M&A Increase in Robotics, AI & Healthcare Expertise

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Tune in for a dialogue to be taught extra about the important thing M&A developments throughout robotics, AI and healthcare tech in 2021 up to now. For a deeper dive into probably the most attention-grabbing M&A exercise in 2021, obtain our M&A Report beneath.

 


Webinar Transcript:

Jeremie Capron:           

My title is Jeremie Capron. I am the Director of Analysis right here at ROBO World, I am speaking to you from New York. And with me on the decision immediately are my colleagues from the analysis crew, Lisa Chai, Nina Deka, and Zeno Mercer. And immediately we will speak about robotics, automation, AI, healthcare applied sciences, with a give attention to deal exercise, which has considerably elevated within the final 18 months. So we’ll be taking a look at each the general public fairness facet and the non-public facet, enterprise capital.

We’ll be discussing a few of the key developments and we’ll ensure to avoid wasting time to your questions. A few of we frequently share a few of our analysis on the roboglobal.com web site and our in biweekly emails. And we simply revealed a brand new report overlaying immediately’s presentation in larger element. So be at liberty to obtain this report, join our publication, roboglobal.com.

So let me begin with a fast reminder what we do right here. We’re a analysis and funding advisory firm that is centered on robotics, AI, healthcare applied sciences. Eight years in the past, we put collectively a crew of funding professionals and business specialists with the purpose of designing thematic, funding methods round what we imagine to be a technological revolution. Robotics, AI are a set of basic function applied sciences that may be utilized to each business. We give it some thought just like the web or electrical energy, and that is providing super funding alternatives.

As we speak there’s over 4 and a half billion {dollars} in funds monitoring our methods, they’re primarily in ETFs. Essentially the most notable might be ROBO, R-O-B-O, that was the primary robotics and automation index portfolio that launched in 2013, and now in its eighth 12 months. And our analysis round automation led to appreciate that one thing essential is occurring in two areas that adjoining to robotics automation.

And so in the previous couple of years we launched two extra index portfolios. The primary one is T-H-N-Q, or THNQ, that’s the synthetic intelligence index. And the second is every H-T-E-C, or HTEC, that’s the healthcare expertise and innovation index. These should not your conventional ETFs or methods mixed, a research-driven strategy, with the advantages of index investing and the ETF wrapper. What you discover in these portfolios is such greatest at school firms from all over the world, small, mid, massive caps, which might be kind of equal weighted and rebalanced each quarter. So they’re diversified but they’ve a really excessive energetic share relative to uncooked fairness indices just like the S&P 500.

And the three methods have outperformed world equities since inception, as you’ll be able to see on this desk that exhibits index returns as of the top of final month, August, 2021. You may see the returns has been fairly passable. They have been pushed by structural and technological drivers of adoption for these applied sciences, and the sturdy monetary efficiency of the businesses which might be main this revolution. So, M&A has been a fairly sturdy tailwind to the ROBO return since we first designed the portfolio in 2013. And that is within the context of little greater than 80 firms in that in our portfolios, we see 25 takeover makes an attempt since we began eight years in the past, and we’ll get again to that. However actually the essential level right here is that we have seen a transparent acceleration prior to now 18 months and that’s regardless of the numerous enterprise disruptions throughout the pandemic.

Actually, it is pretty mentioned that robotics, AI, healthcare applied sciences are seeing an ideal storm of capital now. We at the moment are nearly three quarters into 2021, and we’re taking a look at one other report 12 months when it comes to mergers, acquisitions, enterprise funding. Now we have a report variety of start of unicorns, we now have huge IPO’s. We predict the pandemic has turbocharged digitization of our financial system, and has left some main scars as we come out the opposite facet. You consider the availability chain disruption, rising commodity costs, rising transportation prices. Now we have shortages, semiconductor shortages. Now we have labor shortages. And that is actually led to a race to automate and digitize, and that is grow to be a prime strategic precedence for the businesses all over the world. And particularly these bigger, slower transferring organizations, they perceive that they should have a presence and capabilities round automation. And in lots of circumstances, they’re behind the curve and they should purchase moderately than construct these capabilities and that they are able to pay up for high quality companies.

