After a few years of booming interest in AI platforms, the rubber has hit the road. Now, the market is watching closely to see if drugs discovered with the new tech will pan out in the clinic — and are still worth backing.
Signs have been good so far for Insilico Medicine’s lead candidate, which it claims is the “first end-to-end generative AI-assisted drug.” The company announced positive topline results for a phase 2 study of the idiopathic pulmonary fibrosis treatment in November, which Insilico said demonstrated “encouraging clinical efficacy” by improving lung function for all 12 weeks of the trial. Insilico now plans to charge ahead into pivotal trials with the drug that was recently rechristened from ISM001-055 to rentosertib.
But results have been murkier for other AI front runners.
Recursion Pharmaceuticals revealed mid-stage data for its candidate in September that demonstrated safety but only showed a “trend” toward efficacy endpoints.
Some industry watchdogs suggested the drug may be doomed to fail for the tough-to-treat neurovascular condition called cerebral cavernous malformation. And Recursion, which has built a diversified oncology and rare disease pipeline using an AI platform leveraging “one of the world’s largest proprietary biological and chemical datasets,” has been bolstering its clinical prospects in other directions.
Last year, Recursion picked up Exscientia, an AI drug discovery company facing its own challenges after losing a partnership with Bayer, in an acquisition worth nearly $700 million.
Have these industry shifts and uneven clinical results dulled the market’s appetite for AI drug discovery companies?
While the COVID-19 market boom has cooled broadly across biotech, a major funding round for a Google-backed AI startup last month indicates there’s still momentum.
In fact, 71% of venture capital investments across U.S. industries in the first quarter of 2025 were tied to AI, according to PitchBook.
And in pharma, which has long been hampered by high rates of clinical setbacks, any new approach that brings even a modicum of efficacy or speed to the R&D process could trigger huge returns — a pursuit investors are still rewarding.
Here’s a look at the biotech that raked in that major haul and at other startups that have recently won funding to chase the AI dream.
Isomorphic Labs’ potential AI goldmine
Months after snagging the Nobel Prize in Chemistry, the CEO of Isomorphic Labs helped the company bag $600 million in its first round of external fundraising.
The company’s AI drug discovery platform is based on AlphaFold software, which can predict protein structure, DNA, RNA and ligands that bind to targeted proteins, while creating new proteins as well. The invention was rolled out by Google DeepMind and led to a Nobel Prize for three scientists, including Demis Hassabis, CEO of both Isomorphic and Google DeepMind.
Hassabis predicted last year that AlphaFold could help create an AI drug discovery business worth more than $100 billion — a mouth-watering proposition that investors are clearly eager to get behind.
The company’s ultimate aim is to shrink the average discovery time from five years to two. Isomorphic is also exploring emerging modalities and developing its own pipeline of candidates targeting cancer and autoimmune diseases.
"AI and machine learning have long held the promise of transforming drug discovery, yet few companies over the past decade have unlocked their full potential,” Dr. Krishna Yeshwant, managing partner at GV, one of the firms that participated in the funding round, said in a release. “After witnessing the extraordinary pace of innovation at Isomorphic Labs, we believe their pioneering approach will redefine AI-powered drug discovery.”
Thrive Capital led the $600 million funding round in March with additional boosts from GV and Alphabet.
Isomorphic also landed research collaborations with Eli Lilly and Novartis aimed at discovering small molecules for undisclosed targets last year. Combined, the research partnerships are worth up to $2.9 billion.
Other recent AI wins
Isomorphic’s $600 million haul was the largest biotech funding round so far this year. But other AI companies have also scored significant backing.
Insilico nabbed $110 million last month in a series E round led by Value Partners Group, which has been around since the 1990s and claims to be one of the largest independent asset management firms in Asia.
The fresh capital will help Insilico refine its AI models and algorithms while it advances its pipeline of clinical candidates, the company said.
A duo of smaller upstarts also pulled in funding this year.
Simon Kohl, a scientist who worked on the second iteration of AlphaFold and co-led DeepMind’s protein design team, arrived on the biotech scene with a startup of his own in February. Called Latent Labs, the company’s AI platform is focused on “applying the latest generative techniques to design proteins from scratch,” it said in a release. Latent emerged from stealth with $50 million in funding.
Two notable names from their respective fields also unveiled an AI drug discovery startup. LinkedIn co-founder Reid Hoffman and Columbia professor Dr. Siddhartha Mukherjee, author of a landmark cancer history book “The Emperor of all Maladies,” have joined forces to launch Manas AI. The startup will leverage a Microsoft cloud computing platform and AI to design and hunt for treatments in cancer, autoimmune and rare disease, including “some previously considered unreachable,” it said in January.
Manas AI raised $24.6 million in seed funding and will initially set its sights on breast cancer, prostate cancer and lymphoma.
