Michael Scally MD

Doctor of Medicine
The Axovant IPO Saga

How does a 29 year old hedge fund analyst, with no previous executive experience or history of leading drug research and development, manage to purchase for $5 million a drug developed and later abandoned for showing poor prospects by a pharma giant, and list the venture with no revenues and less than 10 employees less than 6 months later in an IPO on the New York Stock Exchange raising $300 million at a valuation close to $1.6 billion? I don’t know?…

Michael Scally MD

Doctor of Medicine
The FDA’s New Clothes - The FDA does not protect patients from harmful or ineffective drugs, but approves both.

Two linked papers provide valuable accounts of how the FDA is using faster reviews for what it deems to be important new drugs and using supplemental approvals for existing drugs more widely. [ ; ]

This is just what patients and their doctors are said to want—more patients benefiting from taking more new drugs sooner, generating revenue for the companies to fund more breakthrough research.

Put in the context of the FDA’s larger record, however, these studies give cause for concern about whether most new drugs are any more effective than existing products or whether their safety has been adequately assessed.

The term “safe and effective” misleads patients and prescribers.

Although the US Congress and the FDA require “substantial evidence of effectiveness” to approve new drugs, they require no evidence of substantial effectiveness.

Companies provide substantial evidence of effectiveness through trials that in most cases prove only that the product being tested has a non-zero level of effectiveness.

The result is that independent reviews find that 85-90% of new drugs provide few or no advantages for patients.

The FDA’s flexible criteria and low threshold for approval do not reward more research for breakthroughs but instead reward more research for minor variations that can clear this low threshold.

Michael Scally MD

Doctor of Medicine
9 Biotech Stock Funds to Buy
9 Biotech Stock Funds to Buy

These stocks won't stay down for long. The past few months have been absolutely miserable for biotechnology stocks, with major biotech indices registering losses of 35 to 45 percent since July. However, biotech stocks still have a wealth of upside potential to offer, which makes sense considering that they're involved in the science of bettering and lengthening human life, and humans ... well, we tend to enjoy long, happy lives. Pros and Cons of Buying Biotech Stocks

Here are nine biotech exchange-traded funds that will let you play the space from a number of angles.

iShares Nasdaq Biotechnology ETF (IBB)

The IBB is the market's largest biotech ETF by assets at $5.7 billion under management. Despite holding 190 stocks, the lion's share of IBB is held among five stocks -- Celgene Corp. (CELG), Biogen (BIIB), Amgen (AMGN), Gilead Sciences (GILD) and Regeneron Pharmaceuticals (REGN), which combined make up 44 percent of the entire fund. While this provides exposure tomany biotech stocks, the top-heavy IBB is more a play the "big five," as well as general bullishness on the whole sector. Find the right stocks for you | US News Best Stocks

Expenses: 0.48 percent, or $48 annually per $10,000 invested.

SPDR S&P Biotech ETF (XBI)

The XBI is an "equal-weight" fund, in which all stocks regardless of size are weighted equally as of each rebalancing -- though the weight naturally changes depending on whether the stock gains or loses until the next rebalancing. So, larger biotechs such as AMGN and CELG have less impact on XBI than IBB, while smaller companies like AMAG Pharmaceuticals (AMAG) hold more sway. Thus, XBI is a way to better leverage the huge single-stock jumps you get from smaller biotech companies' successful trials and FDA approvals.

Expenses: 0.35 percent

First Trust NYSE Arca Biotechnology Index Fund (FBT)

From its inception in September 2006, the FBT has actually outperformed both of its more popular competitors with roughly 330 percent in total returns, compared to 275 percent for IBB and 250 percent for XBI. That kind of outperformance merits a mention here. But investors should note that this equal-weight fund holds just 30 stocks -- including Spanish outfit Grifols, S.A. (GRFS) and biotech equipment maker Bio-Techne Corp. (TECH) -- so it's the least diversified of the bunch. FBT is also the most expensive of the three.

Expenses: 0.58 percent

Loncar Cancer Immunotherapy ETF (CNCR)

The CNCR ETF is one of a few funds that look at a very specific subset of the biotech industry. In this case, CNCR "is made up of a basket of companies that develop therapies to treat cancer by harnessing the body's own immune system." This results in a small, equal-weighted group of 30 stocks leading this field forward, including familiar names like Celgene and other big players such as AstraZeneca (AZN), but also significant weights in smaller companies like Adaptimmune Therapeutics (ADAP) and Celyad (CYAD).

Expenses: 0.79 percent

ARK Invest Genomic Revolution Multi-Sector ETF (ARKG)

Ark Invest is an ETF provider that focuses on, in its own words, "disruptive innovation," and has created a number of thoughtful funds to that end. ARKG is no different. This ETF invests in companies that incorporate genomics in their business, which produces natural fits like genome sequencing solutions firm Illumina (ILMN) and blood safety company Cerus Corp. (CERS). However, ARKG's wide mandate also allows it to include ag giant Monsanto Co. (MON), which uses genetic engineering in its seeds, and even Nvidia Corp. (NVDA).

Expenses: 0.95 percent

BioShares Biotechnology Products ETF (BBP)

The BBP is one of a pair of BioShares biotechnology funds that splits its strategies based on the biotech product pipeline. As its name would suggest, BBP invests in companies that have put at least one product through trials and received FDA approval, and are now focused on actually selling that product. Like many of the aforementioned funds, BBP is equally weighted, though its current top 10, which includes product-heavy Biogen, Amgen, Celgene and Gilead Sciences, unsurprisingly looks an awful lot like IBB.

