MAIN QUESTION
2.2 Introduction
The process of clinical trials has significantly developed over the years. Almost 20 years ago, a company called Medidata launched a software called Medidata Rave which was about to disrupt the whole market of clinical development solutions. This report aims to illustrate the journey of Medidata’s software over the years from many different perspectives. Firstly, the exceptional features of this 2.0 innovation will be illustrated and justified and with these in mind, the path of conquering the market will be enhanced. Additionally, the customer’s major needs will be evaluated through the ‘Job to be Done’ framework and through this, the new value that Medidata created will be named and justified. This creation of new value affected existent incumbent players in terms of their market share and company status causing different reactions. Therefore, competitor responses and the background of these responses will be examined. Lastly, Christensen’s model of disruptive innovation will be analysed and then applied to Medidata’s case study in order to elicit conclusions regarding the degree that Medidata confirmed Christensen’s predictions. Deviations from the model will be then highlightened and make the hotbed for further forecasts regarding innovations in future markets.
2.3 Description of Medidata’s main products
Medidata company was founded in 1999 having as a central idea the removal of paper from clinical trial process. Traditionally, pharmaceutical companies, universities and institutes used to hire stuff (for example doctors) in order to design the trial, to enroll patients, to manage and monitor trial progress and to accurately report the findings of the trial. Information was either being manually collected in paper or was gathered into poor quality software which was different for assembling for instance clinical information, financial data and operational data.
In 2001, Medidata introduced a product for Electronic Data Capture (EDC), which was a cloud-based software. This product was called Medidata Rave and gave the ability to capture and manage multitudes of data of this clinical study and compare them with data from other clinical studies in a single platform. Rave was meant to be Medidata’s flagship for offering the what is now called Software as a Service (SaaS). Medidata thoroughly developed its Rave suite the following years. These sustaining innovations added to Rave were about automating many of the most challenging data management workflows across randomization, supply, coding, and safety (Medidata, The Platform).
Furthermore, in 2013 Medidata added another suite in its platform named Medidata Edge. This was the result of Medidata acquairing Fast Track Systems inc. in 2007 which was a provider of clinical trial design software (Medidata, 2007). Medidata Edge was used for trial planning and management (Medidata, The Platform).
Until 2007, study design and EDC had been thought as separate segments but Medidata merged them together with Rave and Edge which formed the what is now called Medidata Clinical Cloud.
The most recent breakthrough innovation added to Medidata Clinical Cloud was Medidata Patient Cloud launched in 2013. This is a mobile solution that enrols patients and allows them to directly record their clinical trial data using their mobile phones into the Medidata Clinical Cloud. Specifically, wearable sensors or chest patches capture the activity of patients during their everyday life and replace the traditional activity tracker which is applied to patients by doctors in clinical trial sites. Furthermore, biosensors replace the classic validated by the patient questionnaire.
Until today, Medidata is constantly improving this innovative technology.
2.4 Analysing Medidata’s nature of innovation and successful progress
In Medidata’s 20-year history the dominant feature is Medidata Rave which was the cornerstone of Medidata Clinical Cloud. All solutions that Medidata offered were cost-effective and made it harsh for competitors to ‘skate where the puck will be’. Medidata Patient Cloud f.e. introduced a new value which suggests that the trial can be brought to the patient instead of recruiting the patient to the trial. However, this innovation is sustaining to Medidata Rave which replaced the paper from clinical trials and caused a collapse at clinical trial solutions industry. Therefore, this report will focus on Medidata Rave on the grounds that the other developments are rather breakthrough innovations.
2.4.1 Succesful Progress
Back in 1999, T. Sheriff , G. De Vries and E. Igekuchi who were a tech entrepreneur, a small-time fund manager and an urologist respectively, decided to start a business on creating a powerful but user-friendly EDC using small investments of T.Sheriff. This gestalt of different backgrounds led to the generation of Rave in 2001. Rave was the first cloud-based platform that did not require browser and allowed nurses and doctors to access and process data in one place. Until then, there were seperate and complicated EDC softwares for each different field of a clinical study.
