Welcome, Lada. Welcome, Elliot, to the A6NZ podcast. Very excited to have you here. And I'm very excited to have this conversation because where I'd love to start is I want to talk about all things biotechnology. And let's take a quick pulse check on the state of biotechnology as it stands today in 2025. So question one for both of you is how do you see the state of the industry as it stands today? And how do you see the state of the science as it stands today?

Yeah, if you and I buy ideal society, it's been... Quite a few interesting years in BITAC. I mean, earlier this year we had something like one-fifths of public BITAC trading at or below their cash balances. They had like record low number of BITACs raising their seed rounds. Platform Dream kind of judged more harshly and if you take a step back and look at the bigger picture of it all and ask yourself, "Oh, has it ever been different?" It seems like this state has been ongoing for quite some time.

So we have Erem's Law, which is like Moore's Law spelled backwards. $2 billion per approved drug. We have a rise of Chinese buyback scenes that is threatening the state of early stage buyback companies. And I guess the question is, did we expect it to be different? Because Approving drug use is really hard. It's probably one of the hardest areas of deep tech broadly because it takes not only on engineering risk, but also on scientific risk.

And it does seem like the biotech industry started on a more positive note a few decades ago. Genentech, Amgen, IPOs, they're investors making first huge exits, more so than Intac back then. And we had Human Genome Project that sort of promised that all the biotech will become precision medicine and will develop medicines. as tailored to one patient. And yeah, it does seem like it led us to a slightly different ending. I mean, I hope it's not the ending and I hope there are some positive things that we can find in it all. But in many private conversations during these past two years, mood has essentially been like, will this industry ever recover?

I think there's never been a bigger disconnect between both sides of the market, right? So as Lada was saying, we had this enormous wave of excess. Our last actual boom cycle in this industry was COVID. You had an enormous amount of value creation and success. And now we're sitting on the other side of that. And we're sort of objectively in a downturn. We have, as a lot of point out, an enormous amount of EV negative public companies. That's starting to change and resolve a little bit, but there was a stretch of seven to eight months where there were no biotech IPOs. There's a logjam that goes from the public markets to the growth investors to later stage investors to early stage investors that just changes milestones and makes everything super, super hard.

At the exact same time, there's never been a better point to actually see the progress of technology. You have people developing zero-shot antibody design in labs. You have incredible virtual cell projects and an enormous amount of sort of translational potential at the early stage. Which I think is actually just, you know, for an investor, for a founder, an incredibly exciting time to be building a new company because there's this huge disconnects in the market between sort of publics and what's happening earlier. Sort of a tale of two worlds.

Well, what I was going to say is I think what's interesting is, number one, there are a couple of reasons to be optimistic today. right, in terms of the market at least showing some of the famous green shoots of optimism, right? Some IPO is happening, or at least people are preparing to file some very successful M&As. The biotech index is above, starting to get well above the famous $100 mark for the XBI. Right. So, you know, there's reason to be optimistic.

I think the fundamental question. is what bridges that disconnect between all of the advance and promise we're seeing on the technology side and some of the fundamental laws of physics of the industry that have resulted in this not being a particularly effective industry to invest in over the course of the last several years. You wrote a great post, "Where are all the trillion dollar biotechs?" What's your diagnosis of the situation? What is it about the fundamentals of the industry that make it so challenging economically?

Yeah, I mean, since the birth of this industry, we only had increasing regulation over time. I think there was like only one time in history of biotech where we made it. easier to develop and approve new drugs and that was during the AIDS crisis where AIDS patients were just laying outside of FDA and demanding drugs to be approved on a more accelerated timeline. And if they did make a big change back then that allowed for certain accelerated approvals, but since the birth of the industry, maybe for good reasons, we were always making it only harder to to develop new drugs, all while the science was improving over time.

