Quote Of The Year

Timeless Quotes - Sadly The Late Paul Shetler - "Its not Your Health Record it's a Government Record Of Your Health Information"

or

H. L. Mencken - "For every complex problem there is an answer that is clear, simple, and wrong."

Tuesday, July 23, 2024

I Am Not Sure I Feel Entirely Comfortable With This Approach To Having A Baby?

This appeared last week:

How to make a superbaby

Helena de Bertodano

2:30PM July 19, 2024.

Although Noor Siddiqui and her husband have no fertility problems, she has undergone IVF so that she can freeze her embryos. Then, using the technology of her own startup company, Orchid, she is pre-screening each embryo for any potential health problems.

Siddiqui, 29, does not have children yet, nor is she even pregnant, but she knows a lot about her future family. She will have two sons and two daughters and, like any parent, she wants them all to be healthy. Unlike most parents, however, she is almost guaranteed to get what she wants.

We are not talking about simply screening for major birth defects or conditions such as Down’s syndrome – we are talking a full-scale analysis of each embryo’s predisposition to all the 1,200-plus diseases and conditions about which we currently have genetic information, including a wide range of cancers, diabetes, ­coronary artery disease and even Alzheimer’s. Based on the results, prospective parents can decide which embryos to implant. Testing costs $US2500 ($3700) per embryo, on top of the cost of IVF, leading to concerns that the rich will breed “superbabies” (although Orchid is also planning a select philanthropy program).

The difference between the Orchid testing – which is already available in dozens of clinics across the US – and what Siddiqui refers to as “the old testing” is off the charts. She suggests you think of it “like a book”. “The old testing is only looking at the table of contents, [whereas Orchid] is spellchecking the entire book. So if your genome is 3 billion letters, Orchid is looking at all of them.”

“Look,” Siddiqui adds, pointing to a graph she has pulled up on her iPhone that shows the analysis of one of her embryos. “All these genes that cause horrible diseases are negative. Same for hereditary cancer.” She flicks to another one and I see a solid red line. What’s that? “This ­embryo was in the 99th percentile for breast cancer. So it has a 37 per cent lifetime risk ­versus this embryo, which has an 18 per cent lifetime risk.”

She splits the screen so she can compare embryo three – the one with the heightened risk – with embryo five, which shows no heightened risk factor for any disease. So, I say, you would clearly choose embryo five over three. “You can choose whatever embryo you want,” says ­Siddiqui, who is hypersensitive to any suggestion that Orchid’s services have any similarity to eugenics. But embryo three would be an ­unusual choice, wouldn’t it? “Sure,” she ­concedes. “But embryo three knows at age zero to screen early for cancer.”

We are chatting in the San Francisco apartment of Masha Bucher, a Russian friend of ­Siddiqui’s and an investor in Orchid who plans to use the service herself. Aged 34, Bucher is married but says she is not ready for a child right now. Dynamic and bossy, she explains why she supports Siddiqui: “We have access to data on so many less important things. I’ve been calculating my calories since I was ten years old, I track how much time I sleep, I have financial apps. Why wouldn’t I use something that helps with such a major decision over the health and future of [my child]?”

In their friend circle, freezing eggs or embryos is the norm. “Many who are younger than me are already doing egg freezing or embryo banking with their partners,” Siddiqui says. “They get engaged and they make embryos and they plan to have kids in ten years, whatever.”

So far, Siddiqui has frozen 16 embryos. “Unfortunately, almost all are girls.” Just two are boys – and one of them is at a heightened risk for prostate cancer. Not that that in itself is a deal-breaker. “But if you want to have two boys, then you should probably have more than two embryos. Basically, each embryo has a 70 per chance of becoming a baby.”

So she is going to freeze more eggs in September. Yes, she says, IVF is uncomfortable. “But it’s really not an ordeal. Women do waxing, Botox, laser hair removal – and it’s completely frivolous. Who cares whether you have hair or not? I care way more if my baby is going to get cancer. I care way more if my child will go blind in college. So why wouldn’t I spend an extra two weeks and a couple of thousand dollars to make sure my child doesn’t suffer? That should not be stigmatised.”

Pretty and slight, Siddiqui seems to be one of those intellectually brilliant people who, on a practical level, is a complete disaster. I rarely feel like the grown-up in any situation that involves organisation, but after a chaotic day with Siddiqui I almost feel like a babysitter. The ­location and time of the interview change so often I lose track; patients and doctors whom she has lined up to speak to me suddenly evaporate. She doesn’t know which apartment ­Bucher lives in so we end up knocking on random doors while she tries to contact someone 8000km away who might have the address – except her phone battery dies and she doesn’t have a charger. At one particularly low point in the day I find myself stuck in a fire escape stairwell with her, unable to re-enter the main building because the door has locked behind us.

The day starts smoothly enough, albeit well behind schedule. Siddiqui offers to collect me from my hotel; a white Jaguar pulls up and I get into the back seat next to her. We begin chatting and as the car pulls out into busy traffic, I suddenly realise there is no driver. The car is driving itself. “I hate driving,” she says. “It’s so annoying.” So, being a young San Franciscan, naturally she uses Waymo, the self-driving car app that is rapidly supplanting Uber. “It feels super-futuristic when you first jump in, but then you forget about it,” she says.

It is pouring with rain and I ask her if – with all her technological know-how – there might be a way to stop it. Actually, she says, there might be. She knows someone who has a ­company called Rainmaker. “I don’t know if they can stop the rain, but they can start it.”

The daughter of Pakistani immigrants, both engineers, Siddiqui grew up in Virginia, where discussions around the dinner table were ­highly intellectual. “My family loves to debate. My older sister and my dad would spar about any topic: political, technical, nuclear power… I would try to insert myself and then, when I went to school, I’d sound so smart because I would just repeat the conversation.”

The one cloud on the family horizon was her mother’s worsening vision. She had been diagnosed with retinitis pigmentosa, and Siddiqui says that watching her mother struggle with the disease triggered her fascination with genetics. “Just think about it – someone you love, their independence is getting ripped away from them. It just struck me as incredibly unfair.”

As a teenager, she applied to the Thiel Fellowship, a program that funds 20 gifted young people a year to work on their ideas, deferring college. She won a place and founded a startup called Remedy, using Google’s augmented ­reality glasses to help healthcare providers care for patients. Later she attended Stanford, graduating with a master’s degree in computer science. By then she had met her future husband, Feross Aboukhadijeh, a fellow student. He is now the founder and CEO of Socket, a ­security platform, and seen as one of the most brilliant brains in Silicon Valley.

After eight years of dating, they married in a “giant, crazy” three-day wedding in Hawaii in 2022. “It took me way too long to decide to marry.” She was determined to be the one to propose first. “I told him I wasn’t going to ­accept any inbound [proposal]; I had to ask first.” So, not one to do anything by halves, she organised a flashmob proposal (it’s a thing these days, especially in California), flying in friends and family from around the country and contracting artists to perform his favourite music. He said yes, of course, and then organised his own return proposal with a scavenger hunt. They now live in San Francisco and plan to start a family in the next couple of years.

Using her own relationship as an example, Siddiqui robustly contests the argument that the IVF/freezing embryos route lacks romance. “Think of how much love and energy it takes to say we’re going to plan ahead to make sure this child is healthy,” she says. “This is the ­biggest gift I could give my child.”

And, she maintains, it is still a magical process. “Of the millions of eggs that existed in me when I was a baby, I capture 20 of them. Think about how miraculous that is. My husband has billions of sperm and it’s these specific magical combinations of literally trillions [of options] that get to be our kids… And we haven’t gotten pregnant yet. The first embryo might not take. So there’s still a lot of mystery.”

