so we'll do everything we can.

I will note that we're putting in place—we'll roll it out here at the end of the quarter—a whole new platform at BIO. I get lots of phone calls from a lot of CEOs when they have challenges at the FDA, and what we want to do is formalize that in a much more systematic way.

We're going to roll out a platform where, if you've got a challenge with the FDA, whether it's a high-profile CRL or something as simple as, “Hey, I'm having trouble with a tox study they're requiring to get into the clinic,” or a biostatistics reviewer who's tough, you'll have a platform where you can bring that to BIO through regulatory experts, anonymously or not.

We're going to synthesize that every 30 days and meet with FDA leadership and provide it to them, so that the commissioner knows, at least, “Hey, these are the issues. You need to make sure that they've risen to the radar of senior leadership at the FDA.” Without saying, “You guys made a mistake. You need to fix that,” because we're just not privy to the data or the correspondence, we want to make sure that it's elevated to a policy council at the agency.

The commissioner and senior staff have welcomed that, and I think it's one thing we could do at BIO to continue to help and support Dr. Makary's leadership at the agency.

John, me too. On that last point, John, there's so much. And again, thank you, as you know, for everything you're doing for the industry. We really are at a crossroads, especially on losing the innovative edge against China. That's extremely important.

But what you're saying about the FDA—2 things come to mind. Number 1, trying to rehire 1,000 people: this is going to take time, and not just that, it's going to take time to onboard and educate them.

Oh, it's a year or 2. Yeah, it's a 2-year effort.

Yeah.

That's right.

But more importantly, to your second point, what you just said about this new effort to help companies maybe sort through their trouble with the FDA, is there going to be a screening criterion? Because I can imagine you're going to start getting every company calling you, and that's something you're going to want to avoid.

Yeah. Again, I think half the companies already do. But we're going to get a lot of it, and we're not going to be able to put a screen to it and say, “This is really important,” or, “This is not.”

They're going to know which ones are high-profile, which ones are in the news, what's in the biotech news, and what's in the broader news media. They'll be able to prioritize. We'll synthesize it for them in terms of categories: late-stage and early-stage issues, individual issues, review issues, whatever it may be.

They just don't have that depth of visibility or a tool at the agency to do it. It was always frustrating for me when I was running a biotech company. When you hit a roadblock, there's not really a good means of recourse.

Sure, if you had Janet Woodcock's or Peter Marks's cell phone, you could give them a call or meet with them, but that's not sustainable and probably not very fair. I don't know how well this is going to work, but it's something we're going to pilot throughout the year. The FDA is welcoming that level of engagement and the data from us, so it'll really be up to them to prioritize what they do with it.

That's a great initiative. I just want to open up to the other speakers for questions or comments on this topic.

Well, I was going to talk about some of the news we've had that fits directly into what John was talking about with regard to China.

In fact, both of the news items relate to AstraZeneca. I don't know if you wanted to do that now or wait for John to finish.

Why don't we flag them now, and then maybe John can—

Yeah, sure.

…comment on those—

Sure.

…as part of his—

4. AstraZeneca Bets On China

So, there are 2 things that happened pretty much today, I think. There is a delegation in China from the UK, which is led by the prime minister, Sir Keir Starmer, and involves a whole bunch of people. One of them, of course, is the head of GSK, and the other is the head of AstraZeneca. AstraZeneca has pledged to invest $15 billion in China through 2030, for both manufacturing and R&D.

Just to put that into context, that is versus $50 billion in the U.S. over the same time frame, so that's about a third. What I wonder, though, after what John said, is whether that $15 billion is worth about $30 billion of spend in the U.S. I'd love his comment on that in a minute. Just random numbers, right? How much cheaper is it to do stuff there than it is in the U.S.?

On the other hand, both of these pledges include the ongoing R&D that the companies would have had, et cetera. AstraZeneca is one of the largest players in China. I think it was number 1 in terms of sales for a long time, at least the last time I checked, and I will rerun our numbers.

Then, of course, they also did a licensing deal—which we'll talk about later—with CSPC of China, which is a biotech company, for access to and development and commercialization of peptide-derived products. That's their 3rd deal with the same company. But it's the largest: $1.2 billion upfront, and then you get into several billion dollars in biobucks, which comes up to something close to $18 billion, if I'm not wrong, when you add it all up. There are double-digit royalties, which is interesting to me because it's a relatively early deal.

