If you’ve had enough of James Altucher, well, I don’t blame you — he’s one of the more promotional guys out there right now in newsletterland, and his manic presentations get a little exhausting. Especially because Paradigm Press rarely provides the transcript option to let us see his words in black and white instead of hearing the spiel.

But your fearless neighborhood Gumshoe has signed up for this life, so I have to listen. And share with you what the heck he’s talking about.

This particular ad is all about “The Chairman,” who Altucher talks up… but longtime Gumshoe readers will certainly know his name and probably have strong feelings about him, because this is just another Ray Blanco pitch, selling his Catalyst Trader service ($995/year, no refunds)… so really, it’s just Altucher coming in to provide the intro.

In doing so, he claims…

“In the past it has been virtually impossible to get him to do a speaking engagement for my readers, but that is changing”

Says that Blanco is “America’s most knowledgeable expert” in one very small sector of tech?

And promises that he’s going to “tell us what moves to make before a flood of institutional capital ignites a tidal wave of AI stocks.”

Which is essentially the promise that most tech folks have been making for almost two years now: Stick with me, and I’ll find you the hottest AI stories before the big money comes in.

Will it? Maybe. But the pundits don’t exactly have a great track record of picking which stocks the tidal wave will hit. So far, at least. And that’s no big surprise — this is a “Power Law” kind of market sector, where newsletter folks (and most investors) are counting on the fact that if they speculate on enough of the potentially hot story stocks, one or two of them will turn out to be massive winners. Even if the rest of them end up dwindling into nothingness.

And that might be how it goes, that’s how it has generally gone through past manic cycles of speculative investment in previous hot story ideas, from the internet itself in the late 1990s to mobile phones, and social media, and the cloud, and whatever else. Winners have emerged. It’s just that most folks who clung on to those winners had to also hold on through some Titanic-level sinking along the way, and almost nobody does that (no matter how committed you think you are to a story, it’s much harder than you might guess to remain committed and hold on when the stock is down 70%… as has happened to pretty much all of the long-term mega winners when those stories deflate for a bit, before they have a chance to become the titans we know today, the Amazons and NVIDIAs of the world).

Altucher also says that Ray Blanco is “one of the most accurate and successful biotech speculators in America”

And we’ll charitably accept that this might be an opinion some folks have, though readers reviewing his newsletters here at Stock Gumshoe have generally not used such glowing language… but from the evidence we have available, if he has been the “most accurate and successful” stock picker in this space, those picks have not mostly been in the stocks he has teased to get attention from investors. Blanco’s better teaser picks over the years have more likely been in technology stocks, including a pretty early pick of NVIDIA… the biotech picks he has teased for his Catalyst Trader service in the past few years (it used to be called FDA Trader), have been pretty uniformly unsuccessful (he pitched TNF Pharmaceuticals (TNFA), formerly known as MyMD Pharmaceuticals (MYMD), very aggressively throughout 2022 and 2023, and touted Cyclo Therapeutics (CYTH) in 2021 as an Alzheimer’s hopeful, two real stinkers — of the biotech story stocks pitches we’ve written about following Ray Blanco teaser ads over the past five years, I don’t think any have had positive returns — maybe his picks to subscribers were better, but the headline ones he chose to feature in ads did very poorly).

So this eventually leads into Ray Blanco reading his pitch into the camera and promising that August 23 will be the day that “AI becomes a permanent staple of the biotech industry”, because of a catalyst that not being reported in the news… and that he’s got the “three most foundational stocks in AI biotech” to recommend.

I’ll put the clues and paraphrases from the ad in these blockquotes, but there was no transcript and these are not word-for-word quotes in most cases, just FYI… here’s the gist of the “presentation”:

We’ve been waiting for this convergence of biotech and AI, and the tiny biotechs are going to be on track to control the $1.6 trillion biotech industry.

We will see dozens of biotech AI stocks explode by 500% or more in the next 18 months.

And what’s with the August 23 date? “That’s when the details of a first of its kind AI clinical trial will be made public”

And this new kind of drug can be made “five million times faster, and at just one tenth of the traditional cost.”

