IMS Health Acquires Appature to Get Healthcare Marketing Software
[Updated: 11:30 am PT] Seattle-based Appature, the maker of software for healthcare marketers, has graduated from scrappy startup into something much bigger.
Appature is announcing today that it has agreed to be acquired by Parsippany, NJ-based IMS Health, the giant data provider that tracks prescription trends for healthcare companies. IMS, a private company founded in 1954, declined to disclose terms of the deal, but Appature co-founder and CEO Kabir Shahani called it a “great return” for investors and the company’s employees.
Appature was founded in 2007 and raised just $9.6 million in two financing rounds from local VC firms Madrona Venture Group and Ignition Partners. Appature currently has 60 employees, mostly in Seattle, and plans to keep the local business unit intact with Shahani as the local general manager. Now with the 700-person IMS sales force behind it, and reach into 100 countries, Appature expects to be able to roll out its software service around the world, and grow its local workforce to about 80-100 employees over the coming year, Shahani says.
By aligning with IMS Health, Appature will take its software that helps companies analyze multiple proprietary streams inside a company and that provide some of the most valuable healthcare information pharma companies can get. Healthcare companies spend an estimated $200 billion a year on marketing—on everything from pens, to trade shows, to print ads in the New England Journal of Medicine or TV commercials during “60 Minutes.” While many industries were quick to adopt sophisticated software to help them see which campaigns deliver the best returns, there’s still a hunger in the pharma industry to start using tools like Appature’s to figure out how to get the biggest bang out of those marketing bucks.
“We’re super excited. It’s a great return for our investors and employees. We’re very, very happy,” Shahani says. “We get to keep the same culture, same business structure, and stay in Seattle. In fact, on day one, we’re going to be hiring like crazy. I think people are going to see IMS Appature as a tech powerhouse in Seattle.”
Richard Fade, a partner with Ignition and member of the Appature board, said he was bound not to disclose the amount of the sale, but said it provided a “very good” return for the firm. “We have some upside in the deal, as part of their performance in IMS,” Fade says. “In absolute terms, it’s a very good return. We performed very well for the amount of money we had in it, and the time we had in it.”
[Added comment] Tim Porter, a partner with Madrona who served on the Appature board, had this to say when asked whether Appature represents the kind of transaction that can transform an entire venture fund to put it in the black. “I can say it’s a very good return for us as investors,” Porter said via e-mail. “It does not ‘return the fund’ as you allude, but it’s an attractive return that we are very happy with.”
Appature started in 2007 with the notion that pharmaceutical, medical device, and biotech companies needed help managing data to sharpen up their marketing campaigns. Essentially, healthcare was changing, so companies could no longer get away with wining and dining high-prescribing physicians, or just running traditional print and TV advertisements, and hoping for the best.
While some customers in Appature’s early days were using software programs from Oracle or Salesforce.com to manage their sales contacts, those programs were limited. Appature has sought to offer something more valuable, by creating a place where companies could merge the proprietary data flow they already get on individual doctors’ prescribing habits from vendors like IMS Health, with interactive marketing data they have from other vendors, like IBM. Appature’s distinguishing feature has been its ability to roll sales, marketing, and industry data together to provide healthcare companies an integrated look at how they market their goods and services to physicians and consumers.
Appature signed up about half of the world’s top 10 healthcare companies in its first couple years, and recently sold its wares to Cambridge, MA-based Ironwood Pharmaceuticals (NASDAQ: IRWD), Aliso Viejo, CA-based Avanir Pharmaceuticals (NASDAQ: AVNR), and San Francisco-based Medivation (NASDAQ: MDVN), who all have new drug marketing campaigns underway.
Appature never got to sustained profitability as a standalone company, but it saw annual revenues double for the last two years in a row, Shahani says.
“Coming into 2013, we had continued strong growth,” Shahani says. “We’ve been able to become a great brand name in healthcare and life sciences. We reached the trajectory where it’s seldom that we run into a brand-name pharma company that hasn’t heard of Appature. We were in the process of converting that awareness and momentum into growing our customer base. This [acquisition] gives us an opportunity to do that very quickly.”
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