HomeRoboticsA Sneak Peek into the Subsequent-Gen of Healthcare

A Sneak Peek into the Subsequent-Gen of Healthcare


 

Need to put together your portfolio for the next-gen of healthcare expertise? Hearken to our Senior Analysis Analyst, Nina Deka and Director of Gross sales, Lauren Hein as they talk about how you can seize these disruptive developments.

Webinar Transcript:

Lauren Hein: 

Nina, and I are tremendous excited to be right here with you at the moment. By the use of brief introduction. Hello Nina.

 

Nina Deka: 

Hey, good morning.

 

Lauren Hein:

By the use of fast introduction to me, I am ROBO International’s Director of Gross sales. I’ll be type of moderating my dialogue with Nina, who’s our well being tech, healthcare knowledgeable at ROBO International this morning. I wished to verify I put in a fast phrase for everyone to submit questions. When you have them, we’ll attempt to reply them reside. I see we have already bought one dialed in right here and we even have some … simply so , Nina, we had some pre-submitted questions, so individuals are not going to go simple on you this morning. We’re excited to listen to from you. So we’ll weave them all through the dialog the place we are able to, simply ensure you submit them in by the Q and A field for those who do not thoughts. Okay. So we’re focusing at the moment’s dialog on well being tech and innovation. Nina, why do not you give us a bit bit about your background, so we have now some context for the place you are coming from in our dialog at the moment.

 

Nina Deka: 

Certain. So Nina Deka, senior analysis analyst at ROBO International and I give attention to our healthcare technique and that is largely as a result of my total background is round healthcare. I began my profession within the healthcare business, really, working for firms like Cardinal Well being, Becton Dickinson and I began in company finance working with post-merger integration, for instance, manufacturing stock accounting, earlier than I transitioned my profession towards medical system gross sales. I used to be really a quota carrying gross sales rep for a couple of decade earlier than getting my MBA and transitioning to the road. I labored on the promote aspect for about six or seven years, protecting healthcare, IT and companies and now, I am at ROBO, managing the HTEC portfolio. So, it is fascinating as a result of my background, it spans healthcare companies, diagnostics, med tech and even healthcare, software program, IT and digital well being and people are mainly the kinds of firms that we spend money on, within the HTEC portfolio.

 

Lauren Hein:

Superior. Superior. Thanks. So, an actual skilled within the healthcare house. We’re fortunate to have you ever. So I need to begin actually massive image perhaps, let’s about the long run case for disruption. Let’s speak concerning the runway as you see it for the subsequent decade of innovation particularly within the healthcare business.

 

Nina Deka:

Certain. So I imply, perhaps one place to start out is to speak about why we even want disruption. What’s taking place at the moment? Why cannot healthcare simply keep the way in which it’s, it is good, proper? I am simply kidding, so we have now some actual systemic points. I feel lots of people have observed in headlines currently that we have now a critical healthcare employee scarcity. Within the US alone, we have misplaced about 500,000 healthcare employees for various causes, for the reason that begin of the pandemic, whether or not it is individuals are … psychological well being points, bodily constraints, individuals are leaving as a result of they’re burned out. There’s the debates over whether or not or not they need to be required to get vaccination. Sadly, globally, there have been an estimated 100,000 deaths amongst healthcare employees, stemming straight from the COVID-19 virus.

Other than the pandemic and the impacts of the final couple years, we already had globally healthcare employee scarcity and that’s anticipated to worsen over the subsequent 10 to twenty years. In the meantime, we have an growing older inhabitants. Individuals are simply dwelling longer and so, what we have now is the quantity of people that require care. Folks over 80 are rising over the subsequent decade whereas fewer individuals are getting into the healthcare workforce and extra are retiring. So you have bought this dynamic, the confluence of which lends itself to medical error and because it stands, medical error is already the third main explanation for loss of life in the USA. These are issues that might have been prevented, had sure conditions been detected forward of time. Issues like remedy error, sufferers taking two issues on the identical time, however work together may lead to hospitalization for instance.

Then, one other problem we have now a problem in healthcare is plenty of healthcares run on legacy IT and even no IT. There’s nonetheless plenty of paper charts getting used around the globe and in these international locations which have adopted, broadly adopted digital well being information, transferring paper charts to computer systems, plenty of that’s nonetheless mainly dwelling on premise methods and not likely interoperable with the entire different software program that is getting used across the healthcare system. So, there’s rather a lot that is simply type of dated in healthcare tech proper now, and that is screaming a really compelling want for disruption, for innovation. Actually, that is actually the one method ahead at this level. The one technique to get the quantity of care that is going to be required is by rising automation, higher leveraging AI and simply throughout new innovation. So it is a actually thrilling time to be wanting on the house.

 

Lauren Hein: 

Okay. So individuals are asking about the price of well being care. How do you see advances in expertise impacting the price of our healthcare?

 

Nina Deka: 

Nicely, I imply, there’s plenty of methods to have a look at it. So if you concentrate on an ER go to, for instance, an estimated $500 for an ER go to. Nicely, for those who reside someplace that’s outdoors of a big metropolis, there may be restricted entry to a doctor. It would take some time, perhaps it is a Saturday and you’ve got a toddler who wants a prescription refilled for bronchial asthma, for an inhaler and there’s no close by physician accessible or an pressing care facility, so folks go to the closest accessible place, which is commonly an ER. That is $500 for one thing that might have been resolved now by telemedicine. Now that telemedicine has largely been adopted, there’s an instance of how for a $35 go to, enter your bank card quantity into the cellphone or into your app and growth, you have bought a prescription ready for you quarter-hour inside your nearest pharmacy.