What I also wonder is whether the previous deal the company had done was for an AI platform, and whether this comes out of that a little bit, in terms of they've seen things that have led them to want to do a deeper partnership. It's a preclinical, long-acting peptide pipeline, et cetera. So again, it's very interesting that these aren't even clinical assets, and that's a pretty hefty number to pay. Maybe John wants to say something about this. This is not cheap anymore, right? $1.2 billion for a deal. Maybe what they're getting again is efficiency by investing in a Chinese biotech, or putting the money into a Chinese biotech rather than elsewhere. So I'll stop there.

Yeah, and maybe it's a great point to make, especially as we're about to hear a little bit about John's perspectives on MFN, because we also have to bring into play this global trade war, tariffs, and other countries that have been preferred trading partners with the U.S. now turning to China for trade. We can't ignore that with China's emerging biopharma industry: Global biopharma consumers may, given this MFN mandate, start turning to China for their drugs. It gets so complicated. So, John, as we think about MFN and China and these trade wars, how are you thinking this might evolve?

Yeah, you guys bring up a lot of good points. And again, that last point right there is that there are some really unique changes happening in the world, and we're living it every day. In fact, the entire post–World War II paradigm of mutual security, the notion that we don't slice up one pie but want to grow the pie, and trade—all of those issues are being totally undone. Whether it's right or wrong, they are being undone. So we've got to play into that as well.

With respect to AstraZeneca, I'm usually reluctant to comment on specific companies. I will just say, obviously, a remarkable company. Pascal is a really smart and very competent CEO, and I'm sure he has made a very detailed analysis here and made his strategic decision. I think the decision is that they're going to invest globally in the best research and the greatest efficiencies to build their pipeline and bring more medicines forward.

I think the question is: Why would they do it in China? And why was $50 billion in the United States a very large commitment by AstraZeneca? Why wouldn't it be even more in the United States? What are they seeing in China? Turn the question around and ask, “How could we be more competitive? What is unique? What are the competitive advantages in China? And again, how do we outcompete China?” I think that's how we think about it.

When you see the UK prime minister in China, yes, it plays into a much broader geopolitical story. I led a trade delegation back in September for a week. We went to London with the purpose of building bridges between the United States and the United Kingdom in biotech and biopharma and supporting their growing industry. They've got a big vision. The UK wants to be the number 1 player in Europe and the number 2 or number 3 player in biotech in the world in the next decade. That's a big vision.

We talked to them about how to do that, and we also talked about the fact that you can't do it if people in the UK can't access those medicines. That led to discussions, and hopefully what we'll see now is a trend where they're starting to see better prices being paid for innovation in the UK. So, the UK will always be a very important relationship for the United States in biotech, and we just have to be mindful of what's happening in China and, again, take it back to what we're doing here in the States. I think it would be a fool's errand to try to stop investment or stop research in China.

5. Vaccines Face A Science Battle

And John, maybe another important topic, especially to kick off the year, is one of the more troublesome warning signs: the measles outbreak that just continues to grow in the United States. Obviously, vaccines are becoming shockingly controversial when they shouldn't be. What are BIO's views, and what can BIO do to try to push us back into a pro-science perspective, one that can protect our population from viruses for which there are vaccines available?

Yeah, it's just awful. How in the world? I've got a granddaughter going into preschool now, and to think that she may be susceptible to measles or, God forbid, polio—how in the world did we get here?

So, this is one area where we've taken a very, very strong stance. And look, with the administration, there are areas where we try to find common ground. We found common ground with the secretary on cell and gene therapy and rare diseases. We disagree on vaccines, and pretty strongly. You saw—hopefully you saw—the BIO vaccine campaign last year that we rolled out. We're rolling that out now in some of the more vaccine-hesitant states, but it's a real challenge.

If you look at what's happened to the advisory panel and the members who were replaced on the Vaccine Compensation and Injury Fund panel, they're going down a road to fundamentally change the nature of vaccines and how we think about them in the United States, and we've got to counter it. We can't just do it with science and data.

I do think ultimately we'll win on vaccines for a couple of reasons. One, we've got science and data on our side. We just need to make sure people are using the right science. Number 2, ultimately, the president is not an anti-vaxxer. I think he's tolerated this to a point, but if we start to see measles on the path that we're seeing now—for instance, if we lose our special status for vaccinations globally—I think you'll start to see some changes there.

