Not that Google (GOOGL) had much of a chance of denying it before, but there’s no room for doubt now — the company is getting serious about claiming a piece of the pharmaceutical and medical tech pie.
One can assume Google will continue to buy its way into the healthcare space. The big question, though: Which companies are the most likely acquisition targets of the web-search giant, and why would it want those particular names?
Take any such speculations with a grain of salt, of course; stock gurus seem to predict roughly seven buyouts for every four that actually happen. In the case of Google, though, it’s not like its playbook and M.O. have been veiled. With a little thought and logic, three companies come to mind as ideal (and reasonably likely) acquisition targets.
Yes, Google is Into Healthcare
Those who closely follow Google’s healthcare projects — a collective called Calico –– will know its interests in the sector aren’t exactly new. In September of last year, it took its first major steps in the arena via the launch of Calico … a relatively independent arm of the tech giant that’s broadly aiming to find ways to extend human life spans.
In July of this year, the company unveiled contact lenses that are capable of monitoring the wearer’s glucose levels. Last week, Google announced it was partnering with AbbVie (ABBV) to develop new drugs used to treat cancer, Alzheimer’s, and other diseases that often develop with age. And, just this week, the all-things-web behemoth acquired Lift Labs, which makes spoons that abate hand tremors associate with Parkinson’s disease.
At this point, there’s no going back for Google. It’s getting into the healthcare game. The question is, how? Or, more specifically, with which companies?
Possible Google Acquisition Targets
Cubist Pharmaceuticals (CBST): A year ago, the idea of Google buying pure pharmaceutical name like Cubist Pharmaceuticals would have resulted in snickers and giggles. After the company ventured all the way into the drug game in tandem with AbbVie, however, the tech giant clearly isn’t afraid to enter uncharted territory.
But why Cubist Pharmaceuticals? It doesn’t have anything in the way of anti-aging drugs in its portfolio or its pipeline. The lack of age-related therapies really doesn’t matter any more. The attraction of Cubist Pharmaceuticals to Google would be the ease and price with which the would-be suitor could use Cubist to fruitfully get into the pharmaceutical game. Cubist has posted eight straight years of revenue growth, and has been dancing with consistent profitability for a while.
Better still, Cubist has made a point of developing a new caliber of antibiotics that are aimed at fighting so-called “superbugs”. It may not be as sexy as a medical technology or cancer therapy, but these programs hold promise, and they’ll most definitely be marketable.
CBST could be a simple, clean way for Google to get its feet a little wetter in the pharma arena.
Computer Programs & Systems (CPSI): It’s interesting that Google would endeavor to wade into businesses where it has no history or proven proficiency while ignoring opportunities that bear a lot of fruit for the organization. But Google’s healthcare initiative’s brilliant minds will soon figure out they could do wonders with a healthcare name like Computer Programs & Systems.
Computer Programs & Systems is a healthcare IT company. CPSI provides an A-to-Z solution for hospitals needing to link up care-delivery, physician access, customer billing, record-keeping, and all the other facets of hospital management into one complete digital network.
Computer Programs & Systems does a great job on its own, with six straight years of revenue growth and four years of earnings growth under its belt. If Google could add some scale and pizzazz to the current CPSI offering, however, the company has the potential to set the standard in healthcare IT.
Covidien plc (COV): Truth be told, Covidien looks like such a hodge-podge of healthcare businesses that it’s not clear what a suitor like Google would want — or gain — by bringing Covidien into the fold. There’s actually a lot of value for a suitor like Google, however.
Above all else, Google is clearly into medical technology; glucose-sensing contacts and a tremor-reducing spoon make that point well enough. Owning Covidien would quickly put several more medical tech devices in its portfolio … devices like the tablet-based Vital Sync patient monitoring platform, vascular compression devices, and electrosurgical instruments. The tablet-based monitoring systems are a huge opportunity for Google to improve and expand.
As for the rest of the company, even the basic medical supply business could be a springboard for Google to develop and market other products and services.
Despite Google’s willingness and financial capacity to do pretty much whatever it wants, the combination of its healthcare efforts so far may seem a little incongruent. The three disparate possibilities mentioned above don’t help the cause.
That’s the wrong way of looking at what Art Levinson and Bill Maris are doing with Calico, however. Think of it as an incubator of healthcare projects, with deep pockets, few rules, and a lot of willingness to try. With that mindset, the three possible acquisitions suggested above seem a lot less crazy.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.