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The latest company to spin out of a Stanford Medicine lab is a biotech undertaking with 37,000 employees — and none of them are human. There’s no lab space, no lunch breaks and no payroll. It’s an [artificial intelligence](https://med.stanford.edu/news/topics/artificial-intelligence.html)-powered virtual biotech company that’s the brainchild of associate professor of biomedical data science [James Zou](https://profiles.stanford.edu/james-zou), PhD, who is also the principal investigator of a [virtual lab](https://med.stanford.edu/news/all-news/2025/07/virtual-scientist.html) that launched in 2025, and graduate student Harrison Zhang.
The idea, Zou said, was to build on the virtual lab, in which AI scientists emulate an academic research laboratory. They created an entire company with tens of thousands of AI agents, all trained to support the full pipeline of drug development.
“Our idea was to see how far we could push this. Could we create a biotech company that takes on everything from looking for drug targets all the way to designing clinical trials?” Zou said. “Could we have a fully agentic company that tackles the extremely complex challenges of drug discovery?”
James Zou
James Zou
One advantage of an AI company is that you can skip the startup phase. Zou’s virtual company more or less mirrors the organizational chart of an established brick-and-mortar biotech: A chief science officer agent leads the research teams, which are broken into multiple specialized divisions that work in parallel to tackle the core elements of drug design, such as identifying molecular targets and designing clinical trials.
The resulting effort, while intangible, so far seems powerful. The virtual biotech company has been able to uncover a biological signal that predicts which drug candidates are more likely to succeed and has designed a cancer therapy that a major pharmaceutical company later independently built.
A [paper](http://www.science.org/doi/10.1126/science.aeg6779) describing the virtual biotech company was published on Sept. 17 in *Science*. Zou is the senior author, and Zhang is the lead author.
### A biological clue
One of the biggest challenges in drug discovery is determining which molecules are most likely to succeed in clinical trials, Zou said. “The end-to-end process of a clinical trial can cost tens — sometimes hundreds — of millions of dollars, and it can take many years.” If there are hidden biological features that could tip scientists off to a drug’s odds of clearing clinical trials, that would be a huge boon to the industry, he added.
He sent the virtual biotech agents hunting for any characteristics that might set successful drugs apart. Instead of loosing a cadre of agents into repositories of scientific literature, Zou took a more meticulous approach, assigning a single agent to analyze a specific clinical trial and to retrieve relevant data about safety and effectiveness. In total, the agents analyzed and catalogued some 50,000 trials in less than a week. That task would have taken human agents years, he said.
Alongside the trial result analysis, the agents were tasked with investigating molecular data collected during the trial. “Here, the virtual agents did something quite interesting,” Zou said. For trials with single-cell gene activity data available, the agents built two scoring systems: one that evaluated how specifically a drug targeted a certain cell type (as opposed to affecting lots of cell types broadly) and one that measured something called bimodality, which indicates whether a targeted gene’s activity is more akin to a light switch (on-off — high bimodality) or a dimmer.
### “The science the agents discovered is really exciting, and it shows that these single-cell features can be used to make better drugs.” —James Zou
The agents found that trials with high scores in both categories fared better. Drugs that targeted switch-like genes were 40% more likely to advance from phase 1 to phase 2 trials, were 48% more likely to reach market, and had 32% fewer adverse events compared with those that had a broad spectrum of activity. What’s more, these patterns persisted for a variety of conditions, including cancers, brain diseases, heart diseases, kidney and lung conditions, and more. Zou’s theory: A target that behaves like an on-off switch and homes in on a specific cell type may be easier, and therefore safer, to control with a drug as opposed to one with a spectrum of activity.
“The science the agents discovered is really exciting, and it shows that these single-cell features can be used to make better drugs. It points to the importance of collecting this kind of data,” Zou said. “This could help the entire drug discovery industry.”
### AI-designed, real world ready
Still, the question remained: Could an all-AI company design a new drug capable of helping people? To test this, Zou and his team turned the agents’ attention to a protein that lung cancer researchers have long eyed — B7-H3. The agents analyzed relevant data from a variety of studies and biomedical data repositories and reported that B7-H3 was highly expressed in a cell type known as fibroblasts, which are found in connective tissue and often live near tumor cells.
The agents looked more closely at communication between cells and at spatial-transcriptomic analyses (which map the activity of certain cells in a specific location); they found that fibroblasts expressing B7-H3 seemed to be signaling to nearby immune cells and suppressing their activity, effectively cloaking the tumor from normal immune defenses. The AI scientists designed something called an antibody-drug conjugate: a protein-based tag team that homes in on cells harboring many of the B7-H3 proteins and delivers a toxic chemotherapy payload directly to them.
The agents proposed this drug design using information available before January 2025. Months later, in August 2025, a private, well-established pharmaceutical company independently arrived at the same antibody-drug conjugate strategy against B7-H3. That therapy went on to receive a Food and Drug Administration breakthrough therapy designation, which helps fast-track promising drugs to market after showing effectiveness in a human study. “This was really exciting as an independent, third-party validation that’s consistent with the effects and the design proposed by the virtual biotech,” Zou said.
Zou isn’t chasing the B7-H3 target any further, as it’s already being shepherded into clinics by another company. But he says the virtual biotech has surfaced other candidate targets designed in a similar way. Humans, physical experimentation and validation will always be the conduit through which AI makes an impact, Zou said. “Our next step is to bring the new findings from the virtual biotech into real labs and test how many hold up in the real world.”
This study was funded by a Knight-Hennessy Scholarship and the National Institutes of Health (grant T32-GM145402), the National Science Foundation, and Chan Zuckerberg Biohub. Stanford’s Department of Biomedical Data Science also supported the work.
Researchers from PHD Biosciences also contributed to this study.