Scorpion Therapeutics, Inc.

For any hopes the dealmaking that started the J.P. Morgan Healthcare Conference would give the overall biotechnology sector a running start to 2025, Eli Lilly deflated them Tuesday.The company, which rose to new heights on the success of its medicines for weight loss and diabetes, revealed revenue numbers that for the second time in a row fell short of investor expectations. Lilly shares fell 7% and dragged with them the stocks of several other obesity drug developers. A biotech stock index slid by almost 3%.Amgen is one of those would-be competitors and, at the JPM meeting, executives defended recent trial results for the companys rival weight loss drug. Read on for details on that and other highlights from the conference:Amgens MariTide defenseAmgens market value rose and fell by billions of dollars last year on the promise of an obesity drug called MariTide. The drug, which is meant to act quicker and be dosed less frequently than existing medicines, dominated earnings call discussions.But summary results from a Phase 2 trial failed to convince Wall Street that MariTide is clearly better than other drugs, leading analysts to question not only MariTides potential, but the optimistic picture Amgen leaders had painted before disclosing data.At a discussion with reporters Tuesday, a group of Amgen executives defended MariTides profile as well as the way in which the company presented results. We dont hype data. This is a differentiated medicine, said Peter Griffith, Amgens chief financial officer.Griffith attributed some of the especially large share price decline that hit Amgen afterwards to trading behavior amplifying the stocks initial drop. He also pointed to data suggesting MariTide resulted in comparable weight loss to existing medicines at an earlier time point, and may be able to be administered once per month or less.How many of our peers in this industry have been searching for something once a month in Type 2 diabetes? Griffith said.While investors may stay skeptical, Amgen is advancing. Its initiating late-stage studies in obesity, heart failure, sleep disorders and kidney disease, aiming to better negotiate with insurers, said Susan Sweeney, Amgens head for obesity and related conditions.I think MariTide will differentiate itself not only on the profile that we are a different product than the weeklies, which seem to be more similar to each other than not but also in the investment that we're putting behind it, Sweeney said.A lot of eyes will be on the full Phase 2 study results coming this year. Executives confirmed theyll be presented at a medical meeting they didnt say which and will include findings from a different dose escalation scheme its working on as well. Ben FidlerMercks patent hillKeytruda likely earned Merck & Co. something close to $29 billion last year.The dominant cancer immunotherapy, which accounts for a little less than half of Mercks sales, is patent protected in the U.S. until 2028.But to hear Merck CEO Rob Davis tell it, the looming expiration of Keytrudas patent protection will be more of a hill, not a cliff.In a presentation Monday afternoon, Davis said Merck was planning to offset Keytrudas loss of exclusivity by moving up plans to file for approval and launch a subcutaneous version of Keytruda by the end of 2025.We expect to be able to see adoption of about 30% to 40% of all Keytruda [patients] into subcutaneous pembrolizumab, Davis said. He expects many of these conversions will come from people taking Keytruda on its own, or in combination with oral drugs.“We're going to price to drive the adoption, so you should assume that and the price will evolve over time, Davis said.Executives at Bristol Myers Squibb, which is pursuing a similar subcutaneous strategy for its competing immunotherapy Opdivo, expect a similar rate of conversion to their subcutaneous product, which won U.S. approval last month.Merck also hopes to close the future gap from loss of Keytruda sales with its pipeline of antibody-drug conjugates, sales of its Gardasil vaccine in China and the possible introduction of an oral weight loss therapy.I feel very confident that we have derisked that outcome, Davis said. Gwendolyn WuDual-track dealmakingGSKs buyout of IDRx and Eli Lillys deal for Scorpion Therapeutics both announced Monday fit whats been a trend the past year: privately held companies opting for a deal over an initial public offering.According to Alexis Borisy, a venture capitalist at Curie.Bio, founder of IDRx and a board observer at Scorpion Therapeutics, both companies had confidentially filed paperwork outlining plans to go public. Neither got to the point of sharing those plans more widely, as both were running a dual M&A/IPO process, he said, and ultimately chose to sell.To Borisy, these deals highlight the tough decisions facing IPO-ready startups. IDRx couldve gone public, since it has a promising drug in early testing for gastrointestinal cancer, he said. But it likely would not have gotten much higher of a valuation than it received in an August funding round. The