Hello, Reader.
As a macro investing specialist, I look for big-picture trends that drive huge, multiyear moves in entire sectors of the market.
These megatrends can spin off dozens of triple- and even quadruple-digit gains in a span of a few years. It’s not an exaggeration when I say that catching just one of these trends — at the right time — can help anyone build their wealth.
And after waiting in the wings for years, artificial intelligence has fully taken center stage and is stoking investors’ imaginations with visions of lavish stock market gains for years to come.
But there’s far more than dazzling profit potential looming just beneath the surface of this major, once-in-a-lifetime megatrend.
It has the power to draw a line between those who make their move now… and those who choose inaction.
As I have highlighted here at Smart Money before, I expect AI to impart fantastic benefits to the healthcare industry – both by enhancing existing medical technologies, like imaging, and by supercharging the drug-discovery process.
So, today, I want to spotlight a healthcare company that is using AI to create groundbreaking advancements in drug discovery.
Then, I’ll share a move within this megatrend that you’ll want to be sure to make now.
Let’s dive in…
Breaking Ground With AI
The company I’m talking about is Roche Holdings AG (RHHBY), a global leader in the pharmaceutical and diagnostics industry. Its pharmaceutical division, which accounts for about three quarters of the company’s revenues, focuses on the fields of oncology, immunology, infectious diseases, ophthalmology, and neuroscience.
The company’s 2023 buyout of Telavant Holdings grants access to RVT-3101, a groundbreaking antibody therapy to treat inflammatory bowel diseases, including ulcerative colitis and Crohn’s disease.
Because of the antibody’s novel ability to target both inflammation and fibrosis, it has potential to treat many other diseases as well.
Apart from the Telavant takeover, Roche has been relatively quiet on the mergers and acquisitions front. But the company has been making a lot of noise in the AI space, like the recent deal between its Genentech division and Nvidia Corp. (NVDA)…
This collaboration is not just another flashy AI news story.
It is a potentially groundbreaking fusion of biomedicine and supercomputing technology. And it spearheads a new paradigm in drug discovery, where AI becomes an integral and essential component, and also enables personalized therapies on a massive scale.
Genentech calls this new paradigm “lab in a loop” because it continuously loops from laboratory analysis to AI computational models and back to the lab – each part of the analysis continuously informing the other to optimize and expedite the drug-discovery process.
In other words, the fusion of biomedicine and AI supercomputing is transforming drug discovery from a painstaking hit-and-miss venture to a process that can produce a higher success-to-failure ratio.
Roche’s revenues and earnings have been falling for the last couple of years. A drop in COVID-related sales deserves most of the blame. But revenues appear to be stabilizing. In the fourth quarter, the company managed to eke out 1% revenue growth, thanks to the Pharma division’s 6% growth.
Even though the company’s 2024 pipeline looks uneventful, two of its newest drugs could add meaningful near-term revenue growth.
Vabysmo, which treats macular degeneration and macular edema, just came to market in 2022. But it should produce more than $3 billion in sales this year.
Roche is also getting a boost from Polivy, a first-line treatment for patients with large B-cell lymphoma. Last year, Polivy generated sales of $930 million. But that figure should jump to about $1.6 billion this year.
Looking further down the road, several new drugs could hit the market in 2025 and beyond.
All in, revenues should grow at least 10% during the next two years, producing an even larger jump in net income. Additionally, Roche’s prodigious free cash flow should enable the company to become debt free by the end of 2025, unless it chooses to make additional acquisitions instead.
While waiting for the turnaround I expect, the company is paying a nice 4.2% dividend.
The Next AI Healthcare Winner
It’s no secret that AI is revolutionizing the healthcare industry. And Roche is only one example of many.
I’ve been following this megatrend for some time now. The fact is that the healthcare AI market is entering such an explosive growth phase that I’m issuing an AI Code Red.
In fact, I’ve created a short presentation to help you prepare for what’s coming.
I’ll also show you where to uncover the biggest potential profits from the $15.7 trillion AI Revolution… by focusing on the healthcare sector as it’s set to explode in the days and months ahead.
The sector offers a shot at the kind of explosive gains early investors captured at the beginning of the internet era.
Click here for all the details.
Regards,
Eric Fry
