Tag Archives: Healthcare Information Technologies

Business

Alphabet Unit Verily to Trim More Than 200 Jobs

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Verily Life Sciences, a healthcare unit of

Alphabet Inc.,

GOOG 3.38%

is laying off more than 200 employees as part of a broader reorganization, the first major staff reductions to hit Google’s parent following a wave of layoffs at other technology companies.

The cuts will affect about 15% of roles at Verily, which will discontinue work on a medical software program called Verily Value Suite and several early-stage products, CEO Stephen Gillett said in an email to employees Wednesday. Verily has more than 1,600 employees.

Verily oversees a portfolio of healthcare projects largely focused on applying data and technology to patient treatments, including a virtual diabetes clinic and an online program for connecting research participants to clinical studies. 

“We are making changes that refine our strategy, prioritize our product portfolio and simplify our operating model,” Mr. Gillett wrote in the email. “We will advance fewer initiatives with greater resources.”

Originally known as Google Life Sciences, Verily is one of the largest businesses other than Google under the Alphabet umbrella, part of a group of companies known as “Other Bets.” Alphabet had 186,779 employees at the end of September last year, according to company filings.

The robotics software company Intrinsic, another unit in Alphabet’s Other Bets, also said on Wednesday it would let go of 40 employees. A spokesman said the “decision was made in light of shifts in prioritization and our longer-term strategic direction.”

Verily has recently looked to pare back a once-sprawling collection of projects spanning insurance to mosquito breeding. Last year, the company hired McKinsey & Co. and Innosight to do consulting work, The Wall Street Journal reported.

After a period of aggressive hiring to meet heightened demand for online services during the pandemic, tech companies are now laying off many of those workers. And tech bosses are saying “mea culpa” for the miscalculation. WSJ reporter Dana Mattioli joins host Zoe Thomas to talk through the shift and what it all means for the tech sector going forward.

The reorganization is a sign of the continued difficulties facing big tech companies trying to crack the healthcare industry.

David Feinberg,

the head of an ambitious health-focused group at Google, left the company in 2021 to become CEO of the healthcare technology company Cerner Corp.

In the email to employees, Mr. Gillett said Verily would largely focus on products related to research and care, while concentrating more decisions in a central leadership team rather than individual groups.

Mr. Gillett took over as Verily CEO this month, succeeding the well-known geneticist

Andy Conrad,

who moved to executive chairman.

“As we move into Verily’s next chapter, we are doubling down on our purpose, with the goal to ultimately be operating in all areas of precision health,” Mr. Gillett wrote to employees on Wednesday. “We will do this by building the data and evidence backbone that closes the gap between research and care.”

Google’s peers have cut jobs recently in response to worsening economic conditions and a decline in online advertising. Last week,

Amazon.com Inc.

announced layoffs that will affect more than 18,000 employees, the most of any tech company in the past year.

Tech Layoffs Across the Industry: Amazon, Salesforce and More Cut Staff

At a companywide meeting in December, Google CEO

Sundar Pichai

said he couldn’t make any forward looking commitments in response to questions about layoffs. Google has tried to “rationalize where we can so that we are set up to better weather the storm regardless of what’s ahead,” he added.

Activist investor TCI Fund Management called on Alphabet in November to reduce losses in Other Bets such as Verily, writing in a letter to Mr. Pichai that the company had too many employees.

Alphabet’s Other Bets recorded $1.6 billion in operating losses from $209 million in revenue during the third quarter last year, mostly from the sale of health technology and internet services. 

Verily said in September it received $1 billion in funding from Alphabet and other investors, without naming the backers. The private-equity firm Silver Lake, Singaporean fund Temasek Holdings and Ontario Teachers’ Pension Plan previously invested in the company.

Write to Miles Kruppa at miles.kruppa@wsj.com

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Business

Judge Rejects Antitrust Challenge to UnitedHealth Acquisition

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U.S. District Judge Carl Nichols ruled for the companies in an opinion that he kept under seal for now because he said it “may contain competitively sensitive information.” The judge said he would release a redacted public version of the ruling in the coming days. In a one-page public order, he denied the Justice Department’s request to block the companies from completing the deal.

The court ruling represents an early blow to stepped-up antitrust enforcement by the Biden administration, which sued in February to block the deal. The Justice Department’s top antitrust official,

Jonathan Kanter,

said the department disagreed with the decision and was considering its next steps.

“Protecting competition and access to affordable healthcare is of the utmost importance to the antitrust division and the Department of Justice,” Mr. Kanter said.

The decision is a triumph for UnitedHealth, which owns the largest U.S. health insurer and a healthcare operation that comprises thousands of doctors as well as clinics, surgery centers and other assets, along with a powerful conglomeration of health data.

In a statement, a UnitedHealth spokesman said, “We are pleased with the decision and look forward to combining with Change Healthcare as quickly as possible so that together we can continue our work to make the health system work better for everyone.”

Change provides services related to payment processes for healthcare systems, analytics for financing and billing and tools that help hospitals make decisions about patient care.

UnitedHealth had agreed to divest business assets related to claims-processing to address competition concerns, an offer the Justice Department had dismissed as insufficient.

