Yidu Should See Demand Recovery In the Short Term, but Consistency Still Needed
Yidu Tech provides AI solutions to hospitals, policymakers, and life sciences companies using its algorithm, Yiducore, which works by aggregating and converting raw data sets that lie within the IT systems of hospitals in China into structured and standardized data. Its algorithm is embedded in 2.6 billion full-cycle medical records covering 600 million patients from hospitals and provides models from real-world evidence. As more hospitals and disease registries partner with Yidu, Yiducore can process AI solutions more efficiently and accurately as it adds incremental data to its algorithm. As a result, hospitals can use real world-based evidence from the records to determine the best course of action for treatment and drugs for their patients. We think that the rich amount of data from medical records is a barrier entry, and Yidu has built a client base comprising 88 of the top 150 hospitals. We also believe that it is gaining traction commercially with life sciences companies but this has not yet translated to 40%-50% year-on-year revenue growth as previously forecast. Life sciences companies can use the medical database, insights, and disease models to increase chances of clinical trial success while shortening the cost and time. There are switching costs as life sciences companies are unlikely to switch solution provider mid-clinical trial, and should a trial be successful through all four phases, the recurring life span of a contract could potentially last nine years.
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