Ep. 355 - Capital market mood, Xenon data, Friedreich ataxia pipeline

Biotechs have been pricing follow-ons at a steady pace, with some companies parlaying data into upsized deals, and others even beginning to debut on NASDAQ — but will geopolitical tensions and war in the Middle East scuttle the forward momentum? On the latest BioCentury This Week podcast, BioCentury’s analysts take the temperature of the markets for biotech."
They also discuss last week’s late-stage epilepsy data from Xenon Pharmaceuticals, which revived the biotech’s stock and the Kv7 target.
And, in a Rare Disease Spotlight, BioCentury’s analysts discuss how Friedreich ataxia is moving into a mechanistic second act, with biotechs pivoting from stabilizing the mitochondrial damage caused by frataxin loss to developing therapies designed to fix the gene itself.

View full story: https://www.biocentury.com/article/658810

#BiotechMarkets #EpilepsyResearch #Kv7 #RareDisease #GeneTherapy

00:00 - Introduction
03:23 - Market Sentiment
09:58 - Xenon Phase III Win
18:03 - Friedreich Ataxia Pipeline

To submit a question to BioCentury’s editors, email the BioCentury This Week team at podcasts@biocentury.com.

Transcript

0:00

[AI-generated transcript.]

Jeff Cranmer: 0:02

Biotech follow on financings have been getting out with some upsizing on the back of good data, we're also seeing IPOs get out on Nasdaq, but will geopolitics scuttle this new momentum? We'll discuss the capital markets for biotech on this week's BioCentury This Week podcast. Plus late stage epilepsy data from Xenon are reviving the biotech stock and the Kv7 target. And in our rare disease spotlight. We'll take a look at what's in the pipeline for Friedrich's ataxia. I'm Jeff Cranmer, host of the BioCentury's This Week podcast. And joining me today are my colleagues.

Stephen Hansen: 0:53

Stephen Hansen, Director of Intelligence.

Selina Koch: 0:56

Selina Koch, Executive Editor.

Danielle Golovin: 0:58

and Danielle Golovin, Senior Biopharma Analyst.

Jeff Cranmer: 1:02

Well, we've just wrapped our Fifth East-West Biopharma Summit in Seoul. I am back in the Bay Area and deeply jet lagged. But, very impressed with what is happening in Seoul and in Daejeon around biotech. Good energy, it's really starting to buzz. We had investors and companies from all over Asia, from Europe, from Canada, from the U.S., checking out what is happening in Seoul, and there really does seem to be good energy there. So look for more out of Korea. You could check out our recent coverage. We took a look at some neurology companies that are starting to make their mark raising significant venture capital. And we're also starting to see some Korean biotech setup shop in Japan at the iPark Center. that's a former Takeda site. You can check out more on the special edition of the podcast that we recorded live on stage at the event. It was the final event of the conference and we put that out on Friday. So you can get thoughts from two of the attendees from the conference, uh, as well as Josh and Simone. And it's well worth checking out. And now BioCentury's Energy turns to Bio€quity Europe. Right, Stephen? That'll be in

Stephen Hansen: 2:29

Yeah,

Jeff Cranmer: 2:30

You'll be, uh, taking the podcast on the road in Prague. Yeah.

Stephen Hansen: 2:34

that's right. But I, I wanted to ask you, Jeff, so what was your favorite food that you had while you were in Seoul?

Jeff Cranmer: 2:38

Uh, galbi, I probably had galbi twice a day. Um, goes.

Stephen Hansen: 2:43

I, I'm, I'm sorry. I'm a little naive. What is, what is galbi?

Jeff Cranmer: 2:47

galbi it's, uh, grilled ribs and they, they sort of.

Stephen Hansen: 2:50

Ooh.

Jeff Cranmer: 2:51

Set up a nice, like either hot coals right on the table in front of you, or you know, some other contraption and, uh, they cook it right there for you. Goes down very well with, uh, insert delicious Korean beer of your choice, Korean beer's, very, very light, um, which is, is somewhat dangerous. Uh, and a little bit of soju. And of course, kimchi with every meal. That was, uh, definitely, uh, definitely the way to go. But yeah, I snuck out many times and, and, and got some good galbi. Alright, Stephen, um, there's a war going on. And, uh, I am curious, you, you know, you've been watching the markets. You, you had, uh, you know, your 2026 preview. You said that biotech's back this time, it's, it's for real. Um, we've been seeing some follow-ons. Uh, companies have been upsizing the follow-ons based on good data. Xenon, latest example. Couple of IPOs have gotten out and what's this geopolitical turmoil going to do to that positive vibe we've been seeing in the biotech markets?

