Chapter 1
Digital Evolution of Biotechnology
For nearly four decades, biotechnology has driven the transformation of many sectors, from healthcare to food and energy, and it has grown into a global industry. It is now being transformed itself by its convergence with information technology (infotech). Biotechnology has been defined as “the use of living systems or molecular engineering to create and manufacture biologic therapies and products for patient care” [1], but it can be more broadly seen as the application of molecular biology across industries.
From the start, biotechnology grew together with other sciences. A first inflection point, Watson and Crick's 1953 discovery of the structure of DNA, depended on the development of X-ray crystallography by Franklin and Wilkins. By 1986, the first automated gene sequencer by Hunkapiller at Applied Biosystems supported Venter's National Institutes of Health (NIH) research, and a later-generation ABI sequencer, introduced in 1998, further enabled his research at Celera. This led to a second inflection point, in 2000, with the draft of the human genome by Celera and the Human Genome Project. The synergy between computing and bioscience continued with the emergence of bioinformatics and the 2003 launch of IBM's Blue Gene supercomputer, with a focus on structural proteomics.
Another technology has evolved over the past three decades, supported by the optimization of gene sequencing: CRISPR (clustered regularly interspaced short palindromic repeats). This nucleotide sequence was first identified in Japan in 1987, but it took decades to define its function as a molecular scalpel and an RNA guide capable of editing genes. By 2007, it was shown that spacer DNA could alter microbial resistance, and by 2012, a team including Doudna and Charpentier showed that a simpler CRISPR system relying on the Cas9 protein could work as an editing tool in human cell culture. In 2014, Platt used a Cas9 mouse to model lung adenocarcinoma. CRISPR may be first developed for monogenic diseases such as beta thalassemia, but challenges include safety (avoiding activity in unintended parts of the genome), delivery (via methods such as lipid-based nanoparticles or virus-based particles) and manufacturing [2].
Unlike computing, bioscience has not progressed in linear fashion, due to the inherent risk of working with animal and human biology. After the 1953 discovery of the DNA structure, it took 29 years for the launch of the first recombinant human insulin, discovered by Genentech and licensed to Eli Lilly. Monoclonal antibodies, developed by Köhler and Milstein in 1975, were not marketed until the introduction of IDEC's Rituxan (rituximab) in 1998, after several failed attempts by firms such as Hybritech.
Similarly, the first genotype-specific oral therapy, Novartis's Gleevec (imatinib) for Philadelphia—positive chronic myeloid leukemia, was approved in the United States, Europe, and Japan in 2001, but it took decades to develop it; the abnormal Bcr-Abl gene coding for tyrosine kinase, stimulating leukemia cell growth, was identified in 1985, and the molecule was first synthesized in 1992 (Figure 1-1).
Figure 1-1 Biotechnology milestones
Industry Applications
Today, biotechnology has matured and is driving innovation across sectors, from medicine and food to agriculture and biomaterials (Figure 1-2):
- In healthcare, red biotech has led to novel biologic therapeutics, including recombinant proteins such as insulin and growth hormone, monoclonal antibodies such as Genentech's Herceptin (trastuzumab) for HER2-positive breast cancer, vaccines, molecular diagnostics, gene and stem cell therapy, tissue engineering, and regenerative medicine.
- In food and agriculture, green biotech has improved crop efficiency and used bioremediation for environmental reclamation. It has blurred the distinction between food and medicine, with the emergence of medical foods and innovations such as a strain of “golden rice” yielding provitamin A [3].
- Marine biology has led to blue biotech, with food products and ingredients derived from algae, invertebrates, and fish; diagnostic agents such as fluorescent reporter protein; and marine extract additives in cosmetics.
- In industrial processes, white biotechnology has produced biodegradable plastics, renewable chemicals, pollution-eating bacteria, and advanced biofuels [4].
Figure 1-2 Biotechnology across industries
The following chapters will focus on red biotech, including the transformational impact of digital technologies and the convergence with infotech. A new form of digital convergence has emerged, which presents both an opportunity and a threat for the biopharmaceutical sector. From mobile devices, such as the Fitbit wristband biosensor, to R & D analytics tools such as IBM's Watson, infotech companies are playing a key role in meeting consumer and researcher communication needs.
