Taking a Capital Efficient Company Public and Beyond: Medidata CEO Tarek Sherif (Part 7)

Sramana Mitra: I remember we talked about it a little bit the last time we spoke. So Veeva has its eyes obviously on the clinical data management space. They have one big customer this year. I think that’s their first big pharmaceutical customer. Can you analyze that deal for us?

Tarek Sherif: I can’t analyze it for you because it’s their customer. I can tell you that it wasn’t a competitive process that involved an RFP because we are aware of every RFP that comes to market.

If for no other reason, procurement departments always bring you in to keep the other vendor honest. So you’d have to ask them for the specifics about it, because I really don’t know. All I can tell you is it wasn’t ours and it wasn’t competitive.

Sramana Mitra: Interesting. Given that Veeva’s market cap is quite a bit larger than yours. Even from a revenue point of view, you’re not that far apart. Would it make sense for them to acquire Medidata at some point?

Tarek Sherif: You should ask them that. I think, culturally, we are very different. How we do business is very different. All you have to do is take a look at the lawsuit we have with them right now.

But going beyond that, they come from the document management side of things with CRM. Then they built Vault. They are a well-executing organization. You have to give them credit for building an organization that’s created a lot of value and I think they’ve done a good job in the industry they’re in. But they’re not a data company.

I think that clinical development is a very deep vertical with its own set of requirements. So I’m not sure that I actually see synergies between our two companies. If I take all the other things away, there’s some overlapping customers for sure. But there isn’t really a strong synergy case between the two companies.

Sramana Mitra: But I would say that, from an M&A point of view, people tend to acquire for a reason that they don’t have something. They’re very interested in the clinical research space. They’re very interested in becoming the primary software company catering to the pharmaceutical industry.

So it seems like you have something. You have an asset that they would very much like to have.

Tarek Sherif: Each organization also has its own philosophy. We, for many years, have been very focused on organic growth. I think they have a similar philosophy. Going back to what I said about our mission, we’re entering a period of time where we’re seeing the earliest stages of precision medicine with the focus on sub-populations of patients.

That focus is going to narrow even more to tens of thousands of patients in rare diseases. That is going to continue to shrink. There’s a massive disruption coming to pharma, call it digital disruption or digital transformation. You hear pharma talking about it quite a bit.

But there really needs to be a big change in the way pharma goes from the earliest stages of research all the way through to development, manufacturing, delivery, and ultimately commercialization of drugs. I think that presents a massive opportunity.

If we were creating what is an integrated platform in development, I think there’s an opportunity to create an even larger platform that spans everything I was just describing and brings some of the best data science techniques on top of that.

So if you think about Medidata, that’s the direction we’re thinking which is we’re going to double-down on this view that data is ultimately going to change patients’ lives. It’s going to impact precision medicine in a big way. Pharma is going to adopt technology that really allows them to make better insights and better decisions through their manufacturing in a more agile way.

That’s our philosophy or that’s our vision of where the industry is going. While I understand your comment around the M&A rationale, I don’t actually see that. For us, being able to manage documents in a more efficient way doesn’t really solve the problem that I just described, or the opportunity.

Sramana Mitra: The other M&A question that is floating around in the rumor mill is Parexel trying to acquire you. Could you comment on that?

Tarek Sherif: We don’t actually comment on market rumors. I will leave you with two points, though, on that topic. So first, we feel very good about our prospects as an independent company. The business is in a very good place strategically as I described.

We have our integrated platform. I don’t know if you saw the announcement of Acorn AI. I think that’s a very exciting opportunity for us to leverage the data that we have as well as some of the capabilities that we’ve built over the last five years and help our customers drive value out of what they’re doing in development.

The other point I’d like to make is that this takes us right back to where I started, which is our mission. When we think about our role, what our jobs are, and what our company represents, we serve four constituents: our patients, customers, employees, and public shareholders.

We’re going to balance all of those to the best degree that we can to make sure that we optimize enough outcome there.

Sramana Mitra: As I’m listening to you, what I’m reading is that you want to go independently. You have a vision for this industry and you want to keep going with that. You don’t want to get acquired is what I’m hearing.

Tarek Sherif: We’re a public company. So people can come to us. It’s a free world. It’s a public market. What I’m saying is we will make a decision that’s in the best interests of the constituents that I was talking about.

So whatever moves our mission forward, and has the right outcome for our employees and for our customers is a decision that we would make. I’m a founder. A lot of my network is tied up in Medidata. I have a perspective on the business that is very in line with what I was just describing.

We’re going to do the right thing that we think, ultimately, will have potentially the greatest impact on patient life. I wouldn’t define it by whether we’re independent or not independent.

Sramana Mitra: Fair enough. It makes sense. Financially, you still want to keep working on this problem is what you’re saying.

Tarek Sherif: Exactly. We want to solve this problem in a period of time where we think it’s bright and most exciting to try to help our customers and help patients ultimately. I think that’s a very good framework for thinking about it.

Sramana Mitra: All right. It’s been a real pleasure. I love what you’re doing. I love the story of building this very capital-efficient company in a very systematic and focused way. So thank you for sharing the story.

This segment is part 7 in the series : Taking a Capital Efficient Company Public and Beyond: Medidata CEO Tarek Sherif
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