Variable Interest Entities of Alphabet

Alphabet, the parent company of Google is a collection of several companies, Google being the largest among them. Alphabet reports the other businesses as ‘Other Bets’ in its form 10K every year. Among the other bets of Alphabet are Access, Calico, Verily, Capital G, GV, Waymo and X. Some of these businesses in which Alphabet has a large and controlling stake are meant to further research and development in specific areas.

A Variable Interest Entity is a legal structure in which an investor has a controlling stake even without majority voting rights. Most often companies establish Variable Interest Entities as Special Purpose Vehicles (SPVs) to hold financial assets or conduct research and development. Investopedia notes that under the Federal Securities Laws, the public companies need to disclose their relationships with their Variable Interest Entities (VIEs) in their form 10K. Alphabet’s two VIEs are – Calico and Verily, both of which are healthcare research and development companies. Alphabet consolidates VIEs when it is the primary beneficiary. A primary beneficiary in a VIE is the party with the power to make decisions that affect the economic performance of the VIE significantly as well as is obliged to absorb losses or receive benefits from it.

Calico:

Calico is a research and development company in healthcare. Its mission is as follows:

Calico is a research and development company whose mission is to harness advanced technologies to increase our understanding of the biology that controls lifespan. We will use that knowledge to devise interventions that enable people to lead longer and healthier lives. Executing on this mission will require an unprecedented level of interdisciplinary effort and a long-term focus for which funding is already in place.

Calico’s Mission Statement.

The focus of Calico’s research and development efforts is to tackle aging and increase lifespan. Calico entered into an R&D collaboration agreement on age-related diseases with AbbVie which will help the two companies create new therapies for age-related diseases like cancer and neurodegeneration. Both the companies have committed around $1,250 million to the venture. The two companies share the profits and expenses of R&D projects equally. Calico has created a world-class R&D facility in San Francisco Bay and AbbVie offers scientific and clinical development support as well as commercial expertise to bring new therapies and solutions to the market. By the end of 2018, Alphabet had contributed $480 million to Calico and pledged an additional $750 million in the future.

Arthur Levinson is the founder & CEO of Calico and the company CSO (Chief Scientific Officer) is David Botstein. Richard A Gonzalez is the board chairman and CEO of AbbVie. The company announced its plan to acquire Allergan, an Irish pharmaceutical company with global operations for $63 billion in June 2019.

Verily:

Verily is also engaged in healthcare research. It started as a moonshot project at Alphabet and then became an Alphabet company in 2015. Originally known as Google Life Sciences, Verily Life Sciences was a collection of projects that finally graduated from X (moonshot incubator of Alphabet) to become an Alphabet company. Verily is applying technology and data science to solve some leading health-related problems globally. Verily takes a multidisciplinary approach to solving problems in healthcare. R&D teams at Verily combine scientific expertise and technological know-how to produce solutions to some of the most pressing problems affecting people globally. Apart from medicine and biology, the Verily Team combines innovations from the field of computer science, material design, physics, and chemistry to produce innovative health care solutions.

The mission of Verily is:

Our mission at Verily is to make the world’s health data useful so that people enjoy healthier lives

Verily Mission Statement.

Since its early days, Verily has focussed on developing next-gen sensors and tools that help with health care and health care research like the Verily Study watch and miniature continuous glucose meter developed in partnership with Dexcom. The company is also working in partnership with several other organizations to further research in many more areas including the immune system. Verily has also created machine learning solutions to aid clinical decision making and performance. Verb Surgical and the Virtual Strainer Program of Verily are two of such leading projects.

Temasek is a Singapore based investment company that bought a noncontrolling interest in Verily in 2017 for $800 million in cash. Verily received $900 million in cash in a $1 billion investment round in December 2018. It raised the remaining $100 million in the first quarter of 2019. Overall, it had raised $1.8 billion by March 2019 from the sales of equity securities to external investors.


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APA.Pratap, A. (2020, January 20). Variable Interest Entities of Alphabet. Retrieved from https://notesmatic.com/2020/01/variable-interest-entities-of-alphabet/
MLA.Pratap, Abhijeet. “Variable Interest Entities of Alphabet.” Notesmatic, 20 Jan. 2020, notesmatic.com/2020/01/variable-interest-entities-of-alphabet/.
Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.