MDDI_Medical Device & Diagnostic Industry

MDDI, June 2014

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MD + DI MEDICAL DEVICE AND DIAGNOSTIC INDUSTRY JUNE 2014 | 13 Covidien Acquires Zephyr in Trendsetting Move I n a surprising move, Dublin, Ireland- based Covidien has quietly purchased Annapolis, MD-based wearable technol- ogy firm Zephyr Technology. This marks Covidien's—and presumably any traditional medtech firm's—first foray into wearables, undoubtedly making the company a trend- setter given that wearables is arguably one of the hottest trends in the tech world. It appears to be a small acquisition. Covi- dien is not releasing transaction details but revealed in an quarterly earnings filing that it acquired three companies in the first six months of fiscal year 2014 for a grand total of $128 million. Daniel Levine, director of the Avant- Guide Institue in New York and a close watcher of social and marketing trends, noted that wearables is an undeniable con- sumer trend and this acquisition by Covi- dien is very much on the cutting edge. "Many people in the trends arena are talk- ing about 2014 as finally being the year that wearables hit their tipping point," Levine says. "Leading the charge for wearable com- puting have really been two industries—one is sports and the other is medicine." Similar acquisitions by device makers and diagnostics companies may be coming given how the medtech sector is aiming to boost its service capabilities and play across the healthcare continuum. "A number of wearables with clinical ap- plications will now become good acquisi- tion targets," says Keith Liu, vice president of Klick Labs, the digital innovation lab at digital agency Klick Health in Ontario. But the deal leads to several questions: Can this acquisition truly provide Covidien with the tools to address some of today's healthcare challenges—namely keeping pa- tients healthy when they leave the hospital? Is Covidien hoping to have a direct relation- ship with consumers by jumping onto the wearables bandwagon? Where does the ac- quisition fit inside the company's portfolio of products? Rhonda Luniak, a Covidien spokeswom- an, declined to provide too many details about its venture into the wearables space, but in very broad terms noted where Zephyr fits saying, "Integrating Zephyr into [Covidien's] respiratory and moni- toring solutions business will allow us to broaden our monitoring portfolio across the continuum of care while building our wireless and connectivity capabilities. . ." Bob Hickey, a partner at Newport Board Group, a strategic consulting and business advisory firm, says Covidien's acquisition underscores the importance of remote monitoring in the care of patients amid a changing healthcare landscape. "I think we are emerging into a world that is moving toward remote care and remote monitoring where technologies like this will be part of the enabling system," Hickey says. "A mosaic is developing. Pieces of different technology are going to be integrated into the care de- livery of patients." Founded in 2003, Zephyr is one of the earliest companies to begin making wear- ables to enable so-called physical status monitoring. The company makes different products including the BioHarness chest straps and BioPatch skin patches that can track heart rate, breathing rate, and pos- ture, among other vitals, through its com- panion software, ZephyrLife. In the hospital setting, ZephyrLife paired with the BioPatch device can allow real- time updates of a patient's heart rate, respi- ration rate, ECG, and positional and activity information on a central monitoring sta- tion. When a patient moves from a hospital to a long-term care facility or skilled nurs- ing facility and later the home, doctors can still be aware of the patient's health status through updates on a Web-based portal, as can the patient. "I am not an employee of Covidien, and I can't say this is why Covidien bought the company, but I think that monitoring pa- tients when they travel domestically or in- ternationally for potential complications postsurgery is how this acquisition makes sense to me," says Kevin Huffman, medical director with American Bariatric Consul- tants who is often hired by Covidien to train primary care physicians on how to care for patients who have undergone bariatric surgery. In other words, Zephyr's products could fit nicely as an add-on with Covidien's surgi- cal devices unit, one of its core businesses. But Zephyr has a sports fitness busi- ness and a consumer business as well. It sells its heart rate monitors through Ama- zon.com as well as its own Web site. Elite athletes and even CNN's Dr. Sanjay Gupta have trained on the system to get "medical- grade" knowledge about their bodies to know exactly which area to improve upon. If those consumer and sports business- es are allowed to continue, and once the technology is validated in a hospital set- ting, Hickey believes Covidien could con- ceivably become like a Johnson & Johnson that has a strong connection with the aver- age consumer. Ultimately, however, the true value of the acquisition is in the way it shows a glimpse of a tantalizing future in healthcare pow- ered by remote monitoring. "You and I are going to be living in a world where cloud-based instantaneous access to our complete medical profile will be avail- able to us anywhere we go, even if we are on a safari in Tanzania," Hickey says. —AP Image courtesy of CIMMERIAN/iSTOCKPHOTO.COM ES451551_MD1406_013.pgs 06.04.2014 04:13 UBM black yellow magenta cyan

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