Oracle said on Friday it agreed to spend $685 million to buy Phase Forward, the top maker of programs that help drugmakers run clinical trials, in Oracle's biggest software acquisition in two years.

The move would help billionaire Larry Ellison's Oracle expand its portfolio of programs that help drugmakers boost the efficiency of their operations at a time when the pharmaceutical industry is anxious to slash costs. Drug companies are looking to offset revenue declines, as many profitable brand name drugs will soon face competition from low-cost generics.

"Pharmaceutical companies are really focusing on cost reduction to boost profitability, so software applications that cut costs and improve their processes have become more important," said Jeff Gaggin, an analyst with Avian Securities.

Oracle said it would pay $17.00 per share in cash for Phase Forward, a 30% premium over Thursday's closing price of $13.08. Phase Forward shares jumped 28% to $16.80 in Nasdaq afternoon trade. Phase Forward is the top maker of programs for managing clinical trials, ahead of Medidata Solutions Inc and Oracle. Medidata shares rose 6.6% to $16.30.

"Oracle doesn't like to be No. 3 in any market they serve. This propels them to No. 1," said Piper Jaffray analyst Sean Wieland.

Healthcare is one of several key areas where Oracle has focused on building a portfolio of software specific to an industry's needs. Yet it has done far fewer deals in healthcare than in its other focus industries: financial services, telecommunications/communications and retail. That may be changing.

Last month Oracle said it would buy another maker of software for pharmaceutical makers, privately held Relsys International, whose programs help drugmakers monitor product safety. The companies did not disclose the value of that transaction. Oracle spokeswoman Deborah Hellinger declined to say whether other healthcare acquisitions were in the works. Analysts said they do not expect Oracle to make another relatively large acquisition in healthcare technology any time soon as there are not any other big companies that meet Oracle's acquisition criteria.

Chief Executive Larry Ellison's strategy for buying makers of industry-specific software is to find companies that have loyal existing customer bases that pay them recurring streams of maintenance revenue on their software. Oracle then cross-sells its other key products - a database, middleware and business management software. Phase Forward's customers include AstraZeneca, Glaxo SmithKline, Merck & Co and Novartis.

"It's is a pretty good investment. It's very typical of what we've seen Oracle do," said Brendan Barnicle, an analyst with Pacific Crest Securities. The companies said they expect the deal to close in the middle of this year.