Of course, for couples who take the Orchid route to have a baby, sex in itself is unnecessary. “Sex is for fun,” is one of the lines that Orchid uses. “Embryo screening is for babies.”

“It’s a little tongue in cheek,” Siddiqui says. “But that’s what I personally think. You’re taking more risks [having a baby through sex].”

As for finding out about potential problems post-conception, the emotional toll is high. “The current process is much worse: once the pregnancy is already in progress, you can get a very small amount of genetic information and find out about a very small list of those thousands of diseases. And then you have a very tough choice to make: you can either terminate or continue that pregnancy. I would way rather have the information before I’m pregnant.”

I tell her that when I was pregnant with my second son in the US, I had an ultrasound that showed he might have Trisomy 18, also known as Edwards Syndrome, a chromosomal condition that affects the heart and lungs and is so ­severe that most children do not live beyond the first two weeks of life and fewer than 10 per cent beyond the first year. At the local hospital I was asked if, given the risks, I wanted to ­continue with the pregnancy. They offered me counselling and made it sound almost a certainty that he would be born with the condition (even though there was a much higher chance that he would be born without it).

Twenty-one years have passed since then. Obviously, if I had terminated the pregnancy I wouldn’t have my healthy, kind, beautiful son Joe. Or if I’d had the choice of several embryos, it’s unlikely I would have chosen one with an ­elevated risk of such a condition.

“But you’d have a different son,” Siddiqui says cheerfully, “whom you’d also love.”

She has the same answer to the suggestion that her mother might not have been born if her grandmother had been given a choice of embryos and saw that she had a heightened risk of blindness. “I’d have a different mother.” Clearly, Siddiqui herself would not exist either, but she thinks I am far too stuck on people who wouldn’t have been born. “People are always thinking about [one] person who wouldn’t exist. You immediately say, ‘I wouldn’t have my son.’ But what about all these future people who wouldn’t exist if you don’t use this technology?”

Perhaps doubting the efficacy of her ­positivity, she continues, “Think about this: my grandma had my mum when she was 16. Now women go to college and choose when they get married. You killed all the babies that you [could have] had at 16 and 17. And 18 and 19. All those eggs… There are trillions of children and children’s children who didn’t happen because we as a society have said we value women having autonomy over who and when they marry, when they have kids… I don’t think anyone in society would say that women should all be forced to have kids at 16.”

‘There is a genetic component to substance abuse,’ Siddiqui says. There are even, she adds, ‘certain aspects of personality that have a genetic basis.’

Well, no, but that’s different from ­selecting embryos when there is no apparent medical need to do so. There is something about the randomness of birth that is seen as ­almost ­sacred. Siddiqui is ready for this. “I think ­because it’s sacred, it is incumbent upon us to use the best science [we have] to give this ­person we’re bringing into the world the best chance at a healthy life. If a child needs more resources, then we should be summoning those resources earlier, not leaving it to the last minute, once it’s too late to intervene. There are so many of these situations where if you intervene earlier, you can either totally avoid the illness or significantly alter the trajectory of that child’s life.”

She talks at immense speed for hours, the words tumbling out of her. Even my voice ­recorder can’t keep up with her and at times I have to ask her to slow down. “Sorry, sorry,” she says breathlessly, slowing down a fraction before galloping on again. “When children are born without a skull, they might suffer and die within a week [or be] a stillborn. So it strikes me as very cruel to say to a family who’s going through IVF that you shouldn’t have this information – especially if you’ve already buried a child… Three per cent of babies are born with birth defects. Six per cent of ­babies are born with a neurodevelopmental disorder. We don’t have treatments. We have vaccines for smallpox and polio. And that’s about it. So unfortunately, the most humble thing to do is actually to screen embryos and identify the risks early. Because medicine is still in the Stone Age. We can’t cure most chronic diseases. A lot of people we serve weren’t going to have kids because they were so worried about the child suffering… So the idea that you should stigmatise access to information about the health of your embryo is offensive to me.”

So what you’re doing is editing out the risk? “Not editing,” she quickly corrects me. “Editing would mean you’d be manipulating embryos that already exist. This technology is just ­expanding the menu of choice.”

Although a lot of what she says makes good sense, I find that anyone I talk to about Orchid recoils when I explain what it is doing. Is she surprised that the subject causes some upset? “It honestly doesn’t make sense to me. People are already choosing embryos based on sex, which is a lot less important. They obsess over the most silly things: playing classical music or rock music during pregnancy; whether to have an organic or non-organic apple.”

Late last year, the first Orchid baby was born to a San Francisco couple. Siddiqui posted a film of herself meeting the baby, Japhy. His mother, Leah, was 38 when she married. “We both have family history of type 1 and 2 diabetes and my husband has a history of bipolar in his family, so we wanted to see if there was anything we could do to mitigate some of those issues,” Leah says. “It’s a huge relief to have the information to make informed decisions.”

Siddiqui is thrilled to have met Japhy. “This baby represents the future of how all babies will be created, hopefully.”

Dr Michael Feinman, an IVF doctor, says Orchid provides a valuable tool in preventing severe diseases. “While there are ethical considerations and societal implications, the primary focus should always be on the wellbeing of the future child and reducing the burden of disease on families and society.”

Orchid is also working on a way to predict if a future child is predisposed to addiction. “There is a genetic component to substance abuse,” Siddiqui says. There are even, she adds, “certain aspects of personality that have a genetic basis”. Maybe, I speculate, one could stop a future serial killer being born. Or someone like Vladimir Putin. Siddiqui looks doubtful. “I think you still have free will. You’re predisposed to things but I wouldn’t go so far as to say you could predict character.”

She dismisses as “sensational and silly” a recent headline about her that ran, “This woman will decide which babies are born.” “It’s the exact opposite of that. It’s the parents who decide; I don’t decide anything.”

Yet given the strong feelings the technology engenders, I ask if she sees any downside to what her company is doing. “I don’t think so. I think this is something that society has been waiting for. For generations. So much had to develop in the history of humans for us to be able to get here. It’s up to us to decide the ­morality and how it’s used. It’s just data on ­embryos at the earliest possible stage.”

She acknowledges that for some people, it is just too much information. “For people who want to take the risk and do it traditionally at home, more power to them.” But, she cautions, “Genetics is really messy, and so many things can go wrong. Your genetics is a lottery. Why don’t we try to make it a little more fair?”

Society will eventually embrace this ­technology, she believes. “Previous generations would consider IVF as taboo and stigmatised. And now it’s the opposite.” We are back in the car and she makes an analogy. “Self-driving cars were considered really scary and crazy, but look at the data: how many car accidents are there with human drivers? Thousands. Waymo had to pass one million miles without an ­incident. In the future, our grandkids are going to think it was so unsafe on the road before ­self-driving cars.”

She feels that Orchid is her “life’s work”. “It is the most meaningful work I’ve ever done,” she says. “We want to bring it internationally around the world.” She herself plans to decide which embryos to implant after her second round of IVF. “I built the whole company because I wanted to do that.”

A few minutes after we part, she sends me links to two YouTube videos set to music: one showing her marriage proposal to her partner, the other his proposal to her. The videos are sweet, if corny, and clearly prove the romance in their relationship. As she runs into his arms on top of a picturesque cliff, I note that Justin Bieber’s Anyone is playing and the accompanying lyric is, “You can’t predict the future.” ­Except now, of course, you actually can. b

Here is the link:

https://www.theaustralian.com.au/weekend-australian-magazine/how-to-make-a-superbaby/news-story/498a8f2957046f40fb72389a8a4fcf8b

I offer this article for comment as I am really unsure how I feel about this approach to “baby-making””

I guess many would like the control and risk reduction that is offered while others would really hate the lack of ‘natural processes’ involved.

