第191期——2026年7月31日

It's great to be back on the show, and second-quarter biotech earnings season is in full swing. Earnings season is always somewhat, if not very, painful for those of us on the sell side and buy side. But we've got another great program in store for you today.

As usual, our show is structured generally the same way. We'll first discuss markets and the macro picture. Next, we'll move on to this week's BD deals in biotech, followed by comments on the regulatory landscape. We'll close with notable company-specific developments, where we try to get through perhaps the more salient news events of the week.

1. Biotech Fundamentals Stay Intact

But to start off, let's talk about biotech sector performance, especially as we're now firmly past the halfway point of the year. At a high level, it continues to be a bit choppy of late, and I'd go even further to say we're seeing some pressure in the sector, particularly today. I'm seeing the XBI down about 3.5%, and the XBI is now trading at sub-$150 levels. Recall that we crossed the $160 mark at the beginning of the month and even hit the $164 level on July 9. That said, I think we've come a long way in the bounce back from trough levels several years ago.

Bigger picture, in terms of our sector outlook, my team and I at Mizuho just published our second-quarter biotech sector preview earlier today. Overall, I think biotech fundamentals appear very much intact. Importantly, I'll call out at least 3 specific themes that I think could continue to drive sector outperformance. There are surely others as well, but I'll highlight 3.

First, previous headwinds at the FDA, given the high-profile turnover in senior leadership at the agency, have now, we believe, at least turned into tailwinds for the sector. We'll have more to say about what we're seeing at the FDA in a little bit. Second, the biotech IPO locomotive continues running full steam ahead. If I have my numbers right, I think we have about 14 U.S. biotech IPOs year to date, which is more than the 8 that we saw all of last year. For sure, there are several more in the queue.

Third, there's a continuation of very robust M&A activity. I'll remind you that over the next decade or so, I think there's an estimate out there of over $300 billion in revenue at risk due to patent expirations or losses of exclusivity. That just means that big global pharma companies are going to need to find ways to plug revenue gaps or holes, and that often means looking to acquire smaller and mid-cap biotech companies.

This is all good, in my opinion. I don't see any real big-picture macro reasons for near-term underperformance, and I think this sector continues to rally throughout the balance of the year. In terms of the XBI, which we look at as the best, although by no means perfect, proxy for the biotech sector, we're seeing 24% year-to-date performance as of yesterday's close. This compares very favorably against the year-to-date performance for the S&P 500, which stood at a positive 9%, and the Nasdaq Composite, which is up 8%.

For additional perspective, in just the last 3 months, the XBI has gained some 1,600 basis points. Meanwhile, health care more broadly speaking is up only 6% year to date. Again, given the XBI's 24% positive performance, biotech continues to be a clear winner, and of course we'd love to see this trend in biotech continue.

I'll just briefly comment on the U.S. biotech IPO market. After seeing Sionna Therapeutics make its public debut last week, I think trading should begin in Apnimed this morning, or sometime today. That's a Cambridge, Massachusetts-based biotech focused on respiratory, or breathing-related, diseases. Next on the calendar, I think, is Tenaya Therapeutics. That's a San Francisco-based biotech focused on hypertrophic cardiomyopathy and related conditions. I think the biotech IPO market is nicely humming along.

With this in the background, just on a macro level of where we are in biotech, I'm going to pass things along to Tim, whom I consider one of our more senior statesmen in the industry. Tim, I think you want to make some comments on current trends we're seeing with reverse mergers and PIPE financings. Separately, afterward, you're going to cover the ever-evolving and, of course, perhaps controversial role of AI and biotech in the life sciences. Tim, go ahead and take it away.

No, thank you, Graig. Just a comment on the market today: It hasn't escaped my attention that when there's a week where there's not a lot of M&A, the XBI tends to drift down. If there's 2 weeks like that, it drifts down even more. The moment someone gets bought, the XBI starts heading in the other direction.

We haven't had too much in the last couple of weeks, but it's coming. You nailed it, Graig. There's just so much need for pharma to buy. I think the fundamentals are very much in place, and I wouldn't be surprised to see the XBI finish the year closer to $175–$200 than where it is right now, which is under $150, really for the first time in a while.

2. Reverse Mergers Gain Ground

On these reverse mergers, by my count there are roughly 10 companies that have gone public this year via reverse merger. That mechanism is pretty much as important, if not more important, this year than the traditional IPO, which is quite the change.

The question is why. I talked to people in funds, and I'd love to hear what the rest of you think. What fund managers say is that if you do a PIPE deal in the reverse merger, you get to do confidential diligence, which is a little different from an IPO, and it goes public sooner.

A lot of people are worried about the midterms. For whatever reason, Trump's numbers don't look great, and I think there's just a lot of uncertainty about the complexion of the country around politics. It's not that people are so pessimistic or optimistic; rather, no one wants to wait around and find out what it's going to be.

One of the fascinating things about reverse mergers this year is that, if you look at the post-market performance, these deals have done really well. You get the endorsement of a bunch of funds that have had the opportunity to do confidential diligence, so people pile on and you have a transaction that's oversubscribed. This week, we saw 2 of these transactions as an example.

