Episode 143 - May 30, 2025

Summary

• Summit’s PD-1×VEGF bispecific missed overall survival by a whisker — p=0.0575 on an underpowered trial — sending the stock down ~25% despite a PFS hit and a ~20% mortality-risk reduction in Western patients. Tim Opler’s take: “if I had cancer, I’d be very interested in this drug… this should be a big drug,” but Mike Yee warns the FDA now faces “a tough call” given its stated OS requirement — with AstraZeneca’s Dato-DXd also facing a July PDUFA without statistically significant OS.
• Tim’s categorical call: VEGF×PD-1 “is going to become the backbone standard of care in oncology,” which makes Pfizer’s 3SBio license look potentially cheap rather than expensive. Having bought Seagen, Pfizer now has a backbone therapy of its own for ADC combinations rather than relying on Summit’s clinical development — “very astute,” and it’s “frankly surprising” other players haven’t followed yet.
• The long-promised M&A wave keeps not arriving, and Tim’s explanation “starts in the White House” — Liberation Day tariffs, MFN, and macro uncertainty freezing pharma balance sheets. Meanwhile his actual project book is at record volume but “they’re all commercial stage”: with hundreds of approved-drug biotechs trading cheaply, “why would you buy the phase two when you can go and buy the commercial asset?”
• Sentiment has capitulated to the worst readings in the history of Endpoints’ biannual survey — 94% call the IPO/follow-on market poor, and almost 90% call valuations low or very low — with the XBI under 80. Mike’s contrarian frame: this is largely priced in, the real overhang is regulatory (the XBI fell 7% the day Vinay came in), and Makary and Prasad are now on a visible effort to ease concerns.
• iTeos winding down and returning its $600M+ rather than reverse-merging is a capitulation signal Nina Kjellson reads literally: boards “voted with their wallets” that nothing public or private beats returning cash. The PIPE market is absent, crossovers have abandoned early clinical, and Tim cites Bruce Booth’s “wisdom of crowds” defense of target crowding, while Josh Schimmer counters that TIGIT, like PD-1, is an obligate combination asset where companies need control of their own destiny.
• Vaccines are “definitely under siege” — new guardrails seek placebo-controlled trials for under-65s, Moderna withdrew its flu-COVID BLA, and NIH stopped supporting an mRNA bird-flu vaccine worth about $750M to Moderna — but Mike’s key question is whether the damage stays contained. Tim sympathizes with Moderna’s all-in respiratory-vaccine bet; Chris contrasts it with BioNTech’s pivot to cancer “including, by the way, VEGF PD-1” — “you couldn’t have called opposite direction.” With a ~$10B cap burning ~$4B/year, Chris warns of “being the next Bluebird.”
• Gilead’s June 19 lenacapavir PDUFA is the barometer trade for FDA functionality: a fast review of a twice-yearly HIV-prevention injection with 99% to 100% prevention that impacts up to a million people. Mike is “a little bit nervous about whether they make this difficult” — if this obvious application proceeds without FDA delays, it would support the second-half-relief thesis into a “relatively lackluster ASCO” where Merus was the splash, with its stock approaching a $5B market cap on head-and-neck and other indications.

Deep dive

1. Summit misses OS at 0.0575 — and the VEGF×PD-1 backbone thesis survives anyway

• Tim’s good-news/bad-news framing: the drug cut mortality risk ~20% in Western patients — “would you pay money to take this drug? The answer is heck yeah” — but OS significance missed at 0.0575 because “the trial was underpowered. That’s all… you don’t know till you know.” Summit was very aggressive in moving into Phase 3, so it will probably have to do more work; studies are already underway.
• Mike’s harder edge: expectations were super high, and “it didn’t hit — call a spade a spade.” The FDA has been clear it requires OS, so “that’s a tough spot they’re in” — and he flags AstraZeneca’s Dato-DXd July PDUFA, also without statistically significant OS, as an interesting read-through.
• The underappreciated positive: Western and non-Western Asian populations “basically align” — hazard ratio ~0.79 here versus 0.80 in the Chinese label — making the non-Chinese data an important positive point for the program.
• Tim’s Pfizer/3SBio logic: Pfizer partnered with Summit, then licensed 3SBio’s differently structured PD-1×VEGF with “really good data” — post-Seagen, “they don’t have to rely on someone else’s clinical development” for their ADC combinations. “Maybe the price was low. Who knows?” The evolution now is how the new backbone combines with emerging ADCs like TROP2.

