AI drug development firm Formation Bio has raised $600 million in a dedicated fund to acquire drug candidates and advance their clinical trials.

Beating AI News Flash: AI pharmaceutical company Formation Bio announced a $600 million drug development fund, with plans to acquire or in-license 10 to 15 drug candidate projects over the next 3 to 5 years. The company has already secured licenses for two such projects. Unlike developing new drugs from scratch, Formation Bio selects drugs developed by other pharma companies that have not yet completed clinical validation, focusing on Phase I and II clinical programs. It will establish a separate company for each drug, provide funding, and share its clinical R&D team and AI system to help screen indications, design trials, and advance clinical validation. After obtaining key clinical data, it will partner with large pharma companies for development or commercialization. Founder Ben Liu noted that AI is accelerating drug discovery, but clinical trials remain time-consuming and capital-intensive. Over the past decade, the number of discovered drug candidates has doubled, while the annual number of approved new drugs has not seen significant growth. Many pharma companies, even with promising drugs, lack sufficient funds and manpower to advance them. Formation Bio raised $372 million in equity financing in 2024, with investors taking company equity at the time. This time, it has set up an independent fund, allowing external investors to directly fund drug projects, while Formation Bio is responsible for development and co-investment. If a drug achieves clinical progress, returns will be generated through licensing or sale. This structure eliminates the need for the company to rely on new equity rounds for each drug acquisition, enabling it to allocate more capital to clinical trials.