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  1. 1. The Big Tech in Pharma Report How Amazon, Microsoft, Apple, and Alphabet are capitalizing on pharma’s digital transformation
  2. 2. Contents Summary of findings 6 Market drivers 8 Amazon 14 Microsoft 26 Apple 38 Alphabet 50 5 Big tech | Pharma
  3. 3. Big tech pharma acquisitions slowed in 2022, compared to 2021… • Big tech’s acquisition activity dropped steeply in 2022, after a very active 2021. …and big tech investments also slowed over the same period. • Alphabet leads big tech in unique pharma investments (20) in 2022, followed by Microsoft (4). • GV (Google Ventures) is the most active big tech venture arm in pharma by a wide margin. What’s next? • Big tech companies are likely to double down on hardware and software, with the aim of capturing as much patient data as possible. The amount of data generated from these products is significant. Expect big tech companies to utilize their data expertise to discover and commercialize digital biomarkers. • Big tech companies will continue to offer AI expertise to pharmaceutical companies. Anticipate big tech to begin negotiating contracts with shared upside for drugs discovered as a result of their pharmaceutical partnerships. Overview of big tech’s activities in pharma Summary of findings 6 Big tech | Pharma
  4. 4. Where big tech is developing solutions in pharma 7 Big tech | Pharma
  5. 5. Where big tech is making moves 8
  6. 6. Amazon is building the pharmacy of the future by using its existing supply chain to create a customer experience on par with its e-commerce business. It is scaling remote patient monitoring (RPM) solutions to create a unified experience from prescription to delivery to follow-up. Microsoft is launching healthcare SaaS solutions, leveraging its experience as an enterprise software company. It is entering the pharmaceuticals market through partnerships with existing players. Microsoft’s enterprise software products collect patient data, which is then used to build clinical trials and drug discovery solutions. Apple is using its consumer hardware and massive user base to its advantage as it aims to build a secure and centralized location for patient health data. It is creating hardware to collect patient data and is building a developer ecosystem — similar to its strategy with the iPhone and the App Store. Alphabet is collecting patient data through its devices and organizing the data into secure patient health records. What differentiates it from other big tech companies is how Alphabet is using AI expertise to build in-house drug R&D capabilities. How big tech is transforming pharma 9 Big tech | Pharma
  7. 7. Inefficiencies abound Many processes and workflows across the drug development value chain are still manual (e.g., lab notebooks). Pharma is partnering with big tech companies to decrease costs by improving drug discovery, enabling faster clinical trials, and offering better distribution models. Data, data, data The amount of patient data available has skyrocketed in the past few years. Big tech is using this data to identify drug targets, predict real-time medication demand, and build patient monitoring and health records technologies. Digital transformation Return on investment for drug R&D has ticked up over the past 2 years, after continuous decline throughout the 2010s. Big tech is capitalizing on opportunities across cloud, artificial intelligence, and IoT across the pharmaceutical value chain. What’s driving big tech activity in pharma? 10 Big tech | Pharma | Market drivers
  8. 8. Drug development workflows and processes are still largely manual, from lab notebooks for R&D to data collection for clinical trials. Pharma is working with startups and big tech to deploy digital solutions from drug discovery to clinical trials to the supply chain. Big tech companies are actively investing in and building solutions that improve drug development efficiency. Much of drug development is still manual 11 Big tech | Pharma | Market drivers
  9. 9. The quantity of patient data housed in clinical systems skyrocketed nearly 500% from 2016 to 2020. This data is valuable as “real-world evidence” (RWE) for drug development. Big tech is using this data to identify drug targets, predict real- time medication demand, and build patient monitoring and health records technology. More patient data = improved personalization 12 Big tech | Pharma | Market drivers
  10. 10. Return on investment for drug R&D has increased over the past few years, after continuous decline throughout the 2010s. This correlates with big tech’s increased activity in the space. Big tech is capitalizing on opportunities in cloud, artificial intelligence, and IoT across the pharmaceutical value chain. Digital transformation takes hold as returns tick up Source: Drug Discovery Trends 13 Big tech | Pharma | Market drivers