2. Why the M&A wave hasn’t come: uncertainty, overpayment math, and no scarcity

• Tim’s mea culpa: in January or February he predicted heavy 2025 M&A from his banking vantage point; the simple explanation for the miss “starts in the White House” — Liberation Day plus MFN plus macro uncertainty telling pharma, “This is not the time to take our balance sheet and spend it.” He hopes July tariff resolution helps, but “candidly at this point I don’t know.”
• Tim’s analysis of filings: acquirers’ projected revenues run ~25% above sell-side consensus, which itself runs ~25% above reality — pharma attributing ~50% too much success. The perverse implication: the likeliest sellers are those most worried about missing consensus, “completely antithetical to every investor’s general approach.” His conclusion on timing: “doesn’t matter — it can’t shape your investment decision process.”
• Chris’s Gilead/Celgene-era framework: two urgency drivers — scarcity value (“is this the only game in town?”) and fear valuations run away. With crowded targets and China supplying similar assets, both are absent, creating a lack of urgency.
• Nina on why pharma waits at the early stage too: with crossovers gone from early clinical, the IPO window “for all intents and purposes [is] closed,” and no competitive bid pressure, “you can spend a lot of time doing diligence… and still decide to stay on the sidelines until the next card is turned over.” Chris says the Series B through clinical proof-of-concept remains “the most elusive deal.”

3. The deals that ARE happening: commercial-stage, and echoes of 1982

• Tim is working “a record volume of M&A deals… they’re all commercial stage.” Hundreds of approved-drug biotechs trade poorly, so “why would you buy the phase two when you can go and buy the commercial asset?” R&D-stage companies now must be genuinely standard-of-care-changing — “by definition there just aren’t that many.”
• Chris’s complement: small/mid-cap biotech is “notoriously terrible at commercializing,” often valued below its post-POC Phase 2 level — “a nice value-de-risking, value-shopping opportunity” for pharma with existing infrastructure via tuck-ins. Chris’s historical analogy: the 1982–1988 Reagan-era stretch produced “a ton of commercial acquisitions” before markets fully revalued them.
• Mike’s green shoots: a couple of private financings in the last two weeks, including a billion-dollar private company, plus fresh takeout rumblings — with no confirmed target identified. Josh says the earlier, more desperate companies willing to go first may be a promising sign as things settle out.

4. Sentiment has capitulated — worst Endpoints survey readings ever

• Chris’s numbers from the recently published survey: 59% rate VC investment flow “poor” (90% poor-or-fair), 94% rate the IPO/follow-on market poor with zero positive responses, “not at all confident” on capital access running three times worse than the 2022–23 trough, and almost 90% calling valuations low or very low. His read: “hopefully that’s a sign we truly have hit rock bottom.”
• Mike’s investor framing: low valuations and universal negativity are “largely reflected” in prices; the year’s rally died on tariffs and FDA fears — “the day Vinay came in, the XBI was down 7%.” Now Makary and Prasad are trying to ease concerns — Vinay at Goldman the prior week and Marty at an upcoming Jefferies fireside — though “the rubber needs to hit the road and we need to see PDUFA dates.”

5. iTeos returns the cash — and the crowding debate it crystallizes

• Nina’s reading of the wind-down: within two weeks of getting its TIGIT back from GSK, a board sitting on more than $600M with an “exceptional management team” chose to return the cash, following Allakos, Kronos Bio, and Third Harmonic — “the boards really voted with their wallets” that nothing public or private offered a better return. It is necessary pain that shrinks the denominator of public biotechs, though almost 175 employees now need landing spots.
• Chris asks whether returning money rather than merging is a bad sign. Nina says candidates were “lined up to knock on that door” — it’s about accessing balance-sheet capital, not being public — but the coincident PIPE market “hasn’t been there,” and if holders prefer their cash back, the deal may not get shareholder support. Josh adds: “Everyone has to agree and be behind it. If it’s not, it’s not a deal.”
• On Bruce Booth’s “wisdom of crowds” post defending target crowding as “a feature not a bug,” Tim says biotech takes longer than tech to determine whether a crowded target will work and which program will differentiate, even where roughly 150 programs pursue one target. Josh’s refinement is that TIGIT, like PD-1, is “an obligate combination asset… it’s about control of your own destiny.” Chris notes that Bruce’s piece was a balanced discussion, not an unqualified defense of crowding.