The revenue of the company derived from subscriptions and from strategic alliances with CROs (Contract Research Organisations) who helped building contracts with new sponsors and renewing the already existent. Medidata followed the successful example of Amazon which at this time was selling books using the subscription-based cloud platform of creating value and tried to apply it in clinical trials. By this way, the revenue stream was steadier than selling individual products and the profits may were lower in a short-term basis but in long-term basis and after capturing many contracts with pharmas, were much greater.
Furthermore, employees could set up clinical researches by themselves without getting help from Medidata. It is worth to mention that Medidata until now trains the employees to use the software only once. This fact made the product more intuitive and friendly to users.
By this way, in 2005 Medidata had a 16,712 million dollars revenue (Medidata, Annual Report 2009) and by then Medidata was the second biggest player in the market of EDC after Phase Forward which by then had a revenue of 87,081 million dollars (Phase Forward, Snnual Report 2009).
In 2007, Medidata began a partnership with Fast Track Systems upgrading Rave in order to additionally provide clinical study design. This was a unique feature that no other competitor EDC program included. It gave the ability to both identify possible contradictions and failures to protocols and statistics that sponsors used to develop and also to select the most appropriate EDC information for the process of the study. Once again Medidata achieved to aggregate in one platform two different sectors and reduce cost, time and burden of the study. Moreover, Medidata’s innovation was rather complex on the ground that it is based on repeated linkages between different fields in order to better serve the client.
Between 2005-2008 sales tripled to 106 million. However, in 2009 Ikeguchi one of the 3 founders and chief medical officer of the company decided to resign. This is an example of how a company could face improbable events and in particular the non-loyalty of a very important stakeholder. The same years net profits plunged from 18,272 million in 2008 to 5,182 in 2009. This may have been the result of company’s decision to go public the same year because IPO (Initial Public Offering) raises a big capital. Nonetheless, Medidata’s choice was wise because the company seized the advantages of the IPO and grew further. Stock arised 527% on an annualised basis and net income 23%. (Figure 2.2, Figure 2.1). Medidata gave a good example of a profitable collaboration of a private company with public sector.
In 2010, Phase Forward which until the last years was Medidata’s closest competitor could not rival anymore and therefore was bought by Oracle. This purchase gave Medidata a much bigger than before market contestant because Oracle was the most complete, open, and integrated business software and hardware systems company (Oracle,2010).
In 2013, Medidata introduced Medidata Patient Cloud which modified the hole model of clinical trials. Until then, innovation managers were trying to develop the already existent model of site-centered clinical trials. Medidata reversed the way of thought and made clinical trials patient-centered and in addition to this, reduced cost and time and incremented effectiveness. As seen in Figure2.1 Medidata’s revenue had a sharper increase from 2013 until 2017.
In 2016, a big Chinese CRO named R&G Pharma Studies Co Ltd adopted Medidata Clinical Cloud and made Medidata’s product the only clinical trial cloud used from pharmaceutical companies to APeJ (Asia-Pacific except Japan). From 2006, Medidata Rave was the only EDC software able to manage Chinese characters but until then it was used by west companies to perform clinical trials in Asia. In this case, Medidata’s strategic acquaintances not only facilitated west sponsors to expand in China, but they also put big Chinese pharmas in Clinical Cloud game. It is obvious that Medidata’s significant success is partly the result of its ability to form cluster networks through its partnerships.
Nevertheless, Medidata faced another big crisis. The company accused Veeva Systems and some employees who worked in Medidata in the past of revealing Medidata’s private information and commerce secrets. Medidata faced unexpected intellectual property problems which shows that even in the pick of prosperity of a well-organised company, risk management issues are always probable to happen. The case is pending.
Nowadays, Medidata is the platform of choice for 18 of the top 25 global pharmaceutical companies (Medidata,2018) considerably satisfying the Pareto Principle which suggests that few own the most.
Figure 2.1: Medidata’s total revenue and net profits 2
(Graph based on Medidata’s annual reports from 2007 to 2017.)
