Biotech stocks skyrocket as new FDA commissioner pushes for faster drug approvals

Biotech stocks surged Monday after new FDA chief Marty Makary backed faster drug approvals for rare diseases.

In his first major interview since being sworn in earlier this month, Makary spoke with Megyn Kelly on her podcast, where he proposed a “new pathway” for approving drugs.

He suggested foregoing randomized, controlled clinical trials, which woukd make a major shift for rare disease therapies.

Makary said the FDA would allow approval for drugs targeting incurable or ultra-rare conditions based on a “plausible mechanism,” acknowledging that traditional clinical trials may not be feasible for very small patient populations.

“It’s not feasible to run a randomized controlled trial for diseases that affect just a handful of people,” he said.

Wall Street remains cautiously optimistic

Analysts welcomed Makary’s rhetoric.

RBC Capital Markets analyst Brian Abrahams described Makary as “scientifically grounded and level-headed,” noting his emphasis on expediting drug approvals for orphan diseases, reducing preclinical testing requirements, and modernizing data collection.

“Importantly, we believe he exhibited an adeptness at packaging these ideas to align with administration values without appearing inclined to tear down and remake the agency,” Abrahams wrote in a note to clients.

The comments come as uncertainty looms over broader healthcare policy under Health and Human Services Secretary Robert F. Kennedy, Jr., who has drawn criticism for controversial views on vaccines and medical regulation.

Makary, for his part, echoed Kennedy’s concerns about vaccine safety without naming specific vaccines. He cited what he called an “epidemic of distrust” around the FDA, attributing it to a lack of transparency about side effects.

“When you don’t want to look at complications, the complication rate looks lower than it really is,” he said. “It makes products look safer than they really are.”

Still, Abrahams noted that Makary struck a more supportive tone toward the biopharma sector than in past public comments.

“He came across as far less anti-industry than he had seemed in his historical public statements,” Abrahams wrote.

Biotech stocks rebound

Biotech stocks responded to the news with a major upswing on Monday.

Shares of Lexeo Therapeutics (LXEO) surged 18.5%, Dyne Therapeutics (DYN) rose 14.2%, and Regenxbio (RGNX) gained 12.3% on Monday.

The rebound comes after biotech stocks were hit in March when longtime vaccine official Peter Marks was forced to resign.

Marks had been a strong advocate for expediting gene therapies and rare disease treatments, and his departure created a near-term overhang.

“Given Dr. Marks’ influence on the development of biologics and uncertainty as to who will replace him... his departure will create a significant near-term overhang,” William Blair analyst Matt Phipps wrote at the time.

While it remains to be seen how Makary will steer FDA leadership, his early remarks echo Marks' view on drug development, which bodes well for biotech stocks.