In order that’s one instance. One other is how, when you have a medical process say, the place you are within the OR. You are having a process achieved that ends in the wound … after they shut up after the process, the wound does not heal correctly. Possibly the affected person will get an an infection. Possibly they wind up again within the hospital system. That readmission can also be very expensive. That could possibly be tens of 1000’s of {dollars} that one thing may have been prevented. There are are methods to deploy expertise to keep away from that. For instance, with surgical robotics, the place you have got smaller incisions and every little thing is extra automated and extra tightly managed, much less room for variation and error. When you’ll be able to deploy tech like that, you’ll be able to cut back the chance of someone being readmitted after which take tens of thousand {dollars} out of the system.

 

Lauren Hein: 

Thanks. Okay. So we talked about the long run case and the necessity for disruption within the healthcare sector particularly. Let’s discuss subsequent yr. What actually excites you a bit bit extra close to time period. Possibly some firms, perhaps some applied sciences that you just suppose are like right here and prepared proper now?

 

Nina Deka: 

Nicely, apparently, we really … and for the folks on this name, we simply revealed a sneak peek preview of our 2022 developments report particular for healthcare. So, tune in and look out for that in your electronic mail inbox and that’ll type of summarize a few of the issues that we’re speaking about at the moment. So subsequent yr we’re actually excited. I discussed surgical robotics already, however normally, after I talked concerning the constraints of the healthcare system and the way they’ve dramatically been impacted by the pandemic, the necessity for automation is dire and so, we do anticipate extra deployment of issues like robotics and never simply within the OR but in addition in areas just like the pharmacy. Consider a pharmacist who has spent years getting a pharmacy diploma. That is a really expensive license and type of training.

Plenty of them are relegated to a pharmacy, placing drugs in bottles, the place they could possibly be upfront within the pharmacy, doing extra affected person engagement, speaking to the affected person, asking them what different medication that they are taking and ensuring that they are taking the appropriate meds on the proper time to assist them get effectively and never wind up within the hospital later due to drug to drug interplay. In the meantime, why not take the load off of them, of a few of the each day like placing drugs in jars and the executive work behind the scenes and automate that? There are firms which might be doing that like Omnicell, which is an organization within the HTEC portfolio, is basically automating that pharmacy course of and in addition taking plenty of errors out of the system. For instance, they haven’t solely pharmacy shelling out methods, if you’ll. It seems to be like a merchandising machine in a hospital, within the affected person flooring.

A nurse or a physician can go up and key of their distinctive ID after which, it’s going to put out the precise quantity of medication that is required for that affected person that helps hold the affected person secure. It helps decrease error. It helps cut back the chance of shrinkage as a result of there’s an opioid disaster and generally there’s medication that disappear. It helps decrease that threat, however one thing actually fascinating that Omnicell did throughout the pandemic, if you concentrate on a well being system, so that’s the place you have bought like 10 to twenty hospitals all beneath one massive umbrella. In New York, there’s the New York Presbyterian Well being System. While you had this huge group, when the pandemic first occurred and the hospitals have been getting overwhelmed, there have been completely different medication that individuals have been experimenting with. Let’s do this drug and see if this helps. Let’s attempt that.

When a drug was recognized to be helpful within the therapy of COVID-19 … and I do not imply new medication, I imply like those that have been already on the shelf to assist with signs. Nicely, the place are these medication? If you concentrate on the a whole lot of locations the place medication will be tucked away round a healthcare system, all of the completely different affected person flooring, all of the completely different places of work, the principle hospitals, the distant physician places of work, the constructing throughout the road, there have been a whole lot of areas the place these drugs have been housed throughout a disaster when folks wanted them probably the most. With Omnicell, their software program lives within the background can inform you precisely the place all of those meds are and the place to seek out them and how you can combination them and get them to the place they’re wanted most.

Omnicell is seeing an uptick in bookings as a result of individuals are figuring out, we have to clear up this stock. We have to clear up this course of. We have to automate it.

 

Lauren Hein: 

Actually unimaginable. What else is … give us a bit bit extra of a sneak peek into that 2022 developments report. What else excites you subsequent yr?

 

Nina Deka: 

Nicely, we have … let’s examine one thing that lots of people have not actually been paying plenty of consideration to as a result of the pandemic has taken a lot consideration, is an space in genomics often known as spatial biology. So spatial biology, like what’s that? Okay, so I will simply give a bit background about it, simply to catch all people up, nevertheless it’s mainly, if you concentrate on … let’s consider a smoothie, you’re taking a complete bunch of fruits and also you mix them up and you have got a drink and then you definitely take a look at it and you’ll say, “Okay, I feel that this has strawberries in it. I feel I style banana. It is most likely bought some oat milk in there,” and also you suppose that what’s in there and you’ll type of inform, however you do not know precisely what number of to strawberries went in.

Okay. Now think about a fruit salad. You may take a look at it and you’ll see precisely which fruits are in there and you’ll see precisely what number of, and you’ll see the place precisely each fruit is in that bowl. That’s the distinction that spatial biology is bringing to the desk versus like kind of a traditional methodology of subsequent gen sequencing. So whenever you’re analyzing, for example you’re taking tissue out of a affected person, you biopsy a tumor, you’ll be able to analyze that and the present typical methodology is that you are looking at, for lack of a greater analogy, a smoothie. With spatial biology, it allows you to take a look at the tissue because it stands, all of the cells which might be in it after which you’ll be able to inform precisely which cells are concerned with not solely the most cancers mutations, however what cells are sitting subsequent to it and the way they work together with each other.