Ummm… maybe? Not anytime soon, though. The promise of AI right now is that it can help to select drug candidates for clinical testing, and perhaps improve the approval “hit rate” by selecting better compounds and chemicals and other drugs, with fewer side effects… not that it really dramatically changes the time or cost of those clinical trials themselves. That process of actually testing a drug in human beings, proving that it is safe and effective, still almost always takes the better part of a decade, at least 6-7 years and often longer… the time advantage is on the front end, in the preclinical work that investors don’t pay as much attention to.

It also might take 5-8 years to identify a drug in the lab and get ready to submit it for approval to begin clinical trials, and that’s where the time advantage of AI is likely to be felt most keenly… but the FDA is not going to say, “Oh, you found this drug using AI? OK, then, it must be great — you get a faster approval, no need for those expensive Phase 3 clinical trials to test it on a few hundred (or thousand) people first!”

Which doesn’t mean this isn’t a real and exciting advancement in medical science… discovering drugs faster and cheaper, and maybe discovering better drugs, is important and worthwhile… getting started on a new drug quicker, and cheaper, is good. But it means there’s likely to be an expectations gap for AI-crazy investors, because the AI drug discovery companies are mostly pretty new, and the group has only gotten a few drug candidates into clinical trials, so there’s not likely to be a huge wave of AI-discovered drugs getting approved in the next year.

Still, a lot of the funding for this sector rushed in over the past couple years, so the accelerated pace of work means the next couple years will probably be key for these companies, even if they won’t have many actual approved drugs in the near future… because the race to build the AI systems which work the best to identify drug candidates is on, and there are likely to be dozens of AI-developed drugs in clinical trials that spur a lot of news coverage. I’m sure big pharma and investors will be paying attention to which of these biotech AI R&D firms are successful in providing approval-ready drug candidates and showing good preclinical results and clinical trial results.

Ray Blanco promises to name a few of the most promising AI biotech startups, and he says the ones he’s going to recommend are tiny, with market caps ranging from $50 million to $1 billion.

And he mentions one widely-followed tech expert:

Bill Gates has quietly acquired 7 million shares of one of these companies, valued at over $188 million.

We could see these tiny stocks explode 10X, 20X and even 50X by the end of 2025.

That one’s Schrodinger (SDGR), but we’ll get into that in a moment — it’s not clear whether Blanco is actually recommending that particular “Bill Gates owns shares” stock (and indeed, the Gates Foundation has made deals with a bunch of drug discovery AI companies, including many of the stocks we’ll mention in a moment).

More paraphrasing from the ad…

Virtually any company involved in AI right now is experiencing a hyper boom.

“Small company with offices in Boston, MA is going to answer a $1.6 trillion question that could save 3 million lives….

“Already passed the FDA’s phase one clinical trials with flying colors,” the first AI-developed drug in history to accomplish this.

Drug is for pulmonary fibrosis, a deadly lung disease

That’s the first domino of a much larger trend that’s sweeping the industry.

Since late 2023, Biotech has been in a raging bull market

AI means the best of these companies will create much bigger returns than the best biotechs, and faster than ever before.”

That’s a disjointed bit of notes about the August 23 catalyst he’s pitching — which will apparently get everyone excited about this sector, even though it won’t actually impact any specific stock. That’s a reference to Insilico Medicine, which is supposed to be finishing its Phase 2 trial for that pulmonary fibrosis drug next week. Blanco says it would be the first AI drug in history to sucessful complete a Phase 2 trial, which will be a major catalyst for the whole industry… though Insilico itself is a private company, and you can’t buy shares (perhaps soon, they filed to potentially go public in Hong Kong last year, and have filed again this year, but haven’t gone through with an IPO yet).

So what Blanco is selling is his Catalyst Calendar, which apparently has a special subset called the AI Catalyst Calendar… and that’s generally just a calendar he publishes, as part of his expensive newsletter, to indicate dates on which important news is expected for the companies he follows. In this context, that mostly means dates when clinical trial results are expected, or when FDA approval (or rejection) is expected.

