Last week BioXcel Therapeutics (Nasdaq: BTAI) went public at $11. It looks like a typical biotechnology company with two drugs (BXCL501 and BXCL701) in Phase 1/2 trials for mental disorders and cancer respectively. Both drugs look fairly promising based on the data presented and we’ll get to that.

But BioXcel is taking a different approach to drug development by taking the large inventory of known molecules and coming up with new and different ways to apply them alone or in different combinations to identify opportunities that can be commercialized rapidly.

Using AI in Drug Discovery

At the heart of the process is software, developed by the BioXcel Therapeutics parent company. The software, called “EvolverAI” analyzes a large database of existing molecules and disease types to identify relationships and identify new therapies and “re-innovate” existing drugs. Although they don’t talk about in the BTAI roadshow presentation, there is another software product called PharmGPS which helps to prioritize drug candidates and identify steps to enhance the chances for ultimate approval.These two platforms, when used together also go by the trade name “InveniAI” and can be licensed for use by other pharma companies and the current list of users, includes Takeda, CentrexionTherapeutics, Alnylam Pharmaceuticals, and Axcella.

But only the parent company, BioXcel, owns the AI platform, not BTAI. Instead, BTAI has an agreement to use and leverage the technology in the fields of neurological diseases and immuno-oncology. Post-IPO, BioXcel will still own 60% or so of BTAI. The right of first refusal for BioXcel Therapeutics to negotiate rights to new discoveries in these two areas extends for five years.

This level of indirect access and the fact that BioXcel licenses the AI platform to other pharmaceutical companies gives investors some extra uncertainty to consider in looking at BTAI. They have rights to these existing candidates which is all we can really base our investment decision on.