The rationale why that is essential is as a result of when a medication is prescribed to deal with a most cancers with precision drugs, you desire a very focused drugs that targets a really particular genetic mutation. Nicely, what if that drugs does not work, it was made for that genetic mutation? How come it is not working? That is what spatial biology helps reply. It helps to say the explanation it is not factor is as a result of there’s these different genes close by which might be interfering with this drugs’s skill to work. With that further data, pharma firms can now really go after precision drugs in a method that is hopefully going to deal with many extra folks with illnesses. It has the promise to go far past most cancers. It could actually go into infectious illness, et cetera. The rationale why an organization known as Akoya may be very fascinating … so there is a couple firms within the HTEC portfolio that provide publicity to this. One is NanoString.

They’re the market chief in spatial biology after which Akoya is that this fascinating up and coming participant who’s gaining plenty of market share on this analysis that we have described, however the purpose why they’re significantly thrilling is as a result of they’re serving to to carry scale to this business. So like over a decade in the past, when NextGen Sequencing hit scale, it took off when it comes to adoption and it grew to become a multi-billion greenback alternative. We expect 2022 is the yr that spatial biology hits that inflection level and actually is ready to take off at scale and it is due to new merchandise arising from these wants like NanoString and Akoya. Akoya, keep tuned, is having a spatial biology day that you just may need to register for that, if it is the kind of science that is fascinating to you and you’ll watch concerning the new merchandise that they are speaking about releasing into 2022. So actually thrilling stuff there.

 

Lauren Hein: 

That may be very thrilling. Can I’ve you pivot to speak about robotic surgical procedure and robots inside the healthcare system? I’ve three questions which have are available particularly about robotics. Let me ask you, let me ask you the primary … let’s body the primary one with who’re the main gamers? Intuitive Surgical will clearly most likely be first out of your mouth there, however who else is perhaps up and comers after which, we additionally had a query about Intuitive Surgical be capable of compete with smaller opponents or anybody else that you just see coming behind them within the ranks.

 

Nina Deka: 

Certain. Nicely, so I feel the reply as to whether or not they will compete is fingers down, sure. They don’t seem to be solely a pioneer and a world market chief in surgical robotics, however they have years forward of the opposite gamers. That does not imply that there is not room for different gamers and new entrants and so they proceed to innovate. They proceed to be on their very own subsequent technology and make their very own expertise out of date. In order that they have an effect on their greatest competitor, which is what makes them such a robust market and expertise chief. They’ve a really fascinating new tech popping out that strikes them type of up the physique. So proper now they focus closely and so they’re the market chief in kind of basic surgical procedure procedures that happen across the stomach, like prostatectomy, issues like that.

Now, they’re engaged on a brand new expertise that is named Ion and this focuses on the lung. So if you concentrate on lung most cancers and discovering a tumor … and we talked earlier about precision drugs that is all about not solely discovering the tumor however getting sufficient details about the gene that is inflicting the most cancers to then be capable of deploy the appropriate kind of therapy. That is actually laborious to do if you concentrate on a lung, as a result of this tumor might be someplace in a really laborious to achieve place. So Intuitive is engaged on one thing very thrilling that is ready to … early knowledge is displaying that they cannot solely get to that tumor, however get sufficient data out of that biopsy. that is nearly on a regular basis serving to a surgeon or the physician give you the correct prognosis. Think about for those who went and did the surgical procedure, did a biopsy and also you did not get the knowledge you wanted, would it’s important to do it once more?

In the meantime, the most cancers is progressing. So the important thing right here is doing it the appropriate time and get the most effective data you’ll be able to straight away. In order that’s actually thrilling stuff popping out of Intuitive after which there’s different up and coming firms like one known as Vicarious Surgical that individuals are maintaining a tally of and they will assist make it in order that after they do the incision for process, it’s extremely, very small. So we talked earlier concerning the skill to get better shortly from these kind of procedures. Making a small incision is part of that and just one level of entry with a purpose to make that process occur versus coming in everywhere. They don’t seem to be alone. There’s plenty of different firms which might be innovating. If we transfer to different sections of the physique, there’s orthopedic surgical procedure that can be utilized the place surgical robotics is being deployed.

HTEC supplies publicity by Stryker. Stryker has expertise, and they’re the market chief for orthopedics. They mainly assist decrease error for surgeons in order that they do not minimize off an excessive amount of of the bone or go too far into the unsuitable place. It provides plenty of like a dummy proof functionality. Not that the surgeons want it, nevertheless it simply helps … for instance, for those who’re coaching a brand new surgeon on how you can do an orthopedic process. I imply, that is difficult to do as a result of these are errors you actually do not need to make of like slicing the unsuitable a part of a bone. So when you have a robotic that helps information and decrease these errors, that is what makes striker the market chief in that house, and we anticipate there to be persevering with entrance. There are different gamers on this, not all of them are within the HTEC portfolio. Medtronic has been engaged on a expertise to compete straight with intuitive surgical. So, we’ll see extra to come back.

One other firm within the backbone house is GMED, Globus, I feel they’re GMED. They’re within the HTEC portfolio as effectively. So we have now some publicity to this thrilling house and from a valuation perspective, plenty of these like kind of … some of these OR associated, procedural quantity associated med tech firms, weren’t getting plenty of consideration over the past couple of years. So, it is nice to have publicity to that in your portfolio as hopefully fingers crossed sometime, we come out of this pandemic, folks return to scheduling surgical procedures. These are the businesses which might be going to be very effectively positioned for development.

 

Lauren Hein: 

Unimaginable. So clearly surgical robots or any kind of robotics inside healthcare is only a small subsector inside the well being tech index, HTEC. Are you able to speak concerning the index methodology, perhaps communicate to that a bit. How do you really decide what firms get included? What firms do not get included? Clearly we’re watching a complete lot of them otherwise you’re doing plenty of evaluation on plenty of firms that do not make it in. So discuss our index methodology please.