  11. 11. Amazon 14
  12. 12. Digital pharmacy Amazon aims to offer an upgraded customer experience for ordering and receiving medications. Supply chain Amazon is leveraging its supply chain expertise for generics manufacturing. Personalization Amazon is using IoT devices and patient data to personalize healthcare experiences. Where Amazon is focusing 15 Big tech | Pharma | Amazon
  13. 13. Amazon is building a digital pharmacy 16 Theme 1: Digital Pharmacy
  14. 14. Coverage of Amazon’s digital pharmacy has dropped from its peak… 17 456 469 369 295 627 569 625 864 880 636 480 464 396 313 555 0 100 200 300 400 500 600 700 800 900 1000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2019 2020 2021 2022 News mentions of “Amazon” and “pharmacy” Big tech | Pharma | Amazon
  15. 15. ….but Amazon continues to build its pharmacy capabilities 18 Amazon pharmacy partners with Blue Plans in five states March 10, 2022 | Amazon in talks with Apollo Hospitals for partnership in pharmacy business November 26, 2021 | Amazon launches virtual clinic to provide virtual care and prescriptions November 15, 2022 | Amazon spends $3.9B to acquire One Medical July 21, 2022 | Big tech | Pharma | Amazon
  16. 16. Amazon is developing pharma supply chain expertise 19 Theme 2: Supply Chain
  17. 17. Soft Robotics Series C $26M Soft Robotics builds soft rubber grippers for robots to grab items for automated fulfillment. Attabotics Series C $72M Attabotics develops an automated fulfillment system to reduce costs in warehouse environments. Project44 Unattributed $31M Project44 offers an end-to- end supply chain visibility platform for shippers and third-party logistics firms. Pharma logistics is a hot space… 20 Big tech | Pharma | Amazon
  18. 18. The $482B generic drugs market provides an opportunity for Amazon to manufacture drugs in-house — which could reduce prices and improve delivery times for customers. The company is developing its supply chain expertise by helping Novartis and Pfizer digitize their pharmaceutical manufacturing, supply chain, and delivery operations. …and Amazon is quietly building expertise through pharma partnerships Source: Amazon 21 Big tech | Pharma | Amazon
  19. 19. Amazon is personalizing healthcare with IoT devices and data 22 Theme 3: Personalization
  20. 20. 2.5 4.1 7.5 27.1 46.5 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 Apple Sonos Other Google Amazon Amazon has a head start in remote patient monitoring through smart speaker dominance… Number of smart speaker installations in USA (millions), as of Jan 2020 Big tech | Pharma | Amazon 23 Source: Statista
  21. 21. …and it’s building a competitive advantage through integrations and partnerships 24 Amazon’s Alexa voice assistant can now help you diagnose Covid-19, with information from the CDC May 27, 2020 | Amazon partnered with Cerner to let patients share Halo watch data with providers September 1, 2020 | Nurx teams up with Amazon Alexa on birth control reminders and sex education September 28, 2021 | Amazon Halo can now share heart rate data with third-party apps and equipment August 5, 2021 | Big tech | Pharma | Amazon
  22. 22. Amazon’s plans point to key trends for 2023 25 Amazon is building a digital pharmacy Amazon is developing supply chain expertise Amazon is personalizing healthcare with IoT devices and data Summary Amazon’s e-commerce infrastructure and PillPack acquisition enable consumers to easily order and manage medications. Amazon has an opportunity to reduce drug prices by integrating generics manufacturing with its existing supply chain. Amazon’s existing IoT solutions (such as Alexa and Echo) enable integration into remote patient monitoring and care delivery. Implications Expect Amazon to leverage its existing supply chain to ramp up its digital pharmacy efforts. Due to synergies with its e-commerce business, anticipate Amazon building a pharmaceutical manufacturing unit. Consider that Amazon may be after more than consumer purchasing data with its widespread deployment of these devices. Big tech | Pharma | Amazon | Key takeaways & implications
  23. 23. Microsoft 26
  24. 24. Software-as-a-Service Microsoft is building SaaS offerings for healthcare enterprises. Interoperability Microsoft is using its data experience to address the healthcare interoperability challenge. Drug discovery Microsoft is offering its AI expertise to pharma companies to help expedite drug discovery. Where Microsoft is focusing 27 Big tech | Pharma | Microsoft
  25. 25. Microsoft is creating SaaS solutions for healthcare enterprises 28 Theme 1: SaaS
