第203集 - 2026年11月13日

You’re listening to the Biotech Hangout, a live and unedited weekly discussion of the latest news in our industry with biotech leaders and experts. My co-hosts today are Paul Matthijs, Yaron Werber, and Kate Haviland. For more information about our hosts and guest speakers, or to listen to the most recent episode, go to biotechhangout.com. We’ll be hosting an in-person networking event at JPM in San Francisco on Tuesday, January 12, at Persona, the same location as prior years. Thanks to CFGO and FTI Consulting, returning sponsors for the event. If you’re interested in sponsoring, reach out to team@biotechhangout.com, and look for an RSVP link on our social channels. We hope to see many of you there in January. With that, let’s get into today’s show. I think we've got a great lineup of topics. We're going to start with a few comments on the markets, the broader tape. I know there's interest in the FDA commissioner vote that's going to take place next Wednesday, the 18th. Paul, I also know you had the opportunity to speak to a former FDA commissioner about the state of affairs at the agency, so we'll look forward to your views there.

I think we also have a drug readout or two that we want to discuss, a couple of clinical data sets. Since it's a quieter week, we thought we'd discuss a few broader thematic topics, maybe things we haven't had time to discuss in the past. First, we're wrapping up Q3 earnings, where drug launches have been quite topical. I think it's a relevant question to ask ourselves how good we are at predicting these drug launches, and maybe why we aren't better.

We're also seeing more companies in our industry do less on the research side and more on the development side. R&D has become a lot more about the D, with very little R. I'd love to discuss that trend and whether we're sacrificing innovation as a result of too much focus on clinical programs and even the in-licensing of compounds from elsewhere.

A third topic I've been looking forward to is the layoffs across our industry, the workforce reductions. It's not just companies in financial straits, but also some that are quite successful, even commercial-stage companies trimming their workforce, maybe to become more profitable. I don't know, but in my opinion, we're seeing more of this than we have in the past. I'd love to get our team's view on the impact it might be having on the sector and on companies pursuing that.

1. The Biotech Market Pulse

That's the outline of the show. Let's start with a bit of a discussion of the pulse of the market. The XBI is bumping up against being up about 25% for the year, but as we've talked about before on the Biotech Hangout, it certainly feels a lot worse than that. Many of our buy-side clients are in pain. Many lag the index in terms of performance, and as we've talked about, that index has really not been particularly representative.

This week was another painful week, with a lot of selling on news. We had one or two companies break through the ceiling and actually trade up on news. But whether you were reporting earnings or clinical data, or providing standard course updates, I think generally speaking it was better to keep your head down and lay low. Many of the companies that had any news flow whatsoever saw their stock prices banged up a bit.

We had at least one IPO that didn't go through, so that may be a sign that the financing window is beginning to close further. Hard to say. I'd welcome folks' views on that. Outside of biotech, we had some big news in the tech space, as Yaron was referencing with Nvidia. We're also expecting the Anthropic IPO to hit next week. A lot to digest here. I think some of us are also still digesting the repercussions of the blue wave election cycle from a week ago.

Let me turn it over to the team and see how folks are feeling. I don't know who wants to start. Yaron, Kate, Paul, what are your views on where we are, and maybe how much tech matters these days?

Yeah, maybe let me kick it off. I think what's so prescient, in a way, was some journalists calling before the election and asking whether a blue wave was going to be good for biotech because it was going to be bad for AI. I think we discussed it here. It was a jarring comment that none of us saw coming, at least I didn't, but it ended up being very much foreshadowing.

I think we're seeing that strength in large-cap biotech now as defensive names. The equal concern is that I think the market is pricing in two more rate hikes, and higher rates for a little longer probably aren’t going to be great for biotech. I think we're trying to sort out these two dynamics. That's what I think is really going to drive the tempo in our sector.

There's always going to be a question about whether we're going to see more M&A. I think we've discussed that as a group many times as well. M&A is certainly a tailwind, but it seldom really drives the sector unless you see a lot of it. We continue to be cautiously optimistic. The market needs to stabilize more broadly, and I think that's the bigger question.

I feel like the market is going to stabilize because, at the end of the day, inflation is still relatively under control. As long as earnings next cycle for tech and AI are bouncing back, you can see the volatility with CoreWeave, but we need the market to be stable for biotech to do well. If we're going to continue to see an unwind in AI in a major way, that's probably going to be too much of a seismic shift and too many waves in the market for biotech to react well to.

Yeah, I agree with all that. That was well said, Yaron. As Eric said, this has been a tough year for a lot of the buy side. I think it's made people more risk-averse and more concerned that it's hard to get paid on catalysts. We still feel like certain types of names are trading well. Yaron, you talked about large-cap. I'd even go a step further and say companies with some sort of commercial business floor value, something semi-objective that you can value, plus any pipeline. I also think the commercial names that have no pipeline have traded like value traps for a while.

I still find it's hard to get people super interested in small-cap binary stocks, especially when financing is expected post-data. On the IPO side, I think we've all talked about this: there was a backlog of companies that were maybe more mature and more established than the average biotech IPO candidate over the past 5 to 10 years. Many of those have gotten out, so you wonder if things may be more selective going forward.

