第187期 - 2026年6月26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 observers. I'm Josh Shimmer, one of those observers, joined today by Tess Cameron, Eric Schmidt, and Sam Fazzeli. For more information about our hosts and guest speakers, to listen to the most recent episode, please go to biotechhangout.com. And any commentary about biotech stocks should not be construed as investment advice because we all know how difficult and tricky a field it can be to navigate. But with that said, the XBI is ripping. It’s up two octaves higher in a month. It’s gone from the 130-to-140 range and is now up into the middle of the 150-to-160 range. So I guess we’ll kick off with this question: Are we getting ahead of ourselves? Is this all a response to some expectation that the FDA is going to be highly permissive for new-drug approvals, or is something else going on? Who wants to take a shot at that? Eric.

Of course. Okay, I’ll start, guys. Chime in.

1. The Biotech Rally Looks Rational

As Sam just mentioned, I was in Europe this week, and there was a lot of trepidation that we’re getting ahead of ourselves. Almost every meeting I had started with just that question: Isn’t this a little bit too far, too fast for the XBI? Aren’t we getting ahead of ourselves?

And I don’t know. To me, it feels like that’s coming from a background of PTSD, right? We were beaten for so long and were so glass-half-empty that, when things are as good as they are right now, I think it’s almost a perfect storm in terms of the fundamentals coming together here.

Josh, you mentioned the FDA. Certainly, it’s going to be permissive in the near term. M&A—I know we’re going to talk about that on this show—the macro environment, low interest rates, innovation being as good as it’s ever been. No, I think we ought to sit back and enjoy it.

What I don’t see that you typically see in a frothy market is a lack of differentiation, right? Everything’s going up at once, and we’ve still got names that we can talk about today that are down 20% or 25% on the week. So it’s still a good stock picker’s market and still a great time for biotech, but I’ll leave it at that and let the others chime in.

Something that we like to be anchored to when we look at biotech valuations is pharma free cash flow. We ask, “How many years of pharma free cash flow would it take to acquire all small- and mid-cap biotech?”

That’s kind of our equivalent, I guess, of an EV-to-sales ratio or something like that that you might look at for revenue-generating sectors. When we look at that metric, 2020 was really high, right? When we look at the years of free cash flow to acquire all small- and mid-cap biotechs, it was over 5 years of free cash flow from strategics.

Today, we’re sitting at a bit under 4. So it’s not that out of the realm of reasonable. 2025 was around 3.5 times; 2026, 3.7 times. So at least the growth that we’re seeing in biotech is certainly supported by the growth that we are seeing in pharma free cash flows. So that’s just one point to add here.

I think a second one is that we have to remember the change in XBI composition, right? You could look at this and just go back to history and say, “Well, in 2020, wasn’t the number really high? We were looking at a peak of just south of 170, and now we’re at 155.”

But the composition of the XBI did change pretty substantially, with weighting toward bigger companies with pretty strong fundamentals. So I think that’s important to take into account as well.

Oh, fascinating. Sam, what’s your take?

Yeah, Josh, look, pretty much every indicator you look at is positive for the sector. The FDA issues are behind us, which I think we’re going to talk about a little bit. M&A is doing well. The public market is back open, despite AI—some days, at least—doing really well in the tech sector.

I think the only thing that I hear from people is that they’re not just worried about where the XBI is going, going back to the PTSD, which I think is a very astute comment. They’re also having to worry about what happens if this AI—I’m not going to call it a bubble, but a lot of people do use that phrase—bursts.

That’s the one thing that I think a lot of people are also scared of. It wasn’t that, as biotech was doing really well, there was another sector that they thought could drag them down if that enormous bubble, if you want to call it that, burst. So, just overall.

2. Biotech Should Stay Independent

It’s so interesting. Tess, especially the way that you framed it around years of pharma cash flow to acquire the entire sector. I guess what I would argue is that that framework historically kind of had to be in place because the only way to get capital out of the sector was through M&A, because most of the companies weren’t even profitable. On average, biotech was unprofitable.

But now that we’re in a new era, we actually do have the potential to create profitable biotech companies, diversified biotech companies. Instead of selling off some of our best companies with the best prospects to pharma, if we could keep that revenue- and cash-flow-generating power within the XBI, it would draw in more generalists seeing a sector that was very attractively valued on a fundamental basis—not on hopes and dreams, not on a multiple of revenue, et cetera, but on a real fundamental basis.

That kind of cash flow would be incredibly powerful for the entire sector, probably dwarfing what one could accomplish through M&A. So I’m kind of curious how others see the evolving role of pharma M&A for biotech, and the extent to which it’s great in the moment—getting a 2x return on a stock overnight—but are we compromising the opportunity to create tremendous long-term value for the sector if we keep these companies independent longer and, instead of selling to pharma, sell to other biotech?

