For a company that has been able to achieve its EPS target a year before the due date, and registering a high double-digit growth, one would expect the CEO to talk about nothing but the stellar growth. But Bernard Charles, CEO, Dassault Systemes, instead takes out his phone and merrily highlights the wonders of the human body. Pointing to his phone he says this has 57 different molecules, a human body has 27, yet we can repair ourselves and this (the phone) can’t. It’s hard to miss the enthusiasm around the company’s new acquisition —Medidata Solutions — which cost it $5.92 billion. While many would have considered it as a gamble after Theranos, the med tech startup that failed, Dassault seems to think it has hit a gold mine with Medidata Solutions. And, rightly so.
“For the last 35 years, we have created solutions to design things, and engineer solutions for sophisticated things. Our ambition moving forward is to expand our platform with chemistry and biologics (life),” he says.
It is no coincidence that the world’s biggest tech giants are investing in med-tech start-ups, so it should come as no surprise that Dassault is trying to improve its capabilities and widen its portfolio. The Medidata acquisition at $92 per share in an all-cash deal is expected to get the company closer to its goal of health research. Three years ago, Dassault had announced the Living Heart Project, using its Stimulia programme.
But there is more to the company than just medical. Although the renewed focus is on medical with the US market expected to touch $200 billion by 2023, Dassault is not giving up on its core business. In fact, it will be strengthening it much more with the platform model. Although 3DExperience was launched a couple of years ago, Dassault is trying to integrate more products on the platform and create a pay-as-you-go service. By putting everything online, it will be able to create a system which is self-fulfilling.
Platform economics is what has worked for Facebook and Google; Dassault is betting on it to too. That does not mean that the company is giving up on its core users. However, as Dassault tries to shift more people to its platform ecosystem, it is also trying to integrate more services. It has partnered with Xometry, which shall provide the manufacturing support. Although this is only the first of partnerships, as Dassault extends its system one can expect more associations to make 3DExperience, a seamless experience.
“We have done very well and have been able to achieve the price earnings target way before time, we hope we will be able to do the same for our 2023,” says Charles.
Dassault’s revenue jumped 16% over last year in FY19, and it also reported a 17% growth in net income per share. It will have to grow at a robust 13% CAGR, if it is to achieve the 6 euro EPS by 2023. While Dassault is certainly expanding its market in Americas, and launch of new offerings will help it establish more control, it shall also need Asia to kick in. Revenues from Asia did increase last year, but at a slower pace than Europe and Americas. Meanwhile, non-IFRS earnings show that the share of Asia in total revenues declined from 28.4% last year to 26.9%.
But if the health bid does work, it will certainly buoy the company to a more commanding position.
(The reporter was in Tennessee on the invitation of Dassault Systemes)