Losses continued to build during the first quarter at etrials Worldwide and Datatrak International, two US-based suppliers that have hit a rough patch in the market for eClinical software and services. However, both companies see indications that they are on the road to recovery, sales growth and eventual profitability.

Having earlier this month promised “modest” cost savings in the second half from an accelerated realignment strategy that addresses a string of quarterly losses since a period of turmoil in the business last year, etrials reported an operating loss of US$2.12 million for the three months ended 31 March 2008, compared with a US$1.17 million loss in the same quarter of 2007.

Net service revenues dropped by 9.0% to US$3.71 million and the gross margin for the quarter was 30% against a 47% margin one year previously. According to etrials, both declines were due to delayed new-project starts, which shaved around US$1.0 million off the revenue figure. Revenues from these projects “are expected to be recognised over the course of the year”, etrials added.

The value of new project bookings for the quarter was US$4.8 million, down from US$6.6 million in the first quarter of 2007 and from US$7.0 million in the fourth quarter of 2007. Net new project bookings were US$4.7 million in the latest quarter compared with US$6.2 million in the year-ago period and US$5.4 million in the fourth quarter of 2007.

Despite the delayed project starts, “we continue to increase studies with existing clients and add new clients”, commented etrials president and chief executive officer (CEO) Chip Jennings. “Our qualified pipeline is up nearly 50%; our close rates nearly doubled over last year; and we closed a number of multi-product solution sales with both new and existing clients. The sales metrics we follow are improving and we are where we planned to be at this stage of our sales re-engineering efforts.”

As of 31 March 2008 etrials had a project backlog of US$20.3 million, up from US$19.8 million on 31 March 2007 and from US$19.2 million on 31 December 2007. The backlog includes both projects covered by signed contracts or work orders and projects for which etrials has received written confirmation that the customer has decided to award a contract or work order.

“The eClinical market is beginning to recognise the incremental value created by a multi-product, integrated product suite and demand for etrials’ solutions continues to grow,” Jennings stated.

“The steps we are taking to reformulate etrials’ strategy, focus on the mid-tier market, and improve operations position us to capture an increasing share of this growing demand,” he claimed. “We intend to continue to drive sales metrics, with the aim of growing bookings and backlog through the balance of the year and entering 2009 ready to accelerate revenue growth and cross over to profitability.”

41% revenue decline

Meanwhile, operating losses hit a similar level at Datatrak, which recently said the clinical trial market in 2007 had not been “as responsive or timely to our offerings as we had anticipated”. The company’s losses more than tripled to US$11.0 million last year, on revenues that plummeted 40.3% against 2006 to US$10.6 million.

In the latest quarter, Datatrak’s revenues slid 41.0% to US2.09 million while the company’s gross profit margin was 55% against 62% in the first quarter of 2007. The impact of the revenue decline on margins was partly offset by a 30.2% reduction in direct costs, to US$933,879. The operating loss was US$2.22 million compared with a US$1.84 million loss in the year-before quarter.

“In our last financial release and conference call in late February we stated that we were seeing early signs of a building sales momentum as we entered this year and felt we were moving in such a direction that we believed 2008 would place us back on a positive sales growth trend,” commented Datatrak president and CEO Dr Jeffery Green.

“This optimism was supported by a near record volume of approximately $4.1 million of new business during the fourth quarter of 2007, a reflection of positive results from our re-organised marketing and sales efforts.”

The company had been careful, Green added, “to frame our anticipated return to growth as a gradual, but positive trend, stating it was certainly possible that as we progressed through the remainder of 2008 and beyond, a particular quarter’s sales may not necessarily be greater than the prior, however, looking out, the trend should be progressively upward.”

Datatrak had a project backlog worth US$13.9 million as of 31 March 2008, a figure that has now reduced to around US$12.9 million. This compares with a backlog of US$13.0 million at 31 December 2007. Datatrak defines its backlog as the remaining value of signed contracts or authorisation letters that have “passed the verbal stage, but have not been signed”. Historically, backlog has been a poor predictor of the company’s short-term revenue, it notes.

“Based partially on our first-quarter 2008 revenues, which represented our first sequential quarterly revenue increase in quite some time … and new backlog additions totalling approximately US$3 million, I am pleased to report to you today that during this first quarter we continued to make progress towards achieving our recovery goals for 2008,” Green said.