This article first appeared on GuruFocus.
Novartis (NYSE:NVS) is doubling down on AI-driven drug discovery with a deal that could be worth $1.7 billion, signaling rising conviction that data-intensive platforms may reshape how immunology drugs are developed. The company will pay $55 million upfront to link its immuno-dermatology expertise with Relation Therapeutics’ AI engine, which analyzes patient datasets including human tissue to uncover the genetic triggers behind allergic diseases. Relation, backed by DCVC and Nvidia’s (NASDAQ:NVDA) NVentures, could earn milestone payments up to $1.7 billion, alongside tiered royalties tied to future product sales. Investors saw little immediate price reaction, although Novartis shares are up roughly 21% this year.
Novartis has been shaping a pipeline that could be more resilient beyond 2025 as generic competitors threaten three core medicines, including blockbuster heart therapy Entresto. Earlier in the year, the Swiss group acquired Avidity Biosciences in a $12 billion deal, its largest in more than a decade, before adding Tourmaline Bio for $1.4 billion to secure an experimental treatment aimed at lowering systemic inflammation. The company also agreed to buy Regulus Therapeutics for as much as $1.7 billion and expanded its cardiology footprint further through Anthos Therapeutics, gaining access to a preventative stroke candidate. Relation’s technology is designed to nominate genetically validated drug targets faster, possibly raising the probability of success compared with traditional discovery paths.
The commercial upside could be meaningful given atopic diseases affect hundreds of millions of patients worldwide and remain underserved despite heavy R&D spending. Roughly 75% of drugs entering phase 2 trials fail for safety or efficacy reasons, which Relation’s CEO David Roblin attributed to limited biological clarity at the start of development. Roblin first connected with Novartis biomedical research president Fiona Marshall at the JP Morgan health-care conference, where the idea of a joint research plan emerged and gradually evolved into today’s transaction. Relation has already executed a similar partnership with GSK in 2024, hinting at accelerating demand for AI-native platforms as global drugmakers look to improve the pace and economics of long-term discovery.