Are you ready? Artificial intelligence (AI) isn’t just for tech companies. Biotech stocks are also capitalizing on AI’s potential to deliver revolutionary drugs and speed up drug discovery. A recently released report by Accenture reveals that AI in healthcare could become a $6.6 billion industry by 2021. This is up from just $600 million in 2014.
“I believe that AI is a sleeping giant for healthcare in general,” Eric Horvitz, director of Microsoft Research Labs, said earlier this year. He called the technology a “tremendous opportunity.”
So clearly it is not just our health that’s at stake here- it’s also our wallets. We are looking at a massive investing opportunity here with huge growth potential. So which top biotech stocks can you invest in now to benefit from this booming industry? Here I use TipRanks’ market data to pinpoint five stocks using AI in a variety of exciting new ways.
I also dig down into how the Street is receiving these stocks right now. That way you can see if these companies also make a compelling investing proposition for your personal strategy. Let’s take a closer look now:
Top Biotech Stock: BioXcel Therapeutics (BTAI)
Biotech BioXcel Therapeutics Inc (NASDAQ:BTAI) is on the hunt for the next wave of neuroscience and immuno-oncology medicines. BTAI uses AI to identify untapped potential in existing drugs or clinically validated product candidates. These are drugs that are safe and well-tolerated but didn’t complete clinical development.
“We believe that this differentiated approach has the potential to reduce the cost and time of drug development in diseases with substantial unmet medical need” states BioXcel. Indeed, the savings appear massive — at about $50 million-$100 million of the cost (over $2 billion) typically associated with developing new drugs.
Right now, all eyes are on two pipeline products BXCL501 (for dementia, schizophrenia and bipolar disorder) and BXCL701 (for prostate and pancreatic cancer). “Importantly, if the products, which are first-in-class for the indications that BTAI is targeting, make it to market, we view 501 and 701 as having the potential to generate ~$722mn and ~$1.9bn in peak sales in 2029E” states Canaccord Genuity analyst Sumant Kulkarni.
He has just initiated coverage of BTAI with a $21 price target (113% upside potential). “Our thesis is based on two key factors: 1) neurology and oncology indications target significant unmet need with potentially large market opportunities; and 2) a somewhat de-risked neurology asset … and a novel oncology asset with a new mechanism of action, which has generated very interesting pre-clinical data (especially as a combo) and could drive significant longer-term value.”
Overall, five analysts have published buy ratings on BioXcel in three months. Their average price target of $20 indicates 105% upside potential.
Top Biotech Stock: Globus Medical (GMED)
Globus Medical Inc (NYSE:GMED) is a unique biotech using advanced technologies like AI to refine spinal surgery. Top Cantor Fitzgerald analyst Craig Bijou has just initiated coverage of Globus with a “buy” rating. He also has a $65 price target on GMED (15% upside potential).
He calls Globus a “top pick” in the massive $9 billion spinal market. “It has the best opportunity to capitalize on spine market trends” states Bijou.
“Early success of emerging technologies may be a harbinger of what to expect over the next several years” writes Bijou. He forecasts emerging technologies to grow from around $13 million in 2017 to nearly $100 million in 2020, adding 3%-5% of incremental growth. “GMED’s best-in-class profitability should allow the company to invest organically or inorganically to drive top-line growth for the next several years and react to the evolving trends of the spine market” concludes this top-rated analyst.
Indeed, the company snapped up Swiss robotic developer KB Medical last year. “The acquisition of KB Medical demonstrates Globus Medical’s continued commitment and enthusiasm for the potential impact of robotic technology on surgery,” stated GMED’s Emerging Technologies’ President Dave Demski. Globus also owns the ExcelsiusGPS robotic device system. This was the second spine robot to make it to market in the U.S. in the fourth quarter of 2017. And so far the uptake looks promising with 24 robots installed in the first two quarters (Bijou’s estimate).
In total, four top analysts have published recent buy ratings on GMED, with only one analyst staying sidelined. The average price target from these top analysts currently stands at $60.50.
Top Biotech Stock: Medtronic (MDT)
Medtronic PLC (NYSE:MDT) is one of the world’s largest medical tech companies. Medtronic is forging ahead into the AI space with its revolutionary diabetes device. This is a continuous glucose monitoring (CGM) tool that uses AI to schedule multiple daily insulin injections.
