What will happen to Dotmatics now?
The big news this month, just in time for the annual Bio-IT conference, was the acquisition of Dotmatics by Siemens for $5.1 billion. The two things that I found most interesting about this news were 1) that Siemens would be interested in buying a suite of bio R&D tools and 2) how much Siemens decided Dotmatics was worth. But after looking into the details a bit, I think I have a better understanding.
So this week, I want to discuss 1) How Siemens seems to view bio R&D and 2) why the idea of a digital twin makes Dotmatics more valuable to Siemens than we might otherwise think. Then based on this, I’ll recklessly speculate about what this could mean for the future of Dotmatics.
I wrote a shorter version of this on LinkedIn if you want to share your thoughts there.
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First, some context
Siemens didn’t just buy the Dotmatics ELN/LIMS. They purchased a suite of tools that were put together by a private equity (PE) rollup that was originally called Insightful Science. This suite includes GraphPad, Snapgene and a bunch of other companies. Insightful acquired Dotmatics in 2021, then renamed itself Dotmatics.
Insightful’s strategy was to acquire complementary companies that had found product-market fit and help them scale everything around the software while mostly leaving the product and engineering alone. The main exception was on the backend/APIs where Insightful/Dotmatics began integrating all the products into a custom-built analysis platform called Luma. The idea was to create an ecosystem of tools that could be used separately, but when used together could easily pool all their data into one place.
This seems to have been a successful strategy, both because of this acquisition and because there wasn’t much drama otherwise. Say what you will about the engineering side of Dotmatics’ twenty years of legacy code; it has a loyal user base who continue to bring it with them when they move to new companies.
R&D vs Manufacturing
I tend to think of drug development as an R&D process with some manufacturing at the end. I would guess that most readers of this newsletter feel the same way. Siemens, on the other hand, tends to work in industries that look like manufacturing processes with some R&D at the beginning. I don’t know if it really makes much of a difference, but the fact is that drug discovery is shifting towards biologics and other modalities where manufacturing is more complex and expensive. So maybe it’s becoming more of a manufacturing industry (if it wasn’t already.)
Either way, Siemens already has a number of products related to pharmaceutical manufacturing, bioprocessing, and even clinical trials. And in other industries where they have manufacturing products, they’ve expanded upstream to R&D. For example they sell CAD software for physical manufacturing. From their perspective, this is just another round from a playbook that has worked multiple times in the past. And the reason they seem to think it works is digital twins.
Digital Twins
Like many commercially relevant buzz words, “digital twin” has come to mean many different things. And this seems to be true even within Siemen’s family of products. The basic idea is to build a digital model of something that you want to optimize, then use the model’s simulations and predictions to decide how to optimize it. This can mean mechanistic models of physical machines like engines. Or it can mean analytical models of processes. Or anything in between or around these.
Siemens’ announcement mentions digital twins as one of the main motivations for the acquisition. And they talk about digital twins a lot for other industries where they have products that cover both R&D and manufacturing. So again, this is from a playbook that they know works and can estimate how much it’s worth to them.
In this instance, I’m assuming the digital twins will be more on the side of “analytical models of processes.” And in particular, I would expect it to look not too different from the Luma platform that Dotmatics was already building: Use APIs to collect data from all the different tools from R&D to manufacturing, then put it all into a model. Slap the words “digital twin” on top of it, then use it to optimize everything end-to-end. We might be skeptical that this is possible, given the messy nature of drug discovery, but Siemens seems to think this is worth $5.1 billion plus whatever profit they expect.
Reckless Speculation
So, based on how Siemens has managed other acquisitions like this, my guess is that their strategy for the Dotmatics portfolio of companies won’t be that different than Insightful Science’s strategy: Don’t mess too much with the product and engineering that have built a loyal user base. On the backend, build APIs that integrate with a digital twin platform. The only difference is that Siemens’ digital twin will span R&D to manufacturing.
The bigger question is whether this digital twin platform will be Luma or a platform that Siemens already has. But that probably isn’t too important to most users of Dotmatics, GraphPad, etc. For them, there probably won’t be any noticeable changes.
That’s my prediction, anyway. I could be wrong, but no matter what, we probably won’t know for a while.
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