Good afternoon, ladies and gentlemen, and thank you for standing by, and welcome to today's acquisition of Medidata by the Dassault System Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session at which time. If you wish to ask a question, you will need to press I must advise you that this conference is being recorded today, Wednesday, 12th June, 2019, now like to hand the conference over to your speaker today, Mr. Francois Bernardo.
Please go ahead, sir.
Thank you very much, Fran. Thank you for participating in this conference call. Earlier this morning, we announced the signing of a definitive merger agreement. For Dassault System to acquire Medidata Solutions Inc. On today's call are Bernard Shales, our Vice Chairman and CEO Pascardalos, our EVP, CFO and Corporate Strategy Officer.
Joining us from Medidata, our Tarek Sheriff, Co Founder, Chairman and CEO and Glenn Luiz, Co Founder, President and Director. Before we begin, let me remind you some of the comments we'll make on this call will contain forward looking statements, which could differ materially from actual results. Forward looking statements by their nature, address matters that are different degrees uncertain, such as statements about the confirmation of the proposed merger, and the anticipated benefits thereof. These and other forward looking statements are not guarantees of future results and are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward looking statements in the day. This material does not constitute a solicitation of proxy, an offer to purchase or a solicitation of an offer to sell shares of Medidata's common stock.
In connection with the proposed merger, Medidata will file a proxy statement with the United States Securities And Exchange Commission, the SEC, mainly that our stockholders are strongly advised to read these documents and any other documents that Medidata will fill with the SEC because they will contain important information that Medidata stockholders should consider before voting on the merger. Please refer to the additional information and where to find its section of the press release announcing the signing the definitive merger agreement for Dassault System to acquire Medidata Solutions, Inc. I would like now to turn the call over to Rafael
Thank you, and welcome to this exceptional conference call. I would like to give a special welcome to Taric and Glenn. From Medidata who are here with us. Thank you for taking the overnight flight from New York for this, this special call. For many reason, our announcements should come at as no surprise.
As it is in perfect alignment with our purpose. As the Life Science Industry shifts, it's focused to personalized medicine on passioncentric experiences, we believe scientific innovation on industrial performance call for a unified new approach. And this is exactly what we have been working towards with our investments in Life Science over the last years. The acquisition of Medidata which its with its clinical and commercial solutions reinforces our position as a science based company by providing the life science industry with an integrated business experience platform for an end to end approach to research on discovery, development, clinical testing, manufacturing and commercialization of new therapies on health technologies. Importantly, Medidata's leadership in clinical trials complements our life science on the 3DEXPERIENCE collaborative platform.
Further, with its recent expansion, into real world evidence analytics, coupled with the power of modeling and simulation, we will be able to demonstrate together how the virtual world will analyze the next generation of passion inclusive therapeutics. We are now well positioned to be the enabler of the life science industry transformation, elevating our company's purpose of harmonizing product, nature, and life. A product in New York, Medidata will become a new Dassault System brand and continue to be led by its co founders on executive team. Since 2010, we have taken several major steps expanding our capabilities and footprint in life science from our historical strengths on market leadership in medical device, molding and simulation. We initiated multiple research program programs in life science, including our bio intelligence work focused on collaborative discovery and preclinical modeling and simulation on oncology, with leading pharmaceutical companies and research institutes around the world.
In 2014, we created our bio it is on the acquisition of acillaries, leading provider of software solutions for, chemical materials and bioscience research for the pharmaceutical and biotechnology, consumer packaged goods, aerospace, energy and chemical industries. During that same year, we also signed a 5 year collaborative research agreement with the U S FDA targeting the development of our testing paradigms for the insertion placement and performance of pacemakers pacemaker leads, on other cardiovascular devices used to treat heart disease in connection with our living heart project. In 2018, we acquired cosmologic, bringing freed face computational chemistry software capabilities. As a result, we collaborate with the world's top 20 biopharma companies, 100 of biotechnology companies, medical device, manufacturer, research Institute governmental regulators agencies to develop and bring to market innovative health products and technologies using the power of virtual universe to transform the passion experience. Combining with many data is the next natural step.
As we will discuss on this call The company has a leading position in the clinical market and has introduced significant capabilities to address the commercial market. In term, Medidata has produced a strong track record of client, revenue on earning earnings growth since its initial public offering. Media Data fits perfectly in our industry solution experiences, offer the full offer on categories of industry solutions. They are highly complementary both to the solutions themselves as well as the Biovia brand. In its customer base is also highly complementary to Dassault System on a combined basis, looking across pharmaceutical, biopharma, contract research organization as well as medical device companies.
