2013 Financing of the Year Nominee: Calico

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Across the pharma industry, companies are developing symptomatic treatments, therapies that attack the root causes of diseases, prophylactic vaccines, and occasionally, holy-grail cures that eliminate diseases from patients entirely. But Calico, a new company launched in September by Google founder Larry Page, aims for an even bigger kahuna: it’s trying to “solve death.”

That’s the way Time put it when it introduced Calico in a splashy cover story. And while some prefer the softer terms “anti-aging” and “life extension” to describe Calico’s aims, make no mistake: It’s the latest well-funded effort to discover treatments that slow down, arrest or reverse the gradual process of atrophy that makes us all older and more vulnerable to disease. If its ambitions seem outsized, its creator has company in Silicon Valley, where audacious goals occasionally take form as hundred-billion-dollar companies just a few years after they’re dreamt up.

Google employs futurist/inventor Ray Kurzweil, who has written a couple of books about life extension. PayPal founder and Founders Fund partner Peter Thiel has voiced a desire to be a supercentenarian, and has contributed funds to related projects. And a group including Facebook founder Mark Zuckerberg, his wife Priscilla Chan, 23andMe founder Anne Wojcicki (Page’s soon-to-be-ex-wife) and Russian billionaire/Valley investor Yuri Milner has launched the Breakthrough Prize in Life Sciences, which awards grants to scientists “curing intractable diseases and extending human life.”

If that just seems like a bunch of techies trying to become more like the robots they like to create, well, Calico has brought in one seasoned biotech veteran to steer the ship toward realistic outcomes. Longtime Genentech CEO Art Levinson – still Genentech’s chairman, a Roche director, and Apple’s chairman – is Calico’s chief executive. In a Google+ post at the time of the company’s launch, Levinson wrote that Page and Google Ventures partner Bill Maris approached him about a project “that would take the long-term view on aging and illness”; Page’s own post described the project as “a long-term bet” that might tackle decreased mobility, loss of mental acuity, and life-threatening diseases that afflict the elderly. (Page said Google itself had invested in the project; the Google Ventures web site doesn’t list Calico as a portfolio company. The venture arm has its own data-driven ambitions, as we discussed in this Start-Up profile.)

Calico – short for “California Life Company” – hasn’t revealed much more since its September launch, but it hired a few more industry vets and academic figures during the fall. Former Roche EVP of global product development and chief medical officer Hal Barron will lead Calico’s R&D. Ex-Princeton prof David Botstein, who ran the university’s Lewis-Sigler Institute for Integrative Genomics and won one of those Breakthrough Prizes, signed on as Calico’s chief scientific officer. Both are Genentech veterans. Also, former Genentech Senior Oncology Fellow Bob Cohen was named a Calico Fellow, while UCSF professor and researcher Cynthia Kenyon signed on as a Calico scientific advisor.

It wouldn’t kill you to consider Calico for this year’s Roger in the financing category, now, would it? (Though it remains to be seen if Calico can repay the favor with a little life extension.)

Thanks to Flickr user UlfBodin for the photo of a sun-kissed kitty, reproduced here under Creative Commons license.

Financings of the Fortnight Explores the Alternatives

With all the noise this year about IPOs in our little corner of the world, it’s been easy to forget that most biotechs out there are scrambling for any source of cash they can lay hands on. Assurances aside that traditional biotech VC is making relative bank, the overall pool of traditional venture capital available to invest will continue to dwindle, as respondents in START-UP’s 3rd annual life science VC survey were quite adamant about.

(The survey is now available, by the way.)

This week we got a taste of the post-VC world; or at least, a reminder of the various types of alternative funding out there for health care and biotech that, in a few years, could replace a significant chunk of traditional venture and interrupt for good the boom-and-bust cycle.

First, the elephant in the room: Google announced it would fund a new health care company, Calico, dedicated to anti-aging. The search-and-so-much-more giant is clearly obsessed with health, and doing something about the drastic – dare we say “tragic” – flaws in the care system. Our correspondent Paul Bonanos did a great job delving into Google Ventures’ health care investment strategy in this feature earlier this year, and we recommend reading it (non-subscribers can sign up for a free trial) as background to what might be going on with Calico.