Josh, you’ve always been a bit worried about this. I mean, is there a choice here, though? Is there something you can do to prevent it? Fair?

Well, you know, I’ll just chime in on Josh’s behalf here. Look at Revolution Medicines, right? People were cheering when, earlier this year, the stock was at $80 and there was a rumor that Merck was going to buy them for maybe a whopping 50% premium, around $120.

Something happened. We don’t know, Sam, if it was the Revolution Medicines board that turned it down or what, but there was no deal. And today, the stock’s hitting new highs at $180. So I know that’s a short-term M&A story, and certainly the final chapter has yet to be written, but so far, kudos to those guys.

I’m not arguing against it. It’s just that I don’t know what power we have to prevent it, apart from telling boards and shareholders not to accept these deals.

On the other hand, I completely agree. The people who came into that latest fundraising for Revolution Medicines have told me they’re looking at a future, in their view, like Vertex. You look at that multiple on sales now, look at where this is going, and you can see that would be a particularly strong win.

Yeah, maybe just adding to that: I think, Josh, you’ve emphasized a lot the importance of biotech being a business, right? Executives—biotech executives—really building their companies to be businesses and ultimately being able to grow to profitability.

It is great to have other companies like Revolution Medicines in the sector that can be future acquirers. I remember the anxiety when Celgene disappeared and became part of BMS. They had been such an engine for collaborations and acquisitions within the ecosystem.

So I think it’s definitely good to have multiple business models that can work. I think it can help give boards and companies confidence to commercialize independently when they see great peers that have been able to achieve the same. I would love to see more of those, but I know we’re about to jump into one example of a company where the offer from pharma was just too attractive to resist.

Do you want to continue with that update on the Apogee acquisition?

3. AbbVie Buys Apogee

Yeah, absolutely. Word started coming out over the weekend about AbbVie potentially making a bid for Apogee Therapeutics, and indeed, we saw that come to fruition. So, an almost $11 billion—or, more precisely, $10.9 billion—buyout of the company.

And Apogee is focused on this: They have a half-life-extended IL-13 antibody, zimelartimab, which is currently in development with atopic dermatitis as the lead indication. This is being positioned as a potentially better Dupixent, which is an IL-4 antibody. And third, I think this is the first of the companies that have really been focused on taking a known target, optimizing the antibody, and building in half-life extension to create potentially better molecules.

I know many people on this call will correct me if I'm wrong, but I think this is the first. A Fairmount-founded company—huge congratulations to them on this deal. I think there had maybe been some skepticism in the market previously about this approach, and you can now ask: Is half-life extension going to be enough to be really interesting for strategics to want to jump in? Especially in this case, we do have Dupixent losing exclusivity for atopic dermatitis, at least, in 2031.

I think this acquisition clearly demonstrates that this is a more than $10 billion peak-sales drug and reinforces that when you have half-life extensions that can lead to a potentially differentiated profile, that is certainly very interesting for strategics.

Was anyone else surprised that, given all the competitive dynamics coming out of China, AbbVie decided to pay as much as they did for Apellis as opposed to finding something cheaper? Does anyone think that this may reflect some growing concerns that the U.S. government may block funds from going into China assets?

I don't know if—

Well, it sounds like—

Sorry, go ahead. Go ahead.

No, Sam, please.

Just go ahead. Well, I want Josh to flesh out his view a little further. It sounds like he's got this concern, and I don't know if that's just something off the top of his head or whether we should all be more worried than I am right now about this.

I don't know. We had our bus tour, which our colleague Eric S. Lee Watsek hosted, and I was fortunate enough to be able to join it. It's just so impressive in terms of how much innovation is happening there—how high-quality, how fast, and, most importantly, how cheap.

So I guess companies have to decide: Maybe you're a little bit behind if you're bringing an asset out of China, but on the other hand, the purchase price is quite small. Obviously, there's power to having the first-mover advantage, but how important is that? What is the trend going to be over time as China increasingly becomes the source of high-quality, fast-market—or faster development, I should say—innovation?

Well, let me comment on a couple of things here. The call that AbbVie had was informative about why this asset—instead of doing something potentially earlier but cheaper coming out of China.

One thing to point out is that AbbVie did talk about Part B of the APG777 trial being consistent with what a global trial would look like. They talked about the balance of patients, the balance of countries, and the sites. That speaks to replicability and how valuable replicable data can be.

Another point is that they talked about sales starting in 2030. When we think about the Dupixent timeline and 2031 for atopic dermatitis for Dupixent, that positioning—being a year earlier—may be worth a lot. You're potentially coming into a market where formularies may have changed, rather than having to lead with a branded agent or having someone go through a biosimilar.

They did talk about wanting to position zimelartimab as first-line, and I think that is one reason why time and replicability of data can be worth a lot here. No matter where an asset comes from—whether it was initially discovered in the U.S. or initially discovered in China—a lot of the value creation comes down the road while you're building a dataset that can be highly replicable.

