Gene Munster: FDA approval is the key to Apple’s health ambitions

“The obstacle for Apple is that from a clinician’s standpoint, the majority of data the Watch collects is primarily for ‘entertainment purposes.’”

From a note posted Thursday to Loup Ventures subscribers:

The Wall Street Journal reported that Apple has an internal project codenamed “Casper,” which has explored the possibility of creating an Apple primary care network. A primary care network is a group of doctors and clinics that focus on delivering basic medical care (general practitioners). While Casper is still an active initiative, we believe it’s unlikely Apple ultimately builds a primary care network given it’s outside of their core competency. Instead, we see the company’s health ambitions anchored in devices and data that can be leveraged by clinicians for care. To achieve this, Apple must secure more Class II-grade medical device features for Watch and potentially AirPods. Class II designations give healthcare providers the legal confidence to trust and use the data these devices collect…

In our conversations with healthcare professionals, the obstacle for Apple is that from a clinician’s standpoint, the majority of data the Watch collects is primarily for “entertainment purposes.” We feel this perspective understates the value of the data these devices collect and validates the hard line between the data gathered from a Class I versus a Class II device in the eyes of a clinician.

It’s worth noting that today the Watch does have a Class II designation for its atrial fibrillation (Afib) feature, granted by the FDA in 2018. A Class II designation ensures that collected data is accurate and safe to be acted upon. Class II certifications have yet to be secured for other Watch features, including general heart rate and blood oxygen monitoring.

We believe one indication regarding Apple’s seriousness related to the health opportunity is whether the company achieves Class II designations for other features on Watch. If successful in winning more approvals, it would pave the road to unlock greater wellness, along with economic value, from Watch data. For example, a patient could submit years of Watch data upon entering the ER, which would be a significant, real-time advantage in diagnosis and treatment. The core question is whether Apple engineers can deliver FDA-grade data accuracy across the spectrum of Watch features.

My take: Muster estimates that 13% of iPhone users are Watch users, and he believes this can, over time, rise to more than 40%. With a billion iPhones, that adds up.