Stephen Hansen: 3:58

Yeah. Thanks Jeff. So. it's, I mean, the, the very short summary is, it's, it's, it's kind of good news and bad news, I think. Right? So, um, as, as you mentioned, uh, follow-ons are still getting done. Often it's on the back of positive catalyst, but I think we've seen a few opportunistic deals get done as well. Again, as you mentioned, uh, we saw two deals get substantially upsized last week, which is a pretty, you know, that's a really good indicator for investor demand, particularly generalist demand, because, you know, when deals get upsized 150, 200 million, usually those are pretty large checks that are going into those, those deals. So that's a good sign. So, um, just kinda looking at the numbers, kind of where things stand for the quarter. You know, I know we still have a couple weeks to go here, but, there's been over 7 billion raised so far in the first quarter of 2026 for follow-ons. And, you know, kind of relative to where we were last year, that's actually really good. That's almost as much as was raised in the entirety of the first half of 2025. From that perspective, you know, thumbs up. I think it's pretty, pretty positive sign. We've had seven IPOs on NASDAQ so far. Only three of those are right now above issue price, so kind of mixed performance and kind of this first group that's come out. And the last three have been underwater. Two of those were multi-billion dollar valuations at the IPO. So you can discuss whether you think that that is an issue around valuation or, or what have you. But the numbers aren't as good for venture financing, at least not to this point. So industry is raised about $5.4 billion in private financings so far this year. I'm sure a few more deals will come in before the end of the quarter, but if that number were to hold, it would be the lowest aggregate for biotech venture raised in a quarter since anybody want to guess? Jeff, you wanna guess? Gimme a year?

Jeff Cranmer: 5:44

A year. Um. Hmm.

Stephen Hansen: 5:46

Danielle, Selina,. You guys can chime into, gimme your best guess.

Jeff Cranmer: 5:49

2008. I'm gonna go way back.

Stephen Hansen: 5:52

Selina, what do you think?

Selina Koch: 5:54

Dang, I know we've done these analysis before. I can't conjure it pre COVID,

Stephen Hansen: 5:59

Don't cheat. Yeah. Okay. Danielle, what do you think?

Danielle Golovin: 6:02

I was gonna say 2018. I think Danielle wins. So, uh, if this number holds, it would be the, the lowest quarter for venture money raise since 2017. So nine years or so.

Selina Koch: 6:16

But about how far Stephen?

Stephen Hansen: 6:18

Uh, not a lot. I mean, it's not bad, you know, it's not, this isn't, it's not, we're not talking like desert type of, uh, you know, no money at all getting raised, but, but it's, it's sort of noticeable if you look back over the years, over the quarters. There's a fairly steady kind of like, kind of baseline that you kind of see, and then you get these little spurts where you get a lot of money being raised, but then it kind of will revert back to that kind of baseline. And this is, tucking in below kind of that kind of 10 year baseline, I would say. You're right to point that out. It's not, I'm not, you know, calling the death nail of, uh, private financing here, but it's, but it's noticeable that it's, you know, below that given how well things were going in the second half of the year.

Selina Koch: 6:56

Yeah, but do you think it's sort of like, um, we often see public markets sort of when you are in a recovery recovering faster, there's like a lag in the venture side?

Stephen Hansen: 7:05

You, you're right. Yep. And that's probably part of what's happening here is we're probably partly seeing a lag here, you know, it could also just be, and this isn't very much me talking off the top of my head here now without any reporting to go to this, and, but. I also wonder if the fact that we had started to hear that there was a bit more competition in deals, you know, there were more people vying to get into some deals. I'm, I'm just wondering if valuations are starting to creep up, if maybe some investors are being a little more maybe selective in what they're doing as opposed to the last couple of years where, you know, I think valuations were maybe bit more attractive for VCs. And so, you know, something that we can maybe, uh, dig into and see if, see if something like that's at play. But I ju it just was, thought it was an interesting thing that kind of jumped out at the numbers, uh, to me. But to come back to, you know, what Jeff was saying about and how kind of the geopolitics sort of plays into this. And that's I think where, when you look at the XBI, so it's largely kind of trading flat so far this year. Which relative to, you know, tech and the S&P 500. That's actually not bad.'cause those are both trading down so far a year to date.

