SAIC is ordinarily associated with other acronyms such as NIH, DHHS, and CDC — the government institutions for which the IT services firm has been a major contract provider. But in the life science informatics space, Science Applications International Corp. is looking to change this perception in order to attract business from top-tier pharmaceutical firms.
David Houghton, vice president for life sciences at SAIC, said that the company expects to be able to double its nascent position in the commercial life science market over the next three years. While revenues on the commercial side will be “much smaller” than those it brings in annually from the government sector for life science contracts, Houghton said the company plans to “ultimately create a balance between the two.”
This is a significant strategic shift for the 35-year old firm, which posted revenues of $6.7 billion last year, 91 percent of which came from systems integration projects for the US government. In the life sciences, contracts with the Department of Health and Human Services, the National Institutes of Health, the Centers for Disease Control and Prevention, and other agencies brought SAIC around $300 million in revenues last year, and several thousand of the company’s 43,000 employees currently work on life science-related projects — many of them at SAIC-Frederick, an SAIC subsidiary with 1,500 employees that provides technical support for the National Cancer Institute.
The company is now looking to translate this public-sector success to the commercial sector, and has identified pharmaceutical R&D informatics as its “sweet spot” in this effort, said Houghton.“The life science value chain for R&D — whether it’s in the public or the private sector — is the same, so the folks we’ve had working for years at NIH can bring a lot of expertise to what we’d like to do in the commercial space,” he said.
In addition, he noted, the company’s life science experience could give it an edge over IT consulting giants like IBM and Accenture, who are also jostling for a share of pharma’s R&D IT budget. While these firms “have been trying desperately to work up the value chain from sales and marketing into R&D, they haven’t really penetrated that area,” Houghton said. “I think there’s room for a vendor such as SAIC to come into play, given that we’ve been working in that space for years.”
Houghton ceded that big IT firms may have an advantage in areas like enterprise resource planning or customer relationship management, but, he noted, “if you’re rolling out a CRM or ERP system for Pfizer or Walmart, domain experience probably isn’t much of a differentiator.” In these areas, where IBM and other vendors are well established, “I just don’t think it makes sense for us to go fight those battles,” he said.
SAIC hired Houghton three years ago to build its commercial life science practice, and the company has already seen a few successes. The firm expanded a multi-million dollar deal with Bristol-Myers Squibb in 2002 to provide help desk service support for the company’s custom R&D applications. Last year, Pfizer awarded SAIC a “significant” service contract to integrate Pharmacia’s R&D data with its own data following the merger of the two firms. Houghton was unable to disclose the size of the deal but said it’s in the nine-figure range. SAIC has around 400 people working on the integration project, Houghton said.
The significance of the Pfizer deal, however, reaches well beyond its monetary value. For one thing SAIC beat out some heavy IT hitters in what Houghton described as a “very competitive bidding process.” He said that his firm’s domain experience was a “fundamental differentiator” in the process. “We recognize that this isn’t a black box solution where you simply run a factory approach to migrating the data. You need to be intimate with the data to properly integrate it,” he said.
In addition, the project has served as an effective proof-of-concept for SAIC’s own evaluation of its prospects for the commercial life science market. The project is about 60 percent complete, which marks a bit of a milestone for the firm. “Now that we’ve reached that 60 percent mark and we’re comfortable with the way the work is going at Pfizer, we think it’s now time to conservatively expand the practice,” Houghton said.
The first step in this expansion is the appointment of two new vice presidents of business development: William Hills and David Hardison, who both came from First Consulting Group’s life science practice. Houghton said that there is a core group of around 50 people in the life science group right now, and SAIC plans to hire additional staff.
A key piece of SAIC’s commercial life science strategy is to draw heavily from the considerable resources on the public sector side of the SAIC corporate fence. “The people that we need to provide these services to R&D commercial actually reside over in our government practice, so we’ve aligned our life sciences office with the government side of the business, because that’s where the capabilities exist,” Houghton said. In the case of the Pfizer project, for example, SAIC was able to build out its core team of 50 life science specialists to 400 by tapping into its government sector resources. Going forward, a major goal of the company’s life science practice will be to “harmonize” the relationship between the two sides of its business, Houghton said.
This ability to bridge the public and the private sectors could give SAIC an advantage in the “gray area” of life science informatics, “where the public and private sectors are ultimately submitting drugs to the government for approval, and they’re trying to solve many of the same problems,” Houghton said.
Jim Golden, group vice president of research at Life Science Insights, had a positive view of the company’s chances for success. “They really understand the government space very, very well, and government really influences industries such as drug discovery a great deal,” he said. While SAIC is certain to go head-to-head with formidable competitors such as IBM, Golden said that the company’s scientific pedigree should work to its advantage. “They know how to manage scientists — which is no mean feat — because they are scientists,” he said. “But they’re scientists who have spent most of their careers doing things that have very short timelines, quick turnarounds, and processing information that may be only immediately available and then executing on that information. Those skill sets translated into a very fragmented and dynamic industry like pharma may be hard to beat.”