AI Reprices Biotech
Jay A@jay_azhang
−12.9%
since Sep 30
The idea
I believe AI is compressing the cost and timeline of drug discovery, and that the market reprices biotech well before most pipelines mature. This basket leans into AI-native discovery platforms and credible buyout candidates, backed by the suppliers who arm every lab and a broad biotech fund to catch the repricing wherever it hits. I hold 10% in cash to add on the sharp swings this sector tends to produce, and I'm looking at a multi-year hold while the thesis plays out.
What it owns
- Companies built around AI drug discovery platforms win both as tools spread through the industry and as the market reprices them beyond single-drug bets. · Recursion PharmaceuticalsIt is the purest platform bet on AI-native discovery, valued as a pipeline engine rather than a single-drug lottery as long as partnerships stay active., Tempus AIIt owns the clinical data and diagnostics that AI labs need to design and select drugs, winning if AI-driven research keeps paying for access., Schrodinger IncIt sells simulation software that other drug labs use plus runs its own pipeline, winning both as a platform provider and as the tools spread through the industry., AbCellera BiologicsIt uses AI to find antibodies and gets paid in royalties when partners' drugs work, making it a platform play on accelerating breakthroughs., Absci CorporationIt uses generative AI to design new biologics from scratch, offering upside if the market reprices small AI-native shops as platforms.28%
- Clinical-stage biotechs with late-stage assets and near-term revenue are natural targets for big pharma and cash-rich acquirers shopping for proven science. · Viking TherapeuticsIt is a late-stage obesity drug candidate that sits at the top of big pharma's shopping list and wins if acquirers stay hungry in that market., CytokineticsIt has late-stage heart drugs that make it a standing takeover target for big pharma shopping for clinical-stage assets with real data., InsmedIt sells proven rare disease drugs with patent protection, the kind of protected assets that fit the buyout profile in a shopping spree., Madrigal PharmaceuticalsIt owns the first approved drug for a major liver disease, making it exactly the kind of revenue-generating asset a cash-rich acquirer buys., Axsome TherapeuticsIt already sells brain and mood drugs so an acquirer gets revenue on day one, fitting the buyout profile as long as its sales and pipeline grow.26%
- Sequencing, synthetic DNA and lab-tools suppliers sell to every AI drug effort regardless of which programs succeed, capturing demand from the acceleration. · IlluminaIt makes the sequencing machines every AI-driven lab orders more of if breakthroughs accelerate research spending and data generation., Twist BioscienceIt makes the synthetic DNA that AI-designed experiments consume, so more AI in biology means more orders from pharma and research customers., DanaherIt supplies the manufacturing equipment behind whatever drugs come from the AI wave, providing steady weight and profiting from higher pipeline volume., Thermo Fisher ScientificIt sells instruments and services to nearly every lab, so if AI tools spread through the industry its lab sales and services pick up., 10x GenomicsIt sells the single-cell tools that generate the rich biological data AI models train on, so growth depends on research spending recovering.21%
- The buyers themselves and a broad biotech fund catch the repricing wave wherever it breaks, steadying exposure across the sector. · Eli LillyIt is the most aggressive big pharma buyer of AI discovery deals and has the cash to fund a shopping spree for clinical-stage assets., SPDR S&P Biotech ETFIt holds the entire small and mid-cap biotech sector, catching the repricing wherever it lands and steadying a concentrated bet on the sector., Vertex PharmaceuticalsIt sits on cash and has a habit of buying its way into new science, winning from the same M&A wave that reprices the smaller targets.15%
- Cash10%