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Tap AI-Powered Medical Device Stocks as FDA Bolsters SaMD

Urmimala Biswas

The global financial chaos over the past several months has made us overlook many interesting facts, one of which is definitely the FDA’s proposed regulatory framework to try and prioritize the rise of AI-based medical devices among others. The entire investment world collectively is going gaga over this decision and expects it to potentially alter the trend of putting money on the Medical Device space.

What the FDA Report Says

Traditionally, the US regulatory body reviews medical devices through an appropriate premarket pathway, which comprises a premarket clearance (510(k)), De Novo classification or a premarket approval. However, this traditional system of medical device regulation was not designed for adaptive artificial intelligence and machine learning technologies.

Through the FDA’s recent stand on software modifications, it anticipates that many of these artificial intelligence and machine learning-driven software changes to a device may need a premarket review.

Under this paradigm, a “predetermined change control plan” in premarket submissions has been presented by the FDA. Under this plan, there are types of anticipated modifications that are referred to as the “Software as a Medical Device Pre-Specifications”. This apart, there is the associated methodology used for implementation of those changes in a controlled manner, thereby enabling risk management for patients, which is also defined as the “Algorithm Change Protocol.”

According to the FDA, thisproposed regulatory framework will enable it and the manufacturers to assess and monitor a software product from its premarket development to postmarket performance. “This potential framework allows for the FDA’s regulatory oversight to embrace the iterative improvement power of artificial intelligence and machine learning-based software as a medical device (SaMD), while assuring patient safety,” FDA states.

MedTech’s Take

The entire Medical Device fraternity seems to be hugely impressed with the FDA’s recent approach. A MEDTECHDIVEreport states that both AdvaMed and the Combination Products Coalition (CPC) have praised the agency for its regulatory approach to the emerging technology. Further, they offered the agency a slew of recommendations to consider.

A very recent report by Fitch (published on MEDTECHDIVE) claims that the FDA’s proposed regulatory framework to include SaMD should serve as a catalyst for boosting innovation within the industry. Per the report, the medical technology manufacturers will show greater interest to increasingly integrate AI and machine learning into their innovations.

AI: A Lucrative Avenue for Investors

Already a lot has been said on the growing prosperity of AI and big data in every sphere of healthcare over the past few years. Based on this aspect, the new-era investment trend currently witnesses a sea change. In this context, non-healthcare bigwigs like Apple AAPL, Google, Amazon AMZN, International Business Machines Corporation IBM and Microsoft deserve special mention as these leading companies with their digital affluence are already eyeing the AI part of the healthcare and device market of late, courtesy of its bountiful prospects. 

The latest FDA action on SaMD certainly hallmarks the fact that it is high time that investors should focus more on the AI-driven Medical Device stocks with high potential for tremendous growth down the line.  

4 Stocks Going the AI Way

Medtronic MDT is undoubtedly among the first bunch of MedTech manufacturers, forging ahead with initiatives to introduce AI techniques to manufacturing processes. In 2016, the company partnered with IBM’s Watson health unit to utilize the latter’s machine learning algorithms for incorporate AI in its diabetes app, MiniMed.  In 2017, both jointly launched the first artificial pancreas systems. In 2018, the company acquired Nutrino, an AI powered personalized nutrition platform, in order to boost Medtronic’s offerings for diabetic people and to deliver the company’s predictive glycemic response algorithm. In 2019, Medtronic and IBM Watson have finally unveiled their Sugar.IQ platform, which is a digital diabetes assistant. The stock carries a Zacks Rank #3 (Hold).

Electronic Health Records (EHR) technologies developer Cerner CERN is also adopting AI techniques rapidly. Lately, the company has been grabbing headlines on this front, backed by its efforts to digitize its EHR systems. Notably, Cerner's HealtheIntent is a big data platform, which provides the company with significant exposure to AI trends in the medical world. HealthIntent can fetch data from any EHR system, pharmacy benefits managers and insurance claims. The stock has a Zacks Rank of 3.

Intuitive Surgical ISRG designs, manufactures and markets the da Vinci surgical system, which is an advanced robot-assisted surgical platform. This AI platform enables minimally-invasive surgery that helps negate trauma associated with open surgery. The company’s da Vinci System is powered by robotic technology, which has provided it with a solid visibility to medical mechatronics, robotics and Artificial Intelligence for healthcare. The FDA’s recent clearance of the da Vinci SP surgical system for neurologic surgical procedures is a major development in the area. This stock is a Zacks #3 Ranked player.

Of late, Boston Scientific BSX has also been making an all-out effort to incorporate AI techniques in neuromodulation, cardiac rhythm management, cardiology, electrophysiology, peripheral interventions, oncology, endoscopy, urology and pelvic health. The stock is a #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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