Impact of Megatrends
Multiple trends are disrupting business models and leading the industry to define value differently. For consumers, longer life spans are increasing the incidence of chronic conditions such as diabetes and heart disease, across developed and also emerging markets, driving demand as incomes rise. However, this is also placing manufacturers on a collision course with resource-constrained payers, who are increasingly defining value in terms of outcomes achieved by new therapies. For researchers, postgenomic science is driving precision medicine, which has already yielded a new wave of targeted therapies but is struggling to handle an explosion of data: at the individual level, “small data” from biosensors, monitors, smartphones, and smartwatches; at the population level, “big data” from genomic, clinical trial, and insurer databases. These conflicting trends have led to a disconnect within the biopharma space.
Consumer-generated health data need professional interpretation, which medical offices largely cannot provide online due to liability and reimbursement issues and which cannot be transmitted to most hospital electronic health records (EHRs). Researchers now access an overwhelming amount of health data, well beyond clinical trial databases, which has led to the entry of information technology leaders into healthcare. Apple is partnering with the Mayo Clinic with its HealthKit and ResearchKit software that links patients, physicians, and EHRs. IBM aims to streamline R & D with its Watson Health unit and has made significant acquisitions in data analytics, including Explorys, Phytel, and Merge. Alphabet is partnering through its Verily unit with Sanofi, Dexcom, and Medtronic in diabetes, and in 2013 it launched Calico, a biotech company focused on longevity. Qualcomm and Novartis have set up the dRx Capital joint venture to invest in digital startups and optimize clinical trials. The interaction of these transforming forces is summarized in Figure 1-3.
Figure 1-3 Transforming forces
Digital Health Opportunities
From research to postmarketing surveillance, digital health has the potential to greatly improve R & D and manufacturing efficiency, as well as product co-creation and communication with patients:
- In R & D, digital health can optimize diagnostics through integrated biomarkers, increase speed to market, and streamline data analytics.
- In manufacturing, digital technology can adapt processes to reduce costs.
- From a regulatory and reimbursement standpoint, it can enable real-time drug monitoring and support health economics dossiers with real-world evidence.
- At the commercial end, digital health can allow deep integration of the customer voice, from drug co-creation to postlaunch communications, and it can help collect real-world evidence to support economics dossiers (Figure 1-4).
Figure 1-4 Impact of digital solutions on the value chain
Infotechnology Initiatives in Healthcare
The health sector has been slower than other industries such as banking and retail to adopt digital technology, due to regulation, physician concerns about liability and reimbursement, and upfront costs and resistance to changing workflows, as well as consumer concerns about data security and privacy.
By contrast, infotechs have entered this space rapidly, for various reasons. Companies such as IBM may grow their businesses by addressing large database interpretation problems that require platform technologies such as Watson. Consumer-focused firms such as Apple are responding to market demand for online healthcare information by adding health apps on their mobile devices.
While infotech leaders are reluctant to become directly involved in healthcare due to the heavy burden of regulation and long development cycles, they still have the potential to disrupt the sector, for instance, if digital interventions prove more effective than some drug therapies. To support their healthcare penetration, infotechs have the added advantage of massive resources. Apple's market capitalization passed $800 billion by May 2017, well above that of Johnson & Johnson, which led biopharmas at nearly $346 billion at the same time. A key advantage for Apple is its brand value among consumers. Alphabet combines advertising revenue from Google with strong gains in mobile search, and infotech growth, in general, is driven by the rise of the cloud, that is, the shift of many computing operations to online services [5].
As mobile health (mHealth) comes to dominate the sector, through the fast growth of mobile devices versus PCs or laptops, infotechs play a key role in all of its aspects. As defined by the World Health Organization (WHO), mHealth is “medical and public health practice supported by mobile devices such as mobile phones, patient monitoring devices, personal digital assistants and other wireless devices” [6]. At the consumer end, infotech provides hardware and software from biosensors and smartphones and also enables real-time interactions via social media. At the research end, infotech aims to optimize predictive analytics to gain deeper insights into the origin of diseases, diagnostics, and treatments.
A hybrid category of mHealth includes Food and Drug Administration (FDA)-approved medical devices such as WellDoc's BlueStar to measure glucose levels and AliveCor's mobile electrocardiogram machine. More broadly, Apple's HealthKit and ResearchKit aim to address the current lack of interoperability by linking consumer biomarkers with medical offices and EHRs (Figure 1-5).
Figure 1-5 Digital health landscape
Disruption Risk from Infotech
In addition to opportunities, the rising dominance of infotechs in healthcare may pose significant risks for biopharmas. What makes their convergence uncertain is the significant variance between the business models of biopharmas, device companies, and technology firms:
- R & D is profoundly different in the biology and engineering cultures, where biotech timeframes may span 10 years, in contrast to the rapid cycle times and iterations for technology products. Firms such as Apple may release new or upgraded products twice a year.
