As Pharmacopeia of Princeton, NJ, plans to merge its four software units into a single entity, the company faces a number of challenges in making the integration process as seamless as possible.
The new software business will incorporate Molecular Simulations, Genetics Computer Group, Oxford Molecular, and Synopsys Scientific Systems. The unit’s main sites will be based in San Diego, Calif., and Cambridge, UK. A name for the new business has been chosen, but will not be announced until the American Chemical Society Meeting in San Diego April 1-5.
BioInform caught up with Mike Stapleton, who was recently promoted to COO of the new division, to discuss some of the particular hurdles he faces in ensuring a smooth transition.
BioInform: How will Pharmacopeia and its customers benefit from the integration of your four software units?
Stapleton: I guess it’s a different answer for different segments of our customer base to some degree. We have quite a varied customer base.
This all started back around two years ago. Pharmacopeia did a five-year business plan to understand the technology, products, services, and expertise we had but, more importantly, the needs of particular markets that we’re serving. What really drove us was the understanding that what our customers require is a much more integrated platform solution. That term is quite high profile across the industry, but what it meant for Pharmacopeia as a publicly traded company was that we could pursue quite an aggressive merger and acquisition strategy to complete key components of that integrated platform. And that really motivated the acquisitions of Synopsis, Oxford Molecular, and GCG.
The pedigree of Pharmacopeia two years ago was really Pharmacopeia on the chemistry and lab side and MSI on the molecular modeling side. The third and most critical piece for an enterprise-wide platform for pharma R&D is the informatics approach. The rationale of bringing these pieces together is to provide a far more integrated solution for biology, chemistry, and modeling for research and development as opposed to individual solutions.
That’s the business motivation. You obviously validate such a strategic direction in terms of the customer, and we’ve seen around 110 percent support and confidence in the business direction that we’re going. They want molecular modeling, they want cheminformatics and bioinformatics, and they want it integrated. And I think that is what we’ve achieved as a result of our acquisition strategy.
BioInform: Are there any gaps in the pipeline that you still need to fill?
Stapleton: If you think about Pharmacopeia as a parent company, it owns four software subsidiaries today: Oxford, Synopsis, MSI, and GCG. And by the second quarter of this year we’ll be launching all of those software components under one new name. So part of the challenge as a company is culturally changing four companies into one. That is a human resource issue because individuals work for a certain company for many years and then have that company embodied into the vision, motivation, desire, and so on, of another.
That’s the first challenge. The second challenge is technologically, we have to integrate these products ourselves to deliver a platform. That doesn’t require another acquisition, we just have to get on and do our jobs well.
The third component is when you have that platform and want to take it to market you will continue to deliver products, but you also provide much greater opportunity for customization. To be able to do that we need to be able to run a consultant business, which is a new business model for us. We’ve really been a software business for over a decade — we make software, we sell software. What the industry requires is not just that, but also the potential to have one-on-one consulting relationships. Part of what we’re setting up right now is a separate consulting unit to use our internal expertise and technology and work one-on-one with our customers.
I think we probably need to acquire other expertise in that new area. And I think there are other companies or potential strategic relationships out there that could help us grow into that. There have been a number of very large companies like IBM that have been on the consulting side as strategic partners and there are very small companies of 20-30 people who just do consulting that may be acquired and that would be a far more rapid way of getting critical mass in consulting.
BioInform: How do you see all this affecting your bioinformatics software business in particular?
Stapleton: I think in terms of bioinformatics there’s a pretty interesting angle. What motivates us is that the large pharmaceutical companies and large biotechs want a much greater degree of integration between bioinformatics and cheminformatics. So one particular challenge is that bridge between biology and chemistry. And there are many, many companies out there right now who are claiming to be erecting that bridge. There are many, many large pharmaceutical companies doing it internally in their own IT departments.
I think the position we’re in right now is somewhat unique because there are four critical aspects that need to be together internally. Most of our competitors today are still within one of those vertical spaces — they are a bioinformatics company or a cheminformatics company. The critical mass that’s been generated really from the biology is the functional genomics or protein modeling from MSI and sequence analysis and the Wisconsin package from GCG, meaning that a target identification platform is now viable from one company.
BioInform: How do you plan to deal with overlap between the existing product lines?
Stapleton: In bioinformatics there’s very little overlap because GCG really represents the bioinformatics piece that we bought and our life science modeling business really focuses on functional genomics and proteomics. That meets bioinformatics from the other end, if you like, so there’s no overlap in that part of the package.
In the world of cheminformatics there obviously is overlap between Synopsys and Oxford. For their main products — for Synopsys it’s Accord and for Oxford it’s RS3 - there is an integration period planned over the next year to 18 months. It could almost be represented as a value-added overlap because Synopsys and Oxford are very different — Synopsys is more of a desktop product and Oxford is an enterprise-wide system running on a server. So at the level of the architecture there’s very little overlap.
If you go back five years, MSI and Biosym merged in molecular modeling and there was complete overlap of all products. And that’s quite a painful process to go through for customers and employees. We’re not in that situation now because we’re bringing together four different companies with technologies that are in different parts of that R&D space.
BioInform: Which of the challenges that you mentioned before do you intend to focus on first?
Stapleton: The human resource challenge was met at the end of last year. We put an organization in place so people knew who they reported to. In terms of planning the new company name and the launch, that has all been done. There are further ramifications. We’ve got to bring together some of the individual research sites and we’ve rolled out plans to migrate, for example, the Oxford folks to Cambridge.
This year it’s all about science and technology — the products, the architecture. It’s a balance because what our customers want is continuing algorithmic and scientific development of products like the Wisconsin package. At the same time they want integration into one architecture.
BioInform: What’s your timeline then for introducing new products through the software unit?
Stapleton: We’ll continue to bring out new products all the time. It’s the nature of the beast in the industry. You can’t stop at any point. Through this year there will be new product releases in bioinformatics, cheminformatics, and molecular modeling. That’s balanced against our desire and the industry demand to put the same R&D dollars into internal integrating.So it’s a fine balance between new product development and the requirement to integrate.
So new products will be coming out, but at the same time we’ll be investing heavily in integrating the platform.