Figure 2.2: Medidata’s stock return from 2009 IPO to 2014
(Interactive data, Factset Research Systems)
2.4.2 Innovation
Medidata Rave has elements from a 2.0 innovation.
Emerging technology trends (Ahmad,2018): Firstly, Medidata Rave is a cloud-based software. This means that all procedures are automated and not supervised by a wise expert. There is a pool of existing information where the user can derive all the tools and data needed to improve his trial.
Business/ revenue model innovation (Ahmad,2018): Medidata Rave has a different method of generating value. It doesn’t make profit by directly selling the software. The software is subscription-based and sponsors are found through relationships with CROs (contract research organizations) and other channel partners. This is much more appealing to sponsors which feel free to use Medidata’s vast variety of products throughout their studies.
Co-operation: There are many to many suppliers, competitors and users working collaboratively (Ahmad, 2018). Firstly, patient’s information is collected to the database and is immediately compared to a huge amount of data from clinical researches worldwide which may be funded either by the same or by a competitive sponsor. Secondly, patients are enrolled from all over the world by using Medidata Rave which defines the right patient groups according to the needs of the study.
Co-creation: there is a trend of user‘s capability and desire to create mutual value(Ahmad, 2018) The sponsors create their own clinical trial model based on their needs by taking useful guidance from the platform.
Non-linear process (Ahmad 2018): Lastly, the process is not linear. As discussed above there is interoperability between Medidata’s lines of production, sponsors, competitors and users.
The merits for the sponsors are that non-core procedures that increase the burden of the study are being excluded. A study sponsored by Medidata showed that clinical data gathered from 25 percent of the procedures administered to patients may be unnecessary and, in the aggregate, is responsible for $3-5 billion in overall clinical trial costs annually (Business Wire, 2012). Furthermore, time is significantly reduced whereas the quality and quantity of information is increased.
2.5 Medidata Rave measures through the ‘job to be done’ point of view
CORE JOB: Help sponsors get approvals for new drugs and therapies
CONTEXT: Pharmaceutical and biotechnology companies, government institutions and research organisations who want to perform a clinical trial
FUNCTIONALITY
(UTILITY) PERSONAL
(EMOTIONAL) SOCIAL
(EMOTIONAL)
Reduce total cost of clinical trial development
Increase market share Improve the status quo of the company
Reduce time of clinical trials Increase revenue Being top of company rankings
Reduce excessive burden from non-core procedures Enjoy the pleasure of being a company which uses cutting-edge technology
Provide to doctors and nurses easy access to all sorts of information of this and of other clinical trials
MULTI SENSORY/EMOTIONAL
PARTICIPATION/SOCIAL INTERACTION
Make it convenient for patients to recruit in a clinical trial Use friendly designed software to access seamlessly data of interest
Compete with other companies that perform clinical researches
Make it more intuitive for users (doctors and nurses) Experience loads of information in one platform Benefit from data from other clinical studies too
Increase the objectivity and randomization of the results (better data quality)
CULTURAL/ETHICAL Handle a wide variety of patient groups
Peer-to-peer cooperation between stakeholders of the clinical study
Protect personal data of patients FANTASY/NOVELTY
—
ACCESSIBILITY (OF CURRENT SOLUTION) PERSONAL RISK SOCIAL RISK
COST PERSONAL INVESTMENT
SOCIAL INVESTMENT
Subscription-based software depending on the services Time invested for employees to learn how to manage the new type of data source
Time and burden to cancel contracts or change from previous CRO partners
Time to convince FDA for reliability of questionable new methods or combination of methods used —
CONVENIENCE PERSONAL HARM SOCIAL HARM
Included one training course to users
Accessibility in a digital pool with all the information gathered and classified Inflexibility of employees to handle new software.
Difficulties in the approval process of new drugs —
Table 2.1: Medidata Patient Cloud ‘job to be done’
VALUE CREATED:
Considering the ‘job to be done’ benchmarks, the value that is being created is the forward:
A Software as a Service that allows pharma companies, biotechnology companies, government institutions and research organisations to reduce cost and time and improve the efficiency of clinical trials by offering a cloud platform which integrates information for all stages of a clinical study and has user-friendly, collaborative and global interactive features.