And ultimately, too, we've got to battle back not just the federal changes; we've got to battle in the states. A lot of what we do at BIO is drug pricing; we do a lot with 340B and data privacy. Vaccines are a huge part of our focus. There were over 200 vaccine bills introduced this month in state legislatures, all the way from attempts in some states to ban mRNA vaccines to the continued erosion of childhood vaccines. So, it's a key part of what we do. We have a whole team that just does vaccines, infectious disease, and global health, and I've built that now at BIO in the last year into a center of excellence that reports directly to me.

Let me just add to that, Josh. It's important to recognize that measles specifically is not just a U.S. issue. The UK, Canada, and Switzerland are dealing with it, too. So, the difference in the U.S—the problem in the U.S.—is that vaccine hesitancy has been building for a long while, not just in the U.S.; as I said, elsewhere, too. It's just that it's compounded by pressure from some legislators, as John clearly highlighted. What you don't want to happen is to fuel that hesitancy, as opposed to trying to manage it and reverse it. Unfortunately, that's what's going on. I just wanted to highlight that it's not just a U.S. issue.

Mm-hmm. John, did you have any other comments that you wanted to make, whether it's on MFN or anything we haven't covered?

Yeah.

6. MFN And Tariffs Reshape Biotech

Maybe just very briefly: tariffs, MFN, and this continuing resolution bill. Literally right now, they're working here in Washington on the continuing resolution. If it goes the way we think and the way we hope, we'll have the continuing resolution and will not have a government shutdown. In that bill, we'll finally start to see some relief on PBM delinking and transparency, which will be good for the government payer programs. Importantly, for our rare disease community, we'll see the reinstitution of the Pediatric Priority Review program that's been so successful. Fingers crossed on that. We'll know in the next 24 hours.

On MFN, you've seen, of course, the 16 deals involving the 17 companies that got the letters in July. We have a pretty unique view here in that we can share the broader science research ecosystem. We can show the damaging impact, particularly on small and midsized companies. With Congress, our focus has to be on the fact that, as you saw in the president's health care proposal two weeks ago, it included putting MFN into permanent law and codifying it. We think that would be terrible and unmanageable.

Again, we bring in the competition with China. We get to meet with members of the House and Senate on the Defense and National Intelligence committees—people who typically don't follow or focus on biotech—and share why, from that perspective, it would be bad for economic growth and bad for public health. I'm confident that we'll have a firewall in Congress where we won't see MFN, at least in this Congress. We need to keep building it.

With the White House, we share that we already are the most favored nation in terms of the best medicines and access, and that the president should increasingly think about what I mentioned earlier: medical insurance reform. You're starting to see the president pivot toward that, and then take a look at out-of-pocket prices as well. We'll see if we're successful in shifting that argument, but MFN is not going away.

The last part there is on HHS. You saw the GLOBE and GUARD demonstration models, and we're in the comment period that ends here on February 23. We really question the legality of CMMI's ability to implement those models, so we're taking a very hard look at the legality there. Frankly, the White House pushing for codification of MFN may indicate that they realize those proposed models likely overstepped their bounds. We'll see. We're taking a hard look at that.

One last point on tariffs: the purpose of tariffs, again, is to force the onshoring of manufacturing for medicines. You've seen that with our largest companies, the 16 companies that struck deals with the White House. They basically had to do 2 things. First, they had to agree to MFN in some size or shape, and second, they had to make major commitments to reshoring manufacturing. That got them out of tariffs on products coming over, keeping the 0% tariff for pharmaceuticals.

The Section 232 investigation is complete. The Commerce Department investigation is with the White House now, and the president has until the last week in March to act on that. We expect that he will. We are engaged with the Commerce Department, representing particularly small and midsized companies and sharing all the different reasons, as we have for about a year now, why tariffs would be damaging to our industry.

I'm confident that we'll be able to work out something with the White House that's manageable and gives a lot of flexibility in areas where it just doesn't make economic sense to reshore. If you've got small production volumes, unique materials, or certain therapeutic areas where you'd want an exemption, we're working through that. I think you'll see more on tariffs ahead, but I'm confident that throughout the year we'll come up with a solution. Other than that, not much going on.

Yeah, that sounds right. To your point around codifying MFN, if that were to be implemented, what would that look like, and what would be the implications not only for the larger pharma companies, but also for emerging biotech companies?

I think it'd be devastating. You hear part of the argument that we should put it into law because, right now, it's pretty light. The 16 companies that signed deals didn't put out an 8-K saying that their financial guidance was going to change. That might be because each one of those deals was very unique, and much of it was confidential to each company.