I mean. Our high-strip-width screens for new small molecules and antibodies are like billion times more efficient than they were 20 years ago. And what Elliot said really resonates because it feels like the science continues to get better and the state of science continues to get worse. And I think a lot of it is downstream of regulation. Um... I mean, FDA, just in history of regulation in general, like the way FDA started to crack down on drug development approval process is through like huge strategy, I think was drug, teletermide that pregnant women were taking that led to a number of... Deformant is in kids that were being born from those pregnant women. And since then, FDA started to require not just safety, but also efficacy in the approval process. And yeah, whoever would come to FDA to deregulate this process would have to take on like... the way enormous personal risk because regulation is a tension between safety and efficacy. And if we deregulate process, we would have to take on some type of safety risk.

I think it's interesting. There's a hundred percent of growth of regulation. You know, there's a bunch of low-hanging fruit that would be just substantially better for starting trials, right? So we have three companies in the next 12 to 18 months that will be starting first in human trials. Guess how many are actually doing their first studies in the United States? When you say we, you mean? At Amplify. At Amplify, yeah. Oh, not zero. Yeah, right. And so we've just come to accept the fact 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.

So there is sort of a regulatory barrier. But I was writing about this business vial that was trying to innovate on a clinical research organization. And one thing that I sort of learned in terms of the machinery of translating regular 3 innovation into actually cheaper trials. So let's say that there's a change like whatever variable we think about for trying to actually decrease the costs of trials. How does that get implemented? So, it actually turns out that there's been this enormous consolidation of the clinical research organization market that's come down to about a dozen providers who have each done roughly 40 acquisitions across 30 years to really consolidate into these large clinical outsource providers that most people rely on.

And so, when the FDA says, "We actually want to modernize the standards for trials and have electronic tablets." You actually have to get the clinical research organizations to adopt those tools and technologies, and they aren't. They aren't incentivized to, right? And so there is sort of a structure to the actual process of executing on the trials that lags, sort of a lagging indicator from the changes in regulatory itself. So it's sort of a two-pronged beast. When you think about the cost of clinical development, it's actually sort of what the rule of law is, and like what you can do, and then also just all of this sort of industry entrenchment of what we are doing.

And so I think there are some ways for people to just do things a lot faster, even within the bounds of the law, than we're sort of used to paying for expecting, which I think is in part just like a cultural component of biotech, that we just assume that these things are expensive and take a So that argument would be that the challenge is not technological, that in some level the challenge might not even be the regulatory bodies. It might be something structural, something incentive based, where the way the industry is structured, you have various parties in this case, the groups that... you know, help run the clinical trials that may or may not be incented to be more efficient. Is that the argument? Yeah, that's right. So like if you were to break it down into cultural tech solutions in terms of just implementations and regulatory, you'd have to sort of assign some, you know, percentage at ease. And I think it is a composite of all three.

Okay, so now let's add to the mix here. Let's add to the soup. The China question. Yeah. So for folks that may not spend all their time thinking about biotech, what is going on in China as it relates to the biotechnology industry? What do we see as the impact that is having already and may have in the longer term to the US based biotechnology industry?

So I think it's worth just backing up and saying, you know, how is the biotech industry set up in the first place? How does this actually work? So at the very outset, in about the 19th century, there were chemical companies that decided to get into manufacturing chemical drugs, right? So these were actually dye manufacturers and making dyes for textiles. and they decided to take their sort of chemical manufacturing and distribution and apply it to making drugs. You're talking about Germans. That's right. And the first drugs were incredibly crude pharmacology, right? So this was heroin, this was cocaine, this was morphine. Higher retention than die stuffs, right? You know, like that's a pretty interesting business. But obviously it got a lot more sophisticated and specific over time.

So these groups like Merck, you know, in the 30s, they set up vertically integrated research labs. So they're in the business of manufacturing and distributing their medicines, and then also doing internal research to make new products. And then the FDA comes along, right, so a lot of these top pharma companies predate the FDA, and modern clinical development is formed. And so there's a three-partite component for all these businesses where there is manufacturing, commercialization, and distribution. there is internal research and then there's trials and clinical development.

What happened is that, as Lada alluded to, there's this Erooms law in the industry where it's just gotten exponentially less efficient to do the internal research and clinical development. And so it literally became the case that it was IRR negative to actually do internal research. And so these pharma companies divested their internal research and clinical development out. This is the birth of these clinical research organizations and outsourced organizations in the first place. And the origin of drug discovery startups and biotechs is that we are the lunatics that take on that IRR negative business and say that we're in the business of making these new hits that could ultimately realistically get bought by pharma companies and become their next armamentarium of drugs.