On this subsequent slide, I wish to spotlight that the expertise and market leaders in AI, in robotics, in healthcare tech, the businesses in our three portfolios they are usually prime quality companies when it comes to their margins, their return on capital, the energy of their stability sheet. And this chart right here, it exhibits the proportion of firms with a web money place for ROBO, HTEC and THNQ, and a few uncooked fairness indices. And so 70% of the businesses within the synthetic intelligence index, the THNQ index, have more money than debt, that is a measure of stability sheet energy. That’s much more than what you may discover within the NASDAQ or the S&P 500.

I additionally wish to level out that the businesses we’re speaking about right here, they don’t seem to be simply US firms. You may see we now have greater than 13 international locations had been offered. And a number of these firms are small and mid-caps between 40 and 50% of the ROBO and HTEC portfolios. The overwhelming majority of them, they don’t seem to be represented within the S&P 500 or within the world fairness indices. And so most buyers have very restricted publicity to robotics, AI and healthcare tech.

So, let us take a look at what’s occurring in robotics automation first, then I will cross it on to my colleagues to debate the healthcare tech and AI, after which we’ll wrap up with what’s occurring on the enterprise capital facet. So, it is a chart of whole returns for ROBO over the previous 5 years, it is simply above 21% compound common annual price. You may see the names of the businesses which have acquired a takeover supply throughout these 5 years. And as I mentioned earlier, within the seven or eight years that we have been operating it, we now have seen 25 takeover makes an attempt on our portfolio firms, out of a complete of about 80 within the portfolio.

So firstly of the 12 months, should you transfer to the subsequent slide, I wish to spotlight a few of the offers we have seen this 12 months. And every of these takeouts sometimes occurs at a premium and that gives a tailwind to the portfolio returns. The primary one we noticed was FLIR methods. FLIR is a frontrunner in thermal imaging sensors. They’ve agreed to be acquired by Teledyne, that’s one other ROBO index members, for $8 billion. And FLIR is the worldwide chief in thermal infrared sensing, and so they have sturdy capabilities additionally in drones and machine imaginative and prescient. After which we noticed an important takeout, which is that of Nuance by Microsoft, for $16 billion. Nuance in conversational AI, is the one firm that is in all three portfolios. So I will let’s Zeno focus on the Nuance Microsoft scenario after we cowl AI in a couple of minutes.

Then we noticed Raven comply with be acquired by CNH, that is a $2.1 billion transaction. Raven has been within the ROBO portfolio for a few years. It’s a chief in agriculture expertise, particularly precision farming. They make autonomous options for farm tools and CNH is likely one of the world leaders in ag equipment. And in order that’s one other instance of how the larger organizations are actually seeking to purchase these autonomous and automation capabilities through acquisitions.

After which we now have HollySys, that is a frontrunner in manufacturing facility automation in China, is a Chinese language firm. It is acquired a number of affords, beginning final 12 months, to go non-public. One was led by a founder and former chairman of the corporate. One other one got here from the previous CEO of the corporate together with a personal fairness group. And these affords have been about 30% of each the inventory value earlier than the data turned public.

There’s yet another deal right here, that’s Blue Prism. About a few weeks in the past we heard from Blue Prism that they’ve been in discussions to go non-public, as nicely, with two totally different PE teams. The inventory jumped greater than 30% as nicely. Blue Prism is a prime three participant in robotic course of automation, that’s RPA, that is basically software program robots that automate enterprise processes. So, that is it for ROBO. I wish to remind everybody you can ask your questions through the Q&A field. And with that, I’ll cross it on to Nina to debate the healthcare tech.

