🧬 AI in Biotech: When Sustainable Growth Replaces Hype | Mati Gill (4/4)

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In our last episode, Matty shared the three pillar Teva innovation strategy and how Israel's bioconvergence program and a German venture studio model provided the blueprint for Ion Labs with Teva, Pfizer, AstraZeneca, Merck and Amazon Web Services coming together around a shared mission. If you missed it, check out part three. In Part four, Mati unpacks Ion Lab's full operating model how validated problem statements, multidisciplinary teams and pre committed pharma partner POCs remove the risk that kills most early stage AI biotech companies. He shares lessons from the company they shut down and and the one acquired by Anestro before turning to where AI value is actually being unlocked today, why sustainable growth has replaced the hype cycle and what Ion Labs is already doing to get ahead of the next wave quantum computing. There's so many directions I kind of want to go with this, but I guess the first question I have for you is you see so much on the AI ML side in our space. What's overhyped and what's under hyped? I don't like to go about overhype under hype, right? I would say two different angles on this one. Number one is we see a lot of people trying to capture the hype of buzzwords, right? And five years ago you just had to add AI to your slide deck and you were able to drown. What I try to encourage entrepreneurs to do is raise the right sized amount plus a little bit at evaluation that they know that they'll be able to reach an inflection point in their next round so that they're not going to have to suffer through flat or down rounds very quickly. Right? And sometimes that's almost counterintuitive for AI based entrepreneurs, but biotech is usually more conservative in that space. So we try to encourage them to find the balance between those two natures. So there, I think, you know, we're starting to see pharma companies not buy into the hype of if you just give me all your data, I'll give you the moon and the stars. And they're very skeptical about that. Now. That being said, we saw the big hype four to five years ago when AI started out, huge rounds, huge investments, and then the curve went down. Right? And the valley came after the peak. And now we're seeing a place of sustainable growth. And so it's actually a place of growth that's not hype based, it's actually value based. And the value of AI is being unlocked again by three core pillars. Number one, it's only a question of when, not if. We will see the first drug that was designed by artificial intelligence, that was approved by the FDA and there's over 60 programs in clinical development of small to large molecules at various different stages, including one from Israel from a company called Biologic Design that were designed by AI and currently in clinical development. And once the floodgates open in one and two and then five get approved, we're going to see more. Not all of them will get approved because we all know the statistics, but some will, and then the value will start to be unlocked. Number two is again, what we discussed about technological development in our industry and being able to lower the time to clinical value, time and cost to clinical value, and bring hope to patients of getting new drugs across the finish line through using artificial intelligence capabilities. And these technologies will also unlock a lot of value and companies will be built by attracting the best AI entrepreneurs to come into our space. And number three is the regulators get it and the government gets it. And probably the one thing that the Biden administration and the Trump administration, both Trump 1 and Trump 2 were all aligned on, was we need to apply AI capabilities in the way that we discover and develop new drugs. And the only office that really wasn't doged in the new Trump administration in the FDA was the AI office, which was actually empowered and the regulators are actually leading the way there. So putting out challenges to come and replace clinical studies or pre clinical studies in animals and coming and saying these are not very predictive. Headlines come out all the time about solving cancer and solving neurodegenerative diseases because it shows promising results in mice or monkeys or whatever. But that's not very predictive because we haven't solved any of those diseases yet. And the way that human disease biology works is different than animal disease biology. So what if we could build a virtual patient and do things that would simulate the way a drug is going to behave in a human much better than the current models that we do in preclinical studies. So they come out with these challenges or how to develop antibodies, et cetera. So they're actually part of leading the way instead of being dragged by us as an industry to have to actually convince them. And the Israeli regulators that we work very closely with at the Ministry of Health come here, visit IOM labs very often, want to be at the forefront of innovation. I give them a lot of credit for that because they want to understand and have conviction in these technologies that they know they're going to have to review and then approve. Hopefully some of them behind some of the drugs that they're going to help bring to the market. Again, to bring health to patients. Very cool. I mean again, it's kind of like that. The stars aligning on the timing seems right and it's like, right, we're at a place of sustainable growth because drugs will be brought to the market, technology will help to, you know, come into our industry and the regulators are open for it. And when those three core elements are behind the rebirth of sustainable growth, not hype based growth, but sustainable linear growth in our industry that is AI based for drug discovery and development. Very cool. And just as a question theoretical to you is, I'm always fascinated by the history of our industry. And you see The Pfizers, the AstraZenecas of the world, these massive organizations, but we haven't seen one come up through the ranks and become something as large and goes all the way. I guess you have like Biomarin, Al Nylam, but they're not necessarily Pfizer or Lilly. With all these costs coming down, are we going to see another like a new generation where a company's going to go from earliest stages and going all the way through regulatory and commercialization