Volpara Health Technologies Limited (ASX: VHT) is a company specialising in the early detection of breast cancer. What is interesting about the business though is its structure as a software as a service (SAAS) company. This is very different to most companies operating in the biotech space, but their investment in a SAAS solution enables them to utilise the power of AI to specialise in the early detection of breast cancer. A SAAS based solution is easily scalable and has predictive power beyond that of humans.
Volpara’s share price has more than tripled over the past five years (Credit: Volpara)
The potential for AI and automation to disrupt medicine has been known for some time. A few decades ago, Amos Tversky and Daniel Kahneman, the latter of whom was later awarded a Nobel prize, sought to develop an algorithm to predict cancer, based on a simple series of yes or no questions. They developed this basic test based on information obtained from studying several doctors and finding out the tell-tale signs of cancer. The predictive power of this simple test that was developed from data provided by doctors turned out to be more accurate than even the best of the doctors in the sample. If a simple test based on data provided by a group of doctors collectively has more accuracy than any doctor in isolation, the power of a more advanced AI based solution could be immense.
This power is precisely what Volpara is aiming to capture, and the company is aiming to reduce deaths around the world by 500k. Early detection is very important in cancer, since it can significantly increase the chance of survival. The company has a strong competitive moat, patented technology and gross margins above 80%, highlighting the company’s strengths. Volpara has a first mover’s advantage and a strong sales team, helping achieve the company’s strong growth numbers. Nevertheless, at 48x Revenue, the company will have to continue executing well or it will disappoint investor expectations.
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