Fly-on-wall fantasy: Page: How do we increase Google searches over a person's lifetime? Brin: What if we just increased the lifetime?
— Josh Berlin (@BioPharmaJosh) September 18, 2013

Paul also reminds us that the Googlers aren’t the only tech-heads with health-care ambitions: Peter Thiel, Yuri Milner and others are shifting their fortunes in small measures. And bully for them; we could certainly use fresh minds and tech-savvy strategies (Tech Tonics?), what with the data-intensive nature of health care these days.

But Silicon Valley’s libertarian streak is often at odds philosophically with another important source of biotech funding that we were reminded of this week. The National Institutes of Health announced the recipients of $45 million from the funds dedicated in 2012 to Alzheimer’s research. Those funds aren’t going directly to biotech companies, but the trials and other efforts they’re backing are much needed in an area that seems practically abandoned by industry – at least in proportion to the level of the dire medical need Alzheimer’s represents. So, indirectly, one can only hope the NIH funding can move the needle enough for biopharma, big and small, to see clearer pathways that deserve cash outlays from the private sector, as well.

Finally, we’re about to see a small but significant step toward equity crowdfunding. Title II of the JOBS Act, which loosens the rules for general solicitation of accredited investors, takes effect next week. It’s not quite crowdfunding nirvana – or the apocalypse, depending on your viewpoint – because we’re still a ways away from Mom and Pop, Joe Sixpack, and the Joneses being able to participate.  (That’s Title III.) But all manner of folks are lined up, ready to provide investment platforms for those with an eye on biotech, as our colleagues have written about here.

If you happen to be at PSA: The Pharmaceutical Strategy Conference in New York next week, you can ask Greg Simon, who’s running the equity crowdfunding site Polliwogg, all about the latest developments. (Or you can catch him on the panel “Funding Biotech: New Ways To Create Value.”)

Or, if you hate going anywhere near New York because you’re convinced it’s about to be overrun by giant drooling sea-dragon spiders, well, the people we write about have products that can help you. Until then, relax in the safety of your home or office, avoid the crowds (and their funds), and enjoy the latest edition of….



Civitas Therapeutics: From the ashes of the inhaled insulin efforts of the previous decade comes Civitas, which said September 11 it has raised a $38 million Series B financing to fund late-stage development of the company’s lead program, CVT-301, an inhaled formulation of levodopa (L-dopa) to treat debilitating motor fluctuations – known as “off episodes” -- associated with Parkinson’s disease. Civitas spun out of Alkermes' pulmonary business in 2010, then the latest casualty in Big Pharma’s complete retreat from several efforts to create inhaled insulin products. But Longitude Capital and Canaan Partners raised $20 million for a Series A, and in early 2011 new CEO Glenn Batchelder told FOTF he hoped to bring a Parkinson’s-related treatment to clinical proof of concept by the end of 2012. (Why an inhaled L-dopa for Parkinson’s? During acute “off periods,” characterized by halting or frozen movement, the Civitas technology aims to deliver drug even when it might be difficult for patients to draw a sustained breath.) CVT-301 is being positioned as an adjunct therapy to oral L-dopa. Bay City Capital led the round and was joined by crossover hedge fund RA Capital, an undisclosed blue chip public investment firm, and all returning shareholders including Alkermes, Canaan Partners, Fountain Healthcare Partners, and Longitude Capital. Partners from Bay City and RA Capital joined the company’s board. Civitas will also explore pipeline expansion with its ARCUS delivery platform for other diseases where what the company defines as a “large, precise” dose delivered from an inhalation device “would provide a significant clinical advantage.” – A.L.

DRI Capital: The Toronto health care royalty investor said September 9 it has raised a new $1.45 billion fund, its third following $240 million and $926 million vehicles, raised in 2006 and 2010 respectively. Investments under the first two funds followed a fairly straightforward set of criteria: drugs with FDA or EMA approval that offer strong efficacy and an attractive pharmacoeconomic profile and that are used to treat very serious, chronic conditions, DRI President and CEO Behzad Khosrowshahi told our “Pink Sheet” colleagues. For the third fund, however, DRI also plans to consider investments in Phase III assets and the higher returns that might come from higher-risk investments. It’s part of a larger but still subtle trend of royalty firms dipping toes into pre-commercial assets, even as traditional venture firms cross the other way and dabble in royalty investments. Khosrowshahi said that DRI has “a decent level of internal expertise” to evaluate pre-commercial risks. The drug royalty business has certainly attracted the capital to lure health care specialists, with DRI joined by competitors such as Capital Royalty L.P., Orbimed Advisors LLC and Healthcare Royalty Partners. Earlier this year, Capital Royalty raised more than $1 billion for its second fund, announcing a revised strategy under which it would emphasize debt instrument financing that would offer its deal partners a more concrete sense of the cost of capital. -- Joseph Haas

