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Alphabet, Google’s newfangled conglomeration, arrived in August, but we will not see its first financial figures until January, when the company reports two sets of earnings — Google and the “other bets.” Each subsidiary will not break out its own performance, but the earnings reports will offer some view into their costs and output. Before then, Re/code is unpacking one Alphabet company a week*, presenting the facts, figures and, just maybe, the financials behind the silos of the world’s most ambitious company. We’ve done Nest, Access and Energy and Google Ventures. Here’s the fourth: Verily.
One plausible way to describe Google is as a high-tech university subsidized by search ads. There’s the wacky experiments, the employee cafeterias and coddling, and the appetite for hiring the smartest people in the world.
On that last point, the exemplar is its life sciences division. Launched two years ago with the hiring of esteemed cell biologist Andy Conrad, the research unit spun out of the Google X lab when Alphabet formed and rebranded last week to Verily. In the past year, it has bulked up an already impressive roster of medical experts, poaching top researchers from universities and government.
For the scientists, Google’s appeal is clear: It gives top-notch tech resources at their disposal, and an almost endless supporting budget. For Alphabet, the entrance into health fits its edict of applying tech to massive global problems. Also, health is a gargantuan market: U.S. spending is estimated to hit $3 trillion this year, more than a sixth of GDP. Verily is entering the market with a confluence of factors — the digitization of records and rapid advances in medical equipment, genetic engineering and machine intelligence — that make health care irresistible for the tech industry.
Projects: Wearables for diabetes, multiple sclerosis; clinical studies for nanodiagnostics; medical robots; etc.
Key Execs: Andy Conrad, CEO; Brian Otis, chief technical officer; Jessica Mega, chief medical officer; Karen Ouk, business development principal
The company has announced seven medical partnerships, two research projects and one acquisition. Several more experiments are under way.
“It’s not science fiction,” Vikram Bajaj, Verily’s chief scientific officer, said in its slick debut video. “It’s practical, real scientific development.”
But, so far, those announcements are just that. Only one project has begun human trials, a key step before commercialization. And some in the bio-tech industry wonder whether Verily’s far-reaching research ambition comes at the expense of moving things to market. The research lab has made very ambitious pledges but showed scant evidence of making them realities, said one bio-tech investor familiar with the company. “They’re very good at PR,” this person said. “They use every possible buzzword.”
As it shifts into a standalone company, Verily is thinking about how to turn the buzzwords into a business. It is currently hiring and hunting for several business development positions, looking inside Google and elsewhere.
“We’re both in the middle of hiring a ton of additional members,” said Jorge Valdes, CTO of Dexcom, one of Verily’s medical partners. He described the partnership in glowing terms, but stressed that the fruits — two high-tech glucose monitors for diabetics — demand a long timeline. “It’s probably not going to happen overnight,” he said.
In some ways, Verily is very Googley. Google aimed to organize all the information online; Verily wants to organize all the information about our bodies.
Yet the company, unlike the other Alphabet ones we’ve looked at, operates in a quite different industry from the Internet. And its rebranded debut comes as health tech, given the thorny Theranos situation, faces rising scrutiny over the gaps between lofty promise and execution.
What to Know
One part of Verily’s business is fairly simple: It develops miniaturized medical devices (like its smart contact lens) and advanced software, then licenses these to pharmaceutical and medical companies which will, presumably, sell them. But Verily is also going deeper into the medical field. It’s running several clinical studies and experimenting with genetic engineering sequencing and drug discovery.
Some of these pursuits haven’t been made public yet. Here’s what is. (Ready? It’s long.):
- Diabetes partnerships: Verily has named the disease its first formal target and cut deals with three health care companies: Novartis, Dexcom and Sanofi. The Dexcom devices are “a few years away,” said Valdes. A Sanofi rep declined to comment. The CEO of Novartis, which is marketing Verily’s contact lens, told press the device would begin human trials next year — but for treatment on a sight disease, not diabetes. Novartis wouldn’t comment. Babak Parviz, the Googler who led the product’s creation, departed for Amazon last year.