I'm going to pause before I jump into AI and see if anyone else has thoughts on this topic.

Yeah, you're right.

The only thing I would say about these reverse mergers is that I feel like, at one point, people would ask questions: Why did a company go public like that? Maybe a company goes public via reverse merger and no one really knows—or most of the market doesn't really know—who they are for 2 years, right?

But now it feels like the process has been kind of perfected. You don't really sacrifice syndicate quality. I mean, look at the syndicates of some of these. It's often the who's who. In that context, I also hear anecdotally that it's cheaper, too. It feels like some of the prior disadvantages around perception have waned.

What were you going to say, Yaron?

Yeah, to your point, I was going to add that it's what we're hearing, because we've done some of these: It's just a lot faster. That's what's critical for the investor base and for the management team—that they can get it done really fast.

It does take time for the deal to close, and I would say that's kind of the Achilles' heel of the process. But to your point, they've been very well received.

Well, thank you both. It's really interesting. We'll see how the rest of the year finishes out. It does feel like IPOs are starting to pick up a little bit more. They were sort of quiet before, and it seems like it wasn't so long ago that Israel was bombing Iran all the time. That was the focus, and there was a lot of uncertainty in the market. That uncertainty is perhaps a little bit less today.

3. AI Reshapes Drug Discovery

The other topic I thought would be interesting to touch on is what's going on in AI, and specifically Anthropic, whose Claude for Science program has been coming on really strong. There was a lot of speculation last week that Anthropic could go out and buy a big pharma company. They could just snap up Bristol Myers or AbbVie or something. It all seems a little crazy.

I will say that the interest from big pharma in AI because of this move is really strong. When we talk about AI in the life sciences, we're often speaking about the idea of using a computer to make molecules. The problem with that idea, even if computers are really good at making molecules, is that most of the cost—the real cost—is actually on the clinical side, where AI is helpful but not as helpful. Making molecules with AI doesn't necessarily solve our industry's bottleneck.

What Anthropic is really doing with Claude for Science is using agentic AI to allow scientists to essentially get a lot more leverage. I'm sure we're all trying that.

A lot of people are using these various programs, from OpenAI or Claude or whatever. I know I use them in my everyday life as a banker, and it's crazy how much incremental leverage I can get. So that's even bigger on the science side. There are all sorts of companies out there, Claude being the main one, but others like Kimi that are just so cool.

And, you know, K-Dense, for example, added over 150,000 scientists to their site in just the last couple of months. This space is red-hot. My gut instinct is that AI is going to be really transformational to the process of doing science. I don't think it's so much about making molecules as it is about being a scientist: How am I going to write this protocol? Please design this experiment for me. Here are the results of this experiment. Computer, write up the experiment. Review this article. Do you think the article's well done? No, it's not. Okay, we'll fix the article. So, those are all things that used to take scientists weeks and months that like you can do in 10 minutes now. So, it's very transformational. Anyway, I just wanted to comment on that. I thought it was something that's kind of breaking right now that probably we should talk about more on biotech hanging out. I don't know if any others have thoughts on this kind of trend.

I mean, I cover some of the areas, Tim, involving drugs that use informatics to actually design the molecules. To your point, we've seen this game before, and they've been fairly successful. Relay kind of immediately jumps to mind. There are other examples.

The challenge, to your point, is that the platform—and this is sort of even Anthropic buying a large pharma—could have unlimited power and limited ability to then reduce that to practice, along with the associated costs, especially given the failures that are inevitably going to happen. We think of it as a technology that's going to get embedded in everybody's research. Some are going to do a better job with it than others, but at the end, I don't know that the technology itself is going to be the sole driver. It's going to be an enabler, and everything around it is going to be equally or even more critical.

Thank you very much, Graig. Back to you.

Yeah, I think I'll add this just on AI. Many of us have been following the biopharma industry for a long time, and I've said in various forums that it's not as if AI hasn't been tried in making the drug-discovery process more efficient, making things less expensive, and making everything more productive. I do think we're in a newer age now.

I recall that we've got some publicly traded companies that I don't cover, but I think Recursion and Schrödinger are 2 companies that have been very leveraged to AI. I haven't been following them closely, but if you look at those stock charts, they haven't really been all that great. We're hopeful, and hopefully we'll get some successes, because at the end of the day, we just want newer and hopefully better drugs in the hands of patients and physicians so we can get better health outcomes.

It is a fascinating space to follow. I'm not the smartest one in this space, but I feel like every day that goes by, advances continue to be made, and it's hard to keep up with everything. That being said, let's move on to deals of the week. We have a couple to talk about, and I will start briefly with J&J's new partnership with privately held Sail Biomedicines, which I think I read somewhere is a Flagship Pioneering company.

The deal involves J&J licensing Sail's novel in vivo CAR-T platform, which is designed to generate CAR-T therapies directly within the body. This move is meant to strengthen J&J's presence in immunology and CAR-T. In terms of the deal details, J&J is making total initial payments of $785 million. Interestingly, as part of the deal, J&J can also opt in to acquire Sail at some point for an additional $2.6 billion.