Order of entry really matters, especially for markets that are heavily contracting-driven. Strategics are willing to pay a lot for that.

Okay, coming back to M&A as a driver of biotech, I ran a quick regression analysis looking at XBI performance versus biopharma M&A over the last 5 or 6 years. There's almost no correlation. It's like an R-squared of 0.2.

I didn't slice and dice the data more precisely to figure out if there are clear trends of XBI performance correlating with M&A, but everyone talks about M&A being a major driver of XBI performance. Does anyone really have strong data that proves that to be the case?

Nope.

Did you do deal volume or deal value?

Sorry, just to clarify: I did deal value.

Yeah, so you would have thought deal value would be, if anything, what correlates with the value, because that's the money going back into the sector, supposedly, right?

In theory, right?

Yeah.

But at the end of the day, I mean, to Tess's point—

Yeah, go. Go ahead. No, go ahead, Eric.

Well, I was going to iterate around a comment that Tess made earlier about pharma cash flows and the ability to use that cash flow to acquire a major chunk of our industry.

What would our industry be like if we didn't have M&A? Generally speaking, we've been very fortunate to have somewhere between $50 billion and $100 billion worth of deals each year, year in and year out, all at a very substantial premium to where stocks trade in the public markets.

If we were to X that out, if we were to take out $75 billion a year—and I get that some years are a little higher, some years a little lower, and that there's no direct correlation, as you showed us earlier today, Josh—it would still be a very meaningful premium dollar amount that came out of our industry.

A 40% or 50% premium on $75 billion is $20 billion or $25 billion that would be lit on fire, that we otherwise don't get access to as biotech investors. I don't want to think about that. Just because there's not a direct, year-in, year-out correlation doesn't mean that M&A is not very, very important to our sector.

There aren't too many sectors that benefit from this kind of big-brother-eating-little-brother phenomenon, which is so—

Well, if you add up the value of biotech companies, depending on how you define it, all the way up to Vertex and Regeneron, it now sums to about $1.4 trillion. So does $100 billion in M&A, with half of that being premium, really move the needle on the sector?

Again, relative to what? Obviously, generalists can do it; we see the generalists coming in. That's why the sector is now in the trillion-dollar-plus range.

Interesting, interesting debate, but maybe we're so far off the script. I've never heard a show be so adaptable to all the questions. Maybe we can press on with another one, the China asset spinout update.

We had a couple of them this week: Seraphina, if I'm pronouncing that right. And I think, Sam, you were going to take that, obviously. It's relevant for Tessera and RA Capital, and then Tessera is going to take over in the China spinout.

4. China Asset Spinouts Accelerate

Tess, correct me if I get any of this wrong. Certainly not on the name, because what is Seraphina? I'm going to call it that, right? This is a newco—the Chinese call them newcos—with a twist.

I have to say, it's a hell of a transaction to pull together, because they formed the company and, I think, at the same time or very shortly beforehand—there's no data in it—they in-licensed the key asset, which is—I'm looking for my notes here—YOLT-202, which they've now called SERA-01, for AATD.

Then they reversed into a company called BOLD, which is obviously Boundless Bio. That's some maneuvering there. I don't know how that tango was organized, but the first thing I assumed was to go and see whether there was an obvious shareholding by RA and RTW, who are the key leads on this Seraphina $230 million raise.

Are they on the BOLD investor list? I couldn't find them. RA was there.

RA got out, by the look of it, sometime in the first half of this year. So, the only link I could find—which, of course, I think these things do need—was the connection between RTW and Jonathan Lim, who’s the chairman of Boundless Bio, which is one of the few biotechs in the US where the CEO and chairman are not the same. I’ve done the maths on how many biotechs there are like that.

He’s the chairman, and he, of course, is also the founder of Erasca, if I’m not totally off there. RA had a position there. So, RTW had a position there. They clearly know each other. Maybe that’s what helped link the assets here together, and, of course, the commonality again is that Erasca is also based on at least 1 of the China-based assets.

Boundless agrees to have Seraphina reverse into it. Seraphina raises $138 million in a Series A, plus $92 million to come in and close the deal, co-led by RA Capital, RTW, and a bunch of other luminaries in the biotech sector, including Balyasny, Deep Track, Life Sciences Venture, Casdin, Vivo, and Janus.

With the Boundless cash—I love that. I wish everybody had boundless cash.

Boundless cash. If only every company had boundless cash.

With the cash that’s coming in, although they’re making a dividend to their shareholders of around $40 million or so, the company has suggested they have enough money to get to the second half of 2029, to finish Phase 2 and start Phase 3.

And what is this drug? Well, it’s an investigational in vivo base-editing therapy for alpha-1 antitrypsin deficiency. Of course, that technology was based on what YolTech has, and YolTech is a China-based biotech. They have plenty of other assets, et cetera.