Judge Nichols in his order required UnitedHealth to make that divestiture.

UnitedHealth’s deal for Change, announced in January 2021, will bring the health-technology company under the company’s Optum health-services arm. UnitedHealth had argued that its combination with Change could help improve care by getting better information to doctors, and reduce waste. It agreed to pay nearly $8 billion for Change and assume about $5 billion in debt.

The Justice Department had argued that the deal would give UnitedHealth a virtual monopoly on an important tool that health insurers use to determine when a claim should be paid. And it said the company shouldn’t be allowed to own Change Healthcare’s data clearinghouse, which rival insurers use to compete with UnitedHealth.

The judge, an appointee of former President

Donald Trump,

signaled his skepticism of the lawsuit in a hearing earlier this month. A trial took place in August.

The lawsuit was part of an early batch of antitrust cases brought by the Justice Department under President Biden, a Democrat, that were designed to take a harder line on corporate deal activity. Among other cases, the department is waiting on a ruling in its challenge to a major publishing industry deal, Penguin Random House’s planned acquisition of Simon & Schuster. And it is preparing to go to trial next week in its lawsuit challenging a partnership between

American Airlines Group Inc.

and

JetBlue Airways Corp.

The current crop of antitrust officials, backed by calls from Democrats for a more aggressive approach, have sought to set new court precedents that would steer the law in a broader direction, after years of rulings in which the judiciary has tended to read the antitrust laws more narrowly than a generation ago. Monday’s decision served as a reminder that the Justice Department’s goals are dependent on proving their cases in front of a judge.

The Federal Trade Commission, which shares antitrust authority with the department, also is facing hurdles. It recently lost a ruling from its own in-house administrative law judge, in a case where it was challenging

Illumina Inc.’s

acquisition of cancer-testing developer Grail Inc.

Monday’s decision comes as UnitedHealth and its rivals have continued to move more deeply into vertical integration of health assets, spanning insurance and healthcare provider businesses, as well as pulling together ever-larger troves of health data.

Even after the Justice Department filed suit to block the Change deal, UnitedHealth moved ahead with other acquisitions, including a $5.4 billion takeover of home-health company

LHC Group Inc.

announced last March.

Earlier this month,

CVS Health Corp.

—the parent of health insurer Aetna, a pharmacy-benefit operation and its eponymous drugstores—announced an $8 billion deal to take over home-healthcare company Signify Health Inc. CVS has said it wants to get deeper into the business of primary care.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Brent Kendall at brent.kendall@wsj.com

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Business

CVS Is in Advanced Talks to Buy Signify Health for Around $8 Billion

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CVS Health Corp.

CVS -0.49%

is in advanced talks to acquire the home-healthcare company

Signify Health Inc.

SGFY 1.34%

for around $8 billion, according to people familiar with the matter.

CVS appears to have beat out other heavy hitters including

Amazon.com Inc.

and

UnitedHealth Group Inc.,

which had been circling Signify for a deal that could be announced soon. UnitedHealth never submitted an official bid, one of the people said.

There is still no guarantee that CVS will reach a deal for Signify, which has been exploring strategic alternatives since earlier this summer.

Bids for the company were due Sept. 6, but people familiar with the matter have said that an eager buyer could make a move before then.

Signify’s valuation has ballooned since The Wall Street Journal reported in August that it was for sale. Shares of the company closed at $28.77 on Friday, giving it a market capitalization of roughly $6.7 billion.

Signify works with a large group of doctors to facilitate house calls. It uses analytics and technology to help physician groups, health plans, employers and health systems with in-home care. It offers health evaluations for Medicare Advantage and other plans.

At the close of its deal this year to buy Caravan Health, Signify said that it supported roughly $10 billion in total medical spending.

The company went public in February 2021, raising more than $500 million as a result of the offering. On the day of its initial public offering, shares of the company priced above its expected range, at $24.

New York-based New Mountain Capital has backed Signify since 2017. The firm—which had more than $37 billion in assets under management as of early August—has steadily expanded Signify through a series of mergers and acquisitions since its initial investment.

New Mountain is well-versed in the healthcare sector. It previously sold the healthcare payments firm Equian LLC to UnitedHealth for roughly $3.2 billion in 2019.

For CVS, the deal builds on an effort years in the making to transform itself into a major provider of healthcare services through acquisitions and expanded medical services. The company had been struggling to counter slowing revenue from prescription drugs, which drive the bulk of its sales, and to ward off competition from

Amazon

AMZN -0.24%

for retail dollars.

CVS, the nation’s largest drugstore chain by stores and revenue, acquired Aetna in 2018, arguing that melding the insurance company’s patient data with its network of nearly 10,000 bricks-and-mortar sites would squeeze out costs while improving care and convenience.

The strategy has paid off, buoyed by a surge in demand for Covid-19 vaccines and tests at the height of the pandemic. CVS’s market capitalization has grown to more than $130 billion from around $75 billion since the Aetna deal.

