Nobel Prize-Winning Demis Hassabis’s A.I. Startup Is Spending Heavily On Drug Discovery

Fresh off a Nobel Prize win, Google (GOOGL) DeepMind’s CEO and founder Demis Hassabis has no plans to slow down his A.I. ambitions. The computer scientist runs a startup called Isomorphic Labs, focusing on accelerating drug discovery with the aid of new technologies. Last year, the company more than quadrupled its spending on research and development while taking on widening losses, according to financial documents filed by the company on Oct. 12. The London-based startup’s R&D costs totaled £49 million ($64 million) in 2023, up from £12 million ($15 million) a year prior. Losses for the year also skyrocketed to £60 million ($78 million) from £17 million ($22 million) in 2022.

Hassabis is best known for establishing the A.I. lab DeepMind in 2010, which was acquired by Google in 2014 for around $500 million. Last week, Hassabis and another DeepMind co-founder, John Jumper, co-won the Nobel Prize in Chemistry alongside the University of Washington’s David Baker for innovations in protein design. Hassabis and Jumper were recognized for breakthroughs in protein structure design enabled by Google DeepMind’s AlphaFold A.I. model.

Isomorphic Labs was founded three years ago as a subsidiary of Google’s parent company Alphabet (GOOGL) with the goal of reducing the time of discovering a new drug from an average of five years to two. “I think that would be success for us and be very meaningful,” Hassabis told the Financial Times earlier this year. In August, the startup raised £182 million ($237 million) through an equity sale to its parent company.

Isomorphic Labs has already made meaningful progress in the world of computational biology. Isomorphic Labs and Google DeepMind in May released AlphaFold 3, the newest iteration of AlphaFold. Unlike previous versions of AlphaFold, the third iteration doesn’t just predict the structure of proteins but a broad range of molecules, including DNA, RNA and smaller molecules commonly used in drugs like ligands and antibodies. In addition to a variety of other in-house A.I. models, AlphaFold 3 is one of the tools used by Isomorphic Labs to advance internal drug discovery projects.

As the startup’s efforts grow, so does its headcount. Isomorphic Labs said its staff size rose from 43 in 2022 to 71 last year. It also bolstered its staffing costs, which increased by around 200 percent to £20 million ($26 million).

Isomorphic Labs didn’t report any revenue 2022 or 2023. However, it reported an operating income, which is revenue minus operating costs, of roughly £583,000 ($761,000) in 2023 from partnerships with pharmaceutical giants Eli Lilly & Company and Novartis that could eventually be worth a cumulative $3 billion. Publicly unveiled at the beginning of this year, the collaborations will see Isomorphic Labs partner with the pharma companies on drug design research and projects. The startup will receive $45 million upfront from the Indianapolis-based Eli Lilly with the potential to earn an additional $1.7 billion if performance-based milestones are met. Novartis, headquartered in Basel, Switzerland, will pay $37.5 million upfront, with $1.2 billion on the table for milestone payments.

According to Hassabis, the process of taking on partners for Isomorphic Labs is a selective one. “We could probably sign up a dozen partnerships today, if we wanted to, but then it will cause us to fragment too much,” he told the Financial Times in January.