- Success metrics also vary: in biopharma they are rigidly defined by FDA-validated safety and efficacy, whereas in technology they are driven by network effects and viral diffusion.
As patients manage more of their healthcare, companies such as Apple may be better positioned to own the consumer relationship. In addition, with the rising role of social media such as the PatientsLikeMe website, conducting member-driven observational trials, biopharmas may lose partial control of clinical data and cannot interactively join the online dialogue with product messages, due to regulatory restrictions.
Economic models are just as divergent, as drugs and devices depend on public or private payer reimbursement, with some consumer copays, whereas tech products rely on direct selling through app fees, licenses, or subscriptions, or indirect selling such as advertising revenue from search engines (Figure 1-6).
Figure 1-6 Business model variance
Another nontrivial barrier to the convergence trend is a different cultural attitude toward risk. Silicon Valley, unlike Big Pharma, has an inherent tolerance for risk. Risk itself is also increased by the digitization of healthcare. In addition to the extreme product attrition seen in biopharma R & D, the cloud-based diffusion of data may pose significant security problems. A study of 1,000 US consumers showed that 43 percent were not comfortable with sharing their personal data online [7], and this trend is reinforced by recurring media exposure of security breaches. In 2015, Anthem, the second-largest US health insurer, revealed that its records had been compromised by hackers, posing a potential risk for Social Security numbers and employment data for up to 80 million past and present members [8]. In addition, Silicon Valley has so far remained wary of health regulators. Devices such as the Apple Watch are not therapeutic and are therefore seen by the FDA as wellness-related and not subject to its regulation.
Because a convergent business model has yet to emerge, the following questions for infotech companies entering the health space are worth considering:
- Product or service: Is it a wellness support tool like the Fitbit wristband sensor, a medical device like the BlueStar glucose monitor, or a true therapeutic product?
- Validation: What is required, from randomized clinical trials to user acceptance?
- Technology: Does the product include hardware (smartphones), software (apps), and/or cloud-based analytics platforms? What information is transmitted, from small data (individual biomarkers) to big data (population-level genomics)?
- Customer/end user: Who is the customer? For wellness tools, it is primarily the consumer. For medical devices, there are hybrid targets (patients or physicians). For researchers, analytics platforms reflect the greatest need.
- Economics: Will revenue come from payer reimbursement, patient copays, or full out-of-pocket consumer expenditure [9]?
Technology Strategies
Rise and Limitations of Wearables
According to Forrester Research, the average US online adult uses more than four connected devices (from desktops to tablets and eBook readers), 70 percent use a smartphone, and this usage cuts across age groups, from Millennials (born 1981 to 1997) to Boomers (born 1945 to 1964). However, the generation gap is evident for wearables, with usage by 34 percent of Millennials versus only 7 to 11 percent of Boomers [10]. This may be linked to the limited functionality of apps: While their number exceeds 165,000, from Apple iTunes and Google Play (Android), most are only wellness tools, and less than a quarter focus on disease and treatment management. Over half of apps have low functionality, such as simply providing information.
A major barrier to true “scientific wellness,” including data analysis by healthcare professionals, remains the lack of interoperability, with only 2 percent of apps linking patients to physicians and healthcare systems. Other adoption barriers are a lack of scientific evidence, limited reimbursement, and privacy and security [11].
The mHealth sector is beginning to evolve from consumer gadgets to prescribed devices, but full integration into EHRs is so far confined to a few pilot programs (Figure 1-7). Despite these limitations, infotech-enabled innovations are being introduced by players of all sizes, from startups to multinationals.
Figure 1-7 Evolution of mHealth
New Entrants
WellDoc was first to launch an FDA-approved, physician-prescribed, and payer-reimbursed mobile medical device. Its BlueStar software for continuous glucose monitoring (CGM) was validated with a randomized trial of more than 150 patients, showing a capacity to reduce glycated hemoglobin, that was published in Diabetes Care in 2011. FDA clearance via a 510(k) submission supported reimbursement, and WellDoc was able to raise funding from sources such as Merck.
AliveCor, founded in 2010, adopted a hybrid model. While its mobile electrocardiogram (ECG) device was also FDA approved and validated by trials, including those of the Cleveland Clinic, it is marketed online directly to consumers, without a prescription. It can also be sold to physicians, with reimbursement for point-of-care use [12].
