As the world moves to the “Internet of Things,” an interconnected world where cars, home, healthcare, entertainment and security, is all monitored and to a degree controlled remotely, Goldman Sachs Group Inc (NYSE:GS) reviews the investment sphere and notes innovations and the companies that could provide investors opportunity. Looking to where the future is going, the investment bank, in an August 6 research report, highlights a remote medical monitoring firm that adds to the healthcare remote monitoring value chain.
Goldman: Medtronic and Cardiocom unit “alternative play on remote monitoring”
One such firm is Medtronic and its healthcare unit Cardiocom, which Goldman labeled “an alternative play on remote monitoring.” The investment bank held conference call August 3 where Medtronic Vice President and General Manager of Patient Management Sheri Dodd outlined how their remote health monitoring service disrupted the traditional medical monitoring and healthcare interdiction cycle. In a subsequent research note written by Goldman’s David Roman and Kyle Conlee, specific revenue opportunities were identified that extended beyond the obvious were outlined.
Medtronic acquired Cardiocom in 2013 and in both the report and conference call a growing opportunity in remote healthcare was amply evident. More specifically relative to individual market space advantages, Cardiocom was presented as having a unique full circle manufacturing, sales, distribution and service chain, differentiating the offering from competitors who typically focus on the deal (sales) end of the value chain.
Medtronic and Cardiocom offer service that supplants expensive hospital visits
Cardiocom offers in-home remote digital monitoring of patients and supplants expensive hospitalization for those with issues ranging from heart failure, asthma, diabetes and hypertension. With remote monitoring when a patient’s condition changes in a non-life threatening way they are sent instructions to adjust medications or therapy – tasks normally administered at significant cost in a hospital by a doctor or nurse.
The company offers three primary product categories: the software, hardware and peripheral devices, of which it controls the design and manufacturing to a significant degree; remote monitoring of a patients vital statistics; an integrated nurse call center.
From a financial perspective, Goldman says Cardiocom “represents a new growth driver for Medtronic,” estimating non-device revenue reaching $100 to $150 million in the full year 2015, while the services & solutions segment is anticipated to generate 40 to 60 basis points of additional revenue annually. But the significant driver that might be overlooked in the financial model is the revenue opportunity from incremental device pull-through sales coming from all business units.