Jeff Cranmer: 8:12

And the XBI had a very good year last year, right?

Stephen Hansen: 8:14

And that's right. Yep. It did. It did. But there was also, you know, going into the year, there was every expectation that, you know, that was going to continue. But I think that can sort of lackluster performance. I mean, I think all of this is just sort of due to the macroeconomic kind of chaos, right? That's kind of hit the markets. And there's several different levels of this. I mean, I think it's beyond just what we're seeing from the, the conflict in Iran. I mean, there are fears that private credit markets, you know could sort of implode and potentially lead to a recession. Obviously you've got oil prices, you know, that could trigger a return of inflation. That in turn puts more pressure on the Fed with regard to interest rates. So, I think all those things are sort of playing in the background and making this really just a lot more volatile. And, you know, I think it's the same thing we saw right around when the Ukraine, Russia war started was just the increased volatility, just made things a lot tougher. And so I, I anticipate that until there's some maybe closure on this, that's probably gonna continue. Obviously I think we have the Fed decision this week as well, so we should maybe get some hints from them on kind of how they're thinking about this. Although obviously Powell is gonna be stepping down in May, so that may be interesting to see how the new chair kind of approaches rates and inflation, if this conflict kind of draws on and inflation gets a bit sticky. I think that's, that's sort of the, that's sort of the downside to where things stand and maybe why wouldn't be a surprise if there was a bit of a maybe a lull in some of that financing activity over the next month or two, just as people wait to kind of see where things land.

Jeff Cranmer: 9:48

All right. Well thanks for that, Stephen. I know you're beginning to put out calls for your 2Q Public Markets Preview. So, uh, we'll get an update in a few weeks. And let's turn now to talk about one of these companies that's upsized, on some good data. Xenon, as we mentioned at the top, Selina, you took a look at, Xenon and well last week's Phase III focal epilepsy readout sent it shares up 50%. What was significant here about these data Selina?

Selina Koch: 10:23

Yeah, thanks. maybe I'll just start by saying it was, was a good week for Xenon. In addition to that 50% bump. On Monday, at the end of the day, they then proposed $500 million follow on. By Tuesday night, they had price at actually 650 million. And by Thursday night, the, um, underwriters had exercised their allotment in full. They're over allotment in full, so it ended up being close to 750 million. So good job for them. What was it that pleased investors so much, this, readout was for a molecule that's an opener of a particular kind of voltage gated potassium channel. It's called Kv7. And the readout really kind of cemented its comeback story. This isn't the first molecule to go after that target GSK had a drug approved in 2011, pretty sure it was. but you know, over some years it ultimately ended up being withdrawn from the market, over safety concerns. in the retina for instance, there were abnormal abnormalities that even border risk of blindness. It was turning people's skin blue, so pigmentation, changes, hair, skin, nails, things like that. And so what Xenon has done here is taken a, you know, a mechanism that should be effective ' cause there's validation for it and they've created on a new kind of chemical structure that prevents dimerization,'cause it turned out that dimerization was kind of the thing that was causing the trouble. And now that's borne out with Phase III data. So in its Phase III study, it reduced median monthly seizure frequency by over 42% relative to placebo, so that's a big drop. That was highly statistically significant, even out performed the company's own Phase II two data.

Stephen Hansen: 12:07

I was gonna say Selina, I was, I was just impressed by the P value. I think there

Selina Koch: 12:12

Yes,

Stephen Hansen: 12:13

11, 11 zeros and then a a six. I mean, it was.

Jeff Cranmer: 12:18

Zero my hero. Yeah, that's, uh, I don't even think I can count that high, but.

Selina Koch: 12:22

you know, that said, there are some side effects with this particular mechanism that I think you can never avoid, like altogether is a small molecule, right? So it's going all over the brain, and if you open up this potassium channel from a mechanistic point of view, what you're doing is you're allowing potassium irons to flow out of the neuron. This sort of stabilizes its membrane potential under it makes it a little harder to fire an action potential. Okay, so what you wanna do then as a company, is you wanna do that just enough to counteract that hyperexcitability that drives a seizure, but not too much because you get dizzy, sleepiness, you know, somnolence. And we've seen that with this mechanism across multiple programs. Basically it just requires careful dosing. And so what one thing they did was, you know, they extended the half-life such that it can be just dosed once a day and then they give it in the evening. So basically you take it, you go to bed, and if you have any of that somnolence or dizziness or whatever, it's happening while you're sleeping. So that kind of helped to get around that issue as well.