I think the deal is interesting for a couple of reasons. First, it's yet another deal in the white-hot in vivo CAR-T space. Here, I will remind listeners of Eli Lilly's $2.4 billion deal for Orna and its in vivo CAR-T platform for I&I, and then another Lilly deal that it struck for in vivo CAR-T with Kelonia Therapeutics, more for hematology purposes, and that was for $7 billion.

The second reason I think it's an interesting deal is that there could be some potential read-throughs for Legend Biotech. For that, I'm going to pass things along to Yaron, who will comment on Legend. Yaron, if you could follow up that conversation on Legend by commenting on a deal we saw European biotech company argenx do, please go ahead.

Yeah, absolutely. Sail is really a terrific company, as Graig has just mentioned. They're approaching the whole in vivo CAR-T space in a very different way. They essentially have programmable RNA therapeutics using nanoparticles that are chemically encoded, so they can deliver the RNA payload in a very different way. They're moving away from PEG and using stabilizing lipids, so it's not really the standard lipid nanoparticle. It's also not just targeting hepatocytes, which is why they are very different.

It's called eRNA. It's a lot more durable than linear RNA because it's using a circular RNA construct to prevent degradation. The mRNA kind of maxes out within a day, and the cargo is fairly large, so it really has a very broad transduction potential.

For J&J, this is the second deal that they did. Of course, the first deal was to get a broad collaboration and access to in vivo CAR-T capabilities using a lentivirus from Kelonia, which was more targeted for oncology, presumably really for hematology. Of course, BCMA was not included, as J&J has a deal for the number-one-selling cell therapy in the world, Carvykti. It's ex vivo, so they actually make the cells in a factory and give them to the patient. It's not in vivo.

Ying Huang was the CEO of Legend, as we all know and respect. Ying just announced, literally on Monday, that he is going to be stepping down. He accepted a role, presumably as the CEO of a new venture-backed oncology company that I think is going to be fairly active in business development and other activities. It's not something you want to see, your CEO leaving a company.

Legend, of course, has been at a crossroads for probably 3 main reasons. One is Gilead's anito-cel, its version of an anti-BCMA CAR-T, which is expected to get approval in December. Basically, one of the key issues with Carvykti is that it does cause some immune-related disorders, like parkinsonism and Bell's palsy. It can cause colitis and cytokine release syndrome, and that's been the Achilles' heel.

The drug, anito-cel, does not seem to cause the same adverse events. It might actually be a smidgen less potent as well. We're waiting for the final data, but that competitive overhang is pretty big. That's coming in December.

Secondly, they're a little bit at a standstill. They have a relationship with J&J for Carvykti, and it's unclear whether J&J is going to opt in to develop the in vivo CAR-T for myeloma. If they don't do that, neither company can go into myeloma without the other.

Finally, it's a question of how they're going to broadly develop their in vivo platform now that they have some really good lymphoma data. I think there's a lot of hope that J&J will buy Legend. I think we've been saying in our reports that we think that's unlikely. Now they've done 2 deals that essentially give them a broad in vivo platform, so there's even less of a reason to buy their partner.

Secondly, how are they ultimately going to develop the platform? Clearly, there's probably been some strategic misalignment there. It's not ideal. The stock reacted, obviously. In the meantime, Carvykti is continuing to sell really well, but that market is getting very competitive.

Yeah, I think you mentioned the next deal. If you want to also comment on argenx's deal, that would be fantastic.

Yeah, absolutely. argenx bought a company called Forte Biosciences. We have the luck of covering both of them, so it was really fun to see that go to fruition, and it was very efficient to put the models together.

Under the new CEO, Karen Massey, this is the first deal that I believe argenx has ever done in terms of an acquisition. It was $2.2 billion. They are absolutely committed to external innovation in addition to their internal innovation, and we really have to applaud them for being very early and proactive, despite their internal pipeline very much humming and Vyvgart, their main drug, doing absolutely well. They beat again for another quarter. I think it's their 14th or 15th quarter in a row that they've beaten since they launched.

But you can never start too early on bringing in external assets. The key drug is targeting the CD122 receptor, which is where the IL-15 cytokine and IL-2 signal through.

They bind to the receptor, and they've had positive phase 1B data in celiac disease and vitiligo. We're waiting, by the end of this year, to get the confirmatory randomized phase 2B celiac study and the phase 1B data for alopecia areata. We've been fairly bullish about this asset. I think it's looked very good so far.

We are optimistic that the SILC study will be positive as well. This area is getting a little more competitive and a lot of attention. Of course, you have Teva, with Royalty Pharma, developing its IL-15 antibody. They don't bind the receptor; they bind the cytokine in the blood that binds to the receptor.

They've had positive data in vitiligo, and I think we're all now anxiously waiting, in the second half, for their celiac data. After that, I think vitiligo is the lead indication there. Then, of course, there's another company called First Tracks that also has a CD122 antibody, which is going to read out its phase 1A/phase 1B data in celiac disease in the second half.

This is really, we think, the next area of innovation in I&I, with big unmet needs, and it's great to see argenx now jumping in as well.

Really interesting deal for argenx, which has been a remarkable success in biotech in general, but particularly for European biotech. It's nice to see them, with their aspirations, acquiring Forte.