2.6 Mindset and responses of incumbent players
Market of eClinical solutions is highly competitive as more and more pharma companies desire to adopt them. Oracle and Medidata are two main leaders accounting for a 25% of market’s return as it can be noticed in Figure 2.3 whereas, a number of smaller vendors compete for the rest. Therefore, this report will enhance both Oracle’s and the smaller vendors attitude to the arrival of Medidata’s growth.
To begin with, smaller merchants who had a monopoly before Medidata, started to change their behaviour already from the arrival of eClinical solutions. Their past approach was to develop home-brew systems of CTMS (Clinical Trial Management System). However, when Medidata and Rave were introduced to the market they felt the threat that developed EDC would replace their core job which was to monitor clinical studies and to receive their income out of that. Consequently, in order to survive, they embraced two strategies. The first one was to use third-party established eClinical solutions given the example of ArisGlobal which partnered with Medidata. By this way, small vendors survived because they were in the safe lap of big players. The second strategy that especially big CROs adopted, was to continue to endorse their home made CTMS. Parexel is an example of company that kept its business model immutable and kept investing in technology separation (although it has a choice of EDC platform when it is asked by a sponsor). This is a romantic and realistic business model of a 35 year old CRO that knew it could not compete Medidata’s innovative technology and did not want to be third party provider like ArisGlobal did, so it kept improving what it already knew. In every case, smaller vendors have not yen been able to compete Medidata Rave because they did not have neither the innovative technology nor the connections to expand.
Secondly there is the Oracle case which is market’s biggest player right now. Oracle is a 41 year old company that is very well established and provides high quality software. Thus, this company decided to enter the market of clinical trials in 2010 (9 years after Medidata Rave). Oracle then purchased Phase Forward for 685 million dollars. Phase Forward was the leader in EDC in 2007 but by 2010 it had started to stumble from Medidata’s cloud appearance. Oracle upgraded Phase Forward’s products and introduced Oracle Health Sciences InForm which was a similar to Rave product. In fact, InForm EDC had more successful submissions to the FDA than any other EDC system – including Medidata Rave (Eclipsesol, InForm data sheet). However, Medidata continued to gain market share because of smart side moves. Medidata with no new technology to compete, was based to its wide network of strategic positioned partners (f.e. the Chinese CRO mentioned before), to its strong name recognition because it was the one that introduced the flagship product in the market and to long-year engagement contracts that signed with sponsors. In 2013, Medidata made its technology come-back and introduced the Patient Cloud absorbing many Oracle customers. Medidata was once again the driver of the market and reversed market’s perspective by bringing the clinical trial to the patient instead of the opposite. From 2013 and on Medidata began to aim and to convert Oracle’s customers including huge Pharma Companies such as Boehringer Ingelheim and Bristol-Myers Squibb. The answer from Oracle came after 5 years in April of 2018 when it launched Oracle Health Sciences mHealth connector cloud service which is connected to a patient application named Apple Research Kit. This product is similar to Medidata Patient Cloud and once again it is obvious that Oracle got inspired by Medidata’s innovation. Although there are only 6 months from the launch of Oracle’s new product and this report could not judge its impact in the market, it can be easily observed a repetition in history. Oracle will probably continue losing market share if it does not introduce a new technology followed by a sustainable business model as Medidata does. Big Pharmas reluctancy to adopt new technologies is the major factor that slows up Medidata from converting all Oracle’s customers (f.e. Pfizer refused to change from Oracle) but yet Medidata incrementally establishes its place as the market leader. Currently, Medidata’s sponsors are 18 of the 25 biggest Pharma companies and unless there is a disruptive response from Oracle, this number will continue to grow.
