A company selling a smart sock for babies is going public in a $1.1 billion SPAC deal. Industry veterans and pediatricians aren’t sold on the device.

Owlet Baby Care

Summary List Placement

In February, Owlet Baby Care, the maker of a smart sock for infants, agreed to go public via a deal with a special purpose acquisition company, riding a wave of consumer interest in personal health monitoring to a $1.1 billion valuation

Founded in 2013 by a pair of new dads hoping to make an in-home pulse oximeter, Owlet’s main product is the $299 Smart Sock, which offer new parents real-time data on their baby’s oxygen level and heart rate. The sock isn’t considered a medical device, and isn’t approved by the US Food and Drug Administration to prevent or treat any medical condition. 

In fact, the American Academy of Pediatrics doesn’t recommend the use of high-tech health monitors for otherwise healthy babies, because there isn’t evidence of a medical benefit. Some pediatricians have said devices like the Smart Sock could be harmful in part because they could raise false alarms.

“We do not have a problem with parents using the monitors,” Dr. Rachel Moon, head of the American Academy of Pediatrics task force on sudden infant death syndrome, said via email. “However, parents should not be misled that these can prevent death.” 

Owlet, though, touts healthcare as a major opportunity for growth in its investor presentation. Kevin O’Leary, the former head of innovation at Allina Health, is skeptical. O’Leary highlighted a chart in the company’s presentation in his weekly email newsletter as a contender for “Most Ridiculous SPAC Chart of the Year.”

Owlet chart

Digging into the company’s investor deck, O’Leary noted that Owlet is projecting sales will surge each year, and the company will reach $1 billion in revenue by 2025, compared with $75 million in 2020. O’Leary points out the company compares this 2025 projection to more conservative earnings and revenue estimates from other companies.

“It’s a really nice story to tell, sure, but not exactly based in reality here,” he wrote. 

There’s skepticism brewing over Owlet’s SPAC deal

For O’Leary, the biggest concern raised by Owlet is that companies “selling visions of grandeur” are able to enter the public market, with VCs, founders, and merger companies profiting while the rest of the industry deals with fallout if SPAC companies fail to thrive.

“Of course, not every SPAC is necessarily going to be like this, but this is getting out of hand,” he wrote.

Healthcare consultant Andy Mychovsky tossed the subject out for debate online in late February. Sayed Badrawi, an advisor to Bernstein Williams & Co. criticized the company in response to Mychovsky’s post.

“This company’s current strategy will fail,” he wrote. “However, the investors and C-suite will all make some money regardless.”

In a statement to Insider, Owlet said its products are “vital” for parents of healthy babies. The company said its products are intended to give caregivers “peace of mind” and help them manage their “parenting needs.” It noted that it’s seeking FDA authorization for a medical version of its sock, called the BabySat.

“We take the accuracy and performance of our products seriously,” Owlet said.

The company pointed to two articles that support the use of its device, one from Neonataology Today, and one from Global Pediatric Health.

Regarding its investor presentation, Owlet said its growth projections take into account new investment raised as part of the SPAC deal totaling over $300 million, which will help the company expand quickly. The company stood by its long-term growth projections, noting that it reached profitability in the second half of 2020, that its costs to acquire new customers had declined, and that it planned to continue expanding its products and services.

owlet smart sock

Some pediatricians say that Owlet’s device does little to improve infant health

Children’s Hospital of Philadelphia-based pediatrician Dr. Christopher Bonafide wrote a 2017 academic journal opinion piece arguing against the use of infant consumer health wearables, saying that the consumer trend had gotten ahead of any research proving they actually work and are worth the money. 

“I worry about the unnecessary care and even potential harm to babies that can be associated with alarms from these devices,” Dr. Bonafide told Health Day in January 2017, the month his op-ed was published. 

In May 2020, the Journal of Clinical Sleep Medicine published a review of Owlet’s Smart Sock, reiterating Bonafide’s concerns over issues such as false alarms and parental anxiety leading to unnecessary care. The review also cites a study that found that Owlet’s product “performed inconsistently.” 

“Moreover, marketing these devices for use in otherwise healthy, asymptomatic infants may further exacerbate parental anxiety and worry,” review authors Afeerah Malik and Dr. Zarmina Ehsan wrote. 

Investors are pouring millions into baby health wearables

Other companies are raising cash to compete with Owlet.

Last month, infant health-tech company Nanit announced it had raised $25 million for its sleep monitoring system that keeps track of a baby’s sleep and breath pattern without clumsy hardware, per MobiHealth News.

The company bills itself as selling technology that “could make life a bit more manageable” for first-time parents. 

To be sure, some parents do value the devices. A 2019 Insider reviewer called the Smart Sock, “the best money my wife and I ever spent.” 

“The Owlet gives us constant, real-time reassurance that she is OK; that she’s breathing, that her heartbeat is strong, and she’s not in danger or distress,” the reviewer wrote.

Bonafide and Dr. Irit Rasooly argue that for parents of healthy infants, all they’ll get from the $300 wearable is a false sense of security, or extra anxiety.

They wrote an article in the journal Pediatrics last August that advocates for limiting the use of oxygen monitors for babies in hospital settings despite a larger trend in consumers collecting their own data at home. 

Bonafide and Rasooly said care guidelines have discouraged continuous monitoring in stable hospitalized infants, citing over-diagnosis of below-normal oxygen levels and alarm fatigue among nurses.

Opening with a case study, the article depicts a real-life Owlet buyer from the authors’ combined clinical experience: Megan, the pseudonymous mother of a 5-month-old infant named Riley, pacing anxiously in the hospital. 

Hospitalized for a common lung infection, Riley slept for the first time without continuous monitoring of her oxygen level and heart rate after being an Owlet user since birth.

“It’s ironic,” the authors recalled Megan as saying. In accordance with patient-care guidelines, Riley’s breathing was tracked less at the hospital than at home.

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