We also see a significant opportunity with, the strengthens we can the strengths we can bring to Medidata over the midterm on a geographic basis with a strong presence in Europe and Asia to extend its global reach. Following completion of this acquisition, life sciences will become our 2nd largest industry after transportation and mobility. Finally, as we discussed on our first quarter earnings calls in April, as drugs on their of the pharmaceutical R&D pipeline currently. The industry is moving to a world of personalized health. Under reshaping of the passion experience is also so key for the quality of the service.
As we think about the life science services, the life science industry on the broader ecosystem around health care, the opportunity for our company over the coming decades is significant. I look forward to welcoming soon, I hope, maybe that on all its workforce with incredible talents at Dassault System. We have been following closely its progress for a number of years on initiated discussion last year to develop a more formal relationship As we discussed, our potential partnership is the discussion led both companies to this morning announcement. With that, let me now turn the call to Tarek, Tarek Cherif, Mideet, as I Co Founder of Chairman and CEO, Tarek, you on the floor.
Thank you, Bernard. I want to start by saying how thrilled I am about what is ahead for Medidata and our 2 companies. Together, I believe we will deliver tremendous value for our stakeholders and unlock opportunities for our customers and strategic rationale of this transaction to the investment community. For those of you who do not know us, Medidata is a global life sciences technology provider dedicated to improving the way Our cloud based platform of solutions, data analytics, and AI enables efficiency and improves quality throughout the clinical development programs by accelerating processes, enhancing decision making, minimizing operational risk, reducing costs and transforming trial strategies. Medidata was founded nearly 20 years ago to the day by myself and our President, Glenn DeVries.
We IPO ed on the Nasdaq Stock Exchange 10 years ago this month. Over the course of these 2 decades, a lot has changed as evidenced by revenue growth of nearly 5 times as a public company, but one critical aspect has not changed. Our DNA We are a mission driven company and everything we do ultimately powers smarter treatments and healthier people. This point aligns well with Dassault Systems. Both of our companies clearly value the importance of a purpose to center a company and give customers a clear sense of motivation.
Today our unified platform pioneering analytics and clinical technology expertise power the development and commercialization of new therapies. The Medidata cloud is a connective tissue between patients physicians, regulators, payers, and life sciences companies themselves. Companies on our Medidata platform are individually collaboratively reinventing the way research is done 13 of the top 15 drugs sold in 2018 were powered by our technology. At the time of our IPO, we had about 150 customers Over the past decade, we have grown that number eightfold. Today, we work with many of the world's largest pharmaceutical companies biotech and medical device firms, academic medical centers and CROs.
This has translated into strong top line growth of 18% on average, and healthy profits with a non GAAP operating income CAGR of 22% through our last fiscal year. We are pure SaaS and our revenues comprise about 85% subscription, 15% professional services. I think this progress is attributable to both our technology and our deep domain expertise which reinforce strong customer relationships Thanks to this trust we've built with our customers, we have consistently expanded customer relationships helping to drive our good growth. We have 1300 customers on our platform spending multi study enterprise agreements and single study contracts, We have run more than 17,000 trials on our platform, reflective of the fact that we are the market leader in electronic data capture. Those 17,000 trials represent 4,900,000 patients, 600,000 site sponsor relationships, and billions of data points.
Making us a strong partner with our We're headquartered in New York City and we have 16 offices around the globe spanning 7 countries, including the UK, Japan, Korea, China, Singapore, and Germany with a workforce of about 2800 people. In summary, I'm looking forward to this next evolution of Medidata as a part of Dassault System. This is a great move and will continue to create shareholder value along the way. And with that, I want to turn it over to Medidata's Co Founder and President, Glenn DeVries, To walk you through our product offerings in more detail, go ahead Glenn.
Thanks, Tarik. First, I want to echo what Tarik said about the alignment of our two companies. I could not be more excited about what this transaction is going to do for our clients, broadly for life and for those patients that we ultimately serve. Medidata is focused on 2 areas of the lifecycle of a therapy, the clinical and the commercial. And To set the stage for the challenges that we help life sciences companies address, let me just give you some statistics about the odds of developing a drug and they're really stacked against a sponsor.
The industry average success rate to get a new drug for Phase 1, the first clinical trial to regulatory approval is below 10%. The average timeline from discovering a new drug to getting its regulatory approval is 10 years. As a result, the average costs to develop a new drug are estimated at $2,500,000,000. And of course, the cost of not being able to help patients is not even something we can measure. Finally, affecting life sciences companies, patients and society in the long run is the fact that even after all of that, 50% of drug launches underperform expectations and that places an even larger burden on the few drugs that do succeed.