 

Nina Deka: 

Certain. And really this ties a bit bit to your query about, there is a web page … Erin, for those who may shift to the slide that talks about type of the long run, 5 themes. Lauren, you had requested earlier about like, the place can we see the way forward for healthcare? I most likely did not go deep sufficient into that however I assume it pertains to this a bit bit. These are the areas the place these issues I mentioned earlier, we see them being addressed by innovation throughout these type of 5 themes like digitization. So I talked about how plenty of healthcare is working on like legacy IT. We anticipate to see extra digitization and extra use of issues like wearable units. The info that comes out of that may be communicated to docs in a method that perhaps a affected person who does not see a physician daily is ready to get that communication throughout on a extra common foundation.

Then different themes like consumerization, that is the place individuals are purchasing for healthcare greater than they have been earlier than. Folks, again within the day, used to only depend on referrals. Go see a specialist. This is the one I need you to see. Now, individuals are really buying on-line and searching for high quality companies and selecting their docs. So these type of personalization is one other one, we already talked about precision drugs, prevention is one other space, like how can we hold folks from getting sick to start with? What can we do to maintain folks effectively. We’re seeing employers more and more supply issues like fitness center memberships, constructing a fitness center, proper within the workplace, having a major care workplace proper in an workplace constructing. There’s plenty of methods to forestall sickness after which additionally decentralization.

We’re seeing plenty of healthcare transferring out of the 4 partitions of a hospital to decrease value settings, like folks’s houses. So after we take into consideration how can we make investments on this house, that is how we break down HTEC and now, you possibly can leap again to the slide, Erin with the 9 sub sectors. Yeah, so that is how we break down HTEC. We take into consideration like, the place are the areas that basically assist fill these unmet wants in these 5 issues that I simply mentioned. So, these are the 9 sub sectors the place HTEC is diversified. We have got knowledge analytics. We have got telehealth, regenerative drugs, genomics. These are the areas that we imagine symbolize the subsequent decade of development. So after we take a look at our methodology and the way can we need to spend money on these house, we glance throughout these 9 sub sectors and we’re always evaluating all the businesses that function inside them.

What we’re searching for particularly to our portfolio is market management, expertise management. So if it is just like the primary, quantity two participant, they will get a excessive rating. We have got a proprietary scoring system that we use, we take a look at how they make investments again into their enterprise. Are they buying different firms which might be complimentary, which might be additionally doing one thing leading edge? So the way in which that they make investments can also be a metric and income purity is basically essential. If there is a actually modern firm, however solely like 20% of what they do is healthcare, they’re most likely not going to get into the portfolio. So we use these completely different metrics. We’re valuation. We now have some fundamentals like EV to gross sales, debt to EBITDA ratio for our analysis and our threat mitigation standpoint.

We take a look at all this collectively. We put a rating on. We glance throughout the universe and we are saying, okay, like if this firm has a excessive sufficient rating, let’s put it in our system. We now have a proprietary knowledge base the place we observe all of this, after which we have now a fairly in depth committee voting course of. So for instance, if there’s an organization we’re , I discussed Akoya Biosciences earlier. That was a brand new inclusion, a few quarters in the past. We went by, we analyzed all types of genomics firm. We dug deep into spatial biology. We thought it is a scorching pattern. We have got NanoString. The place else may we get extra publicity? We met with the businesses. We recognized Akoya as an rising chief on this house and a tech disruptor. We now have like a staff of not solely analysis analysts, but in addition a staff of advisors that weigh in.

These individuals are the … ROBO International has an advisory board that features folks which might be type of just like the who’s who, if you’ll, of our thematic methods. Know-how like robotics AI, well being tech. There are some international leaders and thought leaders in that house that weigh in. Then we have now a committee course of. We mainly discover the corporate, do a basic analysis after which have an intensive voting course of, and if the corporate will get voted in, we do proceed to observe it and I do know someone had requested the query earlier about like, how lengthy does an organization usually keep in? We’re searching for the long run potential. So we’re not wanting quarter to quarter. This is not like a brief time period the place healthcare as the subsequent 10 years of disruption. So we’re like three to 5 years out and as soon as … it is such an intensive course of to carry an organization in that we do attempt to hold them in for some time.

In the event that they get kicked out, it is as a result of they’ve violated a metric, like EV to gross sales ratio or one of many different basic metrics or their rating is coming down. Possibly we needed to downgrade them as a result of they’re dropping market share so quickly that they are not our primary market chief. So, that is type of how we do the entire course of and that is how lengthy an organization will keep.

 

Lauren Hein: 

Off the highest of your head, we had a query about portfolio turnover. Do you have got a ball park on an annual foundation, what the HTEC turnover … index turnover seems to be like?

 

Nina Deka:

I do not know that quantity off the highest of my head. I solely know that it is sluggish. So it is uncommon that an organization would are available and go away anytime quickly, however we are able to most likely, if we have now the contact data, get again to that particular person.

 

Lauren Hein:

Certain. Possibly if we are able to go to the highest holdings web page, would love to speak a bit bit about our high 10 holdings and what actually differentiates these firms, perhaps it is one thing particularly grabs you to speak about on this record, perhaps why they’re within the high, versus the underside record, simply discuss how we get right here.

 

Nina Deka: 

Certain. One of many ways in which we get right here, apparently, is again to our methodology, we use a modified equal weighting. So we have now that scoring system that I discussed and of the vary of scores which might be potential, if an organization is on the next finish of the vary, they could have a barely heavier weight than an organization that is on the decrease finish of the scoring vary. That being stated, as a result of it is mainly equal weight, give or take, no firm is greater than a pair proportion factors usually of your entire index. So it is actually really diversified and that’s type of distinctive to our technique, the place you may see firms emerge, you talked about the highest 10 right here, it is all through the quarter. We now have a quarterly rebalance course of. So all through the quarter, two thirds … really about half of the portfolio is small mid-cap and these are well being tech names and so they transfer rather a lot.

