Healx, a UK startup that uses AI to discover new medicines for rare diseases, has raised $47 million in a Series C funding round co-led by Europe's Atomico and Silicon Valley-based R42.
The company also announced that it has received regulatory approval to begin Phase 2 clinical trials of the drug in the United States later this year.
Healx describes itself as a “drug discovery pipeline” that identifies hidden links between existing compounds (such as drugs or medicines at various stages of the development cycle) and rare diseases. It does this by collating a myriad of public and proprietary data sources, including biomedical literature, disease and biochemical datasets, clinical trials, and patents, to create a “biomedical knowledge graph” of rare diseases.
“Our AI platform and team of experts enable us to identify and discover novel disease biology and match it with the right small molecules,” Healx co-founder and CEO Tim Guilliams told TechCrunch. “Our Digital Biology team focuses on understanding the signatures of complex biological diseases, while our Digital Chemistry team uses AI to match these signatures with chemicals, small molecules and drugs, using computational techniques such as virtual screens and generative chemistry.”
Typically, pharmaceutical companies take what's called a “one disease, one target, one drug” approach to drug discovery: they focus on a single molecular target that causes a disease, and then set out to design a drug to target that molecule. The problem is that this approach is very time-consuming and has a high failure rate. Healx analyzes millions of drug-disease data points in parallel, discovering previously undetected associations and contributing to solutions by suggesting new treatments using known compounds.
Founded in Cambridge in 2014, Healx is the brainchild of Guilliams, who holds a PhD in biophysics and neuroscience from Cambridge University, and David Brown, the company's chairman, who was previously global head of drug discovery at Roche but is better known as the co-inventor of the popular erectile dysfunction drug Viagra.
Healx co-founders Tim Guilliams and David Brown. Image courtesy of Healx
Drug Design
With the new $47 million, Healx is preparing to launch a Phase 2 clinical trial of a new treatment it has developed for neurofibromatosis type 1 (NF1), a genetic disease that causes tumors to grow in human nerves. Although rare, NF1 is considered one of the most common genetic disorders, affecting one in every 3,000 people. The tumors are usually benign but can cause other symptoms related to the skin, eyes and nervous system, and can eventually become cancerous.
Healx received Investigational New Drug (IND) approval from the U.S. Food and Drug Administration (FDA) for Fragile X Syndrome in 2021 and is in the early detection or preclinical stages of AI for a number of other diseases across oncology (cancer), nephrology (kidneys) and neurology (nervous system).
Healx's therapeutic pipeline. Image courtesy of Healx
A Phase 2 trial of Healx's lead NF1 candidate, HLX-1502 (a tablet taken orally), is expected to begin by the end of 2024 and will focus on young adults with NF1 and inoperable plexiform neurofibromas, a specific type of tumor associated with NF1.
The company arrived at HLX-1502 by using an existing drug developed for an entirely different purpose that had never been launched in the U.S. The company is reformulating the drug, and says it has growing confidence that it will have fewer side effects because earlier trials in healthy patients have already given it safety data.
This is important given that Healx focuses on benign tumors that often arise in healthy patients.
“There are a lot of cancer treatments out there that basically kill all the healthy cells and all the unhealthy cells, and they have a lot of side effects,” Guilliams said. “For the patient community and their families, people with benign cancers can live 40 to 50 years. It doesn't make sense to put them on chronic cancer drugs with very bad side effects for decades.”
Healx's technology will look at all kinds of existing medicines in development, as well as medicines that have been shelved for various reasons but for which there is enough data to help others develop them.
“There are hundreds of thousands of compounds and small molecules,” Guilliams says, “but as you start to see patterns between the different data types and the predictions, you can choose the drug that's likely to be the least risky. AI can help you find the best drug for the biology of a particular disease, so here we wanted something that specifically acts on nerves, which is likely to have fewer side effects.”
Healx in action. Image courtesy of Healx
All of this raises an obvious question: if Healx developed its lead NF1 drug candidate based on work previously conducted by others, does the company actually own the drug candidate? Guilliams says that Healx has filed and owns a patent for HLX-1502 specifically for the treatment of NF1 and “other neurological-related diseases,” and the FDA has also granted the company new drug product exclusivity in the U.S. market. This is typically granted for new chemical entities (NCEs), which are defined as “innovative” drugs or drugs that have “significant changes to an already approved drug product, such as a new use.”
