August 1, 2023

The need-to-know this morning

Pfizer reported second-quarter earnings that beat Wall Street expectations, but revenue fell short. Total revenue was $12.7 billion, down 53% over the same period last year, largely due to expected declines in sales of its Covid products.
Merck reported second-quarter earnings that missed Wall Street expectations but beat on revenue, led by strong sales of its cancer drug Keytruda. Total revenue was $15.04 billion in the quarter, 3% higher than the year-ago period. Keytruda sales grew 19% to $6.3 billion.
Revolution Medicines is acquiring EQRx in an all-stock transaction that adds $1 billion in EQRx cash to Revolution's balance sheet.
TG Therapeutics shares fell on the signing of an agreement granting ex-U.S. commercial rights to its multiple sclerosis drug Briumvi to Neuraxpharm. The deal dampened the likelihood that TG Therapeutics would be acquired. Briumvi sales in the second quarter were $16 million, well below Wall Street estimates.

Markets

When good news is bad news

Immunogen, a small biotech company with one approved cancer medicine, came through with a massive second quarter, reporting revenue that roughly doubled Wall Street's expectations. And then its stock price fell 10%.

That dissonance is the latest illustration of the gap between what biotech companies want — to develop and sell new drugs — and what their shareholders often desire — for them to sell themselves.

"We think investors were anticipating a near-term takeout," TD Cowen analyst Boris Peaker wrote in a note to clients. The news that Immunogen is planning to launch its drug in Europe, coupled with the departure of its head doctor, suggests there's no sale in the works. The fact that the company's drug appears to be runaway success is apparently immaterial to its stock price.

Regulatory

The thing about Ramaswamy's plan to 'gut' the FDA

Is that there's no evidence suggesting it would really benefit anyone.

Vivek Ramaswamy, the erstwhile biotech CEO now running for president, has inveighed against federal bureaucracy writ large and more recently turned his attention to the FDA, decrying its "corruption" and promising to "expose and ultimately gut" the agency.

That got the attention of STAT's Matthew Herper and Adam Feuerstein, who have spent years reporting on the FDA and who covered Ramaswamy in his old job. They sat down to have a look at just what the FDA does, how it affects patients and drug companies, and what it would mean if Ramaswamy got his way and dismantled it entirely.

Read more.

R&D

Why does pharma throw so much good money after bad?

A group of U.K. researchers set out to explain just how the drug companies wind up wasting billions of dollars on medicines that never pan out, despite watching their competitors try and fail with the same idea. Their findings boil down to two things: Science is hard, and groupthink is real.

The research, led by University of Edinburgh professor and former biotech analyst Jack Scannell, looked at 16 drugs aimed at IGF-1R, a yesteryear buzzy target for treating cancer. Over the course of two decades, drug companies spent about $2 billion to enroll roughly 12,000 patients in more than 180 cancer trials of IGF-1R inhibitors, and not one generated sufficient data to warrant regulatory approval.

Why did they persist for so long despite mounting evidence of futility? One explanation is that it's difficult to discern from mouse studies whether a given drug will benefit people, a problem that pervades translational science. But in the case of IGF-1R inhibitors, Scannell's team surveyed published preclinical literature and found that many of the drugs in question hardly impressed in the earliest stages of development. The other explanation is that company management, "faced with strong competition and the need to fill their drug pipelines, proceeded in a case of herd instinct," the researchers write, wasting money on IGF-1R research in the time-honored fear of missing out.

Venture

Biotech VC might be back on the upswing

The regular pace of $100 million Series A round for biotech companies is now a relic of the mid-pandemic boom, but a surprisingly high-dollar seed investment suggests the sector might be heading back toward its old profligacy.

Solu Therapeutics, a company co-founded by serial biotech entrepreneur Christoph Westphal, said today it had raised $31 million in an "oversubscribed" seed financing, co-led by Westphal's Longwood Fund and Santé Ventures. For context, the average seed round was just $4.5 million in 2020, according to Nature, and Series A rounds averaged out at $34 million each.

Whether the Solu financing is an aberration or a sign of things to come remains to be seen, but 2023's gradual reemergence of a market for biotech IPOs could embolden VCs to spend bigger on early-stage companies, inflating funding rounds and nudging biotech back toward its recent heyday.

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