How do you feel about what is offered here?

David.

Sunday, July 21, 2024

Well That Was Really The King Of IT Outages So Far!

 Here is the basic outline of what happened in case you have been hiding under a rock for the last few days!

The software patch that shook the world

Asa Fitch, Sam Schechner and Sarah E. Needleman

21 July, 2024

Hemant Rathod, an Indian executive, was sipping tea in a conference room on Friday morning in Delhi, about to send a long email to his team, when his computer went haywire.

The HP laptop suddenly said it needed to restart. Then the screen turned blue. He tried in vain to reboot. Within 10 minutes, the screens of three other colleagues in the room turned blue too.

“I had taken so much time to draft that email,” Rathod, a senior vice president at Pidilite Industries, a construction-materials company, said by phone half a day later, still carrying his dead laptop with him. “I really hope it’s still there so I don’t have to write it again.”

The outage, one of the most momentous in recent memory, crippled computers worldwide and drove home the brittleness of the interlaced global software systems that we rely on.

Triggered by an errant software update from the cybersecurity company CrowdStrike, the disruption as those in Asia were starting their days and Australians were well into them.

Over the course of less than 80 minutes before CrowdStrike stopped it, the update sailed into Microsoft Windows-based computers worldwide, turning corporate laptops into unusable bricks and paralysing operations at restaurants, media companies and other businesses.

US 911 call centres were disrupted, Amazon.com employees’ corporate email system went on the fritz, and tens of thousands of global flights were delayed or cancelled.

“In my 30-year technical career, this is by far the biggest impact I’ve ever seen,” said B.J. Moore, chief information officer for the Renton, Wash.-based healthcare system Providence, whose hospitals struggled to access patient records, perform surgeries and conduct CT scans.

Fixing the problem involved technical steps that confounded many users who aren’t tech-savvy. Some corporate IT departments were still working to unfreeze computer systems late on Friday. CrowdStrike said the outage isn’t a cyberattack.

Adding to the chaos – and further underlining the vulnerability of the global IT system – a separate problem hit Microsoft’s Azure cloud computing system on Thursday shortly before the CrowdStrike glitch, causing an outage for customers including some US airlines and users of Xbox and Microsoft 365.

The CrowdStrike problem laid bare the risks of a world in which IT systems are increasingly intertwined and dependent on myriad software companies – many not household names.

That can cause huge problems when their technology malfunctions or is compromised. The software operates on our laptops and within corporate IT setups, where, unknown to most users, they are automatically updated for enhancements or new security protections.

In a 2020 hack, Russian perpetrators inserted malicious code into updates of SolarWinds software in a way that compromised a swath of the US government and scores of private companies.

The rising frequency and impact of cyberattacks, including ones that insert damaging ransomware and spyware, have helped fuel the growth of CrowdStrike and such competitors as Palo Alto Networks and SentinelOne in recent years. CrowdStrike’s annual revenue has grown 12-fold over the past five years to over $US3 billion ($4.5bn).

But cybersecurity software such as CrowdStrike’s can be especially disruptive when things go wrong because it must have deep access into computer systems to rebuff malicious attacks.

Not all updates happen automatically, and computer attacks often occur because people or businesses are slow to adopt patches sent by software companies to fix vulnerabilities – in essence, failing to take the medicine the doctors prescribe. In this case, the medicine itself hurt the patients.

The global outage began with an update of a so-called “channel file”, a file containing data that helps CrowdStrike’s software neutralise cyber threats, CrowdStrike said. The update was timestamped 4:09am UTC – just after midnight in New York and just after 2pm Friday in eastern Australia.

That update caused CrowdStrike’s software to crash the brains of the Windows operating system, known as the kernel. Restarting the computer simply caused it to crash again, meaning that many users had to surgically remove the offending file from each affected computer.

The nature of the patch meant that the impact was uneven, with people in the same office even experiencing the outage very differently. Apple Macs, which don’t use the affected Windows software, were OK, and servers and PCs that weren’t on and internet-connected didn’t receive the toxic update.

CrowdStrike soon realised something was amiss and the update to the file was rolled back 78 minutes later. That meant it wouldn’t affect computers that were off or in sleep mode during that period. But for many of those that were switched on, the damage was done.

In a blog post, CrowdStrike told those users to boot into the Windows “safe mode,” delete the offending file – called C-00000291*. sys – and reboot.

IT teams often can fix problems on employees’ computers using remote-access software – tools that became especially common during the work-from-home boom of the pandemic. But for laptops and other PCs, that approach doesn’t work if the machines can’t restart.

For those systems, CrowdStrike’s fix had to be done in person – either by a tech-support person on site, or by a regular employee trying to apply the instructions.

Moore, the Washington State healthcare CIO, was away on vacation and initially wasn’t worried when emails about malfunctioning computer applications started landing in his inbox on Thursday night.

By late that night, he had learned that the outage had engulfed the nonprofit health system’s approximately 50 hospitals and 1000 clinics across seven US states. Hundreds of IT employees began deploying patches, which required manual remediation, he said.

Some of the system’s affected computers and devices were fixed by 6am Friday US time, and most were humming again by 10am. “It will be the end of the day before we get it all done,” Moore said on Friday morning.

As companies were grappling with the impact, CrowdStrike’s co-founder and chief executive officer, George Kurtz, was on TV trying to reassure customers – and shareholders – looking haggard after a long night.

“We identified this very quickly and rolled back this particular content file,” Kurtz said in a CNBC interview about nine hours after the faulty update.

“Some systems may not fully recover, and we’re working individually with each and every customer to make sure that we can get them up and running and operational,” he added.

The timeframe for the recovery could be hours or “a bit longer”, he said. Kurtz said on X that the outage isn’t “a security incident or cyberattack”.

Home Affairs Minister Clare O’Neil has provided an update on the CrowdStrike tech outage.

Microsoft CEO Satya Nadella took to X to offer his own reassurance that the company was working closely with CrowdStrike to bring systems back online.

Tesla CEO Elon Musk responded, “This gave a seizure to the automotive supply chain,” and later said, “We just deleted CrowdStrike from all our systems.”

For Rathod, the senior vice president at Pidilite, the travails didn’t end with his potentially lost email.

After switching to his iPad to keep working, he had to rush to the airport for a flight – only to find long lines and flummoxed security staff checking boarding passes manually. Flight information screens weren’t working, so he had to find airline staff to direct him to the right gate.

“It was a mess at Delhi airport,” Rathod said. “How can we depend so much on one company?”

Tom Dotan and Robert McMillan contributed to this article.

The Wall Street Journal

Here is the link:

https://www.theaustralian.com.au/business/the-wall-street-journal/the-software-patch-that-shook-the-world/news-story/fe6cce2fc54d97dbae8f57489532640f

I reckon all that can be said about this outage has pretty much been said and the article above is a pretty good summary for the record.

I find it interesting that my system just kept chugging along as I have no need of or awareness of Cloudstrike! To me what happened makes a care for simplicity in critical systems (hospitals and he like) and to plan any updates to happen at times when the use of the machine is not vital. (Given the rapid response just making sure updates happened on the weekend would have saved you!)

I am sure everyone from philosophers to we humble plebs are going to be pleased the simplicity of our operations and lack of pushed updates saved us completely.

