Formation raises $600 million to accelerate AI drug development

AI biotech startup Formation Bio has raised a $600 million fund, the Formation Bio Drug Development Accelerator Fund, to acquire or license 10 to 15 candidate drugs over three to five years and push them through clinical trials using artificial intelligence. Led by CEO Ben Liu, the firm operates as general partner of the off-balance-sheet vehicle backed by endowments, foundations, and hospitals. Formation Bio aims to reduce clinical trial spend by 30% to 50% by eliminating traditional contract research organization overhead and creating standalone companies for each drug asset.

Structure and backing of new fund

• ▪Under the $600 million Formation Bio Drug Development Accelerator Fund's structure, Formation Bio serves as the general partner earning carried interest while establishing a standalone company for each acquired drug program
• ▪Biotech startup Formation Bio raised a $600 million investment fund, named the Formation Bio Drug Development Accelerator Fund, to acquire or license potential drugs and push them through clinical trials
• ▪Investors supporting Formation Bio's $600 million fund include university endowments, research foundations, hospitals, and philanthropic groups
• ▪Formation Bio chief executive officer Ben Liu stated that using the Formation Bio Drug Development Accelerator Fund, an off-balance-sheet vehicle, lowers the company's cost of capital without diluting equity or raising additional venture capital rounds

Early venture funding and history

• ▪Formation Bio was co-founded in 2016 by Ben Liu and Linhao Zhang under the original name Trialspark, raising $615 million in venture funding prior to the $600 million Formation Bio Drug Development Accelerator Fund
• ▪Formation Bio raised its early venture capital from investors including Andreessen Horowitz, Sequoia Capital, Thrive Capital, John Doerr, and Sam Altman at a valuation of $1.8 billion

Clinical trial inefficiencies and cost reduction

• ▪Formation Bio projects that using artificial intelligence and process centralization can reduce clinical trial expenditures by 30% to 50% by cutting redundant headcount and site visits
• ▪Formation Bio chief executive officer Ben Liu stated that traditional contract research organization margins driven by billable hours account for nearly half of total drug development expenses
• ▪Formation Bio co-founder and chief executive officer Ben Liu stated that clinical development is the primary bottleneck where most drugs fail, causing a logjam of discovered drugs awaiting trial validation

Drug acquisition pipeline and targets

• ▪CEO Ben Liu said Formation Bio plans to acquire or license 10 to 15 phase-2 candidate drugs over three to five years, targeting muscle and bone health, ophthalmology, and neurological and psychiatric diseases
• ▪Prior to establishing the $600 million fund, Formation Bio purchased or licensed five drug candidates, including therapies for knee osteoarthritis and ulcerative colitis, and has licensed two additional molecules under the Formation Bio Drug Development Accelerator Fund

Appointment and background of Michael Ehlers

• ▪Before joining Formation Bio, chief scientific officer Michael Ehlers secured regulatory approvals for six drugs and advanced 40 programs into clinical trials during his career
• ▪In July 2026, Formation Bio hired former Biogen executive vice president Michael Ehlers as chief scientific officer and head of R&D