第175期——2026年3月6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. I'm Michael Yee at UBS, and my co-hosts today are Eric Schmidt, Yaron Werber, and Matt Gline. For more information about our hosts and guest speakers, or to listen to the most recent episode, please go to biotechhangout.com. While the other speakers are getting connected with us, I'd love to get kicked off here. One of the topics we wanted to chat about—and certainly an important topic in the investment community—is all of the volatility in the sector, as well as the fact that biotech continues to perform well and that there are important positive capital markets developments going on.

1. Biotech Outperforms The Market

Obviously, the stock market, including the S&P 500, has been quite volatile over the last few months. For everybody who has been focused on the AI trade and all that has been the rage for the last couple of years, the AI trade has generated a lot of debate and controversy, from whether it's a bubble to what other downstream industries are going to get hit, including large-cap software and all these other industries that I see getting impacted. Pharma and biotech have been a bright spot.

As it relates to the capital markets, not only has the XBI been a pretty good performer in the last 6 months, but importantly for us and for a lot of the companies out there, the capital markets and fundraising environment has been quite good. In the fourth quarter, it was pretty remarkable because we saw $10 billion in total follow-on activity, which was approaching the peak of early 2024 and matching some of the numbers that we saw at the beginning of COVID. So, despite a tough past couple of years for biotech, the sector has definitely picked up, and the follow-on activity was quite robust in the fourth quarter.

We also put out a note highlighting that in Q1, recognizing that we're not fully through the quarter, we—the stock market—have done $2 billion of IPOs, and we're approaching about a $2.5 billion run rate for the quarter, which would be the highest single quarter in the past few years. Let me repeat that again: biotech had its strongest single quarter for IPO activity and dollars raised, approximating $2.5 billion for IPOs, in the past 4 years.

That's pretty remarkable and definitely worth talking about. Obviously, the question will be whether it can continue. We've been saying that we think a bunch of tailwinds are certainly turning positive, and biotech should be a pretty good sector this year, certainly the larger companies as well as the smaller companies. I will throw in, obviously, that volatility around the Middle East and rising oil prices probably also help pharma and drug companies.

I'll pause there. I think that's pretty remarkable and interesting for the first quarter, and obviously, with all the macro issues going on and the positive developments in biotech, it's definitely notable that so much capital is being raised. Maybe I'll open it up to the panel to talk a little bit about how they're feeling and what they're seeing out there.

It's Yaron. I think Eric, our fearless colleague, is going to be joining us. I think he's having some technical difficulties. We just came off our Cowen healthcare conference—or TD Cowen healthcare conference, I should say—which wrapped up literally 2 nights ago. It was a record attendance, which I think is a great testament, Mike, to what you're saying about the interest level in the sector.

Fireside chats were packed, panels were packed, and meetings were packed. There was really a lot of buzz, despite the sector being somewhat under pressure because of the risk-off environment and what's going on right now in global equities. Mike, to your point, hopefully biotech and pharma are safe havens in this environment, but we are seeing some risk-off activity right now.

A lot of the sentiment has also been that biotech is obviously in a really good place. The market broadly was due for a sell-off, and I think it was palpable. So far, the market has been handling the Middle East conflict fairly well. Hopefully, it's a little bit of steam off the valve, but in a healthy sort of way, more with respect to a market correction. This is not a political comment.

That hopefully should stabilize things in the near term, and I think people are beginning to try to buy again on the heels of the weakness. The fundamentals are really strong, and the tempo and sentiment were really good. So it was great to see.

I agree. I kept saying that we were ready to buy the dip, but there never really was a real dip. I think it's quite healthy to have this pullback. The numbers do suggest that pharma and big biotech have been pretty resilient, even with the overall market pullback, and certainly less bad than a lot of the tech companies.

I view it as quite healthy, and I think the overarching sentiment and backdrop, which echoes what you're saying, is that we're going to be all right. There's definitely good investment appetite and good enthusiasm in the sector, despite a small pullback here. So I think that's great.

Maybe, Mike, while we have Matt, do you want to talk a little bit about the atmosphere on the corporate side? I'm not talking about the atmosphere with respect to stock prices, but more about the underlying fundamentals, hiring, and things like that.

Yeah, sure.

Right.

2. Corporate Sentiment Turns Healthier

Absolutely. Thanks, Mike. It's interesting: you walk around as a CEO, and the market feels like the weather. You don't have a lot of control over it; it sort of happens to you, and it affects how people feel.

Overall, I feel like we feel better access to capital around us. We've been in a fortunate position; it's not like we've needed to do a lot of raising, although Immunovant did a raise earlier this year. But we see it in competition for assets, in hiring, and in the moods of the people we talk to.

