Ep. 386 - Novartis misses, pharma deals analysis, MFN carve-outs

Novartis experienced a catastrophic week with three clinical trial failures announced in rapid succession. The most impactful was the negative Phase 3 outcome for Pelacarsen (an antisense oligonucleotide targeting LP(a) to prevent cardiovascular events in secondary prevention patients). This trial failure, which wiped out $40 billion from Novartis's market cap, is complicated by multiple possible explanations: the molecule itself may be insufficiently potent compared to siRNA alternatives achieving 90+ percent knockdown versus 80 percent; the target of LP(a) reduction may not be actionable despite strong genetic associations with cardiovascular disease; or the timing and patient population may be wrong, as these patients have had decades of LP(a) damage and may require earlier intervention for efficacy. Notably, Novartis had hedged its bets by licensing siRNA programs targeting LP(a) from Chinese companies in 2024-2025, suggesting internal uncertainty about the antisense approach. Amgen and Eli Lilly are developing competing LP(a) programs (siRNA-based), and their stock declines signal concerns about the entire target class.

On a broader scale, Lauren Martz's annual analysis of top pharma dealmaking found 221 deals over the past 12 months among the top 21 pharma companies, with deal activity trending upward. The key finding is that pharmas are deliberately pursuing disruptive innovation rather than just validated targets. Bispecifics (particularly T-cell engagers for autoimmune disease) show the greatest year-over-year growth; in vivo CAR-T therapies and siRNA deals also surged, while notably, no antisense deals appeared in the dataset. This suggests a market shift away from antisense toward siRNA. Geopolitically, while China-pharma licensing deals have increased, this represents expansion of the overall dealmaking pie rather than replacement of U.S. deals—U.S. biotech licensing deals also grew significantly. However, no major M&A acquisitions of Chinese biotechs occurred, with industry sources citing excessive regulatory complexity. Eli Lilly dominated dealmaking, accounting for 40 percent of surveyed pharma deals, more than doubling its nearest competitors.

On the policy front, the Trump administration's Most Favored Nation (MFN) drug pricing initiative has secured agreements from multiple companies, but notably absent from the White House announcement were mid-tier U.S. biotechs like Vertex, Biogen, and Alkermes, which remain under pressure to sign but have shown no indication of capitulating. Insight Therapeutics signed an MFN deal outside the formal announcement, while Bridge Bio negotiated an exclusion for orphan-only drugs. Key details of individual MFN deals remain opaque, with exclusions and carve-outs varying by company. The administration is deploying two regulatory hammers: mandatory Medicare pricing models (GLOBE for Part B starting date TBD, GARD for Part D set for January 1st) and Section 232 tariffs up to 100 percent on certain drugs, scheduled for September 29. Companies face litigation risk, and significant deal details may be revealed if Congress flips control of the House or Senate.

The episode concluded with remembrance of Peter Barton Hutt, the legendary FDA law figure who passed away at 91. Hutt served as FDA chief counsel (1971-1975) and left an outsized legacy on FDA doctrine, including the adequate and well-controlled investigation standard (upheld through four Supreme Court wins in 1973 alone), the off-label doctrine (which he fought for after personal experience with his brother's medical needs), and nutrition labeling requirements.