ResMed's $225M Acquisition of Propeller Health Highlights the $557M Global Digital Respiratory Care Market Opportunity

In December 2018, VCBeat (WeChat ID: vcbeat) reported that ResMed, a medical technology company specializing in respiratory diseases, announced the acquisition of Propeller Health, a Madison-based developer of connected inhaler solutions, for $225 million.

Propeller is a digital health company that primarily provides solutions for patients with chronic obstructive pulmonary disease (COPD) and asthma. Its product portfolio includes a sensor (which can be attached to inhalers or medication controllers), an app called Cards (launched in 2016, enabling patients to better manage their condition), and a patient management platform (allowing healthcare providers to manage large patient populations).

As a giant in the medical device industry, ResMed has committed to paying $225 million for a company with annual revenue of less than $10 million, a deal that highlights the immense potential of the digital respiratory market.(For details, please refer to VCBeat’s report: “ResMed Acquires Propeller Health for $225 Million to Expand Its COPD and Asthma-Related Product Portfolio”)

Recently, Research2Guidance (R2G), a market research and consulting firm in the digital health sector, provided a brief analysis of this transaction when it previewed the release of its report, “The 2018 Digital Respiratory Care Market: Status and Outlook,” on its official website. VCBeat (WeChat ID: vcbeat) has compiled and translated this content for readers’ reference.

At the time of announcing the acquisition, ResMed executives stated that they aimed not only to leverage Propeller Health’s digital medication adherence solutions to enhance their core business but also to engage in the partnerships Propeller Health had established with pharmaceutical companies, healthcare providers, and payers.

Propeller Health is a key player in the digital respiratory care market, selling connected devices to asthma and COPD patients and healthcare companies, while providing digital respiratory solutions. The market in which the company operates is a niche segment, lagging three years behind other digital health segments focused on chronic diseases such as diabetes. Nevertheless, this substantial investment remains strategically significant for ResMed.

R2G Briefly Analyzes the Top 10 Reasons for ResMed’s Major Acquisition of Propeller Health from Two Dimensions: The Digital Respiratory Care Market and Propeller Health’s Market Positioning

1. Enormous Market Potential. Asthma and COPD are among the most severe epidemics, affecting an increasing number of people worldwide and imposing significant economic burdens on both developed and developing countries.

According to data from the World Health Organization (WHO), approximately 334 million people worldwide were diagnosed with asthma in 2017, accounting for 4.4% of the global population that year; meanwhile, the number of people affected by COPD globally was estimated at 250 million in 2017, representing 3.3% of the global population. Furthermore, due to demographic, social, and behavioral factors, the prevalence of both diseases is projected to continue rising.

2. Significant Development Opportunities. The rising prevalence of asthma and COPD, two major chronic diseases, will drive the growth of opportunities in the global digital respiratory care market.

By the end of 2023, the global market size for digital asthma solutions will increase to 152 million users, the global market size for digital COPD solutions will increase to 121 million users, and the value of the global digital respiratory solutions market will reach $557 million. (Data sourced from R2G’s “Global Digital Respiratory Solutions Market Report, 2009–2023”).

According to the R2G report “Global Digital Respiratory Solutions Market, 2009–2023,” the value of the global digital respiratory solutions market will reach US$557 million.

3. High Lifetime Value of Patients with Asthma and COPD. The value of a patient’s lifecycle varies by country or region. In the United States, the lifetime value of a patient with COPD is estimated at $200,000, while the average lifetime value of a patient with asthma may be three times their life expectancy. Digital solutions are expected to capture a portion of the revenue streams generated over the lifecycle of these patients.

4. Increased Revenue Opportunities for Pharmaceutical Companies. Digital respiratory solutions are expected to improve patient medication adherence. The market for asthma and COPD-related medications is a multi-billion-dollar industry, with a market size exceeding $42 billion in 2018. Any improvement in medication adherence will have a direct impact on pharmaceutical industry revenues.

5. Over the past eight years, Propeller Health has built a robust network of partnerships in the healthcare sector. Since 2013, Propeller Health has established collaborative relationships with Boehringer Ingelheim (2013), GSK (2015), Aptar Pharma (2016), Vectura (2016), and Novartis (2017).

In addition to pharmaceutical and generic drug manufacturers, Propeller Health has also successfully engaged other key stakeholders. Data shows that Propeller Health has partnered with pharmaceutical companies, pharmacy benefit managers, and healthcare systems to launch 65 commercial initiatives.

6. Extensive global business coverage. The company’s projects have reached thousands of patients across 16 countries worldwide.

7. Extensive coverage of existing devices and medication combinations. Due to Propeller Health’s partnerships with most pharmaceutical companies, its add-on inhaler sensors cover nearly 90% of the existing types of inhalers on the market.

In addition, through its partnership with GSK (GlaxoSmithKline), Propeller Health’s product portfolio also covers the world’s leading inhaled corticosteroid medications, Advair and Flovent.

8. Possesses a substantial body of proven clinical outcomes and multiple FDA approvals. Propeller Health has obtained 9 FDA approvals and demonstrated its clinical outcomes in 15 peer-reviewed studies.

According to the Propeller Health website, the company’s product portfolio increases patient medication adherence by 58%, reduces rescue inhaler use by 79%, and improves asthma control rates by 63%.

9. Holds a prominent market position in the digital respiratory care sector. Although there are hundreds of digital respiratory solutions worldwide, Propeller Health stands out for its comprehensive service scope, high-quality offerings, and robust partner ecosystem.

10. SaaS services offer high availability, and a comprehensive patient monitoring solution has been launched. In addition to connected inhalers, Propeller Health provides an additional cloud-based patient management platform, enabling the company to reduce its reliance on device sales and create greater value through its SaaS business model.

ResMed’s willingness to spend heavily to acquire Propeller Health demonstrates that investors have begun to recognize the untapped potential of the digital respiratory market.

In the future, connected inhaler solutions will stimulate the emergence and development of more complex ecosystems (including other value-added services and new business models), ultimately generating the substantial revenue streams expected by investors.

VCBeat will continue to closely monitor the “2018 Digital Respiratory Market: Current Status and Outlook” report, developments in the digital respiratory care market, and the latest updates from ResMed and Propeller Health, providing timely coverage to its readers.