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Forget the Fitbit, the smart patch is the hot new fitness tracker

Patches are no longer just for nicotine.

Health-tracking sensors that stick to the skin are catching on and can measure more variables than wrist-worn health gadgets like Fitbits. These smart patches continuously scan the body and send data to a smartphone app that alerts people when there's a warning sign. As more consumers collect data on their own health, these patches might also help transform health care, say some experts, by helping prevent chronic diseases, like diabetes or heart disease.

"This is an evolutionary technology," said Kate McCarthy, a senior analyst at Forrester Research. She said the potential patch market is huge. Since patches are worn all the time, unlike wrist gadgets, patches spew data continuously. Patches are also relatively inexpensive — costing a few hundred dollars. "There doesn't need to be a big commitment of time and money," she said.

A variety of wearable fitness devices on display.
Justin Solomon | CNBC

The global wearable patch market is expected to grow quickly through 2020, driven mainly by the U.S. market, according to Technavio. Smartpatch, start-ups like Kenzen and Lief Therapeutics, are among the companies that hope to drive sales among insurers, employers and consumers. They are betting that the patches reinforce an existing economic logic in health care: that prevention can be a lot cheaper than treating long-term illnesses.

Kenzen's ECHO smartpatch analyzes sweat to predict dehydration or cramping. The data is sent to a smartphone for analysis, and it alerts a user when they are in a critical zone. Kenzen has raised more than $3 million in grants and funding from investors.

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Several sports teams, like the San Francisco 49ers and the FC Dallas soccer team, have signed up to test the patch. The patch, which costs $300, will be launched in sports stores and online at the end of 2017.

"You might want to monitor vital signs and biomarkers that you don't want to advertise," said Dr. Sonia Sousa, co-founder and CEO of San Francisco-based Kenzen. "By putting on a patch, people can get real-time data on dehydration level, heart rate, respiration and core body temperature to make decisions about their health."

"We have much more information about the health of our car than about our bodies. When data is available to more people, we're leading more informed lives." -Dr. Aenor Sawyer, associate director at the UCSF Center for Digital Health Innovation

Studying sweat can be used to predict health, Sousa said. The effects of losing fluids and electrolytes through sweat have been studied for nearly 50 years. Gatorade, for example, began as a study related to sweat after heat-related illnesses sidelined football players at the University of Florida.

In the past, individuals had to go to performance centers to get sweat tests. "But the measurements are only for a specific point in time," said Jake Ireland, managing partner, Hickory VC, whose firm invested $500,000 in Kenzen. Patches overcome two of the biggest drawbacks of that legacy approach: They monitor body signals 24 hours a day and can be applied by the individual.

Other experts hope that patches will also overcome some of the criticism of wearables like Fitbit devices. "We need more stickiness in wearables," said Dr. Aenor Sawyer, associate director of strategic relations for the UCSF Center for Digital Health Innovation. "And sustaining adoption has been a dilemma, since wrist wearables can be taken on and off or may be forgotten."

Weakling wearables

Americans are still buying fitness trackers, but they no longer wear them as much.

Fitbit, which recently reported disappointing earnings and layoffs, is down more than 63 percent in the past year and more than 80 percent all-time since its first day of trading.

Shares of watchmaker Fossil dropped by as much as 20 percent on Wednesday morning after a big earnings miss, despite a much-hyped move into wearable technology.

Recent growth for the niche has been lackluster. The wearables industry grew only 3.1 percent year-over-year in the third quarter of 2016, according to IDC. While Warren Buffett's conglomerate Berkshire Hathaway recently invested in wearables, a move that caught attention, the famed investor explained it as a bet on the future of the centuries-old jewelry business (of which Buffett is already a big investor) and a bet on what will be stocked on jewelry shelves in the future, not a health-tech play.

Another San Francisco-based start-up, Lief Therapeutics, has a biosensing patch that relieves stress. The patch tracks heart rate and breathing using electrocardiogram and accelerometer sensors. Data is sent to a smartphone app. If a body starts to register stress, the patch vibrates to help you get back into a calmer breathing rhythm.

To create Lief's meditation system, the team tested monks in India, measuring their heartbeats. The Lief patch has been a hit on Kickstarter, where it raised more than $405,000. The patch is expected to begin shipping in June — though Kickstarter-backed projects have a long history of missing initial shipment targets — and costs $229.

"The patch sticks to the chest and listens to the heart constantly using an EKG sensor," said Nathanael Wolfe, co-founder of Lief. "And it understands when you go into fight-or-flight mode."

The patches are intended for people who want to calm down and reduce stress.

Consumers will always covet fashionable wearables like Apple Watches, Wolfe adds, but patches that are worn under clothes are meant for people who may not want to show off their personal or health worries, such as stress management.

"We have much more information about the health of our car than about our bodies," Sawyer said. "When data is available to more people, we're leading more informed lives."

By Constance Gustke, special to CNBC.com

(This story has been updated to include selloff in watchmaker Fossil's shares after a weak earnings report.)