An Alphabet (GOOGL) unit used artificial intelligence to disrupt the way new drugs are discovered. This is the best way for investors to take advantage.
DeepMind announced July 28 the availability of a database of nearly all of the proteins known to science. The open-source project eliminates one of the most expensive parts of biotechnology.
Investors should consider buying the Ark Genomic Revolution ETF (ARKG).
DeepMind rose to prominence last December when its AlphaFold project solved a 50-year biology problem. The London-based firm used AI algorithms to successfully predict the three-dimensional shapes proteins would take as they folded organically. It was a monumental advance in the field of biotechnology.
Related post: Amazon Enters Healthcare
The shapes proteins take ultimately determine their function. If biologists knew the shapes/functions in advance, they could custom-design chains of amino acids in the lab, then quickly develop drug treatments for testing.
Before AlphaFold, determining protein structures was experimental. When possible, researchers had to crystalize the protein, then use either electron microscopes or x-ray crystallography machines to make educated guesses. The process was costly and imprecise.
During a podcast in July, Demis Hassabis, chief executive at DeepMind, told Lex Fridman that determining the structure of one protein used to take a Ph.D. student 4-6years to complete. AlphaFold can process that information in a matter of seconds. Hassabis claims the new database will make finding the structure for 200 million proteins as easy as doing a Google search.
Drug Discovery Trends notes that researchers at the University of Oxford used the results to quickly develop a vaccine for malaria.
While expediting drug discovery is a game changer for biotechnology companies, investors should focus on the way the database will change the narrative about investing in the sector.
Shares of biotechnology stocks ran up in 2019 and 2020 as investors warmed to the idea that anything was possible. They saw advancements in data science and computation as the start of something really big.
Researchers at Gartner Group (IT) in 1995 coined the phrase hype cycle. The basic premise is that new technologies typically follow five distinct stages:
- The trigger
- Peak of inflated expectations
- Trough of disillusionment
- Slope of enlighten
- Plateau of productivity
During the trigger stage, media interest grows despite the lack of commercially viable products. Investors become wildly optimistic. Stock prices rise exponentially, as they did in 2020 based on the promise of innovation. This phase is always followed by peak expectations, and disillusionment.
In my opinion, the biotechnology sector has passed the stage of disillusionment. The next phase, with real products is beginning now. Investors should get ready.
The Ark Genomic Revolution exchange-traded fund holds 60 stocks poised to take advantage of this paradigm shift.
Related post: Why Meta & Alphabet Should Dance on TikTok's Grave
Ark Genomic is managed by Cathie Wood, a polarizing figure in the world of finance. She started Ark Invest in 2014 after her idea to invest in disruptive technology was deemed too risky for AllianceBernstein, her previous employer. By early 2021, she had become an investing star and was named the best stock picker by Bloomberg.
Shares of Ark Genomic zoomed from $35 in early 2020 to a high of $114 a year later. That's when biotechnology shares in general entered the peak of inflated expectations, followed by a trough of disillusionment. Ark Genomic shares traded in June to a low on only $27.
AlphaFold is a substantial innovation. The sector is entering the slope of enlightenment in which first generation products will begin to proliferate. The Oxford University success and others will follow. Buying a basket of companies — as offered by Ark Genomic — is the best way to take advantage of these new products while diversifying risks.
The stock currently trades at $40.39, yet it could easily fetch $47, then $70 during the next 18 months, representing a gain of 17.5%, and 75%, respectively.
A decade ago, no biologist was close to solving the protein folding problem. A company owned by an internet search engine quietly changed science. It's time for investors to reap the rewards.
Another way investors can reap rewards is by joining my service, The Power Elite. Members of that service are enjoying open gains of over 161%, 159% and 147%. Click here to sign up now.
Best wishes,
Jon D. Markman
