第193期｜2026年8月14日

Tess, we often like to start with a pulse on the markets. Would you like to share how you're thinking about the public markets as we sit here today?

Public markets have been really positive. The XBI has been performing really well. I think what's important, though, is that we are seeing strong performance, but we are also seeing selective performance, right? It's not that everything is going up, right?

IPOs are performing well, but the companies that are going public are also really strong companies with really strong data. Companies that have negative updates, which we'll talk about a couple of those—

Yeah.

Those stocks are going down pretty dramatically. The market is strong, but it is also discerning, which is important. So I think healthy—

Yeah.

—but discerning is a really good way to describe this market. Yeah.

Well, I look at it when—

Yeah.

When the markets are on fire, everybody can look good as a biotech investor, but it's the specialty investors, right, like RA Capital, Perceptive, and others. This is where I think specialty investors thrive: that discernment and understanding of where value goes and when the markets are behaving, whether it's on the upside or the downside. I think that favors the longstanding, decades-long investors who've been doing this for a long time. I think that's a good thing for our industry.

Yep. Absolutely. I think we're seeing, on a general level, rational responses to data. That's really important.

You've talked a little bit about what we've noticed this past year: the bifurcation of tech and biotech. We've seen Anthropic going out in an IPO worth trillions, or over trillions, SpaceX, et cetera. These tech investors are very different from the generalist investors that invest in tech. We've seen this separation, and I know you had some thoughts on that. I would love to hear your perspective.

Yeah, absolutely. There was a great article this week from The Wall Street Journal that I loved called “Healthcare Investing Is Now an AI Short in Disguise.” It was about how healthcare companies are really trading opposite to tech.

For the past year, year and a half, there's been this question about the flow of funds: “Oh my gosh, all the money is going into AI. Where is everyone getting their money from? Are they getting money out of Lilly? Are they getting money out of other healthcare companies to invest in AI?”

The Wall Street Journal article was taking a bit of a different view on that. When we look at some of the AI-related sectors that have done super well, it's a lot of the picks-and-shovels companies that are going into AI infrastructure, like chip companies and others, and those are really cyclical. Healthcare is not cyclical.

They were pointing to this idea that healthcare stocks are actually doing a bit better when AI is doing poorly. Are people looking for something of a hedge on their AI exposure? I thought that was really interesting.

Yeah.

We still don't know exactly how much money AI firms are going to make or what that revenue curve is going to look like. People are going to need medicines, right? It was a good reminder with a nice, punchy title.

Yeah. Who knew we'd consider a safer, more predictable type of investment strategy? Twenty-five years ago, we saw the dot-com bubble combine with the genomics bubble, but I think this is a very different, mature market for IPOs today.

I think there are some good distinctions to draw when we would be lumped into tech: We can't predict it. I think frontier tech has a lot of uncertainty. That's an interesting one to watch, to see if we end up converging at any point with tech in terms of how we trade as a sector.

Yeah.

Um—

Yeah, I think it's also interesting because, just going back a while—and this is obviously after the tech bubble and everything, the dot-com bubble—you did see more consistent multiples and forward growth rates. Now those forward growth rates have obviously just diverged significantly. I guess healthcare looks cheap on a relative basis.

Yep. So before I talk about the private markets, Paul, Graig, do you guys have anything to add to the public market sentiment?

I agree that sentiment continues to be pretty good. The fundraising environment looks pretty good, but unlike past periods like this, I still think most investors—and myself—don't feel like things are super overheated.

As Tess said, there's variance in this market that's going in both directions. Despite this being a good year for biotech sentiment and vibes, it hasn't been a great year for everybody. Depending on your investment strategy, and depending on whether you owned some of the companies that were taken out this year, there were some really big takeouts for companies that didn't have an imminent catalyst. Not everyone was there.

Maybe it goes back to what you were saying, Chris: This is a market that feels healthy, but it's also an inefficient stock picker's market, with an IPO window that's open. It feels like a bunch of these factors are just—

Usually, all these factors aren't in play at the same time. When we've got an open IPO window and a big fundraising window, everyone is usually just making a ton of money. I don't feel like that's the case.

Graig, anything to add?

Yeah. Generally, I agree with what Tess and Paul had to say. The XBI is still outperforming the broader market year to date. Biotech has been the darling within healthcare, so I think fundamentals are still really good.

But biotech is always a nervous market. There's always skittishness, especially around individual names. You still see disappointing data readouts, and I think we're going to talk about 2 very high-profile ones not too far away.

As Paul said, it's still very much a stock picker's market. I know I've been asked this on prior Biotech Hangouts—whether the generalist investor is back in yet—and I don't really know that the generalist investor is fully back in.

I think they're seeing that IPO performances year to date have been pretty solid, as Tess mentioned. We've had 19 issues on Nasdaq this year so far, which is a really healthy number. Again, I'm very positive about what we're seeing in the space, but at the same time, any day is a different day, and our stocks are very volatile.