I'm going to quickly touch upon a deal that was previously announced, and then we're going to segue into a broader biotech discussion. I wanted to mention that we got an update on Eli Lilly's recent acquisition of psychedelic player ataiBeckley, which yesterday disclosed, via an SEC filing, some of the play-by-play of how that deal went down.

I always find the play-by-plays fascinating to read. It shows how BD deals get done and the history behind them. In this particular case, it looks like ataiBeckley was approached in December by another pharmaceutical company, which is obviously unnamed.

That was initially for a co-development and co-commercialization deal for ataiBeckley's lead asset, BPL-003, for the treatment of treatment-resistant depression. There was an offer of $125 million upfront for this type of deal. Notably, this approach came 1 month after the company had completed its merger with Beckley Psytech.

Nothing much happened for a couple of quarters. Then Lilly joined the fray, I guess, in early June, with an initial deal. Maybe a couple of weeks later, they ended up sweetening their offer on June 11 to $6.75 upfront.

They tacked on a $1-per-share contingent value right, or CVR, tied to potential FDA approval of a compound called VLS-01 for treatment-resistant depression. VLS-01 is in phase 2 testing. The back-and-forth continued for a few more weeks, but ultimately Eli Lilly moved up on its CVR to $2.50, and that's what got the deal done.

From an initial BD discussion with another suitor, and again, as I mentioned earlier, it seems like Eli Lilly is buying everything. It's very impressive to see what they're doing. I guess it's with a view that perhaps the obesity-related, GLP-1-related, or triple-G-related future revenue streams will be there. Maybe they won't be there forever, but they're certainly being very aggressive with M&A.

Paul, let's get you into the conversation, because I think you had some thoughts that you wanted to offer our audience on this idea of when companies that are smaller but are starting to get bigger should get inquisitive. Then maybe we can segue into a broader M&A discussion. Go ahead, Paul.

No, totally. I want to make this comment, and then I'm actually curious from Yaron what he heard from people on the argenx side. I think argenx is an interesting point to be an inquisitive company. Alnylam is getting to the point now, too, where it's like, are they going to do something?

I hear people talk about this with companies like Insmed at some point—these companies that get into this kind of mini-large-cap range, maybe built on 1 to 2 really big product franchises. Then they almost become a little bit of a victim of their own success, where people start to say, “What's next?”

Some of the cautionary tales around this—one, I think, was Alexion. With Soliris and Ultomiris, they had so much success, but then a competitor to that in early- to mid-stage development emerged. Suddenly, it became this whole existential threat to the terminal value. Where's the pipeline? They kind of played catch-up to backfill the pipeline.

I don't know exactly how this is thought about with argenx, so maybe Yaron can chime in. On Alnylam, Alnylam had this monster TTR launch, and I know we'll probably talk later in this call about their guidance this week that disappointed people. It quickly became a $50 billion or $60 billion company, and then they got a couple of shots on goal in the pipeline, but nothing clear-cut.

It quickly becomes this “What's next?” conversation. We saw Vertex in this limbo for a couple of years until they started to break through with a couple of pipeline assets, and now Vertex is much more comfortable with doing M&A.

I thought it was really cool to see argenx do this deal. When things are going well and you've got a drug franchise like Vyvgart or, you know, like mavacamten, at least before yesterday, where you're beating and things are going well, I think it's easy to be risk-averse and stay focused on what's going great.

The market dynamics, investor perception, and the multiple that people are willing to put on your business can change quickly, often because of factors that are beyond your control. I know there are multiple companies in my coverage—BioMarin is another one—where a lot of investors view it as an undervalued stock, but this whole question of what's next and what's the upside variance in the pipeline continues to loom.

The last thing I'll say is that I've been paying attention to how the acquirers of companies have been trading over the past few months. In general, we're very rarely seeing big down moves, and sometimes, like in the AbbVie-Apogee situation, we're seeing up moves.

Outside of the other factors, that favors more M&A, and that's probably a tailwind for the space, too. Yaron, what did you hear on the argenx piece?

Well, I think this one was a little different for probably a couple of reasons. Number 1, argenx has been very upfront about its desire to start doing deals for innovative I&I assets, so that was expected. Number 2, they actually invested in Forte back in late April or early May. Right. Right.

As part of the recent offering. Exactly. So we sort of knew they were around the hoop, and we knew this data was coming. We knew that Forte had released its vitiligo data, which led the stock to go up a lot, and at that point they also pulled forward their guidance that they were going to have data, quote-unquote, soon—imminently—for celiac disease. Before, it was 2026.

Then, on Thursday, argenx reported and again reiterated its desire to do M&A. Forte stock absolutely ripped on Friday, and of course it got acquired on Monday. It was a little telegraphed, but it was very well received on both sides.

Paul, since you spend a lot of your time on the neuros, any thoughts about what that Lilly deal for atai might mean for M&A in the psychedelic space, or just activity in the psychedelic space?

No. And you should chime in, Graig, especially given your experience doing BD. I cover Compass Pathways, Delix, and GH Research, and obviously pay close attention to all the competing assets.

One of the questions has really been whether we were going to see a traditional pharmaceutical company that might care a little bit more about perception, or might be a little bit more conservative with how it views perception, willing to step in and buy a psychedelics company.