So, very interesting deal, very interesting structure, and I wonder if Tess can or would like to add any further color to it.

I think you summarized it super well.

There you go.

Tess did.

Yeah.

As I said, maybe Tess can cover Allium Biosciences, and then we can keep this conversation going because there’s a little bit of an interesting Twitter battle going on.

Indeed. So, Josh, do you want to summarize the Twitter battle?

Well, why don’t you do Allium first and summarize that? I think they pair interestingly well.

They do. They do. Yeah, I think another financing that got announced this week was Allium Biosciences, which is a $330 million Series B. This was to advance Phase 3 development for OLN-3024 in DME and wet AMD, so they’re coming up with a competitor here for Eylea, which is exciting.

RA Capital—we were in this—along with a number of other investors: Blackstone, a16z, Commodore, and the Canada Pension Plan. This was a company that was launched in 2023 by Arch Venture Partners together with Mubadala Capital and Monograph Capital, with a really interesting set of assets, including OLN-3024, which was highlighted in the press release, as well as another medicine that was in-licensed for Graves’ disease.

In terms of where these came from, the Graves’ disease drug was in-licensed from a company called Velavigo [?] in China. OLN-3024 had demonstrated data in China as well. I don’t actually have a record of which—Innovent, of course—is the innovator behind OLN-3024.

So, I think this is another example of a few assets that came from Chinese innovators that have presumably continued to look strong in the clinic and really led to a very meaningful financing to move forward in Phase 3 development, and maybe make one of those other big biotech companies, Josh, that you’ve talked about that can really bring things forward on their own.

Yeah, I haven’t seen the back-of-the-eye data for the Allium product, but having followed the wet AMD space now for almost 20 years, you just have to be so careful in terms of how you interpret particularly the OCT images and look for baseline imbalances. At least the data is reported to say that the efficacy may be better than brolucizumab, which would be an important differentiating profile.

But these deals triggered a little bit of a Twitter spat, with Arch’s Bob Nelsen suggesting that maybe Seraphina was just a copycat of Beam, and asking why we need that type of innovation. Peter Kolchinsky responded by saying that there’s still some data to come out, so let’s wait and see what that shows before we just call it a me-too. Then someone else chimed in and said, “Well, hold on, Bob. What about Allium? Isn’t that a little bit of a me-too as well?” Of course, the same counterpoint is, “Well, no, it’s actually potentially quite differentiated.”

But I guess, with some of the rumblings in Washington around deal flow coming out of China—and I know this is something that Peter’s been very vocal about—do we have any general expectations in terms of how this might evolve? There was some news this week about the US government presenting to the BIO board about playing offense and defense versus China. Any thoughts as to what the future may hold?

Hard to know, right? I think there have been a few articles about various meetings related to the COINS Act, which does restrict US investment and particularly US knowledge transfer to AI, robotics, and a number of other dual-use sectors. Biotech is a different story in terms of the potential for military applications. They’re certainly there, but can regular biotech business really enable that? I think we’re looking at a different situation than in AI and robotics, where maybe those applications can be more closely linked.

There’s definitely still discussion ongoing on that. I’m not smart enough to have a prediction or forecast for this administration, other than to say I think there’s an understanding that there are important differences between these sectors.

Peter and I wrote in our article about why a ban on China would really be self-defeating for the US. We need to make a distinction between physical supply chains and innovation supply chains. For physical supply chains, we’ve got to really protect the national interest and make sure that the supply of a drug is something that could be maintained in any type of conflict.

Innovation supply chains are based on patents. Patents are out there. The more that we reinforce that ecosystem, the more we’re all relying on patents as the source of value, and the more that innovation is visible and available in a conflict situation. I think that’s a really key difference here that needs to be considered.

And on what the US should be doing, it’s great to see the IND pilot come out from the FDA. It’s fantastic to see a lot of energy and focus on what we can do to keep the US competitive and incentivize early discovery and innovation here.

So, along these lines, if you look at the private financings to date that are north of $100 million, I haven’t crunched the numbers yet, but it is clear that a growing proportion of them are these China-asset-hunting spinout transactions. Go to China, find a couple of assets, build a company around them, and finance it for north of $100 million—sometimes hundreds of millions.

There has been some criticism that we’re not diverting efforts and funding, whether it’s investors or pharma, to US-based innovation. Does this trend pull too much capital away from original US innovation as we’re pursuing these validated, low-cost, incrementally beneficial medicines out of China?

I think you have to look at the numbers really closely, right? Some people cite the numbers in terms of overall out-licensing deals, where, my gosh, there were $136 billion of out-licensing deals from China in 2025. But we have to put that number in context, right? What of that is upfronts? Well, it’s about $5.6 billion in upfronts in 2025.

So, $136 billion—that’s not the right number to be looking at. We’ve got to look at the upfronts. When we consider those upfronts relative to the acquisition of one company, Apogee, for $10.9 billion, it’s like, all right.

