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While the global pandemic appeared to be a hard blow for the majority of economic sectors, the biotech market was on the rise – not only reaching record breaking values for the biotech stock index, but also showing extraordinary deal-making activity on the frontiers of venture capital investments and initial public offerings (IPOs).
The rising trends was also observed for the sector of pharmaceutical artificial intelligence (AI). According to UK-based Deep Pharma Intelligence, the total amount of VC funding in AI-biotech startups increased in 2020 by around 23%, compared to 2019, approaching a total of $1.9 billion, which is also more than in 2015, 2016 and 2017 combined. There is an increasing number of late-stage mega-rounds, including hundreds of millions, which reflects the increasing quality of players in this market, with strong business models, outstanding deal making traction and cutting-edge research. As noted by Dr. Andrii Buvailo, Director at Deep Pharma Intelligence: Some of the leading emerging players in the pharmaceutical AI race include US-based Deep Genomics, Healx and Recursion Pharmaceuticals as well as Hong Kong-based Insilico Medicine. These players managed to create end-to-end AI platforms for rapid drug discovery and demonstrated exceptional proof-of-concepts over the last several years.
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While the European pharmaceutical AI-community is somewhat lagging behind the global AI-adoption race, there is certainly progress in the making, and a number of outstanding AI-biotechs here worth noting include: Germany-based Innoplexus, Luxembourg-based Organo Therapeutics and Austria-based Cellerity. Speaking about public markets, five AI-driven drug discovery companies completed successful (IPOs) – Relay Therapeutics, Berkeley Lights, Lantern Pharma, Schrodinger and Abcellera. Despite the crisis, they showed volatile but steady growth – although still demonstrating negative net income. Overall, the performance of these publicly traded AI-driven biotechs resulted in around $22 billion of cumulative capitalization of the sector, that was 424.2% growth just per one year.
The market capitalization growth dynamics in the sector of AI-driven corporations significantly outperform the global market (represented as S&P 500 index), as well as aggregate biotech industry indices (IBB and NBI). In the same time, the segment of AI-driven pharma companies is more volatile compared to the industry average. After a paradoxically bullish year for the biotech industry, the market may see possible correction over the first half of 2021. However, the sector of pharmaceutical AI will likely outperform the general market and will continue its growth trajectory. This is explained by a systemic nature of value AI is bringing to the table – every large pharma organization is now prioritizing this technology as a strategic component in their model of innovation, driving the overall sector growth, further increase in the number of transactions and R&D collaborations, and an approaching wave of mergers & acquisitions. This also stimulates investors to continue being bullish about allocating capital for AI-driven biotechs.
Gastkommentar: Sergey Balasanyan
Der Gastkommentar ist in unserer Februar-Ausgabe 2021 „Health & Wealth“ erschienen.
Opinions expressed by Forbes Contributors are their own.