May 9, 2023

The need-to-know this morning

Novavax, the struggling maker of a Covid-19 vaccine that failed to find its way into a sufficient number of arms, is laying off 25% of its employees as part of a restructuring plan that aims to slash operating costs by 40%-50% in 2024. Novavax reported first-quarter revenue below analysts' consensus estimates and reduced its sales forecast for the remainder of the year. The company continues to work on an updated Covid vaccine for the fall season and a combination Covid-flu vaccine.
Bluebird Bio reported the first commercial infusion of Zynteglo, its approved gene therapy for beta thalassemia, from which the company expects to report revenue in the second quarter. Bluebird's financial health remains a concern with $364 million in cash on hand at the end of the first quarter, and a full-year cash burn expected in the range of $270 million-$300 million.

Biotech

EQRx is giving up its grand ambitions

EQRx, a company that aimed to lower drug prices by introducing inexpensive me-too medicines, said yesterday that it has abandoned that plan entirely and is laying off nearly 60% of its workforce.

As STAT's Matthew Herper reports, the company's plan of competing on price with high-dollar cancer drugs was derailed in part by the FDA's decision to reject drugs whose supporting data came from Chinese studies. Now, EQRx will focus on only one of several drugs it was developing and on licensing new therapies with the $1.3 billion it has left from going public in 2021.

"It sucks," said Alexis Borisy, the venture capitalist who co-founded EQRx and served as its first CEO. "But if you don't try, you definitely will never bring new things to happen. It didn't work out the way we wanted it to, and we're doing what needs to be done. But it still sucks."

Read more.

Regulatory

Here comes a watershed day for gene therapy

On Friday, a group of advisers to the FDA will gather to discuss whether Sarepta Therapeutics' gene therapy for Duchenne muscular dystrophy deserves an accelerated approval, and the meeting could have lasting implications for patients, rare-disease research, and how promising new medicines are regulated.

As STAT's Jason Mast reports, the process has already stoked controversy. The gene therapy, SRP-9001, appeared headed for approval until March 16, when the FDA told Sarepta it would hold a hearing, despite previous assurances it would not. STAT subsequently reported that agency reviewers were preparing to recommend rejecting the drug before a top official intervened and directed staff to call a hearing to give the drug a public evaluation. And then there's the baggage from Sarepta's last FDA hearing, in 2016, which preceded the polarizing approval of its first Duchenne drug.

"The field will be watching this very closely," said Roger Hajjar, head of gene therapy at Mass General Brigham.

Here's a cheat sheet on the background, stakes, and potential ramifications of Sarepta's big meeting. And a heads up that Jason and Adam Feuerstein will be live-blogging the hearing on Friday.

Activism

Activists prevailed over Exelixis

Exelixis, facing activist pressure to slash its research spending and return money to shareholders, appears to have caved to an agitated shareholder, standing down in what was shaping up to be a proxy fight.

Ahead of its quarterly earnings call yesterday, Exelixis said it would not contest Farallon Capital Management, an investment fund with a roughly 7% stake in the firm, in its effort to replace three of the company's board members.

It started last month, when Farallon published an open letter accusing Exelixis of misallocating the proceeds of cabozantinib, its successful cancer drug, and funding a "large, unfocused R&D program without an organizing principle or strategy." In response, the company agreed to add two of three Farallon-nominated board members and spend $550 million on share buybacks.

But that wasn't enough to convince Farallon to stand down, and until yesterday, the dispute was headed for a proxy fight, with the company saying in a letter to shareholders that Farallon's plan "calls for Exelixis to largely eliminate R&D spending in favor of near-term capital return to shareholders," which "is short-sighted and value destructive."

Now that Exelixis has decided not to contest the election of Farallon's third board nominee, the proxy fight has been averted, but the future of the company might look considerably different.

Policy

Why is the IRA biased against pills?

When scientists dream up new medicines for dire diseases, they look to biology before deciding whether the best tool is a monoclonal antibody, a custom-built mRNA, or a small molecule that might be delivered through a pill. But because of a provision in the Inflation Reduction Act, small-molecule drugs will face Medicare price negotiations years before other types of treatments, a policy that will disincentivize investing in what has been a pillar of modern medicine.

That's according to Eli Lilly head scientist Daniel Skovronsky who, writing in STAT, urges Congress to level the playing field between large and small molecules. "Without this parity, research in small-molecule medicines will languish," Skovronsky writes. "And that will hurt patients with challenging diseases. Estimates from 2017 suggest that 85% of disease targets were 'undruggable.' But, because of their size, precision small molecules can reach a number of these targets."

Skovronsky's point will be familiar to anyone who listened to the industry's many objections to the IRA writ large. But it's notable that he has homed in on one specific provision rather than contesting the broader idea of Medicare negotiating certain drug prices, suggesting pharma might be willing to live with the program if minor tweaks are made.

Read more.

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