company wouldve had to sell about one-third of its shares to raise a couple hundred million dollars in an IPO, and risk its market value eroding after, he said.Instead, GSK offered $1 billion upfront for the whole company compelling enough for investors to earn returns, as well as for IDRx founders and employees to do well. IDRxs drug will now move forward with a company that can easily fund future development. (Scorpions lead drug, meanwhile, was acquired by Eli Lilly for a slightly larger upfront sum.)Those calculations are a direct factor of the market at the moment, Borisy said. Both IDRx and Scorpion are companies that, if [this were] a booming public market, maybe would become public.But in a meh, market, he added, if somebody puts an attractive bid in, investors hit that bid. Ben FidlerViking looks long termViking Therapeutics, a developer of drugs for obesity, aims to compete in a market now dominated by big pharma. As such, analysts have thought it likely the company may look to license its drug or sell entirely.Company CEO Brian Lian isnt about to say who hes talking with, but in a presentation Monday he did outline what characteristics would make for an ideal partner.Given the size of the obesity market, you would want a partner that has some experience in these large metabolic indications, you know, like a lipid background, or experience with diabetes, he said. We would prefer a global partnership. That would be probably the best.On-market competitors like Eli Lilly and Novo Nordisk have struggled to deliver enough of their obesity drugs to meet demand. On Monday, Lian sought to assure investors Viking is planning ahead on manufacturing. He said the company has enough supply of the subcutaneous formulation of its lead product, VK2735, to complete Phase 3 testing, and enough of the oral formulation to get through Phase 2.We've been working really hard to reach a long-term supply agreement that hopefully would include fill and finish for [subcutaneous] and tablet [formulations], he said. We're making a lot of progress. It's too early to make any announcements, but I think we should be in a position in the reasonably near term to update what our supply picture looks like. Jonathan Gardner '

As 2025 begins, emerging biotechnology firms can be sorted into two groups: haves and have-nots.Venture funding rose last year, but a good portion of that money was concentrated into nine-figure megarounds that became more common. Initial public offerings were primarily open only to companies that fit a certain profile. And among already public U.S. biotechs, many saw their stock prices slide as pharmaceutical companies looked elsewhere for deals.The result has been what Piper Sandler analysts described in a report earlier this month as a stock-pickers market, with the few outperformers outnumbered by many more that are struggling. That description could apply to the private sector, too, where companies focused on immunology and cardiometabolic research had an easier time winning investment.With the year looking particularly uncertain, drug startups have several hurdles to overcome in the months ahead. Here are five questions they face in 2025:How will China licensing deals affect U.S. biotech?Pharma companies and U.S.-based biotechs have for years turned to China for help making drugs or running clinical trials. Increasingly, theyre looking to China to acquire new drug prospects they can plug directly into their pipelines a trend that could have ripple effects across the U.S. biotech ecosystem.Both the number and average value of licensing deals involving drugs discovered in China reached record levels in 2024, according to data published in December by Jefferies, an investment bank. Jefferies expects a further acceleration this year. Those figures extended a reversal from 2022, when a few high-profile regulatory setbacks involving China-discovered medicines led to a dip in deals. Notably, according to Jefferies, 2024s transactions involved less proven medicines than previously and drew from a broader group of therapeutic areas possibly signaling a change in deal strategy by U.S. companies.A report last week from Stifels Tim Opler, meanwhile, showed that pharma companies are now sourcing about one-third of their in-licensed molecules from China, up from between 10% to 12% during 2020 to 2022. Merck & Co., for example, bought a trio of China-originated medicines last year that were in either preclinical or early testing. Novartis and GSK sprung for similar deals too.Analysts at Jefferies believe the pattern is the result of China emerging as a hotspot for me too better versions of drugs, enabling dealmakers to cheaply pluck assets they can quickly advance through testing. In many cases, these medicines are aimed at drug targets that have recently become coveted due to emerging clinical data from other companies.The flurry of China dealmaking may come at the expense of U.S. biotechs, whose drugs are typically more expensive to acquire because of scarcity value or because their makers are already publicly