Well, some are predicting that as tech gets overheated and frothy—or as it's perceived that way—they might, as Tess was describing, look to biotech as a safer shelter. We'll have to see, but I agree it hasn't begun in earnest, and I think that's something to watch. I just wanted to highlight 2 other trends.

Maybe just one—

Yeah, please.

Maybe just one other point. It would be interesting—Paul or Graig, you may have more insights into this—but as you're talking about fund performance, Paul, I think short exposure has also played a significant role in that. I think some of the neutral strategies have been harder to manage this year than maybe in the past.

Yeah. The subtext of what I was saying is I don't have the exact numbers, but my perception was that Crinetics, Apogee, and some of these companies were pretty heavily shorted stocks, not necessarily because they were seen as bad companies or anything like that, but they were kind of seen as companies where the clinical pieces of the story were already de-risked. There wasn't a major binary event coming up. What people listening to this call have to understand is that there's a whole bunch of biotech funds out there that have some mandate on the percent short they have to be, some of which have to be completely market neutral. The reality is those funds often look for certain companies that lack catalysts but are liquid stocks to be short to fund their longs. That type of model, I think, has been more challenging this year. The long-only model probably hasn't been as challenging, and then, sort of in between, it depends on whether you've been in the right places with the right events or the right takeouts.

Great comments. On the venture side, we often track and lag the public markets, and overall, I think it’s been a safe place for venture investing. This week, we’ve seen a range of venture investments. I’ll just name a few without going into the details, but we’ve seen 3 deals announced this week.

We had Boulevard Bio, which was a spinout of a Deerfield company—a company creation with a good amount of capital behind it. We’ve also seen Epic Bio, which was a $90 million Series C going after FSHD. It’s been a challenging clinical indication, with an epigenetic target silencing DUX4.

There was a Series B to support a Phase 3 pivotal study for an allosteric inhibitor of AKT1/2 being developed for the rare disease HHT. Again, venture investments are thriving. We’re seeing a wide range of deals, but there’s still a lot of opportunity in later-stage, clinical-stage companies, and we haven’t seen the real big tick-up in seed and Series A.

Aside from specific company creations like Boulevard, I think in Q2 we saw the numbers go down in terms of the number of seed and Series A rounds. I’m looking to the next year to see that start to pick up, with a little more risk tolerance in the venture community.

The other piece that was alluded to is that the PIPE markets and reverse-merger candidates are also buttressing the health of the market, in my opinion. Almost every time there’s a failure of a largely single-product, binary biotech, there’s a frenzy of, “Okay, are they going to be the next reverse-merger candidate?” “Let’s call the banks. Let’s figure out if this can be a pathway to go public.”

I think this is partly because there are a lot of public funds. Many of them might have some PTSD from all the private crossover rounds they were sitting on when the market turned against them, and actually prefer either a direct IPO or a PIPE reverse merger that will fast-track the public trading, as opposed to the traditional crossover mezzanine round, which is still happening.

I just wanted to highlight that dynamic, which I think is healthy. Even when there are failures, those failures could end up working well for those companies, with the companies ending up in a reverse merger. Two of those companies were announced Monday of this week. Tess, you want to cover Tenax, and then I’ll have Paul cover Sionna.

Yeah, absolutely. Tenax was developing a drug for HFpEF, which is a notoriously challenging indication but also has enormous unmet need. It was a highly anticipated readout. The company reported earlier this week that it did not meet the primary endpoint of the 6-minute walk versus placebo. They didn’t meet the secondary endpoint, KCCQ, which is really measuring symptoms. They did see a reduction in NT-proBNP.

What was interesting here was that there was some treatment effect by disease severity, where it seemed like, in healthier patients, there was a question around whether this actually became harmful, based on the decline in 6-minute walk that they observed throughout the trial. I think there are a lot of open questions, but it was a clear miss on the primary and secondary endpoints, and maybe some questions about the observations on NT-proBNP. They pointed to NT-proBNP as a mechanistic rationale to believe this was having the right mechanistic impact, and there’s a question of how that would translate.

Tess, do you think there’s a path forward for this given that context?

I think it’s an open question, but it’s tough. What does that suggest? Does it have to be a much longer trial? Does it have to be a different patient population? Does it have to be a much larger trial to see the effect? It certainly doesn’t seem like a straightforward path forward.

I would expect that they’re really getting into the data and trying to think about whether there’s a path forward and what they could do next. They’re going to meet with the FDA, right? They said they’re going to look at a Type C meeting. They’ll meet with the EMA to see what they can do to enrich the patient population.

Maybe they focus on this more severe patient population where there was a benefit in the 6-minute walk. But I think you’d want to understand mechanistically whether that makes sense and really have confidence that this would work in a larger trial. I think that’s really going to depend on some of those additional analyses. I’m very curious about your thoughts.