After a long period where everyone was struggling to capitalize themselves, it feels healthier. It doesn't feel anything like it did a few years ago, and I'd say it's still a relatively soft employment market. Frankly, I still frequently talk to companies that speak aspirationally about hoping the IPO market opens so they can go public later this year. But from our perspective, everyone seems optimistic, I guess is the word that I'd use.

That's right. Quite frankly, Matt, when I go around talking with investors, I don't think we necessarily want the kind of action that we saw a few years ago. We look back on a lot of that and say, "Well, that was nice. That was also a bit dangerous and not really healthy."

I do like the healthy environment. Good data sets can support financings, a good recovery, and really an increasing appetite by the buy-side community to reengage with the sector.

One of the things you just said that I'll highlight is this: biotech companies are hard to run. It's hard to be a biotech company in some contexts. One of the things that's often frustrating is that you generate data and put it out to the world, and the world judges you immediately for it. Man, is it more satisfying when the market reacts well to good data sets than when the market reacts poorly to good data sets.

I can't speak in general, but since at least September for us, data sets have been working. We've put out data that we thought was good, and the market agreed and reacted accordingly.

Yeah.

That just makes everything easier, to be honest. It's internally motivating. It means you have access to capital. It means you can talk to investors and have constructive conversations, and you're not out there saying, "We thought this data set was good, but the stock market didn't like it, so why?"

That whole dynamic is much harder when data isn't working. The fact that it's been moving in the right direction—and I think that's been true for us and for a lot of companies—has been very helpful.

Yep.

It makes everything easier.

Yep.

It means you can make decisions and plan for things.

Absolutely. It seems more rational. As a market, you can invest in it and, from a corporate standpoint, make decisions and plan for things in this environment. That's great.

I don't know if, Yaron, you want to make any more comments, or if Eric has joined us, but maybe we'll keep it flowing here with some other topics.

Yeah, I'm good on my side.

3. The Moderna Roivant Settlement

Okay. Let's go through some of the big news this week. I think it's obviously timely that Matt is on as well.

One of the things that impacted some of my coverage, but was also a pretty big announcement this week, was obviously the $2 billion settlement between Roivant and Moderna. Maybe Matt could talk a little bit about what happened on the Roivant side, and then I’ll speak to the Moderna side in my coverage and talk about what’s going to happen with Moderna.

Up to $2.25 billion.

There you go. Thank you.

Look, this is funny in some sense. This is obviously not the heart of Roivant’s business these days, right? We have a bunch of drugs that we’re excited to develop. It’s not the heart of Moderna’s business; they have a bunch of drugs they’re developing. In fact, Roivant is a secondary player. It was really Genevant, a subsidiary of ours, and Arbutus, a separate public company, that were the main actors in the situation.

Mm-hmm. Yeah.

But it’s interesting. This goes back 30 years. There were a series of inventors and scientists at a company called Protiva, which became Tekmira, which became Arbutus, which in some sense became Genevant through a series of these—whatever; over time, biotech companies change. Many of those inventors still work for Genevant. I sit down and talk to them. There are a handful of people at Genevant who are central to this whole thing.

They’ve spent their whole careers working on lipid nanoparticles. There are approximately 3 products in history at this point that derive from lipid nanoparticles. I think maybe not even approximately—literally 3 products. There’s Onpattro, which uses the Genevant lipid nanoparticles, and there are the 2 COVID vaccines, which we believed, as soon as we saw them approved, used our technology. Thus began what is now coming up on a 6-year process of getting to this moment.

It’s economic news. It matters financially to the companies involved in different ways. But for the inventors who spent literally decades of their careers working on this, I think it’s a huge moment of recognition to see their technology used in the COVID vaccines, which were obviously such important products, and to be recognized for that in the form of a judgment of direct infringement, and to be able to go around and say, “Okay, now we can speak to that.” I spent part of this week just talking internally to those folks and hearing from them about what it meant for them. That’s obviously a big piece of it.

These cases take a long time to work through, and I don’t think it’s a surprise. The trial would have started this coming Monday. Although I’m not a litigator, and so I can’t really speak to it, in general, cases settle close to trial. I’ll say I was surprised. I’ve made comments before: I didn’t think this case was going to settle; I thought it was going to go to trial.

But we managed to have a really constructive dialogue with Moderna in the recent period, and it resulted in an outcome that we were certainly happy with relative to all of the risk ahead in trial, the uncertainty that comes with it, and frankly the really long time that it can take to get these things resolved. I think they were too, and it was interesting to see both our stock and theirs up on the day of the announcement.

Mm. Yeah. So let me follow on with that. On the Moderna side, for those who didn’t follow all of the details, they’re slated to pay $950 million in cash in July. They’re going to take a charge in the first quarter, but they’re paying that in July to settle the litigation. Importantly, there’s potential for up to $1.3 billion more, depending on the outcome of the federal Section 1498 statute, which relates to whether or not Moderna would be liable because the sales basically fell under the Operation Warp Speed pandemic period. I don’t want to get into all the logistics here, but Moderna is disputing a significant amount due to the fact that this was during the COVID pandemic period.

