Episode Overview
Title: The Brutal Truth About Biotech: Why $2B Per Drug Is Killing Innovation
Podcast: a16z Podcast
Date: November 14, 2025
Host: Andreessen Horowitz (a16z)
Guests:
- Lada Newsuna, Founder of General Control, biotech entrepreneur and author
- Elliot Hirshberg, Partner at Amplify, biotech investor
Main Theme:
This episode dissects the mounting challenges in biotech innovation, particularly the skyrocketing costs and inefficiencies intrinsic to modern drug development. Despite breakthroughs in biological science and AI, regulation, industry structure, and global competition are stifling progress. The conversation probes why these misalignments persist, what China’s rapid rise means for the U.S., the promise (and limits) of AI, and why the next generation of biotech giants may look nothing like Genentech or Amgen.
Key Discussion Points & Insights
1. The State of Biotech in 2025
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Market Disconnect:
- Huge advances in biotechnology (AI-designed drugs, virtual cells) coexist with economic malaise—over 20% of public biotechs trade below cash, early-stage funding is near historic lows, and few IPOs have launched in the past year.
- Lada Newsuna: “The science continues to get better and the state of things continues to get worse.” [07:01]
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Structural Downturn:
- Elliot Hirshberg: “There’s never been a bigger disconnect… Our last actual boom cycle was Covid. Now, we’re sitting on the other side of that.” [04:52]
2. Regulation & Industry Structure
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Ever-Tightening Regulatory Regime:
- The only major period where U.S. drug approval got easier: the AIDS crisis of the ’80s, driven by activist pressure.
- Increase in safety and efficacy standards (since thalidomide tragedy) has made clinical trials increasingly complex and expensive.
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Entrenchment of Middlemen:
- Dominance of clinical research organizations (CROs) creates inertia; they have little incentive to cut costs or speed, even when the FDA modernizes trials or allows electronic data.
- Elliot Hirshberg: “When the FDA says we want to modernize standards… you have to get CROs to adopt [new tools]. And they aren’t incentivized to.” [10:08]
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Not Just a Regulatory Problem:
- Structural and cultural inertia is equally at fault. “It’s a composite of all three: regulation, culture, and tech implementation.” [11:26, Elliot]
3. China's Rise as a Biotech Power
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Regulatory & Speed Advantages:
- China overhauled trial approval: “Implied approval” (INDs approved unless proactively held) speeds up trials drastically vs US’s proactive approval.
- Parallelized reviews and effective use of investigator-initiated trials give China a 5-6x speed advantage for new modalities.
- Lada Newsuna: “They are now leading in B-book RT, gene editing, gene therapy… due to this ability to do investigator-initiated trials.” [17:05]
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Strategic Threat:
- Most U.S.-born innovations are first trialed in Australia or Asia, not the U.S.: “We’ve just come to accept… everyone goes [abroad] to do their studies because the things we invent here, we can’t actually test here.” [09:10, Elliot]
- Third-player disruption: Traditional U.S. “invent, others invest/acquire” equilibrium undermined.
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Shorter Shelf-Life for Innovation:
- Pressure to keep new inventions secret to avoid being scooped:
- Lada Newsuna: “Before they were able to initiate their clinical trials, Chinese biotech… beat them to the clinic…” [22:17]
- Pressure to keep new inventions secret to avoid being scooped:
4. Can AI Fix Drug Development?
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AI Is Inevitable—But Limited:
- Lada: “Everyone will be using AI in biotech five years from now. But can it make $2.5B per drug into $500M? That’s the question.” [24:16]
- Most AI advances cut costs at the preclinical/toxicity stage—where least of the capital is actually spent.
- Real bottleneck: human efficacy/safety; clinical failure rates in Phase 2 remain highest and poorly predicted.
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What AI Can Unlock:
- Elliot: “The answer is probably yes—AI is a pretty important new tool… but the challenge of Phase 2 failure is a readout on how little we understand biology.” [26:09]
- AI’s largest promise: creation of drugs that were previously impossible; platform as product (e.g. personalized mRNA vaccines).
- “There are medicines we just genuinely can’t get to with our existing discovery technologies.” [29:13, Elliot]
5. The $2B Question: Why Are Costs So High?
- Structural & Incentive Issues:
- Cost per patient has ballooned to $500,000; there’s no law of physics that requires it.
- Clinical research middlemen, slow regulatory updating, and “cultural assumption that these things are expensive” perpetuate the problem.
- Elliot: “It should almost be a stat that the FDA cares about… There is no law of physics that requires it to be $500,000.” [45:19]
6. Blockbuster Drugs & Where the Next Trillion Dollars Lie
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GLP-1s as a Case Study:
- Their success hinged on taking a huge contrarian bet that obesity was a real market and that patients would use injectables.
