In biotech, one thing isn’t going to change.

The treatment that makes up 90% of the pharmaceutical market – good, old-fashioned small molecules created in the laboratory – isn’t going anywhere.

Yes, incredibly innovative treatments like T-cell therapy, microbiome therapies, and CRISPR gene editing are all having a huge impact on healthcare.

But we use small, synthetic molecules to create everything from aspirin and corticosteroids to sofosbuvir (Sovaldi) and ivacaftor (Kalydeco) – and we’ll keep doing so for a long time to come.

The small molecule technique dates back to the 1890s, but that doesn’t mean innovation cannot happen within that field.

Scientists are hard at work in the labs, creating cutting-edge drugs, often tailored to treat a very specific disease or subset of patients.

Meanwhile, I’ve turned up a small British company that’s using its artificial intelligence platform discover promising small molecule treatments faster – and cheaper – than ever before.

I call it biointelligence.

It’s a perfect illustration of the “Convergence Economy” we talk so much about here. By combining two or more fields of tech – in this case biotech and AI – it’s like a formula in which 1 + 1 = 3… and often a lot more that.

Today, we’re going to learn all about this tiny company and its brand-new biointelligence technology.

This company is privately held – so if you ask, Wall Street will say you can’t invest in it.

But I’ve found a way you can.

In fact, I’ve found two ways.

Both of them will lead you to outsized returns – and hefty dividends.

Let’s take a look…

Finding Effective Treatments Faster

Don’t worry if you’ve never heard of the Dundee, Scotland-based firm Exscientia Ltd. Few folks have.

But this small company is upending drug development as we know it by adding a Silicon Valley-style innovation – artificial intelligence – into the mix. AI harnesses the power of computing, machine learning, and advanced algorithms to greatly augment what human minds can do – and find profitable patterns they can’t.

The $1.6 trillion biopharmaceutical sector is ripe for this kind of tech.

Let me explain why…

It now takes roughly five years from the time scientists begin looking at an area of disease before they land on a promising compound. Then after that, a drug firm will spend an average of $2.9 billion and 10 years to get the resulting treatment through U.S. Food and Drug Administration approval and out to patients.

According to a recent report from the Tufts Center for the Study of Drug Development, here’s how the costs break down: $1.4 billion in direct spending, $1.2 billion in lost use of funds over the decade, and more than $300 million in post-approval costs. That’s a 145% increase in costs since 2003, Tufts found.

But Exscientia is changing all that. Here’s how it works…

  • The firm’s biointelligence engine combs through thousands of drug studies to fashion best practices.
  • The biointelligence system then employs Big Data analytics to comb through millions of novel, project-specific compounds (nearly all small molecules).
  • After that, it produces a list of a data-rich compounds ripe for testing in the lab.

With this biointelligence process, Exscientia says it can come up with a list of promising compounds in one-fourth the time of standard approaches.

That’s huge – both for patients looking for more effective treatments and for investors looking for bigger gains.

The Inventor of Viagra Is on This Team

This small startup has winner written all over it… in no small measure because it meets Rule No. 1 of our Tech Wealth Blueprint – “Great Companies Have Great Operations.”

Just take a look at Exscientia CEO Andrew Hopkins.

He spent 10 years at Big Pharma leader Pfizer Inc. (NYSE: PFE), where he was responsible for establishing new research methods for finding potential drugs.

Hopkins also has raised a total of $50 million for academic and commercial research activities as Chair of Medicinal Informatics at the University of Dundee. And he’s the author of some of the most highly cited papers in modern drug discovery.

His chief chemist is no slouch either. Andy Bell is a coinventor of sildenafil (Viagra) and a contributor to the development of antifungal treatment voriconazole (Vfend). These products have racked up sales of nearly $40 billion around the world.

With more than 30 years of experience in the field, Bell is the winner of the American Chemical Society’s Technical Achievement in Organic Chemistry Award.

Like I said before, this is a privately held firm, so Wall Street will tell you that there’s no way you can directly profit from this tiny firm’s work.

Unless you know where to look.

