UPDATE: Dec. 12, 2019: Verily announced Wednesday afternoon it is investing more into the Onduo virtual care model for Type 2 diabetes in light of Sanofi pulling back from the venture.

"We recently restructured its ownership with Sanofi to enable Onduo and Verily to move faster, invest more and serve a much broader population of patients managing multiple chronic conditions," Verily said.

Sanofi is retaining "a small stake in the entity," according to Verily. The Google sibling said it still believes Onduo has promise and is on the verge of growth due to partnerships with Walgreens, Blue Cross Blue Shield of Arkansas and Georgia, and life insurer John Hancock.​

Dive Brief:

• Sanofi is pulling back from its Type 2 diabetes collaboration with Google’s sibling company Verily.​ At a presentation on Tuesday, Sanofi’s recently installed CEO Paul Hudson said his company had “over-invested” in the joint venture, a virtual diabetes clinic called Onduo. 

• Hudson thinks Sanofi can make better use of its cash, leading him to stop putting operational expenses into Onduo while remaining on board as an investor.

• The retreat from Onduo is part of a broader shift away from the diabetes market at Sanofi, which will stop drug research in the disease area.​

Dive Insight:

Sanofi and Verily teamed up to found Onduo in 2016. The idea was to combine Sanofi’s knowledge of the needs of diabetics with Verily’s expertise in software and miniaturized electronics to develop a range of devices, other products and remote coaching services that help people better manage their conditions. 

"It was a determined effort to get into the ecommerce component around diabetes and to try and build on the customer relationship with Verily," Hudson said at Sanofi’s Capital Markets Day Tuesday. 

Sanofi contributed around $55 million to Onduo in 2017, setting the joint venture up to start commercial pilots in several U.S. states the following year. However, the value of Onduo in Sanofi’s accounts fell from 2016 to 2018 and Hudson thinks the venture will require "significant investment ... over many years."

Having spent the 100 days since taking over as CEO plotting a new future for the company, Hudson thinks Sanofi committed too much to Onduo and can put its money to better use elsewhere going forward. 

"It’s a much harder nut to crack. It’s a much longer process. And whilst we’re excited about the work being done at Onduo, I think we were over-invested. So we’ve stepped back. We’re still an investor ... but we won’t put any more operational expense in above where we are because we have other things to do with the investment," Hudson said.

The changes mean Sanofi is still positioned to profit from Onduo as an investor if, as Hudson said is possible, the joint venture goes on to "be worth a lot one day." However, Onduo will have to work to grow into the larger, more valuable business envisaged by Hudson without the level of support it received from Sanofi over the past few years.  

Sanofi is streamlining certain other avenues of medtech involvement, too. Last week, Baxter announced it plans to buy Sanofi's adhesion barrier product, Seprafilm, for $350 million.