There has to be a case for a total rethink of all the updating that seems to be presently inflicted on as all. Have you ever had a Windows Update that you really felt you needed? Maybe 3-4 times a year? I do not know but I feel we need some clever souls to redesign what is done, now we have seen the possible harm!

I also think we need to do something about the Windows Hegemony – Linux anyone? Surely Coles and Woolies would be better off with a Linux terminal network?

There are some hard questions that need answers.

What do you think?

David.

p,s. Remember this attack needs considerable effort to fix - if you are affected:

Here is the drill:

"The only remedy for Windows users affected by the “blue screen of death” error involves rebooting the computer and manually deleting CrowdStrike’s botched file update."

Glad you had never heard of Cloudstrike?

D.

AusHealthIT Poll Number 756 – Results – 21 July 2024.

Here are the results of the poll.

Are You Concerned About The Safety Of The Use Of Artificial Intelligence In The Health Sector?

Yes                                                                                30 (88%)

No                                                                                  4 (12%)

I Have No Idea                                                              0 (0%)

Total No. Of Votes: 34

A very clear cut vote suggesting it is really is some worry about the safety of AI in the Health Sector!

Any insights on the poll are welcome, as a comment, as usual!

A very good voting turnout. 

0 of 34 who answered the poll admitted to not being sure about the answer to the question!

Again, many, many thanks to all those who voted! 

David.

Friday, July 19, 2024

I Could Not Agree More And It Is A Really Serious Concern!

This appeared last week:

Both men running for US president are unfit for the job

One is a good man in obvious cognitive and physical decline, and the other is a bad man who lies as he breathes – and who is in his own cognitive tailspin.

Thomas Friedman Contributor

When I look at my country’s presidential contest, the first thought that comes to mind is that only the Devil himself could have designed this excruciating mess.

Both men running for president right now are unfit for the job: One is a good man in obvious cognitive and physical decline, and the other is a bad man who lies as he breathes, whose main platform is revenge – and who is in his own cognitive tailspin.

But the most important difference for the country – where you really see the Devil at work – is in the difference between the Democrats and the Republicans. The plain fact is that only one party in America’s two-party system is ready to defend our constitutional order any more. The other party is interested only in gaining and holding power for the sake of it.
The GOP’s moral emptiness is manifested in several ways. The party has been purged of virtually every Republican politician unwilling to submit to its Dear Leader – Donald Trump, who attempted to overturn our last presidential election.

The wife of a Republican-appointed Supreme Court justice advocated overturning the results of the election on utterly bogus grounds, which shows you just how little respect that party now has for our sacred institutions.

It is the political equivalent of assuming that because you played Russian roulette once and survived you can play it again.

And it is ready to renominate Trump even though many of those who worked most intimately with him in his first term – including his vice president, secretary of defence, secretary of state, chief of staff, national security adviser, press secretary, communications director and attorney general – have warned the country in speeches, interviews and memoirs that Trump is erratic, immoral and someone who must never be let near the White House again.

One of the biggest mistakes Americans would be making if they were to elect Trump again is assuming that because we survived four years of his norm-busting, law-abusing, ally-alienating behaviour once, we can skate by again without irreparable damage. It is the political equivalent of assuming that because you played Russian roulette once and survived you can play it again. That’s insane.

But that is precisely why this election is so important and precisely why the Democratic Party, which still prioritises defending our democracy, must urgently produce a presidential candidate with the wits, vitality and appeal to independents to build an electoral majority to preserve our constitutional order. Nothing else matters today – nothing, nothing, nothing.

But the leader the Democratic Party has right now, President Joe Biden – someone I admire but who clearly has lost a step cognitively and physically – has combatively dug in his heels, lashed out at his critics and dared them to challenge him at the convention, despite the mounting calls for him to step aside.

One would hope that his wife and family, who surely know the extent of his physical and mental frailties, would prevail upon him to step aside, but they won’t – seemingly oblivious to the risk this is posing to the country and the whole Biden legacy.

My God, the Devil must be enjoying this. I am not.

If Biden were to win, we’d all need to pray that he can get out of bed every day to carry out his agenda as well as he did in the past. If Trump were to win, we’d all need to pray that he stays in bed all day so that he can’t carry out his impulsive agenda, which seems driven first and foremost by which side of the bed he gets out of.

We can do better than this – and we must. Because this is also no ordinary election season. We are at a profound hinge of history that is going to put us on a roller coaster of job market volatility, geopolitical volatility and climate volatility.

The artificial intelligence revolution of the past four years is widely expected to slam into the white-collar job market in the next four like a category 5 hurricane. The lengthy Hollywood writers strike last year was just a tiny foretaste of what this destabilising revolution in white-collar work will look like.

At the same time, we are in the middle of defining the post-post-Cold War order, now that the US-dominated post-Cold War order has come unstuck since the Russian invasion of Ukraine.

Managing a hostile Russia – aligned with an increasingly hostile China, aligned with malign actors like Iran and North Korea, and super-empowered nonstate actors like Hamas, the Houthis and Hezbollah – will take not only incredibly wise US leadership but also a US leader able to forge multiple alliances. The post-post-Cold War world can’t be managed by a lonely American superpower telling all its allies to spend more on defence or we will leave you to the tender mercies of Vladimir Putin.

And finally, speaking of hurricanes, there is every indication that our core climate change challenge – how we manage the disruptive weather that is already unavoidable and avoid the disruptive weather that would become unmanageable – is now on our doorstep. The decisions we make in the next four years may be our last chance to avoid the unmanageable.

Those are just a few of the anticipated challenges facing the next president. And God save us from the unanticipated ones, like massive climate-driven migrations amplifying geopolitical instability. America always needs clear-headed and vigorous leadership, but we need it now more than ever.

Democrats, if they are being responsible, need to imagine Biden two or three years from now, given the inevitable march of time. Do those running the Biden campaign and those Democratic Party leaders who tell Biden to hang tough really believe that in two years he will have the capacity to carry out the rigorous job of president, with all its pressures, even on a good day? He is already saying he doesn’t want to schedule events past 8pm, but the presidency has never been and will never be an 8am-to-8pm job.

And can you imagine the conspiracy theories that will be circulating on social media and Fox News over “Who is actually making decisions?” at the Biden White House when people see a president in two years who is more physically and verbally impaired? The only-Biden Democrats – and the Biden campaign – owe the country an answer to that question. I take no joy in asking it, but ask it we must.

Ditto for Trump. What will it mean for America in the age of AI to have a president who swore in an affidavit in a 2022 court case: “Since at least Jan. 1, 2010, it has been my customary practice to not communicate via email, text message, or other digital methods of communication”?

What will it mean to have a president who is a crude oil-loving climate change sceptic when nearly 70 million Americans were under heat alerts last Sunday, a day on which temperatures in Las Vegas hit 120 degrees Fahrenheit for the first time in recorded history?

What will it mean in an age when there is no important problem that can be solved by one country alone – whether mitigating climate change, regulating AI, dealing with massive global migrations or confronting nuclear proliferation – to have a president who believes in America first and only, and that most allies are freeloaders, that US tariffs are paid by China, not American consumers and that global multilateral institutions – NATO, the WTO, the European Union, the WHO, the UN – are an alphabet soup of useless “globalists”?

Of course, I will vote for Biden if he is the Democratic nominee. And you should, too. We have to do anything we can to stop Trump. But Democrats continuing to insist on putting him there are behaving with dangerous recklessness.

