If you’re looking to diversify outside of AI, especially as AI investors look to trim their winners to save up for that mega-cap AI IPO boom on the horizon, with SpaceX leading the way, the biotech space is more than worth exploring, especially as some of the AI benefits start to trickle downstream towards biotech innovators. Indeed, we’ve heard a lot about the promise of AI when applied to the field of biotechnology and healthcare.
From cancer treatments and curing a long list of diseases, perhaps there is no bigger win to be had from AI than within the health sector. Whether we’re talking about AI drug discovery, AI-driven diagnostics and screening, or even AI-powered hyper-personalized medicine, there’s a ton of promise as AI comes for biotech. With the rise of “dry labs” (think simulations over actually running experiments by mixing chemicals), perhaps the biotech landscape could shift in a profound way.
The biotech innovators are starting to look way too cheap
Undoubtedly, the biotech scene is seen more as a less-predictable, perhaps more speculative playground for traders than a place where there’s a great deal of certainty. If AI delivers on its promise, perhaps biotech could become far more investable, which, in turn, could make some of the names worth heftier premiums.
For now, biological AI is in its very early innings, and it’s hard to know when the ChatGPT moment will come for the field. Either way, though, I still think the names are looking cheap these days, especially for investors looking for lower betas, solid growth, and underrated AI exposure.
In this piece, we’ll look at two biotech names that could be worth a closer look as they quietly adopt AI to help produce the next big blockbuster. I have no idea when the Mythos of biotech will arrive, but when it does, I think it’ll be tough to ignore the biotech innovators.
Vertex Pharmaceuticals
Shares of Vertex Pharmaceuticals (NASDAQ:VRTX | VRTX Price Prediction) have done next to nothing in the past two years. The vicious moves in both directions have made the $111 billion biotech play more of a question mark than a name that’s a must-buy on weakness. While the name isn’t exactly an AI stock, the firm is putting machine learning to good use behind the scenes. Time will tell how much AI can help speed things up, but either way, the potential is there.
In the meantime, Vertex is under pressure following softer-than-expected launches of new drugs. The cystic fibrosis business might be firing on all cylinders, but beyond that, investors are wondering where the next big growth spurt will come from.
With a solid pipeline that could refuel growth in the coming year, perhaps Vertex will get its moment to break out. Until then, the stock looks like a cheap way —22.9 times forward price-to-earnings (P/E) — to punch a ticket to low-beta (0.30) growth.
Regeneron
Regeneron (NASDAQ:REGN) stock has already crashed close to 48% from its 2024 high. The Fianlimab disappointment has weighed quite heavily, and as the firm invests considerable sums in its next big drug, questions linger as to whether the hefty R&D (around $6 billion guided for 2026) is going to turn investors away.
Though there’s no easy way out, there are notable catalysts coming up beyond oncology. With a packed pipeline and plenty of potential to get the pipeline moving faster at the hands of AI, I consider the name to be a great deal at 15.3 times trailing P/E. The 0.30 beta is quite low and should help shelter investors if the AI trade were to go through another one of its upsets.
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