Forget AI Stocks: This Pharma Giant Is Using AI to Dominate Drug Discovery

There's no denying modern-day artificial intelligence (AI) is doing some pretty cool stuff. But, to say it's been world-changing would be a bit of a stretch. We were all doing well enough without it just a few years ago.

There is one particular area where AI appears poised to make a major impact for the better, though. That's drug development. And with some technological help from Nvidia (NASDAQ: NVDA), Eli Lilly (NYSE: LLY) is leading the charge.

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Eli Lilly embraces AI

It's not the only name in the business, to be clear. Recursion Pharmaceuticals and AbCellera Biologics are a couple of other names offering AI-powered drug discovery solutions as well, along with a handful of others.

Given the deep pockets needed to build and then maintain an artificial intelligence data center dedicated to pharmaceutical development, though, to whatever extent cash helps, $900 billion pharma outfit Eli Lilly has whatever it needs.

The party started in earnest in September of last year. That's when Lilly launched its TuneLab platform, providing other drugmakers with digital access to all of the pharma giant's proprietary wisdom about how a potential drug molecule might perform. While not a replacement for traditional real-world clinical testing, TuneLab does give researchers a good idea of what likely works and what likely won't. This saves valuable time and money, allowing drug companies to focus on their very best prospects.

And with the average cost of bringing a new drug to the market now in the ballpark of $1 billion, this is no small matter.

Lilly really started turning heads in October, however, when it announced it was teaming up with AI powerhouse Nvidia, committing $1 billion to build a supercomputer with the sole purpose of (as Lilly's chief AI officer, Thomas Fuchs, put it) "interrogating biology at scale, deepening our understanding of disease and translating that knowledge into meaningful advances for people served by Lilly medicines as well as the broader life sciences ecosystem."

By January of this year, this collaboration had gelled in the form of a co-innovation lab intended to "accelerate and scale medicine discovery and production," starting by linking the company's clinical testing data with the platform's digital/computational capabilities ... sharing data in real time.

Plenty of reason to be bullish already

For all the time and money that's been invested in this data center so far, it's still early days; its collaborators still don't necessarily know what they don't know.

Nevertheless, there's plenty of reason for hope. The AI platform already has a couple of third-party biopharma customers, with more likely waiting to complete a deeper review of what this new technological tool can do.

It matters simply because an outlook from Straits Research suggests the AI-powered drug discovery industry is poised to grow at an average annual pace of 30% through 2034, when it will be worth more than $20 billion.

That's still only a fraction of Eli Lilly's current yearly revenue of around $65 billion, and it's certainly not going to win all of this future business growth. It will win its fair share of it, though. And perhaps more importantly, owning a powerful drug development platform not only allows the company to optimize its own research work, but it gives Lilly access to potential partnerships with smaller pharmaceutical companies that may have come up with a fantastic new drug of their own, but need a bigger name to see it all the way through approval and then help with marketing it.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbCellera Biologics and Nvidia. The Motley Fool has a disclosure policy.