Apple's Next Act (Part 2): Keeping That Doctor Away
The future isn't just the Watch - it's what the Watch could do for healthcare ...
We’ve all heard the aphorism: “An apple a day keeps the doctor away.”
Did you ever wonder where it came from? Or if it’s even true?
Well you folks know that I love a good story. And the backstory here is actually pretty cool.
According to the National Library of Medicine, this get-healthy/stay-healthy snippet first appeared in Wales way back in 1866 — written as “eat an apple on going to bed and you’ll keep the doctor from earning his bread.”
It reappeared — in its present form — in 1913. And it’s enjoyed such staying power because, on its face, this bit of homespun advice actually seems to make sense.
“Through the ages, the apple has come to symbolize health and healthy habits, and has been used by government and private health organizations to symbolize lifestyle choices that lead to health and wellness,” said a trio of doctors who decided to study the apple’s impact on health.
After surveying 8,728 adults, those researchers found that the “apple a day” maxim has no juice.
“Evidence does not support that an apple a day keeps the doctor away … [though] the small fraction of US adults who eat an apple a day do appear to use fewer prescription medications,” the researchers said in the May 2015 issue of JAMA Internal Medicine,
Label that Malus myth … “busted.”
But iDevice king Apple Inc. (AAPL) wants another “bite” of that apple.
So it’s devoting a slice of its corporate “Next Act” to a partial rewrite of that “apple-a-day” aphorism.
An Apple Product in Play Keeps the Doctor Away
In Part 1 of this Stock Picker’s Corner (SPC) series on “Apple’s Next Act,” we studied the company’s plan to use its Vision Pro Headset as a new growth catalyst.
Here in Part 2, we’ll look at its other “Next Act:” Health.
The curtain-raiser on Apple’s health-focused foray took place way back in 2011 — with the creation of stealthy startup Avolonte Health. Apple co-founder Steve Jobs himself directed that salubrious corporate detour.
For a truly deep dive, this fascinating report from Bloomberg peels back the secrecy of that origin story. To save you some time, I’ll pull out three of the more relevant highlights.
When Jobs first formed that team, his first assignment was this: Create a noninvasive blood-sugar monitor for diabetes sufferers — ending the hated “finger prick” glucose check.
Just a few years into that project, Apple hit on a possible answer: A technology called short-wave infrared (SWIR) absorption spectroscopy. We’re talking about non-invasive “biosensing,” wearable technology that can monitor blood glucose levels by measuring the absorption and reflection of SWIR light.
The technology wasn’t ready for the 2014 Apple Watch rollout ... or any upgrades since.
If we go back the Apple Watch introduction, you’ll likely remember the pitch: Here’s a watch that’s “smart” … that’ll make you more productive … that’ll let you access texts and receive phone calls … and, hey, we’re throwing some fitness features in as a bonus.
Apple is still working on that glucose technology.
But it’s moving ahead as a “health” company. And it’s laying the groundwork for some potentially cool (and ecosystem-expanding) innovations.
In 2024, Apple’s newest watch is expected to offer sleep-apnea detection — you know, using your sleep-and-breathing patterns to determine if you’re an apnea sufferer.
The Vision headset we spoke of in Part 1 can help with meditation. And Apple is looking to add anti-anxiety and enhanced-meditation features.
Last, but not least, will be the wireless AirPod headphones, which are expected to have hearing-aid potential.
The Path Forward – Preventive Care
The health business is tricky to crack because of potential liabilities; companies don’t want to be sued for providing information that’s inaccurate, false or hurts someone.
Want an example? Think back to Theranos, the failed health startup whose shoddy work made people believe they had cancer (and other maladies) when they didn’t.
In 2022, the company’s founder, Elizabeth Holmes, was sentenced to 11 years and three months in jail.
For Apple’s health foray, the most likely lane is preventative health — for instance, warning folks about issues with sleeping, high blood sugar, irregular heart patterns, and more. And those three afore-mentioned maladies combined could have an aggregate projected value approaching $150 billion.
The cardiovascular and diagnostic and monitoring device market was valued at $14.2 billion in 2021 and is expected to reach $29 billion by 2031.