And he runs through a bunch of examples of times when this kind of FDA news led to big stock-market returns. If you’ve been investing for any length of time, this isn’t news — it’s often true that the biggest stock move in a given week comes from a biotech that had surprisingly good or surprisingly terrible clinical trial results, this is definitely one of the ares of the market where non-financial news can have a huge impact, and smaller biotech stocks pretty routinely double in a day when big clinical results come out (or fall 80% in a day).

Of course, there are hundreds of different drugs in clinical trials or up for FDA approval at any given time, and choosing which of those catalyst dates to bet on is another matter — lots of big investors are biotech specialists, and they get it wrong a lot, too, but I tend to stay away from betting on clinical trials. This is one of the few areas of the market where I can be pretty sure that the person I’d be buying shares from (often insiders and institutions) probably understands (and enjoys) the details of the science a lot better than I do, and being a fool buying from an expert seems like a bad starting point for an investment. Sometimes I get tempted in this space, but I usually regret it.

As Ray Blanco says, though, “All you have to do is pick the right speculative play, and invest before that catalyst date.”

Easy peasy.

To be fair, Blanco does note that when he recommends a stock in this service, it has to have “immediate and urgent catalysts” approaching, and he also says it is highly speculative, and that there will be losers, even though he thinks he can gain “an edge” in picking the stocks.

Most of the examples he notes, by the way, did not necessarily go up immediately after that catalyst date and keep going — some of them stayed flat or went down over the next year or two before the big gains that Blanco is reporting as “rare gains”. So these aren’t always binary trades that move quickly, sometimes it takes time for even good clinical trial results to bring stock market gains.

More of my paraphrasing and notes from the ad:

“Three urgently approaching catalysts could be a few of the largest biotech returns in the last decade.”

Invest before these pivotal dates.

The number of catalyst dates will skyrocket because of AI.

Drug discovery pipeline takes on average six years, to design a new molecule to counteract a disease, test on animals to see if a prototype works, lots of trial and error.

One AI-based pharma trial cut the process down to 30 months, at 1/10th of the usual cost. It was a pilot program, one of the earliest iterations, but it cut the process down by nearly four years.

I believe we are just months away from the greatest and fastest technological boom of our lifetimes.

We are about to see an absolute flood of biotech catalysts hit the calendar. Research is faster and cheaper than ever, identifying more ways to fight disease. A complete shift in the pharmaceutical industry. Within a few years, every drug is going to be replaced by newer, more effective therapies that have less side effects.

The global pharma market is valued at $1.6 trillion.

I don’t know where he gets that number, “valued at” is presumably a reference to what the industry is worth… but if you combine just two of the biggest pharmaceutical companies, the diabetes/obesity drug winners Eli Lilly (LLY) and Novo Nordisk (NVO), those two market caps would already add up to about $1.6 trillion.

Blanco says that stage one of this AI takeover is underway.

Stage one — primarily focusing on drugs for rare diseases. Orphan Diseases. These are some of the most lucrative drugs, 10% of the US population suffers from these types of illnesses, and they rake in $195 billion/year, probably growing to $435 billion in a few years. Most big companies don’t devote major resources to these diseases, and AI biotech companies are primed to make a huge splash, with very little competition, and may get fast-tracked by the FDA because of the lack of existing treatments, or receive other incentives for working on orphan drugs (longer patents, tax breaks, etc.).

And he drops hints about the size of these companies he’s recommending:

$458 million to $2 billion.

One of the most promising is only $45 million, and they already have an AI-developed drug rushing through clinical trials, with huge catalysts occurring in the first quarter of 2025.

So he’s teasing three companies that he recommends right now, each is small and has catalyst dates “on the calendar in the next few weeks” and could make international headlines as soon as August 23. He does flash images of his Catalyst Calendar on the screen, and I can tell you from screen grabs that the only AI-related one in August or September was that Insilico news expected next week, so these other AI stories might have longer fuses.

“If you were to invest in only three companies over the next decade, these are the superstars you would want in your portfolio”

All three could be up at least 500% in the next year.

