Oracle and Phase Forward

With the announced intention to acquire Phase Forward and finalize the transaction in mid-2010, Oracle has made what one industry expert called “an interesting and daring move.” And another called it the deal of the decade.

Most in the IT and financial press are “bullish” on the announcement. Most also outline Oracle’s strategy since 2005 to grow its vertical markets through acquisition, and its Health Sciences unit is no exception. Perennial acquisition began with Siebel’s Customer Relationship Management (CRM) in 2005, which sowed the seeds for an application that crossed many of Oracle’s vertical markets, and made inroads to Siebel’s existing customer base. Somewhere in there, the Siebel CTMS product along with its RDC product went into the Oracle applications mix for Life Sciences. In June 2008, Oracle created the Health Sciences business unit. The next acquisition for Oracle was the Relsys drug safety and risk management application in March 2009.

Phase Forward, founded in 1997 by Paul Bleicher, MD, and while starting off with a strong EDC product for clinical trials, is no stranger to purchasing technologies. Its acquisition list includes:
2005, Lincoln Technologies, safety.October 2007, Green Mountain Logic, Phase I trials software.
September 2008, Clarix Web-integrated IRT.
2009, Waban Software, automation and compliance of clinical data analysis and reporting.
July 2009, Maaguzi, ePRO and late phase.
August 2009, Covance’s IVR/IWR services business.

Other services that comprise an end-to-end eClinical suite, besides the previously mentioned, are: CDMS, data repository, thesaurus management, FDA submissions management, and CRO management. Oracle had six of the 11; Phase Forward, 11 of 11. So there will be overlap of applications. Reports say that Oracle gains access to over 300 established Phase Forward customers.

For now, there is nothing to do but wait, and speculate.

Business Models
Jim DeSanti, CEO of PharmaVigilant, an eClinical software provider in Westborough, Mass., said of the companies’ disparate business models: “Oracle has no ASP arm, only IT. And Phase Forward has a hybrid technology and ASP model, which was growing more on the services side the past two years. So much so that people considered it in competition with CROs.”DeSanti said that merging these two different business models would not be easy. “Clients make decisions based on certain criteria. Oracle is traditionally IT and Phase Forward, clinical.” DeSanti said the goal of IT is how to best integrate its system with the various other systems it has. The goal of clinical? To find the best tools possible to get the drug through the trial. “For them, it’s all about drug development. There are two different agendas,” he noted.

In addition to that mix, throw in the overall conservativeness of the pharmaceutical industry, one that is risk averse. DeSanti remarked that the next 12 to 24 months will be an interesting one for this merger.

Pricing
“It'll be interesting to see how pricing goes with Oracle. I think this merger makes a lot of sense for them from a business perspective, and really puts the squeeze on smaller players migrating away from Oracle due to cost,” said Timothy Pratt, PhD, MBA, principal, Crucial Clinical and business Consultants and Editorial Advisory Board member to Applied Clinical Trials.

While Pratt echoes what others have said about Oracle prior to this announcement—that Oracle is too big and too expensive for viability among the smaller to mid-size pharm or biotech—Ruchi Mallya, Analyst, Pharmaceutical Technology, Ovum told Applied Clinical Trials that she believes that this merger gives small biotech access to Oracle, not further exclusion. “Oracle would like to provide more access to their solutions. By purchasing Phase Forward and its SasS model, it offers small biotech the opportunity to have that Oracle brand. They are moving toward everyone, not just pharma.”

In this article, Mallya noted that the first thing Oracle would need to address is ambiguity among clients, as well as the industry at large consisting of potential clients currently evaluating their eClinical solutions. “There is overlap of products, and so they have to clarify if they will switch over to one product, sustain both, or offer a hybrid.”

While Oracle did offer letters to customers on this Web site, this blog offers advice for current customers. It also mentioned that Oracle traditionally raises its maintenance pricing by 22%.

Drug Safety
As mentioned, one area of overlap is drug safety. Not only did Oracle purchase a well-known provider of data safety and risk management in the form of Relsys last year, it is acquiring Phase Forward’s Empirica suite of safety solutions from clinical trials signal detection, to pharmacovigilance (originating from the Lincoln Technologies acquisition) to adverse event reporting.

Sentrx, a Little Falls, NJ-based company that provides pharmacovigilance services for all aspects of drug development, in areas comprising technology, quality, medical affairs, and regulatory, also as a Business Partner, supports the safety systems provided by Oracle and Phase Forward. Sentrx CEO Chuck Saldarini told Applied Clinical Trials that he is bullish on the announcement. “We think it sends a major signal on the importance of safety,” said Saldarini. “Oracle is basically saying that safety is critical.”

Saldarini outlined the current momentum within health care, specifically EMRs, the move toward a PC in every examination room to now tablet-based technologies, and how it will change the way that safety information is collected, reported, aggregated, and used within the postmarket domains, as well as how it crosses over into the clinical domain. “It’s all exciting for us,” said Saldarini. “We get access to Oracle’s expertise. And we get to track with our customers on the overall Oracle roadmap.”

Medidata
Then there were two--Oracle and Medidata. There are more than two, there are a host of other eClinical players who are viable and have long histories, and satisfied customers in the industry. However, the top three for some time have been Phase Forward, Medidata, and Oracle.

According to Mallya, Medidata is in a unique position to differentiate itself even more from the pack. “They can say, ‘We’re an eClinical provider and we’re not a big giant.’”

Medidata has its own unique history and was founded in 1999. It completed its IPO in June 2009, and currently maintains a customer base of 173. Revenues generated from customers in Europe and Asia comprise approximately one-third of its total revenues.