  26. 26. 1 2 1 6 6 5 7 0 2 4 6 8 10 12 14 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD 11 Partnerships 13 Microsoft has stepped up its healthcare partnerships in recent years… Disclosed business relationships (as of 12/1/2022) 29 Big tech | Pharma | Microsoft
  27. 27. …and is now building its own SaaS business through acquisitions and product launches 30 Microsoft and CMR Surgical are collaborating on “Project Silica” to store clinical data into glass July 4, 2022 | Microsoft is working with SAS to make health analytics more accessible to healthcare organizations September 1, 2020 | Microsoft Cloud for Healthcare expands portfolio with Azure Healthcare APIs August 3, 2021 | Microsoft acquires Nuance to enhance Healthcare AI, Cloud strategy April 12, 2021 | Big tech | Pharma | Microsoft
  28. 28. Microsoft is building data storage and interoperability tech 31 Theme 2: Interoperability
  29. 29. Interoperability funding has skyrocketed over the past few years $1.1B $2.2B $4.3B $5.2B Funding $4.0B $0.0B $1.0B $2.0B $3.0B $4.0B $5.0B $6.0B 2018 2019 2020 2021 2022 Big tech | Pharma | Microsoft 32
  30. 30. CMR Surgical Series D $600M Microsoft and CMR Surgical are collaborating on “Project Silica” to store clinical data using glass. Rescale Series C $50M Rescale is a R&D platform that helps scientists build, compute, analyze, and scale simulations in the cloud. Allscripts (Veradigm) IPO $112M Microsoft is working Allscripts to use EHR data for clinical trial matchmaking. Microsoft is partnering with and investing in data storage and accessibility companies 33 Big tech | Pharma | Microsoft
  31. 31. Microsoft is helping pharma discover new drugs 34 Theme 3: Drug discovery
  32. 32. AI algorithms allow pharmaceutical companies and CROs to rapidly and cost-effectively identify drug candidates. Leaders such as AstraZeneca, Sanofi, and Biogen are rapidly adopting AI-powered drug discovery platforms as a core part of their R&D process. As AI-powered discovery technology matures, providers (such as Microsoft) will look for more shared upside in the drug candidates they help discover. AI-powered drug discovery is a top priority for pharmaceutical companies 35 Big tech | Pharma | Microsoft
  33. 33. Novo Nordisk Microsoft and Novo Nordisk are collaborating to automate the summarization and analysis of information from sources such as literature, patents, scientific reports and discussion forums to get scientific insights. About: Novartis Microsoft partnered with Novartis in 2019 to create an AI innovation lab for drug R&D. About: UCB Pharma In early 2021, Microsoft entered into an agreement with UCB to create an oral antiviral for Covid- 19. By leveraging Microsoft’s Azure, UCB was able screen and design compounds in 3 days — a process that usually takes 6 months. About: Microsoft is discovering drugs with pharma partners 36 Big tech | Pharma | Microsoft
  34. 34. Microsoft’s plans point to key trends for 2023 37 Microsoft is creating SaaS solutions for healthcare enterprises Microsoft is building data storage and interoperability tech Microsoft is helping pharma discover new drugs Summary In the past year, Microsoft has doubled down on healthcare SaaS offerings, through product launches, acquisitions, and partnerships. Microsoft is partnering with startups to improve data storage and interoperability. Microsoft has already had remarkable success helping pharmaceutical partners discover drug candidates. Implications Following its healthcare cloud launch and Nuance acquisition, expect Microsoft to continue investing in its healthcare SaaS business. Expect Microsoft to keep exploring new technologies for data storage, access, and interoperability. Consider that Microsoft is well- positioned to build an AI-driven drug discovery business unit. Big tech | Pharma | Microsoft | Key takeaways & implications
  35. 35. Apple 38
  36. 36. Hardware Apple is investing in hardware improvements, primarily the Apple Watch, to collect more patient data. Biomarkers Apple is turning patient data into new biomarkers for disease. Ecosystem Apple offers a software ecosystem for pharma companies to build apps. Where Apple is focusing 39 Big tech | Pharma | Apple
  37. 37. Apple is building hardware to collect health data 40 Theme 1: Hardware
  38. 38. Portable Ultrasound Electrocardiogram (ECG) Vital Signs The iPhone can integrate with medical devices 41 Big tech | Pharma | Apple Grant Series F Series B $5M Butterfly Network provides portable point-of- care ultrasounds devices that can be read through a smartphone. Unknown AliveCor offers a mobile ECG solution that can provide sinus rhythm analysis and atrial fibrillation detection. $14M enables real-time vital signs measurement via a device’s in-built camera.