I think we can see where value creation is accruing, right? And that is the U.S. market. I think examples like Olin and Seraph actually show why the U.S. market is likely to remain the center of gravity for biotech value creation, which is because the end market is the U.S., right? You need to study a U.S. patient population. You want your phase 3 design, ideally your phase 2 design, to show that these medicines are going to work.

We talked about these comments on how Apogee’s Part B of the trial gave them a lot of confidence in replicability. So I think that’s a really important point to emphasize why a lot of that value creation is likely going to stay here, right? More incentives and more capital that allow U.S. biotech, especially on the early side, to really continue to compete and do well are important. But I think the flow of dollars from here to there—I don’t think that’s really true when you actually look at the numbers and consider the probability adjustment on those future out-licensing payments.

Even just looking at the total amount of out-licensing activity, we looked at the U.S. for the past 5 years or so, and the ex-China value of out-licensing deals has stayed around $140 billion to $160 billion since 2021. Then you just see this spike starting to come up in 2024 and 2025, with a lot more of these China deals, but that ex-China out-licensing activity hasn’t really diminished. It’s kind of sat around that $140 billion to $160 billion level.

So, Tess, if this tap were shut—if you were told tomorrow that you’re not allowed, by some mechanism, to bring in any assets from China to start a company in the U.S.—how do you do that? Would that suddenly mean that you had an extra $5 billion or whatever in your bank that you’re going to now use to hunt for U.S. deals? It’s because that’s the ultimate aim here, right?

Well, look, I think that’s a good question, Josh, about what the ultimate aim is. Is the ultimate aim really national security, as people say, or is it U.S. profits? I think there’s a lot of reason why U.S. profits and U.S. value creation will actually stay here, whether the seeds for that are coming from the U.S. or China.

But if the idea is, hey, can we just keep capital at home and not let it leave the U.S. if you want to invest in biotech, what happens? Well, I think what happens in the near term is, hey, maybe there’s a bit more that’s hanging around the U.S. Is all of that going to flow to early-stage stuff? No, right? That’s going to flow across multiple stages, wherever there’s the highest opportunity for absolute returns.

One key consideration there is that it’s not like you don’t have to think about China anymore if U.S. companies can’t just go outbound to China. You still have to think about China, right? Because China drugs can still go through a lot of other places and come into the U.S., right? There’s nothing that I’ve seen that is proposing an actual ban on a drug that is ideated in China.

It just doesn’t make sense. Anyway, I think we could go on forever about it.

Yeah, and ultimately, a compression of returns in biotech is just going to mean less money for biotech, right? I think we all know that. So let’s hope that people are thinking through that game theory as they consider some of these policies.

You know, this conversation to me sounds like we’re arguing about the weather or something like that. Nobody can control this, right? The innovation is going to find its way to the markets, and the capital is going to find its way to the innovation. So whether or not Bob Nelsen and Peter Kolchinsky view something as innovative or non-innovative, it doesn’t matter. Over time, innovation will rise to the top.

Three years ago, four years ago, we had 20 companies going after CD19 CAR-Ts, and that was too many. Many people who invested in that innovation at the time lost a lot of money, closed up shop, and went elsewhere, right? So that wasn’t an innovative enough thing to do, and the market decided that those companies that were still pursuing that lack of innovation were not going to be rewarded. I think the same thing’s going on here.

It’s a global economy. It’s very, very hard, I think, for anyone to determine, no matter where they sit or who they are, that innovation should or shouldn’t be funded. It’s going to get funded.

5. Oncology Remains Hard To Pick

Speaking of hard-to-predict aspects of innovation, let’s go to oncology. Sam, we’re going to talk about an update from Pfizer and their ADC platform, which they acquired with Seagen.

Yeah, I’m not going to dwell too much on this, given the time and how many other topics we have. They had a trial fail, which was a second-line monotherapy trial with a drug called sigvotatug vedotin, or sig V, which is an integrin beta-6-targeting ADC that came from the Seagen stable. That was in second-line monotherapy against docetaxel. When you looked at the phase 2 data, we couldn’t see a very strong reason why this should work. And phase 3 failed.

What is interesting, of course, is that when you look at the combination with Keytruda—remember these vedotin-type drugs—obviously, that’s a nectin-4 vedotin ADC in muscle-invasive bladder cancer with Keytruda, and it has been super successful. So here, one would be interested to see whether this combination in first-line, combined with Keytruda, is going to give us better data.

Two things: The data that we’ve seen so far from phase 1 does suggest there’s good synergy there. And the other thing is that in the press release, they say that when we look at the two-thirds of patients with only 1 line of therapy—not more advanced—there does seem to be a better trend in OS. Now, I don’t know whether this is going to end up being data dredging or not, but there’s a phase 3 ongoing anyway, so we’ll find out the reason for that.

