BodyMedia Fit Armband
While 2011 has brought with it a number of mobile health investment disclosures, there have been few mergers and acquisitions. GlowCaps-maker Vitality is one of the few exceptions. MobiHealthNews recently caught up with Zeo co-founder and CTO Ben Rubin to discuss the state of M&A in the consumer health space, and which company he believes to be the next likely acquisition target.
Rubin was quick with his answer: BodyMedia.
Zeo, the company Rubin co-founded, is one of the many device-centric consumer health companies. Zeo helps users track their sleep health and learn how to get a better night's rest. Of all the device-centered companies in this space, Rubin believes BodyMedia is best positioned for an exit. That's just a hunch though -- he doesn't have any ties to BodyMedia and isn't privy to any confidential information about the company.
Rubin agrees that the connected consumer health industry is still young, but insists that it is heating up: “There are probably two handfuls [of companies] that [people] know about" and "fifty or sixty small companies that have yet to launch," Rubin said. "So when you think about it, it’s too early for there to have been a number of acquisitions, but we are coming to the point now where there should be some action. This whole market is starting to take off, and the minute that starts to happen, bigger companies will wonder how they can get a seat at the table."
BodyMedia was founded in 1999, making it one of the earliest entrants in the connected fitness space, and has become an attractive business over the years, according to Rubin. The company publicly announced more than 700,000 users, and BodyMedia's devices hover around the $200 mark, which might put total revenues in the tens of millions.
"Consumers are very wary of subscriptions," Rubin said, "but BodyMedia found a loophole: People are used to paying subscriptions for weight loss programs and personal training services. It's something they've been doing for years with Weight Watchers or Jenny Craig. [BodyMedia] glommed onto [that idea]."
So which companies, specifically, might buy BodyMedia? Rubin offered up his best guesses:
Consumer Health Companies: "Philips has to be on the top of the list," Rubin said. "BodyMedia CEO Chris Robins came from Philips. She was in the consumer lifestyle division there. That division was incubating DirectLife, which is a competitor to BodyMedia. So there’s a clear, demonstrated interest from Philips on this area of connected health and wellness."
"You’ve [also] got Johnson & Johnson and P&G. Their bread and butter is large-scale consumer health products. They see the trends we see: So, in some way, all the major consumer health [companies] are going to play in this arena. Buying a company like BodyMedia would be a great way to get a jumpstart on the competition," Rubin said.
Weight Loss Companies: "When it comes down to it, BodyMedia is a weight loss product," he said. "They already have a partnership with Jenny Craig. So, Jenny Craig is a potential buyer [as are] Weight Watchers, and NutriSystem. What you have to think about there is whether these companies want to become consumer technology companies, versus just service companies. It would be a jump."
Consumer Electronics Companies: "Polar, Garmin, Omron [are top candidates]," Rubin said. "Omron makes pedometers, which are very competitive with BodyMedia. They’re differentiated in that you can buy [Omron’s pedometer] for twenty bucks, whereas BodyMedia’s is a much more technology-intensive approach. Omron is someone who might want to accelerate their entry into these tech-heavy devices. The same is true for Garmin and Polar; they have exercise heart straps, which are billion dollar businesses for [both]. That was really one of the first connected wellness products. They could very easily jump into ‘How can we also [do] weight loss? How could we use other sensors in our ecosystem?’ You could also, lightly, toss in other consumer electronics companies that have to be looking at this: Sony, Samsung, Motorola. Motorola made an investment in Zephyr, so they’re clearly interested in this space."
So, when BodyMedia does find a buyer, how much will it sell for? "It’s going to be a multi-hundred million dollar acquisition," Rubin said. "Not $50 million, or $75 million, or $100 million. I think the company is way more valuable than that."
Undoubtedly, a deal like that would set off a flurry of M&A activity in this space. What do you think: Will consumer health M&A heat up soon, or will deals remain pre-revenue and under the radar?