No, I mean, I’m not as close to it. I just know this one’s super controversial. It’s always tricky when you don’t meet expectations. Can you pivot and still keep the show going with the program? Thank you. That’s super interesting.

Paul, you want to cover Sionna?

Yeah. This one was such a bummer for a few reasons. One, from a cystic fibrosis disease perspective, even though Vertex has made crazy strides in making this a livable disease, it’s still a bummer that, at least for now, there seemingly isn’t going to be another option with a new mechanism.

Two, the Sionna team is an awesome team of good people who I think really did their best to try to make this work and also be transparent. Third, I really thought this was going to work. This industry always really humbles you.

Basically, Sionna was developing a novel mechanism to try to stabilize the NBD1 domain of the CFTR protein. The CFTR gene is mutated in cystic fibrosis, and patients don’t make enough functional protein. Vertex, for 90% of patients who have at least one F508del mutation, has made this a very livable disease, but not everybody responds to the same magnitude. There are some patients who have side-effect issues.

Sionna was trying to come into the game to offer a novel option. The study they were running was very clever. Because it’s hard to enroll a placebo-controlled trial in this disease, and because you have to think about the right patient to select and the right duration, they had this clever idea of adding one of their NBD1 correctors on top of Trikafta in patients who inadequately responded to Trikafta and looking at sweat chloride reduction as a pharmacodynamic biomarker.

Sweat chloride reduction has historically been predictive for the Vertex drugs and for this disease. It’s used as a diagnostic, right? It’s used in newborn screening, so it’s a pretty uncontroversial biomarker. They had guided to at least a 10-millimole change.

This is our work, not Sionna’s, but we had tried to recreate what their PK/PD modeling could look like ahead of that, right? We tried to figure out why they guided to 10.

I think the answer was that the confidence interval suggested that 10 could potentially be conservative, depending, again, on the study population and things like that. So they didn’t meet that bar, and they didn’t come close. They saw only a 1-millimole reduction, far from statistically significant. The stock was down 90%.

The investor expectations were pretty high. I think people were even debating whether 10 would have been enough to move the stock, given how much higher expectations had been. The question, kind of like Tess was just talking about, is: Is there a path forward?

They think there could have been a potential drug-drug interaction with Trikafta. If patients were getting the Sionna drug and then their Trikafta exposures were going down, that could easily erase a pharmacodynamic effect. But it’s unclear whether they’re going to be able to look at this data set, which is only 14 patients, and find an unequivocal explanation.

The other nuance is that the endgame of this company was really never to develop a combo drug on top of Trikafta. The endgame was to develop their own combination therapy, but use this Trikafta data to better understand and calibrate their PK/PD modeling. That all stems back from the human bronchial epithelial cell assay—the CF HBE assay—that Vertex had used for years and that Sionna thought it had kind of cracked, in terms of how Vertex does it from a predictiveness perspective.

I don’t know if we’ll ever really know 100% whether it was the assay or something else, but that ultimately did not translate. It’s a tough situation for a really smart and good group of people. I think they’re going to try to come back at some point in the not-too-distant future with a better explanation of what happened here and maybe, or maybe not, a plan to run another study.

They have this other NBD1 corrector. They have these other molecules they could combine it with. But, yeah, total bummer. And for this one, this company as a stock was somewhat controversial, first because it’s biotech, and second because I think there’s a debate on the Street: “Hey, Vertex has set such a high bar, right? How much more do we really need?”

But the perception was that this study was pretty likely to work, and so it was a big, unfortunate surprise on Monday—

Yep.

This week.

Yep. All right. Well, let’s move on. There was a deal this week, and again, what I’ve been encouraged by in the marketplace is these bolt-on acquisitions and, I’d call it, $500 million to $3 billion acquisitions. Then you’ve got the kind of bigger acquisitions, from $5 billion to $15 billion. But we had one this week. Graig, do you want to start, and maybe Paul can comment on the acquisition by Jazz?

Yeah, thanks so much. Jazz Pharmaceuticals is an interesting company in that it’s diversified, focused on both neuro and oncology now, but they beefed up their epilepsy franchise efforts by buying a company called Actio Biosciences. It’s a deal totaling about $1.3 billion: $820 million upfront, with an additional $500 million in regulatory- and commercial-related milestones.

I like this deal for Jazz, which I don’t cover. I used to cover it in the past, but I don’t cover it now. They’re really beefing up their epilepsy franchise efforts. If you remember, they got big into this space by buying GW Pharma. That was, I think, back in 2021. That might have been a $7 billion deal for their drug Epidiolex, which was a very controversial drug at the time.

That being said, I think Epidiolex is over $1 billion in annual sales, so it’s an incredibly successful drug for Jazz. They’ve done some other deals in the epilepsy space that have given them a whole pipeline of epilepsy-type drugs. I think a lot of companies are now focused on rare epilepsies, and obviously you can get better pricing. As Chris mentioned, you like seeing the big deals that garner a $5-billion-plus price tag, but you also like seeing these smaller deals. Not that $1.3 billion is necessarily a small deal, but I thought it was a very interesting deal for Jazz. It really helps them with these rare-epilepsy efforts. Paul, did you want to add some more comments?