When you put it into law, it becomes obviously relatively permanent, but really challenging. We continue to share that we don't know how you'd ever implement it. We haven't seen anything from the White House, and nobody on Capitol Hill has seen any proposed legislative language. All we saw 2 weeks ago was when the president put out the one-pager on his health care bill, with a couple of bullet points on MFN. We haven't seen anything, and we don't know what it would be, but we know that in any form it would be pretty harmful.

I will tell you that Congress gets it. The leaders in Congress, particularly on the Energy and Commerce Committee, get it. We've met with the speaker, the speaker's office, and Senator Thune on the Republican side. The Senate Finance Committee, where this would likely have to go through, I think views this as highly dubious for all the right reasons.

John, I probably speak for everyone here when I say how fortunate we are to have your voice representing the industry. What can we do collectively to help and support your efforts?

Throughout this year, we'd like to do a good job of bringing our innovators to Capitol Hill—large, small, and midsized companies. We partner with patient groups. What we haven't done a very good job of is bringing investors in and doing that through BIO.

One of the things we've just launched is, in some ways, a relaunch of what Jeroen and Dennis Purcell laid such a great foundation for: a BIO Investor Council. We'll really engage anybody who wants to join and be a part of that. We'll come to Washington, have briefings with policy leaders and lawmakers, salon dinners, time up on Capitol Hill, and time with the administration.

You could email Brad Zakes at BIO, or just send me an email, jcrowley@bio.org, if you're interested in that.

We're also doing, for the first time, a small, curated session the day before our investor conference in Miami on March 3. We'll bring in some policymakers for a small group of under 100 people, and we'll have an in-depth discussion. It's by invite only, but if you'd like to be invited, we'd welcome a good audience there. And again, just shoot me an email, and we can get that to you. And any other way you guys want to be engaged.

Fabulous. I think we have one other policy topic to cover. John, we might ask you to weigh in conceptually on it. Sam, I think you were going to talk about the latest IRA list.

Yeah. One of the things I was going to ask John about was the pill penalty that he spoke about and the rare disease angle. I've been talking to our Washington analyst, and he's not optimistic that the pill penalty legislation will pass in terms of removing it before these drugs are going to get hit next year. I'll come back to you on that.

Obviously, the latest list came out. There wasn't anything surprising on it in terms of the drugs that showed up. We expected them to be there. We always do an assessment ahead of time—not that difficult—to say which drugs we expect to go on it, so that was not at all unexpected.

What was interesting, though, is that it came on a day when the dollar was in free fall in the foreign-exchange markets. At the same time, there was renewed excitement around tech because of ASML, the company that produces the magical machines that make all the chips. They supply TSMC in Taiwan. They blew out their numbers, their order-book estimates, forecasts, and so on.

All of that came together, and having had the run that we saw in pharma, I think it just created a bit of headwind for the pharma companies, although that's all reversed today, the way I'm looking at it. We really do want that pill penalty to be removed, and I still don't quite understand why it's there because it's actually easier to make generics for small molecules than it is for biologics. You would have thought that, if anything, it would have been the reverse—not that I'm suggesting that. I'd rather both of them be 11 years. If there's anything you could say about that, John, that would also be very valuable.

When the IRA came out, 3 or 3.5 years ago now, the 2 areas that our industry focused on were exactly that: the 9 versus 13 years, the pill penalty, and then the orphan part of it, the orphan cures.

So we've spent years discussing why it's either a mistake or just bad policy. People get it, and you saw that we were able to get the orphan cures part of it fixed in the so-called big, beautiful bill last year—the first change ever to the IRA.

People, especially now that we have a Republican Congress, are more open to it. The Biden administration was never going to change its signature law, and there's still quite a bit of Democratic pushback here. But on 9 versus 13, it's still just terrible policy.

My view is that you're not going to see that changed in this Congress. We've not made it a legislative priority. We have bigger fights in front of us with MFN and tariffs, and broadly pivoting the administration toward things like 21st Century Cures. We had 21st Century Cures a number of years ago, 21st Century access, again, changing the out-of-pocket payment schedules, limiting or capping out-of-pockets, and changing medical insurance, which is bad practice.

I just don't see an appetite in this Congress. The reality is it's going to get scored by the CBO. It's not a cheap fix. It's actually less expensive than they or we thought, but politically, with everything going on and the need for a healthcare bill, I'm not optimistic we're going to see a change this year.