From the Moderna side, what I can tell you is that it’s interesting because the initial decision already said that the Section 1498 protection does not apply. Therefore, in our opinion, Moderna could have to pay up to $1.3 billion if the appeal is not overturned. We talked about that, so Moderna could have to pay more than $2 billion, and we’ll see what happens with the appeal decision, appreciating that the initial court decision was that it does not apply.

It was brought up, of course, on your conference call as well: Moderna says it does not believe it’s going to have to pay that and has not taken an accounting charge. Since we’re not accounting experts or legal experts who are allowed to opine on that, I would just say that their accountants take 1 view, the court already took a view, and we’ll see if they can overturn that. That’s the decision there.

As they come to the conclusion of what this means for Moderna, they do have $5.4 billion to $5.9 billion of total liquidity, per se, at the end of 2026—technically, $4.5 billion to $5 billion of cash. If they had to pay another $1.3 billion out, subtract that down, and based on the math of our model, that would leave about 2 and change—2 or so years of cash left. So it’s going to be heavily dependent on whether or not they can come up with new revenue streams to get to breakeven, so they can start generating cash instead of burning cash.

So that’s an issue there, and we’ll see how that goes. Obviously, the phase 3 adjuvant melanoma readout—Moderna is partnered with Merck on the cancer vaccine—will read out later this year, and we’ll see how that looks.

And just 1—

Yeah.

One comment, just because I obviously can’t speak to Moderna’s accounting decisions, and I won’t try to. But what I will say is that I talked to some of our accountants because the language they used was “not probable.” I’ll say that, whatever accounting standard they want to apply, in general, the word “probable” means 70% or more likely.

Interesting.

Whether that is exactly the standard they’re using and what their conclusion was, I think 1 version of an interpretation of that comment might be that they think it is less than 70% likely that they might have that outcome.

Got it.

So anyway, that’s a general—

Yep, that’s interesting.

—comment about accounting, not a specific comment about Moderna’s determinations or what they believe. But just because I know that question has come up a few times—what does it mean that Moderna says it isn’t probable? At least under the accounting rules—

There you go.

—that we follow, our accountants tell me that we would record a charge if we thought it was more than 70% likely.

There you go. There you go. Okay, helpful. All right. So that was obviously interesting.

Mike, let me—

Go ahead, please.

Let me chime in quickly. I cover Roivant, and Matt and I just had dinner, literally, I think, an hour and a half ago, as part of our conference. I’m very cognizant that we’re on a public call here. In that sense, what connotations, if any, will this settlement confer on your litigation with Pfizer?

Yeah. I think it’s obviously clear that Pfizer also has a COVID vaccine. Its sales have been approximately 2 times the global sales of Moderna’s COVID vaccine. If you attempted to do straight-line carryover math and thought all the other facts were the same, there’s a read-through.

The facts are similar but not identical. The vaccines are different, and the actual formulations are different. Pfizer and BioNTech have not asserted a Section 1498 defense thus far, so that piece of this, at least for now, does not appear relevant to the Pfizer case. But Pfizer’s a different company. BioNTech’s a different company than Moderna. Their facts and circumstances are different, and the vaccines are different.

One thing that’s helpful here is that a judgment of no invalidity has been entered for the patents in this case. In theory, had we gone to trial, Moderna was going to attempt to argue that our patents weren’t valid. If they’d succeeded, that invalidity would have carried over, and we would have lost those specific patents vis-à-vis the Pfizer case.

Not only has that not happened here, but I think one interpretation—which Moderna might disagree with—is that they looked at the outcome, and our view would be that our patents were likely to withstand the court test. I think all of that is helpful.

And then obviously it gives us something to point to in any potential future discussion we might have with Pfizer or BioNTech to say, “This is how at least one other party decided this was all valued.” So it’s useful. It has conceptual social read-through. I can’t say it has legal read-through necessarily, but I think it’s got to be a helpful fact for us.

You know what’s also interesting, Matt and Yaron, is that Moderna is in direct litigation also with BioNTech/Pfizer, but not on the LNP, but on mRNA technology. Correct? So, just from the Moderna side, we’ve written about this, and it’s also mentioned in the Moderna press release, but this is just a totally interesting angle, right?

So Moderna is in litigation with Pfizer/BioNTech on the COVID vaccine, in essence, believing that Pfizer/BioNTech’s design of the mRNA sequences and the construct is infringing on Moderna’s mRNA technology. Moderna has won in various courts in multiple countries outside the United States in trial decisions, including in Germany, which is interestingly BioNTech’s home court, and in the United Kingdom on the mRNA patents. Moderna won also the appeal, not only the court decision but the appeal in the United Kingdom.