Two of my favorite drug companies have invested in and are working with Exscientia.

Both of these pioneers have the potential to profit from biointelligence.

And now so do you…

Biointelligence Pioneer No. 1

Let’s start with Sanofi SA (NYSE: SNY). The French giant in early May said it would invest up to $285 million in Exscientia if certain goals are met.

Because the pact is new, few specific details are available. But we do know that the two are teaming up on metabolic diseases like diabetes, a market valued at $55.3 billion.

With funding from Sanofi, Excientia’s biointelligence platform will be used to discover and identify “bispecific” small molecules. That means they’re looking for treatments that could treat not just diabetes but also one or more of its accompanying conditions, such as heart disease, all at once.

Tapping AI seems to be a natural fit for Sanofi. This is the firm that paid $20 billion back in 2010 to acquire biotech pioneer Genzyme and its RNA interference (RNAi) treatments. RNAi medicines can send genetic codes that tell diseased cells to stop replicating. That’s why these drugs have the capacity to cure tough diseases that affect millions of people around the world.

Sanofi has 44 drugs in its pipeline, including 13 in late-stage phase 3 trials.

That impressive pipeline is one of the reasons I recommend Sanofi.

Another reason is Dupixent, Sanofi’s new eczema drug approved by the FDA in March. Developed in partnership with Regeneron Pharmaceuticals Inc. (Nasdaq: REGN), Dupixent is the world’s first injectable eczema treatment and avoids the cancerous side effects of topical calcineurin inhibitors (TCIs) often prescribed for eczema. Research firm EvaluatePharma puts expected sales of Dupixent at $4.2 billion by 2022.

The stock trades at roughly $48 and has a market cap of $120.56 billion – and it pays a 3.4% dividend.

Sanofi is up 18.4% in 2017 so far, compared to 10% gain for the S&P 500.

This company’s best days are clearly just ahead of it, so this is a great time to buy.

Biointelligence Partner No. 2

Meantime, at first glance, it may not seem like GlaxoSmithKline Plc. (NYSE ADR: GSK) is a likely candidate for biointelligence.

Last time we talked about GSK, I showed you how the global giant has moved in recent years to smooth out its cash flow by focusing on over-the-counter drugs and consumer products like toothpaste. In fact, the company’s new CEO, Emma Walmsley, spent 17 years at makeup company L’Oréal SA (OTCMKTS ADR: LRLCY),

But make no mistake, GSK is committed to cutting-edge science.

As we’ve also discussed here, Glaxo is an innovator in both bioelectric medicine and immuno-oncology.

Bioelectric medicine is an approach that uses electrical signals to alter the body’s basic functions.

In a child with asthma, for instance, doctors could wrap tiny devices around nerves in the lungs.

Employing those devices, doctors could then alter nervous electric signals in order to ease tension in the lungs

In August, Glaxo struck a $715 million deal with Alphabet Inc. (Nasdaq: GOOGL) to form a new company called Galvani Bioelectronics.

This new firm will develop miniaturized implantable devices that can modify electrical nerve signals.

The immuno-oncology sector, according to Allied Market Research, will be worth $110 billion market by 2020. The goal is to come up with a whole new class of drugs that use our own immune system to combat cancer.

And just two weeks ago, Glaxo said it will invest up to $43 million in Exscientia.

The goal is to use biointelligence to search for drug candidates for up to 10 targets. Drug candidates that will one day add to GSK’s – and its investors’ – bottom line.

Trading at around $42.25, GSK has a $101.91 billion market cap. And it offers us a dividend with a current yield of 4.6%.

And now is a good time to buy.

Both of these firms are great foundational plays. They give us access to frontier fields of science like biointelligence – and the potential huge gains – but with the stability that investors like you crave.

Like I said up top, biointelligence is a combo of one of the oldest forms of drug discovery with one of Silicon Valley’s latest innovations – the epitome of the wildly profitable Convergence Economy.

Finally, make sure to reinvest all your dividends so that these companies are basically paying you to own them.

I’ll see you later this week

— Michael A. Robinson

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Source: Money Morning