- Lada: “It was a big contrarian take on what indication to pursue… Biology is one of the areas where you don’t want to be contrarian about the target, but maybe about how you treat it.” [54:46]
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Aging & Longevity as the Big Prize:
- Incentive misalignment: U.S. insurance (Medicare after 65) leaves no one motivated to pay for costly preventive drugs early.
- “I think we would be able to treat aging before we understand how to measure it, what it is, or why it happens.” [40:29, Lada]
- Medicare’s refusal to cover GLP-1s for obesity: “So can we cover GLP-1s for aging diseases? Not super clear.” [36:16, Lada]
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Need for Novel Incentives:
- Orphan Drug Act-style incentives, but for high-failure, high-impact chronic diseases, including aging.
- “If 50% of drugs are approved for rare diseases… How about every disease that people actually die from?” [49:19, Lada]
7. What the Next Iconic Biotech Company Will Look Like
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New Modalities, New Infrastructures:
- Biotech’s future “iconic” companies will come from unlocking new platforms/modalities (gene editing, epigenetic editing, information-rich delivery, etc.).
- “If you look at the history, there’s enormous value in unlocking new types of medicines… I’m really excited for platforms where the platform is the product.” [56:59, Elliot; 32:53]
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Possibility of ‘Hyperscalers’ in Biotech:
- Will an infrastructure company akin to Nvidia or Illumina emerge in biotech?
- “At one point Illumina sold zero of next-gen sequencing. That turned into $10B of sales…” [59:17, Elliot]
Notable Quotes & Memorable Moments
On the core problem:
- Lada Newsuna:
“The science continues to get better and the state of things continues to get worse.” [07:01]
On China’s threat:
- Elliot Hirshberg:
“We’ve just come to accept that everyone goes to Australia, everyone goes to Asia to do their studies, because the things that we invent here, we can’t actually first test here.” [09:10]
On the cultural, structural, and regulatory deadlock:
- Elliot Hirshberg:
“It’s a composite of all three.” [11:26]
On keeping innovation secret:
- Lada Newsuna:
“…they developed the asset, were taking it to the clinic. And before they were able to initiate their clinical trials, Chinese biotech with the same identical mechanism beat them to the clinic and launched trials not only in China, but also in the US.” [22:17]
On AI:
- Lada Newsuna:
“Everyone will be using AI in biotech industry five years from now. Can it make it 4x more efficient in terms of timeline? That’s the question.” [24:16]
On why costs skyrocket:
- Elliot Hirshberg:
“There is no law of physics that requires it to be $500,000 in terms of complexity and cost to dose a patient in a trial.” [45:19]
On blockbusters:
- Lada Newsuna:
“Biology is one of the areas where you really don’t want to be contrarian. You don’t want to be the only company pursuing some obscure mechanism. Usually you want to have some literature validation, but… it was either a big modality differentiator, or big contrarian take on what indication to pursue.” [54:46]
On aging:
- Lada Newsuna:
“I think we would be able to treat aging before we understand how to measure it, what it is, or why it happens.” [40:29]
Timestamps for Key Segments
- [02:20-06:07] — Market Pulse: Biotech’s Economic & Scientific State
- [07:01-11:42] — Why Drug Development is So Hard: Regulation, Structure, and Culture
- [11:48-17:41] — China & the New Geopolitics of Biotech
- [17:41-22:01] — U.S. Innovation vs. Global Competition: Shrinking Shelf Life
- [23:31-31:34] — AI: Potential and Practical Limits in Drug Discovery
- [34:01-39:45] — Blockbusters, GLP-1s, and the Longevity/Aging Opportunity
- [41:43-44:55] — “The Aging Stack”: Preventing Disease and Increasing Lifespan
- [45:19-49:54] — Magic Wands: How Would They Fix the Industry?
- [52:46-56:24] — What Makes a Blockbuster Drug & the Modality Thesis
- [56:24-61:22] — Predicting the Next Wave: Infrastructure vs. Modality Giants
Conclusion
Biotech stands at a pivotal crossroads: scientific discovery and technological tools have never been more powerful, yet escalating costs, industry structure, regulation, and global competition threaten innovation’s very economics. AI is reshaping what’s possible, but cannot singlehandedly make $2B-per-drug development obsolete—unless deeper incentives, regulatory change, and platform breakthroughs emerge. The next trillion-dollar companies will likely be modality-driven or infrastructure-focused, but their success will require not just invention—but reinvention—of the industry’s core processes.