One Stock to Dominate Biotech

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The amazing biotech advancements coming this decade… breakthroughs in drug discovery… the unrivaled leader in the space from Luke Lango… how it becomes a 10X winner

 

In early January 2020, the Harvard Gazette published a story featuring predictions about the biggest scientific advances we’ll see this decade.

The submissions came from faculty at Harvard’s Wyss Institute for Biologically Inspired Engineering.

What made the list?

Here are three predictions that caught my eye, from the Wyss Institute:

  • I predict that major advances in assembling cells and tissues will emerge that will allow us to print living organs for clinical use.
  • Therapeutic ‘robotic’ systems in the next 10 years will no longer be considered robots. Their parts and control systems will be molecularly based, and will have capabilities akin to an immune system. The boundary between living and synthetic will continue to blur over future decades, requiring even greater care in the domain of ethics.
  • I expect the next 10 years will lead to the demonstration, in human patients, that immunomaterials can dramatically alter the progression of various diseases. Immunomaterials will allow physicians to concentrate immune cells where they are needed in the body, regulate their activity, and disperse them when their job is done. The materials themselves will dissolve and degrade to leave nothing foreign in the body after treatment, but will create an immune memory that prevents the return of the disease.

***Regardless of how these predictions play out, we know that cutting edge technologies are already creating faster breakthroughs than at any point in human history

And these breakthroughs, layered upon one another, will only accelerate this decade, leading to jaw-dropping advancements. Even today, we’re on the verge of eradicating some diseases, while offering life-changing therapies for others.

One aspect of biotechnology where we’re going to see extraordinary strides is in drug development. The challenge to date has been the time and costs associated with bringing new drugs to market.

Here’s our hypergrowth expert, Luke Lango, explaining:

Successfully reaching an IND application – which is simply the point at which you tell the FDA that you have this awesome new drug and want to start putting it through clinical trials – requires on average 5 to 6 years.

More than that, data shows that about 2 out every 3 drug development projects will fail to ever apply for an IND, meaning that the average cost to complete a successful IND filing is exorbitantly expensive – around $35 million per successful filing.

And that’s just to reach the application phase. Thereafter, the drug has to go through all the clinical trials to make sure it’s safe, tolerable, and effective.

Luke points out that though we can’t accelerate the clinical trials, we can accelerate the drug discovery and development phase, while doing so at greatly reduced cost.

We can do this thanks to artificial intelligence.

Specifically, machine learning (ML) models are being used to predict the properties of molecules and therefore reduce the number of potential chemical syntheses that need to be performed in drug discovery.

And there’s one company at the forefront of these efforts. Today, let’s learn its identity by looking into Luke’s recent issue of the Daily 10X Stock Report.

Here’s how Luke describes it:

(It’s a) hyper-innovative company that could forever solve the impossibly hard problem of drug discovery. This company’s tech is truly groundbreaking.

Its team is jaw-dropping. And its potential is enormous. It has long-term winner written all over it.

Let’s jump in.

***The next-gen tech company so advanced that it’s beating artificial intelligence

For newer Digest readers, Luke is our hypergrowth expert, and the analyst behind the Daily 10X, as we call it. His specialty is finding market-leading tech innovators that are pioneering explosive trends, capable of generating 10X returns for investors over the long-term.

It’s a lucrative approach to the markets. To illustrate, in just the past five years, Luke has recommended 17 different 1,000%+ gaining stocks. Most investors never enjoy even one such 10X-winner.

Returning to today’s opportunity, what’s the innovative company changing the drug discovery process?

Schrodinger (SDGR).

Here’s Luke:

Schrodinger is a technology company that has built a one-of-a-kind physics-based computational software platform to accelerate the drug discovery and development process.

The secret sauce is that the company has created machine learning models based on physics principles, so that the models’ training sets are not molecular structures, but rather a robust theoretical physics knowledge base – which the models then use to predict critical properties of almost any molecule with a high degree of accuracy.

In essence, the models are a bunch of a physics robots that are working 24/7 to predict molecular properties, and then output the molecules with the best predicted properties for the drug development project at-hand.

Luke explains that a typical drug discovery project can only synthesize approximately 1,000 molecules per year. Compare that to Schrodinger’s software platform, which can evaluate tens of billions of molecules…per week.

This enables scientists to test only the best, most likely to work, combinations of molecules. And that means a faster, cheaper, and ultimately better, drug discovery process.

Putting this into numbers, whereas the typical drug discovery process takes five to six years and costs $35 million, Schrodinger’s discovery usually takes just two to three years. And it costs significantly less.

***Schrodinger’s opportunities for sector domination

In Luke’s Daily 10X issue, he lays out a laundry list of tailwinds behind Schrodinger’s growth curve.

Here are just a handful…

The addressable market is huge. There are over 20,000 pharmaceutical and biotech companies in the world that could use this product. In total, the global market for drug discovery technologies is expected to climb above $100 billion by 2025.

Schrodinger’s technology platform is robust and is a huge competitive advantage. Luke’s team dove into the technology, and doubts that anyone else will be able to figure this out at Schrodinger’s scale. Plus, the company has a large IP portfolio.

Schrodinger’s customer retention rate among clients that spend more than $100,000 per year on the platform was 99% in 2020.

The tech platform is highly scalable. Schrodinger’s drug discovery platform can be tweaked to work in the materials science space. Luke notes that there are compelling opportunities for Schrodinger to expand its predictive modeling capabilities to mobile electronics, aerospace, oil and gas, and energy.

***What’s the drawback?

Valuation.

Here’s Luke:

Sales are expected at $200 million next year. Market cap is $4.6 billion. That’s a 23X multiple on next year’s sales, which is very, very rich.

Perfect execution is required here for the stock to soar 10X – but that may happen.

So, what are the details of how Schrodinger becomes a 10X winner…even from today’s valuation?

Luke mapped it out…

It starts with Schrodinger becoming a must-have for pharma companies… this could be a tailwind to Schrodinger’s annual contract value pushing toward $200,000 in the long run… this would translate into $2 billion in revenues… if we assume EBITDA margin growth to 40%, leading to $800 million in EBITDA, then a 30x multiple puts the valuation at $24 billion.

Back to Luke:

That’s without any drug breakthrough through its drug discovery collabs. Add that into the mix, and this could easily be a 10-bagger.

Wrapping up, it’s going to be thrilling to watch this decade’s advancements in biotech. And all signs are pointing toward Schrodinger being a major player – perhaps the major player – at the forefront of these breakthroughs.

Here’s Luke to take us out:

Schrodinger is honestly one of the most impressive companies we’ve ever analyzed.

The team couldn’t be stronger. The technology couldn’t be more genius or defensible. The solution couldn’t be more value-additive. And the execution couldn’t be more flawless. It’s a fabulous company.

The only drawback? The stock is valued as a fabulous company.

If perfection persists and you get a huge drug breakthrough, though, the stock could turn into a major winner.

Have a good evening,

Jeff Remsburg


Article printed from InvestorPlace Media, https://investorplace.com/2021/09/one-stock-to-dominate-biotech/.

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