 

Nina Deka:

Thanks, Jeremie. So, HTEC is our healthcare expertise and innovation index. The ticker is HTEC. As you’ll be able to see right here, we have got HTEC efficiency in comparison with the worldwide healthcare index, in addition to world equities. And as you’ll be able to see over a 3 12 months interval, healthcare tech has actually outperformed. Actually since inception the healthcare expertise and innovation index has greater than doubled simply common world healthcare indices. Once we take into consideration what’s driving this out efficiency, there’s a massive demand for lots of disruption occurring in healthcare proper now. An enormous alternative for digitization, automation, increasingly robots are being deployed and large development alternatives in genomics. As these applied sciences scale, they’ll get increasingly environment friendly.

So a number of firms throughout the healthcare expertise panorama are literally collaborating in M&A to be able to go after and get publicity inside their organizations to a number of these new applied sciences. Actually, should you had been to take a look at… Really, the subsequent slide could be… Yeah. So right here we speak concerning the type of the deal abstract right here. As you’ll be able to see in 2019, there have been 59 offers throughout the HTEC index and so they totaled about 17 billion. After which that quantity skyrocketed in 2020, there have been 93 offers, totalling practically 67 billion. After which right here we’re 12 months so far in 2021. And we’re probably on monitor to be stage with final 12 months, if not surpass final 12 months when it comes to variety of offers and deal worth.

So, M&A is de facto scorching within the healthcare tech panorama and we’re seeing a standard theme this 12 months notably throughout the diagnostics companies. Just a few highlights. One firm particularly, Thermo Fisher Scientific, it is a world diagnostic big. They acquired PPD, a number one scientific analysis group, also called CRO. CROs are firms that assist pharma firms develop medicine. And about two thirds of all drug growth is outsourced to firms on this CRO business.

So Thermo is getting publicity to all the expansion occurring in biopharma. They acquired one other drug manufacturing firm, a number of years in the past, named Patheon, and now they’re within the drug growth area additional with this acquisition of PPD. The valuation of the acquisition is almost $20 billion should you issue within the debt and the deal is predicted to shut in This fall of this 12 months. So simply to offer you an thought of what Thermo now has.

Going ahead is, PPD is a worldwide chief in these scientific analysis and scientific trials. They function in over 50 international locations. Within the final 5 years, they helped assist greater than 400 drug approvals. These are firms which might be type of behind the scenes that lots of people do not hear about that basically assist pharma firms convey medicine to market. And with this acquisition, Thermo expects so as to add a greenback 50 in earnings per share, throughout the first 12 months of possession of this asset.

In order that’s only one instance of the bridging that we’re seeing happening from the diagnostics world additional into the drug growth world. There are different areas occurring in diagnostics. Danaher is one other firm. They’re a number one producer in life science diagnostics and lab automation. And so they acquired a scientific analysis group, Aldevron, for $10 billion, in order that they might go additional into genomic drugs.

After which PerkinElmer, that is one other world main diagnostic firm. They acquired the biggest acquisition within the firm historical past, BioLegend, for 5 billion. And this helps them get additional into the antibodies and reagents area. So actually thrilling issues occurring in drug growth, notably as medicine get increasingly into the precision drugs, if you’ll, extra into DNA and RNA forms of medicine. So these diagnostic firms are going after this development space by means of M&A, and we anticipate to see extra of that sooner or later. So with that, I’ll pause and I will go forward and switch it over to Zeno, who’s going to assist us speak about THNQ.

 

Zeno Mercer:

Thanks, Nina. All proper. So, the THNQ index goals to seize alternatives and synthetic intelligence throughout our 11 subsectors, which cowl your complete ecosystem, from core infrastructure to functions and providers. AI has confirmed to be instrumental, not only a good to have, however a have to have with ever growing quantities of knowledge that requires fast evaluation and processing for each client and enterprise functions. And customary giants throughout all industries are investing in home, investing by means of partnerships and acquisitions as leaner AI pushed firms seem within the aggressive panorama.

Close to the date, the THNQ index is up 12.6% barely beneath the broader world market index that’s up 16% for the 12 months. Bear in mind, the THNQ index surge greater than 68% in 2020, and it continues to outperform world indices on an annualized foundation. Of the 5 takeout affords this 12 months, there have been… Oh, maintain on. Slides of transferring round. There’ve been 97 accomplished acquisitions by THNQ index members, in 48 offers pending, for over 74 billion in worth up to now in 2021. That is on monitor to match the 4 12 months 97 billion in whole deal worth in 2020.