Five Prime Therapeutics: The protein therapeutic company notched on September 18 the first biotech IPO of the fall season. More than a dozen are waiting in registration, and an unknown number are also still under wraps with confidential filings. Five Prime raised $62 million by selling 4.8 million shares at $13 each, right within its projected range of $12 to $14 a share. Insiders bought about 408,000 shares. Five Prime was founded in 2001 and built at a time when VCs were more willing to wait for long-term payoffs for platforms. Five Prime’s platform consists in part of a library of 5,600 extracellular proteins to yield novel targets, and biotech or pharma partners have signed on with more than $220 million in partnership or licensing money. Its most advanced candidate FP-1039 is a selective FGF inhibitor that Five Prime and its partner GlaxoSmithKline put into a Phase Ib trial in July.  “If you were to tell a VC, ‘Give me four or five years and a chunk of money to develop this kind of platform,’ it might be a tough sell these days,” Five Prime VP of Biology Brian Wong told our sister publication START-UP earlier this year. Befitting a company that’s taken 12 years to reach the public markets, the pre-IPO ownership was spread rather widely. Only Pfizer had more than a 10% stake, with 13.7%. Venture or priate equity groups Advanced Technology Ventures, Domain Associates, Kleiner Perkins Caufield & Byers, HealthCap, Versant Ventures – from the firm’s very first fund -- and Texas Pacific Group all owned 9%. Founder and CEO Rusty Williams owned 6.8%. Jefferies led the underwriting team, which has the option to sell an additional 720,000 shares. – Alex Lash

Cubist Pharmaceuticals: The antibiotic maker said September 16 it bought $25 million in Series A preferred stock from Optimer Pharmaceuticals, a sale that was negotiated this summer as part of Cubist’s agreement to buy Optimer. That acquisition, not yet consummated, hasn’t gone over well with Optimer shareholders, who have filed suit to stop it because Optimer shares have actually been climbing since the company dumped its CEO and put itself up for sale in February. The $10.75-per-share offer, or $535 million, was at a 19% discount to Optimer’s July 30 closing price. Shareholders could earn more post-acquisition if Cubist hits sales milestones with Optimer’s Clostridium difficile treatment Dificid (fidaxomicin), a product it has been selling in the U.S. since 2011, when it signed an exclusive co-promotion deal with Optimer. The $25 million stock sale is essentially a bridge to help Optimer pay the bills – or as a Cubist spokeswoman told FOTF, “to address Optimer’s near-term cash needs” -- until the merger takes effect. The purchase repeats quarterly, so if the deal hasn’t closed in three months, Cubist will pay another $25 million, and another $25 million three months after that. As of June 30, Optimer had $73 million in cash on hand, down from $119 million at the end of 2012. Seeing how the deal was unusual for its discounted price, there certainly is a chance that the lawsuit will have legs and hold matters up for some time. The Cubist spokeswoman declined to comment on the suit. – A.L. and Jessica Merrill 

