Google was obviously going to be a big med tech player. But we didn't expect anything of the level of activity we saw in 2015. Let's run down the major bits. Google created Alphabet ($GOOG) as an umbrella company over the Google search engine business, as well as Google Life Sciences. It then renamed Google Life Sciences Verily--and broke out robotic surgical and medical device joint venture Verb Surgical in partnership with Johnson & Johnson ($JNJ). Whew.
But it's all about to get very, very real for Verily. First up at the end of January, Alphabet will report its fourth quarter earnings for all of its businesses, including Verily. So, instead of the big black R&D box of Google X, now shareholders can expect more detail on how much money is spent on which projects and, perhaps more importantly, a timeline of business goals for Verily.
Verily's major med tech corporate partners, Johnson & Johnson, Dexcom ($DXCM) and Novartis ($NVS), are also likely to want to show that their big deals with Google are bearing fruit. Novartis has said that its presbyopia-correcting, autofocus contact lens developed with Google will be in clinical testing in 2016.
The reaction of investors to the Verily story over the next year is likely to help define the larger context for med tech. If it succeeds, the company could start to remake the med tech universe via new projects, acquisitions and alliances. If it fails with its ambitious, moonshot products over the next few years, that could help kill investor appetite for backing novel and innovative technology in medical devices and diagnostics.
Medical devices and diagnostics have long been a tough area for venture capital investors since it can be difficult to track a route to a lucrative exit. That has in turn diminished the amounts and level of effort VCs are willing to apply to these kinds of companies.
But if Verily becomes an even more active, and successful, strategic investor, that could help give more legitimacy to a huge range of new potential sources of innovation, as well as put established medical device and diagnostics companies on notice that they need to make a bid to keep up.
Iterative thinking has long been the backbone of the medical device industry. But if major med techs like Verily and Verb can put innovation at their core and make money doing so, it would alter the tenor of the entire industry.
The word verily is synonymous with certainly and the name Verb Surgical is obviously intended as a reference to action. Next year will put those namesake notions, which seem to emphasize concrete, visible deeds, to the test. -- Stacy Lawrence
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