So, you have bought some that type of gained a bunch throughout the quarter and a few that did not and that is how you may get to the place we’re at. The place for those who look right here, you have bought iRhythm, it is like three and a half p.c of the portfolio because it stands and that is till the subsequent rebalance. So whenever you take a look at who’s on high, it is as a result of that they had a robust run this quarter earlier than this subsequent rebalance comes up. I learn them specifically, they reported some nice information. The inventory was really down final quarter as a result of there was considerations that they’d not be reimbursed as a lot as they was for … the healthcare employees who use their units would not be reimbursed sufficient. This quarter there was information saying that they will get greater than they initially deliberate for. So massive bump in income there and the inventory reacted to that. Vocera is crushing it. They’ve been all year long. That is one other firm that is stepped up throughout the pandemic, however has like actually cool expertise normally.

They promote a badge that individuals can put on. So it is a wearable system. It’s utterly voice activated and so they can communicate … healthcare employees can communicate into … Cool. The badge is now, you’ll be able to see it on the white jacket of one of many healthcare employees after which, across the neck of the nurse with the scrubs or the doctor. Anyway, so these two symbolize this expertise. The rationale why this was actually useful throughout the pandemic is as a result of you do not have to the touch it. You may simply communicate into it and when a healthcare employee was in an isolation room with a affected person with COVID, bear in mind the disaster with the PPE, there wasn’t sufficient gloves and robes. So to place this valuable tools on after which go in and work with the affected person, for example it’s important to go ask a query of someone not within the room. While you go away the room, take every little thing off, go discover the healthcare employee after which put every little thing again on once more.

We did not have the provides to allow that. With Vocera, they might simply communicate into the badge and say, “Hey, I am with this such and such affected person. We’re within the isolation room. Do not are available, however are you able to assist us work out what we have to do subsequent?” So anyway, they made plenty of headlines as a result of they have been capable of step up and assist with one thing very vital. Basically, Vocera not solely supplies this communication however the background software program capabilities that assist handle mainly healthcare. So if you concentrate on alarms, okay? Alarms are like, “Beep, beep.” They’re everywhere. I imply, I have already got with my cellphone, so many alarms that I get … like I begin to tune it out after some time. Nicely, in healthcare, these alarms may be vital. They may be like … It may be a matter of life and loss of life.

So think about having so many and the healthcare employee scarcity. So now you have bought like an excessive amount of noise. You are overwhelmed as it’s, and there is not sufficient employees. Vocera’s expertise will assist manage these alarms and solely ship the beep or the alert to the healthcare employee who wants it, so the entire room does not should hearken to it. The one one that can cope with the affected person, who’s assigned to that affected person will get the alarm and just for the affected person who’s in danger. So by organizing this behind the scenes, it helps automate the workflow and helps handle it in a method that is higher for the standard of life for each the physician, nurse and the affected person.

 

Lauren Hein:

Okay. Not certainly one of our high 10 holdings, however individuals are actually interested in CRISPR. Shares is struggling a bit bit this yr. CRISPR is included in our HTEC index. So do you have got any ideas on each the corporate, and in addition we did have a query particularly about CAR-T expertise.

 

Nina Deka: 

Certain. So CRISPR is mainly one thing that everybody must be concerned in as a result of it is what the researchers are utilizing now. Anybody who’s in class doing analysis and going to graduate quickly and going to proceed to be a scientist and do extra analysis, they’re all utilizing CRISPR. It’s extra environment friendly. It is only a sooner technique to conduct the science after which evaluation and get solutions. It is sooner, it is low value and so, it is actually type of taking the place of so many issues earlier than it, like different typical gene remedy strategies. So, it is one thing the place you … you positively need publicity to it and there is a handful of firms, lower than a handful of firms which might be leaders on this house. So, it is right here to say, it is not going wherever and the explanation why it is significantly thrilling with therapeutics is as a result of we’re already seeing some breakthroughs, like over the past yr, we have already seen ways in which CRISPR can work the place … and simply to love perhaps stage set, CRISPR is actually the flexibility to edit a gene.

So take into consideration a pair of scissors. There’s one thing on a gene that should not be there and it is inflicting an issue, it is inflicting a illness. Okay? The CRISPR-Cas9 expertise is mainly one thing that may go in and snip out the issue that is inflicting the difficulty after which, assist to treatment the illness and there is two methods to do that. You may both take the pattern out of the physique and make the snips and do what that you must do after which, put it again into the affected person or you’ll be able to really inject the expertise into the affected person and see if it’s going to work by itself. The ladder of that, which is … it is simply much more scalable is one thing the place we have already seen profitable knowledge. So, some actually thrilling issues taking place in that house and in addition, there’s going to be some talents to deploy CRISPR, doubtlessly down the street with RNA, every little thing I simply described is like with DNA, however there’s additionally potentials to do issues with RNA.

So, there’s a lot extra to come back in that house and it is not going wherever, so all people ought to keep watch over it for positive.

 

Lauren Hein:

Okay. I’ll ask you to zoom out a bit bit and speak concerning the valuations of the type of the index as a complete. Additionally, perhaps discuss how a lot of the portfolio is what you’ll think about development versus worth. That is a query from our viewers and the way you actually take a look at the valuations of those firms whenever you’re deciding on the weightings.

