While the bulk of AI-focused biotechs try to discover drugs and push the boundaries of biology, Benjamine Liu would rather synthesize meeting minutes than molecules.
Liu’s startup, Formation Bio, is focused on the unglamorous tasks that make drug development a slow, costly slog. It’s using AI to develop new ways of handling duties like recruiting patients, medical writing, protocol development, biostatistics and more. Formation now has the cash to put those efficiency goals to the test after raising a $372 million Series D led by a16z with the goal of deepening its own pipeline through a flurry of dealmaking.
“The whole regulatory function of a pharma company — synthesizing meeting minutes, guidance documents — that’s low-hanging fruit. But it allows one person to be 10 times more efficient,” Liu said in an interview with Endpoints News.
Formation’s journey shows yet another way that tech investors like a16z, Sequoia, and Thrive Capital see now as the right time for AI to disrupt pharma. While other big bets have been placed on AI models to design molecules, most notably Xaira Therapeutics’ recent $1 billion debut, Liu’s company aims to impact drug development.
“The bottleneck isn’t discovering interesting drugs, but the bottleneck is testing,” Liu said. “That’s where the cost and time is the greatest. Arguably, the one competitive advantage you want to build a pharma company around is not in discovery. It’s actually in drug development and clinical trials.”
From CRO to aspirational pharma
Formation’s beginnings go back to Liu’s graduate school days at the University of Oxford. While studying Parkinson’s and Alzheimer’s, he discovered some intriguing drug candidates. He approached several pharma executives, expecting excitement. Instead, he got shrugs.
The companies had plenty of interesting options to put into the clinic, but had a shortage of time and money for trials. That led Liu to the idea that improving how drugs are developed, rather than discovered, was a worthy problem.
He co-founded Formation Bio, then called TrialSpark, in 2016. In its first years, it operated like a contract research organization, building the infrastructure to conduct trials of other people’s drugs.
Formation says it can speed up a litany of processes like starting up studies, recruiting patients, or going from the last patient’s last visit to database lock. For instance, Formation uses an AI model to generate adverse event reports, with a human checking the work. That shortens a task that typically takes hours into minutes.
The 150-employee startup is also working with OpenAI and Sanofi. Specifics are sparse around the collaboration, announced last month, but the trio is customizing large language models to tackle drug development tasks.
Padding the pipeline
In 2021, Liu closed a $156 million Series C, which counted OpenAI CEO Sam Altman as a personal investor, then changed tack. It started acquiring its own drugs and stopped running other companies’ studies, and last December renamed itself Formation Bio.
Liu said that was the plan all along, after using its CRO years as a “stepping stone.” He was influenced by stories shared by billionaire venture capitalist Michael Moritz, Formation’s first investor, of tech giants working with others before vertically integrating. Tesla first powered Mercedes-Benz’s cars and Amazon helped Target’s e-commerce business, Liu said.
Formation now has three drugs in the clinic and one preclinical program. While AI may be impacting its development process, the biotech still relies on humans in picking which drugs to license. There’s no evidence to suggest Formation can improve the probability of success for the drugs it chooses, which is a key challenge for all drugmakers.
Liu said he hopes to add 10 to 15 more drugs over the next five years, with each program mimicking the hub-and-spoke model of Roivant Sciences and BridgeBio, creating new companies around each molecule. The goal is to sell these programs back to drugmakers if they achieve clinical proof-of-concept.
The tech world mentality pervades Formation’s investor syndicate. Its Series D was led by a16z, with other backers including Sanofi, Sequoia, Thrive, Emerson Collective, and former Stripe executive Lachy Groom. The round includes a “material step up” to its Series C valuation, which was over $1 billion, the company said.
Scott Kupor“We really respect biotech investors, but there’s a playbook in biotech where you build a company and sell for a few billion dollars,” Liu said. “We wanted to create something a little bit more enduring.”
Liu’s audaciousness helped attract investors like Scott Kupor, an a16z investing partner who is joining Formation’s board.
“I think he’d be really disappointed if he ended up selling this to somebody else, as opposed to this being a pure standalone company for the next 20, 30, 40 years,” Kupor said in an interview. “This is what he lives and breathes every day.”