Nevertheless there is incredible therapeutic innovation in the laboratories and the development pipelines of the life science industry and investments in these new therapies are growing at a rapid clip. So now let me explain with you to you what we do in the Medidata platform from a clinical trial planning and management perspective to commercial and real world analytics well as a new family of products we have centered around artificial intelligence. So first for clinical, we have the RAVE family It unifies all the capabilities our customers and our partners simply put enter data once and our platform masters it and populates it throughout the entire suite of RAVAP locations. By far, the most comprehensive suite in the market, it spans across data capture, clinical data management, clinical operations, financial management, everything you need to optimize for commercial and real world data analytics with products that are specifically for the pharmaceutical biotech and medical device industry. The SHIP platform is the most efficient and scalable way to transform massive amounts of complex health care data into on demand clinical and commercial insights.
And fueled by 1 of the largest regulatory grade clinical data repositories, In the entire world that's coming from the RAVE platform, we launched Acorn AI at the beginning of this year. Acorn AI builds on the foundation of innovation and data science that we've been information and life sciences in the age of precision medicine. It is designed to provide actionable insight to the front lines of decision making with data that is liquid beyond borders in an organization and goes beyond just integrated workflows to a truly intelligent platform for the entire lifecycle of a therapy through R&D And commercialization. We're really well positioned to grow in the near term, both on the clinical and commercial side and in the long term, the combination of our current electronic data capture market as well as with the broad clinical, commercial and data platform. Again, on a personal note, I'm just thrilled to be here looking forward to what our teams are going to accomplish together and the value that we are going to deliver to all of our stakeholders.
And with that, I will turn the call over to Pascal.
Thank you, Glenn. Let's me begin by sharing with you how we are creating the first hand to hand scientific and business platform the life science industry. We begin in research and discovery, where we have our design to cure industry solutions, focused on speeding time to innovation with a higher quality novel therapeutics. For preclinical development, we have our 1 lab industry solution experience Medidata, TENS brings its significant capability in clinical testing, the largest area of investment for life sciences company, presenting a significant opportunity for innovations, combining both BD Data's real world capabilities with our virtual world modeling and simulations abilities. In manufacturing, we have 2 industry solution experiences to assist Life Sciences Companies.
And then in commercializations, maybe that brings critical assets. Our total addressable software market today is approximately $33,000,000,000. When you look by our 3 spheres, products, nature and life, Approximately $25,000,000,000 is in our after yet term in the product's feed. About $4,000,000,000 in nature and about $4,000,000,000 in life science. The acquisition of Medidata would represent an important expansion of our addressable software market, adding an estimated $7,000,000,000 to about $40,000,000,000 in total.
Turning to the transactions. We have signed a definitive agreement to acquire 100% of media data in all cash transactions in the amount of $5,800,000,000. The transaction was approved by both boards of directors. The transaction is subject to receipt regulatory approvals, the approvals of Medidata Solutions shareholders and the certain other customary closing conditions. The transaction is expected to be completed during the fourth quarter, and we are, of course, well positioned to close sooner if this estimated timeline short term.
In parallel with the signing of the definitive merger agreement, we have in place, sorry, a billion committed financing facility from a group of banks to fund the acquisition in addition to using approximately billion of our cash. This financing facility of 4,000,000,000 equivalent debt package with an expected strong investment grade rating is comprised of term loans in an amount of 1,000,000,000 and a 3,000,000,000 bridge to bond facility that we expect to refinance in the next few months is with leathers bond branches. Our objectives is to deleverage fairly and rapidly and to maintain our net debt to EBITDA ratio of around one times across the investment cycle. We estimate a net financial cost to fund this acquisition in an amount of EUR 18,000,000 for 1 quarter of year 2019. 1,000,000 for 2020 and decently progressively from there.
This figure to take into account the use of cash of course, and estimated interest expenses as well as all the financing costs. As Medidata is a public company, it reports and finding present detailed information, but let me share a few figures here. For its fiscal year ended December 31, 2018, Milidata's revenue totaled 600 $36,000,000, with $536,000,000 of SaaS subscription software revenue and a services revenue of $100,000,000. Approximately 76% of its sales were in Americas, 14% in Europe, and 10% in Asia. Medidata's non GAAP operating margin was 23.4 percent, and its non GAAP net income was about $104,000,000.
We will wait to give our specific guidance for Medidata's contribution to our year 2019 financial results at the time of our 3rd quarter earnings. For now, let me point out that we are likely to take into account natural post closing onboarding events that may have a temporary productivity impact. In addition, our guidance will take into account an estimate for the U. S. Dollar to euro exchange rate.
Then once consolidated, We may decide to expense certain Medidata R and D amounts that are currently capitalized so the non GAAP equivalent operating margin will be closer to about 16% in that case. Looking to our long term base upon our analysis. Medidata is likely to represent a large portion of the $0.80 contributions we assume from the acquisitions and the marketplace activities. As part of our year 2023 EPS goal for per shares. Let me now turn the call back to Bernard.