The blood-glucose-monitoring market — checking on blood sugar levels — is in a similar ballpark: It was worth $15.8 billion in 2022 and is projected to hit $32.99 billion by 2030.
The sleep-monitoring-device market is the largest of the three: It’s projected to zoom from $19.68 billion in 2023 to $79.02 billion by 2032.
With advanced Watch features, Apple could follow the playbook of Fitbit — another “wearable” device firm that partnered with healthcare providers to get its smartwatches on the wrists of more people.
In 2019, Fitbit said its Fitbit Health Solutions business segment — which caters to enterprises and healthcare providers — would haul in $100 million in revenue.
Alphabet Inc. (GOOG, GOOGL) acquired Fitbit in 2021 for $2.1 billion. A year later, it said it was working with healthcare and life science organizations to pair Fitbit data with the Google Cloud — to make all that data more useful.
Folks would have more real-time analytics on their health, as would healthcare providers who could use that data to offer better long-term health suggestions.
Apple sold almost 54 million of its watches in 2022, up from more than 46 million in 2021, says Statista.com.
That’s a massive installed base.
But the technology is still playing “catch-up” with Apple’s ambitions. An, as an ongoing legal drama demonstrates, the road to success is strewn with potholes.
Apple Watch Woes
In October 2023, the U.S. International Trade Commission ruled that Apple’s Series 9 and Ultra 2 watches violated the patents of medical tech venture Masimo Corp. (MASI).
The legal dispute focused on Masimo’s patents for a blood oxygen sensor that can read a person’s pulse.
Apple denied the infringement. But it complied with the ruling in mid-December and said it would stop selling the watches in question. But the iDevice maker was then given an early Christmas gift: The patent-focused U.S. Court of Appeals for the Federal Circuit said it would pause the ban while it considering an appeal from Apple, which has allowed Apple to continue selling the watches in question.
A few weeks later, on January 15, news reports said Apple will use a redesign to bypass the ban. Apple didn’t reveal details on the redesign. But the update will probably emerge as a software update.
This is a “stay tuned” saga. But it gives us a “sneak preview” of patent issues Apple can expect as it develops new features — and new technologies — for its “Next Act” health foray.
Our Apple Expert Weighs In
For better context, I turned to friend, longtime colleague and Apple expert David Zeiler.
Dave spent more than 35 years as a journalist — half of them at The Baltimore Sun. At The Sun, Dave had a specialized blog spotlighting all things Apple. In short order, Dave’s blog gained “must-read” prominence on a national level. In fact, Apple soon included him on its list of journalists to announce news to.
(Something really cool: Dave’s work was so respected that he was granted an in-person, one-on-one interview with Apple co-founder Steve Wozniak; and that interview with “Woz” was actually picked up by international news outlets.)
As part of our two-part report on Apple’s “headsets and health” foray, we asked Dave what to watch to watch for to see if (or when) Apple figures it out.
Here’s Dave’s take:
“It’s interesting, Bill: In January 2019, CEO Tim Cook said Apple’s greatest contribution to the world would be [in] health.
Yet, here we are — five years later — and Apple’s progress has been limited. Sure, the Watch has some nice features — measuring your heart’s sinus rhythm and your blood oxygen levels come to mind — but these hardly qualify as ‘must-have’ features.
And Apple has been fighting a patent suit by another company over the blood oxygen sensor. All this tells me that Apple’s march into health has been tougher than expected.
But if Apple can get this all figured out — you know, if it’s able to develop some sort of ‘killer app’ — the cash will flow, its shares and market value will rise, and we’ll all be the better for it.
The company has spent years on a non-invasive blood glucose monitor for the Apple Watch. That would be huge for pre-diabetic and diabetic patients. And it has the potential to make the Watch enough of a ‘must-have’ device that health insurers would be willing to cover some of the cost.
That’s the sort of ‘trigger’ — feature-and-benefit breakthrough — Apple will need for its health efforts to drive the ‘top line’ … to bolster the bottom line … and to jump-start the next growth phase for its share price.”
Apple’s a tech-sector icon. We’re longer-term investors. History demonstrates that it’s usually a losing proposition to bet against it.
We’ll watch this one carefully — together.
See you next time.
