3 Spectacular Ways Samsung Could Disrupt the Health Care Industry

Samsung is traditionally known for its consumer electronics, but it could soon disrupt the health care industry thanks to its investments in these three fields.

Jun 7, 2014 at 11:05AM

When most investors think of Samsung (NASDAQOTH:SSNLF), they inevitably think of smartphones, tablets, and TVs. Yet over the past several years, Samsung has also beefed up its presence in the health care industry through investments in medical devices, pharmaceutical products, and wearable devices.

Let's take a closer look at Samsung's growth in these three areas, and how the tech giant could also disrupt these markets, as it did with mobile devices.


Source: Wikimedia Commons.

$10 billion in medical device revenues by 2020
Samsung's big push into the health care market started in 2010, when it acquired a controlling stake in ultrasound device maker Medison. It then acquired health care equipment maker Nexus the following year and medical imaging company NeuroLogica last January. Samsung then launched GEO, its own line of medical imaging devices, last June.

By 2020, Samsung expects to generate $10 billion in revenues from medical devices, which would account for 2.5% of its projected annual revenue of $400 billion. By comparison, General Electric (NYSE:GE), one of the largest medical equipment companies in the world, reported $18.2 billion in health care revenues last year.

General Electric has already launched a pre-emptive strike against Samsung in South Korea, which accounts for roughly a third of its output of ultrasound products. In 2013, GE made its first move in South Korea by acquiring the mammography assets of Rayence for an undisclosed amount. It also intends to invest approximately $180 million to expand its R&D and manufacturing base in the country. GE initially entered the South Korean market in 1984 through a joint venture with Samsung, but that partnership has since ended.

A $2 billion investment in a $23 billion industry
Samsung is also investing at least $2 billion in the biotech industry, with a specific focus on biosimilars, the generic versions of biologics -- drugs made or derived from living organisms.

The global market for biosimilars is expected to grow from $1.2 billion in 2013 to over $20 billion in 2019, according to a research firm Frost & Sullivan. That growth is expected to be fueled by patent expirations for major blockbuster drugs, deeper penetration in developed markets, and higher demand in lower income emerging markets.

Samsung is entering the biologics and biosimilars market through two joint ventures -- Samsung Biologics and Samsung Bioepis. Samsung Biologics, a joint venture with Quintiles Transnational, currently holds agreements with Roche to manufacture biologics. Samsung Bioepis, a joint venture with Biogen Idec (NASDAQ:BIIB), is focused on developing biosimilars.

Samsung plans to launch its first biosimilar version of Amgen's (NASDAQ:AMGN) Enbrel in Europe in 2016, and a version of Johnson & Johnson (NYSE:JNJ)/Merck's Remicade by 2017. Both drugs, which can cost over $20,000 per patient per year, are blockbuster treatments for rheumatoid arthritis and other inflammatory diseases. 

Samsung will face competition for both biosimilar versions. Hospira and Celltrion's biosimilar version of Remicade was approved in Europe last September, while Novartis' Sandoz unit is testing a biosimilar version of Enbrel in late-stage trials.

Licensing the foundations for modular wearables
Last but not least, Samsung recently laid out the groundwork for a new generation of modular fitness trackers.

The Simband, which the company unveiled at the end of May, is a reference design for a wearable device consisting of customizable sensors that can be swapped out by third-party companies. For example, one sensor might be used to monitor heart rate, while another could be used to measure hydration levels. Manufacturers can create their own sensors, or mix and match existing ones to create their own branded devices.

Although Samsung doesn't intend to sell the Simband directly to consumers, it plans to profit from licensing its design to other companies. This could help the company gain market share in the wearables market by unifying a fragmented universe of fitness bands with a single hardware foundation.


Samsung's Simband. Source: Samsung.

That would be a far more ambitious effort than Samsung's consumer-facing Galaxy Gear smartwatches, which are frequently criticized for their high prices, weak app support, and dependence on Galaxy smartphones. Demand for smart watches and fitness bands is expected to surge soon -- research firm Canalys forecasts global shipments will rise from 8 million in 2014 to over 45 million by 2017.

The Foolish takeaway
Medical devices, biosimilars, and wearable fitness trackers represent three key ways that Samsung could become a force to be reckoned with in the health care industry. Investors should keep a close eye on Samsung's efforts in all three areas to understand how the tech giant could become less dependent on consumer electronics in the near future.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Leo Sun owns shares of Apple. The Motley Fool recommends Johnson & Johnson and Apple. The Motley Fool owns shares of General Electric Company, Apple, and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers