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The Evolution of Drug Development: How AI is Changing the Game
Artificial intelligence has made incredible strides in recent years. However, it has yet to successfully create a blockbuster drug from start to finish. The journey from conceptualization to pharmacy shelves remains unachieved.
Despite this, AI’s contributions to the drug development process are significant.
A recently approved therapy illustrates AI’s role in drug development. Back in the early 1990s, Eli Lilly and Co. (LLY) in collaboration with a partner, introduced xanomeline. Initial trials showed promise in slowing cognitive decline in Alzheimer’s patients and alleviating delusions and hallucinations associated with the disease.
However, xanomeline faced a critical hurdle. The side effects were so severe that over 50% of participants in Phase 2 trials dropped out, leading to the drug being shelved.
But this isn’t where the story ends…
As I have noted in previous articles, AI in healthcare is a significant theme this year. In today’s Smart Money, we will explore how AI helped resurrect xanomeline and whether investing in this technology is worthwhile.
Nearly ten years later, Boston-based PureTech Health PLC (PRTC) took an interest in xanomeline. Their research revealed that while xanomeline effectively targeted certain brain receptors, it induced side effects by affecting receptors outside the brain. This meant solutions were within reach, leading PureTech to acquire the rights to the drug from Lilly.
PureTech’s team identified 65 potential binders and 114 suppressors to mitigate xanomeline’s side effects. They recognized that testing all 7,410 combinations was impractical.
To navigate this complex issue, PureTech employed predictive algorithms, a form of AI. While the specific methods remain confidential, their AI successfully identified an optimal solution: trospium chloride, an already FDA-approved drug for bladder control.
Trospium chloride not only minimizes xanomeline’s adverse effects but allows its therapeutic benefits to operate in the brain. Although we have yet to determine if this combination will treat Alzheimer’s, it has effectively reduced delusions and hallucinations, showcasing potential in treating schizophrenia.
The pivotal results emerged from a groundbreaking Phase 2 trial in 2019.
You may wonder why we continue to discuss PureTech, given its market cap of around $500 million, which pales in comparison to larger pharmaceutical giants.
In fact, PureTech spun off the division responsible for this innovation into Karuna Therapeutics.
In late last year, Bristol-Myers Squibb Co. (BMY) – valued at $115.2 billion – acquired Karuna for a substantial $14 billion. Bristol-Myers secured FDA approvals for schizophrenia treatments just last month.
The significance of this drug, now called Cobenfy, cannot be overstated. Analysts view Cobenfy as the first truly innovative schizophrenia medication in over 30 years. Cantor Fitzgerald predicts it could generate over $1 billion in annual revenue by 2026.
Furthermore, Bristol-Myers intends to further research Cobenfy for its original Alzheimer’s applications and for bipolar disorder. Analyst Paul Matteis of Stifel estimates this expansion could propel peak annual sales to $10 billion, potentially totaling over $100 billion in lifetime sales.
If these projections materialize, Bristol-Myers’ initial $14 billion investment would seem negligible.
Such advancements highlight the transformative potential of AI in drug development. As technology continues to evolve, even greater innovations are anticipated in the coming years.
In Fry’s Investment Report, I often recommend AI healthcare leaders, including Bristol-Myers, which I added to my portfolio in February. Since then, its stock has risen by over 10%.
I’m actively searching for the next wave of AI healthcare leaders.
To discover more about the AI healthcare stocks I endorse, join me at Fry’s Investment Report today.
Next, let’s review what we’ve discussed in Smart Money this past week…
Smart Money Roundup
The Data Center Industry: Needs and Investment Opportunities
Though AI does not directly consume water, the data centers that support AI rely heavily on water through cooling systems to prevent overheating. Let’s delve into the data center industry’s water usage amidst global trends and explore investment opportunities.
Implications of Trump’s Potential Second Term for Energy Stocks
Assessing Energy Stocks as Trends Shift Under Trump’s Second Term
Following Donald Trump’s 2016 election win, energy stocks experienced a significant uptick due to his pro-energy policies. However, the following two years saw a decline in the share prices of many energy companies, a trend that persisted throughout his presidency. In this article, Tom Yeung explores how current trends might influence the energy sector during Trump’s upcoming term and highlights effective investment strategies in this area.
Market Surge Cautions – Keep Your Guard Up
Recent market activity shows a “melt-up” driven by three key factors: Trump’s electoral victory, the Federal Reserve’s interest rate cut on November 7, and the seasonal “January effect.” In this issue, investor expert Louis Navellier elaborates on the latter, explains his outlook for further stock increases, and emphasizes the need for cautious investing amidst this frenzy.
AI’s Potential Star: xAI Gains Momentum
Since Trump assumed the presidency, Tesla’s stock prices have risen sharply, adding over $30 billion to Elon Musk’s fortune. This growth may just be the beginning. Musk’s AI startup, xAI, looks set to bring even larger financial rewards. InvestorPlace’s expert Luke Lango discusses three compelling reasons investors should pay attention to xAI’s lead in the fast-evolving AI sector.
Future Insights
Keep an eye out for the upcoming edition of Smart Money, where we will continue to uncover opportunities in AI and other noteworthy market trends.
Additionally, Louis Navellier has developed a unique stock grading system aimed at pinpointing stocks that are likely to generate short-term profits, which can serve as a consistent income source.
For instance, an initial investment of $7,500 in his prior stock recommendations yielded a $3,375 return within one month, $4,650 over three months, $11,925 in five months, and $16,875 in eleven months.
Furthermore, through his Quantum Cash Project, he identifies potential income opportunities that remain viable despite economic uncertainties, inflation, and other market challenges.
In his latest presentation, Louis reveals this income-generating strategy, predicting the identification of at least $60,000 in income opportunities over the next year.
No specialized skills are necessary for this system; it uses no risky leverage and can create income whether you are employed or enjoying retirement.
For more information on this proven strategy and its mechanisms, click here to view Louis’s special presentation.
Regards,
Eric Fry, Smart Money
