Author Archives: Nick Kurkjy

Consumer Health Applications Receive the Most Attention Today, but the Future Money Is Elsewhere and up for Grabs

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Wearables for health fall into a wide range of technologies, functions, use cases and over-arching regulatory frameworks that developers and prospective entrants have to understand in order to effectively compete. Using an underlying taxonomy for human health, we establish a health-focused wearables taxonomy around three major categories – applications, use cases, and form factors – the three areas critical to understanding the current state of this emerging market. We examined the product specs of 224 wearable devices from 209 developers, limiting the analysis to devices that are either currently on the market or available for pre-order/crowdsource funding. Looking inside the quality and quantity of devices in the ecosystem presents a snapshot weighted toward what is faster to commercialize and drive adoption for today, but with plenty of space to target for longer term and far more valuable applications and markets.

The most notable segmentation looks at applications, comparing wearables activity in consumer health, clinical monitoring, and therapeutics devices. Consumer health applications relying on proven but feature-limited sensors currently receive the most attention, with nearly 2/3 of all devices targeting consumer health applications (63%). The reasons for this are both technical and structural. Many available devices do not conform to more stringent clinical accuracy requirements, leaving developers with limited options in more lucrative – but harder to develop – clinical markets. In addition, a large number of companies shy away from having to deal with regulators, choosing to stay in the unregulated consumer health markets.

Within the consumer space, more than half focus on tracking and training guidance needs of physically active users, a space where the name brands are well known and struggling to maintain any meaningful level of differentiation. Large, established players with specialized products such as Fitbit, Jawbone and Garmin are now facing increasing competition from multipurpose smartwatches from Samsung, Apple and Pebble. That said, a growing number of applications focus on monitoring everyday activities that have a direct impact on users’ well-being, such as nutrition and sleep quality. These less crowded spaces represent key pieces in the fully quantified self that will be needed for optimal health and wellness.

Despite the understandable focus on the consumer space, developers must position for the much larger future of clinical monitoring devices that will overtake the consumer space in market size within the coming decade. More sophisticated devices will enable this growth, and the smart consumer device manufacturers will have this goal in mind. Look for many athletic developers to move toward clinical applications as their product quality improves. Most athletic devices do not have the accuracy or reliability for clinical applications today, but improving technology, including sensors, will push them toward more lucrative clinical applications. One key class, in-vitro diagnostics technologies, are barely making a dent in the wearables market today, but are going to be the largest portion of the clinical mHealth ecosystem of the future. With the advances in sensors, microfluidics, and energy storage, expect many of the diagnostic tests to be implemented in the wearable form factors, allowing patients to be diagnosed outside of traditional care settings.

It is a perfectly fine strategy to follow the hype of consumer mHealth devices, but those who set and follow roadmaps for the long game will reap the rewards.

Google’s Smart Textile Project Follows the Wrong Market

Google recently announced Project Jacquard, to build touch-sensitive textiles in clothes using conductive yarns in partnership with iconic jeans maker Levi Strauss. The current prototype allows users to turn on light-emitting diode (LED) bulbs with a tap on the textile, increase or decrease brightness with vertical swipes, and change color with horizontal swipes. Google said the conductive yarns are strong enough to be woven on any industrial loom, but did not disclose technical details or how they are made. The company is also developing custom connectors, electronic components, communication protocols, and an ecosystem of simple applications and cloud services for the project. Google hopes Project Jacquard can help designers and developers to build connected, touch-sensitive textiles into their own products.

As Google moves to partner with fashion brands before the company can establish solid and clear use cases for smart textiles in the consumer market, expect Project Jacquard to end in a similar way as Google Glass. Partnering with fashion brands is becoming a more common strategy for wearable electronics. For example, Intel partners with Opening Ceremony, a fashion design company, on its smart bracelet MICA, with Luxottica on smart glasses, and Fossil on smart watches, while Fitbit collaborates with Tory Burch (client registration required). However, the major factor holding back smart textiles and most wearables isn’t that they don’t look good enough, it’s that there is not a compelling use case for consumers to pay the extra cost they bring. What’s more, value and success in smart textiles will come primarily from medical applications, not fashion (client registration required). Expect the partnership with Levi to generate some attention-grabbing headlines, but end in a similar fashion to the Google Glass, with limited growth.

Partners Healthcare: Wireless Medical Devices Vulnerabilities Remain a Barrier

What They Said

Lux recently attended BIOMEDevice Boston 2015 and the Wireless Medical Devices breakout session. During a panel titled “Product Development Opportunities for a Highly Regulated Environment,” panelist Rick Hampton, Wireless Communications Manager for Partners Healthcare, expressed his generally cautionary approach to wireless device integration at the major Massachusetts healthcare provider. Hampton said, “We treat every wirelessly connected device as a potential vulnerability in the hospital, so every device must use the WPA2-PSK certification protocol and unique 24-bit security keys.” He went on to add that medical device companies should avoid adding wireless communications on devices that do not require them, such as large, stationary equipment. Furthermore, when asked about his openness to iPhone and other smartphone-based medical devices, Rick said that Partners would need to individually encrypt each device and not allow any outside server connection.