And so the company believes that if you do damages on that, and given the size of the vaccine for Pfizer/BioNTech, which you just said is double, then Moderna believes that the judgments they’re going to win actually exceed the amount of damages they’re settling on—I think that’s the right word, not losing, settling on—with your portfolio of IP.

At the bottom of the press release, it says, “The company continues to believe that assets will exceed liabilities across this portfolio of IP, and as they are actively defending in other markets against Pfizer and BioNTech.” So, interesting, right, Matt? Interesting on that. Moderna believes that they could be due more than $1 billion or $2 billion, et cetera, on those damages due to Pfizer/BioNTech. So, interesting.

And that was obviously orthogonal, not related to our case.

Yep, exactly.

That was a good reminder. Science is a cross-industry collaborative endeavor where a lot of people play a role in a lot of things, and then we are necessarily forced to box it off in corporations with the business and practicalities of who has what medicine.

One of the things that’s clear, looking at the entire landscape of the history of LNP and these products, is that the history of the science doesn’t necessarily live cleanly within the corporate boxes that the products now do.

Remarkable. So, what does Pfizer/BioNTech think about it if they’re engaged in issues with you and then also with Moderna, and in both cases, the biotech company believes they’re in a good position against the pharma company? Okay, let’s keep going.

4. The FDA UniQure Controversy

I know Eric may not have joined us, but I do know one of the topics we wanted to talk about was the general concept that there is some FDA controversy with uniQure. uniQure obviously got a CRL, but it also stems from the fact that Marty Makary had gone on, I guess it was CNBC, and made a bunch of comments around the approvability of a drug and used that drug as an example of one that they felt pressured to approve and were not going to approve.

And then, of course, the CRL letter did come. The controversy around the FDA was that it was in support of it initially, and the pathway, and then the new administration came in, rejected it. He was also making comments about it and using it as an example on public media and public television.

I will just say from my biotech perspective, I think every application needs to be judged on the merits of the risk-benefit, and that review team at the FDA has to go about and do that. I’ve definitely seen examples over the course of my 20 years where one reviewer thinks one thing and another reviewer thinks another thing. Leadership does change within the FDA, and quite frankly, the FDA can just change its mind. They can do whatever they want.

So, I’m not saying we’re right or wrong. I’m just saying that this administration did not like this one. They rejected it. I’m not going to make any judgment as to whether they should be using that as an example publicly on a television interview. But the FDA does reserve judgment to make its own decisions.

Remember those days of SPAs? S-P-A, SPAs? I remember a company that had one, and they had an SPA, and then the FDA changed its mind. So I’ll pause there. I don’t know if Yaron has any comments or perspective on that, and just the idea about FDA decisions, specifically with rare diseases, and making comments about a drug ahead of the decision in the media.

Well, again, amazing having Matt here, because what I’m about to say very much rolls into a corporate situation too. Look, it’s our understanding that there are confidentiality requirements between a regulator and the regulated company, and making public disparaging comments would, one would imagine, run contrary to those legal agreements. So that’s concerning on its own.

We’ve talked also many times about the discrepancy between what the FDA and Micro specifically perhaps publishes in the New England Journal of Medicine and the way they reduce or do not reduce that to practice in their actual decision, because so far it’s been a stark contrast.

But again, Matt, I mean, not to put you on the spot, I don’t know if you can opine. This would be problematic from a regulatory perspective.

Yeah, look, there’s a jokey story that floats around the internet sometimes in which a ship is sailing through the fog and gets into a shouting match on the radio with somebody else. It turns out that they’re both arguing that the other needs to move, and eventually it becomes clear the ship is arguing with a lighthouse, and the lighthouse says, “We’re a lighthouse. Your call.”

I guess the point is, irrespective of the confidentiality arguments that any company might have with the FDA, I think it’s pretty tricky to enforce any of that. We are intensely reliant on the FDA for everything, right? They approve our products. They regulate us as companies. They decide what goes and what stays, and obviously there are laws, and in theory companies have successfully pursued legal action against the FDA in the past.

But it’s a tough decision, obviously, because it’s a repeat relationship. So I don’t envy anybody who’s got to go up against the FDA in any setting in this kind of context.

Look, I think in general we benefit from stability at the FDA. We benefit from clarity. We make multiyear, sometimes decade-long, investment decisions based on the kind of conversations you have. In general, I think there are a lot of very hardworking civil servants at the FDA who are trying to do the right thing by these products.

Even FDA leadership right now says a lot of the right things about trying to accelerate the pace of approvals. So I think there are a lot of people trying to work hard to do the right thing. These moments of conflict and disagreement have got to be really tough for everybody involved and have got to be really tough for the company, and I feel for them.