Notably, Sq.’s introduced its intent to amass Afterpay for $29 billion. A bid to tackle Visa, MasterCard, huge banks, and direct to client finance, e-commerce and in-person, with purchase now pay later play capabilities. This deal brings collectively two of the quickest rising fintech powerhouses to superior monetary inclusion and accessibility to all.

One other firm, Nvidia, whereas dealing with regulatory hurdles for its Arm acquisition introduced final 12 months, has not stopped constructing its expertise portfolio to strengthen its management in AI with our acquisition of DeepMap, which does excessive definition mapping for autonomous automobiles, and this was at an undisclosed value. So, Nvidia you historically know as an AI developer for a {hardware}, however they’re more and more getting and realizing the significance of mapping out and being a powerful participant throughout the stack.

Autodesk, one other THNQ index member, made an attention-grabbing acquisition early within the 12 months with its one billion acquisition of Innovyze, representing a large alternative for sensible water infrastructure modeling and AI simulation for sensible cities. For each water administration for human consumption, waste administration and agriculture, however more and more essential for the affect of world warming as we have seen play out this 12 months. Lastly, considered one of our cyber safety index members, Rapid7 acquired IntSights Cyber Intelligence, to cowl extra exterior threats for enterprise shoppers utilizing AI capabilities.

Of the 5 takeout affords up to now this 12 months for the THNQ index, 4 have been from non-public fairness buyers. By all companies have been more and more energetic this 12 months, buying cloud-based property as digital transformation takes maintain accelerated by the pandemic. However non-public fairness companies, shopping for property like Cloudera, a number one supplier of enterprise knowledge analytics and machine studying instruments, and Talend, a frontrunner in AI knowledge integration, highlights the significance of constructing out the subsequent technology of AI structure.

Extra lately, Cornerstone OnDemand, an HR administration SAS participant, was acquired by Clearlake for practically $4 billion. These knowledge analytic suppliers are key gamers in constructing mission important knowledge pushed functions, the safety, governance, scale and management entry throughout the info life cycle. For the reason that alternative for AI functions are deploying at a fast price, a few of our index members need to ramp up their investments as a personal firm, exterior of the scope of the non-public or public eye. We’d not be stunned to see a few of these firms return in a couple of years with accelerated development profile and market main positions within the AI ecosystem.

Most notably, THNQ index member, Microsoft, acquired fellow index member, Nuance Communications, for over $19 billion at a 23% premium. As Jeremie talked about earlier, Nuance has been a THNQ index member since exception and can also be a member of ROBO and HTEC indices. Nuance has been a serious success as a pioneer and conversational AI and pure language processing for the healthcare area. Protecting each the scientific setting and possibly extra so stepping into diagnostics and different improvements. They’ve an estimated 60% of market share, however that they had been buying and selling comparatively flat.

Microsoft CEO has referred to as out healthcare as probably the most pressing software, and so they have been working with Nuance for a few years. This acquisition places them immediately within the sport to enhance healthcare outcomes and automate the laborious administrative burden on our healthcare system. Now, I will cross issues on to Lisa Chai who will stroll issues or stroll by means of concerning the enterprise funding atmosphere.

 

Lisa Chai:

Thanks, Zeno. It has been fairly a 12 months up to now in enterprise funding market. Enterprise funding hit new highs with 156 billion within the second quarter alone, with a mixed whole of 288 billion for first half of the 12 months. Variety of exits, whether or not it is by means of an IPO, direct itemizing, M&A, SPACs are up over 109% 12 months over 12 months. We get a number of questions on what we take into consideration SPACs normally. And we predict that SPACs are right here to remain. It continues to shatter information with nearly 400 SPAC filings, up to now surpassing final 12 months’s figures.

