“I think this is a very exciting time for Phase Forward”, said Robert Weiler, CEO of Phase Forward, who presented an upbeat view of coming quarters, despite GAAP (generally accepted accounting principals) operating income falling by 46 per cent in the latest results.
This positivity is underpinned by Phase Forward’s belief in the strength of its product range, in particular its “very, very compelling integrated clinical research suite (ICRS)”, and the trends it sees emerging in 2010.
Non-GAAP revenue from contract research organisations (CRO) was $12.3m (€8.3m) in the third quarter, 23 per cent of total income, and Weiler believes the sector will pick up in 2010 as delayed trials are started.
CROs have suffered in recent quarters as a result of delays and cancellations but Weiler expects the situation to improve in 2010 as their “large, large backlogs” start being realised. Phase Forward can profit from this situation as CROs seek to accelerate the trial process.
Weiler explained that CROs’ focus on delivering cheaper, faster clinical trials means that some of them, especially the larger businesses, will move faster to implement integrated eClinical solutions than pharma companies.
Although CROs may be more alert to eClinical benefits, Weiler added that in the wake of this year’s mega-mergers some big pharmas have restarted discussions with Phase Forward.
In the past these focused on electronic data capture (EDC) but the conversations have now expanded to cover the broader range of technologies and services that Phase Forward offers.
Maintenance on existing products, integrations between multiple drugs and support of this process amount to “very, very high” costs in pharma’s IT budgets, according to Weiler and it is in these areas Phase Forward may be able to help.
Adoption of Phase Forward’s offerings in these areas could help offset a potential decline in the number of clinical trials conducted as a consequence of cuts to R&D budgets.
Performance in Q3
Phase Forward grew its GAAP revenues by 24 per cent to $53.1m year-on-year but its income from operations fell. This decline was most pronounced on a GAAP basis, which fell by 46 per cent to $2.4m, but there was also a dip on a non-GAAP basis.
Net income dropped by 47 per cent to $1.8m but, despite these issues, there are numerous signs that the economic downturn, and broader challenges facing pharma, have not impacted too significantly on Phase Forward in the third quarter.
In addition to rising revenues the company reported a quarter-on-quarter decline in cancellations and no increase in delays.