eResearch | In an effort to improve services for patients, healthcare companies are focusing on acquiring and developing Artificial Intelligence (“AI”) technologies to enhance administrative and operational capabilities.
According to ABI Research, last year, global AI venture capital investments in the healthcare and pharmaceutical sector reached $2.4 billion compared with $1 billion in the prior year.
As the healthcare industry becomes more digitized with an increase in the amount of information gathered, companies are leveraging AI to analyze data from various sources, including photos, microscopic images, X-rays, CT scans, and MRI scans.
Medtronic
Medtronic (NYSE: MDT) is a U.S. developer of medical technology, focused on solutions for alleviating pain, restoring health, and extending life. Medtronic is currently expanding revenue and services through the acquisition of various surgical products driven by AI.
This past quarter, Medtronic announced the acquisition of Medicrea International (EPA: ALMED), a medical technology company focused on developing spinal surgery products that use AI and predictive modeling.
Medtronic provided Medicrea shareholders with a tender offer representing a 22% premium over the closing price of Medicrea’s stock two days before the announcement of the acquisition.
Last year, Medtronic announced the launch of its GI Genius intelligent endoscopy module, the first system to use AI to detect colorectal polyps. The GI Genius module uses machine learning to flag pre-cancerous lesions with visual markers in real-time.
To take the GI Genius module to market, Medtronic entered into a global distribution partnership with Cosmo Pharmaceuticals (SWX: COPN), who became the exclusive manufacturer of the medical software. The GI Genius module is yet to be sold in the U.S. as it does not have FDA clearance.
Last year Medtronic also entered into a partnership with Viz.ai, a medical technology company focused on using AI to identify strokes in patients. In a study done by Viz.ai, its stroke detection software was able to save health professionals an average of 52 minutes.
Under the partnership, Medtronic is responsible for distributing Viz.ai’s large vessel occlusions detection and triage software services, which are currently permitted in the U.S.
In Medtronic’s most recent quarter, for the three months ended July 31, 2020, it reported Revenue of $6.5 billion, a 13% decrease year-over-year, due to the pandemic reducing the number of surgical procedures. Medtronic’s Net income was $487 million, a 79% decrease year-over-year.
Medtronic’s stock price is currently trading at $104.35 per share, a 9% decrease this year, and a 6% decrease in the past twelve months. Medtronic has a market capitalization of $140 billion and trades at an EV/Revenue of 5.5x, an EV/EBITDA of 22.5x, and a P/E of 31.6x.
Health Catalyst
Health Catalyst (NASDAQ: HCAT) is a U.S. healthcare data and analytics company that went public on the NASDAQ exchange last year. Health Catalyst has three business segments focused on machine learning and AI:
- Catalyst.ai, which develops machine learning models and various strategies to build AI into Health Catalyst’s products.
- Healthcare.ai, which provides a free collaborative platform to stimulate the adoption of machine learning in the healthcare industry.
- Healthcare Analytics Platform, which provides the fundamental framework and foundation for the adoption of machine learning.
Early this year, Health Catalyst announced joining Partnership on AI, a global non-profit organization that is committed to supporting the development of AI technologies, with more than 100 partner organizations. Health Catalyst was the first healthcare company to join the group.
In 2018, Health Catalyst launched Health Catalyst Touchstone, an analytics platform that applies AI-driven benchmarking and prioritization capabilities, supporting healthcare organizations in determining and prioritizing opportunities for organizational performance improvements.
The Touchstone platform uses the same recommendation engine used by Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) and is capable of analyzing 300 billion patient facts generated by more than 600 million patient visits.
In 2016, Health Catalyst launched Healthcare.ai, a platform that made some of its proprietary machine learning algorithms available for free, to expedite the adoption of AI and machine learning applications in the healthcare industry.
Healthcare.ai currently offers various predictive models for chronic conditions such as Central Line Associated Blood Stream Infection (“CLABSI”) and Chronic Obstructive Pulmonary Disease (“COPD”).
In Q2/2020, for the three months ended June 30, 2020, Health Catalyst reported Revenue of $43 million, an 18% increase year-over-year, with a Net Loss of $27 million versus $11 million in the prior year’s comparable period.
Health Catalyst’s stock is currently trading at $34.26 per share, unchanged this year, and a 4% decrease in the past twelve months. Health Catalyst’s market capitalization is $1.4 billion and trades at an EV/Revenue of 7.3x.
Cognetivity Neurosciences
Cognetivity Neurosciences (CSE: CGN) is a U.K. healthcare technology company focused on using AI and machine learning to diagnose the early onset of cognitive diseases, through its Integrated Cognitive Assessment (“ICA”) software.
The ICA software uses a test that analyzes how patients distinguish and perceive various factors from images. The test is designed to detect early signs of dementia and Alzheimer’s up to 15 years before the affected patient shows any visible signs of symptoms.
Cognetivity leverages AI and machine learning to collect, organize, and analyze information from a large portion of the brain in a single test. The ICA software compares information from both healthy and unhealthy brains, to recognize comparable changes and flag signs of irregularities.
Early this year, Cognetivity announced that its ICA software was approved as a CE-marked medical device, shortly after it announced the registration of the ICA with the UK’s Medicines and Healthcare products Regulatory Agency.
The CE marking permits Cognetivity to sell its ICA software as a medical product in the UK and throughout the European Economic Area, as it demonstrated conformity with the European Union’s medical device safety and performance requirements.
Near the end of last year, Cognetivity announced receiving a major grant worth more than C$1.3 million from Innovate UK, the UK’s government-funded innovation agency. The funds were put towards advancing Cognetivity’s ICA software for other clinical applications.
Last year, Cognetivity also announced receiving approval from the China National Intellectual Property Administration for key patents related to the ICA’s various proprietary elements, such as the method of analysis for detecting dementia and Alzheimer’s.
For the recent quarter ended April 30, 2020, Cognetivity has yet to generate revenue, with a Net Loss of C$0.17 million versus C$0.77 million in FQ1/2019.
Cognetivity’s stock price is currently trading at C$0.14 per share, a 39% decrease this year and unchanged in the past twelve months. Cognetivity’s market capitalization is C$6.7 million.
Healthcare AI Market
As more data is leveraged by AI and machine learning to enhance patient care and improve medical tools, the healthcare industry is expected to continue developing and acquiring AI and machine learning technologies.
According to Meticulous Market Research, the healthcare AI market is expected to reach $51.3 billion by 2027, growing at a CAGR of 41% from this year.
CHART 1: NASDAQ 100 (black) vs CGN (orange), MDT (purple), and HCAT (blue) – 1 Year Chart