We’re seeing the standard of the businesses through SPAC even have elevated prior to now 12 months. So we imagine that not all SPACs are created equal. So, in lots of circumstances there are some good alternatives should you spend the time to dig somewhat deeper into their fundamentals. Investments in robotics slowed barely this 12 months, however total continues at a wholesome tempo after a large funding 12 months, final 12 months.

Up to now, in 2021, industrial robots look to be in a brilliant spot with factories and warehouses investing of their amenities, as demand for e-commerce continues at a fast tempo. This 12 months, it appears to be like just like the 12 months for well being tech and fintech enterprise funding. We’re seeing elevated deal exercise in these sectors, as lots of them are utilizing subsequent technology AI capabilities. After which we predict there will be continued enterprise funding shifting into this area.

China continues to say no enterprise participation as a result of a difficult panorama of laws. Our analysis signifies that it’s down round 20% from final 12 months, and we do not know when it is going to recuperate. However long term, we imagine that China will come again and they are going to be an energetic participant once more. One of many largest IPO firms to debit this 12 months, that’s in enterprise AI, is UiPath, at 31 billion valuation. And that got here shortly after elevating 750 million early within the 12 months in non-public funding.

In the meantime, knowledge intelligence supplier, Databricks, raised enterprise funding of 1.6 billion on the 38 billion valuation and Rivian raised 2.5 billion in enterprise funding this summer time at an $80 billion valuation. You will have heard of Rivian, they’re an electrical automobile producer and their rumored to go public, someday this fall. So, it is positively an thrilling time to be an EV investor.

There’s another actually wonderful revolutionary firms which have gotten funding this 12 months, throughout expertise and digital well being. I will spotlight a couple of. Mollie for instance, is an the Amsterdam primarily based firm, utilizing APIs to combine funds into enterprise providers. And so they’re at present valued at 6.5 billion. We predict Mollie is likely one of the most beneficial fintech firms on the market on this planet. Most lately they raised $800 million spherical to assist fund the subsequent section of development. The corporate is now processing over $24 billion in funds, up 100% 12 months over 12 months. After which we anticipate the corporate to go public presumably someday in the midst of subsequent 12 months.

Basically, we anticipate to see much more fintech offers within the enterprise market as digital spending by shoppers rises. The opposite one I like to spotlight is Ledger. Ledger is one other fintech firm, however in a digital asset class, with its {hardware} pockets to handle your crypto property. Ledger relies in France and so they simply raised nearly $400 million in funding with a $1.5 billion valuation, so it is an organization to look out for.

In the meantime Noom, is a digital well being firm and so they lately raised $540 million. It is an AI powered weight reduction app producing over 400 million revenues, greater than double the revenues from a 12 months in the past. With 45 million downloads and in 100 international locations, the corporate is seeing a number of success with their customized app the place AI can analyze the consumer’s behaviors and it will probably additionally reveal sure knowledge factors on assembly your weight reduction milestones. So positively one other firm to look out for.

And to go somewhat bit deeper into healthcare funding, with COVID-19 disruptions fostering the necessity for advert residence and distant affected person care fashions, each present and new entrance are seeing huge funding in adoption. Simply within the first half of this 12 months alone, digital well being funding is close to 15 billion and continues to outpace final 12 months’s determine of 14.7 billion.

I simply wish to spotlight the highest 5 classes the place the enterprise funding is in Telemedicine at, 4.2 billion. Wellness at 1.7 and medical well being app also called Digital Remedy is at 1.6 billion and Analytics at 1.5 and Scientific determination assist at 1.1 billion. In the meantime, on the subsequent slide, AI investments proceed to soar. Based on CB Insights, in second quarter, we noticed $20 billion deployed to 550 AI energy startups, which is one other funding report. This 12 months, we noticed extra $1 billion valuation firms and ever within the historical past. There are about 24 AI unicorns, simply within the second quarter of this 12 months alone. AI exits additionally proceed to set a brand new report growing 125% 12 months quarter over quarter. So searching, we actually anticipate this AI funding atmosphere to proceed at a report tempo. Now I will flip this over to Jeremie after which we will most likely take questions.