Thank you very much, direct, Glenn, and Pascal. Before opening to questions, I would like to share some final important points. Not just on today's announcement, but also on our global priorities as a company towards the 3's customers we serve. Our first priority continues building on our momentum with the 3DEXPERIENCE platform. As a key enabler for industry renaissance in the industries we address.
Our objective as we have shared with you since our 2018 Capital Markets Day is to make 3 d experience the large majority of our software business over the next 4 years. 2nd, we have invested heavily, many billions of euros support our core industries on our leadership in transportation and mobility, aerospace, on defense, on industrial equipments to name a few. We will continue to advance our innovation on behalf of these clients, our investment in biology, chemistry, material science, clearly demonstrate the cross industry benefits of our investments and expansion of our reach. Sir, we believe through the experience platform can be a critical enabler for innovation on transformation across all major industries where the drive to provide new types of customer experiences in this case, passion experiences on new business models is emerging and accelerating. We see these possibilities across the 3 spheres addressed by our purpose.
Product, nature, and life. 4th, our investment in Medidata complements very well our brands, notably by OEM. Altogether, we follow our brands. We now have an end to end set of industry solution experiences for the life science industry. To conclude, we believe the combination of scientific modeling, simulation on the gigantic patirony of worldwide clinker trials knowledge on know how that media data has been able to build over the years with its top ex top expertise are profound catalysts to accelerate developments in personalized health, passion centric experiences on the next standard of medical practices.
We share values, as Tarek said, and also the vision. So, we are now happy to take your questions on waiting for the day to do the final closing. Do we have questions?
Our first question comes from the line of Jay Vleeschhouwer. Please ask your question.
Thank you, Bernard and Medidata and Pascal. Question for you, Bernard, over the last 20 or more years when you've done an important acquisition, the essence of the IP that you were acquiring was readily identifiable, for today's purposes when you bought Excel risk 5 years ago, was readily apparent, what the IP was. And so with respect to metadata, and I apologize if this is a too simplistic question, is it technology per se that is motivating you here, or is it, process and domain expertise? And then additionally, you mentioned that it's complimentary, but in what way, if any, might this acquisition be orthogonal. That is to say it takes you in some new directions over and above it's being complimentary.
I will give some QJ.
I will give a shot on that, but I
will let Glenn Tarik commented So I'm sure we together will have a complete answer. But in short, you know what? Today, when we do modeling simulation for an airplane, we know this flight is going to go from A to B. On recertify. In Life Science, it's not the case.
As a matter of fact, in Life Science,
the clinical trial
are so critical because the outcome of the clinical trial from my understanding is not only the approval to go to market. Is the extreme at the highest level possible characterization of which passion could benefit under which condition with which therapeutics. So Data science has to be correlated to modeling and simulation. It will take years before we get the perfect model But what for me is unique in metadata is first, the talents the incredible face and passion of the team to have an impact. To have an impact for the sector.
And the knowledge and know how, which is the precious IP capitalized over the years, to make this possible one day. That's my motivation from this side, but Tarek and Glenn, you please step in.
I think that was, very well said. If you look at the the innovations that we were talking about that are going to be coming to patients. They are getting more precise. And that brings new challenges to the life sciences industry. You're developing that right therapy for the right patient at the right time.
And inherently, if your life sciences company means that your market for that therapy is actually shrinking. That has implications for the complexity of finding a patient, treating them, measuring the effect of that treatment and whether it's in the commercial phase of the life cycle of your therapeutic or incredibly importantly. And I think outside way during the development of that, it means that you have to get more evidence out of every time you connect with a patient, every time they encounter their doctor, every time a sensor measures something about them, need to take that data and get more gearing out of it. And that is why in the clinical trial and commercial parts of our business, we really feel like it's a combination fairly unique one. We think we have, at Medidata.
And frankly, even more unique with the combination of what we have at Desosystem is the ability to look at go with this next generation of clinical development and personalized medical therapeutic delivery and the data platform on which all of that needs be managed. So I hope that makes it clear that at least from from I think the perspectives of all of us in the room, this is really about technology and process and a day ecosystem.
Just a quick follow-up. The data provided by Dassault this morning suggests that you have about one tenth of the TAM And could you talk about how your market share has evolved over the last number of years? And the competition comprising the other 90% and what do you have to do now with BS to meaningfully grow beyond that 110th share?
Sure. It's Tarshari. I'm happy to do that. So we when we began Medidata, we focused on one very specific area, which was electronic data capture. And over the 20 year history of the business, we have I think done a very good job of taking market share.
And today, we run probably more than half of all electronic trials that are on globally. However, as Glenn was pointing out earlier, The process of running clinical trials is very complex. There is a lot of process around it. There are a lot of steps involved And over time, we evolved our platform to encompass a number of solutions that bring efficiencies to the vast majority of those process steps. In terms of the market share there, it's typically dealt with by either siloed systems or very sort of manual processes.