Figure 2.3: Market share of eClinical Trial solutions
(First Analysis security corporations, 2018)
2.7 Medidata SaaS agreements and disagreements with Christensen’s model of disruptive innovation
2.7.1 Christensen’s disruptive innovation principles
Clay Christensen in his book Innovator’s dilemma in 1997 firstly described the tenets of disruptive innovation. Disruption is a process where a negligible business achieves to challenge incumbent bigger businesses by changing the business model of the market. Particularly, big players often tend to continuously improve their products and services to satisfy customers with high demands who are usually more profitable (high-end of the market). Therefore, they usually overserve this segment while they overlook customers with low demands (low-end market) or non-customers (new market). Christensen suggests that this is the perfect chance for market aspirants to try to cover the needs of these segments by offering easier to use, low-margin, inferior quality products or services to these neglected fields. Big players tend not to respond robustly because firstly, their revenue is based on the profitable high-end of the market and secondly, a proper response would mean a whole change in their current successful business model. Therefore, entrants are free to develop their products through incremental improvements and thus, climb all the way up the market and convert high-end customers while they keep preserving their first features that made them attract low-end and new-markets. The disruption has finally occurred when incumbent players start to embrace these new services and business models.
2.7.2 Compliance of Medidata SaaS with Christensen’s theory of disruption
Change in the current business model: In order to define to what degree Medidata Saas agrees with Christensen’s model, this report has to first enhance the market before the arrival of Medidata. Nearly 20 years ago, industry was using spreadsheets and diaries to collect data and organise information. There was no use of the Internet in order to deliver data and provide rapid feedback. Medidata attempted to change this process by introducing a cloud for EDC called Rave. Today, Medidata powers eClinical solutions for 13 of the top 15 selling global drugs in 2017, 18 of the top 25 global pharma and 18 of the top 25 global device companies, with over 1,000 customers and 100,000 certified users globally (Medidata, Annual Report 2017). Therefore, Medidata definitely achieved to change the business model of the whole clinical solutions management field. This is one of the first Christensen’s criteria of disruptive innovation.
More suitable functionality in a lower price: Medidata’s core value focused at first on the user experience, making data management through Rave simple and effective for doctors and nurses who were using the software. The charge was subscription based and specifically, the customer payed a typical fee on an annual basis. Consequently, customers favored from reduced usage costs and easy access while Medidata received more constant income stream. Secondly, Medidata SaaS had the ability to define core from non-core procedures. The estimated total cost to the pharmaceutical industry each year to perform procedures supporting “Non-Core” objectives and endpoints for all FDA-regulated phase II and III protocols is an estimated $4–$6 billion USD (Kenneth Getz, Improving Protocol Design Feasibility to Drive Drug Development Economics and Performance; 2014 May).
Democratization of technology and upmarket march from low-end to high-end: Medidata’s first clients were some small biotech companies which could not afford the huge investments that a clinical trial required but thus, had interesting ideas and wanted to examine them further. Smaller pharma companies have to use approximately 50% of their revenue in research and development whereas big Pharmas used 15-20%. Medidata Rave offered them a user-friendly, customer-centric approach in a much lower cost. At the same time, a feature of big pharmas is that they have a conservative approach and are reluctant in adopting new technologies despite its possible merits because their current business model is succesful and they despise risks of unknown fields. ‘When you’re dragging a conservative industry into the modern age, you will meet with fierce resistance. Pharma is no different.’ (Stephenson, NatureReviews 2017). The first partnership of Medidata with a big pharma company came no earlier than 2005 when Bayer standardized its technology in capturing information using Rave. Consequently, an apparent trend is that Medidata firstly approached segments of the market that were underserved and not so profitable for CROs who were back then managing clinical trials. As years went by, Rave received many implementations including patient engagement issues, randomization&supply, holistic imaging of data and safety (pharmacovigilance capture) and thus, moved upmarket and converted big incumbent Pharma companies. The global customer base includes 18 of the world's top 25 global pharmaceutical companies and 18 of the top 25 medical device companies (Medidata, 2018).
Inability of market incumbents to catch up the new disruptive products: CROs used to monitor clinical trials with a completely different approach. They were designing custom-made clinical solutions which required little or no-use of the Internet. As a result they had neither the technology nor the business model to compete with Medidata. The actual response came later from software companies such as Phase Forward (Oracle after a while), Parexel and BioInformatics which all introduced similar to Rave products. The fact that other players started to launch related softwares meant that the disruption had took place.