What We Think

The sentiment shared above should not surprise those developing novel technologies for medical environments. Healthcare providers are notoriously conservative when faced with technology that could compromise their patients’ health or privacy, and rightfully so for moral and regulatory reasons. More importantly, Hampton’s emphasis on acting as a gatekeeper for wireless devices, only allowing those deemed necessary and safe from tampering to connect to the hospital’s wireless network, presents a major barrier to adoption for wirelessly connected medical devices on the whole. Such a policy would seriously damper the potential value of any smartphone-based devices for hospitals. However, those developing wirelessly connected medical devices should look increasingly to the home and less stringent clinical environments, such as doctor’s offices and long-term care facilities, as the major avenue for adopting their products. As healthcare providers and patients increasingly focus on preventive care models, general technology adoption will grow much faster in non-hospital settings, presenting a relatively open and potentially more lucrative market going forward. Those focused on wirelessly connected devices should accept that the barriers to adoption make the hospital market a relatively risky proposition compared to less-centralized care markets, despite the latter’s relative immaturity.

The mHealth IVD Market Reaches $11 Billion by 2023

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mHealth leverages common consumer electronics and mobile communication technologies to collect and analyze personal health data, with the growth of the mHealth device market driven by two major factors: Increasing ubiquity of mobile devices, wireless communication networks, and electronic medical records around the world reducing the cost to produce and implement mobile health technologies; and growing demand for point-of-care (POC) technologies that increase global access to health care at a lower price than existing medical technologies. mHealth devices have made significant waves in recent years, but much of the interest and technology development has focused on the vital signs monitoring and activity tracking spaces largely shunning a similarly sized opportunity in the in vitro diagnostics (IVD) space. This must, should, and will change and numerous widespread indications becoming addressable by an emerging generation of devices. To shine a light on the growth, we built a bottom-up mHealth IVD model which lays out an $11 billion market by 2023, growing from below $1 billion in 2014.

A common theme in any health-related application space is the difference between the clinical and consumer-focused segments of the market. Products developed for these two segments face different regulatory requirements, accuracy expectations, and paths to market. Clinical devices are largely defined by increased regulatory barriers and marketing toward health care professionals, while consumer devices are unregulated and sold directly to users. Consumer-focused devices consistently outsell clinical devices in terms of units sold over the studied time period. However, higher clinical profit margins lead to runaway growth for clinical devices, resulting in an $8.2 billion clinical mHealth IVD market in 2023.

The development status and access to health care in potential markets has a significant effect on the commercial potential for different technologies in the mHealth space. More developed countries own 83% of the fledgling mHealth IVD market in 2013 despite constituting less than 20% of the global population. However, less developed countries will grow to represent 52% of the total mHealth IVD market by 2023, fueled by lower device cost of goods sold (COGS) and broad demand for mobile diagnostic platforms in low-resource settings. It will be incumbent on developers to make appropriate choices between “leapfrog” or “hand-me-down” approaches to the burgeoning market in less developed regions. Although the approach used for IVD platforms should fit the indication of focus, it is clear that mHealth IVD devices are better applied as a leapfrog technology. Those interested in developing IVD technologies for LD markets should focus on mHealth devices. Incumbent medical device firms will likely opt to develop hand-me-down devices to make the best of existing expertise and supply chain understanding. This will produce less than optimal solutions for LD markets, which can affect adoption over the long-term as disruptive alternatives scale up production and marketing.

Source: Lux Research report “Less is more: How low-resource settings will come to dominate the mHealth IVD market” — client registration required.

Obama’s Immigration Action Raises Wages, but Human Labor Still Cheaper Than Robots

On November 20, 2014, U.S. President Barack Obama announced an executive order to grant an estimated 4 million illegal immigrants who have lived in the U.S. for at least five years protection from deportation. In exchange for this protection, the executive order requires workers to submit to a background check and pay taxes on wages earned. This legal status will give formerly unauthorized workers many of the same protections as legal workers, such as worker’s compensation and the right to a minimum wage. According to the 2011/2012 National Agricultural Workers Survey (NAWS) conducted by the U.S. Department of Labor at least 48% of hired crop farmworkers in the U.S. are undocumented and about half of those undocumented workers are considered “settled,” which would indicate qualification for protection under the recent executive order.

Given this large percentage of potentially affected farmworkers, the recent executive order could increase the cost to harvest many fruit and vegetable crops that rely heavily on undocumented farm laborers. The U.S. Department of Agriculture (USDA) reported the average U.S. fieldworker wage as $11.52/hour on November 20, 2014; however, undocumented workers are commonly paid far less than this average. If the recent executive order remains in effect or if Congress passes comprehensive immigration reform, it would be reasonable to assume a significant increase in the wages paid to all farm workers, including U.S. citizens.

