Apple’s top secret healthcare startup has been revealed

Sascha: [00:00:03] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. Apple has been secretly working on a revolutionary health care project for years, one they started when Steve Jobs was still CEO. And here's a clue to what it's about. Did you know? 11.5% of global health expenditure is spent on diabetes. That's 966 billion U.S. dollars. Roughly one in ten Americans are diabetic, and in Australia, it's roughly one in 20. Every day, most diabetics prick their skin to test their blood sugar levels. Apple's secret project has been working on technology to test blood sugar without having to practice skin. And they hope to one day build this technology into the Apple Watch. And this will be technology that everyone will have access to. So anyone at risk of getting diabetes will know when they're pre-diabetic. 

Audio Clip: [00:01:04] If you zoom out into the future and you look back and you ask the question, what was Apple's greatest contribution to mankind? It will be about health. 

Sascha: [00:01:15] It's Friday, the 17th of March. And today I want to know, is Apple about to become a healthcare giant? To talk about this today, I'm joined by my colleague here at Equity Mates. It's Darcy Cordell. Darcy, welcome to The Dive. 

Darcy: [00:01:30] Thank you, Sascha. Pretty exciting episode. This one bit of a moonshot project.

Sascha: [00:01:35] Fascinating. Do you have an Apple Watch? 

Darcy: [00:01:37] I don't. I've actually had one in the past, and I wasn't a massive fan. But if they got this technology in there, I might have to reconsider. 

Sascha: [00:01:45] Interesting. Interesting. I've so far resisted because I know I get very addicted to technology and I feel like having it on my wrist all the time might be a step too far. But everyone I know who has an Apple Watch is a massive fan. Which brings us to this topic today. Apple is kind of already a player in the health space because the watch is marketed as a health device on your wrist. 

Audio Clip: [00:02:09] The tagline is The future of health is on your wrist. And so I think they're being very intentional about saying that this device is not just a wearable, it is really about health.

Sascha: [00:02:20] But Apple has other elements that speak to this health care space. What have been some of their pushes into this industry so far? 

Darcy: [00:02:28] Yeah, Apple's been dabbling in health care for years with a bit of mixed success. There's the Apple Watch itself and that has a number of health care features within it. There's the heart rate monitor, which looks out for irregular rhythm, the ECG app, the AFib history, blood, oxygen levels and fall detection. But Apple has also experimented outside the watch. There's the health habit app, which they were asking employees to use and test out. And there are a couple of other projects that they've worked on over the years. 

Sascha: [00:02:56] But helping diabetics manage their blood sugar levels is a completely different level. How would this blood glucose monitoring work? 

Darcy: [00:03:06] Apple is using a chip technology known as Silicon, photonics and a measurement process called optical absorption spectroscopy. It's a system that uses lasers to send specific wavelengths of light into an area below the skin where there is interstitial fluid and there are substances that leak out of capillaries that can be absorbed by glucose in that area. The light is then reflected back to the sensor in a way that tells you the level of glucose within the blood, and then an algorithm determines a person's blood glucose level. 

Sascha: [00:03:41] If you're diabetic, this could be a game changer because the current means of glucose monitoring is pretty rough. With most diabetics, they're relying on fingerprinting that can be quite painful to take blood samples. Others use a variety of patches that are currently on the market, although those need to be regularly replaced. So that can be quite expensive. 

Darcy: [00:04:03] Yeah, and one of Apple's goals for the technology is to actually create a preventative measure that warns people if they're pre-diabetic and that can then prompt them to make lifestyle changes to avoid developing type two diabetes, which occurs when a person's body doesn't use insulin properly. 

Sascha: [00:04:21] So, Darcy, how big is the opportunity here? One in ten in America, one in 20 in Australia? 

Audio Clip: [00:04:29] Well, once you decide to look at health care and health tech, the obvious place to start is with chronic conditions. And by far the biggest segment there is the diabetes market. 

Darcy: [00:04:42] It cannot be understated, Sascha, as you said, one in ten Americans and 11.5% of global health expenditure is spent on treating and managing diabetes. 

Sascha: [00:04:52] In 2017, 425 million people worldwide were living with diabetes.

Darcy: [00:04:57] If Apple manages to nail this. It would change the lives of diabetics and cement apple as a powerhouse in health care. If this monitoring system is added to the Apple Watch, it would pretty much make that device an essential item for tens of millions of diabetics around the world. At the moment, Apple watches and wearables account for 11% of Apple's total sales, but that number would absolutely surge if this was a success. 

Sascha: [00:05:23] But Apple's a publicly listed company. I'm amazed that they managed to keep this a secret, especially for so long. How did they do that? 

Darcy: [00:05:31] Yeah, Apple, the biggest company in the world. They've managed to keep a project this big a secret. It all began back in 2010 when Apple co-founder Steve Jobs directed the company to buy a Start-Up called Rare Light, and they were exploring non-invasive ways to monitor blood glucose levels. But Apple then went to great lengths to keep it secret. They changed the name of the company to Avalon Telehealth, a name that no one knew was associated with Apple. Then they set up a separate office with Avalon, Telehealth and the Apple employees were given Avalon Telehealth employee badges. As Avalon developed the technology and applied for patents. No one outside of Apple knew that it was actually Apple doing this. And then when they started recruiting people for human trials, no one knew that they were actually trialling Apple's technology.

Audio Clip: [00:06:20] Apple has a Secret Moonshots team called the Exploratory Design Group, and this is the team developing this moonshot, along with other projects, as well as Apple's health team in hardware, engineering and software engineering teams.

Darcy: [00:06:32] Hundreds of engineers came onto the project as it gained momentum and eventually it became part of Apple's exploratory design group, which is also responsible for the company's fully self-driving car project and the mixed reality headset. 

