Healthcare as the Absolute Largest Data-Generating Industry: An Explosion of Nvidia’s Seminal Work

The biotech sector has a chance of recovery. Since the beginning of the year, we’ve already seen some signs of it: SPDR S&P Biotech ETF grew by 5%, while the NYSE Arca pharmaceutical index went down by 0.45%. Actually, it’s a reversal of last year, when NYSE Arca grew by 4.9% compared to the biotech stock index fund, which was down 23%.

Let’s talk about JPMorgan’s healthcare megaconference that occasionally provides inside information through corporate channels.

General Info

1. Markets are expecting lots of fluctuations, but the macroeconomic situation is in favor of biotech. Just as rising rates helped send money into defensive healthcare stocks and out of growth areas (like biotech), making %% rates stable could see some of that money move elsewhere this year.
2. Managers at pharmaceutical companies complain heavily about the spotty U.S. Inflation Reduction Act, aka the IRA, calling it the innovation reduction act, which lets the government negotiate drug prices for the first time ever. The HHS has already announced dates for the Medicare drug price negotiation program under this act: by September 1, 2023, CMS will publish the first ten drugs; the negotiated maximum fair prices for these drugs will be announced by September 1, 2024; prices will be in effect starting January 1, 2026. In other words, investors will soon feel the difference.
3. The reaction to this pressure is capacity pooling. AstraZeneca #AZN (the UK), Ipsen (France), and Chiesi (Italy) have announced three deals, each valued at around $1 billion. Importantly, all the deals include contingent value rights, or CVRs, i.e., an agreement to provide shareholders with rights to additional payments if certain drugs in development reach predetermined goals.
4. Here’s the general forecast: a flurry of deals is coming. This way, biotech can keep growing at the same pace.

If we take a closer look, things are getting more exciting. Only one chip manufacturer and the undisputed AI leader, Nvidia #NVDA, participated in the conference. Here are the key takeaway points.

• Nvidia started its sales journey in the healthcare sector with radiography systems and surgical robots. These markets account for about 80% of Nvidia’s healthcare sales and about 20% of AI-based drug and genomic discovery. Nvidia offers dedicated software and services for all of these medical applications.
• AI-driven discovery and diagnostics now make up 50% of Nvidia’s medical solutions. Universities, pharmaceutical giants, and biotech companies have AI centers that use Nvidia’s technologies to screen new drugs or predict COVID mutations.
• Nvidia works with most of the top-level research companies, including Regeneron Pharmaceuticals #REGN, Illumina #ILMN, Broad Institute of MIT, and Harvard.
• Demand for Nvidia’s computing has recently passed some kind of a breaking point: new DNA sequencing systems enabled Illumina #ILMN, Pacific Biosciences of California #PACB, Singular Genomics Systems #OMIC, Oxford Nanopore Technologies, and other companies to charge less for whole genome sequencing tests (it now costs a couple of hundred dollars compared to the previous cost of more than $1,000).
• Healthcare could well become a $1 billion-a-year market for Nvidia’s counting and AI-powered products