On April 11th, Financial Associated Press reported (Journalist He Fan, Zheng Bingxun) that the USA Food and Drug Administration (FDA) announced they would gradually replace the animal testing requirements, which today boosted the stock prices of AI pharmaceutical companies while also impacting traditional Pharmaceutical evaluation CRO companies.

However, the industry has mixed opinions on this news. From the perspective of AI pharmaceutical companies, the cancellation of animal testing requirements for monoclonal antibodies and other drugs, in favor of pursuing AI-based toxicity computational models, cell lines, and organoid toxicity testing in laboratory settings, represents a trend in Industry development. Yet, there is also an opinion that this is a good Concept but is still far from being implementable.

FDA's plan to eliminate animal testing boosts AI pharmaceutical stock prices.

On April 10th, local time, the USA FDA announced a significant decision to gradually eliminate the requirement for animal testing for monoclonal antibodies and other drugs, opting for more effective, human-relevant methods for drug safety and efficacy evaluation.

FDA Director Martin A. Makary stated, "By utilizing AI-based computational models, human organ-based laboratory testing, and real-world human data, we can provide patients with safer treatments more quickly and reliably while reducing R&D costs and drug prices. This is a win-win for public health and ethics."

In the announcement, the FDA indicated that utilizing Computer modeling and AI to predict drug behavior would significantly reduce the need for animal testing. Additionally, using lab-cultured human 'organoids' and chip organ systems (which simulate human organs such as the liver, heart, and immune organs) to test drug safety yields a more direct understanding of human responses.

It is worth mentioning that the FDA also introduced incentive policies, such as companies submitting robust safety data from non-animal tests may receive streamlined reviews.

Affected by this news, today the stock prices of several AI pharmaceutical companies rose significantly. By the end of trading, Crystal Essence Holdings (02228.HK) rose 7.39%, and Hitgen Inc. (688222.SH) increased by 5.87%. AI pharmaceutical development stocks in the US, such as Certara and Schrodinger, also saw substantial increases.

Relevant personnel from Crystal Essence Holdings told a reporter from Caixin that this represents an industry trend; even non-US pharmaceutical companies will be influenced by the FDA in the USA. "Moreover, the quality of drug development data from organoids and organ-on-chip technologies is significantly higher than that of currently commonly used enzyme activity and other efficacy testing models, with higher clinical relevance. Validating effective drugs through these technologies will perform better during clinical trials, and the AI trained in drug design and prediction will be closer to the real situation in the biological body."

It is reported that Crystal Essence Holdings has incubated two companies focused on organoids and organ-on-chip technologies, one of which, YaoSu Technology, is one of the 10 global participants and drafters of the FDA-designated organ-on-chip toxicology standards. Its AI organ-on-chip platform is currently serving leading pharmaceutical and beauty companies such as Sanofi and L'Oreal. The other company, XiGe Biotechnology, has the world's first pipeline drug developed using organoid + AI, which is currently undergoing phase I clinical dose escalation with positive data.

YaoSu Technology CEO Xie Xin also pointed out on his personal social platform that "Merck and GSK have both stated that the future of new drug development hinges on three things: AI + Lab Automation + MPS."

There is still time before large-scale application.

However, in contrast to the rising stock prices of AI pharmaceutical companies, the leading CRO for drug evaluation, Joinn Laboratories, suffered a severe impact on its stock price today. By the end of trading, A-share Joinn Laboratories (603127.SH) hit the daily limit down, while Hong Kong stock Joinn Laboratories (06127.HK) fell more than 13%.

According to the 2024 annual report of Joinn Laboratories, the fair value of the company's biological assets is 1.069 billion yuan, and the net loss caused by changes in the fair value of biological assets during the reporting period is 0.114 billion yuan.

In this regard, a staff member from Joinn Laboratories' securities department told a Caixin reporter who called as an investor that the company's stock price dropped today is related to the announcement issued by the FDA, but they believe that the FDA's announcement has little impact on the company.

Firstly, this policy has been in place for several years, but progress has been relatively slow; secondly, currently, AI and organoid technology cannot fully replace test monkeys in toxicology testing, and the company believes it is a long-term process; in addition, the company has been laying the groundwork for AI and organoid technology for a long time, but overall, the technology is not mature in either the USA or China, so the company is continuing to follow up.

In response to this, Liu Xiao, Vice President of Business at Xingcheng Biotechnology and Deputy Director of the MAH Special Committee of the China Pharmaceutical Enterprise Management Association, pointed out in an interview with the Financial Associated Press, "Using organoids and AI in toxicological experiments to replace animals is a good attempt, but it may be a bit too ambitious."

Liu Xiao believes that this is a very good concept, but it is far from being implementable. Because under the current technological conditions, without sufficient animal toxicology tests, the safety of recklessly advancing human trials cannot be guaranteed due to the lack of good data support.

Firstly, even if researchers fully understand the entire gene sequence, they still cannot find effective treatments for many types of diseases. Secondly, the human body is a more complex system than the genome. For example, in the tumor microenvironment of human tumor cells, there are many possibilities for tumor escape, and AI and organoids cannot simulate the fragile immune system of leukemia patients. Therefore, it is impossible to simulate with the current technology.

When asked when AI and organoids could completely replace animal experiments, Liu Xiao stated that his original expectation was within ten years, but the recent restrictions on access to the US NIH database and the increasing geopolitical risks may delay this. This is not something that can be accomplished by the scientific team of any single country; it requires global cooperation.