When we spoke back on November 9, I told you what I’m calling the “autonomous world” is advancing at warp speed.
From self-driving delivery pods to automated factory lines, we’re seeing technology rollout that basically runs itself.
Today, I want to talk to you about another dimension of this new paradigm, autonomous pharmacies.
These automated systems can have a huge impact on an expensive and deadly medical problem.
Some 40% of all hospital admissions each year in the US alone are caused by adverse drug events, nearly all from legally prescribed drugs.
The med-tech firm I have in mind for you is a leader in a sector ResearchandMarkets says will more than double in the next five years to $35.5 billion.
The Challenge of Medicine
Adverse drug events, which is when a medicine ends up causing harm, are a “silent” drug crisis.
They cause about 1.3 million hospital visits a year in the U.S., with 350,000 patients ending up being admitted for treatment and observation.
This hits the elderly especially hard. The reason is simple: older adults tend to take more medicines, and so are more likely to be negatively affected by a medicine, or by the way certain medicines can interact.
In fact, older adults are seven times more likely than younger people to be hospitalized after going to the hospital because of an adverse drug event.
Of course, during Covid older people haven’t always been getting the same level of monitoring by health professionals that they did before. That can lead to dosages that are too high or medicines that aren’t working right.
That’s increased the chance of an adverse drug event.
There’s also non-adherence, which is when patients don’t take their drugs the way they’re supposed to. Whether by accident or not, this is very dangerous and costs the nation some $300 billion a year and kills an estimated 125,000 people annually, mostly seniors.
This health crisis is why I want to talk about Omnicell Inc. (OMCL), a company pioneering the autonomous pharmacy. The firm’s central idea is simple: automate all the menial, administrative, and error-prone parts of running a pharmacy, freeing up time for pharmacists and others to actually focus on patients and their health.
This firm’s idea may be simple, but solving this issue is very hard. That’s why Omnicell’s platform is so impressive.
Through a mix of hardware and software, Omnicell makes it so every dose of every medication issued by a pharmacy is tracked individually, from packaging and labeling, through the prescription process, all the way to being given to the patient.
Automated software makes sure to check for any potential adverse drug interactions among a patient’s various prescriptions. Plus, the company’s machines make the packaging and labeling of drugs easy to use and track using barcodes, which cuts down on human error.
This has allowed Omnicell to dispense 10 million medications, with not a single one being wrong. And in hospitals that use Omnicell, the number of pharmacist checks to make sure the paperwork and labeling are correct has dropped by 90%.
This frees them up to do what they actually trained for – helping find the right drug for the right patient, not fill out forms and fill bottles.
No wonder Omnicell boasts exclusive partnerships with 151 of the top 300 U.S. healthcare systems. No wonder more than 90% of the firm’s customers stick around.
With the move towards handling business electronically offering so much potential, it’s no wonder that an entire new “universe” is being constructed entirely within cyberspace.
That new universe, the “metaverse,” is primed to become a market worth $800 billion by 2024, and I’ve found three investments for cashing in on this unstoppable trend. You can see what I mean right here.
A Three-Year Double
This business model is not just good for patients and healthcare providers. It’s also very lucrative.
About 63% of Omnicell’s revenues come from connected devices and software licenses. Another 31% comes from recurring technical services. Software subscriptions account for the remaining 6%.
That last segment is where Omnicell plans to grow, taking that 6% number to 20% to 30% by the end of 2025, as it moves its software into the cloud. This will allow for more features and easier use for customers, and more revenue sources for Omnicell.
As investors, we like recurring revenues like these, as they’re baked in for the long haul and have higher profit margins than single-use sales.
Omnicell’s management forecasts sales will grow from $1.1 billion in 2021 to $2 billion in 2025. That’s a compound annual growth rate of 14%-15%.
Add it all up and you can see this has “winner” written all over it. In the past year, the stock has gained roughly 47%.
That’s more than double the S&P 500’s historic 27% gain. I expect we’ll see continued outperformance. In fact, in the most recent quarter, earnings grew 80%.
To be conservative let’s cut that back by two-thirds. In that case, we’d still see an earnings double in less than three years.
So, by investing in a company that helps save lives lost from bad drug practices you are also locking in long-term wealth.
Cheers and good investing,