The use of AI in healthcare has seen remarkable growth in the past 5 years and it brings with it the potential to reshape the landscape of medical devices, health care, and life sciences. This was recognized by leading data analytics company Palantir Technologies (NYSE: PLTR), which recently announced a multi-year partnership with Parexel, a biopharmaceutical company that specializes in enhancing and accelerating clinical trials.
Under the agreement, Parexel would use Palantir’s AI software to boost their clinical trial operations. Here’s why this could have a positive impact on PLTR stock.
Palantir’s Partnership with Parexel
Long-time investors already know that Palantir is an AI software giant. The company’s technology is seemingly everywhere, from national defense systems, hospitals and telecommunications to anti-money laundering operations and retail. Now, it’s making its first foray into the contract research organizations (CRO) industry.
Dan Ballard, the senior vice president of digital enablement and innovation at Parexel, told Fierce Biotech CRO in an email that Palantir’s Foundry and Artificial Intelligence Platform are perfectly suited to enhance and accelerate the delivery of safe and effective clinical trials and capable of doing so at scale.
Parexel actually has a long history with Palantir as the two worked together over the past year, which helped Parexel understand the potential of Palantir’s platform and how it can accelerate solutions for Parexel and its clients. Notably, one senior medical director at Parexel mentioned that the software has saved six to seven hours per subject matter expert for each study design and has reduced data delivery time by 50%, which is a significant result to achieve.
Additionally, Ballard said that Palantir’s Artificial Intelligence Platform provides an integrated digital environment capable of hyper-automating manual processes, promoting better data discoverability, and distilling insights from historical trials. This is a huge deal, since all of these are essential capabilities for improving the efficiency and effectiveness of clinical trials and, more importantly, helping Parexel to help their customers deliver much needed safe and effective treatments to patients faster, which will shorten the time it takes to get new drugs into the market.
Why Palantir is Betting on Healthcare
During its 2024 GTC event, AI market leader Nvidia (NASDAQ: NVDA) said that the future of healthcare will be software-defined and AI-enabled, adding that around 700 FDA-cleared, AI-enabled medical devices are now on the market, which is more than 10x the number available in 2020. On top of that, the global healthcare AI market, which was valued at $4.8 billion in 2020, is forecasted to reach $88.2 billion by 2028, expanding at a compound annual growth rate of 43.6% from 2020 to 2028. Therefore, there’s a massive opportunity for AI companies in the healthcare sector, and even Nvidia is now working with Johnson & Johnson MedTech (NYSE: JNJ) to develop new AI applications to integrate into surgical procedures.
Just like Nvidia, Palantir knows how important the AI healthcare market is, and its venture into it is incredibly unique because, as a data analytics and AI software company, the healthcare sector provides the perfect breeding ground to collect patients’ data and test and develop AI software to deliver meaningful impact. Healthcare data is often a notoriously challenging aspect for organizations to deal with due to a multitude of problems. For example, the data is often siloed, evades interoperability, and lacks meaningful use, given how challenging it is to analyze cohesively.
There’s also the fact that most hospitals and other organizations in the healthcare industry aren’t really upgrading to the latest tech when it comes to software and data. Therefore, Palantir can leverage its niche expertise and offer its services to organizations in the healthcare industry. If you’ve been following Palantir for a while, you’d know that the company has been really interested in the healthcare market for a while now.
UK’s National Health Service (NHS) signed an agreement with Palantir to create a software platform that would allow it to better manage its patients’ data, but earlier this month, Palantir entered another area of the healthcare market. The company received 256,000 extra shares of MSP Recovery (NASDAQ: LIFW), a healthcare recovery and data analytics company and a Palantir partner, as payments for outstanding receivables. Palantir now owns around 955,000 shares of MSP Recovery, and this is a big deal for Palantir because of the potential synergies with MSP and what the Artificial Intelligence Platform or Foundry platform may be doing to power their operations.
Throughout their partnership, the two companies were able to leverage Palantir’s Foundry platform to create one of the most advanced healthcare analytics tools, as it provides key metrics for providers and payers by making medical claims data more accessible, revealing information on payer rules, billing cycles, and fraud analysis. Additionally, it delivers insights into how to reduce labor hours, increase efficiencies, and eliminate waste through the discovery of improper payments and potential recoveries.
PLTR Stock Forecast
Outside of the Magnificent Seven, there is no doubt Palantir has been one of the market’s biggest AI winners. Over the past year, PLTR stock has delivered staggering returns of over 200%, and quickly became one of the significant names in the AI market to keep an eye on. Palantir built its reputation as a valued partner for the U.S. intelligence community, and it continues to provide critical services to the U.S. government and its allies, but it’s also working hard to grow its commercial business and acquire more customers in the private sector.
In fact, companies are flocking to Palantir for a chance to leverage the benefits of its Artificial Intelligence Platform, because Palantir says that it can help customers perform certain tasks up to ten times faster with fewer resources by combining its proven machine learning technology with the most advanced AI models and real-time data. Potential productivity gains are enough to convince companies to come onboard and this is now beginning to be reflected in Palantir’s financial results, as its commercial revenue increased 70% year-over-year to $131 million in the fourth quarter of 2023, fueled by a 55% increase in customer numbers.
Palantir ended 2023 with just 221 commercial customers in the United States, but PLTR stock investors should expect this number to continue to grow in the coming years, as Palantir recently entered into new partnerships with cloud software giant, Oracle (NYSE: ORCL), and one of Asia’s biggest companies, Hyundai Heavy Industries. Additionally, with Parexel’s deal, Palantir is extremely well-positioned to benefit from its ability to implement AI technologies in multiple industries at once, and we can see it becoming one of the top AI companies in the future as a result.
It is important to note that Palantir enjoys consistent profitability, as the last quarter was its sixth consecutive quarter of GAAP profitability, and its revenue growth is complemented by an expanding margin profile as the company’s strong liquidity position provides it with an extra layer of financial horsepower over its peers, and is fueling the engine as it takes on big tech. As long as Palantir operates from a position of strength in the growing AI market, holding PLTR stock over the long run could generate massive gains for disciplined investors, and the same could be said for the case of buying PLTR stock.
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