This was a conversation that was actually really relevant with GW Pharma a number of years ago, which was developing CBD for orphan epilepsy. CBD ended up being Schedule 5. There's nothing like stimulants, which are Schedule 2, but I think there was even a Bloomberg article, maybe 10 years ago, about how the buyer pool for GW Pharma might be small. It was eventually bought by Jazz, a specialty pharma company.

I think Lilly is probably the most powerful brand in the pharmaceutical space putting its stamp of approval on DMT, a psychedelic compound that has some tremendous efficacy data but also is pretty out there on the psychedelic experience side.

I think that's really validating for the space. People are always going to wonder, “Why did they pick this one rather than that one?” It's always a hard conversation to have, but I think for the other companies that I cover in this area, it's validating. I also think it's probably going to help to have someone like Eli Lilly building the infrastructure here, right? I think a number of these companies are going to benefit from what J&J did with Spravato.

Do you have any other angles, Graig? In your BD seat—and I think you were at AbbVie and maybe somewhere else—how much did that perception angle come into play in the conversation?

Yeah, I agree 1,000% with everything you just said about the psychedelic space. Given what the current administration is saying and doing about its support for the space, there are a lot of great tailwinds for those companies. And look, just as I'm sure you have as well, I've met with a bunch of private companies that have admittedly said to me, “We're jumping on the bandwagon.”

There's obviously very interesting science and some admittedly great efficacy data that exists for a lot of these products, so I do think it's going to be a very active space. Eli Lilly does validate what's happening, and I think that deal further opens the floodgates for more activity. From a BD perspective, I think there's always an element—it's not 1,000% true, but there is an element of a little FOMO, a little bit of, “Hey, so-and-so is doing that, and we don't want to be left behind, so we better catch up.”

Obviously, every company is different. Not everyone is in the neuro space, and certainly not everyone has a play in psychedelics. There are only a handful of public plays, and you look at some of the valuations—in particular, Delix Therapeutics, which I think is 5 to 6 billion—and they just reported some really great data. Kudos to them, but that would be a pretty hefty M&A price if someone was looking at Delix Therapeutics.

I'm not here to say whether it's worth it or not. I don't cover any of the psychedelic companies. You do see market caps for the other companies you follow, Paul, in terms of Compass and GH, with lower valuations, at least from a public perspective, of 1 to 2 billion. It'll be very interesting to see how this space evolves. Tim, Brian, or Yaron, any thoughts there?

4. Advisory Committees Return

Okay, we're going to move on to regulatory and policy matters, and we've got several things to work through. Brian, I think you had 2 things—if not maybe 3 things—that you wanted to comment on, so I'll turn it over to you.

Oh, yeah. Everyone knows advisory committees are one of my favorite parts of the sector, and they are back in a big way. There were 2 really good advisory committees this week that I think embodied all that I appreciate about this process. We can have different opinions on what constitutes substantial evidence, but biology and medicine are complicated and not always necessarily straightforward. We're almost always presented with imperfect information in clinical trials.

I think the FDA has a really tough job. It gets these imperfect applications and needs to balance the responsibilities it's been tasked with under the Kefauver-Harris Amendments, which amended the Food, Drug, and Cosmetic Act and require drug companies to prove that products are both safe and effective before selling them. But often, the process between the FDA and companies winds up being very opaque. We really only get insight from what the companies tell us throughout the entire process.

One of the things that I love—and that gives us broader public insight—is when the agency gets a particularly complicated application and holds an advisory committee meeting. Again, this embodies scientific discourse and the process of achieving scientific consensus with imperfect data in a really transparent fashion. One of my biggest beefs with Marty Makary and Vinay Prasad, when they were running the FDA over the last year and a half before their departures, was the decision to stop doing these and really just internalize the process.

There were a number of applications that were rejected or simply told not to file, and companies made pleas to the public that the FDA just wasn't listening. We really didn't have great insight into what was going on behind the scenes. So this week, we wound up with advisory committees for 2 pretty controversial applications: Capricor's deramiocel for DMD and Replimune's RP1 for melanoma.

In classic Wall Street fashion, critical briefing documents were publicly disseminated a couple of days before the advisory committees, and the respective stocks got hit pretty hard as the agency criticized the data. There was, in a way, a best-of collection of all the different statistical complaints the FDA could have, along with nuances around changing data or how to analyze specific pathology. In Capricor's case, there was a heavy argument around statistics and how protocol changes can lead to biased results—a critique that really resonates with me.

If you look at my Twitter profile, I have the multiplicity calculation for type I error in my headline, so it's one of my big pet peeves to begin with. In Replimune's case, the discussion was more about how to measure intratumoral injection activity versus the way we use RECIST for more of a systemic therapy. I think the FDA had a really good case for why it had previously rejected both of these programs and why the applications don't meet the statutory threshold of substantial evidence of effectiveness.

But this was also balanced by a decent presentation by both companies. Arguably, Replimune's was a little more resounding. There was also an open public-hearing portion, which generally does sway in favor of approvals. In both cases, there was a really robust and well-thought-out discussion among the panelists, who included statisticians and specialists in the respective fields.