Proteus Digital Health innovated in a different way, as it gained in 2012 the first FDA clearance for a medication adherence function for its Ingestible Sensor, a capsule that records and sends to a smartphone the time of ingestion, activity, and heart rate. The adherence indication requires a new drug application filing, but its potential market is significant, as up to half of patients may not be compliant. The company is working with Otsuka to use its sensor with the psychiatric drug Abilify (aripiprazole). Proteus also plans to target common conditions such as cardiometabolic syndrome and high-value drugs such as those for hepatitis C [13].
On a larger scale, Dexcom competes with Medtronic in diabetes, a condition that affects a 29 million population in the United States alone, with estimated direct medical costs of $176 billion and indirect costs of $69 billion, according to the US Department of Health and Human Services. In April 2015, Dexcom announced that its Platinum glucose sensor would be linked to the Apple Watch, to be followed by an integration with Android platforms.
An advantage Medtronic has over Dexcom is that it is the only firm with both a CGM device and an insulin pump. Its MiniMed Connect device was cleared by the FDA in June 2015. Medtronic is also partnering with Samsung to allow CGM and pump data on Samsung devices [14].
Big Infotech Strategies
Technology leaders have entered healthcare with different strategies that reflect their core strengths. Apple remains focused on consumers, whereas Qualcomm and IBM are expanding within a business-to-business (B to B) perspective, and Alphabet may be seen as a holding company with a broad portfolio, from its core Google search engine to biotech Calico.
Apple: Building a Consumer Ecosystem
Apple has become the world's most valued company, with 2016 revenues of nearly $215.6 billion, gained through innovation-driven growth and a role as a category maker. In the same way that it redefined digital music with iTunes, it broke new ground in mobile devices, from the iPod to the iPhone and the iPad, while spending vastly less on R & D than biopharma companies. This is linked to Apple's talent for perfecting through superior design and bringing to the mainstream existing products: MP3 players before the iPod, smartphones before the iPhone, and tablet computers before the iPad.
The power of the brand is such that the “killer app” may be the Apple name itself; in the first 24 hours after the Apple Watch launch, sales reached 1 million devices, and within a few weeks, developers had introduced more than 3,500 apps for it [15].
Apple retains in healthcare its consistent overall strategy: focus on a limited number of products, target the high end of the market, and keep building the Apple brand equity.
As Michael O'Reilly at Apple mentions, “we are committed to making great consumer products with great user experience in the marketplace” [16]. Apple's consumer focus is also apparent in the fact that, after consultation with the FDA, the agency considered the Apple Watch as a wellness tool not subject to regulation. It may now move toward more medical applications, as it is increasingly used in clinical trials. In this context, infotech companies may need to play a future role in screening third-party apps, and data security remains key. Health data collected on Apple devices will not be stored on servers, but instead on IBM's Watson Health cloud, where it will be de-identified and stored for data mining and predictive analytics.
Together, the HealthKit, ResearchKit, and the Apple Watch are meant to constitute a continuous learning environment, linking individual data to health systems.
While ResearchKit is already used by leading health systems, some issues remain. Monetization is not one of them, however, as Apple views it largely in philanthropic terms and does not have proprietary claims to the related apps, because it was released as an open-source platform.
Portability to Android and other platforms will need to occur through third-party developers. Selection bias exists in two ways: the relatively upscale iOS demographics versus those of Android users (who are more numerous, especially outside of the United States) and the “active/take-charge” behavior profile of customers. While the Apple Watch may lead to higher user engagement, it still has a fairly limited worldwide market. Misrepresentation may also pose a problem, as is the case for all social media. ResearchKit participants may disguise their gender, age, or medical condition. This may be addressed through patient identification by physicians in clinical trials.
What remains to be seen is whether these mobile devices can actually impact outcomes, and whether there is enough user incentivization for them to graduate from niche to mainstream products. Will consumers worldwide want to diligently monitor their health, or will many wearables sit on shelves after novelty fatigue, information overload, privacy concerns, and lack of time prevail over health activism?
Qualcomm: From Chips to Health Ventures
Within an overall strategy of “end-to-end two-way connectivity,” Qualcomm Ventures has made investments in companies as diverse as Fitbit, AliveCor, AirStrip Technologies, Telcare (disease management), Sotera (wireless telemetry), and ClearCare (mobile platforms for home care providers).