 

Jeremie Capron:

Thanks, Lisa. Fast reminder, you’ll be able to ask your questions by utilizing the Q&A field on the backside. Now we have a couple of which have are available in. I see there is a query across the particular expertise sectors that the portfolios present publicity to. I will clarify somewhat bit about ROBO after which I will ask Nina to speak about HTEC, and Lisa, maybe you are able to do the AI portfolio. However basically our funding methods share that in widespread, that we attempt to present publicity to your complete worth chain of expertise disruption. So, if you concentrate on robotics and automation, and the robotic portfolio, right here we’re wanting on the suppliers of flip key automation options for particular vertical industries, manufacturing facility automation, in fact, but in addition take into consideration warehouse and logistics automation and the tools that goes into achievement facilities for e-commerce.

Take into consideration the software program spine for the automation of warehouses and issues like that. We’re taking a look at healthcare, in fact, and right here it is about surgical robotics. It is concerning the automation of hospital workflows. Take into consideration pharmacy automation and issues like that or the lab tools for pattern administration or the genomic evaluation. After which we have a look at the meals and agriculture sector. I discussed Raven, that is being taken over by CNH. Right here it is concerning the precision farming. It is concerning the expertise that goes into the manufacturing of meals and drinks. We’re taking a look at client as nicely. Autonomous methods, so take into consideration autonomous automobiles, autonomous drones, and issues like that.

It is about functions but it surely’s additionally concerning the expertise and infrastructure that makes it potential. On the subject of robotics and automation, we’re speaking about sensing, FLIR that I discussed earlier is a frontrunner in thermal sensing. We’re wanting on the computing and the businesses that present the semiconductors and the compute energy for the brains of those automated methods. After which we have a look at the actuation, which is how the methods work together with the bodily world and type of componentry and the mechanical components that make robots.

Actually, once more, the concept is you cowl your complete worth chain as a result of the components of the worth chain the place the worth is created, or the expansion speed up, modifications over time. And we wish to ensure we will seize that in a method that gives snug return and threat profile. Nina, why do not you speak concerning the the sectors within the HTEC portfolio?

 

Nina Deka:

Positive. Yeah. And just a bit little bit of background with our historical past with ROBO. ROBO has healthcare as considered one of its sectors. And what we noticed throughout the 5, six years that that index was operating was there was a lot disruption occurring in healthcare alone that we believed it required its personal index, its personal technique, therefore why we launched HTEC. So after we look throughout the HTEC universe, what we’re making an attempt to do is present buyers with publicity to all the areas in healthcare that we imagine symbolize the subsequent decade of development. There are such a lot of disruptive areas.

So we have got 9 totally different subsectors. They embody robotics, telehealth, genomics, diagnostics, medical devices, precision drugs. These are all of the areas that we imagine symbolize all of the disruption that is occurring. And I suppose there are non-HTEC healthcare indexes which might be on the market, however the place we’re distinctive is that we aren’t solely centered in genomics. We aren’t solely centered in biotech, for instance. We’re not solely centered telehealth. Now we have this broad vary the place we solely choose the market and expertise leaders throughout the board. And in doing so we’re not solely offering publicity to those totally different areas, however as I discussed earlier there’s, there’s a lot exercise occurring, for instance, in diagnostics the place they wish to leverage all the expansion occurring in precision drugs and new therapeutics. And they also’re going after that from an M&A standpoint.

Plenty of these firms all through the HTEC index accomplice with each other throughout subsectors. So when there’s one thing actually new and thrilling occurring like actually most cancers detection, it is not simply the genomics firms that profit from it, but it surely’s additionally our precision drugs firms and our course of automation firms. So by having this diversification throughout a number of totally different subsectors, you get to actually leverage the expansion that is occurring from all these totally different revolutionary areas. Let’s have a look at, Lisa or Zeno, do you guys wish to speak somewhat bit concerning the expertise methods throughout THNQ?

