Update: Oracle to buy drug trials software maker for $685M

Phase Forward purchase adds to Oracle's push into health sciences

Oracle today announced plans to buy Phase Forward, which develops software for drug manufacturers, for about $685 million. The deal is expected to close mid-year.

Phase Forward's SaaS (software as a service) products guide the entire drug-development process, from clinical trials to monitoring after they receive regulatory approval, according to a statement. Its employees will be folded into Oracle's Health Sciences global business unit.

The acquisition of the Waltham, Mass.-based company is the latest in a long string by Oracle in recent years, but also one of the larger ones in recent history. It ties into the vendor's strategy to mine new business from vertical markets such as health care.

The market is particularly attractive these days, given factors like the recently approved health care reform legislation.

In buying Phase Forward, "[Oracle gets] something unique," said Ray Wang, partner with analyst firm Altimeter Group. "It's smack in the heart of medical research, smack in the heart of all the public sector dollars."

The pending acquisition follows Oracle's purchase last year of Relsys, a maker of drug-safety software and a Phase Forward competitor. Also last year, Oracle bought intellectual-property assets from Conformia, which developed technology for managing the design and development of pharmaceuticals.

Apart from selling specialized applications, Oracle's industry strategy is meant to give it a chance to sell companies other products, such as middleware, databases and now hardware, said Forrester Research analyst Paul Hamerman.

Moreover, Phase Forward's roughly 335 customers include many large pharmaceuticals, "which happen to be SAP shops for the most part," Hamerman said.

Phase Forward also counts users among government organizations, biotech companies and medical device makers.

Oracle is far from finished buying health-related companies, Hamerman added. "This is a relatively new business unit," he said. "If you look at the entire health care ecosystem, that's huge. Another way they may want to play is on the health care provider side."

Meanwhile, the announcement underscores a second storyline playing out at Oracle: Its gradual move toward on-demand software.

"The thing you'll find about Oracle is that within the next 24 months, almost every new product they deliver is going to be SaaS," Wang said.

Copyright © 2010 IDG Communications, Inc.

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