In Capricor's case, the panel voted 9–3 against, and in Replimune's case, it was basically the reverse, with a 10–3 vote in favor. The FDA doesn't always go with advisory committee votes—they're nonbinding—but it very often does, and there's usually a big blowback to the agency when it goes the other way.

There are a lot of nuances to the commentary, and it was clear in both cases that committee members really couldn't make a very confident decision about what the benefit of either of these drugs is, if there is a benefit. As always, I think it comes down to the subjectivity of substantial evidence and what is clinically meaningful, or, in the case of accelerated approval, what is reasonably likely to predict clinical benefit.

But I love that we're seeing this occur again. We get a lot of transparency, and I think deep-diving on these things is really educational about all the considerations one has to think about when running clinical trials and then trying to reach a conclusion from clinical data that is imperfect.

Maybe just to put a final point on how this impacts the sector: I think the FDA, for the vast majority of drugs, is pretty straightforward—not to diminish orphan drugs—but we often wind up with these highly debatable results simply because it's hard to enroll very large, very clear studies. These on-the-bubble applications are a very small part of the sector.

Even though some of us view them as the most interesting part of the sector, I don't think the FDA being more or less conservative in these situations is as impactful as, say, drug-pricing reform or interest rates. For those who thought the departure of Marty and Vinay was a signal that the FDA was just giving everyone the go-ahead, I think it was pretty clear from these panels that that's not the case.

These may be more one-off examples, and we'll have to see as more of these applications go forward and more advisory committees happen. But the FDA was not pulling punches at either of these advisory committees, and I'd love to hear if anyone else listened to them.

I love it. Brian, that was a classic FDA rant. I thought that was really great. I cover uniQure, which is completely unrelated to either of these, but the stock trades around on just the FDA-vibes thermometer, right? It was down on the Capricor documents and then up last night after Replimune.

That just tells you that investors are still, in these kinds of contexts where there's an element of subjectivity or flexibility, really taking the temperature of where the FDA is at. It's a touch-and-go, day-by-day thing.

I love the fact that AdComs are back. My sell-side colleagues and I have been in the space for quite some time, and there were times when I'm sure some of us, if not all of us, attended an AdCom in person down in Bethesda, trying to get some sense of the body language or even trying to get an inside read. They're always really fascinating.

With that said, there were other big pieces of news, I think, from a regulatory and/or policy perspective. Brian, I think you want to talk about Dyne and the progress it's making.

Yes. Less on the regulatory front, but Dyne announced this week that they received clearance from the U.S. FDA for its IND application for a Phase 1 study of its drug in FSHD, or facioscapulohumeral muscular dystrophy. This is something that has been a little long in the tooth for Dyne. I think we've been waiting for this for a while, but as I said last week, it's a company that's really starting to move along in a more efficient manner.

It's interesting because, as we all know, Avidity got acquired by Novartis last year, and a big part of Novartis's thesis, at least in their slides, was around FSHD. They made a big deal around FSHD, and obviously Avidity and Novartis are ahead in FSHD. Dyne and Avidity have been paralleling each other. They've had very similar platforms in terms of muscle delivery. I thought this was a nice positive for Dyne, and I'm glad to see another program moving into the clinic for FSHD.

And then, Tim, some of us probably saw the headlines, if not were very curious to see, about the Senate hearings and Anthony Fauci being put on the stand, so to speak, in the public eye. Any comments you want to make on that?

Yeah. Tony Fauci is in his 80s. He got a subpoena and had to appear before the Senate Homeland Security and Governmental Affairs Committee in a hearing titled “Testimony of Anthony Fauci.” The committee's chairman, Rand Paul, who's a hardcore libertarian, has accused him of misleading Congress about whether NIH-funded research in Wuhan contributed to the pandemic. It's sort of crazy. Fauci has denied this.

Fauci got up there and had an opening statement in which he invoked the Fifth Amendment, and he ended up invoking his Fifth Amendment rights more than 100 times over roughly 3 hours. To make this even more interesting, kind of like talking about AdComs, Senator Paul released more than 1,000 pages of Fauci's personal diary from 2019 to 2022. There was no evidence about COVID's origin in those diaries, but I guess it was just an attempt to embarrass the man.

This was a game of tactics, I suppose, with right-wing libertarian types essentially trying to make Fauci look bad and make it look like there was some type of conspiracy behind the COVID situation. The Republicans accused Fauci's silence of being his confession. Senator Josh Hawley said no honest person would plead the Fifth. Senator Tommy Tuberville accused him of having something to do with killing 9 million people. Representative Anna Paulina Luna called him “Dr. Mengele Fauci.”

It was a very politicized event. Democrats wanted nothing to do with it and said the hearing was actually doing damage. Senator Blumenthal likened it to a McCarthy-type hearing. Think of it what you will, but I would say the only choice Senator Paul has is to have a vote in the Senate to hold Fauci in contempt. That's not likely to take place, only because there aren't enough votes for it to go through.