Could it be part of a broader discussion around healthcare and healthcare access and what needs to be changed to promote innovation? Maybe. But I don't want to say we've deprioritized it, but it's not what we go in and focus on today.

Yaron and Brian, any other questions or comments directed specifically for John?

No. Thanks, John.

Great.

That was an awesome rundown.

Yeah, hopefully.

Yeah, terrific.

And again, I'm optimistic. I think, on balance, we do have more tailwinds now for our industry than headwinds from a policy standpoint, if we get this right. So we'll keep working at it, but I appreciate all you guys' help.

To that point, by the way, I would add that, to me, these are the golden years of biotech. The caliber and quality of innovation—particularly from private companies—are lining up by the dozens with de-risked proof-of-concept programs, tremendous pipelines waiting for the IPO window to open up.

I think, to your point about these headwinds, they're manifesting in such high-quality innovation. If we introduce headwinds, I think the last few years have taught us just how fragile this industry can be. Fortunately, the wheels of innovation are starting to crank again, in part thanks to higher drug prices at launch.

I know it's always going to be a point of tension, but when you see the innovation that I'm seeing—by the dozens, for all sorts of really important unmet medical needs—it's hard not to be very excited and enthusiastic for the future of bioinnovation. It's also hard not to be very worried that various policy considerations could grind this back to a halt, and that would be a very disappointing outcome.

John, you're welcome to hang around for the rest of the conversation. We really appreciate your joining us. If you'd—

Yeah, of course.

—have to leave, I totally understand. I think we're going to talk now a little bit more about general market sentiment and conditions. Yaron, maybe some thoughts from you.

7. Biotech Markets Regain Momentum

Yeah, absolutely. The TD Cowen team just put together our preview for the quarter, and one of the things we do is take a look at sentiment and performance. One of the things that jarred some of us unexpectedly is that, when you look at the iShares Biotechnology ETF, or IBB, we're now back to the late-2021 peak, right at the height of COVID.

The XBI is not quite back to those levels. The XBI peaked back in early 2021 at around 167, and we're now at 128. XBI, by and large, as everybody knows, is a little bit smaller-cap, while IBB is larger-cap. IBB is also a little bit more market-weighted, so given that generalists have now moved back into the sector, that's not surprising.

The thing that is misleading, though, is that biotech also underperformed over the last 5 years. So it's not just about reaching where we were 5 years ago; we've massively underperformed. That's why we're hearing from a lot of new money coming back into the sector that biotech did well last year, but it's only getting started.

We feel pretty good. If you look at our sentiment survey, which we're going to publish again, it continues to show, not surprisingly, that investors continue to really warm up, especially to small caps. So we're expecting another good year ahead of us, with fundamentals a lot better.

Brian, how are things from your vantage point?

Was that to me?

Yes, sir.

It's been—I mean, I think people were at a 7 or 7.5 going into the year, the first week or so. I would say it's toned down to maybe a 6 or 6.5 now. I think people are broadly optimistic, but there's certainly, and not uncharacteristically of JPM, a little bit of a JPM letdown.

It's just been kind of a quiet week or so—two weeks now—since then. I think people look at it as a pause for the next move, but it's been a little bit of a not highly enthusiastic month for biotech.

Maybe on that note, Sam, you can talk about the Revolution Medicines ongoing story there, as well as some other topics in the industry.

Sure. This was one that we've talked about a couple of times before. There was a rumor that came out—I can't remember now. I have to say, I don't know if you guys feel like this, but it feels like this year has already been several months in the 3 weeks that we've had.

I don't remember if it was before the new year or after the new year that there was a comment suggesting that Reuters thought AbbVie was going to try to buy them. Then AbbVie, that same day, in a very unprecedented situation, actually said, “No, we're not.”

The next day or 2 days later, the Financial Times, I think, suggested that Merck was there to buy them, and then the Wall Street Journal had that story. During all this time, the share price kept going up. On January 26, this Monday, the Wall Street Journal reported again that Merck was not buying them anymore. They couldn't agree on a price.

We'd done, and I'm sure everybody else had, quite a lot of analysis around what the right price here was—not necessarily the right price, but what a $30 billion market cap would require. We worked backward, asking what kind of cash conversion and internal rate of return Merck would need to see a sensible number. You get into the eighty odd billion dollars.