In healthcare, Qualcomm is in three lines of business:
- Venture investments: Through the Life Fund and the dRx Capital Fund, a joint venture with Novartis with a capital commitment of up to $100 million, for early stage investments in companies including Omada Health (digital behavioral medicine), Science 37 (clinical research) and Cala Health (bioelectronics to develop therapies in neurology).
- Platforms: With its 2net system (acting as middleware between patient and claims data, and healthcare professionals), and the HealthyCircles care coordination platform, monitoring a patient's status at home and optimizing care management.
- Licensing and acquisitions: Among others, Qualcomm Life acquired Capsule Technologie, a French provider of medical integration, with more than 1,930 hospital clients in over 38 countries. This supports an extension into acute and ambulatory care, with the goal of leading to the Internet of Medical Things (IoMT) for the company (Figure 1-8).
Figure 1-8 Qualcomm Life ecosystem
While, in its core chip business, Qualcomm competes directly with Intel, its technology overlaps that of other players such as Samsung. The company can be seen as a technology enabler rather than a business-to-consumer (B to C) player [18].
IBM: From Hardware to Software and Cloud Services
IBM first formalized its healthcare involvement with the Life Sciences Solutions unit it formed in 2000 and its early partnerships with Spotfire and Agilent in data management and MDS in proteomics. These complemented IBM's long-term development of its Blue Gene computer and academic collaborations with universities including Duke, Georgia Tech, and Johns Hopkins [19].
Since then, IBM has continued to evolve from a horizontal technology company to one delivering comprehensive vertical solutions. This is shown by extensive acquisitions and partnerships, from Apple to Medtronic, and the introduction in April 2015 of its Watson Health unit, with its own budget and R & D.
Through the Watson ecosystem, IBM may provide B to B to C solutions, aggregating clinical and claims data at the population health level and from the medical literature, and combining them with individual genomic data to support precision medicine. Within IBM, distinct groups also cover health systems and biopharmaceuticals [20]. Watson Health leverages broad datasets, including 100 million electronic health records, 200 million claims records, and 30 billion medical images. Watson for Genomics absorbs 10,000 new medical articles and data from 100 trials every month, and it is available through Quest Diagnostics to oncologists in the United States.
Current strategic objectives are the management of data (which IBM views as the world's new “natural resource”), cloud computing, and customer engagement through mobile and social technologies. IBM has made multiple acquisitions to build its capacity in data analytics. This includes the acquisitions of Explorys (spun off in 2009 from the Cleveland Clinic), Phytel (with cloud software for hospital data), and Merge Healthcare in October 2015 for $1 billion (in radiology and imaging services), as well as Truven in 2016 (analytic solutions for healthcare utilization, quality, and cost data).
For cloud services, which IBM sees as a “catalyst for innovation,” the company has invested more than $8 billion to acquire 18 companies [21]. To expand its global footprint, the company has been partnering with many others across countries.
Apple and IBM in Japan
In April 2015, the two companies announced a collaboration with Japan Post group, the largest health and life insurer in Japan, to deliver iPads with IBM-developed apps to an intended target group of 4 to 5 million seniors by 2020. Japan has one of the world's fastest-aging populations, with 33 million seniors accounting for a quarter of the population, and a projected growth of 40 percent over the next 40 years. Custom-built IBM apps include exercise and medication reminders, access to community activities, and supporting services, with data stored by the cloud services of the IBM MobileFirst for iOS platform [22].
While this is a global priority, as the elderly will increase from 11.7 percent in 2013 to 21 percent of the population by 2050, several questions remain regarding security, outcomes, and global rollout. Some consumer segments may not wish to release their individual data, even though these are de-identified; multiyear studies will be needed to determine the project's actual impact on health outcomes, and such a large-scale national rollout may be possible in single-payer systems in Europe but not in the fragmented US insurance market.
Medtech and Pharma Alliances
IBM now has a wide range of life sciences partnerships. In diabetes, it announced in April 2015 a collaboration with Medtronic, using Watson to create an “Internet of Things” around its devices. This aims to support real-time care management plans and to explore closed-loop algorithms intending to mimic a healthy pancreas function [23]. Other initiatives include a Johnson & Johnson partnership, applying Watson to prepare patients for knee surgery and help afterwards with care management.
Watson Partnerships
The Watson cloud service is rapidly gaining customers. By May 2015, 14 cancer centers had already signed on to combine genetic databases and the medical literature to optimize treatments. These ranged from the Cleveland Clinic and Duke Cancer Institute to the University of Washington and the Yale Cancer Center. IBM plans to integrate Watson's cognitive abilities with the Epic EHR system and decision-support technology [24].