All The Rest: myoscience, developing Focused Cold Therapy devices for peripheral nerve conditions, closed on a $25M Series E round…Index Ventures is initially investing $10M into Egalet to support work on abuse-deterring pain meds, with the option for another $10M…Emmaus Life Sciences raised $7.5M to complete Phase III studies for its sickle cell candidate…to pay for its acquisition of CNS assets from Merck, Cerecor got $6.8M in Series A-1 financing…Taglich Brothers led a $3.2M round for screening and assay development services company Caldera Pharmaceuticals…Sanofi was an investor on Hadasit Bio-Holdings-portfolio company KAHR Medical’s $2.5M fundraise…BioMotiv and the NYU Innovation Fund launched autoimmune start-up Orca Pharmaceuticals…KV Pharmaceutical emerged from Chapter 11 bankruptcy, simultaneously closing on a $100M credit facility and $275M rights offering…Cell Therapeutics sold $15M in 15k Series 18 convertible preferred shares…Taiwanese biotech Amaran provided half of the $10M private investment in Stellar Biotechnologies…A $10M PIPE by NanoViricides gives the company a total of $22M in cash for the next two years to fund its FluCide and DengueCide candidates…A day after revealing positive outcomes in its Phase II glioblastoma multiforme vaccine study, Agenus raised $6.5M in an at-the-market registered direct offering…injectables developer Sagent Pharmaceuticals closed on a $75M FOPO…to continue work on ZFP Therapeutic candidates, Sangamo BioSciences completed a $64.5M secondary offering…Galena Biopharma’s $35M FOPO will help to commercialize its first product, Abstral…electroporation drug delivery company OncoSec publicly raised $12M…protein therapeutics company Acceleron priced its IPO at the top end of its range to gross $83.7M...glaucoma drug developer Aerie Pharmaceuticals filed for its IPO, while Bind Therapeutics, Ophthotech, and Enzymotec set terms for their offerings…Cubist offered $800M in two series of convertible senior unsecured notes…therapeutic protein maker Protalix BioTherapeutics closed on $69M in 4.5% convertible notes due in 2018…ProMetic Life Sciences’ $Cdn10M debt financing will help put its plasma purification facility into operations for manufacturing plasma-derived orphan drugs…Benu BioPharma established Benu BioVentures for investments in preclinical to proof-of-concept candidates…and Daiichi Sankyo teamed up with Mitsubishi UFJ Capital to launch a new fund for start-up creation; Daiichi gets rights to buy the companies and IP. -- Amanda Micklus 

Image courtesy of flickr use Kitschweb through a Creative Commons license. 

Financings of the Fortnight Surveys The Landscape

This column has never been one to sugar-coat or wax Pollyanna-ish. And we agree with much of the hand-wringing of the past month over the state of life-science venture. Starting with the NVCA/Medic survey, then the BioCentury "canary in a coal mine" story (and one of our favorite Police songs, by the way), then Atlas Venture partner Bruce Booth's nostra culpa blog post this week, it's been a festival of flagellation.

In fact, our own life-science VC survey notes many of the same problems: capital flowing out of life sciences and into health care IT/services or out of health care entirely; a world of blame laid at the feet of regulators; and agreement that the shakeout of funds -- the most recent casualty being Prospect Venture Partners -- will continue for at least two more years.

(In case you missed it, we published our survey in the September issue of START-UP, and you can find it online in two parts: a feature on biopharma and a feature on medical devices.)

Based on the articles published this week, you could conclude that life-science VCs might as well pack up their portfolios and find another gig; in fact that's a question we asked the more than 70 VCs who filled out our survey. (One wag said his dream job other than VC was "dog walker.")

But it's high time to interject a small contrary note, which our survey also exposed. Investors who self-identified as biopharma specialists were in fact fairly upbeat about the current investment climate. Really. We also dug up venture return numbers, with the help of the folks at NVCA, which showed biopharma returns in the past ten years have practically matched total venture returns. Indeed, Atlas venture partner Bruce Booth, doing similar research independent of us, found the returns, sliced in a slightly different manner, even more optimistic:

A widely held notion amongst GPs, LPs, and entrepreneurs is that Life Sciences/ Healthcare (LS) venture investing is too challenging and has underperformed IT and Internet (Tech) investing over the past decade and will only continue to do so. Nothing could be further from the truth – it seems that like Rodney Dangerfield, LS gets no respect.

If a life science VC can convince a limited partner to put cash into venture capital – admittedly no easy feat these days – there's an argument to make that biopharma, if timed correctly, could match or outpace general venture returns.

We also heard from VCs that those raising new funds don't expect any change in compensation structures despite the desperate fundraising straits and the long-running efforts of this group to, ahem, re-align the financial relationship between LPs and GPs. How's that for optimism?

Of course, the next ten years will be a vastly different landscape than the decade prior. Emerging markets, US healthcare reform and budget cuts, potential long-term economic stagnation... all upcoming factors that could disassociate future performance from historical indicators. But those who remain steadfastly committed to biopharma investing can count on one certainty: less competition in the years just ahead. Those who figure out how to be counter-intuitive won't just make a lot of money; they could wind up backing bold new treatments for Alzheimer's, diabetes (perhaps these folks?), HIV, and other health crises. And those are the VCs whose work will put meaning back into stale, self-important buzzwords like "innovation," "patient-centric vision" and "unmet medical need."

