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

Intro - 00:00:06: Welcome to The Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee. In our last episode, Mati 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 Labs' 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 the one acquired by Anistro 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.

Jon Chee - 00:01:38: There's so many directions that 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 underhyped?

Mati Gill - 00:01:50: I don't like to go about overhyped or underhyped. 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. Five years ago, you just had to add AI to your slide deck and you drowned. What I try to encourage entrepreneurs to do is raise the right-sized amount plus a little bit at a valuation that they know 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. 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 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." 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; 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 approved by the FDA. There are 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 was designed by AI and is currently in clinical development. 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. 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. Probably the one thing that the Biden administration and the Trump administration—both Trump one and Trump two—were all aligned on was we need to apply AI capabilities in the way that we discover and develop new drugs. The only office that really wasn't dogged 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 they are putting out challenges to come and replace clinical studies or preclinical 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. 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's 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 on how to develop antibodies, etc. They're actually part of leading the way instead of being dragged by us as an industry to have to actually convince them.

The Israeli regulators that we work very closely with at the Ministry of Health come here, visit ION Labs very often, and 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 will be behind some of the drugs that they're going to help bring to the market, again, to bring health to patients.

Jon Chee - 00:06:03: Very cool. I mean, again, it's kind of like the stars aligning on the timing seems right.

Mati Gill - 00:06:09: We're at a place of sustainable growth because drugs will be put to the market, technology will help to come into our industry, and the regulators are open for it. 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.

Jon Chee - 00:06:34: Very cool. And this is a theoretical question for you. I'm always fascinated by the history of our industry. 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 go all the way. I guess we have BioMarin and Alnylam, but they're not necessarily Pfizer or Lilly. With all these costs coming down, are we going to see a new generation where a company's going to go from the earliest stages all the way through regulatory and commercialization to the stature of the pharma partners that you guys see and work with?

Mati Gill - 00:07:16: So, the 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—Insilico Medicine, and Citro, Xaira 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 fifty 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 a hundred years, and we don't have many Biogens or Amgens that have been built over the last few decades. Even they've become a little bit older in 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. Novartis and Roche from Switzerland—they've been around forever. They're not young. 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.

Jon Chee - 00:08:40: And so, we talk about sustainability and just thinking about how the cost structures are changing. Hopefully, getting a drug to market isn't like what we talked about—the money furnace. It's like you are faced with a challenge: are you going to bankroll this yourself and convince institutional capital to do that, or are we going to get to a point where we can do this without boatloads of cash and actually try to build exactly what you said—a company that goes the distance?

Mati Gill - 00:09:15: Yeah, but it's not going to flip overnight.

Jon Chee - 00:09:17: Oh, yeah. For sure.

Mati Gill - 00:09:18: We're still in a very conservative industry, and rightfully so, because we're talking about medicines that we put into human bodies—

Jon Chee - 00:09:25: For sure.

Mati Gill - 00:09:26: —and into people. 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 a record pace within a year to approval by the FDA, but they didn't cut any corners. They still did all the phases, including administering it in pilot studies in Israel to learn from real-world evidence, and then we were able to improve on it thereafter. So even with the COVID vaccines, we didn't cut corners. We just prioritized it and 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 where 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 the way that you do public transportation or other industries that are disrupted quicker.

Jon Chee - 00:10:30: Yep. Absolutely. Super, super fascinating. 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?

Mati Gill - 00:10:53: We're continuously building out our model. My goal is to make ION Labs sustainable forever. 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 investment model that is attractive, non-reliant on government subsidies, etc. 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. For example, 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 will be at the forefront of these technologies that will start to impact our industry and that R&D heads will start to ask about two to three years from now. That's just one example.

Jon Chee - 00:11:54: Very cool. Yeah. I mean, when you talk about AI and ML, it was like 2017, 2018 when you were delving into it. And now, obviously, we're all like, "Oh, it makes a lot of sense." I love that you're still thinking ahead and looking around the corner.

Mati Gill - 00:12:11: We have to. I give a lot of credit to our partners—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.

Jon Chee - 00:12:28: That's really interesting that you bring up the pharma partners because 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 very prescient of them, despite being such a large organization, to still want to embrace that kind of innovation. It's really, really exciting, and I'm rooting for you from the cheap seats, like here in the stands. It's very, very cool what you're doing.

Mati Gill - 00:12:55: Right. Yeah, the nosebleed sections.

Jon Chee - 00:12:57: Yeah, exactly. So I'll be rooting for you from up there. You've been so generous with your time, Mati. This has been such a blast, and I 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 we'll be over here with the process improvements and innovations." In closing fashion, we always have two questions. First question: would you like to give a shout-out to anyone who supported you along the way?

Mati Gill - 00:13:23: Yeah. First and foremost, to my parents and my family, and my grandparents of blessed memory, who really gave me the value system that has enabled me to be someone I can look in the mirror and be proud of from time to time, and challenged me to be better. Especially my wife, who challenges me on that one. So, yeah.

Jon Chee - 00:13:44: Yeah, absolutely, likewise. My wife is always just kicking my butt, and I'm like, "Alright, alright, alright, let me catch a breather here." And then the second question—and this one we usually ask what piece of advice you would 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?

Mati Gill - 00:14:04: Well, that's a great question. I can maybe go back to the same challenge I got when I was asked to really think about what I want my next career move to be. I asked a mentor of mine at that time whether or not I should sign on for extra time in the army, and he said to me, "Really think about what's core and important for you—not now, but ten years from now. Try to envision where you want to be ten years from now and then work your way back."

At the core elements, not knowing where you're going to be exactly, for me, it was family building, living in Israel, and working in a space that had true meaning—what we in Hebrew call a sense of purpose and mission behind. That's guided every decision of mine: behind my decision to go into public service, and then behind my decision to work in an industry to gain skillsets and grow, but in an industry I could be proud of—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. While doing that career development, I am always prioritizing living in Israel and building a family that I actually enjoy spending time with, 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.

Jon Chee - 00:15:37: I love that. I love that a lot. And a takeaway for me, too, is just like that rule of three. Yeah, the rule of three.

Mati Gill - 00:15:44: 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—

Jon Chee - 00:15:55: —of his own advice—

Mati Gill - 00:15:56: —at a pivotal time. At the time, I was working for a minister in politics who said, "You know what? I'm going into the political realm, but at the end of the day, I want to 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."

Fifteen 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 remember that great advice, I continue to live according to it, and hopefully, he will as well.

Jon Chee - 00:16:39: It reminds me of when someone is willing to give that hard news, the hard facts, and as painful as it is, it is like a gesture of kindness and love to do that even when it hurts real bad. That's awesome. Mati, 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.

Mati Gill - 00:17:03: Thank you very much. And you're going to have to come visit. Have you ever been to Israel?

Jon Chee - 00:17:07: No, I haven't. We're going to have to fix that, absolutely. A lot of my friends make the trip pretty frequently, so maybe I'll tag along with them, and I would love to grab coffee with you.

Mati Gill - 00:17:16: Happy to figure out your salon and show you the country.

Jon Chee - 00:17:19: That'd be super fun. Well, thanks again for your time, and I'll talk to you again soon.

Mati Gill - 00:17:23: Sounds good.

Outro - 00:17:25: Thanks for listening to our four-part series featuring Mati Gill—from an American kid who chose Jerusalem at 12 and never looked back, through six years in the IDF, law school, and the 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 bioconvergence of AI and life sciences is the right foundation for the future of drug discovery. Mati'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 Tordebel, 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 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 needs solved, making this a conversation you won't want to miss.

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