 

Lisa Chai:

Yeah. I may cowl this. So with THNQ, we now have 11 subsectors and you need to have a look at it as we’re actually making an attempt to intention to seize your complete ecosystem of synthetic intelligence. Now we have two classifications the place we now have the infrastructure and the functions. So in infrastructure, these are firms which might be enabling and growing AI, firms within the semiconductor subsectors, firms within the cloud and knowledge infrastructure. And these are firms which might be actually enabling the optimization and functionality of AI functions for organizations.

And on the applying facet, we now have subsectors just like the e-commerce and enterprise course of. And it is actually past simply bettering the workflow and automation of an enterprise, but in addition serving to enterprises extract clever insights to allow them to interact with our clients, giving that customized expertise like e-commerce subsectors. Throughout the fintech, which I talked so much about within the enterprise funding phase, the place you may see the fintech firms both within the e-commerce with a cellular cost or on-line market, otherwise you’ll additionally see within the enterprise course of utilizing synthetic intelligence to stop a fraud from occurring. So you may get the fraud alerts, bank card firms wanting on the credit score scoring. So, you are seeing plenty of the functions and capabilities of AI being leveraged and being utilized by the enterprises in these subsectors.

 

Jeremie Capron:

Thanks, Lisa. Let’s transfer on to the subsequent query, which is round what are probably the most engaging areas in our methods for future M&A. And I feel right here, once more, we will handle the three portfolio individually and I will kick off with ROBO. In robotics automation, we predict that proper now there is a candy spot that’s logistics and warehouse automation. And that is actually pushed by this phenomenal acceleration in e-commerce we noticed, not solely throughout the pandemic, however actually over the previous decade or so. You have acquired giants like Amazon and Alibaba or JD in China which might be setting the bar actually excessive, not just for their very own operations but in addition for your complete business. And so each firm that desires to compete with the likes of Amazon, Alibaba or JD, really want to step up when it comes to their use of automation to have the ability to match the efficiency of an Amazon supply inside generally only one enterprise day.

And so we discover a number of curiosity in firms that may present the logistics automation options. It goes from materials dealing with, transferring packages inside a warehouse to autonomous cellular robots that may try this. The software program firms, simply the suppliers of software program options to automate warehouses after which the expertise infrastructure round that. From sensing to manage methods, to compute, that is very, highly regarded. And so immediately, logistics and warehouse automation represents about 12% of the worldwide index and we now have slightly below 10 firms in there. What about healthcare expertise? Nina, do you wish to handle that?

 

Nina Deka:

Positive. I imply, there’s simply a lot. There’s so many areas proper now that firms need publicity to. I suppose, one solution to reply that is to take a look at… We titled our report comply with the cash, however in healthcare I usually consider comply with the medical error or comply with the demise price or comply with the prices as a result of healthcare prices are rising at an unprecedented price. The inhabitants is getting older at a tempo that’s unsustainable when it comes to the variety of healthcare employees that we will have over the subsequent couple of many years. We have got extra healthcare employees, medical doctors, and nurses retiring than we do new folks coming into the system.

Areas the place you anticipate to see extra M&A funding are alternatives for automation. Anyplace the place somebody’s doing one thing manually is one thing like, have a look at the pharmacy the place human beings are nonetheless placing capsules into particular person containers to distribute to pharmacy clients. That may be automated. There’s robots that try this. There’s an organization referred to as Omnicell within the HTEC and ROBO index that gives that service. In case you have a look at medical errors, the third main reason for demise within the US, there are such a lot of methods to enhance that by means of higher AI. You may additional help what a doctor does and assist them with their scientific decision-making with AI components software program, with higher knowledge analytics.

We are able to have a look at entire populations and decide some individuals who have not been to the physician shortly, may wish to get to a health care provider. And that method they’ll have preventative care that may assist preserve them from having larger prices down the highway like diabetes and coronary heart illness. We lined it in our report, however Boston Scientific has had a number of exercise happening. They wish to get additional automated and higher procedures and capabilities for the cardiology area. They made a number of acquisitions there, PREVENTUS is a $1 billion acquisition.

