7 Pharma Stocks Harnessing AI Brainpower for Big Breakthroughs


  • Schrodinger (SDGR): Schrodinger is one of the premier names in AI drug discovery.
  • Absci (ABSI): Absci represents an interesting mix of potential in the AI discovery space.
  • Bristol-Myers Squibb (BMY): Bristol-Myers Squibb is working with several companies in order to best leverage AI.
  • Keep reading to discover the best pharma stocks to buy!
Pharma Stocks to Buy - 7 Pharma Stocks Harnessing AI Brainpower for Big Breakthroughs

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It’s no secret that artificial intelligence (AI) promises to transform every industry and sector, pharma included. But how do those companies plan to leverage AI, and what will it do for their stocks? The answers, of course, are as varied as the companies leveraging AI. 

Many will leverage AI for the process of drug discovery. AI is much more efficient at identifying compounds with potential efficacy for a given disease or disorder. Others are utilizing AI to improve the development process for validation assays, the tests used to identify compounds. The use cases go on and on. 

There’s also the question of how AI will affect individual pharma stocks. The answer there, too, will be varied. AI will serve to raise the prices of some stocks while others will not be so fortunate. Let’s take a look at seven pharma stocks to buy that leverage AI and what investors can expect.

Schrodinger (SDGR)

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Schrodinger (NASDAQ:SDGR) continues to develop its physics-based computational platform, which heavily leverages artificial intelligence. That platform is especially useful for the purpose of drug discovery, making Schrodinger one of the more prominent AI pharma stocks.

The company leverages that platform for the internal purpose of identifying potentially valid pharmaceutical candidates. In other words, Schrodinger operates its own pharma discovery arm. Meanwhile, the company also licenses that platform as a software to other firms.

Investors who’ve placed their capital behind Schrodinger have gone on something of a roller coaster ride. During the most recent period, the company reported $36.6 million in revenues, $33.4 million of which came from software licensing activities. Software licensing segments improved by 3.7% during the quarter. The big decline in revenues was due to a large collaboration payment during the first quarter of 2023. Schrodinger anticipates making as much in drug discovery revenue in 2024 as it did during the first quarter of 2023. 

Investors should expect its fundamentals to grow in the high single digits into the double digits. The company also has a pipeline of in-house therapeutics in development, which gives it the potential to explode in value moving forward. For those reasons, Schrodinger at least remains interesting and should be a reasonable consideration for investors.

Absci (ABSI)

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Absci (NASDAQ:ABSI) is another firm proving that data is king across all industries in the era of artificial intelligence. The potential of ABSI stock lies in the application of generative AI to drug creation. That opportunity is really predicated on the strengths of AI in sifting through scads of data at speeds never before possible.

This stock itself is interesting because it represents a mix of positive catalysts and potential flags. The company has entered into a collaboration with AstraZeneca (NASDAQ:AZN) for an AI-designed oncology target. That program could be worth up to $247 million in funding and milestone payments with additional royalties possible.

Yet, Absci continues to lose money and consistently produces a million dollars or less in revenues on a quarterly basis. The company also offered up more than 19 million shares of its stock in a public offering a few months ago. Those shares were priced at $4.50. Although such actions introduce the potential for dilution, share prices have consistently stayed above that offering price since.

Bristol-Myers Squibb (BMY)

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It should come as no surprise that Bristol-Myers Squibb (NYSE:BMY), as a large pharma firm and stock, is leveraging AI in multiple ways.

In short, Bristol-Myers Squibb is working with multiple smaller teams outside of its firm while also developing in-house capabilities. The company is working with Exscientia (NASDAQ:EXAI) to accelerate the discovery of small molecule candidates. Meanwhile, Bristol-Myers Squibb is concurrently collaborating with Insitro to develop disease models on which to test potential therapeutics. Then, the company is also working with Owkin to enhance clinical trial success strategies. Each of those three companies extensively leverages AI in its respective operations.