The line between Amazon and Walmart is becoming increasingly blurred, as the two companies seek to maintain their slice of the estimated $5 trillion retail market while chipping away at each other’s share, often by borrowing ideas. Photos: Amazon/Walmart

The company is outperforming

Walgreens Boots Alliance Inc.,

which opted against major acquisitions, in the years since. Walgreens, also racing to expand into healthcare, focused largely on partnerships rather than deals. But last year it bought a controlling stake in the primary-care network Village MD, giving it doctors’ offices that CVS had said it could do without.

CVS Chief Executive

Karen Lynch

has since said that the company must have a foothold in primary care if it is to become a full-service medical provider.

CVS had previously been interested in a deal for the parent of One Medical, people familiar with the matter have said.

Amazon

AMZN -0.24%

agreed to purchase the primary-care clinic operator for about $3.9 billion in July.

The Federal Trade Commission is currently investigating the deal. The parent company of One Medical,

1Life Healthcare Inc.,

disclosed the investigation in a securities filing. The disclosure said One Medical and Amazon each received a request for additional information about the deal from the FTC.

While Wall Street has largely focused on CVS’s efforts to acquire primary-care practices, executives have also discussed ambitions to expand its in-home health presence.

A deal for Signify would represent a bright spot in an otherwise lackluster run for deals lately. Deal volumes globally are down roughly 30% this year after a flurry of activity last year, because of a drop in companies’ valuations, market volatility and other factors including Russia’s war in Ukraine.

Healthcare deal making in particular has slowed more than many other sectors. Over $200 billion of healthcare deals announced so far this year has compared with over $400 billion at this time last year, according to Dealogic. The largest healthcare deal to date this year in the U.S. is

Pfizer Inc.’s

$11.6 billion agreement in May to purchase the rest of

Biohaven Pharmaceutical Holding Co.

Write to Laura Cooper at laura.cooper@wsj.com, Sharon Terlep at sharon.terlep@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

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Business

CVS Plans to Bid for Signify Health

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CVS Health Corp.

CVS 0.38%

is seeking to buy

Signify Health Inc.,

SGFY 2.32%

according to people familiar with the matter, as the drugstore and insurance giant looks to expand in home-health services.

Signify Health is exploring strategic alternatives including a sale, The Wall Street Journal reported this past week. Initial bids are due this coming week and CVS is planning to enter one, some of the people said. Others also are in the mix, they said, and CVS could face competition from other managed-care providers and private-equity firms.

There is no guarantee any of them will reach a deal for Signify, which has a market value of around $4.7 billion after its shares rose on the news of a potential sale.

For Woonsocket, R.I.-based CVS, which has a market value of $134 billion, a deal would help fulfill its stated ambition to become an even bigger provider of medical services. The company has indicated it hopes to have a deal in place to help it do so by year-end. Wall Street has largely focused on CVS’s efforts to add primary-care practices and doctors to its payroll, though executives have also discussed their ambitions to expand its in-home health presence.

CVS, parent of the eponymous drugstores and the Aetna health-insurance operation, had eyed a deal for the parent of One Medical, people familiar with the matter said, before

Amazon.com Inc.

agreed to buy the primary-care clinic operator for about $3.9 billion last month.

Signify uses analytics and technology to help health plans, employers, physician groups and health systems with in-home care. It also offers in-home health evaluations for Medicare Advantage and other government-run managed-care plans. At the close of its deal this year to buy Caravan Health Inc., Signify said it supported roughly $10 billion in total medical spending.

Signify went public in February 2021. Even after rallying recently, the shares, which closed Friday at $19.87, are below their $24 IPO price. In July, the company said it planned to wind down one of its units after changes to a government-payment model and focus on more-profitable businesses.

New York-based private-equity firm New Mountain Capital is an investor in Signify after first backing it in 2017. The firm is well-versed in the sector, having sold healthcare payments firm Equian LLC to

UnitedHealth Group Inc.

for about $3.2 billion in 2019.

Write to Cara Lombardo at cara.lombardo@wsj.com, Laura Cooper at laura.cooper@wsj.com and Sharon Terlep at sharon.terlep@wsj.com

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Business

IBM Explores Sale of IBM Watson Health

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International Business Machines Corp. is exploring a potential sale of its IBM Watson Health business, according to people familiar with the matter, as the technology giant’s new chief executive moves to streamline the company and become more competitive in cloud computing.

IBM is studying alternatives for the unit that could include a sale to a private-equity firm or industry player or a merger with a blank-check company, the people said. The unit, which employs artificial intelligence to help hospitals, insurers and drugmakers manage their data, has roughly $1 billion in annual revenue and isn’t currently profitable, the people said.

Its brands include Merge Healthcare, which analyzes mammograms and MRIs; Phytel, which assists with patient communications; and Truven Health Analytics, which analyzes complex healthcare data.

It isn’t clear how much the business might fetch in a sale, and there may not be one.

IBM, with a market value of $108 billion, has been left behind as cloud-computing rivals Microsoft Corp. and Amazon.com Inc. soar to valuations more than 10 times greater. The Armonk, N.Y., company has said it’s focused on boosting its hybrid-cloud operations while exiting some unrelated businesses.

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