It’s very tricky to know what to do in one of these situations where you have a disagreement because ultimately, in the end, as far as whether a product’s going to get approved or not, only one person’s view or one organization’s view actually winds up mattering. So it’s got to be a tough situation.

I also want to clarify my comment: it was a pre-BLA meeting and a discussion to file, and the FDA told them they couldn’t file. They needed to run a randomized study. So it never actually formally went into review, but it was a discussion about whether they could file, and UniQure had to come out and say they could not file. So that was the more specific comment.

Okay. Let’s keep going. I want to talk about obesity, Yaron. Are there any other topics that you wanted to touch on from this week before I hit on obesity?

No, go for it.

Sure.

I think what you’re about to talk about, and then I’ll follow you, is very synergistic.

Okay. So, a couple of other things. I always like to bring up other topics beyond just the news of the week. I think what is quite intriguing to us in biotech land is obviously the obesity market, which is slated to be the single biggest market, or at least a specific disease therapeutic class, at over $100 billion. It’s going to have potentially broad implications and impact, perhaps negative, to other sectors.

The fact that people are going to be on these drugs over the next 5 years—the math supports 35 million to 50 million people on GLP-1s. If you want the math, it’s at $2,000 a year, approaching $100 billion. So 35 million to 50 million people around the world are going to be on GLP-1s, and they’re all going to be losing 15% to 20% weight, give or take.

What are the implications that these drugs have for other lifestyle and consumer impacts? One is that consumer-sector stocks have actually been negatively impacted because if you are an alcohol company, a soda company, a snack company, or a restaurant company, obviously there could be 20% to 30% less food consumption by those patients, and that would be a negative impact to your revenues, earnings, and your stock.

And so one of the things that has been talked about over the past couple of years is really picking up because the oral GLP-1s are now on the market. Of course, Novo is now in its third month, and they're exceeding 60,000 scripts a week. That's actually only a 50% capture rate, so that's 100,000 scripts per week, and it just got launched. And, of course, Lilly's orforglipron is coming, possibly next month. Funny enough, right? There's no formal PDUFA date, but somehow the media was able to pick up on that, and the FDA is talking about it.

But Lilly's oral drug will be available next month. Think about this. We're going to get really underway with the 3 to 4 million people who are on the drugs now—3 to 5 million people in the United States. It's going to get to 25 million in the United States, so 5× over the next 5 years.

Twenty-five million people would be about 5% to 10% of the adults in the United States. If you think that obese patients are about half the adults, that's upwards of 10% to 20% of obese people who will be on these drugs. Then they may be drinking far less alcohol, drinking far less soda, consuming far fewer snacks, and eating a lot less at The Cheesecake Factory.

We're actually going to host a call with investors later today. It's with consumer investors, so I have to present to folks who cover Pepsi, The Cheesecake Factory, and others, and talk a little bit about what this all means because they're trying to adjust their models for what this can mean. I don't know if you guys know people on GLP-1s. Of course, we do, but they definitely drink a lot less alcohol, drink a lot less soda, and definitely eat a lot less food. It's pretty remarkable how that will play into some of those companies' revenue and guidance projections, as this is really getting underway right now.

Can I just say I've lost 60 pounds on a combination of Wegovy and Mounjaro in the last 10 months?

Amazing.

I still feel like I spend a ton of money on food.

Well, tell us about that. I've met people who said they stopped drinking Diet Coke. I've met people, of course, who say they stopped drinking alcohol because of the GI side effects.

If 10% of people, 1 out of 10, stop drinking alcohol, that's 10% less unit volume. That's pretty impactful to your revenue stream.

Totally fair. I am a personal one-man science experiment on the long-term effects of drinking a lot of Diet Coke.

Okay.

We'll find out in 20 years how that goes for me. But I totally get it. My experience is not going to be the same as everyone else's either.

The experience definitely varies. I've heard people who definitely say they just stopped drinking alcohol because of the GI side effects. I've heard people say they definitely had a Diet Coke—specifically Diet Coke—kick. They'd have a couple of Diet Cokes a day, and they stopped drinking Diet Coke mostly because they don't feel like they have that urge to snack or to consume.

If you talk with anyone, of course, the whole mechanism of the weight loss is eating less. So if you had that big cheeseburger, maybe you don't eat the cheeseburger with the fries, or you don't get the whole appetizer with it. That's obviously concerning: You could lose 5% or 10% in unit volume, or 5% or 10% in revenue, if you're ordering less food.

That's interesting. Are you drinking the same amount of Diet Coke and eating the same amount, or different types of food, I guess you would say?

I'm definitely eating less. I mean, I've got to be eating less.

Yeah.

In terms of Diet Coke, I don't want to say publicly how many Diet Cokes I drink a day, but it's a lot.

Very good. Yeah.

It sounds like if your money spent on food is stable, the formula suggests that other people in the household are probably eating more. They might be growing, though, at the same time.