Yeah, sure. I’ll try, man. I had met with Actio a number of times, and I thought what they were doing was super cool. They also have a SHANK3 program as well.

I wanted to add a positive side and, I guess, maybe a question about this space. On the positive side, it’s really cool to see this rise in targeted therapies in epilepsy. I think the concept of targeted, genetically oriented therapy in neuroscience is theoretically of very high interest. But when you think about neuropsych or Alzheimer’s, talk about something that’s super hard to execute in practice.

With epilepsy, the biology can potentially be a little bit simpler. Some of these targeted therapies, like Stoke or things like that, are showing pretty great data. There’s another private company, too, that I’m drawing a blank on, that has one that works for the NMDA pathway.

I do think, though, that the challenging thing as an analyst with some of these companies has really been being able to garner conviction on how prevalent some of these indications are. I remember with GW, there were a lot of questions about how prevalent Dravet actually is. From covering GW, my perception is that Epidiolex is probably less than a $100 million product in Dravet. It’s really everywhere else that the drug is used; a lot of it is used more broadly in refractory epilepsy.

And so, for Actio with the KCNT1 program, it’s a super interesting concept. But that is the question, right? There’s usually not a lot of good literature in these areas. I love the therapeutic thesis, but the market thesis is often a little bit trickier to diligence.

Yeah. I’ll just highlight something that wasn’t on our list. Because Ovid had to announce it, there was a newly formed company backed by Perceptive Advisors to develop soticlestat, the Ovid drug, so they gave new life to that.

The other thing we see as a common trend is raising financings off positive data. Graig, there were a couple this week involving large financings on the back of phase 2 data.

Yeah, I think there were a number of financings. I’m just going to talk about 2 smaller ones. I think they’re in spaces that probably don’t get as much attention as they probably should.

The first I want to talk about is a Canadian company, but it’s listed on the Nasdaq. It’s called AbCellera. Much to my surprise, it’s a $3.5 billion market-cap company. They announced positive phase 2 data for menopausal symptoms, or what’s known as vasomotor symptoms. They were able to announce a $175 million follow-on offering, which ultimately was upsized to $200 million.

Again, you don’t see a lot of biotechs playing in the women’s-health space. I think the last drug that was approved is called Veozah. We hadn’t really seen innovation on that side, and I’ve looked at this space in the 2000s when I was covering large-cap pharma. There were a lot of antidepressants being used. It’s great to see a biotech leading the way, hopefully getting another therapy on the market.

The other deal that I wanted to quickly mention was a company called Silence Therapeutics, which is focused on siRNA. They announced positive phase 2 data in a condition called polycythemia vera, or PV. There aren’t too many drugs approved here, I think. I don’t know this space particularly well, but I think there are only 2 approved drugs.

There is a drug being developed by Takeda in collaboration with Protagonist that I think has a 3Q PDUFA. Takeda’s a bit—I don’t want to say cagey—about exact PDUFA dates, but I think the guidance is a 3Q PDUFA. That should hopefully be a newer entrant for this polycythemia vera market.

The data from Silence seemed, at least on the face of it, pretty competitive, at least with the Takeda data. They announced that they wanted to raise $150 million and then were able to upsize that to $175 million. I thought that was just another good, positive sign for the health of the biotech sector.

Absolutely. Tess, Revolution Medicines has been one of the big stories of the year. They announced the deal. Do you want to talk about that?

Yes. We’ve talked a lot about drugs from China coming into the U.S., and this was a great example of a drug developed by an American company, Revolution Medicines, establishing a collaboration with Zai Lab to bring their medicines to the China market.

So, that was, I think, pretty interesting. What was quite interesting is that it wasn't just a deal about Boehringer Ingelheim being able to commercialize and develop. It was a mix of daraxonrasib; there was zoldonrasib, elironrasib, as well as the G12V that they're developing, so a pretty broad portfolio.

What's interesting is that, in addition to the commercialization and development in Asia, they also established a clinical collaboration. The clinical collaboration includes Boehringer Ingelheim's PRMT5, as well as an EGFR/MET trispecific that Boehringer Ingelheim has. So that's pretty interesting.

I think we're just seeing with Revolution Medicines a really smart strategy of trying to create a lot of really differentiated combinations with their portfolio, and this is another great example of that, combined with market access to certain markets in Asia. I didn't see any economics announced with this, so that made me wonder: presumably, Boehringer Ingelheim had to pay something for getting access to these medicines. Maybe that's offset through the clinical development collaboration. Maybe we'll find out some more details later.

Yeah, Tess, I'm just curious. When you have the value that RevMed has created, and the stock currency and the cash, oftentimes you expect companies just to be able to go alone and build out those operations. Do you think this was just a choice that it was going to be easier to partner on this than trying to build out that territory ourselves?

