The Friday Biotech Perspective #39
Washington uncertainty, Trump tariffs dismantle global drug development
Before the April 2 “Liberation Day,” the Perspective expected the normal transition of leadership at the FDA and the National Institutes of Health (NIH) would cause short-term disruption in drug development. But several events in the days before April 2, combined with the “Liberation Day” tariffs of Trump II, transformed the short-term disruption into medium-term suspension as no one knows right now how drug development will advance in the US.
And while the path may be more certain for ex-US companies in ex-US markets, all biotech and pharma companies want to sell newly developed drugs in the US. How, or when, that will happen now is up in the air.
Accordingly, Biotech Currents plans to pause stock selections, likely at least through the end of April. Like everyone else, the Biotech Currents portfolio crashed ~20% in recent days. That figure applies to all holdings but particularly to the most recent stock picks in 2025 which did not release any news, good or bad. As the bottom is nowhere in sight for biotech and pharma, it makes no sense to initiate a position on a future catalyst when the stocks are likely headed for additional declines before June 30.
The responses by the NIH, the Center for Disease Control (CDC) and the FDA to the Covid19 pandemic heightened public awareness to the siloed inefficiency of the federal apparatus directed at core research and public health. The CDC did not just stumble out of the gate to develop a diagnostic test for Covid19, it fell flat on its face. In 2020, the NIH and the FDA always appeared at odds with each other about how a vaccine should advance and held petty turf wars on the topic. Improving and streamlining how the US responds to disease outbreaks and approves new treatments are worthy objectives for any new or current administration. The three federal healthcare agencies probably need to be shaken up – but competently.
Instead, the past week’s dismantle involved chain saw staff reductions and the personal agenda of new HHS secretary Robert F. Kennedy Jr. Kennedy, a vaccine skeptic, on March 28 presented the FDA’s Peter Marks with a choice of resigning or being fired. Marks was a key official in Operation Warp Speed to produce a Covid19 vaccine in 2020. Marks chose to resign. The following Monday, April 4, the stock of pneumonia vaccine developer Vaxcyte, Inc. (NASDAQ:PCVX) fell 55% because of Marks’s resignation. Investors concluded the company’s VAX-24 vaccine would receive no support at the FDA with Marks’ departure and Kennedy’s agenda. The 55% decline came on the exact day Vaxcyte announced positive phase II data for VAX-24. Shares of VaxCyte then slid another 16% after “Liberation Day.”
Kennedy also apparently was involved in an FDA decision to delay full approval of a Covid19 vaccine from Novavax, Inc. (NASDAQ:NVAX). The company’s Covid19 vaccine currently owns an emergency use authorization but Novavax was seeking a full approval, similar to uses granted to Covid19 vaccines from Moderna, Inc. (NASDAQ:MRNA) and Pfizer (NYSE:PFE). Novavax said it had complied with all the FDA requests for approval by April 1 but the company continues to wait on action from the FDA and had yet to receive an official decision.
Regardless on one’s personal opinion about vaccines, both Novavax and Vaxcyte met established scientific and regulatory standards for their drugs to move forward. An arbitrary decision by Kennedy to halt the vaccines is not tenable for himself as an administrator or for the industry. Any decisions about vaccine use always will be made by individuals and their physicians. In essence, the patient market. Just ask Merck & Co., Inc. (NASDAQ:MRK) how often it’s lowered sales targets for its Gardasil 9 vaccine for sexually-transmitted human papillomavirus (HPV) infection. The actor Val Kilmer, a Christian Scientist, died this week at age 65 after complications from pneumonia. Either Pfizer’s or Vaxcyte’s vaccine likely would have prevented Kilmer’s relatively early passing, had he chosen to use one.
At some point, pressure will mount from patient advocates, credible scientists, and Congressional representatives from states with large research institutions to rein in the petty Kennedy agenda, not just regarding vaccines but also new cell therapies and technologies such as CRISPR. Science moves forward. A common economic argument is $1 spent by government toward medical research yields $5 in GDP growth. Most politicians understand that cost-benefit analysis, which is why it has supported government funding of research. And that growth should be shut down because of a tariff war and the Kennedy agenda?
Fortunately, a positive development during “Liberation Day” week exposes why the sharp biotech downturn cannot last forever. While the biotech market was crashing on March 31, the stock of Corcept Therapeutics Incorporated (NASDAQ:CORT) soared 80% after the company announced its drug relacorilant succeeded in a phase III trial as a treatment for platinum-resistant ovarian cancer. How could that happen? In drug development, the data always wins the day, even when it runs into a petty agenda.
Do Kennedy and his recently approved surrogates – Martin Makary at the FDA and Jay Bhattacharya at the NIH really want to hold back a new treatment for ovarian cancer, a notoriously difficult cancer to treat?
We’re about to find out. A modest test will be if the FDA approves Abeona Therapeutics Inc.’s (NASDAQ:ABEO) prademagene zamikeracel (pz-cel) to treat the rare disease dystrophic epidermolysis bullosa (DEB) on April 29. DEB is a genetic condition in which a missing protein called type 7 collagen (COL7) causes the skin’s upper layer to disconnect from its lower layer. Multiple drug candidates are attempting to treat the disease, ranging from gene therapy to RNA-directed drugs. Pz-cel is an autologous cell therapy,
The FDA issued a complete response letter one year ago citing chemistry, manufacturing and control (CMC) issues with Abeona’s production of pz-cel. While CMC rejections are common for small companies like Abeona, a year is usually sufficient to correct deficiencies. Like Novavax, Abeona claims its application and data satisfied the FDA, according to its communication with the FDA. The FDA decision is to be based on correcting the CMC deficiencies.
Messieurs Makary and Bhattacharya, the spotlight turns to you.