Exclusive: Baidu, investors in talks to raise $2 billion for biotech startup - source

© Reuters. FILE PHOTO: Wworker wearing a face mask cleans the floor, near a Baidu AI robot which shows a face mask on its screen, at Baidu's headquarters in Beijing

By Yingzhi Yang and Brenda Goh

BEIJING/SHANGHAI (Reuters) - Chinese tech giant Baidu (O:BIDU) is in talks with investors to raise up to $2 billion over three years for a biotech startup, which will use AI technology to discover new drugs and diagnose diseases, a person with direct knowledge of the matter said.

A second person confirmed the startup plan.

Baidu (O:BIDU) is unlikely to be the controlling investor, the first person said. Both sources spoke on condition of anonymity, adding they did not have more details on the investment as talks were still under way.

Baidu's plans come at a time of increased investment in the healthcare sector since the outbreak of the COVID-19 pandemic, with many companies expanding into online diagnosis options to fill the gaps left by overstretched, overcrowded hospitals.

WeDoctor, backed by Tencent (HK:0700), Alibaba 's (N:BABA) healthcare arm and Ping An Good Doctor (HK:1833) have joined the fray to develop apps that offer diagnosis, prescriptions, appointment bookings, 1-hour drug delivery and insurance.

But the startup under discussion plans to focus more on such areas as drug discovery and development, and early tumor diagnosis, by mobilizing Baidu's powerful artificial intelligence (AI) technology that can perform complex computing to produce biological innovations, the sources said.

The name of the startup has not been decided, but Baidu came up with the idea as early as six months ago, one of the sources said, adding that Baidu founder and Chairman Robin Li has been personally involved in the project.

Baidu declined to comment.

Baidu open-sourced its Ribonucleic acid (RNA) prediction algorithm LinearFold this year. The tool aims to accelerate the prediction time of a virus' RNA secondary structure, which is crucial to understand a virus and develop vaccines.

The healthcare industry, especially biotechnology, has seen a flood of money flow in amid the scramble for a COVID-19 vaccine and governments seeking to fix their health systems.

The Hang Seng Healthcare Index (HSHCI) has surged about 40% over the past five months, outstripping the Hang Seng Index (HSI) that edged up more than 6% over the time.