I personally thought the most interesting thing about this entire theatrical event was President Trump. He said nothing. He did not participate when he was asked about it by the media. He just said, “I inherited Fauci,” and said he wasn't a big factor for him. I think, in a funny way, this is a bit of a tempest in a teapot, and Senator Paul is trying to appeal to his base, which is libertarian. They're trying to create an issue. That's my own opinion. Others might feel differently. I'd be very curious to hear what others think.

I think this is very unfortunate. Political grandstanding is not something that should be ascribed to someone who's been such a public servant. There are obviously two sides to what's going on, but sadly, this has always been a very political topic.

I personally just feel awful for the man, given how much he's contributed, I should say, to medicine in general and to public health, and for him to be caught in the crosswinds. There's obviously a political consideration here. I guess I just don't see the real point to this. I'm mostly saddened for him.

It's sad that it's actually going to cause a lot of distrust in our public officials on the health side, on top of all the distrust that's already going on. I know we recently talked about the allowance to compound peptides. It's almost like healthcare is becoming a little bit of a self-choice, in a way, with what patients are going to take, regardless of what the FDA's position is. There's less and less public trust in the agencies at the same time, so it's a bit of a double-edged sword.

5. Alnylam Faces New Pressure

Well said, Yaron. We've got some company news in the time that we have left. Paul, I know we highlighted Alnylam earlier in the show. Do you want to comment on what we saw out of Alnylam this week?

Yeah, sure. I can be brief because I know we have a few other things. Essentially, Alnylam surprised the Street this week when they lowered their guidance on the second-quarter call, just after issuing it at J.P. Morgan. This is for their TTR product, Amvuttra, which had this monster launch last year, but since then, this is the second time they've missed consensus in 3 quarters.

The stock really got hit. I think embedded in that 30% down move is a meaningful amount of fundamental frustration and a meaningful amount of emotional frustration, kind of like, “Ugh, how do I even think about the new guide, and is there risk to that?” Around all this consternation is probably the fact that even in their new guide, the second half of 2026 over the second half of 2025 is still growing at over 50%.

The other wrinkle here, too—and I think Yaron at least covers Ionis—is that the Ionis TTR outcome study for their silencer failed, seemingly because of a lack of benefit on top of tafamidis. Alnylam's next-generation silencer, which would essentially increase the profitability of their TTR franchise by almost double by eliminating the royalties, is in an outcome study that's almost functionally being run as a de facto combination study.

I think part of this sell-off, too, is waiting for ESC to see the full Ionis data. What is Alnylam going to do with its outcomes trial? It goes back to some of the other discussion we had on argenx, where I want to say Alnylam doesn't have a pipeline. They do have a pipeline. They have a couple of intriguing shots on goal, but they don't have anything else derisked, right?

With the Alnylam platform and how productive it was for a long time, I think a lot of investors thought there would be more meaningful programs in late-stage development at this point. I think those are the kinds of pushes and pulls people are grappling with.

Did you want to comment at all, given the Ionis situation?

Yeah, I can be brief. I guess what I can really contribute is what to expect at ESC. What we know is that there was no benefit to the combination versus monotherapy. We know that in the patients who got Wainua monotherapy versus placebo, the hazard ratio was 0.71. So that's a lot more apples-to-apples with the Amvuttra HELIOS-B data.

Ionis believes that the totality of the data at ESC, including an independently conducted meta-analysis, will show that Amvuttra is very, very similar to—slash, identical to—Wainua. They believe that, ultimately, the stabilizers did better than they did historically. It's possibly because of the contribution and the number of patients who were NYHA Class I. Both stabilizers and silencers do extremely well because you're moving really early.

The big question is, how did the stabilizer do against the silencer? They don't have that data in-house yet. They will apparently have it for ESC, but their belief is that, ultimately, the silencer and the stabilizer did equally well.

Hey, can I chime in on this?

Yeah, go for it.

I think this stabilizer-silencer comparison is the dumbest thing ever. I'm not saying that Ionis is dumb. Ionis is brilliant. They're great drug developers. But just from a context perspective, the patients who've been on the stabilizer have been on the stabilizer way longer—anywhere from 6 months to years, right? So it's like a delayed-start analysis.

I don't see why I hear a lot of people comparing the data for this. Again, I don't mean this at all as a shot against Ionis. Those guys are so smart, and they're legends in drug development. I don't see why people are playing this analysis up.

I think the issue for Alnylam is that Alnylam has a hypothesis as to why its drug is different. I don't see how ESC is really going to help; at best, it's going to be hypothesis-generating, in my opinion. So I still think, at the end of the day, they're going to have to do something with their study to rescue people's confidence.

But these comparisons across arms and different trials, when the duration of treatment is different, the timing of treatment initiation is different, and the demographics are different—I don't know. That almost feels like it's set up—I don't know. I don't get it. Do you disagree?

I do. So let me tell you: the Ionis train in TTR has absolutely left the station and is no longer relevant to the story at all. So this is really being played because of the other companies, right? Obviously, Alnylam and BridgeBio. Ionis, at this point, honestly, is an innocent bystander that has to present this data. I agree with you—from an Alnylam perspective, it's irrelevant.

It looks like the 2 drugs are identical, which then begs the question: Who do you start with? Do you start with a cheaper oral, or do you go with an expensive injectable? I think that's probably the issue here for them: Most people believe they'll start with a cheaper oral. Why not?

