Less than one year since its IPO, Fitbit is trying to deepen its penetration into the healthcare ecosystem beyond the health and fitness market. In its 2015 fourth quarter earnings call, CEO and Co founder James Park highlighted collaborations it has with two of the largest health insurers in diabetes and weight management and plans to invest in software that engages users in their health, hinting at its acquisition plans.
Park made several specific references to pilots of its devices to improve health well beyond the quantified selfers that have historically been its bread and butter. Park highlighted its aspiration to reduce obesity and improve the management or prevent chronic conditions such as Type 2 diabetes, asthma, sleep apnea, depression and anxiety.
He also noted it was very active in the clinical research community and cited studies using its device from reducing body mass index to its use in assessing inpatient recovery by Mayo Clinic to studies in activity levels in post-menopausal women. Park added that he believed the company had an important role to play in healthcare.
“We do have specific examples where companies are seeing reductions in healthcare premiums because of Fitbit, but we’re in the early stages of these programs,” said Park. “We are the leading device and preferred device in these programs.”
CFO William Zerella added: “A lot of investment will focus on integration with the health system. That will come more on the software side to guide people to reach their healthcare goals.”
On the subject of its partnerships with the large insurers, Zarella said it was premature to speculate how that will play into its business model, but that it would not see any revenues this year. It would be a factor in 2017 and beyond.
Zerella added that it had increased headcount across sales and marketing and engineering.
On the employer wellness front, which accounts for less than 10 percent of revenues, Park said it added 1,000 enterprise customers that have integrated its Fitbit corporate wellness program, including Fortune 500 companies such as Wendy’s, Marathon Petroleum, and nonprofits such as Teach for America and University of Kentucky. He added that it would expand the corporate wellness programs beyond the U.S. this year.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Fitbit used the earnings announcement to counter critics who view it as failing to retain large numbers of users and for posing as a validated healthcare device (it’s facing a class action lawsuit over the alleged inaccuracy of its heart rate monitor on its Charge HR and Surge smartwatches). By aligning itself more closely with health insurers and pointing to the use of its devices in clinical studies, it also elevates its position from being dependent on the fickle tastes of consumers to becoming a more serious business to business player.
The company more than doubled its revenue from $745 million in 2014 to $1.85 billion in 2015 and net income grew to $175 million. It sold more than 8.2 million connected health and fitness devices last year. It retained 74 percent of its registered users in 2015, with 13 million active users at the end of 2015.
Fitbit’s Alta and Blaze devices are shipping this quarter in its first global launch. In another first, the company made its Super Bowl commercial debut, but Park declined to say what kind of response it met or how much it paid for the commercial.
Market research from ABI Research noted that activity tracker shipments increased nearly 80 percent in 2015 compared with 2014, helped by new players entering the market and rising sales outside the U.S. It projected that activity tracker shipments will grow to 87 million in 2021.
