Photo by Mohamed Nohassi on Unsplash

The pharmaceutical industry is embracing artificial intelligence technology (AI) to help in the research and development of new drugs as such an approach. often can help a company develop a new drug in a matter of days instead of the years it might take using the traditional clinical trial approach.

The AI In Drug Discovery Market

• According to Grand View Research the global “AI in drug discovery” market was worth about $1.1 billion last year and should grow at a 30% clip to 2030;
• Janssen Research & Development (JNJ arm) concludes the AI method to be up to 250 times more efficient than the traditional method of drug discovery holding the potential to reduce timelines for drug discovery, to increase accuracy of predictions on efficacy and safety as well as to create better, and more, opportunities to diversify drug pipelines; and
• Morgan Stanley believes that AI-powered drug discovery will lead to an additional 50 novel therapies being brought to market over the next decade, with annual sales in excess of $50 billion! In other words, a $50 billion AI drug discovery revolution is underway.

Why Use AI Technology In Drug Development?

Most new drugs are currently approved through human clinical trials: rigorous, year-long procedures starting in animal trials and gradually moving to patients in trials who are exposed to side effects that cannot be predicted or expected. The process can cost billions of dollars and take many years to complete - sometimes more than a decade - and their successful trials still have to receive approval of a country’s respective regulatory agency (Source ).

AI technology, however, helps companies: 

• aggregate and synthesize a lot of information that’s needed for clinical trials, thus shortening the drug development process, 
• understand the mechanisms of the disease,
• establish biomarkers,
• generate data and models of novel drug candidates,
• design or redesign drugs,
• run preclinical experiments, design,
• run clinical trials, and
• even analyze the real-world experience. 
• Source

Our AI-Focused Drug Discovery Stocks Portfolio

The following 5 clinical-stage companies are using AI technology to facilitate their efforts to discover and development of new drugs. Below is:

• the focus of each company in the portfolio,
• how each of the constituents (stocks) in the portfolio performed week-ending August 8th, in descending order,
• the catalyst(s) contributing to the change in constituent stock prices,
• how the stocks performed in July, and YTD and
• a link to the companies' pipelines.

1. Absci Corporation  (ABSI): Unchanged w/e August 8th; up 8.0% in July; up 8.4% YTD
   • Focus: analyzes drug characteristics that may provide therapeutic benefit. (see details here),
   • Pipeline: see here
   • Performance Catalyst(s):
     • The stock is showing signs of being overbought and RSI indicators are beginning to flash bearish divergence.
   • Analysts' Consensus Rating:
     • Strong BUY
   • Analysts' 1-Year Price Targets As % Change From Current Stock Price:
     • Low: +125.4%; High: +252.1%; Average: +191.6% Source
2. AbCellera Biologics (ABCL): down 4.9% w/e August 8th; up 23.8% in July; up 45.1% YTD
   •  Focus: searches for antibodies from natural immune responses which are then outsourced to their partners. (see details here)
   • Pipeline: see here
   • Performance Catalyst(s):
     • The Q2 2025 earnings report of August 7th included revenue of $17 million, with $10 million from a one-time licensing fee which left investors with concerns about future quarters.
     • The Company reported a  high burn rate used in its operations and in manufacturing and clinical infrastructure spending and this raised concerns about long-term sustainability, despite the Company's strong liquidity position.
     • The stock had already run up in July, so the earnings report may have triggered profit-taking.
   • Analysts' Consensus Rating: Strong BUY
   • Analysts' 1-Year Price Targets As % Change From Current Stock Price:
     • Low: +17.7%; High: +135.3%; Average: +88.2% Source
3. Schrödinger (SDGR): down 5.0% w/e August 8th; down 1.4%% in July; Unchanged YTD
   •  Focus: uses its platform to discover novel molecules which it leverages to build a pipeline of its own clinical programs in addition to selling access to its platform to other pharmaceutical firms (see details here)
   • Pipeline: see here
   • Performance Catalyst(s): 
     • Historically, SDGR has underperformed after earnings even when revenue rises and a 3-year backtest shows a −20.9% return when holding the stock for 30 days post-report suggesting that this pattern likely contributed to profit-taking.
   • Analysts' Consensus Rating: BUY
   • Analysts' 1-Year Price Targets As % Change From Current Stock Price:
     • Low: +45.8%; High: +134.3%; Average: +71.8% Source
4. Relay Therapeutics (RLAY): down 8.5% w/e August 8th; up 6.7% in July; down 21.8% YTD
   •  Focus: uses its platform to enhance small molecule therapeutic discovery in targeted oncology and genetic disease indications (see details here)
   • Pipeline: see here
   • Performance Catalyst(s):
     • The Company reported its Q2 earnings on August 7 but much of the reported revenue came from non-recurring licensing fees, which don’t reflect sustainable operating income and this raised red flags for investors focused on long-term fundamentals.
   • Analysts' Consensus Rating: Strong BUY
   • Analysts' 1-Year Price Targets As % Change From Current Stock Price:
     • Low: +210.6%; High: +645.3%; Average: +473.0% Source
5. Recursion Pharmaceuticals (RXRX): down 8.5% w/e August 8th; up 16.5% in July; down 20.7% YTD
   •  Focus: decodes biology by integrating technological innovations to industrialize drug discovery (see details here)
   • Pipeline: see here
   • Performance Catalyst(s):
     • The Q2 financial report showed a dramatically lower net loss that spooked investors and, while management reiterated a cash runway through Q4 2027, they did not provide new guidance, which investors were hoping for to provide more clarity on commercialization timelines which added uncertainty..
   • Analysts' Consensus Rating: BUY
   • Analysts' 1-Year Price Targets As % Change From Current Stock Price:
     • Low: -6.7%; High: +86.6%; Average: +30.6% Source

Summary ​​​​​​​

The portfolio was down 5.8% w/e August 8th; was up 5.2% in July, is now only up 2.4% YTD.

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