Oracle Scoops Up Phase Forward for $685 Million

4/16/10Follow @wroush

Phase Forward (NASDAQ: PFWD), the Waltham, MA-based maker of software that helps pharmaceutical companies manage clinical trials of new drugs, will be acquired by California database giant Oracle (NASDAQ: ORCL), the companies announced today. Phase Forward, which is fetching a price of $685 million or $17 per share, will become part of Oracle’s Health Sciences Global Business Unit.

The price represents about a 30 percent premium for Phase Forward’s shareholders over yesterday’s closing stock price of $13.08.

Oracle, which is headquartered in Redwood Shores, CA, painted the purchase as part of its strategy to offer more database-driven business applications in key vertical industries such as healthcare. The company already offers an extensive line of software products for tasks such as capturing patient data and analyzing the progress of clinical trials. It said that combining its products with Phase Forward’s “is expected to enable researchers, clinical development professionals, physicians, regulators and patients to more effectively and securely capture, contribute, access and share data.”

Oracle also said the acquisition would help it tailor its systems to help hold down the costs of pharmaceutical R&D. “The life sciences and healthcare industries are converging as they seek to control costs while accelerating patient-centered innovation,” Neil de Crescenzo, Oracle Health Sciences senior vice president, said in a statement. “Phase Forward brings outstanding products and employees with significant expertise to Oracle that will help enable the delivery of personalized medicine and value-based healthcare.”

The acquisition is subject to shareholder approval. While the news of the proposed takeover came as a surprise—not a word of had leaked out to the media before today’s announcement—it fits a now-familiar pattern in which Massachusetts high-tech companies grow to the sub-billion-dollar stage, and are then scooped up by West Coast giants with deeper pockets.

Xconomy’s Ryan McBride met with Phase Forward CEO Bob Weiler just last month. They talked about the challenges the company faces as it grows beyond the first stage of adoption of clinical trial management software—the simple switch from paper records to digital tracking—and attempts to create systems that will help Big Pharma customers like Roche and GlaxoSmithKline manage the whole process of clinical research (what it calls an “integrated clinical research suite”). Toward that end, Phase Forward has made a number of acquisitions of its own, buying companies like Cambridge, MA-based Waban Software, which makes clinical data analysis systems.

But the company’s move to expand beyond electronic data capture—and its success adding customers (it added 50 new ones in 2009, helping boost its revenue by 25 percent)—didn’t seem to come fast enough for investors’ taste. The company’s market valuation peaked at about $1 billion in November 2007 and, by last month, had declined to just over $550 million.

That drop in market valuation certainly made it a little easier for Oracle to swallow up Phase Forward. Oracle’s market cap today is about $132 billion.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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