Yeah, well said, guys. I think you're both right. Interest is definitely migrating upstream to larger companies, to companies with commercial franchises, sometimes even profitable companies. We're seeing that drag on the development-stage companies. Nobody wants to play binaries. Nobody wants to take on financing risk after a binary. Nobody thinks they can get paid on any of this.

Maybe it's all typical stuff that we see in a biotech downturn. I hope Yaron's right. I hope we can bottom out, find some support here, and look for better times. Kate, what are your thoughts? Welcome to the show.

Thank you for having me. I really appreciate it. Happy to be here. Not much to add, other than one thing I've been looking at: some of the more recent IPOs have been in earlier-stage programs and companies. As much as there was a backlog of more mature companies with more mature clinical assets, we are seeing some companies get out. Knowing a little bit of background on them, those deals have been harder to do, but the companies have gotten out.

I don't think the whole IPO class has traded particularly well this year. A few names have, but we are seeing that. And the reverse merger market still looks pretty hot. I'm involved in one of those right now.

All right. Let's get into the good stuff. We are very likely to have a new FDA commissioner over the next couple of weeks, or at least a new acting commissioner. We just don't know who that might be. If Dr. Overton is confirmed next week, great. We'll know we have a full-time commissioner and can move forward.

If not, I’ve been reading reports, at least through BioCentury and others, that our current acting commissioner, Mr. DeMontes, does not wish to hold the job beyond the end of the year and would likely step down in favor of another acting commissioner.

Meanwhile, shout-out to the FDA. They’re getting their job done. Through the end of October, we’ve had 47 NMEs approved to date. That’s more than in 35 of the past 41 years since the FDA has been making its data available. Even though we’ve got 2 months left in the year, we’re tracking toward the far end of the spectrum in terms of new drug approvals. We’ve actually got a shot at reaching the record of 59 approvals, which I think was achieved in 2 different years: 1996 and, I think, 2019. With a few more PDUFA dates still coming in November and December, this could be a record or near-record year. It’s nice to see the FDA’s continued functionality, even during this period of uncertainty in top-line leadership.

Paul, I know you had the pleasure and privilege of talking to a former FDA commissioner. Why don’t you fill us in?

Yeah, thanks, Eric. It was super cool to get to interview Scott Gottlieb at our conference this past week. He was more optimistic than I thought about Dr. Overton getting confirmed. I think his view was that he’s a big supporter of her being the right person to lead the agency. He was saying she really understands some of the issues at the FDA right now around needing to hire people back, augment expertise, and, where it’s safe, try to move things along.

In this whole conversation, his perspective was that some of the key people who would be involved in a confirmation vote, like Dr. Cassidy or Susan Collins, were spending time with Dr. Overton. He figured, “Look, if they’re spending time with her, these are outgoing senators. Why would they waste their own time?” He thought it’s very likely she would end up getting confirmed.

He was also very clear that if she didn’t, there’s really no clear backup plan. As you said, Eric, Dr. DeMott—or sorry, Kyle DeMott, just not doctor—doesn’t want the role. We could be stuck in a long period with different acting commissioners. There’s really no plan B. It sounds like Scott Gottlieb is maybe at least peripherally involved in the dialogue, still has some relationships and political connections, and wants to make his voice heard that this is someone who should be confirmed.

All in all, it sounds like that would be a good thing for the sector. We spent a couple of years ago on this show talking about Dr. McCary and Prasad and the whole mess at the FDA. It feels like things are in a better place, and this seems like it would be a good step toward that dynamic continuing.

Let me pick on that last point you made, Paul, because in some ways we think a split Congress, with a split House and Senate, might be a good thing for healthcare. Nothing gets done. We’ve just seen probably one of the more tumultuous times at the FDA, and the acting commissioner does seem to have induced some stability. Maybe he doesn’t have full power, but how do you think things would change if Dr. Overton were confirmed? What could we look forward to that we’re not getting now?

That’s a good question. To be perfectly honest, it didn’t sound like a lot would change. At least on the drug side, some of the stuff we’ve seen recently, Eric, like bringing back AdComs and trying to make a concerted effort to be more consistent with sponsors, would continue. I know on the CBER side, there’s been consternation around various 180s, feedback, and filing paths. That doesn’t necessarily guarantee that something that’s filed gets approved, but we’ve seen those kinds of flips.

One thing covered on our panel was this dynamic where companies are now able to immediately run a proof-of-concept study in China with limited preclinical data. We’ve already seen companies starting Phase 1 work in Australia or Europe for years, depending on the therapeutic area or technology area, because that path has been faster. It sounded like there’s an understanding, or at least a dialogue, that maybe the tox group at the FDA has a little too much power. That was his opinion. Perhaps we’ll see things get expedited on the margin.

Honestly, the perception is that things are actually in a decent place, and the biggest need at the FDA is just getting more people. This whole DOGE approach to cutting jobs at the agency was not viewed as a success. I have less of a sense of what would change on the food side or things like that.

