Sep 27, 2024

↑ CEO Benjamine Liu Total raised More than $600 million Headquarters New York, NY During his doctorate work at the University of Oxford, Benjamine Liu came across what he thought were some promising potential drugs for use against Alzheimer’s and Parkinson’s. When he pitched them as candidates to several pharmaceutical executives, he expected enthusiasm. Instead, he was told that the industry’s biggest problem wasn’t finding new drugs. It was testing them. “The fundamental bottleneck for our industry and how we translate these discoveries into new medicines is actually the cost and time of drug development in clinical trials,” Liu said. “If we want to build this generation’s big pharma company, the area to focus on is drug development.” That core idea led to Formation Bio, known as TrialSpark when Liu founded it in 2016. He started out small, helping academic researchers recruit for their studies. Liu strolled Oxford’s campus, looking for flyers on bulletin boards seeking trial volunteers. He emailed his pitch to help speed up trial recruitment. In its first years, TrialSpark functioned as a contract research organization. Liu said they benefited from staying close to the work. For instance, they found its conversion rate when screening potential study participants could be two-fold less if the caller didn’t correctly pronounce the drug name or technical terms. “These inches really matter,” Liu said. After running trials for other drugmakers, Liu led a company-defining pivot that he says had always been part of its long-term plan. In 2021, it closed a Series C co-led by OpenAI CEO Sam Altman and stopped taking on new study customers. Instead, it started placing its own bets, in-licensing assets with the pitch it could run trials faster and cheaper than the industry. The company rebranded to Formation Bio in December 2023. The strategy follows tech giants like Tesla and Amazon, Liu says. Elon Musk first built car software for Mercedes-Benz before building its own cars. Jeff Bezos ran Target’s e-commerce business as it built its own warehouse superpowers. That vision was shaped by some of Formation’s first investors, Michael Moritz and John Doerr, two well-known Silicon Valley VCs who were early Google investors. Other notable backers include a16z, Thrive Capital and Sequoia, among others. That puts the startup in a group with asset-hunting and financial pioneers like Roivant Sciences and BridgeBio. But Liu says what makes Formation different is its study-running experience. It already has three drugs in mid-stage testing, with the aim of licensing about 10 more programs over the next three to four years. It’s a big bet backed by big money — the company has raised more than $600 million — but that has yet to be proven out with data, either on its processes or on the drugs in its early pipeline. While Liu said they can run trials faster and cheaper, there are no published papers or preprints to back up those claims. And it’s unclear how successful TrialSpark was in the competitive CRO space. Liu said the business had a “growing revenue profile,” but declined to disclose specifics on revenues or profits. He said they worked on over 300 studies, but most focused on patient recruitment. It completed six studies, end-to-end, as a CRO, Liu said. (CRO heavyweights, by comparison, routinely conduct several hundred studies each year.) Its recent emphasis on AI is likely to further polarize believers and doubters. Instead of being yet another effort to use AI in drug discovery, Formation is applying AI to tasks like medical writing, protocol development and biostatistics. In the long run, Liu said he sees AI-powered agents becoming more efficient and guiding more of the R&D process. The Kendall Square crowd has heard the Silicon Valley-disrupts-healthcare story before. But Formation has gotten into the weeds of the CRO business and lived to tell the tale. Liu has the ambition and connections to not just dream big, but now take the swing, closing a $372 million Series D earlier this year. It’s also not just the tech world investing, as biotech-focused investors like Section 32, FPV Ventures and Casdin Capital are in Formation’s syndicate. If all works out, Liu could be ushering in a new business model of a pharmaceutical giant. “If we systematically can run trials faster, more cost-effectively, and invest in the AI models that give us a probability-of-success advantage over time, we think we can create a really enduring pharma company,” Liu said. Key backers: a16z, Thrive Capital, Sequoia, Spark Capital, Emerson Collective, FPV Ventures, Section 32, Casdin Capital, Felicis, OpenAI CEO Sam Altman, Kleiner Perkins chair John Doerr, Sequoia Heritage senior advisor Michael Moritz Find the full list of 2024 Endpoints 11 winners here.