traded, Jefferies analysts wrote.While venture capitalists are forming startups around China-based drugs, too, they may end up getting bypassed by pharmas that can do the work themselves, Stifels Opler wrote. Ben FidlerWill biotech keep contracting?A year ago, biotech investors and executives were hopeful the industry had weathered the worst of a prolonged market pullback. They had reasons for their optimism, too, as 2023 ended on a multi-month stock rally fueled by a spurt in dealmaking and expectations of interest rate cuts.Instead, the sector continued to contract. More than 100 biotech companies restructured, laid off staff, or reshuffled their pipelines in 2024, according to a report from the investment firm Mizuho Securities. The industrys flagship stock indices again underperformed the broader market. Public biotech acquisitions slowed. A series of negative study readouts and rising regulatory uncertainty associated with the incoming administration brought further gloom.Along the way, the number of publicly traded biotechs declined for a third consecutive year, either through acquisitions, reverse mergers, stock delistings or outright closures. Mizuho analysts predicted such consolidation will continue in 2025, dragging the number of existing biotech companies down closer to pre-pandemic levels. About 16% had market values lower than their cash reserves, reflecting how the group is trading at what Piper Sandler analysts called in their report historically low valuations.Theres been more of the same already at 2025s start, with several struggling companies laying off staff or considering strategic alternatives, a process that usually results in a sale or merger.While more venture dollars were invested in biotech startups last year, that money went to fewer companies in the form of larger rounds supported by broader investor syndicates, according to a report from HSBC Innovation Banking.That trend could help young companies achieve goals that boost their value. But it may also saddle them with bloated valuations that make for a tougher path to the public markets, HSBC analysts warned. Ben FidlerWill the IPO backlog clear?After three years of waiting for the IPO window to open, drug startups are largely still in a holding pattern.Since hitting a record high in 2021, the number of biotech IPOs per year has settled around 20. Last years 23 stock issuances were primarily priced by biotechs with drugs in mid-to-late stage testing, according to BioPharma Dive data.Meanwhile, the startups that formed during the pandemic-era funding boom have matured. Industry watchers have maintained this backlog of companies is just waiting for the right opportunity.“It's a very long line, and that line is made up of companies all the way back from 2021, said Jon Norris, a managing director at HSBC Innovation Banking.There were signs of momentum last fall. Between September and October, eight drugmakers went public in quick succession, raising a collective $1.5 billion. Many raised more than they had intended, an indication of investor demand.But post-IPO stock performance has remained listless, with most of the companies that went public last year trading at or below their offer price. Preclinical companies have had a hard time, while some of the top performers were already in Phase 3 testing when they debuted perhaps reflecting a lower appetite for drug development risk among public investors.Startups that penciled in an IPO may therefore need to wait. Doing so will be easier for some, however, as the number of mega-rounds, or financings of more than $100 million, grew by 70% to 106 last year, according to HSBC. More than half included the crossover investors that can bridge companies to a public stock offering, suggesting a strong IPO window in 2025-2026, HSBC wrote.At a minimum, people can say, 'I don't know if the IPO market is going to be busier or not in 2025, but if I have the option not to care by staying down as a private company, then that feels like a pretty good option, said Jack Bannister, an analyst at investment firm Leerink Partners. Gwendolyn WuWhat might rekindle the cell and gene therapy field?Gene therapys problems have graduated. The field, which recorded the first U.S. approval of a gene therapy for an inherited disease just eight years ago, has now produced over a dozen marketed products, including treatments for sickle cell disease, hemophilia, muscular dystrophy, blindness and a rare brain disorder. Scores of clinical trials testing others are underway.The pipeline is perhaps even broader in cell therapy, which has grown beyond its blood cancer applications and is now seen as a promising approach for immune diseases as well.Despite those accomplishments, theres a considerable amount of gloom. Many publicly traded biotechs working in the field have had to cut costs, lay off staff or restructure their research over the past year. Some of those decisions were brought on by company-specific challenges; others by changing outlooks for the markets they hoped to enter. Large pharmaceutical companies like Pfizer and