And don’t forget that Pfizer raised a couple of eyebrows when they did a deal with Innovent a while back with a meaningful-sized upfront, which included some ADCs. So folks were going, “Well, why are you doing this? Didn’t you just acquire an ADC company?” Which, of course, is not a relevant point, because things evolve. And that’s what you do. If Innovent’s got something more interesting with their different linkers, then that’s what you do.

This week was the BIO conference in San Diego, right in my backyard, and Mike King, our good friend, was scheduled to be on a panel talking about investing in oncology. He wasn’t able to join, so he asked me to fill in, which is kind of ironic because Eric and I often debate how investable oncology is in general, and I’m often taking the more pessimistic approach.

Oncology is so hard because preclinical data doesn’t effectively translate into response rates, which doesn’t effectively translate into PFS, which doesn’t effectively translate into overall survival. You also wind up in really intense competitive dynamics that make it more speculative and really hard to pick the winners with any degree of confidence.

I think I probably left that audience a little bit more depressed than I had intended. Obviously, oncology innovation is incredibly important and also incredibly successful on the whole, but when it comes to picking specific companies, I find it very challenging. Personally, I’m super, super selective.

Eric and I often debate: Do you need to be all in on oncology, or can you dabble a little bit? Sam, I know you spend a lot of time in this space. I’d love to get your views around really feeling confident getting ahead of potential updates or outcomes in this space.

Yeah, Josh, I hear everything you’re saying about the translation from preclinical models. That’s very fair. What is a positive with oncology is that you can go into phase 1 pretty much into patients, and you can get a much more meaningful outcome or data set.

Now, again, you did say that response rates don’t always translate to PFS. It certainly is the case in some tumors, but not all tumors. But at the end of the day, it is a tough space to be in, and you’ve got to recognize that when you’re pushing up against the tail of the curve with Keytruda and you want to raise that by 10%, that’s a pretty hefty ask if you’re trying to engage the immune system to do better than it was doing before with just Keytruda. And yet whoever does that will be a big winner, because we know these drugs can sell big. So that is the story of biotech.

I could throw back at you that we shouldn’t be doing that. CNS continues to be a difficult space, and yet so many companies spend effort on it. So I think oncology is—I’m hearing that there is maybe a resurgence of interest. I mean, you look at what VCs have been doing; it doesn’t show anything like a resurgence of anything.

It’s the opposite, right? Investment’s been going down, and the number of deals has been going down. In the first half of this year, I think we had, for the first time, far fewer oncology deals than non-oncology deals in terms of Series A, etc. So that’s the story, but I’m hearing from some of my friends who are like you guys on the sell side, doing IPOs and looking at some of these things, that there may be a resurgence. I don’t know what Eric and Tess think.

I think you guys are discussing maybe 2 different things. Sam, you were talking about how, from an investment standpoint, the returns can be quite substantial because you de-risk things quite early, you have premium pricing, you have a lot of unmet need, you have these blockbuster markets, and you have M&A. I think even today, oncology is the number-one subsector for M&A, and it’s been that for the last 5 years, as Josh knows. But Josh, on the other hand, was suggesting that, from our standpoint as investors, it’s hard to get an edge, it’s hard to get an angle, it’s hard to get conviction, and it’s hard to beat our investor competition.

I don’t know. I guess I feel a little bit differently, or maybe I’m still too pigheaded to admit that I can’t be any bit better than the pack at this. I do think that the models have gotten a lot better. Yes, Josh, you have to roll up your sleeves and really understand the clinical data. Certainly, the genomic mechanistic rationale for certain targets is superior to others, and again, I think it takes a ton of work.

I don’t think anyone should dabble in the space, but in some ways, it’s the most molecular of industries that we have, right? Everything comes down to clear, discrete molecular pathways, and I think a lot of it is increasingly predictable. So we’ll see how things play out, but I think it’s going to get easier, not harder.

6. The FDA Moves Toward Normal

Why don’t we move to some of the FDA updates? Specifically, REGENXBIO has resubmitted its Hunter syndrome BLA application for its gene therapy. Replimune is now on the slate for an AdCom, with a PDUFA date for its oncolytic virus in the 3rd quarter. Where do we feel like we’re at now with the FDA? Tess, I think you’re also going to talk about an RBC Capital Markets report on FDA commissioner candidates, to the extent that that’ll influence the outcome of FDA permissiveness going forward.

So, Josh, my answer is very short, so I’ll just give it. I think we are very close to normality. That’s it. We seem to be getting our outcomes back. We seem to be walking back the 1 year of waste that we had. The flu vaccine from Moderna, REGENXBIO, and the melanoma product from a company whose name I forget—that’s going back to normal.

Bring your drug, we’ll assess it properly, and we’ll tell you what we think, not make somebody at the very top decide that they don’t like it. And the same, obviously, with the Hunter syndrome cure, right?