  39. 39. Apple is focused on enabling health measurements with the Apple Watch 42 NIH-funded study to test if Apple Watch can prevent strokes, limit blood thinners August 31, 2022 | Rune Labs translates Apple Watch data into Parkinson’s insights with FDA nod June 13, 2022 | Apple reveals medication tracking feature and more health updates June 6, 2022 | AI researchers at Mayo Clinic use the Apple Watch to detect silent, weakening heart disease May 3, 2022 | Big tech | Pharma | Apple
  40. 40. Amazon is creating/discovering digital biomarkers 43 Theme 2: Digital biomarkers
  41. 41. 141 187 331 476 471 0 50 100 150 200 250 300 350 400 450 500 2018 2019 2020 2021 2022 YTD Interest in digital biomarkers is growing… News mentions of “digital biomarker” from 2018 to 2022 YTD Big tech | Pharma | Apple 44
  42. 42. …and Apple is in a unique position to capitalize 45 Biogen, Apple to initiate study to develop cognitive health digital biomarkers January 11, 2021 | Digital biomarker for asthma indicates Apple Watch move into health tech December 1, 2020 | UCLA collaborates with Apple to develop digital biomarkers for depression December 1, 2020 | Apple, Eli Lilly, and Evidation present first results from digital Alzheimer’s study August 8, 2019 | Big tech | Pharma | Apple
  43. 43. Apple is building a healthcare software ecosystem 46 Theme 3: Ecosystem
  44. 44. ResearchKit CareKit HealthKit Apple has created an open-source framework… 47 Big tech | Pharma | Apple ResearchKit is a tool for medical research that enables consent flows, dynamic tasks, and surveys delivered through developer apps. It gives access to valuable data for research studies, such as step counts, calories, and heart rate. CareKit helps developers better understand and manage user health by creating dynamic care plans, tracking symptoms, connecting to care teams, and more. HealthKit integrates into health and fitness apps to create a more seamless user experience. It provides access for developers to read and write health and activity data.
  45. 45. …that universities and companies are using to build health apps 48 University of Rochester is using ResearchKit to monitor and measure Parkinson’s disease Duke University is using ResearchKit to discover a better way to diagnose autism Johns Hopkins is using CareKit to offer heart attack recovery at your fingertips One Drop is using CareKit to provide an easier way to manage diabetes Big tech | Pharma | Apple
  46. 46. Apple’s plans point to key trends for 2023 49 Apple is building hardware to collect patient data Apple is turning patient data into disease biomarkers Apple is offering a software ecosystem for health apps Summary Apple has doubled down on hardware, in particular the Apple Watch, to collect patient data. Apple is partnering with academia and pharma to turn patient data into new biomarkers for disease. Pharmaceutical companies are using Apple’s software ecosystem to build healthcare apps. Implications Expect Apple to continue advancing its Apple Watch hardware. Consider that Apple may eventually dominate the remote patient monitoring market. Consider that Apple is creating a competitive moat by collecting and storing unique patient data via the Apple Watch. Recognize that Apple’s software kits are uniquely positioned in the pharma tech ecosystem, and they continue to garner usage since their release in the mid-2010s. Big tech | Pharma | Apple | Key takeaways & implications
  47. 47. Alphabet 50
  48. 48. Interoperability Alphabet is making health data easier to access and utilize. Hardware Alphabet is building hardware to collect patient data. Drug discovery Alphabet is discovering drugs with AI through its subsidiary companies. Where Alphabet is focusing 51 Big tech | Pharma | Alphabet
  49. 49. Alphabet is making health data easier to access and utilize 52 Theme 1: Interoperability
  50. 50. DNAnexus Series I $200M DNAnexus offers a cloud- based DNA data management and biomedical data analysis platform. Verana Health Series E $150M Verana Health offers real- world data to accelerate drug research and provide clinical decision support for physicians. Tempus Debt $275M Tempus offers molecular and clinical data to help physicians deliver personalized cancer care. Alphabet is backing real-world data and informatics startups 53 Big tech | Pharma | Alphabet