Yeah. No, I think that's right. Alnylam talked about how tons of these TTR prescribers haven't written their drug yet. I think the one thing—and we're still defending Alnylam; the stock is down so much—but just outside of the stock context, I think the one thing that we got wrong here, and that I do think is an interesting nuance that can happen when you do diligence on the Wall Street side, is this: I felt like if you talk to a handful of KOLs, more of them believed that the silencer mechanism was more effective even after we got the HELIOS-B data. They didn't 100% prove that, but I always now kind of wonder: Was that really an extrapolatable sample?

And to your point, you've got this community physician who runs a busy practice. They might not be mega, mega in the weeds on the data, and if it's close enough, they might do what's easiest, right? I think that's kind of what we've seen play out.

Well, plus, there's one more learning for me. Sadly, my team and I have been joking internally that we've done a better job dodging the bullets that we were positive on. We were working on a big piece, we never got it out, and it blew up. You want to be lucky all the time as opposed to being smart. It's always a much better business plan.

Where I'm going with this is, we did not get the Ionis side right. But if you actually look—and the learning for me is this—when you looked at the original HELIOS-B data, it did show you that combo is not better than mono. It was underpowered, and I think there was always a supposition that because it was underpowered and it was small, it was not statistically relevant, and it was actually clinically incorrect. The early data showed you that there was no benefit, and that then worked out in the bigger sample too.

Yeah, it's interesting. They have this huge reduction in mortality. Some of the other functional secondary endpoints, like KCCQ and 6-minute walk, are less convincing. I would imagine there probably is some benefit if it's studied in the right context, or the right population, at the right severity.

But again, from the Alnylam angle, I think ESC is, at best, still going to be up to interpretation for them. The question is just how quickly they move and how many patients they've already enrolled in their outcomes trial. We don't know the answer to that.

6. Novo Data Rattles Biotech Stocks

Thanks, guys. I'm going to try to squeeze in some data from today, which was Novo Nordisk, whose shares are down almost 10%—and that's not a small amount of money—on a negative readout from a phase 3 study called the ZEUS study for its anti-IL-6 ligand antibody. Basically, that antibody is for cardiovascular disease; it missed the primary endpoint on a MACE outcome. But there are, interestingly, some very negative read-throughs for a host of companies that are developing this novel class of agents called NLRP3 inhibitors. We've got several public companies that are down significantly on negative read-throughs on what that data means for the space.

We've got a company called Monte Rosa Therapeutics that's down 61% on a read-through from the Novo data from today. BioAge is down 31% intraday, and Neumora Therapeutics is down 9% intraday. I think the thought here is that people are trying to get a look at whether lowering this cardiovascular biomarker, hs-CRP, and meaningfully impacting it could lead to a change, or an improvement, in cardiovascular outcomes. The Novo data showed that, at least using their anti-IL-6 ligand antibody, that is not indeed the case.

I do think it's interesting. I don't follow Monte Rosa or BioAge, but on the Neumora side, which I do cover, they've got an oral NLRP3 inhibitor, which just had an update earlier this week. There had been a scare, or a concern, that perhaps there were some adverse events. The company ran a separate, new 13-week rat tox study, and there were no adverse events, so they're going to move forward with their program.

That program differentiates itself from perhaps the Monte Rosa and BioAge programs in that it is highly brain-penetrant. They are not going after cardiovascular outcomes in terms of an indication, but they are going after obesity. We'll probably get some data early next year. That being said, it's interesting in terms of what's happening in the NLRP3 space.

We might have a minute, Paul, if you want to touch upon some CNS news.

Oh, sorry. I was on mute. Yeah, really quickly: This MapLight data came out in schizophrenia for their M1/M4 drug. It did not show the same efficacy as Cobenfy. It did not show statistically significant efficacy for a QD formulation, which I think was a hope for differentiation. Tolerability was a little bit better; retention was a little bit better, but the stock sold off really significantly. It has bounced back some.

I think it raises an interesting conversation just in CNS in general and, outside of just the whole stock-expectations game, how important effect size is and what drives commercial success. I would argue effect size is not the best correlate of commercial success in almost any neuroscience category. Outside of Ocrevus and MS, look at psych, look at epilepsy. Honestly, look at MS even before Ocrevus launched. It really wasn't an efficacy-driven market.

But for MapLight, it's tough when you don't meet expectations. I think the next question going forward for them as they move forward in phase 3 is: How does the Alzheimer's psychosis data look for Cobenfy and for MapLight? I think in ADP there's much greater room for MapLight to differentiate, given the dosing dynamic with Cobenfy.

I think there's reason to be optimistic, or at least cautiously optimistic, that muscarinics may work in ADP. I think a lot of antipsychotics probably do work, right? But they're limited in their utility because of the black-box warning for increased mortality. These studies are not without risk, right? So we'll have to see, and we'll get that data from Cobenfy. I think Bristol pushed it to next year, and MapLight's next year as well.

I'll just briefly mention that Neumora Therapeutics, which I mentioned earlier, does have its own muscarinic franchise. It's M4-PAM-based, and we are going to get updates later this year.