Mm-hmm, yeah, exactly. Tess?

Yeah, I think maybe just one of the big questions outstanding is obviously who is going to be the next commissioner, and who are the potential contenders here? RBC Capital Markets came out with a report looking at candidates, and they highlighted the increased comfort around the FDA. They talked about Replimune resubmitting; we just talked about REGENXBIO resubmitting, and Oculis’ alignment on a single-trial filing.

They put forward an analysis of the current set of candidates they understand to be the top contenders: Heidi Overton, John Crowley, Stephen Ferrara, Norm Sharpless, Richard Pops, and Kyle Diamantas. It was an interesting report, right? It shows that there’s obviously a range of options for who the commissioner could be, and we’re not looking at one unique stance behind these individuals.

They talked about both Heidi and Kyle as currently likely, depending on a lot of the direction from RFK and the MAHA agenda, with Crowley, Ferrara, Sharpless, and Pops as a set of candidates that’s likely going to be quite constructive with industry, with a lot of industry background. Some of those folks—Pops and Crowley in particular—coming with industry backgrounds are likely subject to very high scrutiny around conflicts of interest. So I think those are the things that kind of stood out to me.

I think Vinay Prasad is not on the list, right? There’s a certain amount of maybe trying not to bring the FDA closer to what we have been used to as normal for many years before 2025. I think all the candidates probably bring us back in that direction, but it’s still a pretty broad aperture in terms of what the FDA could look like.

Do you want to cover the German pricing agreement?

Oh, yeah, just very quickly. I think we can cover this quickly. Look, it’s been interesting to see all the back-and-forth on pricing plans for Europe. We had tariffs last year. We had MFN come out at the end of last year, and a lot of European governments have been wrestling with how to think about these policies.

Germany came out with a policy in April where they said, “Hey, we’re going to use drug pricing to close a funding gap in our budget. If you make more revenue as a drug, guess what? We’re going to cut the price more,” depending on what revenue threshold you make. The impact that would have had, I think we can all forecast, would be essentially to make Germany a substantially less attractive market for launching medicines, which, when you combine it with MFN, really puts that market at a real detriment.

We saw Lilly announce that they were going to reduce investment in Germany, and then USTR came out on June 18 saying that they were going to open an investigation under Section 301 into those pricing policies. The word this week was that maybe Germany is going to back off. We’ll have to see where that goes. I’m not sure if anyone else here has more insights.

No, I wouldn’t, but Eric’s in Germany, so maybe he can go into some channel checks for us.

No, but let me just add one little bit here. I obviously live in Europe—not in Germany, but in France and the UK—so I see this issue all the time. As a group, we’re looking at what Europe needs to spend to retain some semblance of sovereignty when it comes to tech, AI, defense, energy, and industrials, and the numbers are eye-watering.

So the problem I think the region as a whole is going to have, if I may, is: How do you balance that need for investing in and defending yourself against some adversary with the need to keep your folks healthy? That’s the tough part, and I don’t want to be in these politicians’ shoes to make these decisions, but I tell you, that is, I think, the background source of this issue.

All right. Why don’t we move to some other industry news? Sadly, it looks like the end of the road for Sangamo, one of the remaining Class of 2000 biotech IPOs. It filed for bankruptcy protection—not necessarily bankruptcy—and is selling off its assets. It has a couple of stalking-horse bids for the platform and assets from Eli Lilly and Astellas.

I didn’t realize they’re called stalking-horse bids because hunters often hide behind a horse as they’re stalking their prey, right? In theory, there are other companies that are kind of hiding behind Lilly and Astellas, waiting for them to make their first move before coming in and potentially bidding higher. Typically, though, there will be a breakup fee for those first-mover asset bidders and buyers.

In other news, ARS Pharma got a little clobbered this week with the announcement that Neffy was not added to the formulary of an important PBM for July 1 ahead of the back-to-school season. Neffy is a nasal epinephrine product intended to replace things like the EpiPen.

What I didn’t realize was that, for negotiating access to formularies with PBMs, oftentimes smaller companies such as ARS can’t talk to the company directly. They have to use a third-party negotiator who negotiates on behalf of a group of smaller companies and smaller assets in a very opaque type of system.

So it’s a little bit confusing there, and also a little bit frustrating that smaller companies just can’t get into important PBMs to get products on formulary a little bit faster. That was kind of a nuance I had not appreciated.

We got an update from Moderna. Now, their Science Day is moving their mRNA platform in all sorts of directions: T-cell engagers, in vivo CAR-T.

Sam, what was your take on that?

Don’t forget, Josh, very quickly, given time, that they’ve got a new head of R&D, David Berman, who came from Immunocore and then spent many years at a large pharma before that. The things that I found quite interesting are, as you and I discussed offline, why do you need T-cell engagers produced by mRNA? What advantage does that give you?

