Thread by @Biotech2k1

Looking at the AI based Drug Development landscape.

This is one area of biotech many investors do not agree with me on. The blending together of tech with biotech to reduce costs and increase the level of success for clinical development.

1/ It takes over $1 billion to develop a new drug and 90% of those drugs will fail to ever reach commercial success. The use of tech in biotech can help reduce the cost and increase the success rate.

2/ There are many ways in which tech can help from understanding genomic data for developing new drug targets to screening many potential targets for the one that offers the best chance of success.

3/ I know many people look at this as a competitive landscape, but I don't see it that way. I see this as the inevitable evolution of biotech to use more and more tech over time to reduce the extensive costs of developing new drugs.

4/ Its not a destination, but a continuing journey. There are so many aspects of clinical development where technology can be deployed now and places where it can developed into the future.

5/ There are 3 kinds of companies focused in this space. The first is the tech companies that use their tech to help drug companies collaborate and develop drugs. I think of companies like $ADPT, $ABCL and $EVO.

6/ The second kind are the biotech companies that collaborate with the tech companies to deploy their tech in developing new drugs. In my opinion, these companies only solve half the problem.

7/ I look for the companies developing technology that is also used to drive clinical pipelines. These are companies like $SDGR, $RLAY, $RXRX and $EXAI.

8/ I believe the future will be biotech companies that use tech to drive their pipelines. It will be the seamless integration of both that will drive the next decade of new innovations to change the inefficient drug development process.

9/ $SDGR this company developed physics based software to predict how proteins and enzyme move and function. They license their software to companies for drug development. They also have their own clinical pipeline.

10/ $RLAY licensed the $SDGR software then went out and bought and built more software for drug development. They have a pipeline that is taking on some of the hardest targets in oncology like PI3Ka and FGFR.

11/ $RXRX uses robots doing experiments to record millions of experiments. They are an automated lab. All that data is collected into a supercomputer that uses software to guide drug development. They have 4 drugs moving into phase 2 with many others in early development.

12/ $EXAI does both drug development and collaborations to develop new drugs. They are also using machine learning to help drive cancer therapies. Their data showed AI assist improved outcomes for blood cancer patients by 30%.

13/ Personally, I am a biotech fan so I want pipelines and big drug potentials. I don't like a giving away all the good stuff with partnerships.

14/ That is why I picked these 4 companies for myself, but I have to believe there might be a Microsoft of drug development software out there.

15/ There are others out there like $EVO, $ADPT and $ABCL that use all partnerships to doing their development. You can find what appeals to you based on if you are a tech or a biotech fan.

16/ I think the valuations are still a bit steep here as many of these companies are $3 billion or more in valuations. Most of them have no clinical data yet beyond $RXRX. The early $RLAY data impressed me.

17/ In a bad market, I could see them trading down to about $2 billion which is a more realistic valuation. Some of these companies like $SDGR are justified on value based on the software sales so you get the pipeline for free.

18/ The AI based drug development space seems to have many skeptics at this point. Its still very early on and their could be a lot of integration on the tech side. I think this will be one of the big drivers for the future of biotech.