So that's kind of the setup of how biotech works, right? These companies have invested their R&D, or biotech companies are doing that research. And what happened is that we're all doing that research with the same discovery technologies, right? So I'd argue that beyond the modernization of small molecule discovery, the growth of biotech and recombinant DNA technology, we haven't had, you know, and then subsequent modalities, you know, we haven't had these huge changes in the fact that people have internal technologies that the rest of the industry isn't using. And so like any other technology, when it's becoming commoditized, you can compete on speed and cost. And this is where China sort of enters the story, right? So China has enormous speed advantages in terms of regulation for starting and running human trials and enormous cost advantages. in terms of the labor and the sort of work ethic and speed involving the people that can be put together at these projects.

And so what's happening is in this sort of loose social contract between big pharma and biotech startups, which are the ones supplying the drugs, biotech startups now make two-thirds of the drugs that go to market. We have this sort of geographic arbitrage where on speed and cost, China can enter the equation and compete for these types of ideas to deliver the medicines.

Yeah, I think what's interesting is China didn't start in this place 10 years ago. 10 years ago, no one was talking about going and running their trials in China. In fact, they were more regulated 10 years ago than they are now. And what really happened is like several ways of deregulation that Probably about the current modern clinical trial infrastructure that everyone goes to Shanghai for. And some of the things that they implemented were the implied approval, which is when you file your IND, unless they issue a proactive hold on your IND, it will be default approved in 30 days. US has the opposite model where you have to proactively approve. documents that comes to FDA, they also parallelize the review of different components of that IND, so you can review CMC section, you can review clinical trial design all in parallel, while in the AS you have to review them in stages. them in stages.

I think what's even more interesting is this whole model of investigator-initiated trials, which is actually what most people go to China for. The actual CFDA process is more efficient than in the US, but I don't know if it's more efficient than just running trials in New Zealand or Australia. With investigator-initiated trials, your view timelines are cut 5 to 6x. It's a very fast process and it's really specific to new modalities, high risk indications, cell engine therapy, and that's what everyone goes to China for. I think it's a model of people used to view China as a need to buy a printer where they print the medicines that would already otherwise exist. So yeah, I think it's... somewhat outdated view, they are now leading in in-devocities, they are leading in gene editing and gene therapy and partially due to this ability to do those investigator initiated trials.

Okay, so given that that that's a reality today, what does that imply for the long term future of the US biotech industry? Right, because you can make the argument that if we're competing on scale, speed, cost, and there's still a lot of great innovation happening here in the US, at some point it becomes difficult to fund that innovation. Here we talk about things being IRR negative, it becomes increasingly difficult to fund that innovation here if we know it's going to get out-competed over the longer term in China. So does our industry get hollowed out?

No. I think the answer is somewhat simple. I think we have to invent stuff. So there's this really good China analyst named Dan Wang who just wrote a really good book on the whole structure between China and the United States right now. And the one-sentence meme version is that China is an engineering state and America is a lawyer state. And I think that's simplistic, right? That's not Dan's full argument, but we forget that we're also an incredible inventor state, right? So some of our founding fathers, we have Benjamin Franklin as one of the US's founding fathers, right? We have the American research universities that are the envy of the rest of the world. We're incredible at going from zero to one.

And so I think that to compete on this, if you're talking about something where it's fast followers and sort of a specific arbitrage opportunity, that's super challenging in terms of speed and cost. If you're talking about inventing totally new modalities and sort of growing the pie, things on the scale of the recombinant DNA revolution, which is a fundamentally US thing, the birth of immunotherapy, which is in Texas, right? You know, like, these are these types of things that I think get us out of it, where we have to just invent our way and actually change what's possible with biotech. I think when you get those big unlocks, That's when you start to really deliver value.

