Recursion Pharmaceuticals (RXRX -0.47%) and 23andMe (ME 5.71%) are both popular biotech stocks that are wooing investors with their claims about using artificial intelligence (AI) to supercharge the drug development process. But over the last three years, share prices of Recursion have lost 72% of their value, whereas 23andMe’s stock is down 89%.
Given the expanding interest in anything related to AI, however, there’s a good chance that the next three years could be better for both of these companies and their stocks.
Let’s examine their prospects and determine which of these two biotech stocks is the better investment.
23andMe is famous for its consumer genetic testing business, which accounted for 79% of its $61 million in total revenue for its fiscal 2024 first quarter (ended June 30). You’re probably familiar with its model, where people send a sample of their saliva, pay a fee, and get (some of) the mysteries of their genome unlocked and explained succinctly in an online report. The other 21% of its revenue stems from its research services segment, in which it collaborates with biopharma companies like GSK to identify therapy targets and then validate those targets as leads for further drug development.
That’s the segment that is driven by its hoard of consumer genetic data derived from around 13 million people and the AI and machine learning models used to analyze that data. If the research platform lives up to what management implies, collaborators could experience shorter drug development times and lower failure rates, and perhaps they’ll even be able to make medicines with fewer side effects and greater efficacy.
The biotech also develops its own therapies in-house, though only one of its roughly 50 wholly owned programs is in clinical trials. It’s currently in phase 2 trials with that program, testing to see whether it might be useful to treat metastatic tumors in a few different cancers. If that pans out, it’d result in plenty of growth, but it’ll be at least a few years before it could happen.
With all these efforts, 23andMe still isn’t profitable, despite the sales from its two revenue-bearing segments. Nor is it experiencing much in the way of growth; its quarterly top line shrunk by nearly 6% year over year in Q1. And its core propositions to prospective collaborators, while probably true, have yet to be proven definitively via the commercialization of a medicine produced with the help of a collaboration with the company.