I think it's just that New York restaurants keep raising their prices.

I think that's what they're going to do to offset the volume. There you go.

The other last thing I would say is that even among the casino stocks, the topic that's come up is whether, 5 years from now, 10% of people at the casino will be gambling less. Obviously, addiction, smoking addiction, alcohol and substance abuse, and other types of addictions are actually being studied in Phase 2 and Phase 3 studies, just to be clear, with some of the GLP-1s run by Lilly.

There is definitely evidence to suggest that people have less desire to do those things, like I just said with the Diet Coke situation. Again, I'm going to make no comment about the business models of the casinos, but I think, Matt, in your own experience, you could agree that if 10% of people were definitely gambling less, it's probably not good for casino revenue. There are a lot of interesting dynamics there, and it's pretty interesting to see this dynamic play out beyond our biotech world because we're actually one of these drivers of other models. Interesting.

Mike, the next topic on this is the whole concept of drugs being developed as a preventative measure, wherein the payers might not be willing to reimburse. But as prices are coming down, consumers might be willing to pay out of pocket.

There's a private company with a pretty amazing management team, Sarah Health, that is now in Phase 1. They're planning on developing an siRNA that could be dosed every 6 months. We'll have to see. Maybe even less frequently. That's going to be both for blood pressure, AGT3, and also an LDL reduction with a PCSK9. The question, of course, is how do you get that registered?

I mean, to your point, many people are taking GLP-1s. In our business, we probably all know a lot of people who are taking a statin prophylactically, right?

Mm-hmm. Mm-hmm.

So why not go on a statin or blood-pressure medication if it doesn't cost that much out of pocket?

That's right.

The bigger question is, how do you get that registered?

Yeah. Well, we definitely agree that the reimbursement part will be tricky. Now, to be clear, I think it's remarkable that the obesity market is going to do $20 billion outside the US, and it's essentially all cash pay. Let me repeat that again: all cash pay.

The United Kingdom, which is crushing numbers right now for Lilly, is all cash pay. You could imagine that people have $200 a month to pay for that stuff. A gym might cost $100, so here's $200 a month. Of course, in the US, the orals are $200 to $300 a month, and the prices will be coming down over the next few years.

So if you're losing $10,000 at the casino, and it's probably not great, maybe $2,000 on the drug is a better result. But I make no claims about the desire or willpower to use the drugs prophylactically for gambling. Certainly, for alcohol, substance abuse, and some of the other things, I could appreciate that might be a good pharmacoeconomic solution.

All right. Eric Schmidt, you jumped on. Are you able to speak? I see—are you able to speak?

I don't know. Can you guys hear me?

Beautiful. Great to hear your voice.

You guys are doing a great job. Tenth time's the charm for me. Thank you for bailing me out, and apologies to our listeners for coming in so late in the call. But it sounds like we're ready to go on to another topic. I missed a little bit. We haven't yet covered financial guidance and our press release.

Yeah, go for it.

5. Companies Debate Financial Guidance

So, just in terms of things that a lot of us haven't really seen before, as old as we are and as long as we've been watching this industry, Harrow put out a press release that I thought was quite interesting. Essentially, it was about how they were going to change the strategy behind their financial guidance going forward.

And this is a quote from that release: “Greater clarity in our financial guidance is an area where we owe it to Harrow shareholders to make improvements. Our new approach, while perhaps more conservative, will focus on greater transparency and structure. Our objective going forward is clear: to meet and beat expectations.”

So this was, I thought, a very transparent way of telling Wall Street, “Look, we are going to be really adopting the mantra of under-promising and over-delivering.”

Essentially, we're going to be sandbagging with our guidance going forward. It was refreshingly honest and open, but it really brings up the topic of whether sandbagging is a good strategy, something that we ought to do more or less of. We've got such a great group here to discuss it with folks who have probably been sandbagged too many times by companies. And, of course, Matt, I'd love to hear your views on how you, as a corporate executive, think about providing guidance. But let's start with Yaron and Mike on whether they think sandbagging is effective when it comes to investors.

Yeah, I mean, Eric, it's 100% effective, right? It's part of the game. The first thing, Eric, that you and my prior boss taught me back when I started is that what happens in the company in Cambridge versus what happens to the stock are two completely different things. The way we attribute value to companies is all based on the supposition that the beats will continue forever, that the long-term numbers are low and they're going to go up, and that's why they deserve a better multiple, because their earnings growth is going to be higher. If they beat this quarter, there's a supposition that it lasts forever, and if they miss this quarter, there's a supposition that it's not going to last forever.

