Apple's Healthcare Strategy: Build, buy or partner? Buy appears to be the most likely.

Exec Summary:

Apple has been investing in healthcare for several years, and it has used a variety of strategies to grow its healthcare business. These strategies include:

• Build: Apple has developed its own healthcare products and services, such as the Apple Watch and the Health app. These products and services are designed to help people track their health and fitness, and they can also be used to collect data that can be used to improve healthcare outcomes.

• Buy: Apple has acquired several healthcare companies, such as Glimpse and Evidation Health. These acquisitions have given Apple access to valuable healthcare data and expertise, which the company has been using to develop new healthcare products and services.

• Partner: Apple has partnered with a number of healthcare organizations, such as the Mayo Clinic and Aetna. These partnerships have given Apple access to healthcare data and expertise, and they have also helped Apple to promote its healthcare products and services.

In recent years, Apple has increasingly focused on partnerships and acquisitions as a way to grow its healthcare business. This is likely because these strategies allow Apple to quickly gain access to new technologies and expertise without having to invest the time and resources needed to develop these capabilities on its own.

Here are some examples of Apple's healthcare partnerships:

• In 2019, Apple partnered with Aetna to offer Apple Watch users discounts on health insurance premiums.

• In 2020, Apple partnered with the Mayo Clinic to develop new ways to use the Apple Watch to monitor and manage chronic diseases.

• In 2021, Apple partnered with Johnson & Johnson to develop a new digital health platform for managing chronic diseases.

• In 2022, Apple partnered with the University of Pittsburgh Medical Center to study the use of the Apple Watch to improve patient outcomes.

These are just a few examples of Apple's healthcare partnerships. As Apple continues to invest in healthcare, it is likely that we will see even more partnerships with healthcare organisations and technology companies and also more strategic acquisitions.

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Acquisitions: what, when and why?

As Apple reaches a massive $3 Trillion valuation, a growing number of factors suggest the company is looking to make a large healthcare acquisition or number of smaller tactical acquisitions in the near future.

First, Apple has been making significant investments in healthcare in the last 7 years building up their experience, talent and understanding of the industry. Apple’s main Investments and acquisitions in the healthcare space since 2016 include:

• In 2016, Apple acquired Gliimpse, a personal health data platform.

• In 2017, Apple acquired Beddit, a sleep tracking company.

• In 2019, Apple acquired Tueo Health, an asthma monitoring company.

• In 2020, Apple launched the Apple Watch Series 6 with a new blood oxygen sensor.

• In 2021, Apple received FDA clearance for its electrocardiogram (ECG) app.

These acquisitions suggest Apple is serious about developing a comprehensive suite of health-related products and services.

Second, the healthcare industry is a large and growing market, which other new markets offer the growth size and potential scale to Apple? In 2020, the global healthcare market was worth an estimated $8.8 trillion. And by 2028, it is projected to reach $12.9 trillion. This growth presents a significant opportunity for Apple, which could potentially tap into this market by acquiring a healthcare company.

Third, Apple has the financial resources to make a significant acquisition. The company's cash and cash equivalents at the end of 2022 were $203.9 billion. This gives Apple the financial flexibility to make a large acquisition, even if it requires paying a premium price.

Fourth, the Apple Watch is growing in importance as a medical device. In the UK for example, the NHS is using the Apple Watch to monitor patients with chronic conditions such as diabetes and hypertension. The watch can send alerts to patients if their blood sugar levels or blood pressure are too high, and it can also track their medication adherence. This information can help doctors to provide better care to patients and prevent them from developing serious complications.

Fifth, Apple recently announced the launch of Apple Vision Pro, an upcoming mixed reality headset. Apple Vision Pro is designed to be used for a variety of purposes, including gaming, entertainment, and productivity. It can also be used for healthcare applications, such as remote patient monitoring and medical training.

Sixth, recent press reports suggest Apple plans to develop AirPods into a HealthTech device. Mark Gurman, tech reporter for Bloomberg was recently quoted saying the 'next version of Apple's hugely popular wireless earbuds will include new health features covering both hearing and body temperature monitoring.'

Based on these factors, if a large acquisition or series of strategic acquisitions are coming, what type of company or companies will it be? If the past is an indication of the future, then the 3 most likely types of acquisitions are:

1) Healthcare Provider

2) HealthTech companies

3) Virtual Reality or Augmented Reality

Potential acquisition targets for Apple - healthcare providers

There are a number of healthcare businesses that Apple could potentially acquire. One possibility is a healthcare provider, such as a hospital or clinic. This would give Apple a way to directly provide healthcare services to its customers.

Some potential targets for Apple could include:

• Aetna: Aetna is one of the largest health insurance companies in the United States. It would give Apple a major foothold in the healthcare industry.

• CVS Health: CVS Health is a pharmacy chain that also operates a large health insurance business. It would give Apple a way to reach more consumers with its healthcare products and services.

• UnitedHealth Group: UnitedHealth Group is another large health insurance company. It would give Apple a major competitor to Aetna and CVS Health.

Apple has also been expanding its partnerships with healthcare providers. In 2019, the company announced a partnership with Aetna to offer Apple Watch users discounts on health insurance premiums. In 2020, Apple announced a partnership with the Mayo Clinic to develop new ways to use the Apple Watch to monitor and manage chronic diseases.

These partnerships suggest that Apple is interested in working with healthcare providers, rather than competing with them. However, it is possible that Apple could acquire a healthcare provider in the future, if it believes that doing so would give it a strategic advantage in the healthcare market.