So still using spreadsheets, still transferring files manually. And what we bring in our platform is an integrated approach. So in terms of the market share, while EDC, we have a very strong market position in terms of the opportunity for the broader platform for the various solutions, there's an enormous opportunity. There's a lot of white space and we feel like we have we're in a very strategic position to capture that. So I think we feel very strongly that we're just at the beginning of capturing that TAM.
And with our existing product and now also in concert with Dassault System will be unearthing even more opportunities. And I suspect that TAM will continue to expand.
Thank you,
Hi, thanks very much for taking the question and congratulations to everyone on the transaction. Maybe first of all, specifically meditation and the growth in competitive landscape. Could you maybe just help us a little bit, on the organic growth that you've seen over the last few years? Is that sort of mid high teens growth rate fairly representative of the organic growth adjusting for M And A and also any lengthening of subscription contracts that you've seen. And could you talk a little bit about, I think, Veeva's moved more into your market?
How you see the competitive landscape? And whether you see any of the other maybe larger companies, the Microsofts and so on looking at the space? And then secondly, when we think about the integration of the products and the platforms, would it prefer to say that your aim is to bring metadata onto the 3DEXPERIENCE platform? Or will they be kept more separate than that? And how long do you think it will take to be able to bring this integrated platform, to market to the customers?
Thank you.
I'm sure, Derek, you want to address that question.
I will certainly take the first half, and I suspect Glenn may want to may want to join in for the second half, but In terms of our growth, we've shown very consistent growth over a long period of time. And yes, you're correct. It is, in the mid to high teens And we feel very confident that our business given the opportunities that we see out there and the customer relationships that we have as well as some of the new areas that we've entered into, we see that growth continuing. And as I said, it's been probably, since we've been a public company, we've shown very consistent growth So given the market dynamics and our ability to execute, I feel very good about that. In terms of the competitive landscape, it is interesting.
It certainly keeps evolving. One of the things that we like to say is that if you don't have competition probably not a market worth being in. But I also would say that if you look at the offering that we have the sort of the breadth of the platform that we have as well as the kind of customer relationships we've built over several decades. Our customer retention rates are have been consistently above 99% over the past, since we've been a public company, basically. I think while we take competition seriously wherever it comes from, I think we're unmatched in the industry in terms of capability, domain expertise and the data assets that are special to Medidata given the relationships that we have with our customers and are us being a strategic infrastructure provider to them in clinical trials puts us in a position to provide value to customers in a way that that's I think, that's very unique for Medidata.
And we are in this room having just signed a definitive purchase agreement. So I'm not prepared to tell you timelines for getting onto the 3D experience platform, but what I can tell you is the philosophy behind the 3D experience form and the way we've built the Medidata platform to date is incredibly well matched. If you think of the problem that we're trying to solve, in two dimensions. You go down from the DNA of an individual patient all the way through their physiology and behavior and environment they live in and they imagine that's the Y axis. And on the X axis, you have not just that patient, but all of the stake who are necessary to generate that evidence that I was talking about to connect the right patient with the right therapy at the right time as Bernard was talking about.
And so the I'm sure to many of the people on the call who are, familiar with Dassault System, but I don't need to describe that the Compass related to the 3 d experience and all the philosophies that are embedded in it. That is how we think about the Medidata platform. So yes, the answer is Medidata's will be integrated into 3 d experience platform. And not only will that be great for our clients in the existing things that they're using, That is how we will bring the research expertise, the industrialization capabilities that are on the broader Desso system platform into both the clinical and commercial areas that we work in as well as to broader parts about the future of medicine and life sciences.
Absolutely. And just to add one thing, I wouldn't be surprised if, a Salesforce based platform can fix the kind of research development production on Test. It has never happened in other industries. I don't think it will happen in this one. But you know, at the beginning of digitalization of every industry, every industry have started to manage documents.
But at some point in time, the documents disappear on the experience on modeling and simulation become the master model. We have seen that in all other industries. I believe it will happen in the life science.
Thank you. And our next question comes from the line of TC Pollard. Please ask your question.
Hi, thank you. Just can you maybe talk about your accretion dilution expectations? And do you would you expect to get the margins of metadata up to Dassault's group level within 3 to 4 years. Also you haven't mentioned per se, anything, but do you see any synergies with your other life science solutions, either revenue synergies or cost synergies? And then finally, do you still do you believe you still have a potential or, I guess, enough scope to continue with acquisitions and other areas?
Either life sciences or perhaps construction or simulation, etcetera.
Okay. So Stacy, for all the questions you ask, I will give details at some point of time. So because it's a little bit early to share the guidance, but what I could say first, this transaction will be accretive. At the EPS level, okay, for all the years. Point number 1.