So it does ship the risk profile though Where I think that fundamentally like part of where you go is Really pushing the boundaries of new modalities. I spent a lot of time with Michael fishback incredible scientists at Stanford We're all talking about what's the next big interesting set of modalities? What's the new interesting mechanism in biology? and so I think that risk profile shifts and like You know, at Amplify, that's what we always think about those technical founders, right? Because it starts to be the case that, you know, it's like the regenerons of the past, right? Leonard Scheiffer and Georgian Coppola, these scientists that are actually sort of going to tell us where the future is.

Yeah, I do wonder though, to what extent... Like I look I think it's a very compelling argument. I obviously very aligned with that The counter argument to that would be that something you said a few minutes ago There was this nice equilibrium that the industry has had for decades, which is you know, you know us biotech invests sorry invents and You know global biopharma invests right they they in license it they acquire it they partner with it, right? that equilibrium basically meant that The by the in inventions that come out of biotech had time to develop But now you have a third player in the form of China that that could disrupt that equilibrium meaningfully So yes, we can invent the next great modality But we have to implement it faster too. So effectively the shelf life of an innovation has gotten far shorter before we deal with competition.

- Talked about this a little bit, right? Where it sort of, it changes one of the dynamics, which is like of secrecy. - Yeah. - In the industry, it's like secrets become more important is like when you want that longer time horizon to actually invent something. You probably need to keep it a little bit closer to the chest initially.

Yeah, and to push back with one example, I keep thinking about this professor Ervin Weissman, who is a legendary cancer biologist and stem cell biologist. from Stanford, launched a few companies into existence five years ago. He published a new paper on the new cancer targeting mechanism, which is what ultimately we think that U.S. biotechs should differentiate themselves on is like new biology, new modalities. It immediately started a company, well-funded. They developed the asset, were taken it to the clinic and before they were able to initiate their clinical trials, Chinese Biotech with the same identical mechanism bid them to the clinic and launched trials not only in China, but also in the US.

So I do think that secrecy really matters. I think many people starting to ask themselves whether they want to present at conferences, whether they want to publish papers, whether they want to file patents, which wasn't the case when Genentech was created. Back then, people were just putting everything out there for everyone to see and share. That's a real negative externality, right? In terms of just the mean substrate of communicating science, of open source, of this proliferation of technologies. A lot of technologies are built on other technologies. And if everybody has to keep it closer to the chest for that exact reason that your time to actually commercialize your own invention shrinks, that's probably a consequence of this trend that we have to think about.

So, speaking of inventions, one of the great inventions that we've seen over the course the last few years is the rise of artificial intelligence. Artificial intelligence is obviously being heralded as being transformative across a broad range of industries, a broad range of applications, creating new experiences, new consumer products, all kinds of things. Lots of use cases that we would have never imagined. Where do you view the impact of AI when it comes to developing new drugs? Is that the invention that actually makes biotech competitive again, that makes biotech an investable asset again?

Yeah, I think it's sort of not a question of whether AI will be useful. I'm definitely in the camp of like everyone will be using AI in the biotech industry five years from now. For me, it's more of a question. Can it take two and a half billion dollar stopper with drug and make it into 500 million dollar stopper with drug? Can it make it like 4x more efficient in terms of timeline? And I think to answer that question, we really should go back and look where most of that money is spent right now.

And most of it spent is not in the preclinical stage. It's spent in validating safety and efficacy in humans. It's spent on commercialization stage, which is what happens after phase three clinical trials. And I think so far, and maybe at stake would be different from mine, a lot of the efforts that we are seeing are concentrated on the preclinical stage. Can we make toxicity studies in mice much faster? Can we have in silica tox for cell lines? And a lot of those things are valuable, but they don't necessarily bridge the gap. And it don't necessarily improve the failure rate of clinical trials, which is like the highest failure rate right now is phase two, which is efficacy.

So if we were, if I started to see those same companies use and generate more human data to apply to those models, I think I would become more optimistic. I actually think many big bio problems and open questions will be solved with AI way before we can predict efficacy for drugs. But I think virtual cells is actually not that far out. I think we have all the necessary data to generate something like that. The question is like, how can we make it useful for predicting efficacy of drugs? in humans. Yeah.

