Inside AION Labs, the AI-focused venture studio with the backing of AstraZeneca, Pfizer, AWS and other power players

Pharma R&D has a reputation for glacial change, but AI could finally force the industry to pivot. According to Deloitte’s 2024 Global Life Sciences Sector Outlook released in late May, only about 16% of drug discovery efforts were using AI, though it projected triple-digit growth over the next few years. “It’s definitely early,” says AION Labs CEO Mati Gill, “and even outside of AI, pharma is one of the last industries to be disrupted by AI new technologies or digital business-model disruptions.”

The scope of pharma’s traditional research efforts is already immense and the industry has been battling stubborn R&D productivity rates for decades. An August analysis in Nature Reviews Drug Discovery estimated that global biopharmaceutical companies collectively poured $276 billion into R&D across more than 4,000 firms in 2021 alone. “If you look at potential value in drug discovery and development, there’s a lot of waste and inefficiency. The failure rate is enormous, especially in clinical stages, and costs are skyrocketing,” Gill said. “There’s a huge opportunity if we apply AI and computational technologies in a robust way.”

With the backing of Big Pharma firms like Merck KGaA (Darmstadt, Germany), AstraZeneca, Pfizer, and Teva, along with cloud giant AWS and support from investors AMITI, Israel Biotech Fund, BioMed X Institute and the Israel Innovation Authority, AION Labs spearheads a systematic transformation of drug discovery and development—one startup at a time. “We pitched it to various pharma companies, along with BioMed X and Israel Biotech Fund,” notes Gill.

A COVID-era coalition

AION Labs partnership itself was born in the middle of the COVID-19 pandemic—formed largely over video calls. “Honestly, it came together faster than it would have without COVID—we spent hundreds of hours on Zoom ironing out structure, governance, and scope,” Gill said.

In addition to the founding partners, the consortium also brought on BioMed X (a German venture studio pioneer) to help shape the model, along with Amiti Ventures as a second VC last year.

The venture studio’s strategy reflects Israel’s unique approach to technological innovation. The old adage about the gold rush and selling picks and shovels illustrates AION Labs’ strategy. Given Israel’s limited domestic market and a tradition of tending to focus on specific technologies over end-to-end systems, the venture studio aims to develop the computational tools and AI platforms that will power the next generation of drug discovery rather than competing directly in traditional pharmaceutical development. “Israel is only about 10 million people, so we can’t rely on having a huge domestic market,” Gill explains. “Instead, we look at where we can add unique value—like Mobileye did in auto-tech. They didn’t build entire cars; they made the enabling vision and AI systems that everyone else started using and implementing in their cars.” Intel eventually acquired Mobileye in 2017 for $15.3 billion.

“We want to replicate that Mobileye approach in biotech. Our startups focus on multi-product platforms or critical enabling and specialized capabilities—like advanced AI algorithms for antibody optimization or epiproteomics—rather than just focusing on specific molecules. It’s more efficient for a small country to become a global hub of breakthrough technologies than to try to do everything ourselves.”

Israel’s burgeoning biotech scene

Gill notes that more Israeli — and international — entrepreneurs are resonating with this specialized, technology-first approach to pharmaceutical innovation. “Now they see that biotech is the next frontier, especially where AI intersects biology. There’s a massive global need, and Israel is well-positioned to supply key innovations without having to build an entire pharma infrastructure.”

Israel’s ecosystem also offers other advantages. The country has “all the ingredients that should have led to a robust economic growth engine in biotech,” Gill explains. For instance, it possesses “a strong healthcare system, digitized data, excellent scientific research, top universities, and a lot of government support.” He also points to the country’s culture of rapid innovation and resilience: “We’re a small nation used to solving challenges under pressure—that mindset naturally carries over into biotech.” Gill adds that the Israel Innovation Authority has launched programs specifically aimed at “bio-convergence,” bringing together biology and AI. “They’re co-funding startups and providing non-dilutive grants,” he notes, “which helps de-risk early-stage ventures.”

The momentum is building: “We’re seeing more dedicated biotech funds, more multinational companies setting up some R&D presence—like GSK, which has an AI/ML R&D group in Tel Aviv,” says Gill. Other non AION Labs partner pharmas with R&D investment, collaborations or operations in Israel include Roche, Sanofi, Takeda, and Novartis. As these global players deepen their footprint, more of Israel’s AI-savvy entrepreneurs are gravitating toward biotech. “Historically, a lot of local talent went into cybersecurity or e-commerce, but now they’re seeing the big opportunity in life sciences.”

AION Labs’ approach

AION Labs’ venture studio approach brings fresh energy to an industry that rarely disrupts itself. By zeroing in on real-world R&D pain points—then pairing entrepreneurial scientists with pharma insiders, deep tech expertise, and tangible funding—this coalition aims to break pharma’s slow adoption cycle. Each new startup, whether emerging through the “building” track or the “seeding” track, is guided by milestone-based progress and de-risked by proactive involvement from pharma and AWS. These players help shape proof-of-concept studies, shorten time to pilot, and ensure solutions align with genuine drug-discovery needs.

AION Labs deliberately steers clear of building a product first and hunting for a use case later. Instead, it zeroes in on challenges that multiple pharma partners have already identified as top priorities—assuring each startup of immediate industry interest. Every team also works with a dedicated ‘pharma champion,’ an internal R&D expert who supplies real data, guides proof-of-concept experiments, and delivers prompt feedback. This structure keeps development efforts tied to pressing, real-world needs instead of drifting into purely theoretical work.

Measuring progress

In practice, AION Labs uses milestones to gauge progress. Once a new startup is formed, AION Labs works with founders to set short-term R&D goals—like demonstrating initial proof-of-concept data or hitting key in silico milestones within a set timeframe. “That structure helps us pivot or double down based on what the early data shows,” explains Gill. This milestone-based approach de-risks the usual unpredictability of pharma R&D, ensuring that resources go toward projects that show genuine promise.

In addition to offering the “building” and “seeding” tracks, AION Labs runs a high-intensity, one-week “boot camp” once a specific R&D challenge is defined. “We bring in top candidates from around the world, give them intense workshops, mentorship, and real pharma feedback,” says Gill. “By the end of that week, they pitch to our Scientific Investment Committee.” The “winning” team (or sometimes a merged team) then receives $1 million in pre-seed funding, facilities, mentoring, pharma R&D expertise and administrative, talent and financial support. This boot camp is deliberately “outside their comfort zone,” ensuring that each finalist group has “the right combination of domain expertise, AI skills, entrepreneurial drive and character of the scientist-founders,” as Gill puts it.

Beyond just funneling out new AI-driven ventures, AION Labs is also fostering a culture shift within pharma by bringing fresh talent, novel tech approaches, and big-industry mentorship onto the same playing field. “That’s no small feat,” says Gill, acknowledging that the pharma sector isn’t known for breakneck transformation. “But if we want breakthroughs, we have to take bolder steps. When you say something’s impossible, people here tend to push through anyway.”