The pharmaceutical industry suffers from all of the issues that plaque heavily regulated industries that have been heavily regulated for a long time. Costs increase, restrictions increase, the ability to create new medicines declines. Everyone sees at least part of the problem, but no one person and no one group is in a position to change enough of the perverse incentives that operate during regulatory capture in order to meaningfully steer away from a collapse into mediocrity and inability to make progress. People have certainly tried! The past few decades have seen intense lobbying and patient advocacy on the part of quite well funded groups and influential insiders in regulators and industry, aiming to reduce the cost and speed up regulatory approval of new therapies. Yet this is the same period of time in which the cost of drug development has more than doubled, largely due to increased regulatory requirements.
The article I’ll point out today is written largely from the perspective of investors, entrepreneurs, and other businessfolk. The author advances the idea that (a) the way out of this present industry malaise is to make drugs to treat aging, because they will have a vastly greater value than present disease-specific drugs, and (b) that nearly everyone presently involved in the aging field is going about this in the wrong way. I largely agree at the high level, and perhaps would quibble on the details. Certainly, I think that the most practiced and well funded areas of biomedical research and development are a poor fit for the treatment of aging as a medical condition, particularly the present fixation on genetics and gene variants. Aging is universal. Certainly genetic variants have some small influence on the process, but the underlying mechanisms of aging are the same for everyone. This limits the scope of the benefits that can be achieved as a result of discovering a gene variant that reduces disease risk, understanding how it works, and then building drugs to manipulate the relevant mechanism.
We only have to look as far as atherosclerotic cardiovascular disease to see this in action. Every drug class that lowers LDL cholesterol (statins, PCSK9 inhibitors, etc) emerged from the discovery of human populations with a variant gene that exhibited lifelong low LDL cholesterol and consequent reduced risk of developing sufficient atherosclerosis to cause a heart attack or stroke (by as much as 50% for some variants). Yet reducing LDL cholesterol via small molecule drugs in later life has been shown to produce only a 10% to 20% reduction in mortality risk, many people cannot tolerate the side-effects of statins, and lowering LDL cholesterol does not regress existing atherosclerotic plaque reliably or to any great degree. This is not a curative approach.
Where are all the trillion dollar biotechs?
Of the many trends people chase in biotech, the only one that proves sure and consistent is declining returns. Even after adjusting for inflation, the number of new drugs approved per $1 billion of R&D spending has halved approximately every nine years since 1950. Deloitte’s forecast R&D internal rate of return (IRR) for the top 20 pharmas fell below the industry’s cost of capital (~7-8%) between 2019 and 2022. In other words, while the industry remained profitable overall, the incremental economics of R&D investment were value-eroding rather than value-creating. So, while other industries have a reason to treat the current market downturn as transient, the business of developing medicine has a more fundamental problem to deal with – it is quite literally shrinking out of existence.
When was the last time the industry managed to get the IRR number to go up? It wasn’t better targets, it wasn’t AI, and it wasn’t cheap Chinese trials. Both in the case of the 2021 and 2024 industry comebacks, the average return on investment rose because of sales of drugs for extremely large patient populations – COVID-19 vaccines and GLP-1 receptor agonists. To me, big indications almost always mean age-related indications, since aging is the only disease that affects everyone (“aging is the biggest total addressable market (TAM) on Earth”). So if you asked me to write a recipe for an industry-wide fix, I would start with age-related diseases: Alzheimer’s, sarcopenia, and heart disease. Solving those would almost certainly put pharma growth back on track. Yet in 2024, of the 50 new drugs approved, only 2 targeted age-related indications (Resmetirom and Donanemab). The same trend was true in all the previous years.
I generally don’t subscribe to the idea that pharma isn’t solving aging because their thinking is old-school or outdated. This ignores the fact that companies like Novartis, Regeneron, and Eli Lilly have long-standing “aging” research arms, and that many pharmas are experienced with multi-morbidity and all-cause mortality trials. If aging represents a trillion-dollar market, but the field still has little traction in addressing it, it’s not because people with PhDs are blind to opportunities or complacent about the lack of progress. I’ve written about this before, but the reality is that, despite our best efforts and billions in investments, we just aren’t very good at treating age-related diseases.
Our best heuristics for drug development are just failing to work here. First, genetic targets have poor propagation to late-stage damage. I think of genetic variants as models for early prevention. Unfortunately, factors that prevent late-stage disease are, in most cases, harmful to carry as a genetic variant in youth. For example, targets that ended up being successful for reducing fibrosis in age-related lung disease, idiopathic pulmonary fibrosis – like PDGFR, FGFR, and VEGFR – are essential for tissue repair, capillary growth, and connective tissue formation. This means our standard approach to discovering treatment targets is much harder to apply here.
In alternative approaches to target discovery, aging also breaks our intuition about cause and effect. We are used to the idea that, if something seemingly causes damage, then clearing it will fix the disease. In age-related macular degeneration, for instance, accumulation of complement proteins in extracellular retinal debris was one of the most consistent clinical features observed in patients. However, when complement cascade activation was pharmaceutically halted, there was no improvement in vision decline. Similarly, one of the most obvious features of Alzheimer’s is amyloid plaques in post-mortem patient brains. Multiple drugs have now cleared plaques successfully, yet they show no evidence of improved cognition. In fact, most beta-amyloid drugs shrink patients’ brains. Multidimensional problems, of course, require multidimensional solutions.
Most industries have eras when progress stalls before a new paradigm unlocks scale again. Electricity needed transmission grids, computers needed operating systems, and aviation needed jet engines. For biotech, whether the shift will come from new modalities, new regulatory frameworks, or entirely new ways to validate efficacy in humans is not yet clear, but we can, perhaps, outline the boundaries within that future will exist: manufacturing and trials should get cheaper with each run, regulations should become more adaptive, approval frameworks should increase and not decrease in variance, and new therapeutic modalities should focus on unlocking new biology, not just producing slightly better iterations on problems we already know how to solve. Until those new paradigms take hold, building a trillion-dollar biotech will remain caught in Lewis Carroll’s logic: running as fast as we can just to stay in place, and twice as fast to make any real progress.
