Formation Bio raises $372M to boost drug development with AI

Formation Bio, a startup focused on applying AI to drug development with backing from OpenAI CEO Sam Altman, has raised over a quarter-billion dollars to support its ambitious product roadmap.

Formation announced Wednesday that it raised $372 million in a Series D funding round led by Andreessen Horowitz with participation from drug maker Sanofi, Sequoia, Thrive, Emerson Collective, Lachy Groom, SV Angel Growth and FPV Ventures. The new tranche brings Formation's total raised to more than $600 million (according to PitchBook), which the company says is being put mainly toward partnership acquisition efforts and R&D.

Formation declined to reveal its new valuation. But a spokesperson told TechCrunch that it's a "material step up" from $1 billion, Formation's Series C valuation.

The company, which previously went by the brand TrialSpark, was co-founded by Benjamine Liu and Linhao Zhang in 2016. Liu has a background in computational biology, having conducted neuroscience research at Oxford and UPenn. Zhang is a software developer by trade and worked at Salesforce before joining Oscar Insurance as a product engineer.

Formation builds tech-forward solutions for clinical trials and drug development. The company licenses drug IP from and co-develops drugs with biotech and pharma companies, and develops these drugs past clinical proof-of-concept.

Drug development is a notoriously expensive and challenging endeavor. It takes 10 to 15 years on average to take a drug from initial discovery through regulatory approval, with the cost per drug reaching up to $5.5 billion. And an estimated 90% of drugs fail to reach the market.

Formation claims it's able to run clinical trials more efficiently by streamlining processes such as study startup, participant recruitment and data management. For example, the company is currently deploying AI to generate patient recruitment materials and reports for "adverse events." It's also fine-tuning AI models to provide drug development teams recommendations for R&D decisions and better predict drug toxicity, tolerability and efficacy.

Last month, Formation announced a collaboration with OpenAI and Sanofi to jointly design and develop customized AI solutions for drug development. OpenAI said it would contribute access to AI capabilities and expertise, and Sanofi said it would bring proprietary data for developing AI models.

OpenAI's involvement gives the appearance of conflict of interest, given that Altman was involved in Formation's Series C fundraising. OpenAI PR told TechCrunch the deal was led by OpenAI COO Brad Lightcap and OpenAI's board of directors but didn't indicate whether Altman, who's on the board, recused himself.

"At Sanofi, we're all in on AI," Sanofi CEO Paul Hudson said in a press release. "And we are proud to partner with and invest in Formation Bio, whose AI-driven drug development vision and capabilities will help lead our industry forward in the shared ambition to accelerate and improve how we bring more new medicines to patients."

Formation has three drug candidates in its clinical pipeline, including treatments for chronic hand eczema, sensory neuropathy and knee osteoarthritis. The furthest along is the eczema treatment, which recently reached phase 3 — the last stage of testing before a drug is submitted to regulatory authorities.

A number of startups are attempting to pioneer AI-powered tech for drug development, including EvolutionaryScale, which emerged from stealth this week with investments from Amazon and Nvidia. Market research firm Markets and Markets anticipates that the market for AI in drug discovery will be worth $4.9 billion by 2028. Major players in the space include Xaira (which launched with $1 billion), DeepMind spin-off Isomorphic, Insilico, Jeff Dean-backed Profluent, Enveda and Causaly.