Pre-commercial drug developers don’t have traditional financial fundamentals — revenue, earnings, cash flow — to interrogate, which means investors have to fall back on less familiar metrics. Perhaps the most important is the probability of success (POS), defined as the percent chance that a drug candidate eventually earns regulatory approval. The POS is quite low in early development (5% for a cancer drug candidate in phase 1) and gradually increases as an asset advances (33% for a cancer drug candidate in phase 3). As the POS increases, so does a company’s stock price.

That presents a problem for investors. The best returns are achieved by identifying early-stage assets that eventually reach the market, but you’ll be wrong 95% of the time for cancer drugs. How do you navigate this uncertainty?

7investing Lead Advisor Maxx Chatsko’s recommendation for July 2021 is harnessing world-class computational power and artificial intelligence to design better drugs from the start. He thinks Wall Street is still underestimating the technology platform’s POS, which presents an opportunity for patient investors.

Transcript

Using artificial intelligence for more efficient drug discovery.

Hey everyone, I’m 7investing Lead Advisor Maxx Chatsko. I cover biotechnology and renewable energy here at 7investing, where we empower you to invest in your future by giving you our seven best stock market opportunities each and every month, each backed by the domain competence of one of our lead advisors.

My recommendation for July 2021 is a very high-risk investment, but one that’s looking to become a leader in precision medicine. In fact, if the company’s approach succeeds, then it might fundamentally change how the entire industry approaches drug discovery.

The company’s technology platform lives at the intersection of experimental data and computational modeling. By using AI and machine learning to better understand molecular targets and chemical space, the company’s drug discovery engine has the potential to design truly precise medicines for a range of diseases. That suggests each drug candidate might have a higher probability of success at each stage of development, which would support a premium market valuation.

If you want to read my full research report, then go to 7investing.com. We are 7investing, empowering you to invest in your future.