Top tips for investing in ASX-listed digital health stocks
Health & Biotech
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Digital healthcare will continue to grow exponentially driven at first by smartphones and then by artificial intelligence, says biotech expert Anton Uvarov.
What place does technology have in the diagnosis and/treatment of medical conditions?
Digital healthcare tools are starting to replace traditional tools used by doctors such as digitised patient records, cloud-based image processing and analysis software, digital healthcare diagnostic tools and so forth.
In short, everything is getting digitised these days.
How much has the digital health industry grown in the past few years and what is driving it?
Due to our ageing population the expenditure on healthcare is growing exponentially.
Changing lifestyles and people living longer mean there is a shift towards chronic diseases becoming the main burden for healthcare system now.
Digitisation of health services can help to improve the quality of and access to care while reducing costs, as in any other industry. The trend has just started and will continue to grow exponentially with the growth of technological capabilities of mobile devices.
The technological leap from iPhone 4 to iPhone 6, 7 and 8 allowed emergence of such products and applications as Resapp (ASX:RAP) and G-Medical’s (ASX:GMV) Smartphone Case.
Just imagine what the iPhone X or iPhone XX could do.
I don’t believe in exact growth numbers, as I think most of the market reports are produced just to make money with no substance. But surely we can all acknowledge the infiltration of healthcare with digital products.
I would not be surprised to see triple-digit growth per annum. I think the second major leap will come with AI (artificial intelligence) tools finding the mainstream use by healthcare companies.
ResApp’s share price hasn’t recovered since the failure of its trial in August. Will they rally again?
The company is in great shape. They are fully funded to repeat the study that in my view was extremely poorly conducted, mostly due to the company pioneering the field as well as terrible execution on behalf of the clinical research contractors and study sites.
The good news is that in less than 12 months we should see the real data, unless the management have not learned from their mistakes. I expect ResApp to achieve new highs or at least return to familiar share price territory within three to six months before new study data is released.
What other digital health stocks are on your radar and why?
Neurotech (ASX:NTI), ePat Technologies (ASX:EPT), Dorsavi (ASX:DVL) and Volpara Health Technologies (ASX:VHT) are all key stocks to keep an eye on. But my favourite stock in the digital health space is Foundation Medicine (NASDAQ:FMI). (See below.)
What should investors look out for in digital health stocks?
Most importantly the ability to have a regulatory approval or a proven and well-identified pathway towards it. Without regulatory approval these companies will never make a dollar.
Existing clinical data (ie robust, completed clinical studies) is a must. The most attractive component of investing in digital healthcare companies is that their clinical studies cost a fraction of those conducted by traditional biotech or pharma companies and can be completed in months. It’s a dream for any head of R&D.
Adoption of these digital healthcare products by major corporate clients (ie mining and industrial companies, large insurance groups) will ultimately validate the model and sustainability of the digital healthcare sector. That will be a good trigger for investors to start adding companies like Resapp, G-Medical, ePat and Neurotech to their portfolios with a view to high returns.
As an investor, I’m also keen on finding the companies that create or provide new models in digital healthcare such as the use of wearables. Also, in the not-so-distant future the use of genomic data for predictive and preventive healthcare solutions.
We are just at the initial steps before a major explosion in the digital healthcare sector. Imagine the largest item on the budget of every developed country that is going to be completely disrupted and turned upside down in the next two to three years probably.
Investors should stay awake.
Anton Uvarov has significant experience as an equity analyst in the healthcare industry with a focus on biotechnology sector, both domestically and internationally.
Dr Uvarov’s scientific expertise and company knowledge spreads across variety of therapeutic areas and spectrum of market capitalizations with his particular interest in early stage biotechnology companies. He holds a PhD degree in Biochemistry and Medical Genetics from the University of Manitoba, Canada and an MBA degree from the University of Calgary, Canada.