Special reprot is called, “The AI Drug Rush: How to Capitalize on Three 500% Catalysts before 2025”

So who are they? That’s not enough clues to be certain, but let’s run through some candidates…

How about Schrodinger (SDGR), that company Bill Gates bought seven million shares of (that was a while back, his investment has not been a great one so far… nor has mine, I also own SDGR in my $100K LockBox Portfolio)? Things have actually been going OK for SDGR, they registered a gain when Lilly bought Morphic, which was a company they had partnered with and owned shares of, and they have both received a FDA Fast Track designation for one of their own drugs, and initiated a Phase 1 study of another one.

They have three Phase 1 studies which have milestones over the next year or so, and at least one will report out in the first half of 2025, so I guess that’s technically close enough to be on the “catalyst calendar” — particularly because there are also a few other Phase 1 drugs being developed by partners, as well as two in Phase 2 and one in Phase 3, which could lead to milestone payments and/or royalties if those keep moving forward and get approved.

SDGR used to resist the term, “AI” — but in more recent presentations they’ve gotten on board now, they call their drug discovery technology a “Physics-enabled AI/ML Platform.” I’ll buy that, this could be one of the three stocks.

Other candidates?

The most obvious one is probably the most popular AI drug discovery stock among investors over the past year — that’s Recursion Pharmaceuticals (RXRX), which just agreed to buy Exscientia (EXAI), and is top-of-mind for investors partially because NVIDIA bought shares of RXRX a year ago. Recursion is on the big side now, and will be larger when the EXAI merger goes through next year, but they’ve got a market cap of about $2 billion right now — I suppose that fits in with Blanco’s pitch, though just barely.

What makes them “catalyst-ready” is that the combined company will have “~10 clinical readouts over the next 18 months,” according to their investor presentation, with the most notable being a topline readout of Phase 2 results for Recursion’s first drug, REC-994, next month, and another readout in the fourth quarter (EXAI also has a dose escalation for its lead drug likely later this year, though we don’t know if we’ll get real results anytime soon).

StatNews did a nice piece on Recursion Pharma this week — that’s behind a paywall, but Adam Feuerstein excerpted some of it on Twitter for us:

Recursion Pharma $RXRX is entering a crucial 12-month period that will render an early verdict on its AI drug development capabilities. It starts in September, w/ readout of Recursion’s first clinical trial.

Can $RXRX, w/ a $NVDA assist, prove high-powered computers can conquer…

— Adam Feuerstein ✡️ (@adamfeuerstein) August 19, 2024

I think those are probably the best two bets for the larger companies Blanco hints at…

For the tiny one, the Thinkolator’s best guess is Lantern Pharma (LTRN). It’s certainly very small, with a $48 million market cap now, and has disappointed investors in its five years as a public company… but they do now have three drugs in clinical trials: LP-184 and 284, which are in Phase 1 together and continue to advance, and LP-300 (has preliminary Phase 2 results). They also have a couple partnerships with Oregon Therapeutics and an owned subsidiary called Starlight Therapeutics, in different cancers. Their investor presentation is here.

They expect to have some initial data from their LP-184 Phase 1 trial by the end of the year, and they expect to advance to “Phase 1B/2” with LP-284 around the same time, so that could be a catalyst, as could further data from that Phase 2 trial for LP-300. They’re running pretty low on cash this quarter, down to about $33 million, but say they’re “capital efficient” in using collaborators, so they could certainly have another year or two worth of “cash burn” time if their clinical trials don’t get too large during that time (little early-stage trials on a dozen patients for an orphan indication are fairly cheap — big trials of a few hundred or thousand patients get expensive fast). Like all cash-burning biotechs who are running a bit low, good results would almost certainly lead them to sell shares and raise money to extend their runway.