We’ll see extra funding in wearable gadgets. Something that helps firms and med tech firms be extra interactive with the patron. Teladoc made one of many largest digital well being acquisitions final 12 months once they acquired Livongo 16, $18 billion. And that was a method for them to be actually within the pockets of individuals with diabetes, hypertension, and weight administration to assist present teaching providers. So something that is going to assist drive wellness, to maintain folks nicely earlier than they get sick, assist drive higher affected person expertise, higher client expertise, after which even have with fashionable procedures, get them much more modernized and digitized.

 

Jeremie Capron:           

Lisa, do you wish to handle engaging areas for M&A in AI?

 

Lisa Chai:

In AI, I feel you are seeing this subsequent technology of cloud providers occurring. And cloud is essential as a result of with out the type of the brand new fashionable structure that is been at present being constructed and I feel that is why you are seeing this type of the huge acquisitions by the PE agency. That is to take a few of these firms and type of roll it up. It will be actually attention-grabbing to see what the type of the subsequent section of development, these firms going to face.

However you are going to see a number of, I feel, consolidation and acquisitions across the cloud expertise suppliers. Whether or not it is on the info analytics facet or whether or not it is the mixing and even enablement of multi-cloud options. So you are going to see a number of these new terminology that is occurring. And that is all essential to the AI ecosystem as a result of you’ll be able to’t actually run on actual subtle superior AI algorithms on a conventional older expertise infrastructure. So, I feel that a few of the M&A exercise will proceed on that facet and clearly having that SAS sort of enterprise mannequin as very engaging.

 

Jeremie Capron:

Thanks. Now we have a query round portfolio building and why not enhance allocations to the highest well being dozen or so holdings, firms you imagine are sturdy long-term advert efficiency. It is a essential piece of our funding technique. The place, as I mentioned the portfolios present publicity to the very best at school firms which might be on the forefront of this expertise revolution.

By design we have determined to not focus or bets on a handful of firms and moderately present diversified publicity to your complete worth chain. And so the best way we do that’s by combining this analysis route and number of the very best firms with the advantages of index investing when it comes to the chance administration of your portfolio. And so we, kind of equal weigh our positions. It isn’t precisely equal weighted as a result of we now have a scoring system that may drive the place measurement to some extent. However on the finish of the day we now have place sizes that vary from slightly below 1% to simply below 2% on the excessive finish.

We predict that is an excellent recipe when it comes to offering the publicity to the theme and expressing a bullish view on robotics, AI and healthcare tech. However on the similar time delivering it in a portfolio that has a beautiful threat profile. Meaning it will take you from level A to level B in a comparatively smoother method than should you take concentrated guess.

So each investor could have a distinct urge for food for that type of technique, however we predict up to now the outcomes have been fairly passable. There’s yet another query on machine studying and perhaps Lisa you’ll be able to take that. Some firms develop machine studying capabilities in-house and others use machine studying platforms to offer their providers. Do you see any distinction when it comes to the aggressive benefits that present?

 

Lisa Chai:

It is attention-grabbing as a result of there are a number of opinions round that and I feel it actually relies on the enterprise resolution that you just’re offering. We do know for positive that there’s a scarcity of AI expertise. Some firms proper now, normally, the business is de facto pivoting at this level the place we’re compelled to undertake a few of these API options or off the shelf AI functions and packages. So a few of these algorithms are going to be packed collectively the place it is simple to deploy and straightforward to make use of and fast to deploy. And that is as a result of we do not have sufficient knowledge science expertise on the market.

So there’s been this huge type of coaching that is occurring with the software program engineers and making an attempt to steal a number of expertise away from one another, so that is what we’re seeing. It’ll be attention-grabbing whether or not when it comes to the precise in-depth evaluation of the expertise, whether or not in-house is de facto higher than type of the off-the-shelf. That is going to be attention-grabbing to see that. However proper now I feel you do not have a selection aside from whether or not you need to spend so much of sources round capabilities, in addition to constructing the info science expertise.

 

Jeremie Capron:

All proper. Properly, I feel it is time to wrap up. So, I wish to thank all people for becoming a member of us immediately, and we stay up for speaking to you once more subsequent month.