How's this for an alignment of interests: You want a biweekly roundup of biotech financing news, ornery viewpoints, and silly links. And we provide you...



Cleave Biosciences: Big Series A rounds have been few and far between lately, but Cleave Biosciences has pulled in one of the year’s largest, intended to support identification and clinical development of oncology drugs that work by addressing protein homeostasis, the balance between protein synthesis and protein degradation within cells. The Burlingame, Calif.-based start-up landed $42 million in first-round capital, mostly from four venture firms: 5AM Ventures, U.S. Venture Partners, OrbiMed Advisors and Clarus Ventures. The four contributed equally, according to USVP’s Larry Lasky. A smaller component came from Astellas Venture Management, the investment arm of Japan’s Astellas Pharma. Cleave chief executive Laura Shawver served as an entrepreneur-in-residence with 5AM last year, when she met Cleave’s three scientific co-founders. Two were veterans of Proteolix, the developer of proteasome inhibitor carfilzomib, which was acquired by Onyx Pharmaceuticals in 2009. After tracking the scientists’ progress for several months, Shawver formally sought investors; USVP led the process with a term sheet, and the four came together. Shawver isn’t saying which targets Cleave will pursue but says it has three programs that could yield clinical candidates. It will choose its priorities based on both scientific data and market opportunities as they emerge. Cleave expects to seek a partner that would supply non-dilutive capital for at least one drug, although an eventual Series B is likely as well. Shawver confirmed that the Series A round is tranched, but wouldn’t say how much Cleave has received already. – Paul Bonanos

Incline Therapeutics: Last year, we gave Incline a place on the end-of-year A-List for the creative spin-out and funding that formed the company around a discontinued electronic pain patch. More than a year after the deal was announced, Incline has received the balance of its $43.5 million Series A, adding $21.5 million to the $22 million it took in during June 2010, according to a Form D filing. It's more than the arrival of another big hunk of money, however. The second tranche was coincident with a $3.5 million option payment that keeps alive Cadence Pharmaceuticals' exclusive right to acquire Incline. Cadence, the maker of Ofirmev (intravenous acetaminophen), thought it might acquire the pain patch from Johnson & Johnson at first but decided it had other fish to fry -- namely getting Ofirmev approved. So it helped orchestrate the creation of Incline, and it structured a pair of non-dilutive $3.5 million option payments to acquire it down the road. Now that it has prolonged its option with the second payment, its exclusive right comes with a steeper price tag: it can buy Incline for up to $228 million plus a $57 million earn-out any time before the end of 2013 or before Incline files an NDA for its first product. (Before the second tranche came in, the price tag was $135 million.) The product in question is Ionsys, an electronic patch that delivers fentanyl through the skin via a small electronic charge; the product was previously approved in Europe for post-operative pain while in the hands of J&J-owned Alza, but was pulled from the market in 2008 due to a safety concern. Cadence CFO Bill LaRue wouldn’t say whether Cadence strongly considered buying Incline during the first option period, but confirmed ongoing interest in the company. – P.B.

DNAnexus: Google Ventures and TPG Biotech are leading the genomics firm's $15 million round, its second, with previous investors First Round Capital, SoftTech VC, K9 Ventures, and Felicis VC also on board. The firm is teaming with Google to mirror the Sequence Read Archive, a US government site that stores and makes publicly available next-generation genome sequencing data. The agency hosting the site, the National Center for Biotechnology Information, said earlier this year it was phasing out funds for the program. DNAnexus announced plans to host the free databank Oct. 12. It likely won't be the only effort to store and provide access to the vast amounts of genomic sequencing data, given the explosion of new platforms from companies like Pacific Biosciences, Roche's 454 group, Life Technologies’ Ion Torrent and sequencingstalwart Illumina, as well as the rapidly dropping price of sequencing. Personal genome sequencing isn't quite ubiquitous, but the day is coming. DNAnexus is offering a free personal sequencing and $20,000 cash to employees who successfully refer software engineers to the HR department. (What, a 2-for-1 coupon for dinner at Chevy's isn't enough anymore?) With the DNAnexus deal, Google has taken another step into the health field. Not all have gone well. The search and data firm said in June it would shut down its Google Health project that aimed to let individuals store their personal health records online. Google's venture arm has also invested in monoclonal antibody platform firm Adimab, stem-cell researcher iPierian, and personal genomics firm 23andMe, which is run by Anne Wojcicki, married to Google founder Sergey Brin. -- Alex Lash