 

Nina Deka: 

Certain. So from a valuation perspective … so, whenever you’re wanting throughout utilizing our methodology the world over of innovators, you are typically going to have firms which might be smaller, which is why about half of the portfolio is small mid-cap names, however what you even have are firms that aren’t but worthwhile. So, typically in our different sectors, perhaps ahead earnings or EPS normally is the way in which that individuals take a look at analysis, however we imagine that the most effective metric to make use of for HTEC is the EV to gross sales ratio, the ahead EV to gross sales ratio, as a result of that is how most of those firms commerce. So, whenever you take a look at the ahead EV gross sales of HTEC, it has are available and it is really lower than 5 occasions proper now, 4.45 occasions EV to gross sales over the subsequent 12 months.

So, whenever you take a look at like, why has it are available, simply there’s so many truth proper now. Considerations round inflation, total. When the tech business takes successful, so does med tech, as a result of it’s extremely adjoining, as a result of these are primarily largely tech names. So the appropriate method to have a look at this from a valuation perspective is for to EV gross sales and only for comparability a yr in the past, it was buying and selling at like seven occasions. So, in our view, it is a phenomenal entry level. For expertise, that is right here to remain and going to be disruptive over the subsequent decade. Then, and so about 31% of the portfolio doesn’t but have earnings. In order that’s why type of that is the appropriate metric to make use of. What was the opposite a part of your query?

 

Lauren Hein:

The proportion of firms which might be displaying earnings now was really certainly one of them, after which, the opposite query was concerning the PE ratio and the way a lot of the fund would you think about development versus worth, which I feel you have been adjoining to that in your reply, however do you have got something you would like so as to add there?

 

Nina Deka: 

No, only for probably the most half we do … I might need a metric right here concerning the development fee of the index. I do not know if I’ve it useful. I may search for that later however total, the portfolio … I feel the final time I checked, it was one thing like a ten to 12% development. It’s a double digit high line development normally. So anyway, I might say as a portfolio, consider it as development, however there are positively some names that could possibly be considered worth which might be in there. These are type of the extra firms which were round for some time. They do have earnings, they’re single digit growers, firms like … even Boston Scientific, Edwards Lifesciences. Even these firms with regards to our scoring system and our methodology, what we’re centered on inside them are the expansion and disruptive areas of what they do. So our scoring system will seize these parts of these firms accordingly, however we do have publicity to worth names.

 

Lauren Hein:

If anybody needs comply with up, I am simply going to inform you my electronic mail handle. It is lauren@roboglobal.com. You may ship these questions on to me. We’re pleased to reply them and get you some extra metrics. So Nina concerning rebalancing, you type of talked in that final reply just a bit bit about your scoring system. If an organization has a robust quarter or sturdy sequence of quarters, somebody is questioning why we do not simply proceed to carry that inventory or improve the ready in that firm each single quarter, as a substitute of perhaps pairing again a few of our winners. Are you able to speak concerning the rebalance course of for the HTEC index?

 

Nina Deka:

Certain. So we do maintain to our modified equal ready methodology. So the rebalance course of retains us true to that and that is to assist actually diversify publicity and leverage if there’s one thing actually unimaginable occurring with certainly one of our mid, smaller cap names, why should not the portfolio efficiency replicate that. So actually type of everybody will get a good likelihood in our portfolio, after which, with regards to pairing down, we simply … I do know that there is some methods that may do like a semi-annual rebalance course of however … I discussed earlier, like we have some movers in right here when you have got this stage of small mid-cap publicity, the extent of volatility that that brings to the desk, if we do not do the rebalance of the frequency at which we do, we type of … we do run the chance of an organization working into the three, 4, 5 plus p.c of the entire portfolio and that strays away from what we’re attempting to do.

So, that is type of why we do it on the frequency we do, the advantage of that’s that there is plenty of motion taking place, significantly in healthcare proper now. There’s plenty of firms which have gone public. There’s firms that get taken out. So the quarterly course of additionally offers us an opportunity to carry the brand new up and coming, most modern firms in and it forces us to maintain it recent all through any given yr. In order that’s type of the reasoning behind that after which, why? Okay, so take into consideration … I imply, final yr we added Moderna to the portfolio. It is no information to anybody that that is been a monster inventory, proper? In order that continues to develop, once more, we do not need Moderna to be like 9% of the portfolio, proper? So we do trim it in keeping with our methodology and in impact, we’re all the time promoting excessive and shopping for low.

Then when it comes to the ready, if an organization for example does not meet all of our standards, it’d solely are available at half weight anyway, after which for example it, the EV to gross sales comes again into our vary or the debt to EBITDA ratio. These kind of metrics will allow it to be full weighted. In order that’s type of how we take into consideration issues and I hope that solutions that query.

 

Lauren Hein:

Actually. All proper. I’ll grasp round a bit bit. The primary query that we had was asking about your opinion on the doorway of huge retail or perhaps some massive tech firms into the healthcare house. Particularly, we had an anecdote right here the place certainly one of our attendees visited a brilliant Walmart this week and there’s a healthcare clinic hooked up. So each massive retail and in addition mega tech. Do you see them getting into the healthcare house increasingly?

 

Nina Deka:

Completely and there isn’t any purpose why they should not. I imply, Walmart is already … the factor that they’ve is that they are already type of like so deeply embedded into the lifetime of a Walmart buyer. In order that’s the place our buyer goes to get not solely their hair merchandise, however their meds, their groceries, their toys, their Christmas buying however they’re already there all day lengthy. Why not when you’re there, get your flu shot? Why not when you’re there, get your blood stress checked out? I imply, that is what Walmart needs to do, identical with CVS. They’re already within the neighborhood. They have already got this footprint and folks coming in, the foot visitors and so they’re already healthcare suppliers. They’re already offering pharmacy companies, however, however when you’re there, why not utterly spherical out the service functionality?

