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Will Artificial Intelligence be a Trump Card for MedTech?

Zacks

In the era of big data, unless one's portfolio is in tune with the evolving digital trend, making prudent investment choices can prove to be a daunting task. Millennials have started to recognize the increasing need of the emerging automation trend and subsequently robotics, IoT, 3D printing are becoming part of our daily life with the latest buzzword being Artificial Intelligence (AI).

While Siri and Ok Google have made life easier, the latest version of Global Positioning System helps track almost anything and everything along with its intelligent route map. Also, not being a pro on social network sites like Facebook, Twitter or snapchat can be seen as primitive.

According to investment giant Jim Cramer, AI along with big data will soon let companies to bat a thousand. Interestingly, the benefits of the same will not remain restricted to any particular industry but will be felt across all business segments and investment arenas.

AI to Help MedTech Gain Traction


Non-healthcare bigwigs like Apple AAPL, Google, Amazon AMZN, IBM and Microsoft with their digital affluence are already eyeing the healthcare and device market of late, courtesy of its solid prospects.

Two things to be noted here:

Health treatment costs have skyrocketed over the past few years. Surprisingly, medical devices and pharmaceuticals account for only a small portion of healthcare expenses. Per Josh Makower, MD, general partner venture capital firm New Enterprise Associates, the greater part of healthcare costs goes in paying the salaries of healthcare employees. AI can help to curtail this high labor cost.

Going by 2018 Deloitte data, global health care spending is projected to increase at an annual rate of 4.1% in 2017-2021, a significant escalation from just 1.3% in 2012-2016. Per the report, rising labor cost is acting as a major spending growth driver.

Also, with growth in the aged population, the necessity for AI has increased by leaps and bounds. Per the U.S. Census Bureau report, between 2012 and 2050, there will be a significant rise in the aged population in the United States. In 2050, the population aged 65 or older is projected to be 83.7 million, almost double its estimated population of 43.1 million in 2012. Data also shows that the median age is increasing in most areas of the country and this is the global scenario as well.

Notably, the industry is bearing the brunt of an exploding population at present. The World Health Organization's ("WHO") latest available data show that more than 45% of WHO Member States worldwide report to have less than 1 physician per 1000 population. The density of physicians to patients in the United States is 2.3:1000.

The strategic application of AI in every sphere of healthcare can provide an impetus to productivity. Evidently, companies that adopted AI technologies have already witnessed a 50% reduction in healthcare costs and have also experienced improved patient outcome by more than 50%.

MedTech Stocks Going the AI Way

Medtronic MDT is undoubtedly among the first MedTech manufacturers forging ahead with initiatives to bring in AI techniques in manufacturing processes. Back in 2016, the company partnered with IBM Watson to utilize the latter’s machine learning algorithms to incorporate AI in its diabetes app MiniMed. In 2017, they jointly launched the first artificial pancreas systems. Metronic has utilized sugar IQ with the cognitive computing capability of IBM Watson to detect important patterns and trends for diabetes.

EHR technologies developer Cerner CERN is also adopting AI techniques rapidly. Lately, the company has been in the headlines, courtesy of its efforts to digitize electronic health record systems. In this regard, the company recently entered into two collaborations, one with Salesforce, a renowned player in the field of customer relationship management, and the other with Centrus Health, a clinically integrated, physician-led network. With the latest development, the company is planning to advance its flagship big-data platform HealtheIntent.

Intuitive Surgical ISRG designs, manufactures and markets the da Vinci surgical system — an advanced robot-assisted surgical platform. This AI platform enables minimally-invasive surgery that helps negate trauma associated with open surgery. The company plans to expand the usage of da Vinci in general and thoracic surgery, colorectal surgery and hernia repair.

Of late, Boston Scientific BSX has also been putting an all-out effort to incorporate AI techniques in neuromodulation, cardiac rhythm management, cardiology, electrophysiology, peripheral interventions, oncology, endoscopy, urology and pelvic health.

Conclusion

A long debate can be structured on how an intelligent machine intensive technology can make human capabilities outmoded gradually — but that’s a different story. Despite several adversities, AI undoubtedly has emanated to change the behavioral pattern of consumers in medical device space like all other sectors. Once again going by Jim Cramer’s say, I love behavior-change investing. It can be incredibly lucrative, and when you have a behavior-change theme you can use selloffs to pick stocks based on those changes.” Thus, it goes without saying that the market holds ample promise and the proper execution of AI will definitely prove to be a trump card for the space.

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