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Barry Cohen
Barry Cohen
Articles (138) 

Get In on the AI Health Care Revolution With Globus, BioXcel, Apple, Amazon and Google

Market forecast to increase at more than 40% CAGR over next five years

Even though funding of health care artificial intelligence companies declined 6% in 2019, the industry still attracted plenty of cash. Global venture capital funding for health care AI reached $8.85 billion in 615 deals, according to an article in FierceHealthcare. Total corporate funding for digital health companies, including venture capital, debt and public market financing, reached was more than $10 billion.

Investors might want to keep an eye on Babylon Health. The U.K.-based company has a digital chatbot that also links up to provider practices. The company raised the most in venture capital funding in 2019 - $550 million. Others who broke the $200 million mark are Tenecent Trusted Doctors, Collective Health, Digital Pharmacy Capsule and Tempus.

On the mergers and acquisitions side, major deals included Dassault Systemes’ (DASTY) acquisition of Medidata, Google’s (NASDAQ:GOOG) purchase of Fitbit (FIT) and the Agfa-Gevaert (XRBU:AGFB) acquisition of Dedalus Holding.

When looking at the market potential for AI health care, the attraction becomes clear. The global market was about $2.5 billion in 2018. Nice and tidy, but not overwhelming. However, explosive growth—a more than 40% compounded annual growth rate—is expected over the next five years, according to a study by Grandview Research.

Driving the demand are the need to lower health costs, the increasing value of big data, the growth in precision medicine and lower hardware costs, among others.

Most AI applications in health care fall into three main groups:

  • Patient-oriented AI.
  • Clinician-oriented AI.
  • Administrative- and operational-oriented AI.

The future of AI in health care could include tasks that range from simple to complex—everything from answering the phone to medical record review, population health trending and analytics, therapeutic drug and device design, reading radiology images, making clinical diagnoses and treatment plans and even talking with patients, according to an article in Modern Healthcare.

The market is currently dominated by small companies striving to make their mark in the field. Some of the names worth following are AiCure, Amara Health Analytics, Apixio, Aterys, and Atomwide.

To get in on the action now, investors should consider some of the more pure AI health care plays like Cognetivity Neurosciences Ltd. (CGNSF), Globus Medical Inc. (NYSE:GMED) and BioXcel Therapeutics Inc. (NASDAQ:BTAI).

At just about 14 cents a share, Cogentivity is cheap and probably the riskiest of the group. As the name implies, the company focuses on cognition platforms. Forbes was bullish on the company’s future a year ago, naming it one of its top five young companies to watch in 2019.

Globus, with a market cap of more than $5 billion, inspires a great deal more confidence. It has positive earnings and has more than doubled its share price in the past five years, to over $53. It's applying AI technology for minimally invasive surgeries with the assistance of its robot.

According to a CNN Business article, Globus has plenty of upside. At $55, 12 analysts have its low price target under its current price and a high of $67. Not surprising, they rate the stock a buy.

Contrary to Globus, BioXcel doesn’t have positive earnings, but the company’s share price is up nearly 75% from last October. The clinical-stage biopharmaceutical company applies AI to design new medications for immune-oncology needs. It, too, is rated a buy with an average price target of more than $27, according to Yahoo Finance.

Then there are the 800-pound gorillas that want a chunk of the health care market, and who would dare bet against Apple (NASDAQ:AAPL), Google and Amazon (NASDAQ:AMZN).

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An April 2019 article in Fortune reported that while Google and Amazon might have greater AI capabilities, Apple’s health care opportunity is a whopping $15 billion to more than $300 billion by 2027 because of its broad base of users.

Disclosure: The author holds no positions in any of the companies mentioned in this article.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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