Additionally, we carry up CVS, they don’t seem to be solely doing like Walmart providing kind of these major care kind companies, however they’re additionally taking one step additional and providing telehealth kind companies by an organization portfolio, Teledoc. So, there are methods that these massive retail massive packing containers can do extra and deploy expertise and there isn’t any purpose why they should not. There’s completely room for them to function on this house and they need to leverage their current consumer base. Why not?

 

Lauren Hein:

We’ll ping round a bit bit and discuss a few of the underlying applied sciences inside HTEC. Do you have got any ideas on telehealth? T-doc is type of on a slide right here within the again half of this. Do you have got any ideas concerning the shares particularly or perhaps simply speak a bit bit about digital and telehealth usually within the outlook there?

 

Nina Deka:

Certain. So Teledoc is basically thrilling and I feel there is a … the shares are available as folks have observed, however I feel that traders are lacking a extremely fascinating a part of the story. So for those who take a step again, Teledoc is the pioneer of telemedicine. The rationale they have been capable of ship the tens of millions of physician affected person visits remotely throughout the pandemic is as a result of that they had already achieved the legwork and laid that infrastructure to make that occur. They did not have a capability problem when their quantity went eight occasions their regular quantity stage. They’d already constructed … prepared for that capability, effectively and … again across the time of their IPO, 2014, ’13. So they have been able to go for this wave, if you’ll, of telemedicine visits, however that is just one small a part of what they do.

They need to mainly be the digital entrance door of all people’s healthcare and so they simply introduced … yeah, that they had an analyst day, if you’ll, and so they simply introduced a brand new tech system or a brand new software that they are piloting proper now, and I feel that is going to be sport altering. So mainly it is an app, a affected person can use it and it’ll assist them not solely handle their care. So for example they’ve diabetes or hypertension, it would give them very till nudges like, “Hey, remember to test your blood glucose stage,” or no matter metrics being measured. If the affected person’s studying goes out of a spread and it is one thing vital, they will get a cellphone name. The system will really ring and it will say, “Hey, we have observed you are out of vary. What is going on on? Do that you must take a stroll?”

“Do that you must drink some orange juice or do that you must come into the emergency room?” So, what they’re successfully doing helps a affected person handle their care after they’re not head to head with a physician, proper? So this has been by M and A, like they acquired Livongo, it was the biggest digital well being acquisition within the historical past final yr. So now with this new expertise, they will monitor folks with their continual sicknesses. What they will additionally do is assist schedule appointments, “Hey, I would like my routine checkup or hello, I’ve sinus an infection.” They’ll do all that from their system. So, what it is doing is it is mainly being the one cease place on a affected person’s cell system or pc that may assist them handle all of their healthcare wants whereas nudging them towards … I bear in mind I discussed earlier, prevention was going to be an enormous theme whereas serving to them handle illness in order that they do not get sicker.

All of that is going to be paid for by their … both their employer or their medical health insurance firm, who is actually going to drive down plenty of healthcare prices by protecting these folks from getting sick or protecting them from getting sicker. So actually thrilling expertise, sorry, there’s like a factor that simply flew by. Actually thrilling expertise that they are deploying and I feel that the broader investor group is type of lacking that. What individuals are being attentive to is the variety of new customers, telemedicine is already right here, everybody has adopted it. We needn’t depend new customers anymore. Now let’s depend, for those who’re a consumer, what number of extra merchandise you are shopping for and utilizing inside one platform, as a result of that is going to be the expansion driver.

 

Lauren Hein:

Okay. I need to ask you about AI, so the influence of predictive analytics, cognitive sample recognition, different types of synthetic intelligence purposes inside healthcare, what do you suppose the influence will be, are there any particular firms that excite you which might be doing new and thrilling issues?

 

Nina Deka:

So many, I imply, if something, firms that aren’t searching for methods to leverage AI to do what they do higher are most likely going to fall behind, as a result of it’s a necessity. After we talked about genomics earlier, there’s a lot knowledge that comes out of even one affected person. In case you take a look at a sampling of sufferers, then there’s orders of magnitude extra knowledge, and it is laborious to know when you have got an enormous quantity of it, what to search for, however for those who can deploy imply machine studying and knowledge analytics to look throughout at a ton of dataset, you can begin to uncover issues like, for instance, “Wow, we’re wanting on the genetic composition of 500 people who have diabetes,” and we discovered this frequent thread amongst them that we did not even know existed. There’s a particular gene and all of those folks have the sort of diabetes.

Possibly now, we must always begin searching for that gene to see if different folks may be prone to this. In order that’s only one instance of the way you won’t have had the flexibility to try this kind of analytics or it will’ve taken many individuals a number of months to digest all that data to actually tie it collectively. When you have got all that data, you possibly can take it one step additional and say, what drug can we make now that may assist this very particular subsect of individuals, and that is the type of data that pharma firms are paying for as a result of they need to not solely develop a drug, however they need to do it shortly as a result of it prices much less them much less. In order that they get a greater ROI after they can have extra data and get a drug out the door and commercialize sooner. In order that’s only one instance of how AI and machine studying can assist.

It could actually assist information ORs and the surgeon who’re utilizing robotics. It could actually assist platforms, like whenever you’re looking for, for example, inhabitants well being administration. That is the place you have bought a zipper code, if you’ll, of individuals and also you need to get forward of their prices and also you need to say, “Okay, who’re the folks which might be going to drive the subsequent 80% of healthcare prices and what can we do to forestall that?” I do know, let’s run some analytics amongst this inhabitants at a hospital and say, who’re the folks, who’re ladies over the age of 40 which have by no means are available for a mammogram and let’s arrange a marketing campaign within the neighborhood and attempt to drive folks to get screened for breast most cancers. Even, let’s goal individuals who might need had a household historical past and actually get them to come back in.