That's not that far off if you add up the total consensus between 2027 and 2040, although those numbers get very thin as you go out that far. But it just seemed quite stretched at that sort of number. So we wrote that up at the time, and then, of course, the situation happened.

The interesting part is that Revolution Medicines doesn't need it. They've got great assets and a great data set coming out. They have data coming this year that could potentially change the landscape in pancreatic cancer, and they have plenty of cash. They've just done the deal with Royalty Pharma, with more money available to them if they need to draw down.

I just want to remind everybody that these are not recommendations or investment ideas. Revolution Medicines is probably a company that will eventually be attractive to a pharma company at some point. Valuation? No idea. Where will the share price be? I don't know. What I do know is that they have a good oncology platform.

Okay. And maybe some of the other topics—the Eikon IPO and some Madrigal updates.

Yeah. The Eikon IPO would be, am I right, the second therapeutics IPO this year after Actys? Actys has done relatively well; it is still above the issue price.

But I've talked to some investors, and they said, “No, no, no, biotech IPOs need to double for them to be counted as a good one.” I thought, “Okay, well, that's asking for something.” We've just opened a window, and I'm not convinced that we're going to see doubling, et cetera.

Eikon is trying to raise in the region of $358 million. It depends on the price that it comes in at.

The range they're going out at is $16 to $18. The valuation would be something in the region of just shy of $1 billion, based on the listing. Of course, it's run by 2 very well-known people, Roger Perlmutter and Roy Baynes, people who have been stalwarts in the oncology space, having been involved in the launch of probably the most successful IO oncology drug out there. It's interesting: We saw some data from their IKE one thousand and one. It's a TLR7/8 dual agonist.

At ESMO 2025, we wrote on it. We were impressed by the depth of response. The waterfall plot looks great, and all the different elements that you look at when you look at an early-stage cancer drug look great. The only thing is that the trial was a single-arm study, but that's not abnormal in the world of early-stage oncology trials.

The one thing that I'm a bit miffed about, although I don't know if that means anything in this space or not at the minute, is that that drug isn't out of their drug development platform. The drug that's coming out of their drug discovery platform, if I'm not wrong, is the PARP-1 inhibitor, where the data is quite early. The competition is tough. They're going after prostate. So we'll see, but it could be a good proof of concept.

It's a big market if they make it work—something in the region of 3 billion in advanced and about 1 billion in hormone-sensitive settings. So it looks good, run by the right people, backed by the right people—Foresite, Lux, Soros. We're going to see. I'm not sure. Does it price today?

Sam, maybe a couple of things, and I completely agree with everything. The IQ001 PARP actually came from China as well, so that's also not internal. I think the rest of the pipeline is internal. It's still early.

Right. Thank you. Is it pricing today? It's usual, right, on the Friday? I mean, Josh should know, but I suppose he can't say anything about it, right?

No, we're not involved with this one. I got my eye on a whole different set of private companies, and you talk about the point of them needing to double. I think the candidates are out there, as long as they're priced right.

I actually want to get to the ReGenix clinical hold, Brian, because that is a very remarkable update for the field of gene therapy. Why don't you tell us what's going on?

Yeah. ReGenix had a surprise announcement a couple of days ago. Their MPS I program is for Hurler syndrome, which is really one of their deprioritized programs, and ran into an issue where they had a case of an intraventricular CNS tumor in a patient treated 4 years ago with RGX-111. This is their brain-injected, AAV-based gene therapy for Hurler syndrome.

Four years afterward, they saw this tumor on just a regular MRI. The patient did undergo resection, and they thought they would look at the genetics underpinning the tumor to exclude any causality here. What they actually found was that the AAV vector did wind up integrating into the genome upstream of PLAG1, which is a proto-oncogene, likely leading to its overexpression. As a result, the program went on clinical hold.

Interestingly, the FDA also put RGX-121 on clinical hold. This is for their MPS II gene therapy in Hunter syndrome, which is actually under review right now at the FDA. There’s a PDUFA next week, actually. This PDUFA was already delayed for review. I think the efficacy data has been pretty good in terms of what you want for a Subpart H approval for expression of a protein, but now they're in this bind where this has led to a clinical hold on both programs.

This AAV9 is utilizing a CNS promoter and is being directly injected into the brain. The commonality between the 2 programs seems to be what's leading to the FDA clinical hold. Now it's about whether they can get off clinical hold before the PDUFA. Probably not. What do they need to wind up doing to resolve this?