6. MAHA, vaccine guardrails, and Moderna’s impossible position

• Nina’s tour of the May 22 MAHA report: 100+ pages, with citations partly “misgenerated by AI,” on childhood chronic disease, overmedicalization, environmental toxins, and GRAS excipients — with the replication crisis a strong Bhattacharya priority at NIH. Striking omissions: social media/screen time, alcohol, and tobacco. The read-through: greater scrutiny of childhood vaccines.
• The new FDA guardrails seek placebo-controlled trials for COVID and flu vaccines in under-65s, with hospitalization and death — not titers or symptoms — as the relevant prophylactic endpoints. Moderna withdrew its flu-COVID BLA to refile next year; NIH stopped supporting an mRNA avian-flu vaccine worth about $750M to Moderna even as 50–60 million chickens were culled. With 70–80 human cases and the virus not particularly pathogenic in humans, Nina says, “maybe that juice isn’t worth the squeeze.”
• Mike’s containment thesis: MAHA is mostly food and agriculture; vaccines are a niche area for biotech but “definitely under siege.” The question that matters is whether the next six months show regulation of new cancer, rare-disease, and autoimmune drugs is “not too abrasive.” Moderna may also face an imminent PDUFA for its refrigerator-stable next-generation COVID vaccine.
• Tim sympathizes with Moderna because it “bet the farm on vaccines.” Chris contrasts that with BioNTech’s pivot to being all-in on cancer, “including, by the way, VEGF PD-1” — “you couldn’t have called opposite direction.” With a ~$10B cap burning nearly $4B a year against $8B cash, tough decisions loom — Chris says it could risk “being the next Bluebird.” Tim adds: “There are a couple of venture firms they could acquire.”

7. Lenacapavir as FDA barometer — and the case for taking the listening tour

• Mike’s June 19 setup: Gilead’s breakthrough-therapy six-month HIV PrEP injection, 99% to 100% prevention, “overwhelmingly obviously positive” risk-benefit. He sees it as a test of whether FDA resources and headcount concerns create delays, whether a very fast review can complete within six months, and how the agency handles large populations where post-approval safety matters. “I’m a little bit nervous about whether they make this difficult” — biotech needs this one to go right.
• Tim on the report’s autism focus: RFK “sometimes sounds a little bit loopy… but they’re talking to the right people” in the KOL community — a consequential, under-invested disease that might finally draw capital. Chris adds that portfolio companies in pediatrics, including one in the NICU, see the regime change as opportunity, not just threat.
• Nina’s call to action: industry is “very shy to go on the record with constructive criticism… fear that might come back and bite you later,” but BIO is organizing listening-tour access to Makary and FDA — she offers to help facilitate. Chris agrees, and says companies that provide constructive feedback may have a chance to do better.

8. Readouts: Prothena’s post-hoc curse, an oral carbapenem, and ketamine economics

• Mike has covered Prothena for a decade — “what a rise and fall and rise and fall” — and the AL amyloidosis antibody that failed at a futility analysis seven years ago, was rerun based on a subgroup, and “here again failed again”: the stock is around $4, below the company’s roughly $300M cash position, with all scenarios under evaluation. Nina’s caveat: the AL thesis remains “worthy” — this antibody was “not quite designed” for AL, but rather SAA.
• Nina on Spero: potentially the first oral carbapenem, GSK-partnered in complicated UTI, stopped a 2,000-patient active-controlled study early after hitting noninferiority — a $150M milestone and a stock up ~215%. Nina notes that hospital formularies make market access challenging and venture ROI tough. Chris adds that anti-infectives have a higher probability of successful translation after Phase 1 than “pretty much any other indication”; Tim notes that Cubist/Merck remains the reference exit.
• Tim’s ketamine detour, while Josh was unavailable for the Gilgamesh discussion: J&J’s esketamine crossed $1B in sales by training outpatient pain centers — centers that, back in the day, might have pushed some of the wrong drugs — with drug and services bundled into one profitable payment. The lesson: “incentives for providers matter” for how much a drug actually gets used. Nina flagged the Naurex founders’ new next-generation NMDA PAM startup with strategic money from Lilly and AbbVie.

9. Into ASCO and Jefferies; Regeneron wins 23andMe

• Mike, from the airport: “a relatively lackluster ASCO” by historical standards. Merus was the splash — its head-and-neck data accompanied a stock approaching a $5B market cap — plus the DLL3 space, where Amgen’s tarlatamab will have survival data and Mike calls it a billion-dollar drug; Zai Lab and I-Mab are fast-following with “some better drugs.” Summit hosts a Sunday event, though its data isn’t at ASCO. With Makary at Jefferies Thursday: “there’s probably only some relief for the second half of the year.”
• Nina on Regeneron/23andMe: a genetics-based discovery company “from inception,” so the logic is clear — but Anne Wojcicki is challenging the bankruptcy sale, and a Congressional rider seeks protections for identifiable consumer genetic data in bankruptcies. Tim closes it out: “bravo for them… I don’t see any particular threat to patients.”