It's kind of silly, but that's the way things work, so it certainly works that way. It's the art of communication and investor relations. Recently, one company guided only at the higher end of consensus, and the stock took a dive because they didn't guide above it. Then there's the question of how much they guide above. It would be great if everybody got together and agreed that, from now on, we're going to give reasonable guidance, but then, to many people, in the absence of other catalysts, the question is, quote-unquote, “Why own the stock?” Especially given that so much money is managed on momentum. So it's a great question and a little bit of a tricky topic.

And I guess the question is, does it defeat the purpose if you're telling everyone you're going to sandbag? Go ahead, Mike.

Yeah, I think that, given my history of following the large biotech companies, Eric—we go way back—you think about Amgen, which typically always beats and raises, or Gilead, which kind of beats and raises, or Celgene—there you go—always beats and raises.

It's great that they beat and raise because you don't have to worry so much about whether they're going to totally whiff the number. They're probably not going to completely miss it, and the company, every quarter, regardless of what the stock does, fundamentally gives you a sense of what the numbers are going to be. Large fund managers do want to know what the model says and what the earnings are going to be. You feel good that that's the number, and if not, there's possibly upside.

That is a good thing philosophically. I don't think it's necessarily something that you would straight out tell people, but the concept that a company does a good job of executing and hits its numbers is a good thing. That is different, in my opinion, from stocks—which is about to what degree people own or trade on that because the company is going to beat, and we know that. Therefore, I want to own stocks that are going to beat, because maybe it's a tough market and there are people who are missing. You're particularly seeing that now. Of course, biotech and pharma are beating, and other companies are having problems, so pharma and biotech are doing well. That's more of a stock thing.

I do think it's good to underpromise and overdeliver. I do think it's good to beat your numbers and raise. I don't think I've ever run a company that straight out says that's the case, but they say, “We like to hit our guidance.” I do think that's a generally positive thing overall, regardless of what the stock does on the print.

Matt, how do you think about giving guidance and whether you're consciously underpromising?

For the moment, we don't give guidance, and nothing about this conversation or anything I've seen in the world makes me excited to start. First of all, just to be clear, your clients all call us and tell us to sandbag you. That's the way this works, right? Every investor who owns any stock calls the management team and tells us, “Give your analysts low numbers and beat them.” So whatever they're telling you to do, what they're telling us to do is sandbag you. That's the first piece of this.

The second piece, I agree—I think it was Mike who said it—is that there's the concept of beating expectations because either the drug or the execution is fundamentally beating some real sense of people's expectations in the world. That's obviously a good thing for everybody, and we aspire to do it. Everybody aspires to do it, and sometimes it's within your control and sometimes it's not within your control.

There's also just a fundamental truth. Occasionally, we get asked about guidance for our upcoming potential launch in dermatomyositis. No one has launched a modern drug in dermatomyositis ever. We have our thoughts and opinions based on talking to physicians and thinking about the business model, but ultimately, we don't know. Until we actually get out there, cross challenges off the list, and get the drug to patients, it's hard to predict for anybody, including the company.

The last thing I'll say is that this isn't just about guidance around revenue numbers. In general, one of the dumbest parts about being a public company, or the CEO of a public company, is this whole background-shadow thing that happens.

Investors are arguing with each other based on which positions they have, who's long and who's short, and which stocks they're in, about what the bar is supposed to be for something. In some good version of the world, that's price discovery and people trying to establish what the right levels are. But it's also that, as a company, you feel like you're fighting really hard to deliver a good data set, or you're fighting really hard to deliver a good revenue number or to get a drug out to patients, and that's hard enough in and of itself.

Meanwhile, there are people out there trying to convince investors that the bar is high, not because they think the bar is high or because they think the bar should be high, but because they have a series of positions that makes it worth their while to spend time on this. It creates this weird adversarial dynamic where it separates what you're trying to do from how you're trying to talk about it. I think that's not particularly constructive from a company's perspective, but mostly you just control what you can control.

All great points and discussion. My final thought here on this topic is that there is a little bit of a circus atmosphere, as Matt just described, out there, whether it's with regard to financial reporting or other data sets. In the short term, at least, maybe companies do need to pay some attention to it, or maybe investors, unfortunately, because of the world we live in, are stuck with it. No one's willing to break the mold and think outside the box.

On the other hand, at the end of the day, this is a fundamental industry, one where earnings and revenue matter, and I certainly would hope that stock prices would migrate toward those fundamentals, almost regardless of what else is going on. But let's move on to another topic. I know that next week is a big week. I think we're starting to call it conference week in terms of the center of biotech gravity moving from maybe the Northeast or the West Coast down to Miami, to Mike's neck of the woods. I think we've got 4 or 5 different bank conferences lined up. Mike, why don't you kick this off and tell us what's happening down in Miami?

6. Miami Becomes Biotech Conference Hub

Yeah. I think what's interesting is that Miami now has 2 different periods. I guess they're both in the winter. Next week, there are 4 or 5—I've been told up to 8—different biotech conferences. At least 4 or 5 are actually investment bank conferences, from Barclays, Leerink, Jefferies, UBS, et cetera.

