Building a robust framework around proprietary artificial intelligence (AI) platforms is critical for small biotechs seeking investment, according to a managing partner of a healthcare venture capital fund.

David Schuster from US-based UpScalerVC was speaking at a session during the Clinical Trials in Oncology West Coast 2024 conference in San Francisco held from 23 April to 24 April.

AI has become an ever-prominent feature in the pharma industry, with many emerging biotechs leveraging deep tech to get a leg up on rivals in the same space.

Whilst AI has become a buzzword to attract investment, Schuster highlighted that small biotechs still need to withstand examination of howthe technology is used.

“Everybody’s using AI. So if you’re using it, be prepared to defend that. Because investors will bring in data scientists to review what [companies] are doing with AI.”

And though shared large language models (LLMs) are becoming more frequent, Schuster added that the companies in the strongest position for investment are those using proprietary inputs for algorithms.

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“Defensibility on how you built the models is important because there would be concern for any AI company that has built their LLM using a non-proprietary data source – that could shut the entire model down.”

AI has a plethora of applications in the pharma industry ranging from drug discovery to sifting through patient data in clinical trials. Schuster said no matter where it is being used, companies should be transparent on how they are using AI.

The startup funding landscape for deep tech companies is thriving. Genesis Therapeutics caused a stir in the investment arena with its $200m Series B round in August 2023. Deep learning biotech Evozyne raised $81m also in a Series B in September 2023.

US-based Zephyr AI, which primarily targets oncology and cardiometabolic diseases, closed an $111m Series A financing round in March this year.

It is not just investment rounds either; big pharma players are also getting involved. Bristol Myers Squibb (BMS) entered a collaboration with US deep tech company VantAI in a $674m deal earlier this year.