The interesting thing to us is that this AAV has really been designed to try to get around genomic integration. That's what lentiviral gene therapy's purpose is. It certainly happens very infrequently—not as frequently as lentivirus—but it has occurred in other cases. There is a case of a spinal cord neoplasm linked to Zolgensma, so there is some experience here.

The question is really, is this just bad luck with this RGX-111 program? Should the denominator truly be tens of thousands of patients at this point, with this just going to happen rarely? Or is there something specific about these constructs that is leading to a numerator/denominator equation that shows a higher risk factor? I think it'll be very interesting to follow this because, as you know, the head of CBER, Vanai Prasad, has been an outspoken critic of some of the flexibility, particularly around therapeutic index with gene therapy.

The company now has the onus to try to make the argument that this is a rare event, and the efficacy of gene therapies overall should outweigh this risk of an infrequent insertion.

Excellent summary. We'll have to see how this all evolves. Sam, do you want to touch upon the Roche obesity data? That's another important update this week.

Yeah. They put out some data. This is the CT drug, the Commot drug that they acquired through the acquisition of the company a year or 2 ago. The data, to our eyes, was competitive with what we've seen from even up to the triple agonist from Lilly.

What's interesting is that the share price didn't move very much. It's early data. You need longer, and you need some more detailed safety and tolerability information. So this is a press release format. But the numbers that they told us, the estimates that they told us, and the different ways to compare it when you do all your shenanigans of trying to compare it to the right data set—which is already, of course, a cross-trial comparison—looked good and competitive.

Lilly and Novo didn't really fall. Maybe they did a little bit, and then the market... That tells me—and I'm happy to see that, because I've been going on about it for ages—that investors have moved on from this discussion of constant 2% here, 2% there: I'm 1% above you, or I'm 18% and you're 20%, or I'm 22% and you're 23%. I'm glad to see that investors have moved on from that, because I think the real game to play, or the real future for obesity, is to try and get people to stay on these drugs to maintain their weight loss.

That requires you to think about a better dosing profile, which of course this potentially has, and also managing the side effects and getting rid of this muscle aspect of it. I think that's where people's eyes are going to be focused. I think the share price reactions potentially tell us that folks are now looking for things that are differentiated, not just the same.

Excellent. I think we've got time maybe for 1 more topic. Yaron, Amgen is stepping away from the OX40 partnership. Is this the end of the road for OX40?

Good question. The answer is no. It's the end of the road for Amgen's involvement specifically with rocatinlimab, which is the only OX40 receptor binder. The challenge has been twofold. As you recall, the hope and promise of OX40 was twofold: 1, potentially maybe even replace DUPI in atopic dermatitis by not having the conjunctivitis; and 2, hopefully even work more broadly into asthma and ultimately even in a Dupixent-refractory setting.

I think 2 things happened. Number 1, the OX40 data is not beating DUPI overall for the class. It does have activity in a Dupixent-refractory setting in atopic dermatitis. In asthma, the data has been a little bit more mixed so far from Sanofi. They had a really nice response. The placebo initially did very well, too. They sort of believed the placebo overperformed, and in subsequent follow-up, the placebo effect has gotten more manageable. So they're moving that forward.

This specifically with Amgen's drug is twofold. It causes fevers initially, which the ligand blockers—everybody else's kind of mechanism—do not cause. More importantly, it does cause some ulceration, fairly rarely. But this is not going to be a blockbuster product. It's a 50/50 deal with KHK, and so we think Amgen has decided to walk out.

We didn't expect much in sales. It was going to be a drag on R&D and profitability in general. So this is a good move overall.

No, I think one of the things to note is also—and I think this occurred too recently for Amgen to really take it that much into account—that this is probably being driven more by what I would argue is more middling efficacy from rocatinlimab specifically.

But there was this case of Kaposi sarcoma that occurred in the Sanofi program, which was announced a week ago today, right? This is very clearly likely a non-mechanism effect. Patients with OX40 deficiency, that sort of T-cell deficiency, or due to HIV/AIDS, show Kaposi sarcoma, so it’s not totally shocking that shutting down this mechanism to some extent would lead to it.

But I think seeing it happen live and being called out as a case certainly raised a lot of questions about it last week. Overall, it probably does factor somewhat into Amgen’s determination of whether to invest in what will be an expensive launch for a drug that doesn’t really seem to have knock-it-out-of-the-park efficacy and potentially could lead to a warning and precaution on the label that would limit its usage.