Advances in genetic artificial intelligence have taken the tech world by storm. Biotech investors are making a big bet that similar computational methods could revolutionize drug discovery.
On Tuesday, ARCH Venture Partners and Foresite Labssubsidiary of Foresite Capital, announced that they have incubated Xaira Therapeutics and funded AI biotech with $1 billion. Other investors in the new company, which has been operating in stealth mode for about six months, are 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 poised to begin developing drugs that would have been impossible to make without recent breakthroughs in artificial intelligence. “We’ve done such a large capital raise because we believe the technology is at an inflection point where it can have a transformative effect on the sector,” he said.
Developments in the fundamental models come from the University of Washington Institute for Protein Design, directed 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 built in a three-dimensional, physical world.
While Xaira’s investors are confident that the company can revolutionize data design, they stressed that genetic 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 the data that trains AI models is generated by consumers, biology and medicine are “data poor. You have to create the data sets that drive the development of models.”
Other biotech companies using genetic AI to design drugs include Recursion, which went public in 2021, and Genesis Therapeutics, a startup that last year raised a $200 million Series B round led by Andreessen Horowitz.
The company declined to say when it expects to have its first drug available for human trials. However, ARCH Venture Partners managing director Bob Nelsen stressed that Xaira and its investors are ready to play the long game.
“You need billions of dollars to be a real drug company and also think about artificial intelligence. Both are expensive industries,” he said.
Xaira wants to position itself as an AI drug discovery powerhouse. However, some see Tessier-Lavigne as CEO as a surprise move. Tessier-Lavigne stepped down as Stanford president last year amid explosive reports — among Stanford Daily — that his lab at Genetech, where he previously served as chief scientific officer, had manipulated research data.
Tessier-Lavigne himself was not accused of manipulating any data and denied knowing that falsified research was being published by the laboratories he supervised.
Investors, meanwhile, 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 excellent CEO,” Nelsen said in an email. “Stanford cleared him of any wrongdoing or scientific misconduct.”
