On December 3rd, ResMed announced the acquisition of digital therapeutics maker Propeller Health for $225 million to help establish itself as a leader in COPD management across all stages of the disease. Digital medicines can help to personalize treatments, monitor patients in real-time, detect day-to-day changes in disease condition and increase patient adherence.
Founded in 2010, Propeller helps people and their doctors better manage their COPD and asthma. Propeller’s digital medicine platform consists of small sensors that easily attach to consumers’ inhalers and pair with a mobile app to automatically track medication use and provide personal feedback and insights.
Propeller’s clinically validated solutions have demonstrated a 58 percent improvement in medication adherence, a 48 percent increase in symptom-free days and a 53 percent reduction in emergency room visits. Propeller’s ability to support people in stage II and III severity levels of their COPD are complementary to ResMed’s own suite of cloud-connected ventilators for those with stage III and IV COPD, including Astral, Stellar and AirCurve 10 ST-A with iVAPS – plus ResMed’s new portable oxygen concentrator Mobi.
Respiratory Care Market Infancy
According to recent Ressearch2Guidance analysis, the market that Propeller Health operates in is still a niche and lags three years behind other digital segments that focus on chronic conditions (e.g. diabetes). ResMed announced that it was interested not only in augmenting their mainstream business with Propeller Health’s digital medication adherence solutions but also in stepping into Propeller Health’s established partnerships with pharma, healthcare, and payor organizations.
Why the Propeller Health Acquisition Is Good for ResMed
Ressearch2Guidance outlined ten reasons why this deal will turn out to be a good investment for ResMed divided into market-related and those relating to the company’s position within the digital respiratory market:
Market arguments:
1. An enormous addressable market: Asthma and COPD are one of the most dangerous epidemics, which affect both developed and developing economies.
According to WHO, asthma and COPD affect more than 334 million and 250 million people worldwide correspondingly. Moreover, the prevalence of both conditions is expected to increase due to demographic, social, and behavioral factors.
2. Big digital opportunity: Digital respiratory solutions could target more than 270 million patients by 2023.
The increase in the prevalence of both major chronic conditions is set to drive the global digital respiratory opportunity, i.e. the total number of diagnosed patients with a capable mobile device that can provide access to digital services. The global digital asthma opportunity will increase to 152 million people, whereas the global digital COPD opportunity will grow to 121 million people by the end of 2023 (Digital Respiratory Report, Research2Guidance 2019).
3. The high lifetime value of asthma and COPD patients.
The lifetime value varies from country to country. In the USA, the lifetime value of a COPD patient is estimated at US$ 200,000, whereas the lifetime value of an average asthma patient can be three times as big due to higher life expectancy. Digital solutions are expected to capture parts of these lifespan revenue streams.
4. The revenue opportunity for pharma companies.
Digital respiratory solutions promise to improve patient’s medication adherence. The market for asthma and COPD related drugs is a multi-billion USD market reaching more than US$ 42B in 2018. Any improvement of medical adherence will have a direct impact on pharma’s revenues.
Propeller Health’s market position:
5. The impressive network of industry partnerships that Propeller Health has built during its 8-year market life.
Starting from 2013, Propeller Health has established partnerships with Boehringer Ingelheim (2013), GSK (December 2015), Aptar Pharma (February 2016), Vectura (May 2016), Novartis (February 2017). Apart from pharma and generic drug manufacturers, Propeller Health has succeeded in reaching other major stakeholders. All in all, the company claims to have established 65 commercial programs with pharmaceutical companies, pharmacy benefit managers and healthcare systems.
6. The global presence: The company’s programs have reached several thousands of patients across sixteen countries.
7. The extensive coverage of the available device-drug combinations.
As Propeller Health has the highest number of partnerships with pharma, their add-on inhaler sensors cover nearly 90% of the currently available types of inhalers. Due to the partnership with GSK, Propeller Health’s portfolio includes such the world’s top inhaled corticosteroid drugs as Advair and Flovent.
8. The substantial clinical evidence, proven patient outcomes, and a wide portfolio of FDA clearances.
Having received nine FDA clearances, Propeller Health has demonstrated clinical outcomes in 15 peer-reviewed studies. The company reported a 58% increase in medication adherence, a 79% reduction in rescue inhaler use, a 63% increase in asthma control, etc.
9. An outstanding market position in the digital respiratory market.
Although hundreds of digital respiratory solutions are available globally, Propeller Health’s width and quality of service offering, as well as its partnership ecosystem, are outstanding.
10. Availability of SaaS services and the opportunity to roll out a full-fledged patient monitoring solution.
Apart from connected inhalers, Propeller Health offers an additional cloud-based patient management platform, which allows the company to decrease its dependency on device sales and create more value via SaaS business models.
Untapped Potential of Digital Respiratory Market
ResMed’s acquisition of Propeller Health illustrates the untapped potential of the emerging digital respiratory market. Connected inhaler solutions will continue to stimulate the emergence and development of a more complex ecosystem, which will include other value-adding services, result in new business models, and eventually generate the revenue streams.