Yeah. I think China commercialization is really hard, right? Really hard. You need a lot of people. Doing something that's focused there just to get that regional access definitely makes sense. It's a very different market dynamic, both in terms of reimbursement and how you get the right price on NRDL in order to get the right access. You typically need a pretty large field force as well.

So I think it's an area where, yeah, could RevMed raise money to do that? No problem. Absolutely, right? Could they hire really smart people to do it? Also, no problem, right? But do they necessarily want to be focusing management time and attention there? Maybe not.

That's obviously me hypothesizing. I haven't talked with them about it, but I do think it's a rational approach. And then it also makes me wonder: maybe Boehringer Ingelheim's PRMT5 is awesome, right? They really want to work with that, and they're like, "Oh, okay, cool. Maybe you can have these China rights so we can access your drug." So again, these are me speculating. Not going to say—

Good trade-off, though.

Yeah, exactly.

Yeah.

Exactly. But it's really interesting that those 2 things came together, and it wasn't like there were separate economics announced for each of them or something like that. So it does make me wonder which one of those came first: the PRMT5 or the China commercialization?

Yep.

Yep.

Well, we talked about some negative data readouts, but we've got some positive data readouts that we had this week. Paul, you want to start with MindMed first?

Yeah, sure. Thanks. So MindMed is a psychedelics company developing its proprietary formulation of LSD for depression and anxiety. They announced positive Phase 3 data from their GAD study, their generalized anxiety disorder study, that succeeded with a very large effect size.

I think there are just a couple of quick things that were notable about this study versus all the supportive data we've seen for this company and also just across the psychedelic space. The first one that continues to amaze me—and I wish we even had a better idea beyond the high-level explanation of what's happening biologically here—is that MindMed ran a study for 12 weeks that was placebo-controlled, and at 12 weeks, dosing is on Day 1, the effect size is still really big, right? Which is just unbelievable.

I think we've talked about how psychedelics seem to have this plastic rewiring effect in the brain—at least temporary, but temporary for quite a bit of time. To see that in a placebo-controlled study at 12 weeks, where I think the MindMed data is supporting once-quarterly, if not less-frequent, dosing, I think that's really compelling. Even as people are jaded to it, it still sort of blows me away.

I thought the other interesting thing about this trial, and it sort of gets at maybe a nuance that I think the FDA is going to be thinking about in this space as the indications broaden, is that MindMed went a long way in this study to try to find patients with significant anxiety symptoms but without comorbid depression. That's not easy, right? Because when you think about a psychedelics trial, you generally think about patients with any sort of psychiatric element who are at the more severe end of the spectrum coming into a study for something like this. If you have severe anxiety, significant depression is very common.

And so, to find patients with a much lower baseline depressive burden and still show such a big effect size, you've de-enriched your population a little bit to have a significant response. I just thought that was really cool.

I think what's interesting here is it feels to me, reading the subtext, like the FDA now has seen enough data across psychedelic trials that they sort of know many of these drugs work for depression. But if you're going to be pursuing indications beyond depression, they want to get at the question of pseudospecificity, essentially making sure you're not, by improving depressive symptoms, improving all of these other things as an indirect byproduct.

The Psych Division has been pretty sensitive to things like that in schizophrenia. You can't get a benefit on your label for cognition if it's in an acutely psychotic population. You have to study it independently.

MindMed now has 3 positive large placebo-controlled studies: 2 in anxiety and 1 in depression. They've proved an independent benefit on both. And now they've got 1 more anxiety Phase 3, but they could be looking at an approved product in the not-so-distant future.

Wow. The psychedelic space has come a long way. Graig mentioned Jazz acquiring GW back then, and when you look at the recent acquisition of atai/Beckley, this data set, I think, across different analogs in the psychedelic space really shows that this marketplace is here to stay.

Well, Graig, were you at AbbVie when GW was acquired, or were you back on the Street? I was just curious. You probably have a perspective from your industry role, but you referenced the GW drug as controversial, and I do think on the M&A side there had been reporting around that company that there wasn't a very long list of buyers, right? I feel like part of the reason was just the perception around CBD.

You think about that now with Lilly, right, the big dog buying 5-MeO-DMT. It's kind of hilarious to think about reticence around CBD 5 years ago.

I was back on the Street when that transaction happened. I remember that time. I think I was covering Jazz when that deal happened.

The feedback from investors was that the data were very good for Epidiolex, and I think they thought it could be a very successful drug. But there weren't many acquirers where this would fit in the mold, and it could only be someone like Jazz. For those who know Jazz, it has been a very successful company and took the orphan-drug pricing model to new heights with its Xyrem drug for narcolepsy.

But with that said, Jazz had been looking for CNS assets for a while, and this was the largest deal that they did. It was going to require a combination, I guess, of 2 players that were a bit off the beaten path.