In fact, another thing that I didn’t quite understand is how they get away from, or avoid having to prove, the contribution of components when you have 3 mRNAs. One of the ones they’re moving forward with is one that expresses 3 mRNAs that create 3 T-cell engagers, which are, of course, secreted against BCMA, GPRC5D, and FcRH5, I think, if I recall correctly—all 3 are T-cell engagers in myeloma.

I don’t know what the side-effect profile of this thing will look like, because each of those has a slightly different side-effect profile. So, let’s see where they go. The area that I thought would be interesting is if you could target these intracellularly. But even there, when I think about intracellular targets, I still don’t see how you get the cell to become a production factory—the leverage that you would get.

In vivo CAR-T makes a lot of sense. That is what LNPs are used a lot for at the minute, or there are 2 ways of doing it: LNPs and lentiviral vectors. If they can make it work, that’s great. I think it’s interesting.

The last thing I would say on this is that David Berman, very interestingly, kept repeating that they won’t be putting an enormous amount of money into some of these things—some of the earlier-stage antigen-based mRNAs—if the intismeran autogene trial in melanoma doesn’t work out, which, of course, he said he fully expects it to. Just the last thing to say is that we have some worries about that trial, with a potential readout in the second half of this year.

Yeah, it feels to some extent like when you’re an mRNA hammer, everything looks like a nail, but the question is which is the best fit for that hammer. Maybe we can close out with a number of data updates. Tess, you’re going to take us through them, including an exciting update for Definium in the psychedelic space, which we’ve spent a lot of time on, as we watch the field of psychiatry really start to transform from a chair-and-couch-type practice to interventional psych.

We’re also going to cover AbbVie’s side bet between them and Veradermics. The hope is that maybe someday I’ll have a great head of hair just like Veradermics’ CEO.

7. Late Stage Data Starts Landing

Absolutely. Let’s take these through pretty quickly. I think MoonLake showed their drug, sonelokimab, in HS. They shared an update on that data. They had week-52 data from the VELA-1 and VELA-2 trials, and they reported that, for HiSCR75, 67.2% of patients reached that endpoint at week 52.

We have, I think, bimekizumab, which has really become one of the important drugs in that space. I think it’s around 60%. They were also slightly higher on HiSCR100. This likely suggests that they have a drug that looks pretty similar to risankizumab.

They also looked at the safety profiles, and those were comparable as well. So that BLA submission is on track for later this year, and we’ll see what happens with the company as they move forward with a drug that looks competitive relative to the lead therapy in HS. Not sure if there are any other comments on that one.

[snorts]

Maybe moving on then to Merck: all we know is that the trial was positive. Great news. They met their primary and secondary endpoints in ulcerative colitis. This is obviously a mechanism that we’re all watching, and we’re looking forward to data in the fall on that.

Josh, why don’t you take Definium here, since you’ve been so close to that space?

Oh, sure. Positive Phase 3 data for LSD in MDD. A very robust efficacy signal, generally well tolerated, and it looks like another psychedelic potentially coming to market for patients.

I think one question we’ll have to sort through is that the FDA certainly seems amenable to approving psychedelic therapies for treatment-resistant depression. Are they ready to move to MDD? Although, in that study, there were a number of refractory patients as well.

There’s certainly a tremendous amount of enthusiasm for this space. As noted, psychiatry is changing in front of our eyes. It used to be that residency programs for psychiatry were nearly impossible to fill, and you’d almost take anyone with a pulse, from what I understand. Now, residency programs in psychiatry are some of the most competitive to get into, and the psychedelic wave is a driving force behind that.

Do you want to finish off on Upside?

Yeah, sure. Upside has an antibody that is a half-life-extended antibody targeting the prolactin receptor that they’re advancing, and they shared some of the initial clinical, I think, SAD results for this medicine, as well as a $100 million offering that they did with Eli Lilly, Adage, Bessemer Venture Partners, Columbia Threadneedle Investments, and Redmile Group.

There’s certainly excitement around this drug. It’s an anti-PRLR program, and they’re focused on androgenetic alopecia and endometriosis. An interesting point to highlight is that this is actually an example of inspiration from China biotech. Hope Medicine, a China biotech, has studied prolactin in endometriosis and androgenetic alopecia and shared some of those results.

Upside said, “Okay, cool. That’s a really interesting finding. Let’s go forward with a program that they think can be really competitive there,” where they’ve focused on optimizing the half-life so that, Josh, you don’t have to worry about taking a pill every day.

Exactly.

So I think we close on a great example of how we can be inspired by innovation that happens in a lot of places and work on improving it. That can happen here just as much as it can happen in China.

My fingers are crossed. What a treat to be able to host a session with three of my favorite people really in all of Wall Street and in biotech. Eric, Sam, Tess, thank you for your thoughtful commentary. Thanks everyone for tuning in and we'll catch up again soon.