Zeltiq Aesthetics: You caught us. Four paragraphs after we fume over VCs shying away from true unmet medical need, we write up this piece of work. Cosmetic therapies aren't usually our thing, as you know, but when a panel of well-heeled life science VCs are backing a company that's trying to go public, well, these days that's worth noting. Even if the company is hawking a high-tech procedure that it says will get rid of your spare tire. This isn't a treatment for obesity; it's more like a Dustbuster that zaps your "annoying bumps and bulges of stubborn fat" with a blast of cold without killing surrounding skin and tissue. That's the claim. The FDA approved the device, called CoolSculpting, in 2010. As of June 30 it had 629 systems installed in medical offices worldwide. On October 7 the firm set terms for an IPO at 7 million shares to be sold at $14 to $16 per share, which would raise $105 million at the mid-range price. The main VCs are Advanced Technology Partners, Aisling Capital, Frazier Healthcare, and Venrock. All except Aisling bought at least 2 million preferred shares at $3.42 each in Zeltiq's Series C round in 2008, with each preferred share convertible to 1.07 common shares at the offering. In 2009, all four participated in a $10 million convertible bridge loan and soon after a related financing round. (Details are in Zeltiq's latest SEC filing here.) Aisling says it might buy 10 million shares as part of the IPO, but it's not a binding commitment. Underwriters are led by J.P. Morgan Securities and Goldman, Sachs; they have 30 days after the offering to buy up to 1.05 million additional shares. Zeltiq is expected to price next week. Meanwhile, antibiotic drug developer Cempra filed on Oct. 12 to go public. -- A.L.

Photo courtesy of flickr user Cat Sidh via a Creative Commons license.

Going, Going.....Google

Two bits of follow up on previous posts about the health care IT space.

AthenaHealth absolutely hit one out of the park with its IPO.

Shares opened at $18 and nearly doubled, hitting $35.50. This could be a big win for its VC investors including Oak Investment Partners, Venrock Associates, Draper, Fisher Jurvetson and Cardinal Partners. All together the four owned 65% of the company prior to the opening. IN VIVO Blog talked about the importance of this IPO back in June.

Meanwhile, speculation abounds that Google, in a bid to bolster its presence on the Web, is eyeing an acquisition of health care Web site leader WebMD. Last month, IN VIVO Blog admitted to being slightly underwhelmed by the early glimpses of Google's health offerings.

Apparently, we're not the only ones. Dan Penny, director and lead analyst for publishing Outsell Inc., a market research firm focused on the publishing industry, writes:

Implications: The discovery in 2005 that 12% of individuals would consult Google before seeing a doctor has sent a message to the search giant that it should be doing something with health information, but it doesn't seem to know how to add value to an area where others have stolen a march. Google Health, as it stands, is a confusing experiment that offers little more than an old-fashioned portal for health information. Google now realises that it needs to do more than aggregate, because the boom in online health information has sent users flocking to WebMD and similar sites, such as AOL Health and RevolutionHealth. A year ago, the idea of Google acquiring WebMD would have seemed rather bizarre, but since the purchase of YouTube, Google has proven its willingness to spend, and to spend on content as well as technology. Moreover, its rival, Microsoft, bought Medstory earlier this year in a clear attempt to secure some of the healthcare vertical for itself.

Oh yeah, and Google's health care push probably wasn't helped by the fact the fellow in charge of the effort is leaving.

Now back to your regularly scheduled programming....

They MIGHT Be Giants

But can they change health care?

The New York Times reports yesterday that IT titans Microsoft and Google were set upon using their individual might to “improve the nation’s health care.”

Try as we might to be impressed by caliber of these indisputable pioneers, IN VIVO Blog is having a bit of troubling mustering anything more than a “ho hum.” Perhaps, if we try real hard, we might push it to, “We’ll believe it when we see it.”

See, we’ve been hearing (and writing about) about this IT revolution in health care for close to 10 years now. Back then Internet entrepreneurs—albeit with shoddy business plans and puddle-deep knowledge of health care—promised to bring the power of IT and the Internet to bear on the $1.3 trillion dollar health care system. The end result? Now many of those same entrepreneurs are promising to bring the power of IT and the Internet to bear on a $2 trillion-plus health care system.Yep, a 50% increase. How’s the might of IT doing so far?