Fast-forward to where we are today: now we're talking about psychedelics. But again, with Gilgamesh getting acquired by AbbVie, or now you're seeing Lilly buying atai/Beckley, it does take some time, but I think the time is now.

I just wanted to highlight real quick: We had another phase 3 lung cancer readout. Lung cancer has been pretty elusive, with a lot of failures in the space. Cullinan, which has a collaboration with Taiho—I think it was an original Taiho drug for which they reacquired co-development and commercialization rights—already had a second-line readout that they have filed. The PDUFA date is in February. They've now got a first-line study that just read out this week, which was also positive.

This is a very interesting space. J&J has its combination products in this space that are on track to do over $1 billion this year. AstraZeneca has some competitive product coming. It's just something to watch as we expect approval on a PDUFA date, potentially in February of next year. And Tess, MoonLake had phase 3 data read out as well. You want to talk about that?

MoonLake announced data for its IL-17 program, which I think was an important part of the thesis for MoonLake—for the company and for many people. They were studying this in psoriatic arthritis, and the bar there was really bimekizumab. I think what everyone was looking for was, “Hey, is this going to be potentially better than bimekizumab?” The press release highlighted positive results in the biologic-naive patients, and the ACR50, ACR20, and PASI90 endpoints all looked good.

I think the stock reaction—the stock was down after those data—was pretty indicative of, “Hey, interesting, but how is this going to compete?” How is this going to compete against bimekizumab? I think it shows some of the commercial challenges, where that differentiation for any follow-on drug really becomes a critical emphasis.

Sometimes we've seen disappointment after clinical data because everyone was excited about the potential for differentiation, and then the company gets closer to launch and everyone's like, “Oh, yeah, but they can still sell, right? There'll still be a market for this.” People can often identify some patient population or commercial strategy that can be a fit and can still make the commercialization really worthwhile. So it'll be interesting to see how MoonLake ends up driving the positioning for this asset.

Great. We also had another kind of readout—a safety readout—from Neurocrine on the product that they acquired with the Soleno acquisition, where 7 deaths were reported in this indication, Prader-Willi syndrome. Graig and Paul, I think, have both followed this. Graig, you want to start on Neurocrine? What was the data release there?

Yeah. I'll just introduce the news, and since I don't cover Neurocrine and Paul does, he'll go into much greater detail. This was an interesting development because the news of new safety issues for Vykat XR, which is approved for Prader-Willi syndrome, did not come directly from Neurocrine, I believe. It actually came from the Foundation for Prader-Willi Research.

It was basically a communication by a patient-based or research-based organization where they put out what they called clinical recommendations for real-world use and monitoring of side effects. Importantly, the message was really about how this is an important new medication to treat the specific symptom of hyperphagia. For those who don't know what Prader-Willi syndrome is, it's a genetic mutation that unfortunately creates insatiable hunger, and it particularly impacts children.

With that said, this was really a clinical perspective around how to use the drug, but it did identify 7 deaths, which I don't think had previously been appreciated. Of course, this is heartbreaking for patients who hope for a new treatment that can hopefully change their lives. I don't think what the Foundation for Prader-Willi Research was trying to do was necessarily say, “This is a problem. We need to get this drug pulled off the market.”

I think it was really more of a PSA, but obviously it raised alarms both in the community and among investors. With that, I'll turn it over to Paul for his further comments.

No, thanks, Graig. From a Neurocrine stock perspective, they bought Soleno—not at a distressed price, but not close to Soleno's all-time stock high—and that is, in large part, because there had been reports of stuff like this dating back to a year ago, albeit not from as credible a source as the Foundation for Prader-Willi Research. There was also a STAT News article from Adam Feuerstein about all of this.

Again, I'm not trying to be insensitive to the greater issue here, but from a Neurocrine stock perspective, they bought Soleno for not a huge value relative to what the drug was already selling for. I think the deal was a little bit less than $3 billion, and Soleno was already a profitable company on a standalone basis. I think investor expectations here for this drug aren't huge. It's going to do close to $400 million this year. The hope is, can it get to $500 million to $600 million? It's profitable for Neurocrine.

It still feels like this disease is severe enough that there's going to be demand to try the drug, even if it sounds like people clearly have to be careful. From my perspective, the clinical data on efficacy for this drug is not overwhelmingly convincing. The most positive study is a randomized-withdrawal trial, and those trials tend to be better enriched for a larger effect size.

For Neurocrine, as a stock and as a company, certainly if this is just the beginning of a lot more noise around this, it becomes a bigger problem and maybe raises a greater question around whether this was the right deal. But given that we already had some of this noise before and given the unmet need, my perspective is that it's still going to be a viable commercial product that can probably grow at least some from here for them.

Yeah. And presumably, that rumor was out there from the short thesis, and that would have been part of their due diligence, right, to dig in deeper on that. It's always interesting to watch. Even thinking about Sarepta's gene therapy when the deaths came out, there's always a trade-off—a risk-benefit assessment—that every patient family has to go through.