  51. 51. Alphabet is also acquiring health data directly through partnerships 54 Mayo Clinic CIO: Google partnership will ‘transform healthcare’ November 19, 2021 | Google Cloud to beef up HCA Healthcare’s clinical operational data analytics in multiyear partnership May 26, 2021 | Highmark Health inks 6-year partnership with Google subsidiary Verily Life Sciences March 2, 2021 | Google, Ascension continue EHR collaboration by launching new search tool February 23, 2021 | Big tech | Pharma | Alphabet
  52. 52. Verily, the life sciences subsidiary under Alphabet, raised $1B in capital in September 2022. Verily will use these funds to invest in and build “precision health” products. Applying machine learning to research, clinical, and non-clinical data, Verily hopes to improve healthcare personalization. The capital may also be used to fund strategic partnerships, business development, and potential acquisitions. In 2021, Verily acquired SignalPath, a clinical trials operating system provider. It has also partnered with Lumea, L’Oreal, and Mayo Clinic. Verily raised $1B to use patient data for precision healthcare 55 Big tech | Pharma | Alphabet
  53. 53. Alphabet is building hardware and software to collect patient data 56 Theme 2: Hardware
  54. 54. 198 304 305 360 401 150 200 250 300 350 400 450 2018 2019 2020 2021 2022 Executives are increasingly talking about remote patient monitoring Earnings transcript mentions of “remote patient monitoring” or “RPM” from 2018 to 2022 Big tech | Pharma | Alphabet 57
  55. 55. Alphabet is building RPM hardware and software 58 Alphabet’s Verily, ResMed launch sleep platform Primasun November 14, 2022 | Patent granted for “Imputation of blood glucose monitoring data” October 18, 2022 | Patent granted for “Display on a bandage-type monitoring device” October 4, 2022 | Google and Samsung join forces to make it easier to sync fitness data between apps May 15, 2022 | Big tech | Pharma | Alphabet
  56. 56. Alphabet is discovering new drugs with AI 59 Theme 3: Drug discovery
  57. 57. Drug discovery funding falls from all-time high but stays above pre-pandemic levels in 2022 $1.4B $1.3B $2.5B $6.0B Funding $2.8B $0.0B $1.0B $2.0B $3.0B $4.0B $5.0B $6.0B $7.0B 2018 2019 2020 2021 2022 YTD Big tech | Pharma | Alphabet 60
  58. 58. Google’s DeepMind division is developing AI for Drug R&D. AlphaFold — released in 2021 — predicted more than 350,000 protein structures, which encompass proteomes for humans and other organisms. Google packaged this technology into a new company called Isomorphic Laboratories, which will take an “AI-first approach” to drug discovery and development. In addition, Google’s work in quantum computing may eventually amplify its drug development capabilities. Alphabet launched a drug discovery company based on DeepMind’s research 61 Big tech | Pharma | Alphabet
  59. 59. Terray Therapeutics AbbVie Broad Institute Alphabet subsidiary Calico Life Sciences is partnering to develop anti-aging drugs 62 Big tech | Pharma | Alphabet Terray Therapeutics and Calico have a multi-target collaboration to discover small molecule therapeutics for age-related diseases, including cancer. AbbVie and Calico are working together to develop drugs for aging- related diseases, including neurodegeneration and cancer. The Broad Institute and Calico have an ongoing partnership focused on the biology and genetics of aging and early-stage drug discovery.
  60. 60. Alphabet’s plans point to key trends for 2023 63 Alphabet is making health data easier to access and utilize Alphabet is building hardware to collect patient data Alphabet is discovering drugs with AI Summary Alphabet is investing in health data startups and gathering health data through partnerships. Alphabet’s companies are partnering with existing players and patenting novel technologies for remote patient monitoring. Alphabet now has 3 separate pharmaceutical ventures, with Verily, Calico, and Isomorphic Labs. Implications Expect Alphabet to continue investing in companies, products, and partnerships that provide access to patient data. On the heels of recent granted patents, expect Verily Life Sciences to use a portion of its recent $1B funding round to develop remote patient monitoring tech. Consider that Alphabet is the only big tech company to pursue drug discovery and development in-house. Its unique AI expertise is well-suited to this strategy. Big tech | Pharma | Alphabet | Key takeaways & implications