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Watch your health — it's Google's next bajillion-dollar business

Forget about the Google car — the tech giant's major money making programs are all in health care.

Angelo Young
September 13, 2016 2:00PM (UTC)


For Google-owner Alphabet Inc. there’s been only one major way to make money, by selling advertising from its online search business, and numerous ways to lose it. But among its so-called moon-shot programs, which include a wide net of costly bets in smart thermostats, self-driving cars and internet balloons, is a growing web of deals that could turn the company into a major player in the health care field.



Monday’s announcement that French drugmaker Sanofi and Alphabet’s Verily Life Sciences are investing $500 million in a diabetes joint venture is now the sixth major deal the Silicon Valley company has made in the health care world. The venture, called Onduo, will initially focus on developing better ways for Type 2 diabetes patients to manage their often complicated day-to-day health conditions.


Verily’s experience in miniature electronics could be useful for the future development of smaller and less-invasive glucose monitors and transmitters while its data analytics and software could be used to improve the information that patients and their doctors rely on to manage Type 2 diabetes, which affects more than 400 million people worldwide.


The deals that Verily is making with top-shelf pharmaceutical manufacturers and smaller innovators in bioelectronics and surgical robots is part of long-view strategy that Alphabet is hoping will eventually pay off big.



“These deals aren’t about generating revenue,” Jan Dawson, chief analyst at Jackdaw Research, told Salon. “They’re about getting funding for new research, which at some point these companies are hoping to commercialize.”


Added Dawson: “These companies want to take advantage of Verily’s technology, but it’s a slow process.”


Verily is one of more than seven currently unprofitable Alphabet operating segments in what is known as the “Other Bets”group, which lost $2.5 billion in the first nine months of the year, according to the company’s most recent regulatory filing. Only the company’s Google division makes money, which for the first nine months of the year has amounted to $14 billion in profit on more than $63 billion in sales.



Some of projects in the these other “bets” have been faltering.


Several key technologists have departed Alphabet’s self-driving car project (operated under the secretive research and development entity known simply as X), raising questions about the company’s prospects in an increasingly crowded field of self-driving technology. AT&T recently ribbed the company about its track record on Google Fiber and a perceived inability to develop its superfast internet infrastructure as fast as it intended. And Alphabet’s Nest, a maker of smart-home thermostats, has reportedly been unable to meet revenue growth expectations and also been hit with the departures of key employees. (Alphabet doesn’t break out the performance of each of its other “bets” so it’s unclear which ones are losing the most money.)



But Verily continues to support a web of ventures that put it in a league with giants like Johnson & Johnson and Novartis and bestow it important recognition for patents on small devices, data analytics and software, all of which  could  prove significant for future health care developments. Here are some of the other health care companies that Verily has partnered with in recent years:

Dexcom Inc. The San Diego-based medical device manufacturer Dexcom is a leader in developing easy-to-use wireless systems that monitor glucose levels and transmit the data to mobile phones. Verily and Dexcom are planning a 2018 launch of a next-generation miniaturized continuous glucose monitor. The device is being designed to have a smaller transmitter and a simpler sensor applicator and to require fewer calibrations, which would mean fewer pin-prick blood samples. The companies are also planning to develop an inexpensive, disposable glucose monitor by 2021.


Novartis AG. In recent years Verily has been working with Swiss health care giant Novartis to develop  “smart” contact lenses. One type would help restore the eye’s natural autofocus, which can degrade as a person ages, and another would help diabetics track their blood glucose levels. Human testing of these devices began this year and Novartis CEO Joe Jimenez told Swiss newspaper Le Temps in 2015 that he expected the lenses to hit the market in 2020.

GlaxoSmithKline PLC. Britain’s biggest drug company GlaxoSmithKline will soon establish a joint venture with Verily to develop tiny bioelectronic implants to treat diabetes, arthritis, asthma and other conditions. The new company, Galvani Bioelectronics, will be based near London but operate a research hub in San Francisco. GlaxoSmithKline will hold a majority stake in the business and use Verily’s patents to make implants that will be able to modify electronic impulses in nerves. Bioelectronics is a relatively new field and Verily is emerging  as a leader in making small, low-power devices for the industry.

Johnson & Johnson. A medical devices subsidiary of Johnson & Johnson teamed up with Verily in 2015 to build surgical robots. Based in Mountain View, California, Verb Surgical Inc. is working to design small  cost-effective robots that would let surgeons work closer to their patients. The global market for these high-precision robotic assistants is valued at about $4 billion but expected to grow about 20 percent a year through 2024, according to Grand View Research. Da Vinci Surgical Systems is the current market leader, but  Verb could someday carve itself out a significant chunk of the business, especially if it can leverage Johnson & Johnson’s resources to drive down the costs of these $2 million machines.

Biogen Idec Inc. The Massachusetts-based drugmaker Biogen announced last year a partnership with Verily to create machines that use software and sensors to root out the reasons why multiple sclerosis  progresses differently in various patients. Multiple sclerosis can result in one patient’s loss in significant mobility while another might remain physically active even though they initially showed the same symptoms early in life. The data collected from Verily’s patents will help Biogen produce better treatments that are customized to various patients’ needs. This could then be used to market drugs to cost-conscious health insurers who have been trying to lower the prices for MS treatments, whose wholesale costs can run about $50,000 a year, according to Bloomberg.


Angelo Young

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