to the stature of like the pharma partners that you, you guys see and work with. So, short answer is yes. And some of these companies are on the path to ipoing and then going public and bringing drugs to the market, you know, and Silico Medic and Citro Zaire potentially, but they're far away from that and others. Yeah, we're seeing some of that and there's some that are promising and some will be bought by the big pharma companies and that's the way our industry works. But actually the longer answer is how many Pfizers have been built in the US over the last 50 years? Pfizer is a very old company that has continuously been reinvented. And even Teva, in a country that's only 78 years old, Teva is a company that's 125 years old. So if you really think about it, we're in an industry where the vast majority of the large players have been around for well over 100 years. And we don't have many biogens or amgens that have been built over the last few decades. And even they've become a little bit older and age. And they're probably the baby boomers of a more conservative industry. So, yeah, we will see some and some will then get bought by the larger ones. And that's just the nature of our industry. Novart Roche from Switzerland, they've been around forever. Right. You know, they're not young and we don't have. I mean, how many new companies do we have in our industry that have been built over the last three decades, even before AI came in? Not many. And so we talk about sustainability and you know, I'm just like thinking about how the cost structures are changing. Like, hopefully getting a drug to market isn't as like where we talk about the money furnace. Right. Is like you kind of are faced with a challenge, like, are you going to bankroll this yourself and you need to be able to convince like institutional capital to do that or are we going to get to a point where it's like, no, this is like we can do this with not boatloads of cash and actually try to build like exactly what you said. Like a company that goes the distance. Yeah. But it's not going to flip overnight. Oh yeah, for sure. We're still in a very conservative industry and rightfully so. Yep. Because we're talking about medicines that we put into human bodies for sure, and to people. Right. So you want to be somewhat conservative about the medicines that you administer and approve. And regulators, rightfully so, are very conservative about that as well as scientists in the industry. Even with the COVID vaccine, it was brought at record pace within a year to approval of the fda, but they didn't cut any, any corners. They still did all the phases, including, you know, administering and pilot studies in Israel to learn from real world evidence and then be able to improve on it there afterwards. So even in the COVID vaccines, we didn't cut corners, we just prioritized it, focused on it as regulators and as an industry to be able to bring it to help save the world from a pandemic. We're still at a place in the industry that we're open for innovation, but it'll be incremental improvements to the timelines and costs and not revolutionary improvements or changes as you see in like the way that you do public transportation or other industries that are disrupted quicker. Yep, absolutely. Super, super fascinating. And like you have a very interesting seat and vantage point to all of this. It certainly seems that you're at the intersection of all the stakeholders and kind of seeing how they're thinking about it and how it's all interacting with the ecosystem. Now when you look one year, two years out for yourself and Ion Labs, what's in store for you guys? We're continuously building out our model. My goal is to make Ion Labs sustainable forever. Right. I don't want this to be something that'll be around just for a few years. I want it to outlive me and then outlive my replacement. And that means building a sustainable model with investment model that is attractive, non reliant on government subsidies, etc. And we're working on doing that with VC partners to be able to actually build up a sustainable investment model. But even more importantly than that, it's about identifying the next wave of technologies. So like we like to say, you know, we want to start dealing with quantum theory and quantum computing. Why? Because we all know it's going to impact our industry, but it's not yet. So let's start learning it and building up that expertise so that we'll be at the forefront of these technologies that'll start to impact our industry. And R and D heads will start to ask about two to three years from now. And that's just one example. Very cool. Yeah, I mean you talk about like AI and ML and you're like, it was like 2017, 2018 when you were like delving into it and now obviously we're all like, oh, it makes a lot of sense. It makes a lot of sense. And I love that you're still thinking ahead and looking around the corner. We have to. And you know, I give a lot of credit to our partners, right? Our VC partners and our pharma partners that are continuously challenging us not just to innovate in areas that we've already done, but to be at the forefront of that and to use this as a platform to do risky stuff. That's really interesting that you bring up like the pharma partners because like it makes a lot of sense. If you're going to be around for a hundred years, you kind of have to look around the curve or else you're going to get disrupted and you won't stick around. So it's like, it's very prescient of them to be, despite being such a large organization, to still want to embrace that kind of innovation, but really, really exciting. And I'm like, I'm rooting for you from the cheap seats. I'm like, out here in the stands is very, very cool what you're doing, right? Yeah, the nosebleed sections. Yeah, yeah, yeah, exactly. But. So I'll be rooting for you from up there. But you've been so generous with your time, Matty. This has been super fun and love to also geek out about the process improvements formerly. Being from the bench, I was like, I'll leave it to my colleagues to get the Nobel Prizes. But like, we'll be over here with the process improvements and innovations. But in closing fashion, we always have two questions. First question, would you like to give any shout outs to anyone who supported you along the way? Yeah. So, you know, first and foremost, to my parents and my family, my grandparents, a blessed memory that really, you