All in all, I think we agree: in a year that could be a record year for drug approvals, the status quo seems good. There are still certain therapeutic areas where investors are trying to figure out exactly where the FDA stands. Rare disease always comes up as an area where a number of decisions in the next year will be informative about whether we’re closer to the Peter Marks world or an I. Prasad world. I was pleasantly surprised by how positive Dr. Gottlieb was on the direction, because we know he’s been someone to tell his honest view in the past.

For sure. Very interesting. Thank you. I know Dr. Gottlieb had some comments around MFN and China relations that you were going to want to share, too. But maybe before we get there, Yaron or Kate, any thoughts on commissioner, no commissioner, Dr. Overton, no Dr. Overton?

Yeah, I can jump in here. As a former company leader, and as we think about drug developers, what we need most out of the FDA is some predictability. Before the DOGE cuts and all that went through, we were all looking for the FDA to modernize, to really understand how we could work together, accelerate pathways, and be a bit more innovative. Those conversations were ongoing.

Where we sit now, after a couple of years and a number of changes at division leadership as well as overall leadership, predictability is the number one thing we’re looking for. As a drug developer, you can deal with a difficult FDA. It’s hard to deal with one where the policies and the goalposts shift under your feet.

In many ways, it seems to me like Dr. Overton is going to get confirmed, and having some predictability and a science-driven, independent agency is going to be really important. Then it would be great to go back to those dialogues around innovation pathways and how we can make sure that really important innovation is getting to patients as fast as possible.

Okay, Paul, maybe back to you on MFN and China, and anything else you’d like to share from the discussion.

Yeah, totally. Maybe we can open up this dialogue to the group, too, because I know you guys all have opinions and talk to different consultants and things like that.

I thought the quick takeaway on the China side was that we were talking about the COINS Act and the legislative response to China biotech. He was saying the response at this point is behind the eight ball as it relates to what’s actually happening on the ground. His view of what’s happening on the ground is that the arbitrage opportunity here is already closed. We all know this to some degree: companies and BD groups are all over China biotech.

Separately, he was saying the actual capital markets environment there allows some of these companies to raise money and take things further. Companies on the China side are now looking for 50/50 cost and upside sharing in development. He was sort of dismissive of this being as problematic for the U.S. biotech sector as it might have been a year ago.

Our conversation went back to the FDA and how it can safely allow companies to move faster in the U.S., so that running a quick proof-of-concept study in China isn’t seen as an attractive, capital-efficient alternative for companies.

On the drug-pricing side, this is a little more speculation. His first reaction to the blue wave was that it’s interesting the market traded up the next day in our sector, because he thinks drug pricing may be the easiest area for Trump to agree on things with the Democrats.

And MFN could be back. It’s hard to know what sort of structure or iteration there could be, what areas could be carved out, or whether it would apply only to new drugs. But he confirmed my gut feeling, too, that we’ve been in a safer period. There’s been a little noise around drug pricing, but a lot of companies have been pricing drugs at launch 20% to 50% above consensus, as we’ve discussed on this show. You have to wonder if the scrutiny, headlines, and all of this are going to be back in our newsfeed soon.

It’s certainly pretty… Go ahead, Yaron.

Maybe the… I want to get everybody’s take, because what’s interesting with MFN is that the last time I checked on novel drugs launching ex-US, Eric, back when I started, ex-US sales were 60% in some cases, and US sales were 40%. Now ex-US is about 20% of sales, so it’s going to be completely de minimis to these drug launches. Aren’t we already MFN’d, essentially, just because of the US?

I think that’s fair. There are mature companies that don’t even launch, which is crazy. I think it’s a fair point, Yaron. If this happens, the risk is less that we have to change our models and decrease ex-US sales. It’s more about existing drugs that have launched and are a few years in, with a massive US–ex-US price gap. There are certain drug franchises where people are nervous there’s going to be some sort of price reset. It’s definitely a fair point, though. I’m sure you have this dialogue too, Yaron, but we talk to emerging companies launching their first drug that wonder whether they can even build an NPV-positive business ex-US. They decide not to partner it because they want to leave all the upside for potential M&A someday, and I think the Street ends up not really valuing anything outside the US.

Do we know—

Yeah.

Yeah, and I’m sorry. Go ahead.

I was just going to jump in and say that many of the companies I’m involved with now also aren’t thinking about licensing ex-US, because I don’t think anyone believes MFN is going to go away. It may get more attention and become more of a headline, but it’s difficult to figure out how to implement. Most of the people I speak to, and the companies I’m involved in, assume some form of this will remain part of the dialogue, regardless of the administration, to a large extent. Therefore, the freedom you have from a corporate strategy perspective is limited if you assume that context. It’s different from when I was building Blueprint. Back in the day, we had a real opportunity to look at licensing ex-US, consider different geographic territories in the hands of other partners versus building it yourself, and analyze what was best for the company and why you’d go in one direction or another.

Rare disease may be in the minority, but it’s worth making the point. Kate, I know you launched a rare disease drug. I still think that for many of the rare disease companies some of us cover, ex-US really matters. We’ve got one launch we’ll probably be talking about, Scholar Rock, where they’re still looking at ex-US and saying, “We expect the majority of our sales to come from outside this country, and we think we can get pretty good pricing because of the severity of the disease and the unmet need.” At least some areas would be difficult if they were MFN’d, Yaron. But go ahead. I think you wanted to add something else.