With the resources of partners such as Memorial Sloan-Kettering, Mount Sinai, and MD Anderson, IBM aims to apply Watson's cognitive computing in several areas:
- At the point of care, it may facilitate evidence-based medicine for providers.
- For researchers, it may optimize drug discovery and standards of care.
- For consumers, it may enhance activity and adherence via real-world sensing.
While these applications impact the entire healthcare area, IBM has a key objective to create a new middle layer in the system, linking EHRs and R & D centers with a new cloud-based architecture.
Alphabet: Expanding a Healthcare Portfolio
While Apple's identity is that of a consumer-focused company, and IBM's main business is within the B to B realm, Alphabet is expanding a broad range of activities, from its core consumer-centered Google Search to its Verily unit and the Calico biotechnology company, founded in 2013 under the leadership of Art Levinson, the former Genentech CEO.
Among infotech leaders, Google has shown a great willingness to innovate and explore far-reaching growth avenues, at the risk of facing failures in the process. It introduced Google Health in 2008 with the goal of helping customers set up online personalized health records, but it may have been ahead of the market. Early users found it burdensome to manually enter their own data, and the initiative did not have a compelling value proposition. As a result, Google abandoned this service three years later. By 2011, an IDC survey showed that only 7 percent of consumers had tried online health records, and fewer than half of them continued to use them. Suppliers of similar services included Microsoft and WebMD, but the more successful services have often operated through alliances with insurers and providers [25].
This history of mixed success in vertical businesses including healthcare may explain, in part, Alphabet's new structure. While the company has more than 80 units covering everything from robotics to fiber optics, virtual reality, and self-driving cars, the reorganization enables them to be more independent and entrepreneurial. Healthcare initiatives span the core search business (a curated search project with the Mayo Clinic and other health systems), the Verily unit (biopharma alliances in diabetes), the Calico biotechnology company, and a portfolio of investments by GV (initially known as Google Ventures) and Google Capital (Figure 1-9).
Figure 1-9 Alphabet healthcare portfolio
Alphabet does not appear to envision becoming a healthcare company overall, largely because of concerns shared by many infotechs about pharma regulation, and is pursuing many related initiatives through partnerships.
Google Search and Mayo Clinic
In its core search business, Alphabet announced in February 2015 a partnership with the Mayo Clinic to provide enhanced information, to be curated by Mayo doctors and delivered on PC and tablet browsers as well as Google mobile apps on the Android and iOS platforms. This may cover conditions ranging from diabetes to the measles. The service does not include actual medical advice, but it intends to address the current problem of pseudoscience on the Internet [26].
Google has sought for several years to leverage its successful customer engagement to deliver more granular healthcare information. In 2008, it announced a predictive flu-tracking model, correlating its own searches with flu data in 2003 to 2007 from the CDC (Centers for Disease Control). A 2014 academic review pointed to a possible overestimation of flu prevalence, inasmuch as some correlations may have been unrelated to actual flu history [27]. While Google updated its model, there may be further potential for a collaboration with the FDA for adverse event tracking, because the sheer volume of related postings on social media like Twitter and Facebook does not allow accurate monitoring.
Verily Partnerships
The Verily unit has a wide range of acquisitions and alliances, and it is adopting a disease-centric viewpoint, with a first focus on diabetes. In 2014, the unit partnered with the Novartis subsidiary Alcon to develop a contact lens that could noninvasively track glucose levels in tears, obtaining a patent in 2015. The device includes miniaturized versions of a chip, sensor, and antenna, aiming to transmit data every second. Clinical trials were initiated, with a goal of obtaining FDA approval.
The focus on diabetes was strengthened in August 2015 with two new partnerships with Sanofi and the Joslin Diabetes Center, and with Dexcom for a glucose monitoring device. The Sanofi alliance aims to develop new tools to integrate previously siloed components of diabetes management, including indicators such as blood glucose and hemoglobin A1C, patient-reported information, and medication regimens. Objectives include helping physicians understand daily trends in blood sugar and offering patients real-time information and guidance in diet and medication dosage [28]. The alliance was formalized in September 2016 as Onduo, with a joint investment of about $500 million.