Jeff Cranmer: 13:27

Alright, Selina, what's next?

Selina Koch: 13:29

Well Xenon plans to submit it to NDA to FDA in the third quarter of this year. So that is coming. And then in addition, they're, they're testing it in not only focal onset, but generalized tonic-clonic seizures, and in some psychiatric disorders. Where depression is prevalent, so a major depressive disorder, bipolar depression. They say they think it's has antidepressive effects, which they anticipate could help it differentiate even in epilepsy. So yes, the main objective here is reducing seizure frequency, but they're also testing these other psychiatric symptom domains. There are a lot of drugs one can take to mitigate seizures, right? There's, um, a lot on the market. There's generic, having something that can also address depressive symptoms because these patients with intractable epilepsy tend to have that, could just be another differentiator to add to that, that profile. So we'll be seeing some data, on those symptoms both inside epilepsy and then independently as well in the future.

Jeff Cranmer: 14:28

All right. And, uh, also, uh, following the that Xenon had last week, uh, was Dianthus. The company, uh, met an interim goal for, one of its polyneuropathy programs. Shares rose by more than 20%, and the company proposed a $400 million offering, by the end of the week it was close to 720 with, uh, an upsize and, uh, the green shoe coming home. Quite a good week for Xenon and Dianthus. So hats off. Well, we have something new for you here at BioCentury and here to tell you about it is Selina, Selina. Um, have a new feature in, uh, our BCIQ database.

Selina Koch: 15:18

We sure do. So those of you who will have access to BCIQ, you know, you can search for products in there in addition to deals and financings and all the other kinds of data in the database. Well, now you can also search for discontinued products. This is something that a lot of people have asked for over the years. We've wanted it internally as analysts of the industry. So to give like one example of what you can do with this last week, we published a package of stories on pulmonary fibrosis. So there's this wave of Phase II programs, 20 something Phase II programs, right, approaching proof of concept. Lots of different targets there. And so we look back a little bit between the era of the first two approvals and the 10 years that elapsed between Boehringer's recent approval last year, and said, okay, well how many programs were discontinued and what were they targeting? And then we counted up, you know, number of programs per target, compared it directly to this current Phase II wave, and you could see kind of a marke there's just a lot of new targets that haven't been tried before in the pipeline right now. A few are still, carryovers from this earlier era. and if you're curious about them, what they are, you can dig into them in a story. In that story package, this particular one was from our colleague Lindsay Martin.

Jeff Cranmer: 16:43

All right. Yeah, it's, it's good stuff. So hopefully we'll fuel future stories in BioCentury. We're gonna take a quick break and then we'll come back to talk rare diseases with Danielle.

Voice Talent: 16:55

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Jeff Cranmer: 18:03

Okay. We are back, Danielle, you took a close look at Friedreich's ataxia. what did you learn about what's in the pipeline?

Danielle Golovin: 18:13

Well, Jeff, I believe our style is Friedrich ataxia. No s.

Jeff Cranmer: 18:17

Man, I've been, uh, I've been hammering people about that for years. And look at you. Just get

Danielle Golovin: 18:23

As I learned from you in our style channel.

Jeff Cranmer: 18:27

that's a nice throw down. I, I much respect Danielle.

Danielle Golovin: 18:32

Yeah, so I did a deep dive into, I'm just gonna call it FA for our talk here.

Jeff Cranmer: 18:39

I think good way to roll.

Danielle Golovin: 18:40

So this disease is caused by a trinucleotide repeat expansion in a gene called frataxin. And this has to do with mitochondria. So mitochondria use iron for energy production, as you all know, since mitochondria is the powerhouse of the cell, had to get that in there'cause it's in all the textbooks. So frataxin, helps keep this mitochondria iron in a usable, non-toxic form. So this limits iron overload and downstream reactive oxygen species generation. Without frataxin, this increases oxidative stress. The mitochondria produce less energy, cells get tired, and eventually they die. Most affected cells in this disease are typically the heart, the pancreas, and the brain, and this causes cardiomyopathy, diabetes, and ataxia.