Point number 2, from a synergies standpoint, yes, definitively, this is, at least the rationale behind behind the transactions. Do we have multiples? On one hand, it's a SaaS solutions, the company is using extensively Amazon. And I think there is a lot of interest to use on our own cloud infrastructure. That's one of the labor.
As Glenn explained, there is a lot of value to have a common platform. This is the synergy at the development side. I could also go through the go to markets to explain that we have a bunch of synergy relatively well in notify, and I will quantify them at the right times. On the revenue side, yes, we also have synergy. Because the way Medidata is approaching their customers is it's biased to this.
The way we approach them is by the infrastructure, the core infrastructure, you know, to structure the entire transformation of the companies. I think we need both. You need to be able to enter by PCs and you need to be able to enter with the end to end solutions. So if I combine all those kind of things, I'm pretty confident that this revenue and this activities combining BioVR and Medidata will grow very fast. It's already with the combinations, the 2nd largest industry for us, And in the race to become the number 1, I think they are well positioned because if you look at the spending, if you look at the GDP, life science and health care is by far the largest.
In term of scope, do we have enough to continue to do some The answer is yes. If you do the math, I told you that, we're going to use a 1,000,000,000 in cash of our cash to fund these acquisitions. Meanings, we still have 1.6 in our pocket. And with a EUR 900,000,000 cash flow generation per year, not taking into account the contribution of Medidata, I think we have some levers to continue to do some transactions to complement nicely what we have.
That's great. Thanks. Thank you, Stacy.
Thank you. And our next question comes from the line of John King
Yes. Thanks for taking the questions. Just one really. I was interested in maybe the response from both management teams. So just on timing of the deal, why now?
Obviously, for the Dassault team, I don't think you've gone into net debt before. Obviously, you speak to the enthusiasm for which you have, you hold this opportunity in, but it in why you think this deal is happening there and also for Medidata. Sounds like you're very confident of your own organic prospects. I'm just wondering what is it that you see out there, that makes you want to do this deal now? Perhaps again, that would speak to the synergy potential you see with Acceleris, but, yeah, I'd be interested in your thoughts.
Yeah, of course, first of all, all acquisitions we have done in the past have been well thought years in advance. But it does not mean that because it's on paper, it will happen. And basically, for all of them, it's even it's the case even here in the case of Medidata. We value at first First, we want to make sure we understand the industry we want to serve. And we have learned a lot in the last, as I tried to say it at the beginning of this call, in the last 10 years with the research we have done on the relationship we have established with the Amgen of the world on with many other clients that we have observing where they are versus where we are with the most advanced digitally enabled companies, which are also gigantic groups.
With gigantic revenue. Toyota is still around 1,000,000,000 revenue, just revenue. So, we know where they are and we can compare. We were astonished with the level low level of digitization of the sector. That's one piece.
So the why now is we observe that. The second is building relationship. This is about people. This is about trust to build the future. When we started a year ago to exchange, we were having in mind a partnership because we thought it was very complementary.
And what happened is that we discovered that we shared more and more, and we wanted to do more and more together to a point where one of us ask, why should we not come together? And this is why we are here today. So there is there is a matured progression in, formulating not the sum of what we have only but where we can go, because there is one unique characteristic in what Dassault System has done across all industries. We have always been game changer. We always change the game.
It's harder, but it's more fun. And I believe that's the time to do it in Life Science That's my view from why we have together. And so it's the wedding day or
I have to echo, what Bernard was saying. I think I couldn't agree more with everything that you've said. I think from Medidata's perspective, we've always been a mission driven company. It's what gives us our passion. It's deeply ingrained in our culture.
And as a mission driven company, we have also had a massive impact on our industry. We partner with our customers. We've developed, I think, a unique technology, even unique business model in our industry. And, after we began to get to know the team here, we simply saw that it that there were so many there were so much potential in an industry that I think is going through major disruption that the time felt like now. And when we started to think about the alignment.
There's a cultural alignment. There's being a mission and vision driven company. There's a passion around it. And there's industry readiness. And I think the what was so attractive to us is that The SO system brings a lot of experience in other industries that have gone through the same kind of transitions that our industry is going to go through There is a they bring maturity and scale and they bring capabilities that really completed the full circle that we saw was necessary to bring to make precision medicine a reality in our lifetime and so the timing seemed perfect to us.
Thank you. And our next question comes from the line of Glenn Santangelo. Please ask your question.
Yes, thanks. Tarek, I just follow-up on the comments that you just made. I mean, essentially, I understand a little bit about DS and their 3 d experience in some of the life science solutions that they have. But you just specifically said that they bring certain capabilities, to Medidata. And what I'm really wondering if you could elaborate a little bit on the complimentary nature of these two companies and what Medidata might be able to do proposition is going to be, in Medidata's legacy market.