The predictive algorithm uses IBM (NYSE:IBM) Watson’s Sugar.IQ diabetes assistant, which monitors how a patient’s blood glucose levels responds to everything from food and insulin dosages to exercise. “Newer sensors paired with intelligent algorithms that help to both predict and understand glucose excursions, particularly hypoglycemia, will make diabetes safer and more comprehensible for people who inject insulin,” commented Professor Timothy Bailey.
Indeed it is likely that this will be just one of many Medtronic AI innovations. Management has stressed that technological innovation is crucial for driving revenue growth. For example, Medtronic sees big potential for AI in pain management. “While many wearables and implanted devices are already smart, we expect AI will help them to automatically adapt and anticipate patient needs in the future, providing a new approach to chronic pain management” states the company. “This could significantly reduce the need for prescription painkillers among certain patient populations — reducing hospital admissions due to overdose.”
In total, six analyst have published buy ratings on Medtronic in the last three months, vs three hold ratings. These analysts have an average analyst price target on MDT of $96. Most recently five-star Needham analyst Mike Matson boosted his price target from $97 to $103 (19% upside potential). He notes that all four of MDT’s business units “are seeing growth driven by recent product launches and appear in our view to have high potential pipelines.”
Top Biotech Stock: TransEnterix (TRXC)
If you want to add AI biotech exposure without breaking the bank, consider robotic upstart TransEnterix Inc (NYSE:TRXC). The company just received another regulatory win for its Senhance robotic surgical system. Shares spiked 27% on the news that the FDA has now approved the Senhance system for two new procedures, namely laparoscopic inguinal hernia and cholecystectomy (gallbladder removal).
“There are approximately 760,000 inguinal hernia and 1.2 million laparoscopic cholecystectomy procedures performed annually in the U.S.,” the company revealed in the press statement. “With this clearance, Senhance System’s total addressable annual procedures in the U.S. has more than doubled to over three million.”
On the news, top-rating Stifel Nicolaus analyst Rick Wise reiterated his “buy” rating and $4 price target. Although the win was largely “expected,” Wise cheers that “the agency’s turn-around time is likely slightly ahead of expectations.” And looking forward he believes these “broader procedure indications could accelerate Senhance market adoption.”
“Importantly, this indication expansion represents another important regulatory milestone for TransEnterix, as it continues to successfully navigate FDA. And, with a now broader set of surgical indications, we believe TransEnterix is better positioned today to engage both surgeons and hospital administrations in robotic acquisition discussions,” concludes Wise.
Overall, this “strong buy” stock has received three recent buy ratings from the Street and one hold rating. The average price target of these analysts currently stands at $4.13.
Top Biotech Stock: Johnson & Johnson (JNJ)
Global pharma giant Johnson & Johnson (NYSE:JNJ) is investing heavily in AI. Look out for an exclusive collaboration with biotech Janssen R&D into how AI can detect signs of Alzheimer’s disease. The companies are aiming to be able to diagnose neurodegenerative diseases years before they become apparent just by using voice samples.
“There’s so much unmet need out there when it comes to medications,” explains Janssen’s scientific director Hugo Ceulemans. “Our algorithms can help us better mine our information to find better treatments faster.”
And don’t forget JNJ has also partnered with Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) in the wildly ambitious startup Verb Surgical. Verb wants to make substantial changes to the healthcare market. This includes introducing cheap robots for surgery assistance alongside software tools to drive insights from the surgery. Verb CEO Scott Huennekens refers to the company as a “platform for digital surgery.” He told CNBC: “We want to create remarkable things, and I know that there are high expectations on us.”
“Verb capitalizes on strengths of both companies, with management highlighting what it sees as differentiated instrumentation, a better surgeon interface, and use of data analytics pre-op, post-op and to optimize the procedure. The system is on track for a 2020 market launch” commented Oppenheimer’s Steven Lichtmann.
In total, JNJ has a cautiously optimistic “moderate buy” analyst consensus rating. Over the last three months this breaks down into six buy, two hold and one sell rating. The average price target of all the polled analysts comes out at $144 (18% upside potential).
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of 4,700 analysts, 5,000 financial bloggers and even 37,000 corporate insiders. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.