I repeat: Just because we managed to barely survive the Trump stress test to our constitutional order once – not without some serious damage – does not mean our democracy can survive another four Trump years with his now Supreme Court-fortified sense of impunity. Especially if we combine the self-induced stress levels from a second Trump term with the boiling external stresses already building up around us.

That would indeed be playing Russian roulette again – only this time with a fully loaded pistol. That’s a game only the Devil himself would design.

This article originally appeared in The New York Times.

Here is the link:

https://www.afr.com/world/north-america/both-men-running-for-us-president-are-unfit-for-the-job-20240710-p5jsgd

So the US public are faced with the choice between a crook and a man who is slowly dementing and slowing down as you watch.

If ever there was the need for a circuit breaker the time is now!

I am not sure the US system has the mechanisms that seem to be necessary.

David.

Thursday, July 18, 2024

This Is A Useful Review Of Stocks Involved In Health AI And Some Emerging Ones!.

These appeared last week:

Top AI healthcare stocks - Part 1

By streamlining workflows and improving diagnostics, Pro Medicus is the Apple of AI healthcare.

By Graham Witcomb · 5 Jul 2024

Practically all medical fields will benefit from artificial intelligence (AI) but, for now, most applications are more science fiction than fact. The medical imaging industry, however, is already experiencing the advantages — and Pro Medicus is leading the charge.

Currently, most algorithms approved for use by the US Food & Drug Administration (FDA) are focused on medical imaging. Plenty more will come: traditional radiology relies heavily on pattern recognition, which is an area where AI performs exceptionally well.

Key Points

·         AI to improve diagnosis

·         Opening platform to AI ecosystem the best bet

·         Stock priced for growth

AI has two main applications within medical imaging — prioritisation and diagnosis.     

AI is being used to triage cases by reading through the endless stream of scans and putting those patients with the highest risk of pathology at the top of the pile for a radiologist to review.

One German university hospital found that using AI to prioritise cases reduced the average turnaround time for reporting critical findings from 80 minutes to 35-50 minutes. This may not sound like much, but there's a major shortage of radiologists in Australia, Europe, and the US, so small increases in efficiency mean radiologists can see more patients and reduce wait times.

Diagnostic accuracy

So far, Pro Medicus's bread and butter has been a software platform that processes medical images remotely and streams the necessary pixels to the radiologist's viewing station, allowing doctors to access high-resolution scans almost instantly. This approach improves efficiency and output, enabling faster diagnosis and more convenient viewing (see Analyst picks: Uncovered gems).

While superior processing speed is Pro Medicus's main competitive advantage — allowing it to charge a 50% premium to competitors — the company is investing in machine learning to enhance its software's capabilities, including the ability to spot anomalies and assess patient risk.

The company has taken a shotgun approach to AI. Its three-pronged strategy includes: (1) developing its own AI algorithms internally; (2) partnering with third-party providers and universities to co-develop them; and (3) providing an open imaging platform accessible to independent AI developers.

The first prong of that strategy is arguably the weakest. In 2021, Pro Medicus received FDA approval for an internally developed algorithm to detect and categorise breast density. Since then, however, the company has barely said a word about internally developed AI — there may be further advances, but we're more excited by a number of partnerships with external developers.

Earlier this year, Pro Medicus invested US$5m into Elucid, a US-based AI provider that specialises in a Fractional Flow Reserve (FFR) evaluation tool for cardiac CT scans, which measures the pressure gradients in a coronary artery. The procedure's use is limited by its cost, complexity, and invasiveness, so an AI-driven non-invasive estimation of FFR will be a major benefit to patients.

Elucid has raised around US$120m in total funding. Pro Medicus's stake is small, but it shows the company's seriousness about building relationships with AI providers and funding their growth. Pro Medicus intends to partner with Elucid and integrate its AI algorithms into Pro Medicus's imaging platform.

Apple-esque

While developing AI algorithms and partnering with start-ups are both opportunities worth exploring, our best hopes are pinned on the third prong in Pro Medicus's AI strategy — its imaging platform.

Most revenue currently stems from image processing, not charging for AI services, and Pro Medicus boasts impressive financials: gross margins over 99%, with a free cash flow margin and return on equity each brushing 50%. Over the past three years, revenue from imaging has grown by 30% a year. Anything that strengthens the imaging platform's competitive position is a good thing. 

Rather than focus solely on building the best AI models, the company has opened its imaging platform to third parties by providing accessible APIs (application programming interfaces). These APIs allow other AI developers to easily integrate their AI models into Pro Medicus's software.

We think it's the right strategy. Pro Medicus's strength is in speed and convenience, not AI development and diagnosis; open access is a way to use external developers — who may be better at AI than Pro Medicus — to improve Pro Medicus's core product.

Two things are clear: Pro Medicus's platform shows the output of AI, which is ultimately what matters to the radiologist; and there are hundreds of companies working on AI algorithms to improve diagnosis across an endless array of diseases. Given the choice between using dozens of different applications or using a single platform that shows the output of dozens of different AI models, we suspect the latter will win out.

Just as Apple's success with the iPhone stemmed from providing a platform for apps, Pro Medicus's approach allows radiologists to access a wide range of AI models through a single, streamlined interface.

It's hard to fault Pro Medicus's strategy and, so far, the company has gone from strength to strength. With roughly $150m of revenue, Pro Medicus has a 7% market share in North America, double what it was three years ago.  

Unfortunately, the market has already caught on to Pro Medicus's potential: the stock's market cap of $14bn is 177 times the $80m of net profit expected in 2024. Consensus estimates are for net profit to more than double by 2028, making that price-to-earnings ratio more digestible — but anything other than rapid growth would still clobber the share price.

We'd love to own Pro Medicus at the right price, but we'll probably need to wait for a disappointing result before we get an opportunity.

For companies like Pro Medicus, AI is a core component of their product, making it integral to the user experience; other companies benefit from AI's capabilities quietly in the background. In Part 2, we'll explain how one such company's AI investments will deliver improvements in efficiency, costs, and research.

Here is the link:

https://www.intelligentinvestor.com.au/investment-news/top-ai-healthcare-stocks-part-1/153685

Top AI healthcare stocks - Part 2

No health stock has more to gain from AI than CSL, with drug and vaccine development just the start.

By Graham Witcomb · 10 Jul 2024 · 5 min read

In Part 1, we looked at how AI is transforming the medical imaging industry through the innovations of Pro Medicus. Now, we turn our attention to CSL, the undisputed leader in blood products and a top-tier producer of vaccines.

AI's potential applications within CSL are extensive, offering significant improvements in efficiency, speed, and research. 

Key Points

·         Predictive drug design

·         Faster vaccine development will improve effectiveness

·         Manufacturing efficiencies

Traditionally, drug discovery has been a lengthy and expensive process.

The first phase of drug development involves identifying potential drug candidates through laboratory studies to evaluate the biological activity and efficacy of these contenders. A bottleneck in this research is the sheer quantity of proteins available for study: blood plasma contains more than 4,000 different proteins, sometimes in indescribably small quantities, each of which could have an important biological effect when concentrated and administered to patients for a specific illness.

AI can help to prioritise research. By analysing huge datasets, algorithms can predict how different molecules will interact with biological targets, identifying promising candidates more quickly than conventional methods based on trial and error.

AI can analyse research data more precisely than humans to find unusual patterns or similarities in drug performance. For CSL, this means a more efficient path to discovering new therapies, reducing time and cost.

R&D accelerator

Once a drug candidate shows promise in basic research studies, it progresses to clinical trials, which are conducted in three phases to test the drug's safety, dosage, and side effects. The clinical trial sequence is the most expensive part of research and development (R&D), often costing hundreds of millions and taking more than a decade.

