Frank, the speaker in the video provides a persuasive argument for investing in AI. He highlights how AI stocks are more substantial than the dot-com bubble stocks of 1999 and mentions the significant investments that large companies are making to develop their AI businesses. The speaker also mentions NVIDIA’s contribution to the field by bringing crazy acceleration in processing speed. Although currently, only 6% of businesses are using AI, the speaker believes that small and mid-sized AI businesses have seen a significant increase in earnings over the previous twelve months or so. This trend is likely to continue as more companies adopt AI, and it is expected to make them more profitable over the coming years.
“One of them is saving $100 million a month by using AI to streamline its supply chain, it’s a logistics company that’s been around for 100 years. Small market cap. Hundreds of customers, large retailers and stuff.”
The challenge of identifying a trucking and logistics company that is both 100 years old and large enough to save $100 million per month through streamlining. While there are around 100 such companies that trade in the US, not all of them fit the criteria. However, there is a possibility that Kuehne + Nagel (KHNGF, KHNGY) could be a contender. This company has a market capitalization value of approximately $35 billion and incurs operating expenses of around $10 billion per year. As such, there might be substantial efficiencies to be gained by streamlining its operations over time. It’s worth noting that like most trucking and logistics companies, Kuehne + Nagel is leveraging AI and other technology tools to improve its efficiency.
It seems that the stock Curzio may not have suggested is just a guess. Nevertheless, we can provide you with information about the other stock he mentioned from his newsletter, which is an AI-based drug development company that can accelerate the process of clinical trials. The company is trading at a high premium, but it has the potential to grow into its valuation, similar to Netflix and Tesla. It has a market capitalization of $500 million, but it is not generating any revenue yet. The company has been involved in AI for years, and it benefits from its experience. It has reduced preclinical time from five years to two and cut costs from $45 million to $15 million, which could translate into billions of dollars.
Absci (ABSI) is the artificial Intelligence in Pharmaceutical Research company that we have previously talked about, and it has been promoted by Alexander Green at The Oxford Club as his favorite microcap stock for both 2023 and 2024. The company is a drug discovery business that employs AI tools to accelerate the development of new drugs which are then partnered with larger companies. Their partnership with Merck for several potential drugs and with AztraZeneca for a cancer antibody has been a significant deal. They have a steady stream of partnership announcements and early-stage projects, however, drug discovery doesn’t happen overnight, and the actual human trials still take roughly the same time as before AI. AI helps to tailor the compound to better match the disease and reduce side effects, but testing and monitoring patients still take years and are expensive. The hope is that AI-assisted results will be better, but it won’t necessarily be faster.
ABSI has made significant progress in advancing their drug pipeline and securing new partnerships for drug discovery programs. This has attracted the attention of investors interested in AI-based ideas. As a result, the company’s stock has bounced back after a disappointing 2022-2023. ABSI has capitalized on this attention by raising funds at the beginning of the year, resulting in a cash balance close to $200 million. The company expects this funding to sustain their operations for the next three years, until the first half of 2027.
They currently have 16 active drug development programs, and are expecting to begin clinical trials with one of their own drugs in about a year from now. This provides ample opportunity to generate positive news updates, but it is unlikely that they will generate meaningful revenue or profits before 2027, which is when they will run out of money.
Investors are closely following the news flow, particularly any early clinical trial success that may lead to more partnership deals or larger milestone payments in their existing partnerships. The ultimate goal for investors is to have multiple drugs approved, possibly within the next 5-8 years, through successful partnership deals with companies such as Merck and Astrazeneca, resulting in royalties on those partnered drugs.
It is unlikely that the drugs will be ready in eight years since they haven’t even entered Phase 1 clinical trials yet. The company provides a chart in one of their recent presentations that shows the value of the drugs while also giving an idea of what the timeline might look like at present.
Speeding up the drug discovery process to obtain FDA permission to test in humans, known as IND, is a crucial step that shortens the commercial life of a compound and makes it more profitable. However, this acceleration does not necessarily expedite the clinical trial process, which typically takes eight years or more to complete. In some cases, clinical trials may take more than a decade if funding issues or poor results arise.
In an ideal scenario, the timeline for the discovery, preclinical and clinical development of a new drug can be shortened from the usual 12-13 years to about 10 years. This is a significant achievement. However, it is important to note that Absci is relatively new in the field, and their programs and projects are still in the early stages of this timeline.
It is reasonable for companies to invest in drug discovery deals to shorten the front-end process. However, it’s important to note that investors may need to exercise patience since most of the rewards for Absci from these deals will likely be in the form of milestone payments that come later in the clinical trial process. For instance, a payment for entering Phase 3 trials or for receiving FDA approval. Besides, the best returns are expected to come later as the company earns royalties from the sale of the drug. Although AI speeds up the initial stage of drug discovery, it doesn’t necessarily make drug development fast enough to satisfy our impatient nature. The real money starts pouring in during the development stage when the drug is “de-risked” with proof of safety and efficacy.
The drug discovery space is currently a hot area for newsletter writers, as evidenced by the numerous stock promotions we’re seeing this week. One such stock to consider in this space is Absci, a well-funded Artificial Intelligence in Pharmaceutical Research company that has garnered the support of at least two newsletter writers.
It’s worth noting that we can expect to see more stories that combine biotech and AI in the near future, leading to recurring teases for a number of companies. Currently, the greatest focus is being given to “Artificial Intelligence in Pharmaceutical Research” stocks like EXAI (Exscientia), ABCL (AbCellera), SDGR (Schrödinger), ABSI (Absci), and RXRX (Recursion). However, some investors might overlook BioXcel BTAI (Therapeutics), a notable pre-COVID “AI-driven drug discovery” IPO. Additionally, there are a number of dditional biotech stocks specializing in precision medicine that are beginning to sell themselves more prominently as AI stories. These include LTRN (Lantern Pharma), Benevolent AI, RLAY (Relay Therapeutics), and POAI (Predictive Oncology), among others. We can expect to hear more about these companies in the future, and I’ll be keeping an eye out for any interesting teaser pitches.
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