- Multiple sclerosis partnerships: Google first aimed at this immune system disease in January, through a deal with bio-tech firm Biogen that includes the development of wearable sensors. Ann Romney, Mitt’s wife, is involved.
- Nanodiagnostics: This could be the most Googley one there is. Slap on a wearable device and swallow a tiny pill — Verily’s researchers see this as the future of how your doctor may spot problems. It’s in the “early stages,” according to the company.
- Baseline: Another far-out one. It’s an attempt to develop a comprehensive snapshot of what a healthy, or baseline, person looks like. Previous studies have looked at fit folks over time. This one claims to deploy hitherto undeployed genomic, molecular and cellular science. It’s currently enrolling participants for a pilot version of the study.
- Liftware: A year ago, Google acquired Lift Labs, a startup behind a $295 spoon designed with tremor control for Parkinson’s disease patients. Alphabet CEO Larry Page has lauded the device multiple times in public. It’s Verily’s only acquisition so far.
- Robots: In March, Google inked a deal with Johnson & Johnson to develop medical robots through a joint venture. On Thursday, the companies announced the joint venture had a new CEO and name, Verb Surgical.
- Heart disease: After diabetes, this is focus number two. Verily signed a $50 million funding commitment to the American Heart Association last month.
- Mental health: Here’s a likely number three. Tom Insel, the director of the National Institute of Mental Health, joined Verily in October. No word on what he’s up to.
Who to Know
True to Alphabet form, Verily’s CEO Conrad calls most of the shots. But he’s surrounded by a growing team of medical expertise. (In total, Verily is a “few hundred” employees is all a rep will share.)
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Brian Otis, CTO, joined Google X in 2012 from the University of Washington. With Parviz, he co-created the contact lens and his wizardry in embedding chips and sensors into devices sits behind Verily’s hardware. Another big academic hire was Harvard Medical School’s Jessica Mega, considered one of the leading researchers on cardiovascular disease. She heads up the Baseline study.
Last month, Verily made a less splashy but just as critical hire: Karen Ouk, who joins as the business development principal. She didn’t move far. Ouk has spent 12 years at Google, working as a strategic partner manager for a range of units, including Shopping, Google X and Fiber. She’s well respected inside Google, but Verily will need to add more seasoned business hands like Ouk, particularly ones that know how to navigate the world of health and tech.
Where It Stands
In June of 2014, Sanofi, a French pharma giant, and Medtronic, an Irish medical device maker, broadcasted a “strategic alliance” to improve medical outcomes for diabetes patients. By the next summer, that alliance was undone.
In walked Google, which cut a similar deal with Sanofi. That could be a pattern if the Alphabet company can keep flaunting its high-tech chops and medical experts to lure in the health industry. The Sanofi terms were undisclosed, but the Dexcom deal gives us some financial clues — Dexcom paid $100 million upfront to be the exclusive distributor of Verily’s intellectual property; then it will pay out a royalty fee down the line, assuming the devices are commercialized.
With these pharma deals, Verily is going up against established medical and health care firms. It may soon face rivalry from other tech giants, Apple among them, dipping into health. Plus, scores of bio-tech startups could battle Verily for business. These startups with a singular focus (like genomic sequencing or applying data to cancer) may have an edge on Alphabet’s operation, which, despite its prestigious names, remains a two-year-old lab trying to do a wealth of things never done before.
Asked if Google’s newness in the medical space gave its partner pause, Dexcom’s Valdes batted the concern away. “This is a whole new area for everybody,” he said.
*So far, Alphabet has confirmed the existence of nine subsidiaries, including Google. It’s very likely that an additional one or two — or many — may get the official stamp before the earnings report in January. Rest assured, we will tell you about it if it happens.
Update: An earlier version of this article misspelled the name of Jorge Valdes, CTO of Dexcom. We regret the error.
This article originally appeared on Recode.net.
