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Cowen and Company Analysts Predict Healthcare Is Google (GOOG)’s Next Big Target



9/14/2015 10:14:38 AM

Cowen & Co. Analysts Predict Healthcare Is Google’s Next Big Target
September 14, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Analysts at Cowen & Co. released an in-depth research report last week looking at Google Inc./Alphabet’s apparent focus on healthcare.

The report focuses largely on Alphabet’s Life Sciences division, the first company to be split off under the Alphabet umbrella. On Aug. 31, the company announced a partnership with Paris-based Sanofi (SNY) on diabetes monitoring and treatment. Life Sciences is also working on developing contact lenses that can monitor blood sugar levels with Alcon Laboratories, Inc. (ACL), a division of Novartis (NVS).

The Cowen report suggests that Google just might build its next multi-billion dollar business in healthcare. “A closer look at Google’s vast health care efforts,” the report stated, “reveals that the company is targeting very large markets with an expansive list of projects that with even minor success could justify the company’s recent investments.”

The analysts also cite three trends in healthcare that go lockstep with Google’s areas of expertise. They are the digitization of health data, the shift from fee-for-service to pay-for-value, and genome sequencing. However, it’s rather unclear to date how the pay-for-value is actually going to work, or if it’s going to work at all.

Novartis, which is collaborating with Google on the contact lens project, also recently proposed a pay-for-performance pricing model for its cardiovascular drug Entresto. The plan was to sell the drug to some customers at a discount, but if the drug reduced hospital visits, Novartis would receive additional payment. “In the United States, we proposed to insurers a differentiated price calculated according to length of stay,” Joe Jiminez, chief executive officer of Novartis told the Swiss Newspaper Le Temps. “Few insurers entered in the field. They told us that the system was too complicated.”
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Although the pay-for-performance aspects of the Cowen report may raise more questions, the other two areas, digital data and genome sequencing, which is intensely data driven, are clearly within Google’s wheelhouse.

“A closer look at Google’s vast health care efforts,” the analysts wrote, “reveals that the company is targeting very large markets with an expansive list of projects that with even minor success could justify the company’s recent investments.”

Cowen projects the diabetes market at $20 billion.

The report also takes a close look at Google Ventures, which is currently backing 14 life science companies. Two of those companies, Flatiron Health and One Medical Group, have valuations over $1 billion. Flatiron Health focuses on data management in the oncology space. One Medical Group is an innovative approach to individual physician practice using online technology. Another of the companies Google Ventures invests in is Spruce Health, a telemedicine company focused on dermatology. Cowen believes that market is about $5.7 billion, even though telemedicine reimbursement is still unpredictable.

Although Life Sciences, which will be renamed by the end of the year, is getting a lot of the headlines recently, another of Google’s companies to be shifted under Alphabet is Calico. Calico recently inked a collaboration agreement with AbbVie (ABBV) and announced it would be hiring up to 150 and building a new R&D facility in the San Francisco Bay area. Calico’s mission is seemingly broader than Life Sciences, focused on extending and controlling lifespan and other age-related diseases, including neurodegeneration and cancer.

Read at BioSpace.com


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