CSL hit this reality check with its plasma-derived cholesterol drug CSL-112. Earlier this year, the company announced the results of an enormous 18,000-person Phase III clinical trial and found that CSL-112 was no better than placebo at reducing cardiovascular events following a heart attack. CSL spent $500m or so and a decade of research on this single project.

As mentioned earlier, AI is likely to help in the drug discovery process by proposing molecules worthy of investigation or spotting anomalies in data. Its most valuable contribution, however, may be eliminating low-potential drugs earlier in the clinical trial process. Only 1-in-10 drugs that move from basic research to clinical trials make it through all three phases to commercialisation. R&D is a lottery where most research spending is wasted.

The final Phase III trial typically accounts for around 60% of clinical trial costs. By more thoroughly analyisng the vast quantities of data produced by earlier trials — or trials of similar molecules — AI may be able to predict the likelihood of success with more accuracy, helping CSL to allocate resources more effectively.

When one of CSL's therapies is finally approved, the research doesn't end there — the company is constantly looking to repurpose drugs, aiming to find new uses beyond their original indications. Most rare diseases — CSL's specialty — don't have any approved treatments, so AI has the potential to help CSL expand the market for its existing products by finding new therapeutic uses for them. Given the cost of development, an expanded list of 'off label' uses could add meaningfully to CSL's return on investment.

Vaccine development

AI's fast analysis is especially helpful for CSL's vaccine division. CSL has a 26% share of the flu vaccine market, making it the world's second-largest flu vaccine maker.

Influenza viruses mutate frequently, leading to a phenomenon known as antigenic drift. Small changes in the virus's surface proteins can lead to new strains that existing vaccines may not protect against.

The issue is that the flu virus is evolving constantly, whereas vaccine development takes many months. As soon as a new flu vaccine hits the shelves, it is already out of date because the virus has shifted slightly since it was developed.

To address this, flu vaccines are reformulated each year based on predictions of which strains will be most prevalent. This prediction process involves global surveillance and data collection by health organisations. Despite these efforts, there is almost always some degree of mismatch between the vaccine strains and the circulating strains, resulting in reduced vaccine effectiveness for that season.

CSL can use AI to model viruses and predict immune responses, speeding up vaccine design. By accelerating the development process, vaccine strains will more closely match the virus they're targeting.

AI is likely to become a standard feature in flu vaccine development, so we doubt it will give CSL any competitive advantage or increased profitability, but you never know — small differences in software performance could lead to large discrepancies in real-world outcomes. In a field where effectiveness is paramount, doctors are likely to recommend the most effective vaccine, so the company that delivers that could dominate the market. And more effective vaccines overall could improve demand.

Manufacturing

Two final applications of AI that could supercharge CSL's operations extend beyond R&D into manufacturing and compliance.

The company intends to use AI to improve the efficiency of its supply chain and assist in meeting its regulatory, legal, and compliance requirements. Predictive maintenance algorithms keep production equipment running efficiently, reducing downtime and increasing output. Real-time monitoring through machine learning models can detect anomalies early, preventing potential quality issues.

AI can aid CSL in making more informed strategic decisions, too. Predictive analytics can forecast market trends, assess demand, and guide management in where it invests the company's cash pile.

Management expects net profit of US$2.9bn-3.0bn in 2024, up 13 -17%, putting the stock on a price-to-earnings ratio of 32 at the midpoint.

AI has the ability to enhance almost every aspect of CSL's operations — from drug discovery and expanded labelling to vaccine development, manufacturing and quality control.

CSL's size and 100-year operating history is a major competitive advantage as it has troves of research data on which is can train AI models more effectively. The company spends 9% of revenue on R&D and its US$1.2bn research budget is bigger than almost any competitor.

With significant financial resources, CSL can invest in cutting-edge AI technologies and infrastructure, hire top talent, and collaborate with leading AI research institutions. We can't think of a healthcare stock better positioned to benefit from developments in AI. HOLD.

Here is the link:

https://www.intelligentinvestor.com.au/recommendations/top-ai-healthcare-stocks-part-2/153690

It is interesting that the review did not extend to some of the smaller AI companies in the health sector of which there are many in various states of development.

There is also a useful review here:

AI is already being used in healthcare. But not all of it is ‘medical grade’

Dean, School of Computing Technologies, RMIT University, RMIT University

David Hansen

CEO, Australian e-Health Research Centre, CSIRO

Enrico Coiera

Professor of Medical Informatics, Macquarie University

Artificial intelligence (AI) seems to be everywhere these days, and healthcare is no exception.

There are computer vision tools that can detect suspicious skin lesions as well as a specialist dermatologist can. Other tools can predict coronary artery disease from scans. There are also data-driven robots that guide minimally-invasive surgery.

To precisely diagnose diseases and guide treatment choices, AI is used to analyse patients’ genomic and molecular data. For instance, machine learning has been applied to detect Alzheimer’s disease and to help choose the best antidepressant medication for patients with major depression.

Deep learning methods have been used to model electronic health record data to predict health outcomes for patients and provide early estimates of treatment cost.

Much more here:

https://theconversation.com/ai-is-already-being-used-in-healthcare-but-not-all-of-it-is-medical-grade-207912

We just have to wait and see how this evolves – as we can be sure there will be a lot of investment in this area over the next few years!

Watch this space….

David.

Wednesday, July 17, 2024

There Really Are Some Who Can’t Recognise The Time To Stop It Has Arrived!

This appeared last week:

Personally Controlled Electronic Health Record

No ‘shoebox of PDFs’: My Health Record in good shape, says former ADHA CDO


By Peter Gearin

Thursday July 11, 2024

Steven Issa stepped down as chief digital officer of the Australian Digital Health Agency (ADHA) two years ago, but any criticism of My Health Record still stings.

“I genuinely believe in it,” Issa told The Mandarin following his presentation at the Qualtrics X4 conference in Sydney. “For families like mine — and those who are frequent fliers in the healthcare system — I can’t tell you how much of a benefit it can be.”

More here:

https://www.themandarin.com.au/250453-no-shoebox-of-pdfs-my-health-record-in-good-shape-says-former-adha-cdo/

Really you wonder why, after more than a decade, there is still a belief that the myHR can be a nationally useful system that should continue to be supported and funded!

It is clear the time has come to stop wasting money on what is obviously a failed idea – or at least a failed implementation of an apparently unworkable idea.

Surely we need to stop it before we all go blind!

David.

Tuesday, July 16, 2024

Australian Healthcare Companies Worth Considering Investing In!

This appeared a few days ago:

Buy Hold Sell: 2 high-conviction healthcare winners for FY25


Plus, fund managers outline the key trends shaping the sector.

Livewire Markets

Healthcare stocks have been some of Australia's most consistent wealth generators, with stocks like CSL () skyrocketing more than 6000% since listing on the ASX 25 years ago. 

Over the past 20 years, the S&P/ASX Health Care Index has far outperformed the rest of the market, lifting 994% compared to the S&P/ASX 200's 121% over that same period. By a long shot, it has been the ASX's best-performing sector over the past 20 years.

And yet, while COVID-19 put our health back into the spotlight, healthcare stocks have been a mixed bag since then. Yes, the developed world's populations are ageing - which spells good things for healthcare companies, but many of the sector's former darlings are now on life support. 

So how can investors identify the companies with a clean bill of health?

To find out, Livewire's Ally Selby was joined by two healthcare analysts in Alphinity Investment Management's Stuart Welch and Yarra Capital Management's Marcus Ryan.