Among other genuinely tiny public companies, it’s tough to find one that doesn’t smell funny… two more come close to being reasonable matches:

BenevolentAI SA (BAI.AMS) (SPAC IPO with Odyssey in Amsterdam, 2021) — has one Phase 2 trial among several other clinical trials, acquired Proximagen, Astrazeneca partnership… but also had some tough times along the way, including a clinical trial flop that led to cost-cutting and layoffs, and hit “pause” on their AI drug development projects in May of 2023 to refocus and target spending more carefully, just when AI was taking off for investors. Very lightly traded, down 95%, not really easy to trade in the US, hard to believe that would be a Blanco pick.

And BioXcel Therapeutics (BTAI) is a pioneer in this space, it’s been public since 2018 and was one of the first AI drug discovery IPO’s. They’ve more recently been accused of fraud (in an Alzheimer’s trial site, last year), but this was already not exactly an investor favorite before that. They’re focused on their drugs that are used to calm patients with dementia or other neurological diseases, and from what I can tell those weren’t AI-identified drugs, but they say they’re using AI to identify the next wave of drugs. The marker cap is down to $30 million or so, with no real signs of optimism after that big blowup in 2023, but who knows, someone was calling them the “Pharma Phoenix” a few months ago, maybe they’ll rise from the dead.

Other larger candidates for those top three picks?

Absci (ABSI) is the right size, about a $500 million company, but it’s probably a little too early in development to get the “Catalyst Calendar” treatment — their first drug, ABS-101, is likely to be starting Phase 1 clinical trials early next year… but it could be impressive, it’s a cancer drug, so it might get a lot of attention if early results are encouraging (probably no actual clinical trial results until late in 2025). They also have an oncology partnership with AstraZeneca, and partnerships with Merck, Astellas and NVIDIA, though they turned off investors a bit by almost running out of money for a while last year (they raised more).

AbCellera (ABCL) is developing antibody-based therapeutics using AI, and has been public since 2020, with lots of partners and co-development programs, and they now have nine molecules in clinical trials with partners. Arguably the first to get an AI drug approved, since they had a COVID treatment approved for emergency use, but they’re not entirely an AI company, they also use traditional R&D (including a specialized mouse model).

Their own drugs won’t be in the clinic until next year sometime, assuming all goes well, so it’s probably early, but those partnered and co-developed programs could lead to a “catalyst” moment along the way (the most advanced partner programs are also in Phase 1 — their earlier “most advanced” candidate was an Alzheimer’s Disease drug with Denali (DNLI), which flopped a while back… coincidentally, DNLI was teased by Blanco way back in 2019, at about the price it trades at today — though in his defense, it went to $90 before falling back down to the $20s).

And Relay Therapeutics (RLAY) is mostly focused on one drug, they have RLY-2608 in cancer trials now, but it’s in several different trials, in monotherapy as well as combination therapies, and they expect results from at least three of those trials by the end of the year, with the likelihood of a Phase 3 trial for one of the combination therapies next year. A bit of a stretch, but it could be a match.

They’ve got a few pre-clinical programs that aren’t likely to start clinical trials before next year, and a lot of cash ($600 million, for a sub-$1 billion market cap), but also have a recent failure as Genentech dropped migoprotafib development. Like Schrodinger, they haven’t pushed the “artificial intelligence” angle very hard for their computational drug discovery and precision medicine programs, but we can throw them in as computational drug discovery… which, really, isn’t all that different from AI drug discovery, they’re both supposed to be more efficient than trial-and-failure bench work in the lab — using computers that can process mammoth data sets, with proprietary software, to come up with better drug candidates.

So that’s what I’ve got for you — no guarantee that these are correct, but my best guess is that he’s pitching Schrodinger (SDGR), Recursion Pharmaceuticals (RXRX) and Lantern Pharma (LTRN) as his first three “catalyst calendar picks” in AI drug discovery. It’s a busy space, though it’s also busy with hundreds of startups and lots of projects within the big pharmaceutical and tech companies, so we’ll see if someone really turns out to have better drug discovery or novel molecule synthesis technology than the others — if so, I bet I won’t be the first to know.

But wait, there’s more!