Four years ago, or before COVID, there was basically 1, which was the Leerink-Barclays conference. Remember that?

And so now there are 4 or 5 of them, all in the same week in March, during a particularly good-weather week. It's about 80 degrees here. I think it's freezing cold in Boston and New York. That's fine, but it has presented a great retreat for some people to escape to, now for a few years. It seemingly keeps getting bigger.

Then there's a second period, in November or December, when you also have a 2-week or 1-week period where Citigroup, ISI, and Evercore have their conferences the same week in November. So that's another overlapping period in Miami. I just think it's nice to see it. It's great to see folks coming down here. The weather is great. More importantly, it's been a great center for a lot of these banks, investors, and companies to get together that week.

I found it interesting here. I didn’t realize why there are a lot of executive officers, because March 9 to 10 in Fort Lauderdale is the R&D Leadership Summit, which is actually organized, I think, in part by Fred Hassan. Fred hosts a long list of about 20–25 different R&D people, where they all get together with their companies and talk about R&D strategies and BD strategies. You can see the long list there. David Reese and folks from Big Pharma are all there, so it’s all kind of the same week.

It’s great to see it. I’m sure weather has partly to do with it, but there are a lot of investors, and people have a good time getting business done and enjoying things. It’s nice to see it. Hopefully, some of you are there. I think a lot of people are going from Boston, seeing you all down in Miami, and seeing some others down here. It’s a great thing to see, and I’m sure people are aware of it.

Mike, can I ask a quick question?

Thanks, Matt.

You know, the buzz—the synergy between the conferences—must be dramatic, right? It’s such a great use of time to come down. There are so many corporates between 4 or 5 different banks, essentially probably covering the whole industry. What is it like at JPMorgan? There are a lot of times when people skip meetings; they get delayed, bogged down, or stuck in traffic. What’s the dynamic there? Are people walking between 4 or 5 conferences? Are there a lot of no-shows?

Mm-hmm.

Yeah.

I think we can all agree that the JPMorgan conference in San Francisco remains the central conference that everyone attends. I know at some point there were talks of eventually trying to convince the industry to move it because they want to be there. But I think everyone agrees that the JPMorgan conference this year was good.

We have our week here in March where you have 4, so that would be the opposite, right? You have 4 or 5 different banks all at once. These conferences are spread out over 4 days. In our case, UBS is on Monday and Tuesday. I think Leerink is Monday, Tuesday, Wednesday, and a half-day. Some of the others are Tuesday and Wednesday, and they’re all within about 15 or 20 minutes of each other or less, all in the same general vicinity.

I think what happens is that people look at their schedules, determine they’ve got some great meetings, and split it up over the 3 days. In some cases, people split their time between 2 or 3 banks and try to do it all, and also probably try to enjoy some downtime in between those meetings and whatnot. I think they get a lot done throughout the week. They get to split time among perhaps their favorite brokers, and I’m sure people are enjoying business development and client dinners in a warm environment. I’m sure all of that gets done during the week, and everyone heads back.

Not only have we seen conferences migrate down to Miami, I guess, 2 times a year, as Mike was just saying, but I think we’ve also perceived a bunch of biotech investment dollars migrate down to Miami. Obviously, there are some tax benefits from a state tax perspective that are facilitating that. But I’m curious as to whether Miami can really become a central point of investment in our industry.

We’ve seen other regions, perhaps the Midwest, lose assets. But when you think about biotech investing, you still think of New York City first, maybe Boston and San Francisco second. What’s it going to take for Miami to be right up there? Mike?

What I would comment is that, first, it’s definitely beyond biotech. I think Ken Griffin specifically is leading that charge. Ken Griffin needs no introduction. He’s made a lot of positive commentary around that, personally moved, and purchased a lot of real estate here. Mark Zuckerberg, if you believe he’s actually going to move, purchased a $170 million house last week.

But I think the idea is that it’s a spot where pockets of people have come down. I don’t think that it’s somehow going to change New York City by any means, and I think there are definitely pockets of folks that are here and growing. There are healthcare funds or portfolio managers that are here, certainly more than just biotech. It’s other sectors as well. I’ll even throw in the topic of Puerto Rico, which has been on some of our mutual clients’ lists, as people are out in Puerto Rico.

I think Miami is great for that week that folks are here. It’s nice to see everyone getting together for the week. Certainly, pharma BD folks are here that week as well, and I think it’s a good way to end the spring and make a note of it. So I guess maybe we’ll wrap it up there too, Eric.

Well, that’s a good way to end this session. Again, apologies for not being able to dial in at the outset. Mike, Yaron, Matt, thanks for having my back, and thanks to all our listeners for participating in this week's session. We'll see you next week on Biotech Hangout.