know, gave me the value system that have made me been able to be someone that I can look in the mirror and be proud of from time to time. So, and challenge me to be better continuous, especially my wife there who challenges me on that one. So. Yeah, yeah, yeah, yeah, absolutely. Likewise, my wife is always just like kicking my butt and I'm like, all right, all right, all right, let me catch a breather here. And then second question, and this one we usually ask, like, what's a piece of advice you'd give your 21 year old self? But I kind of want to flip this one. What's the best piece of advice that you've been given? Well, that's a great question. So, you know, I, I can maybe go back to the same challenge I got when I was asked, you know, really think about what you want your next career move to be. And I asked a former mentor of mine, or a mentor of mine at that time, whether or not I should sign on for an extra time in the Army. And he said to me at the time, he said, really think about what's core and important for you. Not now, ten years from now, try to envision where you want to be ten years from now. And then work your way back and at the core elements, not knowing where you're going to be exactly and for me, it was family building one, living in Israel and working in a space that had true meaning and what we in Hebrew called shlichut and have a sense of purpose and mission behind. And that's guided every decision of mine. Behind my decision to go into public service, and then behind my decision to then work in an industry to gain skill sets and grow. But in an industry I could be proud of, in the healthcare industry, where by definition, when we succeed, we're also doing good. And if at some point I go back into public service, that'll be behind that as well. And while doing that, career development, always prioritizing living in Israel and building a family that I actually enjoy spending time with and making sure I spend enough time with them and prioritizing that accordingly. So that's been very inspirational for me. And I continue to try to aspire to live my life accordingly. I love that. I love that a lot. And a takeaway for me, too. It's just like that. Rule of three. Yeah, the rule of three. Now, I will add one thing. You asked me to give you one piece of advice. I'll give you an example of another piece of great advice, but in a story where I actually had to remind that same mentor of his own advice at a difficult time. So at the time, I was working for a minister in politics who said, you know what? I'm going into the political realm, but I want to, at the end of the day, be able to look myself in the mirror. Even if I can't achieve everything I'm going to achieve, I'm going to make sure that I can always look myself in the mirror and recognize and be proud of what I see. And 15 years later, when he was at that same dilemma point, I had to go back to him and remind him of his own advice in his own political career. That was a tough conversation. That was a very tough conversation. But because I remembered that great advice for me, I continue to live according to it and hopefully he will as well. And it reminds me of, like, you know, when someone is willing to give that hard. The hard news, the hard facts. And just, like, as painful as it is, it is like a gesture of, like, kindness and love to do that, even when it hurts real bad. That's awesome, Matty. This has been such a blast. I've learned a ton. Thank you for being so generous with your time, honestly. And again, I'm rooting for you. Thank you very much. And you're going to have to come visit. Have you ever been to Israel? No, I haven't going to have to fix that. Absolutely, Absolutely. A lot of my friends make a trip pretty frequently, so maybe I'll tag along with them and and know. Would love to grab coffee with you. Happy to take you throughout Jerusalem and show you the country. That'd be super fun. Well, thanks again for your time and I'll talk to you again soon. Sounds good. Thanks for listening to our four part series featuring Matty Gill from an American kid who chose Jerusalem at 12 and never looks back. Back through six years in the IDF Law School and a Minister's Bureau run in parallel over a decade at Teva, building a global legal organization and then a pioneering external innovation program to founding Ion Labs on the conviction that Israel's bio convergence of AI and life sciences is the right foundation for the future of drug discovery. Matty's story shows what it looks like when someone spends a career accumulating exactly the skills their mission will eventually require and then builds it anyway. If you enjoy the show, please subscribe, leave a review or share it with a friend. Join us for our next series featuring Javier Tordebul, Founder and CEO of Pauling AI, a company building the first fully autonomous drug discovery platform enabling scientists to go from research idea to validated drug molecules in days, not years by orchestrating integrated computational pipelines through a conversational AI agent that requires no computational chemistry expertise. Before founding Pauling AI, Javier built a career at the intersection of large scale engineering and and applied AI, including a long tenure at Google bringing deep technical rigor to one of the most complex and high stakes domains in science. At Pauling AI, Javier is attacking the core inefficiency of drug discovery, a process that still costs billions per approval and fails 90% of the time. By automating the entire in silico workflow from molecular docking and structure prediction to admet profiling and molecular dynamics, all without requiring the scientist to touch a single piece of computational chemistry software. Javier's journey from large scale engineering to autonomous drug discovery founder shows what it looks like when someone turns their full technical attention to a problem the world urgently meets, needs solved, making this a conversation you won't want to miss. The Biotech Startups podcast is produced by Exceda. Don't want to miss an episode? Search for the Biotech Startups Podcast wherever you get your podcasts and click subscribe. Exceda provides research labs with equipment leases on founder friendly terms to support paths to exceptional outcome outcomes. To learn more, Visit our website www.Exceedr.com. on behalf of the team here at Exceda. Thanks for listening. 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