Why Drug Developers That Utilize AI, Including SDGR and RXRX, Are Jumping

Pharmaceutical firms that specialize in utilizing AI to speed up the drug discovery process are soaring today. The rally comes after an Alphabet (GOOG,GOOGL) executive yesterday reported that the firm intends to start testing its AI-developed drugs this year.

Schrodinger (SDGR) and Recursion Pharmaceuticals (RXRX), which both specialize in using AI to hasten drug discovery, are jumping 17% and 11%, respectively. iCAD (ICAD), whose products harness AI to detect breast cancer cases, is advancing 9%.

A scientist in the lab, researching the development of biopharmaceutical monoclonal antibody drugs.

Alphabet Is Using AI to Develop Drugs

GOOG’s Isomorphic Labs, launched in 2021, is utilizing AI to create pharmaceuticals,  Google DeepMind CEO Demis Hassabis said in Davos at the World Economic Forum yesterday. Moreover, such drugs may enter clinical trials by the end of 2025, Hassabis added.

“We’ll hopefully have some AI-designed drugs in clinical trials by the end of the year. That’s the plan,” Hassabis was quoted as saying.

Also importantly, the CEO reported that Isomorphic is seeking to reduce the drug development process from many years to “weeks or months.”

SDGR’s Recent Deal With Novartis

In November, SDGR announced a drug development deal with Novartis (NVS), a giant pharmaceutical firm. Under the agreement, Schrodinger received a $150 million payment upfront and can receive up to roughly $2.3 billion of milestone payments and royalties.

SDGR has major deals with multiple, other large drug developers.

While we acknowledge the potential of SDGR, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SDGR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: The author owns shares of SDGR and ICAD but has no plans to trade them in the next 48 hours. This article is originally published at Insider Monkey.