Potential acquisition targets for Apple - healthtech, medical devices or software

Apple has been making significant investments in healthcare in recent years, and it is likely that the company will continue to acquire healthcare companies in the next 12 months. Some of the types of healthcare companies that Apple might acquire include:

• Companies that develop or manufacture wearable health devices. Apple is already a leader in the wearable health device market with the Apple Watch, but it could acquire other companies to further its wearable health device offerings. For example, Apple could acquire a company that specializes in heart rate monitoring or sleep tracking.

• Companies that provide remote patient monitoring services. Remote patient monitoring (RPM) is a growing field, and Apple could acquire a company that specializes in RPM to expand its healthcare offerings. RPM companies use technology to remotely monitor patients' health data, which can help to improve patient outcomes and reduce the need for in-person hospital visits.

• Companies that develop or provide artificial intelligence (AI)-powered healthcare solutions. AI is rapidly transforming healthcare, and Apple could acquire a company that develops or provides AI-powered healthcare solutions to stay ahead of the curve. For example, Apple could acquire a company that develops AI-powered tools for diagnosing diseases or developing personalized treatment plans.

• Companies that operate healthcare data platforms. Healthcare data is becoming increasingly valuable, and Apple could acquire a company that operates a healthcare data platform to gain access to this data. Healthcare data platforms can be used to collect, store, and analyze healthcare data, which can be used to improve patient care and develop new healthcare products and services.

Potential acquisition targets for Apple - virtual reality or augmented reality

Apple has been acquiring virtual reality (VR) and augmented reality (AR) companies for over a decade now. In 2013, it acquired PrimeSense, which developed 3D camera technology that is now used in the iPhone's Face ID facial recognition system. In 2015, it acquired Metaio, which made AR software for mobile devices. In 2016, it acquired Flyby Media, which worked on computer vision technology.

In 2017, it acquired SensoMotoric Instruments, which developed eye tracking technology, as well as Vrvrana, which developed a VR headset. And in 2020, it acquired NextVR, which filmed video content for virtual reality, including sports.

Most recently, Apple acquired Mira, an AR startup that makes headsets for other companies and the US military. The acquisition was confirmed by Apple on June 7, 2023, just one day after Apple unveiled its own VR headset, the Vision Pro.

Apple's VR and AR acquisitions suggest that the company is serious about entering these markets. The Vision Pro is a high-end headset that is aimed at professional users, but Apple is also rumored to be working on a more consumer-oriented VR headset. It is possible that Apple will continue to acquire VR and AR companies in order to accelerate its development of these technologies.

Here is a list of all the VR and AR companies that Apple has acquired:

• PrimeSense (2013)

• Metaio (2015)

• Flyby Media (2016)

• SensoMotoric Instruments (2017)

• Vrvrana (2017)

• NextVR (2020)

• Mira (2023)

Acquiring a company that specialises in VR or AR for healthcare would give Apple a way to develop new products and services that could improve patient care. Combining a new acquisition with it's recently announced Apple Vision Pro headset would enable the company to move faster and potentially capitalise on the lucrative 'early adopter cohort' of customers in healthcare.

In addition, some potential healthcare applications of Apple Vision Pro, the company's new headset include:

• Virtual reality therapy: The headset could be used to provide virtual reality therapy for patients with mental health conditions, such as anxiety or PTSD. The headset's immersive 3D environment could be used to create realistic virtual scenarios that can be used to help patients cope with their conditions.

• Medical training: The headset could be used for medical training purposes. Doctors and nurses could use the headset to simulate real-world medical procedures. This could help them to improve their skills and knowledge without having to put patients at risk.

• Education: The headset could be used for educational purposes. Students could use the headset to learn about different subjects in a more immersive and interactive way.

These are just a few of the potential healthcare applications of Apple Vision Pro. As the headset becomes more widely available, it is likely that we will see even more innovative ways to use it in healthcare.

Final Thoughts:

Apple is focused on the healthcare industry for a number of reasons, including:

• The healthcare industry is large and growing. The global healthcare market is expected to reach $12.8 trillion by 2028, and the US healthcare market is expected to reach $5.8 trillion by 2025.

• The healthcare industry is ripe for innovation. There are many opportunities for Apple to use its technology to improve healthcare, such as by developing new ways to track health data, diagnose diseases, and deliver care.

• Apple has a strong track record of innovation in consumer electronics. The company has a history of developing products that are both popular and innovative, such as the iPhone, iPad, and Apple Watch.

• Apple has a strong brand reputation. The company is known for its high-quality products and its commitment to privacy.

Apple's focus on the healthcare industry is evident in a number of its products and initiatives, including:

• The Apple Watch, which has a number of health-tracking features, such as a heart rate monitor and an ECG app.

• The Health app, which allows users to store and track their health data from a variety of sources.

• The ResearchKit and CareKit frameworks, which allow developers to create apps that collect and share health data.

• The Apple Heart Study, which is a research study that uses the Apple Watch to track heart health.

Apple is also investing in a number of healthcare startups, such as AliveCor, which makes a heart monitor that can be used with the Apple Watch.

It remains to be seen how successful Apple will be in its efforts to disrupt the healthcare industry. However, the company has a number of advantages that could give it an edge, such as its strong brand reputation, its track record of innovation, and its access to a large customer base.

Engage with the HealthTech Community

HealthTech M&A Newsletter from Nelson Advisors - Market Insights & Analysis for Founders & Investors. Subscribe today! https://lnkd.in/e5hTp_xb

HealthTech M&A Advisory by Founders for Founders, Owners & Investors. Buy Side, Sell Side, Growth and Strategy mandates - Email lloyd@nelsonadvisors.co.uk

HealthTech Thought Leadership from Nelson Advisors - Industry Insights & Analysis for Founders, Owners & Investors. Visit https://www.healthcare.digital