AI in healthcare: 3 ASX small caps discuss their recipe for success
Health & Biotech
Health & Biotech
A number of ASX stocks are working with advanced Artificial intelligence (AI) and machine learning solutions to improve the field of healthcare.
Stockhead spoke this week with three companies in the space, all of which are in different stages of commercial development.
What stood out was the technical aspects around the application of AI, within a sector (healthcare) which is subject to the strictest regulatory standards.
That construct makes the process of developing AI more complicated.
But for companies that spend the time and due diligence to meet those strict criteria, it also provides an important competitive advantage.
For LBT Innovations (ASX:LBT), the focus is on using AI to improve efficiencies in laboratory testing.
“Every day, clinical microbiologists are manually reading culture plates to test for signs of infection,” LBT’s corporate development head Jack Brown says.
“But it’s inefficient. And it’s also a poor use of a highly skilled resource, especially given about 80 per cent of these plates are negative and show no sign of infection.”
LBT booked its first sales into Europe last year after obtaining CE Mark approval.
However, the sales followed a multiyear process of development for APAS (Automated Plate Assessment System) – the AI platform used for automated analysis of culture plates in lab testing.
“What we were able to do with that process is demonstrate that APAS can read a culture plate to the same standard as a microbiologist does,” Brown says.
It’s a rigorous process; to get approval from the US FDA for another testing procedure back in 2016, LBT had to conduct a 10,000 patient clinical trial across three sites globally.
But having done the groundwork, Brown said LBT now has the opportunity to capitalise on sales opportunities in its two key markets – Europe and the US.
“What LBT have been able to achieve from a machine learning perspective is a world first. And it’s something that coming from Australia we should be pretty proud of,” Brown said.
Another company leveraging AI in medtech is Opyl (ASX:OPL), which has built out a software solution to improve efficiencies in the clinical trial process.
Speaking with Stockhead, CEO Michelle Gallaher highlighted that the clinical trial process has been conducted the same way for decades.
“There are clear regulatory boundaries about how they should be conducted. But our belief is that a huge amount of money is wasted in clinical research that doesn’t need to be,” Gallaher said.
“The area is ripe for digital transformation because for many companies, clinical trials are now almost unaffordable.”
In addition, the strike rate is low. Citing the example of the US market, Gallaher said that out of more than 25,000 clinical trials run each year, less than 50 are successful.
“So it’s an incredibly inefficient and high risk space. And while AI is not the complete answer, it can really help augment a good design process,” she said. On that front, Opyl’s technology has “two key impacts”.
“One is about improving design of protocol. So we use explainable AI to examine the effect of hundreds of variables. And that provides clients with the opportunity to change inputs before the protocol is put in place
“The other side of platform is for investors and governments — providing a vehicle for them to evaluate risk and govern the flow of capital into clinical programs with a better chance of success.”
Having established proof of concept earlier this year, Opyl is looking to build revenue from consulting fees before establishing a SaaS-based platform clients can use to streamline their processes.
“If you look at the ASX, a lot of listed biotech stocks deliver phase 2 results that are inconclusive,” Gallaher said.
“You really shouldn’t spend millions on clinical trials to to come out with an inconclusive result.”
“No shareholder wants that but sometimes small companies don’t have the luxury to employ the best clinical trial designers. So our platform will offer a more efficient and affordable model.”
The third player we spoke to in the AI based medtech space is PainChek (ASX:PCK).
The app-based platform gauges pain levels for aged care residents by measuring changes in the face.
Speaking with Stockhead, CEO Phillip Daffas neatly described the contrast between AI solutions in medical sectors compared to other industries.
“If you think about AI, you’ve got two models,” Daffas said.
“One is static where you develop and apply the technology, and the other is dynamic where you pick up data, learn and change the algorithm in real time.”
“We’re static at this stage, because product development requires clinical validation. To make a change, you’d have to go through that process all over again.”
“So at this stage, it’s difficult to have a dynamic model that’s changing all the time, because that’s not how medically regulated products work.”
The flipside is that companies which reach clinical approval then have the advantage of years of research IP that’s difficult to replicate.
Like LBT, PainChek has reached the commercialisation stage after a multiyear development process.
The company’s technology is contracted to around 65,000 aged care beds across Australia (out of a total of around 210,000).
Daffas said PCK is aiming for the 100,000 bed-mark by June next year.
It’s also pursuing sales opportunities into Europe (where it has CE Mark approval) and other global markets.
PainCheck operates a SaaS-based model, charging a monthly rate of $4-5 per bed for a minimum of one year to use the technology.
And Daffas said the business has pivoted well to the post-COVID era.
“Since COVID-19 hit, we’ve contracted more than 25,000 beds and we’ve done similar number of training programs — all online,” he said.
“So as a business model we’ve pivoted to a fully digital strategy and it’s working very well.”