They share some of the trends they are seeing in terms of valuation, cost pressures, and supply chain challenges, whether investors need specialist knowledge to be successful when investing in the sector, and the one non-negotiable healthcare companies need to make their way into these fund managers' portfolios.

Plus, they also analyse three healthcare companies, including CSL (ASX: CSL), Ansell (ASX: ANN) and Sonic Healthcare (ASX: SHL), and each name their highest conviction stock pick within the sector.

Note: This episode was recorded on Wednesday 10 July 2024. You can watch the video, listen to the podcast or read an edited transcript below. 

Edited Transcript

Ally Selby: Hello and welcome to Livewire's Buy Hold Sell. I'm Ally Selby and today we're taking a deep dive into the healthcare sector. Many of Australia's greatest success stories have been healthcare companies, but since COVID, quite a few of those stocks have been on life support. So to find out which of these stocks have a clean bill of health, we're joined by Stuart Welch from Alphinity Investment Management and Marcus Ryan from Yarra Capital Management.

A lot of healthcare valuations have traditionally been more expensive than the rest of the market. Stuart, I'm going to start with you. With some of the pain that we've seen in this sector, is that still the case? 

Is the healthcare sector overvalued?

Stuart Welch: I think people have historically been attracted to healthcare because of the structural defensive growth, and whilst it was upended a little bit during COVID, I think that is still the case. We still see growing ageing populations, increasing chronic disease, and often a lot of new treatments that improve the standard of care. And so I think people are still attracted to those growth stories that can continue irrespective of the economic cycle.

Ally Selby: Over to you Marcus. How much value are you actually seeing within the healthcare sector today?

Marcus Ryan: The sector is trading on a higher PE premium relative to the market, and that's really reflecting investor expectations around the better growth of prospects. Overall, I would describe the healthcare sector today as being modestly cheap. Interestingly, the PE ratio, the premium relative to the industrial companies is around a 50% premium, and that compares to the historical average of around 60%.

We believe though that there's really a story within a story here. Using that same basis of relative PE, what's really interesting is that 10 of the 15 major healthcare companies are trading at higher PE multiples today relative to their historical average. So as we sit here today, we think dispersion in the sector is large and we are really focused on unique stock opportunities rather than the sector overall. 

Are there any headwinds facing the sector?

Ally Selby: As you mentioned there, we have seen quite a lot of dispersion in the healthcare sector, particularly when it comes to returns. A lot of those companies have been facing high costs as well as supply chain challenges. In your view, are we still seeing those headwinds today?

Marcus Ryan: I would say we are partially seeing those headwinds. What's interesting is we observe supply chain challenges across the sector. We're really noticing that it's evolving from being broad-based wage cost inflation pressures and product-specific shortages to now being more discreet issues like Red Sea shipping cost increases. We expect this to manifest when we think about the margin potential. 12 of the 15 major healthcare companies today are actually continuing to have margins below pre-COVID levels.

These issues could still provide a challenge to get those margins back. As you mentioned, FY24 was the year for stock dispersion within the healthcare space. In fact, while the sector put on almost 10% for fiscal '24, what was amazing is that the best returner Pro Medicus (ASX: PME), a healthcare technology company, jumped 119%. Whereas at the other end of the ledger, pathology names, actually dropped 25%. They were really hit hard with some of those inflation issues. So, moving forward, the key themes we are monitoring across the sector are AI, GLP-1s and how that'll impact the sector.

Ally Selby: Stuart, over to you. What are some of the major trends you're seeing right now in the healthcare sector?

Stuart Welch: So I think Marcus has touched on one of the key ones. I think it's margins. So as we came through COVID, there were COVID beneficiaries and COVID losers. Normally it's a very stable industry. We had the companies that were able to provide the pathology tests, for example, or respiratory systems for COVID patients winning. And some of the hospitals that were quasi-nationalised and CSL (ASX: CSL), for example, which couldn't collect plasma, struggle.

I think every company has been recovering at different stages, but I think in the last 18 months, they have been hit with margin pressures and that's been relatively universal across the space. And so I think that's one of the key trends in terms of trying to understand the performance of the sector - what's the outlook and trajectory for that margin recovery and how quickly that's going to come through relative to people's expectations.
Do you need specialist knowledge to be successful in healthcare investing?

Ally Selby: All the stocks in the sector are incredibly different. Do you feel like you need specialist knowledge to be able to be successful when it comes to investing in healthcare stocks?

Stuart Welch: Quite a few other sectors are a lot more homogenous. The healthcare sector is very heterogeneous. So firstly, you have the different sub-sectors, so you've got things like hospitals, pathology companies, radiology companies, aged care. But then also the three largest companies are leaders in various specific sub-segments like Cochlear's (ASX: COH) cochlear implants, sleep apnea for ResMed (ASX: RMD), and blood plasma products for CSL. Each one of those has very different fundamentals, and so it's very hard to apply a one-size-fits-all kind of approach to healthcare.

On top of that, it's not only the products they offer and the markets within which they operate, which are often highly regulated and vary country by country, but you also have to have an eye on the competitors. So it's often the product you don't know about that could upend some of these companies as well. So there's a lot to keep on top of, if you're not doing that full-time, I would suggest...

Ally Selby: ...Maybe not doing it at all. Do you feel like you need a medical degree or any kind of knowledge like that to be able to invest in these stocks?

Marcus Ryan: The answer to that would be definitely for the healthcare sector. Our investment process does lean into engagement with specialists and we find that's a really helpful part of the process, particularly for healthcare. When I think about specialist expertise, it could be with a prescribing physician who's close to patient trends. And what we've really found is that can often help identify and validate potential points of inflexion for businesses early on.

Today, consensus expectations are in excess of 15% profit growth for the healthcare sector over the next two years. That's really quite staggering compared to the last two years when the sector only generated 4% per annum earnings growth. And it's these specialist engagements that help to discern which companies will have the capacity to meet or beat those expectations. 

One non-negotiable when investing in healthcare stocks

Ally Selby: Okay. Marcus, one more question today before we get into buy, hold, sell. For you, what is one non-negotiable that you believe every healthcare stock needs for it to make its way into the portfolio?

Marcus Ryan: What we find really interesting when we look across the sector is that stocks are trading on anywhere from 15 times earnings to in excess of 100 times earnings growth. And what that says to us is a key ingredient is understanding the durability of revenue and the sustainability of earnings growth. That's our number one focus and I'd call that our non-negotiable.

In addition to that, I'd say before we actually put a new healthcare name into the portfolio, we're often asking the question, "Does this make sense from a portfolio perspective? Could there actually be a better stock outside of the healthcare space that makes better sense?"

And just finally and impressively when we think about the healthcare sector over the last decade in Australia, and this is actually quite staggering, the sales growth and the earnings growth from the healthcare sector per annum is in excess of three times the growth rate of what we've seen from ASX industrial companies. And it really encourages us with that active research to lean into the sector and to find the best stock ideas.

Ally Selby: Over to you, Stuart. What's your one non-negotiable when investing in healthcare stocks?

Stuart Welch: So it is something we apply to all of the stocks that we put in the portfolio. And what we're looking for is quality, reasonably valued companies that are in or entering an earnings upgrade cycle. These are companies where we think the earnings power has been underappreciated and earnings can come in ahead of expectations. We apply that lens across all companies that we invest in. And healthcare is no different. We do think that one of the key drivers of that over the next 12-18 months is going to be margins for some of the reasons we've talked about already. 

