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Accelrys Snaps Up SciTegic for $21.5M; Emkjer Pledges to Keep Platform Open

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Last week Accelrys announced plans to purchase workflow software provider SciTegic for $21.5 million in cash and stock — a move that raised questions across the informatics community about the company’s intentions for SciTegic’s flagship Pipeline Pilot product once the acquisition closes.

But Accelrys CEO Mark Emkjer told BioInform that the openness of SciTegic’s platform is “sacrosanct.”

“We will not close it, we’re going to keep it open,” Emkjer said. “That’s my absolute commitment.”

Workflow software allows users to mix and match multiple applications — whether they be proprietary, public domain, or third-party — into a single research pipeline. Emkjer said that Accelrys has been looking to add this capability to its product portfolio as it moves from a shrink-wrapped software model toward “more of a service/solution business offering.”

But the open nature of such a solution appears counter to the goals of the industry’s largest pure-play software provider: Why would Accelrys encourage its customers to use products from other vendors in combination with — or instead of — its own?

Emkjer said that such models are common in other industries, and that he is taking a proactive approach to resolve any doubts about his plans. “I have written 10 letters over the past two days to our competitors, and I have told them that I am very open to a coopetition model, whereby we would work with them utilizing the SciTegic Pipeline Pilot product, and wrap their applications, and work with them to offer those solutions to clients who desire that,” he said.

While acknowledging that the commercial life science software sector has not yet embraced the concept of open platforms, Emkjer said he’s optimistic that other players will be receptive. Several competing firms have already expressed interest in collaborating, he said, although he did not disclose any by name.

The Deal

Accelrys said it will provide SciTegic shareholders with $12.25 million in cash and around 1,040,119 shares of Accelrys stock when the deal closes, and an additional 334,324 shares over the next two years. The value of the transaction, expected to occur before the end of the month, is around $21.5 million.

SciTegic is privately held. Emkjer did not disclose the company’s current revenues or projected future revenues, but said that Accelrys went through six months of due diligence before deciding on the purchase. “Price is really the perception of the mind of the buyer,” he said. “SciTegic is an outstanding company with outstanding employees, and I feel that the value was fair.”

The two founders of SciTegic — Matt Hahn and David Rogers — along with several “key employees,” already have employment agreements in place, Emkjer said. Accelrys is also offering incentive agreements for the company’s remaining staffers to remain on board following the acquisition. SciTegic currently employs around 40 people.

In a break from Accelrys’s past acquisition strategy, SciTegic will operate as a wholly owned subsidiary of the larger firm, maintaining its name and branding. This move is designed to address a reputation that Accelrys has in the industry for a less-than-smooth post-acquisition integration process — a holdover from its early days of rolling up numerous software firms as a unit of Pharmacopiea.

Some industry observers have even surmised that the SciTegic buy is simply the most recent move in a series of failed attempts to integrate its disparate products from prior acquisitions — a perception that Emkjer is happy to see come to an end.

“This is one area where people will begin to see the divergence of what was the Accelrys of the past and the Accelrys of today and going forward,” he said. “The plan is to maintain the brands of SciTegic and Pipeline Pilot. These are brands that people use and respect. I wouldn’t want to wipe them out.”

Over the last year and a half, Emkjer said, “we have begun to build our credibility” after a period in which the company’s growth strategy was based on “quick and fast” acquisitions.

“How do you convince the market that you will be open? One of the ways you do that is by keeping [SciTegic as] a subsidiary,” he said.

Growth Opportunities

Accelrys has already penetrated most of the top-tier pharmas, and SciTegic also boasts a number of large pharmaceutical firms among its customer base. Emkjer said there are still plenty of opportunities for future revenue growth for the combined entity. “I see it in terms of expanding into different target market segments, and I also see different regions in the world where there is opportunity,” he said, citing a new bioinformatics offering from SciTegic and the Asia-Pacific region as near-term growth areas.

There are a number of ways in which Accelrys can make Pipeline Pilot available to its customers, Emkjer said: as part of an expert user system, via a web interface; as an interface itself; or even as an icon on the screen of another interface. So far, he said, several SciTegic customers have already wrapped Accelrys applications to work with Pipeline Pilot, but the details of the final product and services offering that will be available through Accelrys are still being worked out.

If Accelrys can ensure a smooth integration — and keep its promise to maintain the open nature of Pipeline Pilot — the company could be entering one of the more successful segments of the informatics market. Other workflow informatics firms, such as TurboWorx and InforSense, told BioInform that they have seen a marked increase in deal flow over the last few months.

“The concept of workflow is really catching on in the marketplace right now,” said Christian Marcazzo, vice president of business development at InforSense. “The industry is aware that writing Perl scripts isn’t a viable way forward anymore.” Marcazzo said that the company’s revenue is “significantly up … and we see our business growing.”

Jeff Augen, CEO of TurboWorx, was also sanguine about the market for workflow software, which he pegged at $200 million in the life science sector, and growing. “Our business is accelerating quite a bit,” he said.

Both firms viewed the SciTegic acquisition as a positive sign for the broader workflow software market. “It’s an advantage for us in a marketing sense,” said Augen, “because all of Accelrys’s competitors will wake up and realize they need a workflow solution.” Marcazzo agreed that the acquisition “more firmly puts workflow in the area of market needs. It’s on the radar screen now.”

Neither company considered Accelrys to be an immediate competitive threat in the workflow market. Despite the company’s claims that it will keep Pipeline Pilot open, Marcazzo noted that “customers will still fear that they will be encouraged to buy other technology from Accelrys” — a concern that may drive them to smaller, vendor-independent shops.

Emkjer said that Accelrys will disclose further details of its plans for Pipeline Pilot when the acquisition closes later this month.

— BT

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