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Startup X-37 Raises $14.5M to Expand on AI-Powered Drug Discovery

Xconomy San Francisco — 

Launched just last year, artificial intelligence-powered drug discovery company X-37 now has raised $14.5 million in Series A financing to expand its development programs.

Co-founded by Atomwise and a team from Velocity Pharmaceutical Development, the San Francisco, CA-based company uses Atomwise’s AI platform for structure-based drug design to screen chemical compounds against pharmaceutical targets.

DCVC Bio—which also participated in Atomwise’s $45 million Series A round last year—led the funding round and was joined by Alpha Intelligence Capital and Hemi Ventures. Following the financing, Kiersten Stead and Antoine Blondeau from Alpha Intelligence Capital have joined X-37’s board of directors.

“The business plan is that we, the X-37 team, in collaboration with the team at Atomwise, select a series of targets that we think will be very valuable to generate drugs against,” David Collier, X-37 CEO and co-founder, tells Xconomy. These targets include ZAP-70 for autoimmune disease, PIM3 and SHP2 for cancer, and Factor XIIa for anticoagulation.

The financing will give the company enough for its discovery efforts to identify at least one novel drug lead, but hopefully several, to advance into development, Collier says. Clinical trials are expected to begin in 2022.

“You hear a lot of buzz and a lot of it is about AI in health care broadly … But Atomwise is a fairly unique company,” Collier says. “What Atomwise does is a narrow slice of the drug discovery world, which is to replace physical screening of chemical libraries with in silico screening powered by AI.”

“In silico” refers to drug discovery work done via computer simulations.

Velocity’s connection to Atomwise, and thus the genesis of X-37, also is due largely in thanks to DCVC Bio, noted Collier, who was introduced to the AI company nearly two years ago over a cup of coffee.

X-37, in addition to its Atomwise partners, is made of up a team from Velocity that has been working together since 2011. The business model was to develop a series of drugs licensed from other pharmaceutical companies. Each drug program was then put into a separate virtual company, all of which were spun out, converted from virtual to real, made public, or acquired, explains Collier, who also serves as the CEO of Velocity.

The structure is similar to that of Boston-based Nimbus Therapeutics, which has an exclusive partnership with Schrödinger, a chemical simulation and in silico drug discovery company. It also is becoming fairly common in the biotech world, Collier says, as it enables companies to put each drug program into separate virtual companies from which the parent can exit without having to sell off the entire organization. The structure provides flexibility and tax advantages.

“Over the past decade this has been a perennial problem for the industry, where a company wants to buy an individual program and they don’t really want to buy all three or four of them,” explains Collier, adding that there had not been an efficient way to do this without buying the entire company and spinning out the one program.

Velocity has to date divested all its businesses except for Corsair Pharma, which is developing a transdermal prodrug of treprostinil to treat pulmonary arterial hypertension (PAH). While all Velocity staff are currently working at X-37 in some capacity, Collier says the entire team will become full time in the next year or so, after the PAH program is divested.

This transition will be supported by a Series B financing round, which the company will begin thinking seriously about mid next year, Collier says.

“We think that this is really a revolution in drug discovery,” he adds. “The pharmaceutical world in general is already waking up to this and is going to be using this technology to streamline all of their drug discovery processes.”

Image by Atomwise