4 AI-Powered Drug Discovery Stocks to Watch as AI Reshapes Pharma
Recursion Pharmaceuticals, Schrödinger, Relay Therapeutics and Absci offer exposure to AI-enabled discovery, clinical catalysts and partnerships, but investors face substantial development, financing and execution risks. All carry a Zacks Rank #3 (Hold).
Artificial intelligence could shorten pharma’s lengthy timelines, reduce costs and improve clinical success. McKinsey, citing Tufts researchers, estimates roughly 10 years and $1.4 billion in out-of-pocket costs to bring one drug to market. AI analyzes biological and chemical data, identifies targets, designs candidates and predicts responses before laboratory testing; experiments can improve subsequent models. Licensing, partnerships and milestone payments offer additional revenue. Recursion Pharmaceuticals’ (RXRX) Recursion Operating System combines biological and chemical datasets, machine learning, automated experiments and computational tools. Its AI agents support target discovery, drug design and clinical strategy. The pipeline includes REC-4881, REC-1245, REC-617, REC-3565 and REC-4539. REC-7735, an AI-designed PI3Kα H1047R inhibitor, received IND clearance and is expected to enter phase I/II in the second half of 2026 for selected PIK3CA H1047R-mutant solid tumors. Schrödinger (SDGR) combines physics-based molecular simulation with machine learning. Its Bunsen agentic AI co-scientist supports discovery workflows, while predictive toxicology targets failure risk. SGR-1505 is in phase I for relapsed/refractory B-cell malignancies, and SGR-3515 is in phase I for advanced solid tumors; both were computationally discovered, with preliminary activity reported. Shares fell 1.6% year to date versus industry growth of 2.9%. Schrödinger plans to seek partners beyond phase I, preserving capital while monetizing software and collaborations. Relay Therapeutics (RLAY) uses its Dynamo protein-motion platform in precision oncology and genetic diseases. Shares rose 134.8% year to date versus an industry decline of 2.1%. Zovegalisib (RLY-2608) is in phase III ReDiscover-2 with fulvestrant for previously CDK4/6-treated, PIK3CA-mutated HR+/HER2- advanced breast cancer; a frontline study is planned, subject to regulatory feedback. ReInspire addresses PIK3CA-driven vascular anomalies, while RLY-8161 targets NRAS-mutant tumors. Fabry disease programs broaden exposure. Absci (ABSI) combines generative AI, synthetic biology and rapid validation. ABS-201 is in phase I/IIa HEADLINE for androgenetic alopecia, with a reported half-life of at least 65 days; interim proof-of-concept is expected in the second half of 2026 and full data in early 2027. Endometriosis phase II is targeted for the fourth quarter of 2026. Shares rose 163% year to date versus industry growth of 4.8%. ABS-202 remains preclinical. Eli Lilly’s $40 million investment funds operations into the second half of 2028.