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Why This FDA Approval Could Be a Huge Deal for Apple

By Danny Vena - Dec 11, 2017 at 9:06AM

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The FDA approval for an Apple Watch accessory could be the first step in a long journey that could amount to huge profitability for the iPhone maker.

When Apple Inc. (AAPL 0.03%) released the Apple Watch Series 3 earlier this year, the company's aspirations in the field of health became increasingly clear. The Apple Watch was described as "an amazing health and fitness companion" and "the ultimate device for a healthy life."

Several other recent developments point toward a broader entry into personal health, and there's mounting evidence that this could be Apple's next big growth area.

The U.S. Food and Drug Administration (FDA) has approved the first medical device accessory for the Apple Watch, the KardiaBand electrocardiogram (EKG) reader by med-tech start-up AliveCor. The KardiaBand replaces the original watchband and combines a sensor with an artificial intelligence (AI) app that can detect an abnormal heart rhythm or atrial fibrillation (AFib). This could be the first step of potentially a massive opportunity for the iPhone maker -- the healthcare market.

Two different models of the Apple Watch linked by their bands.

The Apple Watch is a signal of Apple's entry into the broader field of healthcare. Image source: Apple.

The heart of the matter

Atrial fibrillation is a heart condition that affects more than 30 million people worldwide. The condition causes an irregular, rapid, or chaotic heart rate that can lead to heart failure and is a leading cause of stroke. A full 25% of the population over the age of 40 are at risk of developing the condition. 

The KardiaBand continually monitors the user's heart rate to determine what is "normal" for that individual. By evaluating the correlation between heart rate and physical activity, the device establishes a baseline, which can then be used to detect when something is amiss. The AI-infused app combines the user's personal history with a treasure trove of data from healthy and sick patients to analyze when the wearer might be in trouble.

This expands on technology already used by the Apple Watch, which can identify spikes in heart rate. The Watch uses green LED lights that flash "hundreds of times per second" combined with sensors that can detect blood flow in the wrist, and AI to control it all. This allows the device to detect heart rate and rhythm. 

The KardiaBand takes measurements every five seconds and will prompt the user to initiate an EKG if an abnormal reading is detected. This data can then be shared with a healthcare professional in the event of an emergency.

An Apple Watch featuring the KardiaBand and displaying a heart rate.

The KardiaBand is the first FDA-approved accessory for the Apple Watch. Image source: AliveCor. 

Additional developments

The FDA has already enlisted the help of Apple as one of nine companies chosen to participate in a pilot program that seeks to accelerate the process for approving software-based devices and medical apps. The regulator has been reviewing its approach to technology as part of its Digital Health Innovation Action Plan, with plans to "modernize the regulatory framework" and reduce the amount of red tape necessary for the approval of these apps and devices.

Apple has also been involved in a number of heart-related studies using the Apple Watch and its built-in heart rate monitor in combination with other apps. Now, Apple is teaming with Stanford Medicine in launching the Apple Heart Study, which is enlisting Apple Watch wearers to collect heart data using the device's sensor. Apple embarked on this path after users reported that the device had saved their lives.

"Through the Apple Heart Study, Stanford Medicine faculty will explore how technology like Apple Watch's heart rate sensor can help usher in a new era of proactive healthcare central to our Precision Health approach," said Lloyd Minor, Dean of Stanford University School of Medicine. "We're excited to work with Apple on this breakthrough heart study."

This is a big deal

This seemingly small step could be the beginning of big business for Apple. According to the most recent data available, spending in the U.S. healthcare market reached $3.3 trillion in 2016. Even a small slice of the market could eventually generate huge profits for Apple, as the company seeks growth areas outside of its iconic iPhone.

This could be the start of something big.

Danny Vena owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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