Selina Koch: 19:27

So people have been going at FA in different ways over the years. Um, what's happening with the pipeline right now?

Danielle Golovin: 19:34

Yeah, the pipeline is definitely shifting from the early pipeline was sort of just stabilizing the mitochondria. Now it's shifting towards gene therapies to actually restore the gene itself. So delivering frataxin, the field FA has one approved drug Skyclarys, and this switches on and antioxidant defense to, you know, increase mitochondrial energy production and reduce those reactive oxygen species. Basically the first gen drugs help the cells cope with the mitochondrial stress caused by vert frataxin deficiency. Whereas the incoming pipeline is more these gene therapies to re, you know, supply the gene. And the leading gene therapy. And there are at least five, LX2006 from Lexeo Therapeutics is the leader. It's being tested in FA associated cardiomyopathy. As I mentioned, the heart cells are very affected by this disease, and unfortunately this is the leading cause of death in these patients is cardiomyopathy. But they did have positive results in October, and that led to conversations with FDA to agree to an accelerated approval pathway.

Selina Koch: 20:47

I think that's a big, that's like potentially a very important development for this field, right? Anytime you can get agreement on what could constitute an approvable endpoint for accelerated approval. So what, what are they looking at there as the endpoint?

Danielle Golovin: 21:00

So in this case, since they're targeting FA induced cardiomyopathy, they're using, you know, a measure of heart function. So in this particular case, they're using left ventricular mass index or LVMI, in addition to frataxin expression.

Selina Koch: 21:17

So among the gene therapies, Danielle, are they all AAV based? Are they kind of similar to each other, or are there kind of key differences?

Danielle Golovin: 21:26

Yeah. The one big difference that came out to me as I was reviewing these programs. So there's five that identified and four out of the five are using AAVs to deliver the gene. But the sort of unique one in that case was Replay Holdings and it's spin out company Kaleibe, I dunno if I'm saying that right. Kaleibe, um, are using herpes simplex viruses, so HSB as vectors, and their big claim is that it has a high payload capacity. And while the frataxin gene itself isn't huge, you know, like, DMD or anything, if you wanna give its full regulatory elements, then that's gonna exceed an AAVs five kilobase payload capacity. And so that's their advantage there, is that they can deliver a large construct in its sort of native form with its regulatory elements. That's a bit of the landscape on FA. And we also looked out on the innovation horizon a bit to highlight a few papers with insights into new avenues for treating FA. So check those out in BioCentury's Science spotlights.

Selina Koch: 22:31

Still makes me wonder, Danielle, if, um, this is a place where, you know, brain shuttles applied to those capsids could really help of course you wanna treat the cardiac problems problems lead to death, but it's a multifactorial disease. It definitely has a lot of, you know, CNS issues.

Danielle Golovin: 22:51

Oh, right, yeah, so Voyager and partner Neurocrine have a preclinical gene therapy that's utilizing an IV delivered AAV capsid discovered by Voyager that uses an ALPL-mediated transcytosis pathway to cross the BBB and deliver frataxin broadly across the CNS. And other programs may have innovative methods to enhance CNS exposure, which could include other BBB crossing mechanisms or a more direct route of administration.

Jeff Cranmer: 23:19

All right, Daniel, thanks for that deep dive. what's next in the rare disease spotlight? Or are you still, uh, picking among a few, uh, a few choices.

Danielle Golovin: 23:29

I always have a list going. If anyone has any uh, suggestions, throw 'em my way.

Jeff Cranmer: 23:35

Yeah, that would be great. We always love hearing from our listeners. and if you're liking what you're hearing on the BioCentury This Week podcast, don't forget to subscribe. give us a rating. I guess it works differently depending on your platform, but, uh, always eager to hear from you and, uh, it was great, being in Seoul and meeting, some of our listeners in Seoul, and elsewhere in Asia. So good to know that we've got a broad reach. Alright, thanks for tuning in. We will be back next week, with another edition of the BioCentury This Week podcast. And look out for, our sister podcast The BioCentury Show. Selina will be in conversation with Najat Khan from Recursion Kendall Square Orchestra provides the music for BioCentury's this week. The group connects science and technology professionals and other members of the Greater Boston community to collaborate, innovate, and inspire through music, while supporting causes related to healthcare and education.