Alphabet Breathes New Life and Resources Into Google's Health Care Projects
Google executives rocked the Internet with the announcement of Alphabet -- a new portfolio-like company that will separate Google's core business -- such as search, Gmail, YouTube and maps -- from projects, such as those in health care, that are farther afield.
Some industry observers note that investors had growing concerns about Google's broadening business ventures, which range from its foundation as an Internet search company to less lucrative projects, such as drones, pharmaceuticals and venture capital. Some analysts say the move could help ease some of those concerns by allowing investors to see the real value of Google, which will release separate quarterly financial results from Alphabet.
Scott Strawn, IDC's research director, said, "The restructuring will achieve a lot of different objectives," adding, "In some ways [Google] is redefining its relationship with financial markets and transparency."
What Does This Mean for Google's Health Care Projects?
Although Google has been involved in various health care technologies for several years, executives have seemed wary of playing a larger role in the heavily regulated industry.
During a 2014 fireside chat, Google co-founders Larry Page and Sergey Brin said the regulatory burden in the health care industry makes it a difficult area. Brin noted that while he was excited about certain health projects Google was working on, "[i]t's just not necessarily how I want to spend my time."
However, in announcing the restructuring, Page -- who will become CEO of Alphabet -- emphasized how the new company will allow Google's health care projects, particularly Life Sciences and Calico, to have "more management scale."
John Moore, founder and managing partner at Chilmark Research, in an email to iHealthBeat said that the restructuring "provides Google's many ventures, including those focusing on health care, to operate semi-independently with what will likely be their own budgets/resources, staff, etc."
A Snapshot of Google's Health Care Projects
Unlike some of Google's other health projects, Calico has operated as an independent company since Google created it in 2013. The new restructuring will bring Calico under Alphabet's umbrella.
The Google-backed company has attracted world-class researchers on aging and genomics and has been quietly working on projects to address health issues related to aging. In an article on Medium, Bill Maris, president and managing partner at Google Ventures, highlighted the importance of leveraging computer intelligence to better understand the brain and debilitating neurological conditions that affect the elderly, such as Alzheimer's disease and Parkinson's disease.
Google's venture capital arm -- Google Ventures -- also will fall under the purview of Alphabet.
The company has been increasingly expanding its health and life sciences projects. According to the Wall Street Journal's "Digits," Google Ventures' investments in the sector jumped from 9% in 2013 to 36% in 2014.
Currently, Google Ventures is working with 11 innovative health care and life sciences companies, including:
- Doctor on Demand, a telehealth company;
- Flatiron Health, a technology company developing the first data platform dedicated to oncology; and
- 23andMe, a genetics company that leverages DNA analysis technologies and Web-based interactive tools.
Maris has said he expects to see the company's health and life sciences investments continue in 2015.
In his article in Medium, Maris wrote, "Right now is the 'transistor moment' for the human body. In the coming decades, health care will begin to improve at the same radical pace we've seen in computing." He added, "At Google Ventures, we're on a mission to accelerate this health care revolution."
The Life Sciences Team
Nearly two weeks after the initial announcement, Brin published a blog post naming Google X's life sciences team as the first Google venture to become a standalone company under Alphabet.
The life sciences team -- which was previously housed as a division in Google's research lab, Google X -- will be headed up by Andrew Conrad, a molecular biologist who joined Google in 2013.
Brin noted that the life sciences team will "continue to work with other life sciences companies to move new technologies from early stage [research and development] to clinical testing -- and hopefully -- transform the way we detect, prevent and manage disease."
For example, the projects housed under the life sciences team include:
- A cardiac and activity monitor;
- Nanodiagnostics platform, which could be used to detect and fight cancer;
- Smart contact lenses, which aim to monitor the blood sugar levels of individuals with diabetes; and
- The Baseline Study, which aims to create the most complete portrait of the human body by collecting and analyzing the genomic and molecular data of thousands of individuals.
Adam Clark Estes over at Gizmodo hypothesized that the team's graduation from Google X could be "a good sign that some of these ambitious projects might be ready for show time."
Avoiding Another Google Health
While the restructuring opens doors for Google to continue and expand upon its health care ventures, some analysts say it also could help prevent repeated failures.
Stephen Parente, a finance professor at the University of Minnesota's Carlson School of Management, said that Google has experimented with getting into the health care sector several times, but it has not always worked, causing it to gain large debts with different technologies. He added, "Carving the health ventures under Alphabet will allow them to put more metrics on these products to see if these technologies can become anything."
For example, Parente said Google Health -- a personal health record service that shuttered in 2012 -- experienced a lot of issues that would have surfaced earlier "if it was a standalone thing seeking capital" through normal processes. He said the restructuring would allow Google "to put more parameters and milestones around these projects to avoid another Google Health. ... They can see if the technology is viable versus just throwing more capital at it."
Brad Shimmin, an analyst with Current Analysis, told Computerworld that the restructuring also could be beneficial to Alphabet companies like Google X, which was behind the rocky launch of Google Glass, because they will have more freedom. Google Glass is poised for a relaunch that has some industry observers optimistic about its success in the health care industry.
However, Chilmark's Moore said there is little to gain from comparing past failed ventures, such as Google Health, with Google's current businesses. He said, "Google Health was a completely different program at a completely different time in the company's history. Drawing parallels between then and now is largely irrelevant."
Meanwhile, Forbes staff writer Matthew Herper raised concerns about the new transparency, particularly for Calico, which he noted has been protected from outside investors by Page and Brin. He questioned whether the change could suck Calico into "the terrible, deceitful purgatory of the biotechnology industry, where companies try to break up years-long scientific endeavors into quarterly bites."
However, Calico CEO Art Levinson said the company does not expect the restructuring to have an effect on "Calico's mission, directions or goals (either near or longer term)." He noted, "Everyone involved understands the long-term nature of the business."
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