At the same time, Verily teamed with Dexcom to develop a bandage-like disposable sensor, linked to a smartphone app for CGM, with a first version planned in two to three years and another generation in the next five years. Verily is expected to limit its role to R & D, with Dexcom handling sales and distribution. The deal includes an initial upfront payment of $35 million, R & D milestone payments up to $65 million, and revenue-based royalties of 5 to 9 percent from Dexcom [29]. Although these partnerships are separate, as they lead to commercial products, the goal will be to integrate miniaturization technology, sensors, and data analytics, with a potential to disrupt diabetes care management. In another area, Verily formed in December 2015 Verb Surgical, an independent company with Johnson & Johnson, focused on developing surgical instruments for a new robotics-assisted platform.
In addition to these efforts, Verily is engaged in several broader studies. In November 2015, it announced a five-year, $50 million collaboration with the American Heart Association (AHA), with each partner contributing half of the funding, and a single team working on new approaches to research the causes, treatment, and prevention of heart disease.
An earlier initiative announced in July 2014 is a Baseline Study, collecting thousands of individual genetic data to identify patterns of genetic mutations, with a goal to define a healthy human body and to identify new biomarkers to detect conditions such as cancer and heart attacks at earlier stages. Google was to collaborate on the study with the Duke and Stanford medical schools. Verily's long-term opportunity is to build chronic disease models as a path to better outcomes; for diabetes, this includes disease management and medication dosing, and also behavioral changes such as diet and activity [30].
Galvani Bioelectronics
Verily and GlaxoSmithKline (GSK) announced on August 1, 2016, an agreement to form Galvani Bioelectronics, aiming to develop and commercialize bioelectronics medicines. This fairly new field targets a range of chronic diseases, using miniaturized implantable devices that can modify electrical signals along nerves. GSK has researched this since 2012, and Verily brings expertise in data analytics, the miniaturization of low-power electronics, software, and device development. The initial goal is to reach clinical proofs of principle in inflammatory and metabolic disorders, including type 2 diabetes. GSK is to have 55 percent equity in the venture, and Verily will hold the rest [31].
Calico Partnerships
In addition to the wide-ranging initiatives from the Verily unit, Calico has started several biopharma alliances since its start in 2013. Within its focus on longevity, it started in September 2014 a collaboration with AbbVie to create an R & D facility in the San Francisco Bay Area, specialized in age-related diseases, including cancer and neurodegeneration. Each partner was to initially provide up to $250 million, with the potential to contribute an additional $500 million. AbbVie is to provide scientific and technical support, as well as commercial expertise in bringing products to market [32]. Other partnerships include C4 Therapeutics (protein degradation), QB3 (age-related diseases), as well as the Broad Institute of MIT and Harvard, the University of Texas Southwestern Medical Center, and the University of California in San Francisco.
Google Investments
To complete these initiatives, Alphabet has also broadly invested in healthcare through its two investment arms. GV was founded as Google Ventures in 2009 and has since accumulated more than $2 billion under management in 300 companies, including the Uber car service and the office messaging system Slack. The fund's objectives are financial return and also access to operational help for its portfolio companies. It has moved strongly into healthcare since 2014, with more than a third of its current funding in this sector. This includes more than $100 million in Flatiron Health (applying analytics to oncology data), Editas Medicine (genome editing firm with expertise in CRISPR/Cas9 technology), and DNAnexus (next-generation cloud-based sequence data management).
Biotech companies include Alector and Denali Therapeutics in neurodegenerative diseases, Compass Therapeutics in antibody discovery, Rani Therapeutics for the oral delivery of large molecules, and SynapDx (blood test for autism). GV also invested in 2017 in Arsanis (monoclonal antibodies), Magenta Therapeutics (stem cell research for cancer) and Science 37 (mobile technology and clinical trial provider).
In addition, Google Capital was formed in 2013 as a late-stage growth venture capital fund. It has since invested in a dozen companies, in areas such as big data, financial technology, security, and e-learning. Its 2015 healthcare investments include Practo in India (healthcare discovery and practice management platform) and Oscar Health Insurance, with $32.5 million in funding for the latter [33].
Oscar competes against UnitedHealthcare, Anthem, and other insurers by focusing on Internet services for individuals, including free fitness-tracking and unlimited telemedicine, and signs up customers through online exchanges created by the 2010 Affordable Care Act (ACA). A potential goal of the partnership is for Oscar to help distribute new Google products to its members [34].
The scale of these investments does not obscure the fact that Alphabet, like other infotech leaders, is keeping its core business at a safe distance from heavy biopharma regulation.
