Bloomberg covered some chatter that caught TrialSite News attention. France-based Dassualt Systems’ potential interest in acquiring electronic data capture market leader Medidata triggered a commentary here. Medidata is a global life science technology provider. Built around its core EDC product RAVE, it has grown over the years to offer a suite of “eClincial” products—now known as the “Medidata Cloud.”
Medidata, founded in 1999 by focused charismatic leaders took the industry by storm and ultimately accomplished a comprehensive lift and shift from Oracle Phase Forward to RAVE 2010. Along the way Medidata made a few small acquisitions and worked to open up new solutions such as structured protocols and clinical trial management system. Most had limited success but its core “bread and butter” RAVE continued its market share growth.
Medidata didn’t start in the cloud back in 1999; as technology options changed by the 2007 they began a prolonged move to open source in some cases and ultimately to cloud technologies paving the way for what is today the integration Medidata Cloud. One problem they faced was a cloud locomotive called Veeva Systems.
We cannot emphasize enough Medidata’s employee depth, breadth and quality of expertise and experience in the clinical research technology space. Moreover at least when it came to their core EDC product they did a marvelous job infusing domain expertise into the feature and function mix. Arguably, they have the largest pool of clinical trials domain experts of any vendor other than large CROs. They systematically took down Oracle’s leading position in the clinical trials electronic data capture market a decade ago.
With nearly 2,000 employees, they however have faced a formidable foe in Veeva with ongoing litigation as just one skirmish in what is an epic battle. The stakes are big. Veeva represents the next wave of consolidator in the clinical trial technology market—based on cloud technology rather than traditional hardware and software mix.
Originally designed to exploit the momentum of Salesforce now they have their own. As of this writing, Medidata has a market cap of $4.6 billion on revenues of $636 million while Veeva enjoys a market capitalization of $18.7 billion on $862 million of revenues. Medidata earns about 13% net profit and $240.5 million cash in hand while Veeva earn 27% net profit and holds $1.1 billion in cash. Medidata was founded in 1999 and Veeva in 2007.
Medidata built its’ first products before the pervasive cloud infrastructure afforded what Veeva was able to exploit upon inception. Veeva capitalized on a cunning Salesforce, maximizing the platform-as-a-service (PaaS) opportunity to enter the market (Veeva’s commercial CRM sits inside of Salesforce cloud while its Vault clinical trial products (eTMF, CTMS, EDC) are designed from the ground up as multi-tenant SaaS). Veeva has however, embarked on major upgrades to AWS (in parts) for scale. Medidata perhaps had hope for protections in its mature, purpose-built RAVE product—that was until Veeva opened up hunting season on EDC. Medidata wasn’t wearing orange and was caught off guard.
Veeva was able to capture and essentially blitzkrieg pharma software markets starting with its leveraging of the U.S.S. Salesforce on the commercial side and then propelling itself on to clinical trial technology beachhead with Vault which is now the most pervasive eTMF application. It announced new cloud-based Vault clinical applications for CTMS and EDC for example—hence threatening Medidata’s core position in the market. Veeva accomplished its’ invasion on the status quote due to 1) leadership and execution: hybrid DNA infusion combining Silicon Valley pedigree with deep life science subject matter expertise 2) Cloud scale from start: massive jump start on the Salesforce PaaS cloud; 3) Timing: industry was stuck on older products (Oracle Siebel for CRM; Documentum for EDMS, etc.) too long and coveted change and 4) Masterful selling: exploitation of the severe pain associated with the cost and duration of legacy FDA complaint system upgrades and maintenance cycles.
Veeva first cozied up to Medidata for partnership status to study its prey; then quickly sought the jugular vein on a specific European deal. They haven’t been friends since and in fact are involved with ongoing litigation. Medidata has pivoted to embrace cloud scale and consolidate applications. Some have argued they have too many wares for sale and have lost focus. Some questionable acquisitions have raised questions: are they just trying to keep up with the Pleasanton ninja army? A fundamental question for shareholders however: Does Medidata have the financial wherewithal, market muscle, out-of-the-box innovation to out-maneuver and out-compete against Veeva moving forward?
They face a tough situation based on this writers vantage. They will undoubtedly maintain core EDC customer base but they even recognize the dangerously competitive landscape—from CRO offerings to software behemoths such as IBM and Oracle trolling to get back into the space in force: trying to recapture territory to Veeva themselves and a new batch of innovative, cloud-based point solutions that may drive down price for market share. The bigger prize—and why IBM and Oracle are so interested in life sciences—artificial intelligence. The data is future gold.
Dassault Systems is a subsidiary of the Dassault Group created in 1981 by Avions Marcel Dassault to develop next generation CAD software known as CATIA. The French government has been a shareholder since 2001—although it sold a 15.74% stake in 2003. Over the years it evolved into a product lifecycle management (PLM) vendor competing with the likes of Siemens. They specialized across industries from aerospace and defense to engineering and consumer goods to life sciences (with a focus on medical devices). The allure of big pharma rich profit margins always attracted a keen interest in exploring entry paths into the potentially lucrative field. PLM isn’t that big in pharma however—other applications are more relevant and hence important.
It is reported that they are the largest French software venture. With revenues approaching $3.2 billion they had recent success with 3DE experience. With $2.8 billion cash on hand they enjoy a market cap of $39.5 billion. Dassault Life Sciences appears to covet Veeva-style growth and undoubtedly sees potential with Medidata if the chatter reported in Bloomberg is correct. Dassault is not known for their clinical trials depth or subject matter pedigree. Acquiring Medidata would immediately change that and transform them into a sector leader. An acquisition would be a game changer.
Dassault has grown through acquisition in life sciences such as the 2014 purchase of Accelrys which included FDA compliance document control system Qumas.
The larger French holding company that owns Dassault Systems has considerable size, scale and a far larger market cap than that of Veeva. But they are also a lot heavier. Moreover, scale may not be sufficient to win in the emerging, new global clinical trials solution arena. Deep domain expertise, integrated offerings, cloud-scale utility options and new disruptive models that can align with the considerable industry transformations that are now ongoing. Moreover whole new classes of disruptive business models are introducing new approaches to clinical sponsors and large research sites—involving both cloud-based software and tailored services addressing fundamental challenges including patient recruitment. The move away from the big blockbuster to the disruptive platforms (e.g. gene therapy, CRISPR, etc.); the transformation from fee-based to value-driven; the introduction of even cheaper, more pervasive cloud computing with sophisticated AI and transformative delivery models will soon make even Veeva start to look legacy. Medidata should study its choices carefully.