The week ahead
As we prepare to make our annual pilgrimage to that beautiful albeit rainy city by the bay a few thoughts about what we might see and hear at JP Morgan. Based on the pre-show buzz artificial intelligence seems to be tracking as a big story. Another is the continued speculation about how Amazon will change healthcare. Along those same lines there will be more speculation as how our friends in the Valley will change healthcare.
Speaking of our friends in the Valley Verily the life sciences unit of Google made some noise last week when they unit raised a billion bucks. Not to digress here but why is that investors feel the need to pour a billion bucks into a company that has a few hundred billion in cash just sitting around. Yes, we know that everyone wants to be associated with Google but seriously a billion bucks into a unit that so far has produced nothing but great copy is a little much.
What these investors seem to be banking on is that Verily will be spun off from Google as separately traded independent company sometime in 2020. That this IPO will value Verily in the $20 billion range and everyone will do the happy dance. While this might happen Verily has bigger issues to deal in 2019. The much-ballyhooed partnership with Sanofi, OnDuo isn’t going all that well. The once way cool whiz bang glucose sensing contact lenses has been shelved and while there have been some recent victories, the deal with Walgreens, heavens know what Verily paid to get this deal done.
Verily also has some additional issues now that Google has brought in new guy to run their health initiative. The problem was accurately summarized in a post on the CNBC web site by Christina Farr who noted;
“Late last year, Google announced it had brought on a new executive, Geisinger Health’s David Feinberg, to consolidate its health efforts. Feinberg will work closely with Verily executives, according to people familiar with the matter, but he won’t directly manage its leaders, including Conrad.” (Conrad is Andy Conard who heads up Verily)
What Ms. Farr doesn’t mention is how this powerplay between Feinberg and Conrad will play out. While Google is trying to say that everyone will play nicely together in the sandbox, internally many are wondering how these two corporate heavyweights will get along. Our sources indicate that Google isn’t all that happy that Verily hasn’t produced anything of substance which is the reason Verily had to go outside the mothership to get more money. Our put another Verily went to the mothership for more money and they said no if you need more money go raise it yourself.
Another story we’ll be following closely is how our friends in Northridge will explain away the problems in the diabetes unit. The unit has just undergone another series of layoffs and has initiated several cost saving measures. The much-anticipated Animas conversions aren’t going well plus there is the FDA investigation. What the Street misses with this is unit is the numbers are very misleading the unit isn’t really growing; the so-called growth comes from the unit churning their huge installed user base. By converting existing customers to newer higher revenue generating systems.
A few other stories should also gain our attention;
The battle between CGM heavyweights Dexcom and Abbott.
Is Lilly really serious about becoming a diabetes device company.
Will Sanofi buyout Google and go it alone with OnDuo.
This being JPM we have learned to expect the unexpected which is what makes this such a fun week. So, stay tuned everyone.