I mean, I think Laura's right. The answer is probably unequivocally yes. It's like it's becoming consensus that AI is a pretty important new experimental tool for biology and biologists, just as software was. The way that I like to evaluate where it's useful right now, is if you sort of break down like the three horsemen of Eroon's law of the time and cost of clinical development, right? That's an enormous pillar that's sort of hard to tackle. We sort of talked about that of tech. Probably software 1.0 can help a lot there. Regulation, culture. One layer deeper you have the challenge of phase two failure, which is basically a readout on the fact that we don't understand biology. Right. We can't predict what's going to work and what's not going to work with high-radiability. Yeah. So sort of efficacy prediction on net new targets or sort of hypotheses for a mechanism. And then the third being that there's an enormous amount of interest in ideas that we have, but we actually can't express those ideas in molecules and sort of make new drugs. So that's sort of a third pillar of why it's really hard to make exciting new medicines.

For all the reasons we talked about, it's sort of hard to dramatically change the time and cost if you're doing preclinical discovery when it comes to clinical development. But when it comes to making things that are otherwise impossible medicines, so either finding really interesting new targets and having higher confidence in predicting the efficacy of a drug, there are some exciting directions. And then especially when it comes to expressing ideas in molecules. I think that a lot of these platforms and capabilities to take new interesting data sets, to take what's coming out of molecular machine learning, and just make things that are unequivocally impossible to make without these tools, make some really, really exciting medicines. And so I think that the ambition of a TPP will go up.

You in your piece on the Where are the Trillion Dollar Biotechs talk a little bit about where will the next big wins for the industry come from? And you talk about finding diseases based on genetic basis, rare diseases where we can have a big impact. You have a couple of other examples, but really if I've read your conclusion correctly, where you land is the real big nut to crack for the industry is to go after the disease of and to solve to the extent that we can longevity. What's your view on what the industry is doing right and where the industry is still lacking when it comes to all things aging and longevity?

Yeah, I think unfortunately the incentive to develop aging drugs is still not quite there because if you look at the US payer system, The payer that pays the most for diseases of age population as Medicare, which kicks in after 65. Before then, we have a multiplayer system where patients tend to rotate their insurance every few years. And so there's really not much incentive for someone to cover preventative medicine early in life. And once you hit 65, it's no longer preventative medicine. um, treating the disease itself.

But I think a lot of it would be downstream of fixing how we pay for aging drugs, how we pay for preventative care. I don't know if we have a way to do that now, uh, not for chronic medicines. especially not for one and done solutions to age-related diseases. I do, I am very excited about Gel P1s. I'm probably not the first person in agent space to say that maybe Gel P1s would be one of the first agent drugs. I think this month Lily's reading out their semaglutide in Alzheimer's trial, which is to me is a real test of whether it's an agent drug or not, because it's well outside of the metabolic spectrum of diseases. Yeah, at the same time, Medicare refused to cover gel P1s for obesity care. So can we cover gel P1s for aging diseases is not super clear to me.

Yeah, I think it's a good, I mean, it's a great argument that GOP wants to have really achieved two important things. It's potentially given us ways to treat some of the most endemic, challenging conditions that affect society, whether it's metabolism. obesity and other factors. And the second one is at some level, it's given the industry its mojo back, right? To go after big problems, to go after the big indications, to find the act twos, because you're absolutely right, you're going to have to replace at some point, you know, this product with the next big idea.

Speaking of magic wands, we spent a lot of time talking about the industry and some of the challenges that I think the industry faces in getting drugs to patients. If you had a magic wand and you could change something around the regulatory environment, you could change something around the laws of physics of the industry, what would those be?

Sort of two being the cost per patient per trial. That should almost be a stat that the FDA cares about, right? So when Georgiou and Coppola started Regeneron, it cost about $10,000 per patient in trial. That's ballooned to $500,000. 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. If we want to see the next Regeneron, we want to meaningfully care about that as sort of a KPI for regulation for industry.

I also think like we talked about earlier, it should not be accepted as the default that innovative American companies go to other geographies to run their first in human studies. There is low hanging fruit when you think about the regulation that's in place for in Australia and Asia and Carl Jun, who's the early developer of CAR-T therapy, was asking this in a workshop recently with the FDA. Why do we not have investigator-initiated trials for cell and gene therapy in the US? if there is this distinction of them being the engineering state and us being the lawyer state, we should actually sort of say, let's win on regulatory innovation. Let's be really creative in terms of the way that we actually regulate this industry. We should still be the beacon of where people do their clinical development and where trials are approved.

