Investors have become accustomed to Alphabet's (NASDAQ:GOOGL) wacky acquisitions and moonshot projects. The reigning search engine champion has gotten involved in everything from self-driving cars to autonomous flying wind turbines to robot dogs. But its recent initiative is nonetheless raising eyebrows: mosquito control.
While combating the planet's deadliest animal has recently been more closely associated with next-generation biotech Intrexon (NYSE:XON), information-technology companies including Alphabet and Microsoft (NASDAQ:MSFT) are beginning to take aim at mosquitoes, too.
As it turns out, their forays into biotech aren't that illogical. In fact, Alphabet and Microsoft may have the perfect tool sets for excelling in next-generation biotech applications -- but only if they recognize some important limitations.
Mosquitoes in the crosshairs
Intrexon has made waves with its self-limiting insect platform, brought under the conglomerate's technology umbrella when it acquired Oxitec in 2015. The idea is pretty simple: genetically engineer insects to contain a lethal gene and release them into the environment; they then mate with wild insects and produce offspring that don't survive to adulthood. That way, the modified gene and the insects are removed from the environment -- all without a single drop of insecticide.
While agricultural pests will find themselves in the crosshairs in the near future, the first targets are mosquito species that spread diseases like malaria, Zika virus, and yellow fever, among others. Intrexon is working on gaining regulatory approval in the United States sometime in 2017, but the self-limiting mosquito technology is already being deployed in the Brazilian city of Piracicaba. The company recently announced that a pilot program covering about 5,000 people was expanded to more neighborhoods, which should give protection to roughly 60,000 individuals.
Why stop there? A mosquito production factory currently under construction will have enough capacity to cover the entire city's population of about 300,000 people. The public-health tool will cost Piracicaba about $8 to $10 per person, which, at full coverage, represents an annual revenue stream of about $3 million for Intrexon. Expand the map to other Brazilian cities and those in the southeastern United States, and the potential for a sizable business is clearly visible.
The opportunity to create and capture value in public health -- utilizing funds currently allocated for purchasing and spraying insecticides and treating infected citizens -- hasn't gone unnoticed by information-technology giants. Alphabet's in-house biotech venture, Verily, has been quietly developing technology very similar to Intrexon's self-limiting mosquito platform, albeit with a stricter focus on data collection and data-driven decisions.
Like Intrexon, Verily plans to release millions or billions of modified mosquitoes by truck, but there are two major differences. Instead of genetically engineering them, Alphabet will infect its mosquitoes with Wolbachia bacteria. While this approach may mollify consumers skeptical about engineered biology, more recent polls (link opens PDF) have shown that 60% of Florida residents surveyed support the release of genetically engineered mosquitoes to combat insect-borne diseases. Only 19% of those polled "strongly opposed" the technology.
Additionally, Oxitec CEO Hadyn Parry has explained that the Wolbachia approach faces a more difficult path forward because the mosquitoes are harder to screen, and releasing even a small fraction of females limits the tool's effectiveness (both platforms aim to release only male mosquitoes). This is the major cause of the differences in field-trial results to date: Intrexon has routinely demonstrated wild-population declines greater than 90%, compared to just 70% for Wolbachia tools.
Another difference between the two approaches: Verily plans to track released mosquitoes using geospatial software. Although it has been quiet on the details, it's conceivable that Alphabet has the muscle to develop an algorithm for just this purpose.
Meanwhile, Microsoft has decided to focus on the data side of mosquito control. That means building a better mosquito trap. Standard traps today cannot single out a specific insect -- they collect flies, moths, and various mosquito species -- and require additional tests to be completed manually. The new mosquito trap being developed as part of Microsoft's Project Premonition, which includes insect-identification processes and behavior analysis, changes that.
It's selective toward specific mosquito species, automates data collection and assays, and uploads data to the cloud in real time. Researchers are also applying the company's deep knowledge of machine learning and artificial intelligence to further improve the tests. Superior performance, combined with an easier path to market than that of engineered mosquitoes, could allow Microsoft to make a meaningful impact on public health in the very near term.
Be aware of the limitations
It's important to remember that biology is not software: Biology is significantly more complex and much less understood. Therefore investors need to be careful not to blindly believe the hyped-up stories crafted to explain complex research-and-development programs. That's especially true for information-technology companies, which have been guilty of oversimplifying biology and overpromising results.
For instance, Alphabet's Verily has made outlandish claims about developing insulin-sensing contact lenses, even though tears are known to be a terrible source of reliable biological information.
Perhaps the extreme confidence in biotech is simply hubris from some of the world's most valuable companies -- or perhaps they'll eventually make breakthroughs from bringing a new perspective into the lab. The opportunity to create and capture significant value remains, but investors need to beware the limitations.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Alphabet (A shares). The Motley Fool owns shares of Microsoft.
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