AI is ‘not a panacea’ for all drug discovery challenges, but partnerships can be for Generate

AI is ‘not a panacea’ for all drug discovery challenges, but partnerships can be for Generate

The geniuses of biotech—the Mozarts and Beethovens, as Generate Biomedicines CEO Mike Nally calls them—can only find so many new drugs. Without the limits of human discovery, AI can churn out as many programs as you have servers to run it. But then you hit another limit: how many programs can your biotech actually handle?

With that in mind, Nally is heading to the J.P. Morgan Healthcare Conference in San Francisco to build relationships for the biotech’s next partnerships. But just before heading to the Golden Gate City, Generate has announced that Amgen has picked up a sixth program in their two year-old disease-agnostic partnership.

Amgen has made an undisclosed upfront payment and added $370 million in future milestones to the original five-target deal, which had the same milestone potential for each of the programs. The deal also includes royalties on future sales.

The companies have been pretty mum on what, exactly, they are going after, saying that the drug discovery efforts are target specific, not disease specific. Nally said they are working on three different protein modalities so far. The collaboration has been “fruitful,” “wonderful,” and is going “exceptionally well,” he told Fierce Biotech in an interview. The sixth program came about naturally from the original collaboration.

“The sixth target was something that we both had an interest in, we both had some early work going on in, and we basically said well, if we worked on this together, the probability that we find a meaningful medicine for patients increases substantially,” Nally said.

Generate is heading into the biggest healthcare investing conference of the year in a stronger position than most companies after a brutal 2023 defined by layoffs, program reprioritizations and biotech closures. Nally’s team raised a whopping $273 million in September 2023, has $400 million in cash on hand, programs aplenty to work on and a handful of crucial data readouts coming this year.

Nally of course provided the stock CEO answer to the question of whether he’ll be trying to secure the company’s next financing at J.P. Morgan: “We always are thinking about our next fundraising round.”

There are no near-term plans to fundraise, but the CEO promised to be “opportunistic if conditions allow it”—such as if the biotech sees some clinical success that drives investor interest.

Another option buzzing in the background is an IPO. While Generate also is not planning to hit Wall Street any time soon, Nally is keeping a sharp eye on biotechs that do. He pointed to CG Oncology’s Wednesday IPO announcement, the first of 2024.

“The question we ask ourselves constantly is what is the best way to create a company that creates enduring value? Is that to be privately financed? Is it to be publicly financed?” Nally said. “At some point, obviously, public financing becomes the right answer for a company with ambitions like ours.”

But that point is probably not now: “We don’t have any definitive plans to go public, but we’ll obviously monitor market conditions and if it is the right way to build the company we’ll certainly proceed down that path.”

Nally says Generate managed to hold investor interest in such a tough environment because of its focus on AI—a hot area in biotech and the larger tech space. He suspects the signals emerging at the end of 2023 could mean his peers will see a brighter year, too.

“One of the things we’ve watched over the last few years has been the peak of the biotech market in the 2021 timeframe, and then the trough for a couple of years,” Nally said. “There were some green shoots coming out at the end of last year—the XBI rebounded really nicely in November, December, which leads to a bit of optimism as we enter 2024.”

But AI companies will need to put up the data this year to prove it’s more than just a cool tool. Challenges emerged in the drug discovery world in the spring last year when BenevolentAI announced that its AI-enabled eczema drug had failed a phase 2a trial. The company later cut the program and laid off staff.

And Exscientia chopped down a bloated AI-driven pipeline in October 2023 to ensure just the strongest programs are getting attention.

Nally said many companies have rushed into the space with big promises. “Unfortunately, we’ve seen this in biotech before,” he said. While today it’s AI drug discovery, previously it’s been the genomics revolution, or CRISPR gene editing. Only the strongest and best companies survive and actually deliver new options for patients.

“These tools have a potential to fundamentally find better answers than traditional approaches. At the same time, they’re not a panacea across all of drug discovery, development, and ultimately commercialization,” Nally said of AI. “You need to blend both these new tools with really profound and in depth understanding of drug discovery and development.”

There’s three parts to drug discovery: the target, the molecule and then the clinic. AI can help with these components individually, but Nally doesn’t know of a company that’s using it for all three. Generate has been focused on the molecule side of the equation and can churn out 10-15 programs per year. But Nally says the partnership with Amgen and another with MD Anderson’s oncology experts helps the small, 300-person biotech find the expertise needed to interrogate the best programs.

Partnerships will be a big part of Generate’s future, which could bring in even more upfront cash to the balance sheet.

“We are few, but the challenges that patients face are many. We’re gonna need a lot of great partners to help us get the most out of this platform,” Nally said.

Generate does, however, have its own internal pipeline which will get the spotlight in 2024. A phase 1 study for COVID-19 monoclonal antibody GB-0669 will read out at some point this year. The biotech is aiming the program towards immunocompromised patients, for whom vaccines do not provide protection, Nally said. There’s still an unmet need there. Generate’s candidate goes after the receptor binding of the spike protein to avoid the pitfalls of emerging variants that have taken down earlier monoclonal antibodies developed by Big Pharmas such as Pfizer, Regeneron, Eli Lilly and Gilead.

Another internal med is GB-0895 for asthma—an “exquisite molecule,” according to Nally. The TSLP-targeting antibody aims to cut dosing from every four weeks to every six months and may allow patients to come off of steroids. Nally said the therapy could have potential in chronic obstructive pulmonary disease, too.

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