So, there’s methods to do analytics which might be going to assist us forestall sickness and decrease total medical prices by utilizing AI as effectively. It may be in every single place. Folks ought to anticipate to see it and if they do not see it someplace, marvel why and marvel if there’s one other firm that may spend money on that’s utilizing AI, as a result of they’re most likely going to have the ability to do it higher, quick and cheaper.

 

Lauren Hein:

Okay. We now have somebody that is curious, your opinion or a brief dialogue about Natera, clearly an HTEC tech … it is an HTEC tech index.

 

Nina Deka:

Yeah. Natera is unquestionably … I feel it has been like type of certainly one of our high picks for a short while and continues to be. This can be a firm in our genomics subsector and they’re a market chief in prenatal testing. So that is what put them on the map. People who find themselves pregnant can have their blood drawn, and by analyzing that blood, they will detect start defects of the fetus. The traditional method of doing that is by ready till the fetus reaches a sure age, say 16 weeks and so they can put a needle into the amniotic fluid and that comes with some dangers, and you are able to do a genetic testing that method, however this manner, it is a lot much less invasive. It does not even contact the fetus. So, this drawing blood doing these kind of genetic exams is named liquid biopsy.

So, Natera is a frontrunner in that, however what they’re doing, they’re doing different issues now with liquid biopsy. So most cancers, if someone’s been … present process therapy for for example colorectal most cancers, Natera has an FDA accepted liquid biopsy take a look at that may detect whether or not or not the most cancers is recurring, did it come again? They’ll detect it as much as eight to 9 months prior to typical strategies. Yeah, that is in the identical type of area. This can be a chart that we borrowed from Basis Drugs, a division of Roche. That is one other firm within the HTEC portfolio the place we have publicity to most cancers testing. So, for those who look right here on the completely different phases of a affected person’s most cancers journey, for those who take a look at the crimson type of humps there, the crimson hills, these symbolize type of at the moment, typical strategies of most cancers testing.

There is a tumor and somebody will biopsy tissue by a surgical process and so they’ll analyze it after which, they will say, “Hey, primarily based on the knowledge we have now right here, what sort of therapy ought to we give or does an individual even have most cancers?” So for those who look type of, like in that later stage, you have bought one other type of the crimson hill, that is the place it’s important to biopsy the affected person once more, to see if the therapy they have been present process is working. So take into consideration the flexibility moderately than doing one other surgical process and ready for that point to only go in routinely, get your blood drawn and see if the cancers come again that method. A lot decrease value and I feel what plenty of traders are lacking with the Natera story is that it is a personalized take a look at.

In order that they create the take a look at, it prices a pair thousand {dollars} after which there is a reimbursement, which is basically thrilling. They do not make that a lot in revenue it on that first take a look at however then as soon as the take a look at is made, it does not value them a lot to … the take a look at is finished, so the price of that take a look at now for Natera may be very low, however the reimbursement is identical quantity. So in the event that they get like two to a few grand a take a look at, and the primary time it goes towards making the take a look at, however every further time, it drops straight to the underside line, we may see a bit ramp up there in profitability. Now, have in mind, it is a very distinctive subsect of sufferers. So we’re not anticipating tens of tens of millions of individuals to rapidly having these exams achieved, however I feel it must be impactful to the underside line, and that is only one fascinating factor that they are doing.

They’re additionally doing genetic testing for transplants as effectively. So, positively a market chief and a tech disruptor.

 

Lauren Hein:

Okay. We’re very near being at an hour. So I need to acknowledge, there are nonetheless some questions within the queue that we did not get to. If we have now your data, we’ll attempt to get again to you straight with solutions to these questions. Nina, you have got 60 seconds, any type of concluding ideas or any closing ideas from you on the house or the outlook for 2022, something in any respect?

 

Nina Deka:

Completely. Yeah. I feel that we actually wished to assist clarify the type of, why now, behind why become involved with healthcare innovation. So I simply actually wished to reiterate that, that individuals suppose like, “Oh, yeah, I hear about all this cool expertise however I have already got publicity to healthcare.” Typically an individual’s portfolio won’t have plenty of the names that we simply described as a result of plenty of different healthcare portfolios are cap pushed. So, what you have got because of this there, is plenty of type of massive cap pharma firms. You’ve got bought plenty of medical health insurance firms, HTEC has little or no publicity there and much more publicity to the entire different … type of these 9 subsectors that I talked about. So that is really type of complimentary to plenty of portfolios that exist at the moment.

So it would not be a matter of like, “Oh, we have already got healthcare.” It is extra simply, do you have got this excessive development type of healthcare tech functionality? Yeah, thanks Erin. These inexperienced horizontal bars symbolize HTEC and as you’ll be able to see, they’re type of extra distributed the place we have ready in additional of those different areas that we think about to be type of the subsequent decade of development, if you’ll, whereas the grey bar, for those who take a look at the highest, it says prescribed drugs. That is like your extra commonplace healthcare index, if you’ll and you will simply see much more publicity in that like massive cap pharma. So this could possibly be fairly complimentary and in addition give folks a chance to become involved with a few of this actually thrilling stuff that we talked about at the moment. Anyway, Lauren, thanks a lot on your time and thanks for everybody who joined and all of your nice questions.

 

Lauren Hein:

Any final questions you’ll be able to electronic mail me straight, once more, it is lauren@roboglobal.com. You can too simply go to our web site, which is roboglobal.com and you’ll submit questions or any type of comply with up there as effectively. Nina, thanks on your time at the moment.

 

Nina Deka:

Thanks.

 

Lauren Hein:

We’ll speak to you quickly.



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