Roche have pulled the plug or written off past investments.All of that has trickled down to the private markets, where funding for new cell and gene therapy developers has ebbed, according to BioPharma Dive data.One of the chief problems the field now faces is proving that these therapies, in more cases than not, are going to be commercially viable products when they reach market.Gene therapy has come of age, but commercial launches have been largely underwhelming, wrote analysts at Piper Sandler in the sixth edition of a sector report they published in October.Bluebird bio is a case study. The company has three approved gene therapies: Zynteglo for beta thalassemia, Skysona for cerebral adrenoleukodystrophy and Lyfgenia for sickle cell. Yet the firm has come close to running out of money and, even now, doesnt project breaking even until the second half of this year.The field needs more examples of commercial success. And for new technologies like gene editing, proof that the complex and cutting-edge medicines are clearly more compelling to patients than drugs made with established platforms. Ned PagliaruloWill the upswing in private M&A continue?Public biotech acquisitions may have slowed last year, but the number of private M&A deals swelled. According to HSBC, seven were worth $1 billion or more in value, with notable deals including GSKs purchase of Aiolos Bio and Mercks deal for EyeBio.Such deals can provide the exits that private companies venture backers may be seeking when IPOs are a more uncertain prospect.“When the rubber hits the road for these later-stage companies and they can't hit the public market, what is that going to look like? HSBCs Norris said. For companies with little to show potential acquirers, it could be a year of consolidation, while others might seek out reverse mergers. According to Norris, the latter is an option when companies cant increase their valuations any higher, but need more capital to continue R&D.Pharma companies may also be in need of M&A to bolster their pipelines as they face the loss of exclusivity for some of their best-selling drugs, said Scott Beardsley, a managing partner at Novo Holdings.“[Investors] are going to have to start making money again, and I think the easiest thing to fix that is M&A,“ Beardsley said. A couple of wins with big private M&A deals could also provide a boost to public deals.On Monday, there were two: GSK bought IDRx for $1 billion upfront, and Lilly acquired Scorpion Therapeutics principal drug for up to $2.5 billion. Gwendolyn Wu '

Eli Lilly has announced plans to acquire Scorpion Therapeutics’ PI3Kα inhibitor program. Credit: Michael Vi via Shutterstock. Eli Lilly will buy Boston biotech Scorpion Therapeutics’ PI3Kα inhibitor for upto $2.5bn in cash, with the latter splitting away to form a new entity with its remaining assets. Lilly’s bid to acquire Scorpion was driven by the Scorpion’s PI3Kα inhibitor program that is centered on the drug STX-478. The drug is in clinical studies evaluating its potential in solid tumours and breast cancer in particular. As per the company, STX-478 could avoid affecting healthy human cells and selectively target cancer cells, paving the way for better tolerability. As per the deal terms outlined in a 13 January announcement, the new spinout company with its non-PI3Kα assets will be owned by Scorpion’s existing shareholders and Lilly will hold a minority equity stake in it. The news was announced amid a steady trickle of deals announced in the last few days, including one involving another oncology biotech—that of the Johnson and Johnson acquiring Intracellular Therapies . Pharma and biotech investors are expected to engage in rapid deal making in the next few days at the JP Morgan Healthcare conference 2025, which started today [13 January]. Eli Lilly already has market share in the breast cancer space with the approved drug Verzenio (abemaciclib) , and is advancing investigational drugs like the oral selective estrogen receptor degrader (SERD) imlunestrant. With its latest acquisition, Lilly will carve out a spot in the PI3K inhibitors space in breast cancer, which for long was dominated by Novartis’ Piqray (alpelisib). In October 2024, Roche had a significant win with the approval of its PI3K inhibitor Itovebi (inavolisib) in combination with Pfizer’s Ibrance (palbociclib) and AstraZeneca’s Faslodex (fulvestrant) as the first-line treatment for certain breast cancer patients. The drug is expected to yield 1.3bn in revenues as early as 2030, as per a consensus forecast by GlobalData, the parent company of Pharmaceutical Technology . PI3K inhibitors are directed toward the subset of breast cancer that are hormone receptor (HR)+. Oncology is expected to be a key area of development in 2025 having been the top therapy area with an estimated CAGR of $232,271 bn in 2024, as per GlobalData’s State of the Biopharmaceutical Industry report . Oncology trials will outnumber CNS and cardiovascular trials, with the most planned clinical trials for 2025 are for solid tumours, followed by pain, as per the report.