In the same year as Google closed Google Health, Microsoft folded its Health Solutions group into the Caradigm joint venture with General Electric (GE). Caradigm is a population health company with an enterprise software portfolio including healthcare analytics, data control and security, care management, and patient engagement. Its partnerships include the Geisinger Health Plan and the Eliza Corporation for health engagement management [35].
Microsoft has, for now, stayed away from vertical business forays, leveraging instead its Windows platform dominance with partnerships. These include a collaboration with Johns Hopkins, announced in October 2015. Based on the latter's Project Emerge, the new solution will apply data analytics to show when a patient in intensive care requires treatment to prevent complications; it will scale existing workflows and care concepts into an integrated system for patients, families, and care teams, with a move to Microsoft's Cloud for real-time intelligence. It will also link with Microsoft Azure to connect disparate devices into an Internet of Things. The goal is to deliver this to health systems nationally and to transform the management of intensive care [36].
A new entrant into healthcare is Amazon. It has stated its interest in the pharmacy business, and it joined Johnson & Johnson, Bristol Myers Squibb, Merck, Varian Medical Systems, and China's Tencent for an investment totaling $900 million in Grail. A spin-off in 2016 from gene sequencer Illumina, Grail was set up to develop a comprehensive cancer screening test for asymptomatic patients, sequencing tumor DNA in blood samples and combining it with datasets from its population-scale clinical trials. Its first trial plans eventually to enroll 10,000 participants. Together with IBM's Watson Health, this illustrates the growing importance of integrating knowledge from large databases into diagnostic and drug development [37].
Conclusion
The convergence of infotech and healthcare may lead to a profound transformation of biopharma business models, and infotech companies may gain a dual role as enablers and disrupters. They are most likely to do so as external players, due to concerns about regulation, long development cycles, and different cultures.
Areas of opportunity include the optimization of clinical trials, as cognitive computing tools such as Watson aggregate data from multiple sources and apply them to individuals to enable precision medicine. Real-time data streaming from biosensors may also help optimize trials; the use of Apple's ResearchKit has already enabled broad enrollments [38]. It may also disrupt biopharma, as diurnal variations in biomarkers, linked to exercise patterns, may allow patients with conditions such as prediabetes to bypass early drug therapy.
For biopharma companies, there is, so far, a lack of a clear value proposition for significant investments in digital health. They may therefore need to view it not as a classic investment but as a hedging of the risk that infotech leaders and new entrants will own a dominant position in that space.
The next two chapters will further examine financing and alliance strategies for biopharma companies, including possible partnerships with infotech firms.
Summary Points
- Biotechnology has now matured and is driving innovation across sectors, from medicine and food to agriculture and biomaterials.
- Information technology companies have rapidly entered the health space in a new convergence that presents both an opportunity and a threat for biopharma firms.
- Infotechs are playing a key role, with digital solutions through the value chain; in R & D, digital tools can optimize clinical trials and streamline data analytics; at the commercial end, these tools may allow deep integration of the customer voice, from product co-creation to post-launch communications.
- Infotechs are entering healthcare with different strategies that reflect their core strengths, from Apple to IBM and Alphabet.
- Apple is building a consumer ecosystem, from its HealthKit partnership with the Mayo Clinic to its Apple Watch that tracks vital signs and aims to optimize outcomes.
- IBM is extending its vertical solutions through acquisitions such as Explorys and Phytel; Watson Health may provide BtoBtoC solutions, aggregating clinical, claim, and journal data for researchers, and combining them with individual genomic data to support precision medicine.
- Alphabet has built a large portfolio, from its core Google Search to Verily and longevity-focused Calico Life Sciences; Verily has several diabetes alliances with Novartis, Sanofi, and Dexcom; GV and Google Capital investments range from Flatiron Health (oncology analytics) to Oscar Health Insurance.
- These investments do not obscure the fact that infotech business models differ greatly from those of biopharmas, from rapid production times to a greater tolerance for risk and a wish to avoid healthcare's heavy regulation.
- Convergence barriers are also significant, from consumer privacy and security concerns to physician reimbursement, liability, and lack of infrastructure to handle massive patient data flows.
- The objective of providing seamless patient care remains elusive, given the siloed nature of digital innovation and the lack of interoperability between consumer biosensors, physician offices, and hospital electronic systems.
- Despite these uncertainties, the new convergence is profoundly transforming biopharma business models; this may evolve into an enabling scenario (optimized research and clinical trials), but it could also be a disruptive one (disintermediation by infotechs of patient/physician/researcher communications).