My magic wand. I would cast a spell and ask for something that... There will be a version of orphan drug designation, but for common diseases. Orphan Drug Act, I think, was enacted around 1980s. Before then, we had less than 40 approved orphan drugs for patients that have a population of less than 10,000 patients. And today 50% of drugs approved in 2024 were all orphan drugs. So orphan drugs for like very, very small population. And I think we are at the stage of biotech development where We really need something like that to incentivize development of drugs for age-related diseases or for longevity itself. Right now, age-related indications have some of the highest failure rates in terms of drug development because there are no genetic The process is much longer, the trials are way more expensive. So we need some kinds of those incentives to make sure that more biotech companies go and develop drugs for cancer where phase ones kill half of the companies at early stages.

Okay, so we started this conversation talking about where the trillion-dollar biotech companies are. You guys, you are both students of history of this industry. Where do you see the next wave of biotech? iconic biotech companies coming from? Where would you see them coming from? Where's the next? Obviously, the industry started with the Genentechs and the Amgen and the Biogens of the world. Then we eventually got the Vertexes and the Regenerons of the world. Where do you see the next wave of iconic biotech companies emerging?

I'm a big believer in modalities also. I think that if you look at the history of the industry, there is an enormous amount of value that's created from unlocking new types of medicines. So I'm really excited for the fact that you have all of these new generative design tools and sequencing technologies and delivery tools that can all start to be stitched together into sort of a composite specific product. So there are these sort of waves within technology, right, where there's specific problems that are solved, and you start to bundle a bunch of different components together. And then there's new ideas that come and it sort of unbundles the stack. And this sort of happens across software, different markets. I think that in biotech we're in this sort of moment where there's a lot of opportunity in rebundling. The types of platforms that I see that I'm super excited about are this composite of incredible synthetic biology and genomics tools, plus modeling, you know, plus other, you know, tools on top of them that just unlock things that otherwise weren't possible. And so I'm really excited about that sort of opportunity to make things that are just net new in the industry And I think that's where we have to go to really keep winning

I mean, recombinant DNA gifted us the first off-the-shelf insulin, mRNA vaccines gifted us vaccines that we can synthesize in less than a month produced from the genomic sequence of the virus. First, human monoclonal antibodies gifted us a wave of cancer-precision medicine that we have now. And I think something similar has to happen for chronic multifactorial diseases. I think we are starting to see light at the end of the tunnel with gene editing and genetic editing. tailored targeting approaches where No longer do our own piece just go to the liver. We cannot target HCC is we can target kidney We can target potentially brain and Yeah, I'm bullish on new modalities.

There is something really interesting in just this this argument right now within biotech if there are hyperskillers that emerge There's this question. There's a lot of AI and biology companies that are raising a lot of capital and some just have no aims to make drugs And there's this continual, again, for sort of like the background cynicism or discussions in the industry, a lot of people are asking like, what is that all about? I think that there's this really interesting component where we have to believe in like net new market creation. So at one point, Illumina sold exactly $0.00 of next generation sequencing technology to the industry. right that turned into over 10 billion dollars of sales and you know independent large listed companies where their cost of goods sold were primarily going to to Illumina right and I think there's this interesting question right where the largest company in the world Nvidia is an infrastructure company is it possible for there to emerge a really large and and sort of fundamental infrastructure company in biotech.

And so I think there's sort of questions of either going where others can't and making something that people can't make, or making the sort of final arc of commoditization and building these sort of consolidated platforms that do. all of discovery for sort of small molecules and antibodies as this technology matures. And so it's kind of like two different possible poles of value creation in the instative of bio. Biotech is dead and long live biotech.

I agree. We're big believers in new modalities and we're big believers in there's going to be modern infrastructure that drives, that underpins the ability to make modern drugs. And so I think there's a ton of value creation on both of those axes. And we're very, very optimistic about that feature. Long live biotech.