I’m sure you know the question, and I’m embarrassed to say I’ve never really been clear on the answer. If a biotech launches a drug in the US and then completely licenses it out to pharma, and they’re completely divorced from pricing and launching it ex-US, that ex-US price is still MFN’d, right?

I think so.

Yes, it is.

I talked about this with a few companies.

Yeah.

Yeah.

The tricky bit with ex-US pricing is that it’s not just the price, right? There’s a list price, a confidential discount, and often caps on your overall revenue opportunity in a given year. So it’s not just list price; there’s complexity there. At Blueprint, we’re launching ex-US and going through all those pricing and reimbursement negotiations country by country. We had great innovation scores, by the way. We were in a rare disease market, and we had incredible innovation scores. I can tell you that the price in many of those markets was a very small fraction of the US price.

I guess the other question is, let’s look two years ahead. We don’t know who’s going to be in the White House, and we don’t really understand the Trump MFN agreements with these companies or whether they’re going to survive into the next CMS. Any thoughts on that?

As you’re aware, many of these deals include sunset provisions, so we assume they’re just going to go away. We don’t know the details. Obviously, the Democrats in Congress want to make those details public. The real question is what Paul suggested at the outset: Is Trump going to play ball with the Democrats or not? I don’t know. It’s pretty hard to get into this guy’s mind right now and understand what he’s considering or thinking. It would be very populist for him to go back and say, “I’m going to be the president who takes a whack out of drug pricing.” On the other hand, he does seem to be pretty buddy-buddy with many industry leaders these days, and he needs his friends in high places if he’s going to exit the White House.

2. Predicting Drug Launches

Any other comments on our former commissioner, Dr. Gottlieb? It’d be wonderful if he came back, but I think that’s probably too much to ask for. Maybe we’ll transition to our next topic. Many of us have spent the last two or three weeks thinking about nothing other than Q3 earnings, which means we’ve been thinking pretty much only about new drug launches. We’ve got a lot of them going on. As I mentioned earlier, there have been a near-record number of approvals this year, and last year was a pretty good bumper crop as well. Some of these drug launches are pretty easy to call. I think everyone expected Revmed’s Resond Q to have a huge first couple of months on the market. Other drugs target smaller indications or areas where there’s a lot more work to do in physician education, and we expect them to be fairly modest out of the gate.

As I look at the slew of different drug launches we’re always asked to evaluate year in and year out, I can’t help but have some humility and look back at some of my prior predictions for drug sales. None of us—or at least I—are very good at predicting how these things are going to launch. I’ll throw it open to the team. Paul, Yaron, and Kate, I know you’re all looking at drug launches, and Kate, you’ve got the unique perspective of having been on the inside. After Paul, Yaron, and I speak for a little bit about what we see from the outside, maybe you can set us straight on how we might be better at predicting a drug launch. Who wants to start? Paul?

I’ll start quickly, and then I can turn it over. I’ve actually been thinking about this a lot, Eric, because, like you, I’ve been way off on a few of these. Cobenfy is one where the survey work we did suggested it was a monster. I’d imagine Bristol and AbbVie’s survey work was pretty good too. The Alnylam launch with Ambuchra has kind of petered out. It’s still very good, but way below where expectations went. I think Ionis was brought up in the email chain. All of these are different, but one theme I’m trying to keep in mind going forward is whether the doctors we’re talking to in expert networks are an extrapolative and representative sample. That may be an obvious question, but in certain cases, I think they really aren’t. They might be much more in the weeds on the data and much more risk-tolerant. Sometimes, in certain psychiatric indications, they might not even be treating a lot of the patients those new prescriptions come from. In schizophrenia, a lot of new prescriptions come from nurse practitioners, right, and mental health facilities.

With the triglyceride launch on the Ionis side, one of the questions was whether there were KOLs who were deep believers in its importance. I’m not trying to say anything should be thrown in the towel after one quarter, but sometimes those of us on the sell side and buy side are talking to the same small handful of physicians. They have a valid point of view, but it might not be broadly representative, and that can lead to a kind of mispolling. This is especially relevant when there aren’t good sales analogs in new indications or big new markets.

Yaron, your perspective?

Paul, you said it extremely well and succinctly. We all run physician surveys, and a lot of them are directional; we know they’re not accurate. It’s a pleasant surprise when some surveys are accurate. Usually, that requires literally quarterly tracking or consistent follow-up every 6 months, and sometimes even polling the same physicians. We definitely need to put some science around it.

A lot of what’s surprising these days, though maybe it isn’t anymore, is that access is taking a lot longer in the U.S. In many cases, building a market from scratch takes time too. Ionis is an amazing recent test case with the severe hypertriglyceridemia launch. They gave guidance for the year, then launched in the third quarter with Tryngolza. Redemplo came from Arrowhead. Both are for APOC3, and Tryngolza is an antisense oligonucleotide. Consensus was $20 million for the quarter, and they put up $9 million, up from $5 million the quarter before in rare familial chylomicronemia syndrome.