CSL (ASX: CSL)

Ally Selby: Let's get into buy, hold, sell now. First up today we have CSL, which is Australia's biggest healthcare company by a country mile. Stuart, going to start with you today. Is it a buy, hold or sell?

Stuart Welch (BUY): We think that one's a buy. It's a company that is yet to recover from COVID. Margins are still 800 basis points in their key business bearing below where they were pre-COVID. And it's been struggling with some of those inflationary cost pressures that we've been talking about in the healthcare space. One of the key drivers to improve that is the Rika system, which is a new plasma collection system. This will decrease the amount of time required to collect a donation but also increase the volume of donations that they can take from patients as well. And we do think that the rollout of that is going a bit faster than what people currently expect and that there's some margin upside from that as that comes through.

Ally Selby: Its share price has recovered around 12% over the past 12 months. Its share price is now trading back near $300. Marcus, is it a buy, hold or sell?

Marcus Ryan (SELL): For us, Ally, CSL today is more of a sell. We like parts of the industry that CSL operates in. We like parts of the business, and we like the management team, but what we just cannot get our heads around is the mispricing opportunity. Building on some of the margin comments that Stuart made, where we see things a little bit differently is we feel some of that margin upside story seems to be well captured by consensus expectations. When we also think about competing products and generic products, we sense that that's going to be an ongoing feature of the industry. And just finally, we feel it's actually a very well-loved stock. Interestingly, if you look at analyst reports, 12 of the 16 brokers covering CSL have it on a buy or a very strong buy. And we just think that limits the potential for positive news flow. 

Ansell (ASX: ANN)

Ally Selby: Okay, next up today we have Ansell, which sells protective equipment like medical gloves. Marcus, staying with you, is it a buy, hold or sell?

Marcus Ryan (BUY): For us, Ansell, a leading personal protective equipment company, is a buy. This is really predicated on a bunch of key points. We see the healthcare part of the business as returning to system growth as they rotate through COVID impacts. We like the cyclical upside potential from the industrial side of the business. Thirdly, we actually see the business quality and the earnings quality improved as a result of their April acquisition of the Kimberly Clark PPE business. And just finally, we think the valuation's attractive. The stock's trading at a PE discount relative to where it historically traded.

Ally Selby: Okay, its share price has fallen around 3% over the last 12 months, but most brokers rate it as a buy. Stuart, over to you. Is it a buy, hold or sell?

Stuart Welch (SELL): We would look at that as a sell. It's been getting some earnings downgrades. It's had, I think, earnings downgraded by 40-50% over the last couple of years. And actually, the first half was no different - earnings missed by about 40%. And the key issue is that these guys benefited greatly during COVID. They sold a whole lot of gloves. In fact, people ordered a lot more than they needed and have been stockpiling them. And that's been impacting the outlook for the business. And that first-half result was a 40% miss at the NPAT line. At some point that will normalise, but I think we'd need to see some evidence that that is normalising before we could get comfortable stepping into it to make sure there are no further earnings downgrades ahead of us.
Sonic Healthcare (ASX: SHL)

Ally Selby: Okay. Next up today we have Sonic Healthcare, which is a pathology services provider. Its share price has fallen around 25% over the last 12 months. Is there value there, Stuart, or is it a trap? Is it a buy, hold or sell?

Stuart Welch (SELL): That would also be a sell for us. It was a huge COVID beneficiary as well doing a lot of the pathology tests for COVID patients. And during that period, they were actually able to repay pretty much all of their outstanding debt, excluding leases. And what's happened subsequently is that they've been redeploying that capital into acquisitions that should drive growth. The underlying base business earnings power has been eroded through inflation. So they've got a fixed reimbursement from the government. And as those higher costs have come through, that's eroded the margin of the underlying business. We've seen that as some of those COVID tests have receded. And so I think we would again just need to see a bit more evidence that those inflationary pressures are under control and that the margins have stabilised before we could get comfortable investing in Sonic.

Ally Selby: That said, most brokers rate the stock or buy, or at least on the system that I was looking at. Marcus, over to you. Is it a buy, hold or sell?

Marcus Ryan (HOLD): For us Ally, Sonic would be more of a hold at this point in time. The challenge we have at the moment is just trying to understand, particularly the pathology industry, how it actually can lift margins back anywhere close to where they were pre-COVID. Building on some of the themes that Stuart touched on, what we're observing at the moment is volume demand for pathology services is still quite sluggish. We're seeing the cost pressures linked to labour costs still inflated. And while some of the acquisitions we would say look pretty good on the surface, the overall earnings trajectory is still challenged. And as a result of that, we have to be a hold.

Ally Selby: Okay, we asked our guests to bring along their highest conviction healthcare stock today. Really excited for this one. Marcus, I'm going to start with you. What stock are you backing? 

ResMed (ASX: RMD)

Marcus Ryan (HIGH CONVICTION BUY): Our key pick in the sector is the sleep apnea treatment leader, ResMed. For us today, we see the real opportunity centring around the concern that the increased prevalence of GLP-1 drugs could erode ResMed's market opportunity moving forward. We've done a tonne of calls over the last couple of weeks, building on the specialist knowledge question from earlier, to try to understand what physicians are saying and what patients are doing. And frankly, we're getting a picture back from these experts that is very different to what's embedded in the current share price and frankly, very positive for ResMed.

So what we're hearing back from the sleep practitioners, and the weight loss practitioners, is that CPAP - which is the treatment that ResMed put forward to sleep apnea - is still the primary solution for sleep apnea. The other thing we're observing is that GLP-1s, if anything, are just increasing the treatment awareness for sleep apnea.

We see ResMed as the key mispricing opportunity in the large-cap healthcare space. We like the market opportunity. There's a tonne of penetration opportunity for the company. It's the market leader. We still see high single-digit EBITDA growth over the next few years. And the stock's trading at a tremendous discount PE relative to the past.

Ally Selby: Okay. Over to you, Stuart. Your time in the hot seat. What's your highest conviction healthcare stock right now? 

Cochlear (ASX: COH)

Stuart Welch (HIGH CONVICTION BUY): It would be Cochlear. So Cochlear produces cochlear implants to improve hearing. Their key market is the adult market. They've always had a huge addressable market. The challenge for Cochlear has been unlocking that, and system growth has been reasonable in the low mid-single digit range.

Under the current CEO, they've put a whole bunch of long-term growth initiatives in including medicalizing hearing loss, putting in standards of care, seeing studies come through that link hearing loss with accelerated dementia, and a bunch of initiatives to try and free up clinic capacity and operating theatre capacity to be able to service those patients as well.

We think a lot of those long-range initiatives are starting to bear fruit and we're actually seeing an acceleration in system growth, which we think can move further as well. And that's really the key driver for Cochlear, which is the leader in the space. They own that space. They've got a 65% market share, they invest far more in R&D than anybody else and they've got a far superior product suite. And we see more of that coming, which further extends their lead, but also helps free up the industry to grow more as well.

Ally Selby: Well, I hope you enjoyed that healthcare special of Buy Hold Sell as much as I did. If you did, why not give it a like? Remember to subscribe to our YouTube channel. We're adding so much great content just like this every single week.

Here is the link:

https://www.livewiremarkets.com/wires/buy-hold-sell-2-high-conviction-healthcare-winners-for-fy25

I can confess I have holdings in most of these – and am certainly not equipped to offer share purchase advice – but I reckon each of these is worth a close look!

Make up your own mind and seek your own advice!

Overall I reckon the healthcare sector is quite investable as part of a properly diversified portfolio – if you have a few spare dollars available!

David.