Los Angeles Business Journal

Ailing Phone Maker Calls Dr. Patrick Soon-Shiong

HEALTH CARE: BlackBerry takes stake in NantHealth; will work on new handset. By Deborah Crowe, Omar Shamout Monday, April 21, 2014

Slumping mobile handset maker BlackBerry Ltd. has expanded its foray into the health care technology market, acquiring a minority stake in billionaire Dr. Patrick Soon-Shiong’s NantHealth.

Waterloo, Ontario’s BlackBerry, once the undisputed leader in the smartphone space, has failed to keep up with Apple Inc. and Samsung Group in the hotly contested handset market. In the quarter ended Nov. 30, BlackBerry sold just 1.9 million smartphones. In its quarter ended Dec. 28, Apple sold 51 million iPhones.

BlackBerry reported revenue of $976 million for the fiscal fourth quarter ended in March, down 64 percent from a year earlier. Yet while it has suffered, it still had $2.7 billion in cash and investments on hand in March, thanks in large part to a $1 billion investment in November from Fairfax Financial Holdings Ltd. and other institutional investors.

The investment in NantHealth, terms of which were not disclosed, is part of BlackBerry’s concerted effort to enter the enterprise services market under the direction of Chief Executive John Chen, who took the helm six months ago. BlackBerry’s newer embedded operating system already is used in MRI systems, and the company wants to expand use of the software to medical devices.

“Health care is one of the key industries in which we have unique advantages,” Chen said in a statement, “and this investment reflects our commitment to maximize our opportunities there.”

NantHealth, an affiliate of Soon-Shiong’s Culver City holding company NantWorks, offers a secure technology platform to facilitate communication among patients, health care providers and researchers. The NantHealth platform is installed at about 250 hospitals, connecting more than 16,000 medical devices to collect more than 3 billion vital signs annually.

Soon-Shiong said that offering a mobile unit was a key piece of the puzzle.

“What we needed was a handset that offered security and privacy,” Soon-Shiong told the Business Journal.

He added that BlackBerry and NantHealth hope to launch their first handset product by the end of the year. The smartphone will have the same functionality as other BlackBerry smartphones, though it would not be sold to consumers.

Daniel Ruppar, a health care market analyst in the San Antonio office of research firm Frost & Sullivan, said incorporating a secure form of mobile communication is a vital concern for medical providers as they embrace big-data initiatives such as cloud computing to increase the quality and cost-effectiveness of patient care.

“Security of data is of extreme importance, especially when we’re dealing with mobile devices,” Ruppar said, noting federal privacy regulations require an extra level of attention from technology vendors such as BlackBerry.

Handset makers are not the only ones trying to become players in the expanding health care technology market. Ruppar said first-tier telecommunications companies across the globe are looking at how they can leverage their strengths within the sector. AT&T and Verizon have each developed divisions that sell communications infrastructure solutions for medical providers, including remote teleconferencing.

“Companies across the information and technology landscape are looking at what their opportunities are in health care,” he said.

Soon-Shiong, a former UCLA surgeon and cancer researcher, topped the Business Journal’s list of Wealthiest Angelenos in 2013 with a net worth of $8 billion. He founded NantHealth in 2007.

The health care entity is now a subsidiary of NantWorks, a multifaceted technology company he formed after Summit, N.J.’s Celgene Corp. bought his West L.A. cancer drug maker Abraxis BioScience Inc. for more than $2.9 billion in 2010.

NantWorks touts itself as a developer of next-generation technologies including voice recognition software, ultralow-power semiconductors and supercomputing. Beyond health care, it also operates in the digital commerce and entertainment sectors.

Staff reporter Deborah Crowe contributed to this story.