The actual number of patients who got on the drug quickly was fairly small, and there was probably a lot of free drug in the channel too. They’re essentially guiding to a flat fourth quarter now because they think it will take time for patients with high fat and high triglycerides to come into practices and build awareness. These things really do take time, especially when they aren’t necessarily life-threatening disorders. Even the company got caught off guard. They had to cut guidance by half, and you could see what happened to the stock. Ionis and Arrowhead are both down fairly substantially, even though both had warned that the launch would be protracted and take time. I agree with you, Eric. The more we do this, the more we realize how little we know.

Your reference to tracking surveys took me back 20 years, when I think you and I put out one of the first surveys on Erbitux in the colorectal cancer marketplace. That was a lot of fun. You make a good point that sometimes companies are confused too, or offer guidance that’s off. I guess that’s a lesson for any corporate executive listening: You probably shouldn’t give guidance if you lack certainty about your outlook.

To some extent, I do blame the companies because we get fed so much information about their drug launches. Let’s be clear: None of us has the time to get into the nitty-gritty, do these tracking surveys, talk to a broader spectrum of doctors, and devote a good chunk of the day to any one drug launch. We’re drinking from a fire hose of information all the time. Companies are intentionally optimistic with us about the prospects for their drug. Maybe they’ve fooled themselves, as might have been the case with Trinquala and the higher guidance Ionis gave out.

We’re always told only the best things about data sets, a company’s marketing materials, its own KOL surveys, or even its own KOLs. They bring these physicians to us and cherry-pick the ones they think are most appropriate. Kate, this is a good setup for you. At Blueprint, you may have been a little frustrated that people didn’t believe you when you thought the market you were launching into would be quite lucrative. You ended up being right, of course. Do we have a point that sometimes the signal doesn’t come through the noise?

I think it’s easier to think about what the potential market opportunity will be, and we all do a pretty good job of saying, “This is what we think the opportunity or the peak could be.” Forecasting the path to that has so many determinants of success.

Some of it you can know ahead of time. As a company, you can get your arms around some of it by being out there before launch, talking to a wide array of decision-makers: the clinician, their office staff, and patients. You’re trying to understand the decision-making process, diagnostic odysseys, and the friction in getting a patient completely diagnosed. You need to do all of that to have a market where you can bring a new innovation forward and have physicians and patients become aware of it and adopt it as they see fit for their clinical care.

There’s a lot involved. Some of it we can know beforehand, and some of it you have to be in the market with the medicine to understand. Then some of it shifts. Free-drug dynamics are a really big deal in certain categories, particularly depending on your payer mix, and that can change year over year or based on policy. Patients can move from commercial drug coverage to Medicare or Medicaid for various reasons, which can really affect what happens when you reauthorize everyone who’s on the drug at the beginning of the year.

One thing companies really need to do is manage expectations and the psychology around that for investors, analysts, and others. It’s not something anyone is trained to do as part of bringing a drug all the way through development and thinking about an educated physician. It’s a skill that needs to be learned and understood, and you don’t always get it right. There’s also a lot of noise because a company may be saying certain things while investors with different interests put all sorts of what I call “narrative arbitrage” into the market. We had to first understand that it was happening and then try to offset it, which is tricky.

That’s a really interesting perspective, Kate. Thank you. To your point about companies setting expectations, in my experience, there’s a massive variance in how aggressive they are. Some companies will come to us and say, “As a reminder, this is going to be approved. Then we’ve got to work on getting access. The next quarter, keep in mind that scripts are going to come throughout each month, so you can’t just assume a patient’s on therapy for the whole quarter.” They walk you through that, and it gets the point across to keep certain nuances in perspective. That can be very effective in controlling expectations.

Yep.

Others just don’t say anything.

Yep.

Others convey things in a positive tone. And then there’s the reality of the sell side. Sell-side analysts are generally positive. Most companies under the large-cap market-cap threshold are buy-rated by most analysts. We can get into all kinds of reasons why that is. Maybe people just cover the things they like. There are all these other factors. But in that context, you tend to have a group of analysts covering a stock, many of whom are conveying the bull case. They might accidentally be setting a higher bar too. It’s interesting.

To that point, in a company with 20-plus covering analysts, there are always a couple who may intentionally take a bear case because that’s what they fundamentally believe, or it helps shine a light on their coverage. We see that with some companies too. They also provide a platform for what I consider narrative arbitrage, where people are just trying to make some fast money around an earnings call. That’s real, and it’s something we as leaders in these companies have to figure out how to manage.

It’s tricky to manage.

Kate, I’m thinking back to when you launched your program at Blueprint. When did you know you had a live one, that the drug was going to sell? Was that before or after launch? What gave you that conviction before the sales numbers came in? What signal did you get from the market that said, “I’m pretty sure this is real”?

We had conviction before launch. We were in a new disease category with new clinical endpoints that we were using with the FDA, endpoints that had never been used before. We were sure the drug would have a clinical profile that was compelling for these patients. But how do you contextualize a point change on a new endpoint, a PRO, for everybody? You do your best to project that. Saying, “We’re looking for it to be statistically significant, and if it is, that means we have a clinically relevant data set,” isn’t satisfactory to anybody. Everyone wants you to say it’ll be 12.7 points and that that’s clinically significant. That’s a false level of precision in a scenario like that.

