The recent integration of DeepSeek’s AI model into Airdoc Tech’s system has sparked investor interest, leading to a significant jump in the company’s stock price. However, given Airdoc Tech’s history of net losses, a key question remains: can this AI upgrade truly reverse its financial trajectory?
Shares in the medical imaging provider experienced a substantial surge, reaching an eight-month high following the announcement. This positive market response suggests the AI model upgrade has resonated well with investors. This enthusiasm stems from the broader excitement surrounding DeepSeek, a relatively new player in the global tech landscape.
Established in 2015, Airdoc Tech focuses on providing diagnostic imaging tools, particularly for eye conditions such as myopia and vision impairment linked to diabetes. Its signature product, Airdoc-AIFUNDUS, has gained recognition within the medical field as an AI-driven healthcare solution. The company has been developing its own AI system, the Wanyu Medical Large Model, since last July, aiming to expand its applications from image-based diagnostics to encompass general medical Q&A and health management.
The Wanyu model is designed to quickly provide doctors with valuable medical information, clinical guidelines, and research findings to inform their decision-making. Additionally, it aims to offer patients personalized health analysis and treatment recommendations, according to Airdoc Tech. The recent upgrade has improved the speed and accuracy of data processing, leading to enhanced disease recognition and a more tailored health management experience.
The health technology sector has seen increased attention as investors recognize the potential of more affordable AI technologies. However, the medical AI field is highly competitive. A report from CITIC Securities indicated that Chinese companies have already launched over 50 AI models for medical application. The diagnostics sector alone features models from major tech players like Tencent, Baidu, Alibaba, and JD. These tools span various medical scenarios, including diagnosis to follow-up care, with AI-enhanced analysis of medical images and decision-making at the forefront.
Specific AI tools, such as We Doctor’s system for chronic disease management and Xunfei Healthcare’s post-diagnosis system, often have a clearer commercial path. In contrast, the commercial viability of Airdoc Tech’s Wanyu model is less defined, especially given that the software aims to serve both doctors and patients across a range of services.
The Wanyu model isn’t Airdoc Tech’s initial foray into AI-assisted diagnosis. Two years ago, the company introduced AI-powered products designed to help prevent or control myopia. The company’s financial report for the initial half of 2024 showed that the service had reached 16,000 users, with more than 800 hospitals across China utilizing its vision training tools. Nevertheless, Airdoc Tech hasn’t disclosed the exact revenue gained from this new business venture, only stating that revenue generated by its overall vision health business rose 22% during the six months to reach 38 million yuan ($5.24 million), when compared year-over-year. Sales of this tool have faced challenges since its reclassification as a Class Three medical device in China last July, which required greater controls. The company is working to obtain the necessary certifications to relaunch sales.
Since its listing on the Hong Kong stock market in November 2021, Airdoc Tech has seen a considerable decline in its stock price. Initially priced at HK$75.1 per share, the stock has since lost over 80% of its value, hovering around HK$10 for an extended period. The company’s repeated net losses have been a strong concern to investors. Between 2019 and 2023, the company recorded total accumulated losses of 623 million yuan. Despite a 13.6% increase in revenue to 93.71 million yuan during the first half of 2024, the net loss nearly doubled to 81.49 million yuan.
A closer look at the company’s financial data reveals an imbalance in its cost structure. Surprisingly, research and development expenses decreased by approximately 13% to 49 million yuan during the first half of 2024, while sales and administrative expenses were notably higher at 80.19 million yuan. In addition, wage costs for 254 employees reached 103 million yuan, surpassing the total revenue for the same period. To achieve a breakthrough in the medical AI model market, Airdoc Tech may need to increase its R&D investment, although its cash and cash equivalents had decreased to 548 million yuan by mid-2024, which may pose an obstacle.
Airdoc Tech’s price-to-sales (P/S) ratio is only 7 times. This contrasts with Xunfei Healthcare Technology, a specialist in AI-powered medical tools, which has a P/S ratio of 36 times. Though AI has the ability to reform the business of medical services, it is difficult to translate its potential into commercial profits. Only time will show whether Airdoc Tech can successfully capture a sizeable portion of the medical model market.