And then secondarily, I was wondering, could you just comment, is there a breakup fee And are there specific roles for, you and Glenn in the new combined company? Are you guys are you under contract? Are there any earnouts? Anything of that nature would be helpful. Thanks.
Thanks, Glenn. So actually it's Glenn. I'll let me start and then I'll hand it over to Tarek. So if you look at what we've been doing, which obviously you're deeply familiar with, there are complexities beyond just the kind of clinical trial process is that we've been addressing to date around things like managing, frankly, a supply chain, the chain of custody of things in a clinical trial. As we see more of these cell therapies, other personalized therapies, not just life sciences, medicine is going to be struggling with processes that they just don't know how to scale things around getting a sample from a patient through a manufacturing process.
A complex biologics style manufacturing process, which are the our colleagues to be at the ecosystem. We're very good at managing that then needs to get back to that same patient. So there's things that actually are just part of what is that future state of blocking and tackling and running at scale, the kind of development to bring the innovations that I was talking about, people's pipelines to market. Beyond that, if you look at the capabilities around looking at research data. Some of the things in the BioVIA brand, there are ways that we can should and I think frankly need to as the life science industry look at a much more sophisticated level at that interaction of drugs and devices at a deeper physiological and molecular level to figure out exactly how to optimize getting therapeutic value out of every single dollar invested in people's R and D pipelines.
That is just as much a part and parcel of getting that gearing out of getting that evidence gearing out of the data that's collected as just running a better clinical trial. And so those are 2 very practical examples where as we've talked about in the past, connecting some of the loops, making closed loop feedback systems the world of clinical and parts of commercial that we've done at Medidata, while actually synergistically with Dassault System, we can start to think about those feedback loops across discovery, research, development, commercialization, industrialization, delivery of those therapies in the market place in ways that we really couldn't even conceive of before we started talking about this combination. And so hopefully that gives some very practical examples as well as philosophically how we thought about it.
And I'm happy to take the second half of the question. So Glenn and I are you know, we've always been driven by the mission that we set out 20 years ago. We are 100% committed to making this successful. We are definitely staying on We will be running Medidata as a wholly owned subsidiary, reporting into the senior management here at Dassault System, but but we have no plans to go anywhere. As it relates to the other questions you ask, we'll have a regulatory filing in a couple of weeks that will answer all those but I'll what I'll say is that it's not financial incentives that bring us here.
It's our desire to change the world And I think together, we can do that. And we're in here for the long term.
Thank you.
Thank you. And our next question comes from the line of Michael Breese. Please ask your question.
Yes, thank you. My congratulations as well. Tara and Glenn, I noticed that, I mean, you have a lot of customers, thirteen 100 which suggests an average selling price or an average relationship of about 500,000 a year, but 20 odd percent comes from the top 5. So it's a very sort of weird shape of customer. Can you talk about why some customers are spending tens of 1,000,000 with you and some others are presumably spending very little on what the potential to raise those amounts would be?
And then, Pascal, I guess, one for you on cash flow. So, the business made 1,000,000 free cash flow in 2017, 1,000,000 last year. It's guiding for over 1,000,000 this year. So, I'm just curious why it's going down and what will happen to the shape of that? I mean, if you're paying 1,000,000 of interest next year, will this thing generate enough cash to cover that in 2020?
So happy to take the first question. I think when you think about our industry, first of all, there is to the second part of what you asked in that, there is an enormous opportunity to have our customers adopt more of the solutions that we have currently in the marketplace. The broader platform is not fully adopted by our customers. Even by our largest customers. And now, with the offerings that we've brought forth with Acorn AI and the shift offerings, there's even more opportunity to, increase the average selling price to our customers.
You have to remember in the pharma industry and biotech The top 100, 150 customers are fairly large in size and then you have a lot of smaller biotechnology companies that tend to run fewer clinical trials. And so that when you look at the average ASP, I think that's a very healthy one. But you do get sort of this bimodal view of or skewing in revenue. But I think the most important thing is that there's a lot of white space for us to continue to drive adoption and drive higher
Michael, related to the cash flow, I will do the same answers as I did for Stacey. Against wait a little bit will come with the details at the right time, but I can ensure you that we have identified the lever. To accelerate the cash flow generations coming from these activities. So you can count on me.
Okay. Thank you.
And our next question comes from the line of Jason Talino. Please ask your question.
Hey guys, thanks for taking my question. Can you hear me alright?
Yes, we can. Thank you.
I know it's still early, but what's some
of the potential feedback you anticipate hearing from some of your customers especially maybe some of the customers that are using both of your company's products?
I think we can both speak. I got personally outstanding feedback from a few of them already. Because they understand that the future is a platform based end to end. We'll have the opportunity to discuss with more of them, but it's very positive from Tarick and Glenn.