We started seriously looking at indolent systemic mastocytosis in 2016, and we started bringing Ayvakit forward for it. We got to know the patients, understand the disease better, and spend a lot more time with physicians. Then, around 2020 and 2021, we went deep into data sources like claims data and patient journeys. We used technologies like AI to understand how many patients might be out there who hadn’t even been diagnosed yet. We got our arms around what I’d call a triangulation of data sources that gave us a tremendous amount of conviction.

We also knew we couldn’t just walk out and say, “This is going to be a $4 billion to $5 billion market.” We’d say it was a blockbuster market, north of $1 billion. Even that was hard for people to get their arms around or trust as a genuinely held view, rather than an attempt to create short-term value for the company. I think we were very intentional about updating our view on the overall market size annually, at the start of the year at the J.P. Morgan Healthcare Conference. We didn’t do it in the middle of the year. We said we’d continue to update it at that point, and we did.

We continued to raise what we thought the peak opportunity was in the context of the growing revenue line. I think that gave our viewpoint more credibility, as well as confidence that we were on a trajectory that could reach it over a relevant timeframe. I don’t know if that answers your question, but we had conviction much earlier than we guided externally.

Yeah, absolutely. I’m curious: given that it sounds like you knew you were heading toward a better launch than the Street was forecasting, how did you use that disparity? What did you choose to do with it in terms of your guidance?

Guidance is as much an art as a science, and we would debate it heavily. We had ultimate conviction in the overall opportunity, but we still had a range of outcomes for how the quarters would play out. There are a significant number of variables that lead to the actual revenue dollars. You have to think about the solution set across each variable and where you think the most likely outcome will land.

We would try to be as realistic and pragmatic as we could, while understanding that we had a view on the overall opportunity. If you draw a straight line from launch to peak, let’s say 7 or 8 years out, you understand that people are doing that math and have an expectation for what’s on that line. Then you have to think about what you can really deliver and how to manage expectations and psychology around it.

It’s tricky because you have to find that sweet spot where you’re showing confidence in the overall opportunity while managing expectations and the range of outcomes that could be considered good, and that keep you on a path to that eventual peak. It’s not just a single-point number; it’s a range. You’re also monitoring all the variables that feed into it. In one quarter, there may be more seasonality, but you might get a better free-goods mix and another region of the world coming on. All the things that contribute to the revenue line change throughout the year, quarter over quarter.

Okay.

Yeah.

When you’re the CEO, how do you and your team know the degree to which you can take physician feedback literally? I think we deal with this, right?

Yeah.

We do a survey and haircut it by 50%. But I have to believe that if you’re at the company, you’re talking to physicians who probably greatly appreciate that you’re developing something for a disease they care about. They might be even more inclined to tell you what you want to hear. What’s the thought process there?

I think we were always triangulating between multiple data sets. To your point, I’d personally be sitting there talking to physicians. I went out into the field quarterly with my team, and I wouldn’t just meet our KOLs at the big academic centers where we spent a lot of time developing the drug. We had very good relationships with that group, but I’d also meet a treater somewhere in the middle of the country and hear their perspective: what they valued in this new medicine and where they found friction in practice dynamics.

For instance, if there’s a specific diagnostic assay and a practice does all its business with Quest, but the assay is at Labcorp, that doesn’t mean they can’t eventually get it. It’s going to take some time. Understanding those practice dynamics helps you figure out how to handle them. Do you try to force a square peg into a round hole, or do you figure out how to get your assay into Quest as well? The answer is you do both. In the short term, you try to help the patient sitting in front of the physician; in the long term, you adjust your business to meet the practice dynamics of the many treaters out there. You have to do both.

Part of it is getting that personal interaction. You take it seriously, but you also have to adjust what physicians say against the non-personal market research we do, like the physician surveys you’re talking about. I don’t love some of these platforms. I can tell you we’d see calls with physicians who’d put themselves forward as ISM experts on GLG or one of those places. We’d look at our data and see that they hadn’t seen ISM patients in 5 years. That could be wrong; the data isn’t perfect. But they certainly weren’t experts.

We see that too.

They’re certainly not experts, for sure, right?

Yeah. Yeah.

That’s okay. We had that kind of market research, with hundreds of physicians who weren’t sitting there talking to us, but filling something out or talking to a third party. Then we had our claims data, and we invested heavily in a data infrastructure to understand the patients in those claims data. We used machine learning and AI to identify likely patients and to help direct our field, with real-time targeting.

We would triangulate those points of view. Any one of them would never be enough for us to say, “Okay, we have the information we need to think about the input we need to provide guidance or what we think the next quarter will look like.” We needed all three. I don’t know if that’s satisfying or not, but I do think each of those data sets has pros and cons.

And they’re not standalone, so they’re not going to provide any level of accuracy.

And, Kate, when a company puts together guidance, maybe based on your experience, is it “bottom-up,” or is it “top-down”? For example, there are 10,000 patients in the market, and we think we’re going to do 2% in year one and 6% in year two.

Yeah.

