Medidata Solutions has been acquired for $5.8 billion on approximately $660mi in revenue for a significant multiple on revenues. TrialSite News discussed this potential acquisition months ago. Medidata was the leading electronic data capture vendor, but struggled commercializing other technologies such as clinical trial management systems and electronic trial master files. They ran into a juggernaut called Veeva Systems that combined not only CRM, but also eTMF and now EDC and CTMS in one cloud-based system. In fact, Medidata and Veeva are presently locked into some fairly nasty litigation over business practices. This acquisition opens up opportunity and challenge as two very different cultures come together. Dassault has acquired other life science/clinical trial technology system assets.
Who are Tech Consolidators in Life Sciences
Big traditional technology players in clinical trial operations includes Oracle, not to mention the large CROs that often have proprietary systems that they offer for their clients. The $117.7 billion market capitalization of Salesforce, on $14 billion in revenue and $6.3 billion in cash makes them a dangerous operator in the business—most pharma use a Salesforce-based CRM (Veeva CRM is based on Salesforce) and many custom apps are built on their Platform as a Serve in the cloud. They just acquired data visualization and reporting system Tableau for $15.7 billion. IBM has made a few purchases some years ago; Google through Alphabet has subsidiaries such as Verily that are seeking to disrupt the drug development process—from discovery through clinicals to commercialization. Microsoft is used by nearly all pharma for products such as Office 365, SharePoint and SQL Server but they may not focus on the specific business application anymore. Their Azure infrastructure-as-a-service (IaaS is in a class of its own behind the number one IaaS Amazon AWS. The latter being the most prominent IaaS in big pharma next to the former in terms of adoption in R&D. Azure has heavy adoption when you count Office 365 as part of that IaaS.
This author has assumed that Veeva, at some point, will be a target, but on around $900 million and a $24.4 billion market capitalization the price tag is high, only one of the larger tech companies could afford this neighborhood. Unless there is major market correction impacting Veeva’s stock price in a material way, with over a billion in cash now they could have a chance to join the next category of software club—and become a consolidator themselves. Veeva’s ride has truly been unprecedented in the conservative, traditionally slower moving life science space.
Business process and technological disruption can throw a wrench in the best plans. There are a many new ventures out in the market seeking to truly disrupt clinical trials from a business process and technology perspective. With consolidation comes opportunity for new ventures to introduce profound change for the better as the bigger consolidators have weaknesses that a healthy startup ecosystem can augment. But penetrating and monetizing within global industry sponsor business entities is difficult. Even Veeva rode on the back of Salesforce to get into the game—their CRM product is built on Salesforce.
Cloud Stories and Scenarios of Consolidation
There are three layers to the cloud: Infrastructure as a service (IaaS); Platform as a Service (PaaS) and Software as a Service (SaaS). In the life science (big pharma & CRO) space the number one IaaS is Amazon AWS closely followed by number two Microsoft Azure. The latter is catching up with the former—often Microsoft-centric shops adopt Azure in life sciences more than Oracle/J2EE shops which prefer the former. The two have both strengths and weaknesses but are far ahead of the rest of the pack. Just counting Office 365 which is in Azure would mean many if not most big pharma are now in Azure. Microsoft will seek to grab more IaaS and PaaS market share, but it is not clear if they will attempt to verticalize where Amazon clearly is digging deep into healthcare and even making considerable investments in healthcare related businesses. Both command and control hundreds of billions and could make unexpected moves.
The leading PaaS has been Salesforce in the life science market with their “Force” and Apex development environment. There are hundreds of customized Salesforce PaaS apps in the industry and market leading CRM Veeva is built on Salesforce CRM. We just recently wrote about a compelling Salesforce-based patient enrollment app at UCSF.
Salesforce, as both a SaaS and PaaS and could make bolder consolidation moves within life sciences—there are many start ups in life sciences that are built on Salesforce’s dynamic partner program leveraging their PaaS.
Microsoft’s PaaS may ultimately become the leader as they are massively investing to create the rich, partner diverse developer ecosystem experience in the cloud—just like they did in client server environments previously. This cloud consolidation in life sciences will occur more rapidly in Microsoft-centric technology organizations and how well they ultimately, they do in life sciences is contingent upon the demand for new products delivered from that environment.
Veeva is an example of a SaaS that has made incredible progress in life sciences by adding organic applications for a comprehensive, unified experience across the drug development value chain. So they are attempting to consolidate life sciences value chain from an app perspective, but this won’t be easy as A) they will struggle to have the same velocity of adoption in CTMS and EDC not to mention eSource, regulatory publishing and safety as they did with CRM and eTMF and B) they will have to truly open up the PaaS to partner ecosystems and build a comprehensive network of startups building on top of the Veeva PaaS. They have made some overtures in this direction, but they are notoriously aggressive and known to cannibalize partners. The culture sort of needs to evolve within Veeva to become the lead consolidator.
Dassault comes out of the French aerospace world; a large company with a $40 billion market capitalization they have just made a big statement making the move to buy Medidata—arguably the market’s leading electronic data capture system training by Oracle and other niche players. Medidata has acquired or built a range of other clinical trials-related applications. First Dassault has to close the deal and second, they will now have an asset on hand that represents enormous potential that could propel them to the highest ranks of technology vendor in life sciences—one of the most valuable global industries. This could open the door for intensified competition against Veeva or on the other hand, it could slow down Medidata giving Veeva even more life’s opportunity to work with.