So what’s different today? Well, to be fair, the Internet model is in a lot better shape than it was 10 years ago. Google, which continues to impress us (have you used the Street View feature on Google Maps? Amazing), wasn’t even around, and no one had quite figured out how to make money off the Internet yet. Today, Google’s model and services serve as a foundation for many of the start-ups in this area today. As for Microsoft, IN VIVO Blog won’t pretend we know much about the company other than we use Windows and Internet Explorer. But there’s little doubt the company hasn’t focused on health care up until now because it had much lower fruit to pick in other industries. Hospitals and doctors are notoriously bad customers for IT companies.

Perhaps that’s why both companies appear to be targeting the consumer… er…the patients. Question is can these companies capture some of the juice for a health-care consumer product? (It’s hard to imagine a ready list of drug allergies garnering the excitement of finding a new sushi restaurant on your iPhone.) Here’s what’s reportedly being planned, according to the Gray Lady:

A prototype of Google Health, which the company has shown to health professionals and advisers, makes the consumer focus clear. The welcome page reads, “At Google, we feel patients should be in charge of their health information, and they should be able to grant their health care providers, family members, or whomever they choose, access to this information. Google Health was developed to meet this need.”

A presentation of screen images from the prototype — which two people who received it showed to a reporter — then has 17 other Web pages including a “health profile” for medications, conditions and allergies; a personalized “health guide” for suggested treatments, drug interactions and diet and exercise regimens; pages for receiving reminder messages to get prescription refills or visit a doctor; and directories of nearby doctors.

Google executives would not comment on the prototype, other than to say the company plans to experiment and see what people want. “We’ll make mistakes and it will be a long-range march,” said Adam Bosworth, a vice president of engineering and leader of the health team. “But it’s also true that some of what we’re doing is expensive, and for Google it’s not.”

Bosworth deserves credit for remaining humble, but the question we have is—will all this really improve health care? The profile idea and the prompts sound like window-dressing (web-dressing?). Sure, some people might benefit from an email reminding them to make a follow up appointment, but that doesn’t mean they’ll follow through. As for the personalized health guide, the information is out there and often collected by Web sites like WebMD. How does a simple aggregation of data help? (And when does the notion that Google—which bases its Gmail ads on the content of the messages—will have complete health profile on record stop feeling weird? The assurances that this data will remain completely confidential don’t do it for me.)

Note: Google Blogoscoped, which tracks the behemoth, has previews of Google Health Screen Shots here. Lots of sizzle but not seeing the steak.

Microsoft’s efforts, in contrast, sound a little more grounded—at least initially. Again, from the NYT:

… “It will take grand scale to solve these problems like the data storage, software and networking needed to handle vast amounts of personal health and medical information,” said Steve Shihadeh, general manager of Microsoft’s health solutions group. “So there are not many companies that can do this.”

This year, Microsoft bought a start-up, Medstory, whose search software is tailored for health information, and last year bought a company that makes software for retrieving and displaying patient information in hospitals. Microsoft software is already used in hospitals, clinical laboratories and doctors’ offices, and, Mr. Shihadeh noted, the three most popular health record systems in doctors’ offices are built with Microsoft software and programming tools.

But then the talk veers off into discussion about creating consumer-oriented tools such as online offerings “as well as software to find, retrieve and store personal health information on personal computers, cellphones and other kinds of digital devices — perhaps even a wristwatch with wireless Internet links some day.”

A wristwatch? Perhaps this would work for Dick Tracy. Yes, the current process of sending faxes and letters to get a simple medical record transfer done is onerous. But do we need a wrist watch? Just let me download my records onto a thumb drive and bid me good day.

Yes, IN VIVO Blog has a difficult time seeing all of this having any real impact from these consumer-oriented efforts. They sound great, but will they really make a difference?

While Microsoft and Google bring some much needed buzz to health care’s out-moded record keeping, there are at least two other multi-nationals worth keeping an eye on in the race to digitize health care: Siemens AG and General Electric. Keep in mind that Siemens and GE also have major plays in healthcare IT and they develop the imaging and diagnostic tests that make up the bulk of a patient’s record. Who better to lead healthcare’s digital revolution than the companies that generate the actual data patients—and more importantly, doctors—want tracked. (BTW, keep an eye out for an analysis of Siemens’ IVD approach in the upcoming Sept. issue of IN VIVO.)