Or does it come literally from the territories—the territorial managers on the sales side, on the physician engagement side—saying, “I think I’m going to do this and this,” and then you build it bottom-up?

It’s mostly bottom-up, both from direct feedback from territories, as you said, and from sophisticated modeling of our own data. There is a top-down element, too, because there’s psychology on all sides of this. We’re talking about investor psychology and management expectations. You also know that your sales professionals want to meet or exceed their forecast targets, so they may keep a little dry powder in some of those views.

As an executive team, you’ve got to think about what you’re seeing from the bottom-up, what you’ve been seeing over the last set of quarters, and what kind of growth you’re driving. What are the biggest drivers of revenue, considering all the different variables around payer dynamics? We talked about time to coverage, free drug programs, new patient starts, and the breadth of physician prescribing. Are we getting repeat prescribers or new prescribers? Frankly, you want both, but how do you see that happening? What’s that dynamic? How are you looking at all those things?

Then you marry that with the top-down view: We’ve clearly been growing at this clip, and the bottom-up view may be a little lower than that, but we think we can challenge everybody and say, “We’re going to project this type of growth. Let’s put it back to the teams and see what they can do.” It’s a little bit of an art more than a science. You bring both views together and think about what’s realistic, pragmatic, but optimistic.

You’re also getting real-time feedback. We’re seeing that patients are staying on the medicine and their refill rates are strong. As you get into a launch, all those things give you a lot of confidence that the various determinants of success are positive and going in the direction you thought and hoped they would.

Kate, let me ask you this, and I’m sorry to hound on this topic—

No, no. Yeah.

—but it’s fascinating for us, as you can tell. Given all the resources you have at a company and the information you’re able to use, why do some companies get it wrong? Why do we see the IOs of the world every now and again?

Honestly, we got it wrong at Blueprint. This was a long time ago, but we had a RET-driven lung cancer and thyroid cancer drug. I would say that we got it wrong, Roche got it wrong, Lilly got it wrong, and Loxo got it wrong. We all thought the RET-driven lung cancer market was going to be a significant player.

One lesson from that humbling experience is that physician habit change is really hard, and the last mile matters a lot. We don’t talk about that last mile that often. We talk about step edits and how payers are controlling access, all the things we think about. But how do you actually change practice?

The RET inhibitor drugs are tremendous. The data was incredible: 80% response rates, 30% complete response rates. It was really undeniable. And yet neither lived up to what the acquirers or originators of those medicines expected. Blueprint was one of them.

I think part of what we saw was the challenge of changing physician and practice dynamics, along with the diagnostic dynamic. You’re sitting there with a patient with advanced lung cancer, and they need to wait 2 weeks to get their mutational profile back. In the meantime, the patient is devastated by the diagnosis and highly anxious. The physician prescribes a medicine like an IO that doesn’t require molecular testing, and the patient goes on that first. Eventually, they get their mutational profile back, and maybe they go on the targeted therapy.

We know patients will do better if they’re on the targeted therapy first and then follow up with a more generalizable therapy. In some disease states, you want the combination. These little points of friction matter a lot. RET-driven lung cancer is a great example: The data on those drugs is amazing, and patients who are on them do extremely well, but they never lived up to what many very smart people thought the opportunity was going to be.

So, Kate, on that point, we’re seeing that very routinely. We’re seeing it in RET—

Yeah.

—we’re seeing it in ROS1, and we’ve seen it in KRAS G12C. To Amgen’s credit, they consistently called this out before the launch: “Just so you know, yes, we stand by the fact that 14% of patients with lung cancer have KRAS G12C, and we believe they’re diagnosed in the electronic medical records. But getting practices to actually use the drug is a very different matter. Most of them may not follow the medical record. They might not be aware that it’s in the medical record.”

In many cases, we’re talking about things that are very rare. Physicians don’t have time to remember that, for ROS1, they should be giving this and not crizotinib or an IO. What’s the challenge there?

I’ll never forget walking into a community oncology clinic in a major metropolitan center in the United States. If you’ve never been in one, it’s hard to understand why these incredibly innovative new drugs, with incredible data sets, don’t get adopted. You walk into one of those clinics and sit down in the postage stamp-sized break room. There’s a refrigerator, and you sit in fold-out chairs with a physician who has 15 minutes to come in. You start to understand why these things have a hard time getting traction.

These physicians are overwhelmed. The waiting room is full of incredibly sick patients with numerous different types of cancer. You’re trying to get them to pull a needle out of a haystack, even though your drug has an 80% response rate. That’s the reality we don’t talk about or see, and it does take a long time.

What’s really helpful in some of these moments is getting into the big group practices and getting some of this information into their electronic pathways and EMR systems. That takes away some of the need to know the latest information just by reading about it or seeing a pharmaceutical sales professional or medical affairs professional. It takes a long time to get these things into those systems. We had a whole team of people focused on that, as do most companies, to work on updating their pathway systems. That takes some of the guesswork out of it for these really busy physicians, who see tremendous numbers of patients with all sorts of issues. I think that’s part of it.