“We always conduct comprehensive commercial and IP analyses when selecting lead candidates to advance to the clinic,” Guilliams said.
However, Healx did not disclose the actual origin or safety data of the original compound.
There's money involved in drugs
Prior to this round, Healx had raised approximately $68 million, most of which came from a $56 million Series B round in 2019. The company also recently announced an investment from one of its long-term partners, the Children's Tumor Foundation (CTF), which will make “milestone-based payments” aligned with the completion of clinical trials as Healx works toward clinical trials.
It's important to note that the financial arrangement is not a grant, although CTF is a non-profit organization, although Healx did not disclose the terms of the investment.
Of particular note is that Healx's Series C round is $9 million less than its Series B round five years ago, which, while not entirely unprecedented, is a bit unusual in the startup funding space. In fact, when asked what the most capital-intensive part of Healx's business is, Guilliams replied that it's running clinical trials, which the company is currently embarking on with its NF1 candidate.
Healx was initially looking to raise significantly more funding than it had hoped for in its Series C round, and last year it cut its headcount by about 45%, shedding roughly 70 employees in a series of voluntary and involuntary layoffs, sources familiar with the matter told TechCrunch.
Healx confirmed this to TechCrunch, with Guilliams noting that the economic downturn and macroeconomic factors of the past few years have not been kind to the startup industry.
“It's important to point out that we were in the midst of raising a larger round of capital when the market crashed,” says Guilliams. “We stopped that fundraise at the time and then effectively adapted to the new market environment by streamlining our operations, refocusing on our core strengths, and becoming more cost-effective and leaner. This allowed us to maintain our momentum and continue to make great progress, something we're proud of today. Advances in generative AI have made us even more capital efficient, allowing us to achieve more with less. We then opened a new round of capital raising with a better sense of what we needed to achieve our goals.”
As a result, Gilliams has announced that its latest round of Series C funding was oversubscribed, raising more than its target amount.
“Given the challenging market conditions for deep tech and biotech funding over the past two years, securing this investment is a testament to investor confidence in our approach and technology,” he added.
Healx's funding comes amid a string of investments in AI-driven drug discovery platforms, including Sam Altman-backed Formation Bio, which recently raised $372 million, and Xaira, a startup that launched with $1 billion in funding, both of which are significantly larger than the total raised by Healx.
Guilliams stressed that the company doesn't necessarily need as much capital this time around because much of the groundwork needed to bring its first drug to market has already been done, and said the company's valuation has increased since its last funding round, but declined to provide details.
“It's all about the quality of the program, picking the one with the most potential,” Guilliams said. “The NF1 market is $16 billion. [according to Healx’s own internal commercial analysis]and if [its candidate] “Because it works for NF1, it may work for other neurological diseases and is already being tested in preclinical trials. For rare diseases, the clinical trials are small-scale and do not require a lot of funding, which is a good situation in the current market.”
Guilliams also acknowledged that the company has made cuts to its workforce, but did not provide specific numbers or circumstances beyond saying they were “both voluntary and mandatory.”
“Despite the challenges of having to lay off talented individuals, this process ultimately enabled us to build a stronger, more focused team,” he said. “This restructuring was part of our strategy to streamline operations and focus on key therapeutic areas and technological advancements.”
Market entry
Today, Healx has about 55 employees, about half of whom write the “code” in the areas of machine learning and computational biology; the other half are in the clinical and pharmacology teams “working hand in hand with the engineers,” Guilliams says.
While most of the company's team is based in Cambridge, UK, the company is currently looking to expand in the US, where it expects to begin clinical trials by December, after which it could take several more years to get to market due to strict regulatory requirements for new drugs.
“We conservatively expect to have clinical trial results in the first half of 2026. Then, depending on those results and interactions with regulators, we may need to do a second clinical trial and then we may need to register the drug,” Guilliams said.
Healx's Series C round included lead sponsors Atomico and R42, as well as Ayana Capital, Balderton, Btov, Global Brain, Jonathan Milner, O2h and VU Venture Partners.