Earlier this year Bristol-Myers Squibb enlisted the help of VantAI in leveraging generative AI. The firms are working together to better understand the application of molecular glues to proteins. If the project is successful, VantAI stands to reap as much as $674 million in milestone payments. Molecular glues work to bind together two or more proteins that would not normally bind. Thus, Bristol-Myers Squibb may, in time, develop totally novel treatments for diseases and disorders.

Eli Lilly (LLY)

Eli Lilly (LLY) sign on corporate building with blue sky in background
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Eli Lilly (NYSE:LLY) stock is on many investors’ radars due to the success of its weight loss drugs, Mounjaro and Zepbound.

Sales of those drugs continue to thrive despite supply chain issues that continue to plague the company. In short, Eli Lilly is well positioned to thrive currently on the success of its weight loss champions. The sky continues to be the limit, as the company chose to hike its sales forecast beyond Wall Street’s expectations even with nagging supply chain issues.

While that’s arguably the top reason to consider investing in Eli Lilly, its AI efforts are very intriguing. Scientists at the company were particularly surprised at the ability of AI to produce potentially viable and novel therapeutics humans could not have envisioned. That was the opinion of Chief Information and Digital Officer Diogo Rau. He noted that much of the application of AI in drug discovery centers around iteratively teaching the AI how to correctly produce viable candidates. 

Rau noted that while the structures of many of the molecules AI is producing at the firm were “weird”, they are also viable. That leads Rau to believe AI is set to revolutionize the types of therapeutics beyond that which humans could have envisioned in the past.

Novartis (NVS)

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Novartis (NYSE:NVS) is an interesting pharma stock to consider if for no other reason than it exemplifies the applicability of AI across all fields. 

That truth is exemplified in the career path of the firm’s current head of AI and computational sciences, Dr. Bulent Kiziltan. He started out studying black holes and ultimately found his way to Novartis. If nothing else, his decision to join Novartis is a clear indication of the potential of AI in the pharmaceutical realm.

Furthermore, Novartis currently has more than 150 ongoing AI projects. The company has partnered with leading AI firms, including Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA), to scale AI firm-wide.

The results from those projects will take time to materialize, and the current status of the company is strong. Novartis recently released earnings results showing 11% top-line growth and operating income that increased by 22%. 

The stock represents a potent mix of strong fundamentals and strong AI-driven upside worth considering for investors.

Pfizer (PFE)

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Pfizer (NYSE:PFE) is an interesting stock at the moment for a number of reasons. Most of those reasons can be traced back to its pandemic success and the current hangover therefrom.

The company’s pandemic success is also attributable to AI.

Investors are well aware that Pfizer’s shares have fallen dramatically of late. The pandemic is over, and Paxlovid sales have essentially cratered. Shares continue to trade below $30. The company is no longer capable of reaching $100 billion in annual sales. However, many investors, myself included, see great potential in the firm at this price. It certainly represents a nice income opportunity through its current high-yield dividend. 

Did you know that Paxlovid was developed using AI? Pfizer leveraged IBM’s (NYSE:IBM) supercomputing might to successfully develop the drug. Pfizer noted that in doing so, it was able to reduce development timelines considerably. Who knows, perhaps Pfizer will successfully develop the next blockbuster drug by utilizing AI again.

Novo Nordisk (NVO)

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Novo Nordisk (NYSE:NVO) is the other weight loss stock dominating the pharma sector currently. It’s also a company dedicating substantial resources to AI.

In March, the Novo Nordisk Foundation announced that one of the world’s most powerful supercomputers will be built in Denmark, the company’s home base. The project is a collaboration between multiple funding organizations in the European nation and Nvidia. 

The collaboration will establish a national center housing one of Nvidia’s supercomputers. It will be accessible to both public and private researchers within Denmark. The project is intended to accelerate solutions to societal problems.

CEO of the foundation Mads Krogsgaard Thomsen noted, “Drug discovery, disease diagnosis and treatment, as well as complicated life science challenges, are examples of areas where extreme AI computing power can enable the positive transformation of our society.”

Novo Nordisk will continue to be a firm to watch for its early success in commercializing weight loss drugs. That success is leading to investment that it may use to jump ahead further in the future.

On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/7-pharma-stocks-harnessing-ai-brainpower-for-big-breakthroughs/.

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