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Verily’s all-out war on disease starts search for healthy returns

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When Andy Conrad spun Verily out of Google’s secretive research facility, X, he declared that the newly formed life sciences unit of Alphabet was on a quest to “defeat mother nature” — through “truth”. Four years on, this journey has taken some strange paths: from biohacking mosquitoes and putting sensors on babies’ nappies to developing tiny devices to control electrical pulses in the body.

Verily began as a Google X for biology, experimenting with how its capabilities in data, artificial intelligence and sensors could be used to revolutionise healthcare. It is one of a series of expensive bets made by Alphabet to use funds from Google’s core business to tackle big problems, alongside the self-driving unit Waymo and the artificial intelligence start-up DeepMind.

Verily sits outside Google, which has its own Google Health projects, ranging from health information in search to cloud and artificial intelligence services for healthcare providers.

Mr Conrad, the chief executive who joined from LabCorp and previously co-founded the National Genetics Institute in the US, has lured $1.8bn from investors including private equity firm Silver Lake and sovereign wealth fund Temasek, making Verily the only one of Alphabet’s “Other Bet” units to take outside funding.

Andrew Matzkin, a partner at Health Advances, a consulting firm focused on health tech, said Verily tries to harness Google’s experience in managing huge data sets to try to create new digital, personalised ways to tackle disease. “They are really good at working with big data to . . . create predictive models,” he said.

Now, Verily is beginning to commercialise some of its products, starting with a joint venture with Sanofi on diabetes, over which the partners are in talks on expanding into other chronic diseases.

But though the company’s data-led approach has led it into a formidable range of healthcare projects, questions loom over whether it should focus its myriad projects — and how fast it can generate returns for investors.

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Medicine and money

Central to Verily’s new push to commercialise its research has been Mr Conrad’s ability to secure partners in the healthcare industry. The chief executive has so far struck deals with large pharmaceutical companies, device makers and research institutions, offering expertise in machine learning and user experience in exchange for deeper knowledge of medicine and regulation.

Eric Topol, author of Deep Medicine and a former adviser to Verily, said bringing in partners and investors was Mr Conrad’s “forte”.

G1581_19X Verily human body projects diagram

One person familiar with the matter said the leadership played the “Google card” very effectively. “They argue: ‘We have a bunch of really smart engineers that you don’t have and we’re hiring all the top academic researchers’,” the person said. “The joke is: nobody gets fired for buying Verily.”

Ameet Nathwani, chief medical officer and chief digital officer at Sanofi, said one reason the French pharma company partnered with Verily was to access this talent. “The data engineers and computer scientists joined Google because that is where they felt most at home,” he said.

While Sanofi’s Onduo is a 50-50 joint venture, Dexcom has a looser partnership with Verily, which advised the device maker in developing a continuous glucose monitor. “It was refreshing having someone challenge us,” said Kevin Sayer, Dexcom’s chief executive. “They focused very much on the consumer experience.”

But no one knows how much Verily generates from these partnerships. One analyst described the company’s finances as a “big black box”.

In the last quarter, Alphabet’s Other Bets collectively generated just $170m in revenues — 0.7 per cent of the company’s total. In 2016, Sergey Brin was reported as saying that Verily was profitable “on a cash basis”; Verily did not comment on whether this was still true.

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As well as funding from Alphabet’s deep pockets, Verily has secured $800m from Temasek in exchange for a “minority stake” in 2017 and a further $1bn in January in a second funding round led by Silver Lake.

Egon Durban, managing partner at Silver Lake, said the firm backed Verily because of its “visionary CEO” and its “strong collaborative approach”, working with established blue-chip partners.

But he would not say how he plans to get a return from a company that still sits inside Alphabet.

“Those investors are going to ask where all their money went,” said an industry expert who has followed Verily for years. “It’s not like it was small amounts.”

The main criticism levelled at Verily is that it spread itself too thin. Mr Topol said that when he was an adviser to the company, he told them he felt that its 40-something projects were too many. “Maybe they are right that they need lots of shots on goal to figure out what is ultimately transformative,” he said.

“I just wonder whether that should be refined to a number that is manageable,” he added.

Some of the shots have missed the goal — usually because of the sheer complexity of biology. Verily’s endeavour with Novartis’ Alcon to create a contact lens that measures glucose levels for diabetics, for instance, was paused after it could not achieve consistent measurements.

Verily said it accepts failures, as long as it learns from projects.

The road ahead

Verily may now have to evolve to reorientate itself around a new, more focused Google Health. David Feinberg, the former chief executive of the esteemed Geisinger health system in the US, was brought in at the start of the year to streamline its “let a thousand flowers bloom” approach to its healthcare work. The health team from DeepMind, the London-based AI company Google bought in 2014, has recently been subsumed into Google Health.

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Dr Feinberg’s purview does not officially stretch to Verily, but they work on projects together, such as using computer vision to screen for diabetic retinopathy in India. One person familiar with the company said it often seems “very competitive” between the two groups.

But Vivian Lee, who recently joined as president of health platforms at Verily, said she looked forward to spending more time with Google Health. “There is so much talent at Google and under David’s leadership they are doing some really exciting things,” she said.

She oversees the newest “baby” in the Verily family, which could be the first to generate significant revenue.

Her vision for Verily’s future is that healthcare will move from a service delivered to a patient to a technology-enabled collaboration between clinician and patient.

“It’s a whole another approach to thinking about personalised medicine: ‘I’m going to manage my pancreas, with my continuous glucose monitor — mine, not the average of everybody else’,” she said.

In the longer term, Verily’s big play for transforming healthcare is Project Baseline, a vast study of over 10,000 people to understand more about what we define as “healthy” and look for early signs of disease.

Michael Snyder, director of genomics and personalised medicine at Stanford, said it was “very, very early” for Baseline. But he said Verily was in a “unique position” to fill the gap between academic research and when it crosses over to industry, because it was prepared to invest for the long term.

“It could spin off useful things that could turn out to be blockbusters,” he said.

Via Financial Times

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