Apple's September 12 Event: New Products And The Tech Sector's Push Into Healthcare

Apple Inc. AAPL product launch event happened earlier this week, with the company debuting new iPhones, the Watch Series 3, Apple TV 4K and AirPower, a wireless charging pad that works with several of its products.  While the iPhones were the main focus, The Apple Watch Series 3 and operating system drew attention for new features, which included expanded fitness and health-focused capabilities.

A Health-Focused Wearables Market

There’s already a large number of smartwatches and wristbands on the market that are focused on health and fitness tracking. Garmin Ltd. GRMN produces a wide range of products and Android Wear, Alphabet Inc GOOG GOOGL operating system designed for smartwatches and wearables, is used by numerous brands in their product lines.

In recent weeks, Fitbit Inc FIT has launched its new smartwatch, the Fitbit Iconic. Fitbit’s smartwatch also touts a bevy of health-focused features and the company’s foray into smartwatches comes as the wearables market continues to evolve.

“The transition towards more intelligent and feature-filled wearables is in full swing,” according to Jitesh Urbani, senior research analyst for market research firm IDC. “Previous niche features such as GPS and additional health tracking capabilities are quickly becoming staples of the modern smartwatch,” Urbani added.

He also highlighted growing interest from the medical industry to adopt wearables, saying “this is where companies like Apple and Fitbit have the potential to maintain their lead as their investments in the tracking and perhaps diagnosing of diseases will be a clear differentiator from low-cost rivals."

According to IDC, the worldwide wearables market is projected to nearly double by 2021, with vendors shipping 240.1 million units across product categories. The watch category is expected to reach an estimated shipment volume of 161 million units in 2021, growing at a compound annual growth rate (CAGR) of 26.5% from 2017 to 2021 (CAGR is a useful measure that provides a consistent rate of growth over multiple time periods).

FIGURE 1: PERSONAL CONSUMPTION EXPENDITURES ON HEALTH CARE SERVICES. The graph above shows personal consumption expenditures on health care services in the United States (numbers shown in billions of dollars). The large size of the healthcare market is one reason that some tech companies have cited for their expansion into the industry.  This is one of many data points TD Ameritrade clients can analyze on the Economic Data tab on the thinkorswim^® platform from TD Ameritrade. Data Source: Federal Reserve's FRED database. FRED® is a registered trademark of the Federal Reserve Bank of St. Louis. The Federal Reserve Bank of St. Louis does not sponsor or endorse and is not affiliated with TD Ameritrade. For illustrative purposes only. 

Beyond Wearables: Tech Companies Focusing on Healthcare

Beyond just wearables, many companies are launching new products and services for the healthcare industry, and many more are exploring additional opportunities. Here’s a few examples of some of the things companies are doing:

1. Alphabet (GOOG, GOOGL): The mission of Alphabet’s Verily division is to “make the world’s health data useful so that people enjoy healthier lives.” Verily has announced partnerships with several major healthcare companies and is working on a wide variety of projects ranging from developing smart contact lenses that can monitor glucose levels for diabetics to rearing and releasing sterile male mosquitoes to stop diseases that are spread by the pests.
2. Amazon (AMZN): In July, CNBC reported that Amazon.com Inc. AMZN has a “lab dedicated to opportunities in health care”, with projects focused on electronic medical record systems, telemedicine and health applications for some of the company’s hardware products. And earlier in May, CNBC reported that Amazon is also exploring opportunities in the pharmacy business.
3. Apple (AAPL): Along with the updated heart rate app for the new smartwatch, Apple announced the Apple Heart Study in partnership with Stanford Medicine. The study will use data from the Apple Watch to identify irregular heart rhythms. In the past, Tim Cook has said that the company wouldn’t want to put the Apple Watch through FDA regulatory processes, but that they’d be open to putting “something adjacent to the watch,” like an app or other hardware, through the process.
4. Fitbit (FIT): In September, Fitbit announced a collaboration with DexCom (DXCM), a manufacturer of continuous glucose monitoring (CGM) systems for diabetes management, to “develop and market products to help people better manage their diabetes and get a more complete picture of their overall health with easy-to-use mobile tools.” According to a company press release, the first initiative of the partnership is to make DexCom’s CGM data available on Fitbit’s new smartwatch, Fitbit Iconic.
5. IBM (IBM): For several years, Big Blue has promoted Watson Health to the healthcare industry to analyze data. Different healthcare companies and institutions have used International Business Machines Corp. IBM machine learning platform for genomics, drug discovery, developing care plans, and other applications.

The above are just a few examples of how tech companies are expanding into healthcare.  Many more are taking other steps and some of the things being developed are likely to require regulatory approval, which adds additional complexities that a company’s managers might not have experience navigating.

Considering the challenging environment, even management has been cautious about some of the potential opportunities they are exploring. In a recent interview with Fortune, Apple CEO Tim Cook highlighted the fact there isn’t necessarily a viable commercial business for everything the company is working on in regards to healthcare, but he does “think it’s a big area for Apple’s future.”

Looking at all of the tech companies making moves into healthcare, Cook doesn’t appear to be the only CEO that thinks so.