Advances in generative AI have taken the technology world by storm. Biotech investors are making big bets that similar computing methods could revolutionize drug discovery.
On Tuesday, ARCH Venture Partners and Foresite Labs, an affiliate of Foresite Capital, announced they had founded Xaira Therapeutics and raised $1 billion in funding for the AI biotech. Other investors in the new company, which has been operating in stealth mode for about six months, include F-Prime, NEA, Sequoia Capital, Lux Capital, Lightspeed Venture Partners, Menlo Ventures, Two Sigma Ventures and SV Angel.
Xaira CEO Marc Tessier-Lavigne, a former Stanford president and chief scientific officer at Genentech, says the company is ready to begin developing drugs that would have been impossible without recent breakthroughs in AI. “We did such a large capital raise because we believe the technology is at an inflection point where it can have a transformative impact on the field,” he said.
Advances in basic models come from the University of Washington’s Institute of Protein Design, led by David Baker, one of Xaira’s co-founders. These models are similar to diffusion models that power image generators such as OpenAI’s DALL-E and Midjourney. But rather than creating art, Baker’s models aim to design molecular structures that can be manufactured in a three-dimensional, physical world.
While Xaira’s investors believe the company can revolutionize data design, they emphasized that generative AI applications in biology are still in their infancy.
Vik Bajaj, CEO of Foresite Labs and managing director of Foresite Capital, said that unlike technology, where data that trains AI models is created by consumers, biology and medicine are “data poor.” You need to create the data sets that drive model development.”
Other biotech companies using generative AI to develop drugs include Recursion, which went public in 2021, and Genesis Therapeutics, a startup that raised $200 million in Series B funding last year under the joint direction of Andreessen Horowitz.
The company declined to say when it expects to have its first drug available for human trials. However, Bob Nelsen emphasized that Xaira and its investors are ready to play the long game.
“You need billions of dollars to be a real pharmaceutical company and also think about AI. Both are expensive disciplines,” he said.
Xaira wants to position itself as a leading company in AI drug discovery. However, some consider naming Tessier-Lavigne as CEO an unexpected move. Tessier-Lavigne resigned as Stanford president last year amid allegations that his lab at Genetech had manipulated research data.
But investors are confident he is the right person for the job.
“I have known Marc for many years and know that he is a person of integrity and scientific vision who will be an exceptional CEO,” Nelsen said in an email. “Stanford has cleared him of any wrongdoing or scientific misconduct.”