Dassault Systèmes Q2: Life Got More Interesting, Results Suggest

Life science rules as revenue is up 8% to €1.45 billion and puts the company on track for a €6 billion year.

If any engineering software company can figure out the meaning of life, it will be Dassault Systèmes. The French engineering software giant (heading toward €6 billion annual revenue) alone has extended its reach into medicine, pharmacy and biology. It is all part of CEO Bernard Charlès’ master plan to integrate mankind with what mankind makes.

“Since 1981, we have been instrumental in the sustainable innovation of products that are central to our lives and core to the development of society,” said Charlès leading off the quarterly call. “In parallel, our ambition to harmonize product, nature and life has led us to develop a new understanding of the relationship between life and nature. That is why in 2020, we unveiled our ambition to develop the Virtual Twin Experience of Humans: From Things to Life. As we look to our next horizon, 2040, we will build on this heritage to catalyze a metamorphosis thanks to Virtual Twin Experiences for a Sustainable World.”

Applying engineering technology and additional technology from acquisitions, Dassault Systèmes has carved out a market for itself in the medicine and life sciences into which it can not only introduce its engineering tools to medicine but can also broaden its base of customers. With a customer base that includes hospitals, health agencies and big pharma, Dassault Systèmes may have a business less affected by recessions. PTC, Siemens and Autodesk may fret about a looming recession, but Dassault Systèmes has itself a hedge.

Two and half years have gone by since Dassault Systèmes reported a boon from its investment in Life. As the pandemic raged, the rush to test vaccines was on. It proved to be big business for Medidata (acquired by Dassault Systèmes in 2019 for $5.8 billion, a company record), generating a €114 million spike in profit for Dassault Systèmes to close out FY2020.

In Q2 FY2023, for which results are in, Dassault Systèmes has recommitted to Life.

We hear of a recent conference, Science in the Age of Experience, a conference that featured a Nobel Prize winner (Dr. Martin Karplus, who received the award in 2013) and was full of interesting case studies, of engineering software being used for medical reasons, for example. Maybe the grass is greener on the other side, but digital models of hearts and lungs? How can nuts and bolts possibly compete with that? 

Dassault Systèmes is on a mission. It will no longer just be known for products, but also sustainability, a harmony between Things and Life. Image: Dassault Systèmes.

After a series of acquisitions in the life sciences, Dassault Systèmes leads in the development of a digital twin that, unlike other digital twins in our industry, actually represents a human being. Others make digital twins of buildings, factories and machines.

The move to Life is more than acquiring companies that create applications for the medical industry. It is using Dassault Systèmes applications—once exclusively used for things to improve or save lives. We see a video in which SIMULIA was used to study airflow and show virus concentrations in a hospital room.

Using engineering software to solve medical problems comes up more than once in the quarterly call. Researchers used MODSIM (system modeling) along with the Alphabet (formerly Google) Alphafold AI software that predicts protein structures and shows 3D models of their molecular structure to create “millions of potential molecules” and test them on a digital twin that models a heart, a liver and a brain. Although the representation of organs is not complete, there is enough in the organ models to test for liver toxicity and heart damage and assure delivery to the brain’s dopamine function.

Complete organ digital twins are on the road map, however. Dassault Systèmes started with the heart model, used by Dr. David Hoganson, a heart surgeon at Boston Children’s Hospital (featured here), and has plans for a digital brain, lungs, cells and even gut. How Dassault Systèmes plans to model billions of organisms that reside in each of our guts will be a matter of scaling.

If you think the simulation of structures and fluids is complicated, imagine modeling organs, or the biome of the mammalian gut. The material of our structures is usually isotropic (uniform and homogenous) and our fluids are contiguous, which allows us the convenience of working on the scale of our structures or products. But accurate modeling of drugs and delivery of the drugs to an organ requires modeling on a molecular scale. The journey of a drug through a digestive system is almost always a molecular transformation. The drug is carried in the blood, a complex fluid composed of liquid (plasma) and solid (blood cells). A model that is at the scale of molecules or cells for whole organs or organisms would overwhelm a supercomputer. Never mind modeling their interactions—that would be next level.

So, to model systems composed of very, very small particles, a workaround has been developed that allows microscale to be translated to macroscale, and Dassault Systèmes, the software company with horses in both races, is motivated and vested in this method. From BIOVIA to SIMULIA, Dassault Systèmes has shown itself best at assigning material properties to a whole based on the properties of a part and bridging the gap from microscale to macroscale.

As an example of microscale to macroscale, consider bone cells lumped together to model the whole bone, which are then able to predict the likelihood of a fracture occurring in someone who has osteoporosis.

A double-digit increase in revenue must have been doubly sweet to Dassault Systèmes as archrival PTC seemed to stumble, simultaneously recording flat revenue, and perhaps not coincidentally, a change in leadership.

In the Americas, revenue was up 10 percent, representing 40 percent of the global software revenue with aerospace and defense, high-tech and life sciences sectors doing particularly well.

SOLIDWORKS continues to be the company’s cash cow, as “mainstream innovation,” software for small and medium-sized businesses, like SOLIDWORKS and Centric PLM, contributed €335.1 million, growing 12 percent and representing 26 percent of all global software revenue. This is more revenue in one quarter than Dassault Systèmes paid to acquire SOLIDWORKS (€282 million).

“Industrial innovation” software, a designation into which all enterprise design and manufacturing software falls, including CATIA, SIMULIA, DELMIA and GEOVIA, represents over half of all global software revenue and was up 7 percent. The stalwart CATIA, which has been around since the beginning of CAD, has still not saturated enterprises and registered double-digit growth.

Life science software revenue grew less—only 7 percent, to €287.2 million, accounting for 22 percent of all software revenue, mostly from MEDIDATA’s contribution. It was less than past quarters, as noted earlier, due to an industry-wide reduction in clinical studies compared to high levels of testing during the peak of COVID-19. Still, Dassault Systèmes claims increased business with the top 50 pharma companies, including several multiyear renewals, and expects its Life Science division to return to double-digit growth before the end of the year.