It's basic, it's the same. It's customers who brought us together in the first place who introduced us. And I think they view this as Bernard said, as something that is very, very value creating for the industry in the long term.
Great. That's helpful. Thank you.
It's positive, yes, very positive.
Thank you. And our next question comes from the line of Neil Steer. Please ask your question.
Hi, thanks very much. My question just relates to something Bernard said for fall on the call and, in response to a question just a moment ago, the fact that, Medidata is going to be run separately or autonomous separately. And I'm just wondering how that figures with achieving some of the synergies. And surely given everything that you've said in the presentation, you would want to make this as quickly as possible part of the Biovia brand and run with that as soon as possible. So I'm just intrigued just to why the insistence that it's going to be separately run?
Or it can be the other way around. Simply said to address your question. And For me, it's very simple. This is an empire sector by itself. Which is with an index of adoption of digital, which is where space on Aerospace was 25 years ago.
It's driven by data because there is weak capabilities for modeling. On simulation. One day, they will come together. But it's the reality today, it's driven by the power of data. And this is many data is doing that extremely well.
So I, in some way and without going too much in the organization. Pascal and I, we agreed and with Tarek Ombland. That this should be run on reporting directly to Pascal. Everything that is needed to that business expand for the platform on end to end, is in direct on Glen's mission. But of course, we need to prepare this well.
But for me, putting a powerful collaborative innovation platform, driven by the data approach. Is very different than doing document management. And I believe that the current players can be marginalized, marginalized just with that effect when customers will have realized how deep can go. Again, it happened in other industries before. So I don't see why it would not happen here.
Okay. Thank you. And just another sort of unrelated question. In reference to the fact that Medidata addresses sort of the 10% of the billion market opportunity at the moment. Who would be the names of the sort of 3 or 4 next players that the remaining 90% that you'd currently don't cover?
Oracle is a relatively large player. The way I look at that PEM, however, is not that there are other software players that are covering that. It's a lot of process work. It's a lot of manual work. And if you look at the penetration rates for technology, cloud technology into pharma, it's certainly in the United States.
It's among the lowest only, 2nd above the U. S. Government. And so I think there's a lot of room for modern technology to be adopted and replace, the existing processes and homegrown systems, etcetera.
We'll take one last question.
Yes. And our question comes from the line
I have three quick questions. The first is probably for Pascal. When you talk about in EPS impact. I know it's very early. I don't want you to give us margin guidance, but I think you probably already know your assumption you took for the tax rate of, I mean, the data that will be useful and then we make our own assumptions.
The second question is, when you give us a breakdown of revenue, is it possible to have a rough overview of the contribution of the free different product line net media data? Has? And my final question is back to the competitive landscape. I'm not too familiar with the healthcare industry, but I was wondering the company Visa? Is it competing directly with you and what would be differentiates them with you?
Thank you.
Can I start with the last one? I think many of the players are doing what happened 20 years ago in PDM for manufacturing, document management. But the world is not going to stay on document. And the full integration is going to happen. I think it's visible already.
And so, like in any technology, providing platforms for the market, the shift is not only capabilities, is changing, the paradigm to do the job. So multi discipline, multi scale collaboration, is now number one priority when we talk with Amgen common customers, when we talk with other common customers, let's say, multi scale, multi discipline, collaborative work for all functions end to end through the life cycle. I have not heard of any document management companies being able to do that. That's what we want to do together to be simple. That was the answer to the last point.
So our targets is very clear is game changer for the industry. On the previous questions, I think Pascal, you want to
There is one more to say. No, no, there is one related to the split, of revenue between the different product line I don't know if you want to see if you were stuck.
I'm happy to. So what we've historically talked about is sort of our core, revenue, which is around rate. DC and in comparison to the broader platform or other solutions, including our analytics. And You can think of it as about a 2 thirds, 1 third breakdown with 2 thirds still coming from core EDC and about a third coming from the rest of our solutions. So obviously, the rest of our solutions are growing faster.
And over time, we'll see that split become fifty-fifty and more.
And related to your first question, I think I already gave the answer when I was telling you that Medidata will represent a large portion of the $0.80 contribution we were assuming coming from the acquisitions on our long term plans going to €6. So I think you have the answer.
In fact, I have 2 gaps. I have missing the margin, the tax rate.
Thank you very much all of you for participating and for your interest. As you can imagine, it's a moment because we this is a definitive commitment to really make sure we do something unique so necessary for this huge market of health care discovery on new therapeutic it goes very well with the bio, the biotech approach, the connection with how you produce things. On the targeting of personalized health. So we have a plan together, and that's the one we want to execute. Thank you very much and talk to you soon.
Thank you. And that does conclude our conference for today. Thank you all for participating. You may all disconnect.