There may be people who are aware of these risks and still feel the risk-benefit is justified. It's just interesting to see how these death reports ultimately play out in the market.

Similarly, Amgen had a drug, Tavneos, that was pulled by the EMA this past week. This followed the FDA really urging Amgen to pull the drug from the U.S. market, against which Amgen initially pushed back and defended the drug's risk-benefit profile. But now, with the EMA pulling that same drug, it does call into question whether that puts pressure on Amgen to pull the drug from the U.S.

This was interesting. I didn't really follow the story too closely, but apparently ChemoCentryx, which Amgen acquired in 2022, provided what was described as “incorrect and misleading pivotal data” in its filing. What was uncovered was that selected members of the ChemoCentryx team were unblinded, realized that the study was going to miss the P value, and then re-adjudicated, I think, 9 patients. By classifying them essentially as responders, the P value was positive, and that enabled the drug to be filed and approved based on that statistical significance.

I don't know all the details on that; I'm just reading what has been reported in the press. It just doesn't look good for our industry in general that this kind of thing goes on, with Amgen initially pushing back against the FDA and now the EMA acting. It really raises the bigger question. This happens a lot. I just think of when GBT sold to Pfizer and Pfizer ended up pulling the drug from the market. Whether that was right by Pfizer or not, that was their decision to voluntarily pull the GBT drug.

We see this a lot where there are shoes that drop post-acquisition, often with multibillion-dollar acquisition prices. I’m just curious if anybody has any comments on that. The biotech that’s selling looks brilliant, and this is putting aside the fraud or misleading, unethical behavior.

How do you guys look at that when you see these billion-dollar acquisitions? We celebrate them when they’re announced, and then you see a shoe drop after the fact. Maybe, Paul, you mentioned that Neurocrine should have been aware of this, and that probably was part of their due diligence. Any comments about this? It’s not an infrequent occurrence. Anyone?

I’ll just say it’s a capitalist system that we work in. You obviously want honesty and transparency in transactions, whether it’s in biotech or not. It could be real estate.

I have not been following this story closely. I don’t have skin in the game as to who did what. With that said, it does, I think, create a little bit of a black eye for the industry when these things happen. But I think, by and large, these tend to happen in a small minority of cases rather than more generally speaking. I guess that’s all I’ll add on this.

Yep. I think that’s fair. Look, for any company—we meet with companies raising money, trying to raise money, all the time—you have to dig deep in due diligence to make sure that they’re being transparent. We know that they always put their best foot forward, but we do expect them not to hide or have any kind of misleading data in data rooms, et cetera.

But I think it is incumbent on the acquirer to make sure that they’re digging into that due diligence. For most pharma companies and large biotechs, it can be a laborious task to get through the 50 people who might be involved in a multibillion-dollar acquisition. At the end of the day, you have to put the onus on them to make sure that they’ve checked every box and really assessed the risks, short of anybody being fraudulent in what they present. Paul, were you going to mention anything?

No, sorry. I think you guys got it.

Okay, great.

I think you guys got it. Makes sense.

There were 2 company news events that you followed this week: Belite Bio and Axsome.

Yeah, thanks so much. I just wanted to mention news flow out of 2 companies that I follow closely. One came from Belite Bio, a publicly traded company. Remarkably, it has been a darling and a success story over the past several years.

For those of you who don’t know Belite Bio, it’s a company based on the West Coast that has been working on developing therapies for ophthalmic diseases. With that in mind, they have a drug that, in news that happened this week, is called tinlarebant. It’s being developed for a rare orphan retinal disease called Stargardt disease. There are about 40,000 patients in the U.S., according to the epidemiological data.

They got their new drug application accepted by the FDA following very positive phase 3 data. I’ll remind everyone that there are currently no approved drugs for Stargardt disease, which is ultimately blinding and does affect patients as young as their teenage years or even younger. They did get priority review, breakthrough designation, and orphan drug designation. They had all of the bells and whistles that you would hopefully get from the FDA.

We now have an official PDUFA date assigned. That date is February 12, 2027. Hopefully, we could have a new drug approved for the very first time for patients with Stargardt disease. It’s caused by a genetic mutation. Interestingly, this drug does not work by correcting that mutation, but there are companies working from a gene-therapy perspective.

It’s almost like a DMD story, as I understand it, where the gene that you would want to fix and put into a gene therapy is a bit too large. You’re going to need some kind of second- or third-generation attempts at gene therapy to be able to tackle it from a genetic perspective. There’s nothing else out there. This is an oral drug, and we do look forward to hopefully getting that approval.

I do think the timing is interesting because last week, another company that I follow called Tarsus Pharmaceuticals announced some news. Historically, Tarsus has been focused on what we call front-of-the-eye diseases. They have a drug on the market called XDEMVY. It’s an eye drop that treats a condition called Demodex blepharitis, which is caused by microscopic eye mites that live on your eyelashes.