Practice economics matter. It’s something we don’t talk about a lot. When a practice has a medically integrated dispensary and can make some margin on small-molecule drugs, that matters compared with practices that don’t. They’ve built infusion centers, too. Practice economics matter. It’s to everyone’s benefit to understand that, at the end of the day, these are businesses. They’re running a business and paying staff, and you have to understand that, too. You have to take all these things into account.

It’s hard. Some of the testing dynamics matter, too. A lot of the panel testing, which should be a great solution, isn’t sensitive enough for every one of these mutations to be used in every case. I’m many years out of lung cancer now, so I don’t even know the sensitivity anymore for ROS1 or RET.

For instance, in systemic mastocytosis, our mutation was KIT D816V, and none of the big panel tests were sensitive enough to pick that up. We had to develop a specific test, and then make sure everyone used that test, not panel testing, to identify their patients. We also had to move that test to a blood-based test, which really opened up the opportunity for SM. A noninvasive blood test, rather than a spinal tap or bone marrow biopsy, helps a lot because many patients don’t want a bone marrow biopsy, even if they’re really sick.

You have to consider what patients are willing to endure and what procedures they’re willing to go through to be appropriately diagnosed. You need the right labs, widely used by prescribers and already part of their business processes. Having your assay is super important. If someone reaches for a panel test because they want to test all the different lung cancer mutations at once, it may not give them the information they need. How do you help educate people about that? Any friction can create delays in value capture or patient identification.

At ESMO, we hosted a lunch on head and neck cancer with 2 real experts, talking about all the nuances of the drugs in development. At some point, they literally said, “Timeout. You guys in the audience know this data inside and out better than 90% of the community physicians who are going to be using these drugs. Remember that these oncology practices in the community see 90% of their volume in lung, breast, prostate, and colon. Anything outside those core areas, they’re not going to be that knowledgeable about all the nuances.” That was something that really lit a light bulb in my head.

Yeah. Every tumor type is different, but in much of oncology, 70% of patients are treated in the community. Often, the patients who eventually make their way to academic centers are later-line patients, so they’ve already seen multiple lines of treatment. That means the ability to significantly impact their outcome is lower at times.

It depends, of course. We’re talking in generalities; this is specific to each drug and tumor type. But once a patient has seen multiple lines of therapy, you certainly want to provide a benefit. In certain cases, depending on the medicine you have, if you could have gotten to them earlier, that benefit could have been much more profound.

Well, fascinating discussion. I know we went a little long with that topic. Kate, thanks for pulling back the curtain and letting us see a little more of what’s happening at companies during these very sophisticated drug launches. We only have a couple more minutes on the show. Paul, I know you wanted to highlight at least one important data point we saw today: the PepGen results in DM1 myotonic dystrophy. Do you want to introduce that topic?

Sure. DM1 is a genetic disease, and we’ve seen a mini-explosion in drug development there, with Avidity acquired by Novartis, Dyne, PepGen, Entrada, and a number of private companies too. I’m sure I’m forgetting others. PepGen has these peptide conjugates that try to bring drugs into muscle. Some of their prior data was a little mixed, but this week they put out data for a higher dose that showed, in a small sample of patients, the best impact we’ve really ever seen on splicing, which we think is at least a directional biomarker in DM1. Splicing of various genes in the muscle improved by almost 50%. Other drug programs have shown something closer to the 10% to 30% range, so it’s really interesting data, with a number of functional endpoints that look good.

These peptide conjugates also have a potential risk of renal toxicity, and it’s early days. It’s a small sample of patients, but the PepGen data at this dose looked a lot better than many thought. I think the other interesting, broader conversation—and maybe Eric can opine before we drop off—is the question of the right modality for this disease. Novartis purchased Avidity, which was doing siRNA. There was debate about whether siRNA is the right modality because the target is in the nucleus of the cell. Avidity had some early data that seemed to answer that question, only for the pivotal study to fail.

Dyne is using an antisense oligonucleotide drug, and its pivotal study for accelerated approval reads out early next year. Full disclosure: we cover Dyne, and we had believed the view that the ASO approach might be better. Its impact on splicing is better, but that still needs to be confirmed. I thought it was good, for the potential read-through to others, to see another data set in this space show concordance between splicing and some of the functional endpoints. One of the speculated reasons for the Novartis failure is that some of these functional endpoints may have greater variance or a greater placebo effect. It’s great data for PepGen and maybe an incremental positive data point for the space. Now we await the Dyne data, which are pretty binary. Anything to add, Eric?

I agree with you. The caveat is that these are all noisy data sets with relatively small numbers. They are placebo-controlled, which is nice, and these are noisy endpoints—not just splicing, where you’re trying to do muscle biopsies and find the right location, but also the VHUD endpoint and even the functional scores that are probably going to carry the most weight with the FDA.

It’s a tough indication, but it’s nice to see someone else making progress. Hopefully, that consistency is real, and the Dyne data you alluded to, Paul, show what we’ve now seen on splicing and some functional benefits. It’s obviously a very large and very needy population. Unfortunately, that’s all the time we have. I’m sorry we didn’t get to some of the topics I was hoping to cover. In particular, I was looking forward to discussing whether biotech is giving up on the R in R&D and focusing a little too much on the development side of the equation. We can come back to that and some other topics in future episodes. Thanks, everyone. Have a great weekend.