Sascha: [00:06:45] You know, Apple is known for being quite a secretive company and having such a loud splash when they reveal things at their launches. But this is just a whole nother level. Let's take a break and then when we come back, I want to talk about just how far this technology is from becoming a reality. And also who are some of the other competitors in this health care space. We'll be right back. Welcome back to the Dive. I'm your host, Sascha Kelly. Look, if you enjoy the dive, if we're part of your regular commute or regular routine, then do us a really quick favour. It'll take 30 seconds of your time and makes a massive, massive difference to us. Open your podcast player and give us a five star review. Write a few nice words and help us be discovered by many other people. It really makes all the difference. And we read all your reviews and love them. A sincere thanks from all of us here at Equity Mates Media. But Darcy, let's get back into our topic today. Apple wants to integrate a blood glucose monitoring system into the Apple Watch, which would revolutionise how diabetics and non diabetics measure their blood sugar levels. How far away are we from Apple potentially releasing this product? 

Darcy: [00:08:08] We're still probably 2 to 3 years away from the product being available to customers, but Apple has been testing the tech on hundreds of people over the past 12 years and they now consider it to be at the proof of concept stage. Basically, they think the technology works, but it needs to be shrunk into a smaller size so that it can actually fit in the watch. And Apple's regulatory team has already held early discussions about getting government approval for the system, too, but. 

Sascha: [00:08:35] Does say they are the only company working on non-invasive blood sugar monitoring. What else is being developed out there? Whose part of this competitive landscape? 

Darcy: [00:08:46] There's obviously a lot of competitors. It's such a massive market, the diabetes treatment and management. So at the moment there are patches from Dexcom and Abbott which are inserted into the skin, but these need to be replaced about every two weeks.

Audio Clip: [00:09:00] There's really only two players in this market. There's Dexcom and there's Abbott. Dexcom is kind of like the core of the Apple of CGM. You know, the high end premium product doesn't get all the bells, all the whistle, whereas the Freestyle Libre from Abbott is a value proposition that have all the bells and whistles, but it's extraordinarily cheap, easily get in the patient's hands works just fine.

Darcy: [00:09:24] Dexcom is the biggest one. It actually partnered with Apple and Google in the past, but Apple is now distance itself. 

Audio Clip: [00:09:31] I mean, there's Uber, okay, there's Airbnb and then there's Dexcom CSA. 

Darcy: [00:09:36] There's a reason non-invasive blood sugar monitoring is considered a moonshot gold. There have been numerous start-ups some of the world's largest companies as well that have tried and failed to develop an effective and affordable system. In 2014, Google announced plans to make smart contact lenses that could measure blood glucose through teardrops, but it shelved that project back in 2018.

Sascha: [00:09:59] But there are definitely still some competitors, even though it is a moonshot goal. 

Darcy: [00:10:05] Yeah, so no labs. They're developing a handheld device and wristband which can measure blood sugar by emitting radio waves through the skin to measure specific molecular signatures associated with glucose in the blood. Hey, guys. GWave technology operates through a similar mechanism to no labs. And then there's also a graph where the approach, which relies on nanotechnology to measure blood glucose. 

Sascha: [00:10:30] Darcy Let's put diabetes to the side because obviously we've recognised and what a huge part of the healthcare industry that is, but the tech giants are actually going after health care in other areas as well. 

Audio Clip: [00:10:44] Now Apple is not alone in its pursuit of those health care dollars. Google began organising its health initiatives under the name Google Health in 2018, and now it boasts over 500 employees. Amazon bought Pillpack a prescription medication delivery service in 2018, among other health initiatives. 

Audio Clip: [00:11:02] This is a three and a half trillion dollars market just in the US. A third of that is wasted spend and it's that wasted spend that technology companies are going after. And it won't just be one technology company that disrupts, it'll likely be many. 

Darcy: [00:11:18] The big four tech companies, Alphabet, Amazon, Apple and Microsoft, they're all pursuing a slice of the health care market. Apple is focusing on its wearables. Microsoft is focussed on its rise with Amazon and Google to lay claim to the health care cloud market. Alphabet is focusing on its AI expertise to drive precision medicine, and Amazon is trying to disrupt the pharmacy, virtual care and telehealth areas. Amazon recently completed a $3.9 billion deal for one medical, which is a health care provider. And Google's parent company, Alphabet, acquired Fitbit back in 2019 for $2 billion.

Sascha: [00:11:56] So big investments are happening all across the board. And Apple's investment in blood glucose monitoring has already cost hundreds of millions of dollars. But with 11.5% of the health care industry on the line, it. Would all be worth it if it's successful. 

Audio Clip: [00:12:16] So if there's any technology company today that's well positioned to pull this off and build the trust of health care institutions and consumers, it is Apple, Sascha. 

Darcy: [00:12:29] Apple is the biggest company in the world. I think if anyone can pull it off, it's going to be them. But a big wait and see here. And they aren't the only one in the space going after this market. So a good one to keep an eye out on. 

Sascha: [00:12:42] We'd love to hear if you think Apple can succeed with this moonshot project. If you want to keep the conversation going, let us know. Tell us your feedback. You can contact us by email thedive@equitymates.com. Or if you're listening on Spotify, you can tell us right there in the app, hit, follow or subscribe whatever you're listening right now, and then you're never going to miss an episode again. Darcy, thank you so much for joining me today and talking about this subject. Really interesting. Thanks, Sascha. Until next time.

Audio Clip: [00:13:12] Our business has always been about enriching people's lives, and as we've gotten into health care more and more through the watch and through other things that we've created with research and care kit and putting your medical records on the iPhone, this is a huge deal and it's something that is very important to people. We are democratising.