The primary business opportunity in biotech is in developing already-discovered drugs, not in discovery itself, which is becoming commoditized by AI.
A portfolio of at least 10 drug programs is the minimum scale required to make the risk-adjusted decision to take a drug through late-stage trials rather than selling the asset after Phase 2.
AI will impact pharma sequentially, with discovery being the first and easiest problem to solve, followed by toxicology, and finally the much harder problem of predicting clinical efficacy in humans.
'Healthspan drugs,' which aim to extend the period of healthy life, are poised to be the next major therapeutic category, following the massive success of GLP-1s.
The pharmaceutical industry has not produced a new major company since the 1980s, creating an opportunity for new, more efficient models like Formation Bio's to emerge as the next generation of pharma giants.
Company Founding
Ben Liu's company was originally founded as TrialSpark, a tech-enabled Contract Research Organization (CRO).
Early Funding
The company secured initial funding with a $2.25 million seed round and a $15 million Series A round.
Strategic Partnership
Liu partnered with Joe Jiménez, former CEO of Novartis, to create Aditum Bio, a fund designed to acquire and develop drug assets.
Business Model Shift
After raising a Series C from investors including Sam Altman and Lockhee, the company, now named Formation Bio, began acquiring drugs directly onto its balance sheet, shifting from a CRO to a drug development company.
Recent Acquisitions
Formation Bio has recently licensed a fibroblast growth factor 18 (FGF18) drug program from Merck KGA and acquired a brain-penetrant TIK2 inhibitor, utilizing its AI platform to find new indications for these assets.
▶De-Risking Drug Development via a Portfolio Model
Ben Liu's strategy centers on mitigating the high failure rates of clinical trials. By acquiring drugs that have already passed the discovery phase and building a large portfolio, he aims to overcome the low probability of success for any single asset (e.g., 30% for Phase 2). His belief that a company needs at least 10 programs to justify not selling a successful asset underscores this risk-adjusted approach.
This model suggests that the future of biotech may favor platforms that are expert capital allocators and clinical operators over those focused solely on novel biological discovery, shifting the core competency from science to risk management and execution.
▶The 'Uneven Frontiers' of AI in PharmaJul 2026
Liu posits that AI's impact on life sciences will occur in a specific sequence: first commoditizing drug discovery, then improving toxicology predictions, and finally tackling the ultimate challenge of predicting clinical efficacy. This framework guides Formation Bio's strategy to leverage AI for identifying and developing existing assets rather than for discovery, which he sees as a soon-to-be crowded field.
Investors should consider that according to this framework, the most durable value in AI for pharma will be created by companies that can solve the later-stage, more complex problems like clinical trial success, not just the initial discovery phase.
▶Exploiting Market Inefficiencies and ValuationsJul 2026
Liu identifies a market inefficiency where the number of discovered drug candidates has doubled in 10 years, while regulatory approvals remain flat at ~50 per year. He predicts this supply-demand imbalance, accelerated by AI, will lower the acquisition price of discovered assets. His model is designed to capitalize on this by acquiring promising but deprioritized assets from larger companies, like the FGF18 program from Merck KGA.
This strategy implies that significant value can be unlocked not just from creating new drugs, but from systematically identifying and developing undervalued or stranded assets within the vast pipelines of existing pharmaceutical companies.
▶The Next Wave of Therapeutics: HealthspanJul 2026
Looking beyond the current success of GLP-1s for obesity, Liu predicts that 'healthspan drugs' will be the next major impactful class of therapeutics. These drugs aim to help people live longer, healthier lives. This forward-looking view informs his company's therapeutic focus, exemplified by the acquisition of an FGF18 drug candidate that has shown potential for cartilage regeneration, addressing a condition associated with aging.
Analysts should monitor the development of preventative and regenerative medicine, as leaders in this emerging 'healthspan' category could become the next pharmaceutical giants, mirroring the recent explosive growth seen in the obesity market.