Blanco also hints at a fourth stock, here are my notes:

Tiny stock developing AI cancer drugs… leading the charge to solve cancer with AI. Currently worth less than $500 million. Have already lined up a $113 million development deal with Merck, and have $674 million in funding on the way. They’re also attracting partnerships from Bristol-Myers Squibb and Sanofi. In the short term, I believe this company has a clear path to hit $7.5 billion in revenue within the next twelve months.

That’s a stock Blanco has teased before, we covered that “hidden cure to cancer” pitch back in June, and which was arguably the most popular of the AI drug discovery stocks among newsletters last year, Exscientia (EXAI).

But about ten days ago, Exscientia agreed to be acquired by Recursion Pharmaceuticals (RXRX), as I noted above, so that’s combining probably the first and second most popular AI drug discovery stock among newsletter pitchmen… so if we assume that the deal goes through, as seems likely, that would mean future results would be driven by the various programs of both of these companies. It’s an all-stock deal, so each EXAI share will turn into 0.7729 shares of RXRX. This is pitched as combining Recursion’s stronger discovery tech and Exscientia’s stronger chemical design and synthesis tech, but I’m way too much of a dummy to understand whether that’s real or just marketing-speak.

The combined company, which will keep the Recursion name and CEO, will unquestionably become the highest-profile publicly-traded AI drug discovery stock, at least until somebody new and sexy goes public, with a plan to conduct ten clinical trials by the end of next year… so it’s bound to have some news to report. It will also be headquartered in Utah, though the Cambridge, UK presence of Exscientia will be maintained.

That special report, just FYI is called, “The #1 AI Cancer Stock for a Life-Changing Payday.” Don’t know if he has updated it for the new RXRX news, or since we covered his tease about Exscientia curing cancer a few months back.

And there’s one more, which Blanco teases as, “The Weight Loss Miracle: One Company Poised for a 7,500% Surge This Decade”…

My notes:

A tiny stock soon to overtake the soon-to-be $158 billion weight loss drug market. Just recommended to Catalyst trader

Major upcoming catalyst that could hit the news any day now, could be the fastest surging stock of the next 3-5 years.

Many insurers won’t pay for these drugs, but this new drug is already blazing through clinical trials and could be the first to be widely accepted by insurers. Only valued at $499 million.

Could be a 7,500% return over the next eight years. Still trades at a few dollars per share.

There’s no way to be particularly certain about this one, with limited clues, particularly because there are dozens of obesity drugs in the pipeline now… but the best match I’ve got is Altimmune (ALT), which has focused mostly on liver diseases but has an obesity drug in Phase 2 trials right now called pemvidutide — they expect “topline data” from the current clinical trial in the first quarter of next year, which isn’t exactly “any day now,” but, well, we have to guess sometimes, and there aren’t many $500 million companies with meaningful obesity results of late (Altimmune has already released encouraging data at some conferences this summer, it appears). The first Phase 2 trial showed pretty impressive results, with “up to 15.6%” weight loss in 48 weeks, not as dramatic as some of the new drugs in terms of speed, but, they noted, “with weight loss continuing at the end of treatment.” Maybe that means it will turn out to have lasting effects, unlike the current GLP-1 drugs that seem to need to be taken for life to maintain the weight loss. Could that lead to easier insurance coverage? I dunno, maybe?

I am absolutely not an expert on this, at all, so I’ll leave my comments there. If there are Altimmune investors, or folks who better understand pemvidutide or have other input to share about the anti-obesity drugs, well, feel free to chime in with a comment below. And, of course, if you think I’m wrong in guessing Altimmune for this match, we’d like to hear that as well.

And that’s about all the Ray Blanco-inspired opining I’ve got for you today, dear friends — have better matches? Other ideas in AI drug discovery that you think deserve a more thorough airing? Let us know with a comment below… and have no fear, venture capital has pushed billions into every possible AI idea we might imagine over the past year, and some of those are in the pharmaceutical space, so I bet we’ll see more ideas make their way to the public markets over the next few years. Well, as long as NVIDIA doesn’t destroy the dreams of the AI enthusiasts and create a massive crash when they report next week… no pressure.

Disclosure: Of the companies mentioned above, I own shares of NVIDIA, Amazon and Schrodinger. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.