You may have seen commercials on TV or social media. The DTC campaign is quite robust, and Tarsus has been able to grow XDEMVY. Guidance was raised on their earnings call last week from $670 million to $700 million this year to $685 million to $705 million. The drug is doing well, but they did announce an acquisition of Belite Bio’s biggest rival, a company called Alkeus Pharmaceuticals. It’s a private company.

They’re working on a very similar drug called gildeuretinol, which works through a somewhat similar mechanism of action, and they are in phase 3. Their ongoing phase 3 study is called DRAGON. They won’t get data until the second half of 2029.

It does create some interesting questions for Tarsus as I think about enrollment in this phase 3 DRAGON study, because I think the study is going to be in the neighborhood of about 250 patients. It did recently open for enrollment, but you could have a situation where patients with Stargardt disease are faced with the option of either going into a trial or just getting the drug, which is already approved.

I think it’ll be an interesting dynamic going forward between Belite Bio and now Tarsus Pharmaceuticals, which just bought Alkeus. That was about an $800 million acquisition.

Then, just very quickly, on Axsome Therapeutics, which I cover, they reported second-quarter results Monday. Investor focus is on an antidepressant that has done very well. That drug is called Auvelity. It was approved several years ago for depression, but it got approved more recently to treat Alzheimer’s disease–related agitation, and all eyes are focused on the launch and how that drug is going.

There’s a lot of sampling. Many of these patients are Medicare patients because they’re older. They’re being treated in Alzheimer’s care facilities or long-term care facilities. People are trying to look at the prescription data. It’s very hard, in my opinion, to get a direct read from what’s available through IQVIA or Bloomberg.

Management comments were very positive. They did say that new-to-brand prescriptions, which means a patient getting on a drug for the first time, in the 65-and-older segment are up 126%. We’ll continue to monitor this launch very closely, but so far, so good for Axsome with its launch of Auvelity for Alzheimer’s agitation.

Yeah, good stuff. It’s nice to see, again, a diversity and an expansion of the potential acquirers. Even though Tarsus, I think, is a few-billion-dollar company acquiring Alkeus, it’s nice to see these acquisitions happening with not just the large pharma companies out there, but with all the private and public companies out there.

I wanted to end with Tess. Your boss, Peter Kolchinsky, has been very vocal about the nonprotectionist stance, and you and he have written white papers about this. There was an interesting debate that Endpoints hosted that I would encourage everybody to watch—it’s free online. It was Peter Kolchinsky, head of RA Capital; Fiona Murray from a multinational, Europe-based pharma company; and Jason Kelly, who’s the CEO of Ginkgo Bioworks.

We had a diverse panel with very different opinions about this, but the BIOSECURE Act was reintroduced. Adding biotech to biosecurity through the BIOSECURE Act is reigniting this China debate and the question of what level of “protectionism” we’re seeing out there. We’d love to hear your thoughts, Tess. We know RA Capital’s position on this. I believe that it is the right kind of stance, but do you want to share what transpired in that debate?

Absolutely. I thought it was wonderful that Endpoints did this. Drew, one of their editors, set it up really nicely. I love that he was like, “Can we just talk about this and actually have a real conversation with multiple sides of the debate?”

Fiona Murray was there. She’s a professor at MIT who does a lot of national security work across sectors. Biotech is newer for her; she said she’s more focused on drones and other technologies these days. But she was there to fact-check and provide the national security, cross-sector lens.

Obviously, Peter and Jason, as people who are within biotech, have very different perspectives on how to compete with China and how much that competition should include various protectionist measures. It was a good discussion, with lots of important disagreements to get out.

Chris Garibedian

Yeah.

It totally was. I thought Fiona did a really nice job highlighting how the current legislation being proposed is, I think, the bottom line that the debate came to—and I think both Fiona and Drew did a nice job summarizing it. There are reasonable and valid concerns around U.S. competitiveness in biotech, so let’s take that really seriously. But is a broad-based ban the right legislative approach? Probably not.

Chris Garibedian

Yeah.

That would also take a lot of coordination for the ban to be effective. One of the big points of debate, where Peter was really pushing Jason, was: How do you enact this ban?

Yeah.

Jason was saying, “Well, the FDA can ban this.” We’ve talked about this Euro-washing issue, where Europeans could get Chinese drugs and bring them over to the U.S. Jason was saying the FDA could ban even that, right? It could be something that you discover in China, but our patients could be—

Chris Garibedian

Yeah. Basically, Peter challenged him on the details, right?

Right. Yeah.

Chris Garibedian

You’re not providing the details. I have to applaud Peter. I think a lot of people would’ve expected him to lose his cool more quickly. He doesn’t suffer fools gladly, so people were expecting him to lose his cool, but he was very restrained, in my opinion. He just let Jason talk, and it kind of helped the argument Peter was trying to make.

Yeah, it totally did.