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Google parent Alphabet and ResMed Inc. agree to form new digital health company

One of Australia’s leading healthcare companies in ResMed Inc (ASX: RMD) appears to have secured a major coup today in announcing it has signed a deal with Alphabet’s healthcare research company, Verily, to form a new data-driven healthcare company focused on how software can improve healthcare for sleep disorder sufferers.

ResMed has spent the past few years investing heavily in building out its data analytic and online health monitoring capacity and recently boasted that it now has more than 1 billion nights of sleep data, alongside more than 5 million cloud-connected devices.

Its push into the digital health space is important because the data can help improve therapy outcomes for patients, while clearly demonstrating the benefits of its treatment to public healthcare providers and insurers with regard to publicly-funded patient reimbursements for treatments.

In other words if ResMed can use data to show public healthcare bodies that its treatments actually save money by preventing patients incurring more expensive medical costs down the line (i.e. via hospital treatment, or treatment for more serious conditions) then it is in an excellent sales and price bargaining position with public healthcare reimbursement bodies.

For example it’s believed sleep disorders contribute to a wide range of more serious medical conditions like diabetes, heart failure and obesity, with some medical research suggesting that more than 1 billion people suffer from some sort of undiagnosed sleep disorder.

Data is also crucial to ResMed’s business as many sleep treatment patients using wearable masks struggle to comply (i.e. they don’t sleep with the masks on due to comfort issues, etc), which means sleep data can demonstrate to a patient and other medical professionals the benefits of wearing the mask among other actionable conclusions.

“By better identifying at-risk individuals as well as generating real-world evidence regarding the value and effectiveness of treatment, this collaboration has the potential to improve outcomes for millions of people living with sleep apnea, and potentially other related conditions” said, Jessica Mega, Verily’s chief medical and scientific officer on the joint venture.

Given the virtually bottomless pockets of Alphabet’s Verily and Google’s world-leading data analytics, machine learning, or artificial intelligence resources the deal looks an exciting one for ResMed shareholders.

“The combined industry expertise, scalable infrastructure, and data analytics capabilities of ResMed and Verily can unlock meaningful ways to identify these individuals and support their journey to improved sleep, health and quality of life,” said ResMed’s chief medical officer Carlos Nunez.

Nothing was revealed over the financial structuring of the deal or ownership interests in the start-up other than to note it was a “joint venture” separate from both Verily and ResMed. Although unlikely, the partnership also raises the possibility that Verily could one day move to acquire the $20 billion ResMed or commit to it further financially via an investment or other joint ventures.

Analysts will be chomping at the bit to get an idea of the projected financial benefits of the deal when ResMed holds its quarterly earnings call on August 3.

ResMed shares have tripled over the past five years, but to be honest if you want to make the really eye-watering returns in the share market you have to find the ResMed of tomorrow not today…

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Motley Fool contributor Tom Richardson owns shares of Alphabet (A shares) and ResMed Inc.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia has recommended Alphabet (A shares) and ResMed Inc. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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