Automated harvesting robots have become an interesting topic in recent years as a potential lower-cost alternative to hand-harvesting crops, which is the standard for many high-value fruit and vegetable crops. However, cheap labor supplied by undocumented workers has largely limited robotic harvesting technologies’ use to date because of high initial capital equipment costs and the resultant long payback periods. Obama’s recent executive order has the potential to shorten payback periods for robotic harvesting robots, potentially providing substantial market demand for technology previously considered too expensive.

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To illustrate this point, we took the example of Spanish startup AgroBot (client registration required), which developed an automated strawberry picking robot with a capital equipment cost of $250,000. The company claims that its technology can reduce the cost of labor for harvesting strawberries by 50%. The table above shows the savings per acre and the payback acreages for the company’s system for different worker wages. Considering the average U.S. strawberry farm is only 4.7 acres – 33,000 acres and split between 7,000 farms – even at an average fieldworker wage of $15/hour the payback acreage is still 75 acres. Therefore, assuming three harvests per year, an average U.S. strawberry farmer would break even only after five years at this wage. This short analysis shows that automated harvesting robot technology is still struggling to be a viable product for individual farmers today, in spite of rising labor costs. However, not all robotic harvesting solutions are as large, complex, and expensive as AgroBot’s solution. AgroBot has over engineered its harvester by incorporating 60 robotic arms, making for a complex system that may prove unreliable. Robotic harvesters need to move away from building cumbersome equipment and focus on smaller, simpler, and most importantly cheaper systems in order to successfully automate harvesting. Several companies are already taking this approach, for example Vision Robotics (client registration required) has proven that it can build a robotic grape vine pruner for $100,000. Considering the cost of a high value crop like grapes, Vision Robotics’ solution may actually prove useful to not just agricultural advisors and service providers but to individual farmers as well. Clients interested in the space should focus on developing partnerships with robotic companies building simplified harvesting solutions that will offer the shortest pay back periods and high product reliability.

UK Doctors 3D Print Patient a New Face

Doctors in the UK recently used computer-aided design (CAD) software and 3D printed components to reconstruct the face of a motorcycle crash survivor. Dr. Adrian Sugar, a consultant maxillofacial surgeon at Morriston Hospital in Swansea, U.K., where the surgery took place, said, “[W]e produced guides at each stage of the surgical process, not only to cut the bone but to reposition the bones, and then we had custom implants 3D printed.” The surgical team spent months planning the procedure, which included taking scans of the patient’s face, creating a software model of his head, designing scaffolds to be used during the surgery, and the final implants. Dr. Sugar said that the team took extra care to document and design a repeatable process that would enable much shorter turnaround time for future surgeries. He added, “We’re talking maybe days as opposed to months. The ultimate aim is to undertake planning and be able to use custom-made guides and implants on a routine basis.”

As 3D printing makes a splash across multiple technology areas, one of the most promising could be medical implants and prosthetics. As mentioned in the report “Building the Future: Assessing 3D Printing’s Opportunities and Challenges” (client registration required), companies including Oxford Performance Materials (client registration required) and Arcam (client registration required) have already received U.S. Food and Drug Administration’s (FDA) 510(k) clearance for the use of their 3D printed materials for orthopedic and cranial implants. The ability to customize and quickly redesign 3D printed components has a specific added value for orthopedic implants and prostheses that need to be custom fitted to each patient. To this point, 3D printing has been restricted to passive medical applications. However, the emergence of 3D printing systems like those developed by Optomec (client registration required) that can deposit metal and plastic concurrently could enable the production of customized active implants – e.g. pacemakers, insulin pumps, and neurostimulators. Clients interested in new approaches to medical therapies should consider engaging with players in the 3D printing space that have a proven record of regulatory compliance, while steering clear of companies that claim medical applications with no proven track record.

Trimble Triples Down on Precision Ag

What They Said

Trimble, a location-based services company with its own precision agriculture offering dubbed “Connected Farm,” recently announced multiple acquisitions of companies in the space. The company announced that it acquired the assets of two sister companies, RainWave and Hydro-Engineering Solutions, focused on rainfall and watershed monitoring services respectively. In a separate release on the same day, Trimble also announced it had entered into an agreement to acquire IQ
Irrigation, a New Zealand-based GPS-enabled precision irrigation firm. Joe Denniston, Trimble’s VP of Agriculture, said, “With the solution, farmers can more efficiently utilize water by delivering the right amount of water to where it’s needed. By also staying apprised of other critical information via the Connected Farm dashboard – such as rainfall data and weather forecasts – farmers can make more informed irrigation decisions for their operations.”

What We Think

Through these acquisitions and its continued development of the Connected Farm platform, Trimble is making inroads toward establishing itself as a key precision irrigation player in an extremely crowded space. Many companies with offerings in precision agriculture, like John Deere, J. R. Simplot, and Monsanto, have significant market share in the space, but increasing competition and increased farmer adoption are set to grow the precision agriculture market substantially in developed and developing countries, making space for new players to successfully enter the fray. Companies not already focused on possible opportunities in precision agriculture should pay close attention to this and other similar acquisitions in the space. Those companies with any existing precision agriculture capabilities should take notice and look for partnership and acquisition opportunities including advanced irrigation, weather forecasting, input control, and crop monitoring technologies.