Expenses: 0.85 percent

BioShares Biotechnology Clinical Trials ETF (BBC)

Unlike BBP, which invests in companies that have approved products that can help drive revenues and profits, the BBC rolls the dice on trial-stage firms that have not yet gotten a green light from the FDA, and thus have no product sales. That means you're looking at stocks withmuch smaller market capitalizations, much more volatility among the holdings and a huge dependency on clinical trial news. Top holdings include Inovio Pharmaceuticals (INO) and Aimmune Therapeutics (AIMT).

Expenses: 0.85 percent

Direxion Daily S&P Biotech Bull and Bear 3x Shares (LABU/LABD)

Leveraged funds can make or lose a lot of money fast -- so offering leveraged biotech funds seems almost comical. LABU (bull) is designed to return 300 percent of the Standard & Poor's Biotechnology Select Industry index -- the index behind XBI -- on a daily basis, while LABD (bear) is designed to return -300 percent. These are young funds, so LABU missed most of the roaring biotech bull market. But LABD is up 125 percent for the year.

Expenses: 0.95 percent (Both fund expenses include a fee waiver through Sept. 1)

Michael Scally MD

Doctor of Medicine
22 Case Studies Where Phase 2 and Phase 3 Trials had Divergent Results

Pre-market clinical testing usually progresses in phases, with increasingly rigorous methods at each phase. Product candidates that appear insufficiently safe or effective at one phase may not proceed to the next phase. Roughly 9 in 10 drugs/biologics that are tested in humans are never submitted to FDA for approval.

Typically, a candidate drug is submitted to the FDA for marketing approval after phase 3 testing. In recent years, there has been growing interest in exploring alternatives to requiring phase 3 testing before product approval, such as relying on different types of data and unvalidated surrogate endpoints.

To better understand the nature of the evidence obtained from many phase 2 trials and the contributions of phase 3 trials, we identified, based on publicly available information, 22 case studies of drugs, vaccines and medical devices since 1999 in which promising phase 2 clinical trial results were not confirmed in phase 3 clinical testing.

Phase 3 studies did not confirm phase 2 findings of effectiveness in 14 cases, safety in 1 case, and both safety and effectiveness in 7 cases. These unexpected results could occur even when the phase 2 study was relatively large and even when the phase 2 trials assessed clinical outcomes. In two cases, the phase 3 studies showed that the experimental product increased the frequency of the problem it was intended to prevent.

This paper is not intended to assess why each of these unexpected results occurred or why further product development was not pursued. Rather, these cases, chosen from a large pool of similar examples, illustrate the ways in which controlled trials of appropriate size and duration contribute to the scientific understanding of medical products

Michael Scally MD

Doctor of Medicine
[OA] How to Use FDA Drug Approval Documents for Evidence Syntheses

Evidence syntheses may benefit from using aggregated clinical trial information in approval documents published online by the US Food and Drug Administration (FDA). We provide practical guidance on how to access and use this source of information for evidence syntheses on treatment effects of drugs and therapeutic biologics.

· There is compelling evidence that published trial information is selectively reported and that results not showing favourable effects of the tested treatments often remain unpublished.

· Clinical trial information published by regulatory authorities such as the US Food and Drug Administration (FDA) may help to reduce such reporting biases.

· FDA approval documents are long and do not follow the typical structure of medical journal articles, which may discourage reviewers from using them for evidence syntheses.

· Our practical guidance on how to efficiently identify and use approval documents to find the relevant information may help promoting the use of this valuable data source for evidence syntheses.

Ladanie A, Ewald H, Kasenda B, Hemkens LG. How to use FDA drug approval documents for evidence syntheses. BMJ 2018;362. How to use FDA drug approval documents for evidence syntheses

Michael Scally MD

Doctor of Medicine
Early-Stage Biotech Value Creation: The Roles of Equity and Partnerships
Early-Stage Biotech Value Creation: The Roles of Equity and Partnerships


Its genesis lay in my current efforts to develop a business/financing strategy for Decibel Therapeutics. In that context, I have been giving thought to how others have been successful—and failed—in such endeavors.

The piece starts with my thoughts. It is then followed by responses to these thoughts by three great thinkers (and friends) in the biotech industry: Mark Levin, John Maraganore, and Jeff Tong, who reviewed an earlier draft. My replies to their responses are also included. In fact, there are two rounds of responses and replies.

The publication of this piece on a blog, which has a “comment” functionality, is intended to enable additional colleagues in the industry (including you) to join the conversation if they/you so desire. Invariably I find that responses to my thoughts are much more insightful than anything I have to say.

In addition to being very long, the piece features extensive endnotes. I tried to move the bulk of my asides, philosophical musings, anecdotes from the history of biotechnology, etc. to endnotes to make the main text flow better. One can read the text without reading the endnotes. With respect to the historical anecdotes, at least one reviewer who is a biotech history buff loved them (albeit, flipping back and forth between the text and the footnotes is somewhat an act of masochism perhaps only appealing to fans of the writings of David Foster Wallace). I make no claim to 100% historical accuracy or completeness. They are the best my failing memory has to offer and draw heavily on my first-hand personal experiences.

Thanks to Mark, John, and Jeff for consenting to the inclusion of their comments and for their encouragement to put this out there for consumption and participation by a broader audience.


For every successful biotech company, 1000 fail.

To play it safe:

1 Sell out all your stocks
you already fear a "Trump caused stock market crash", so there shouldn't be a problem.
2 buy bonds
3 use (some of) the bonds accrued interests to buy some call options on the biotech stocks you find interesting.
4 wait and see
if any stock surges, you win
if not, you don't lose you of your safety nest, since it's all invested in bonds.

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