Why An AI Biotech Startup Launched A $600 Million Fund To Buy Stalled Drugs

Most AI drug development firms are focused on discovery. AI biotech Formation Bio is betting the real bottleneck is clinical trials. With a new $600 million fund to buy or license potential drugs that have stalled out, the startup now hopes to prove that it’s right. (To get the Forbes weekly InnovationRx newsletter in your inbox, subscribe here.)

Formation Bio cofounder and CEO Ben Liu has a theory about AI and drugs. Finding new ones might be the sexiest use case, but the long, grueling and expensive part of clinical development is where most drugs fail — and where AI will prove most fruitful. Liu has now raised a $600 million investment fund to prove out that thesis.

“There are increasingly more good discovered drugs, and the fundamental bottleneck is how do you show they work in the clinic,” Liu tells Forbes. “What this allows us to do is to take more shots.”

With the new fund, he hopes to acquire or license 10 to 15 new drugs over the next three to five years, and push them through clinical trials faster with the help of AI. That’s potentially a big advantage when every day of delay in a clinical trial can be worth millions. Investors in the new fund include research foundations, endowments, hospitals and philanthropic groups.

“Our thesis is that you are going to have a logjam of beautifully designed drugs, and you’re not going to know if they work for diseases until they go through the trials,” he says.

Liu and Linhao Zhang started Formation Bio (then called Trialspark) in 2016. Since then, it’s raised a total of $615 million from top investors that include Andreessen Horowitz, Sequoia, Thrive Capital, Kleiner Perkins’ chairman John Doerr and OpenAI’s Sam Altman, at a valuation of $1.8 billion.

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