US-based eClinical specialist Datatrak International continued to edge back towards financial health in the fourth quarter of 2008, cutting operating losses to US$109,069 from US$2.63 million in Q4 2007 as revenues grew by 15.4% year on year to US$2.12 million.

Datatrak’s gross profit margin was 79.6% in the latest quarter against 47.5% in the year-before period, reflecting the improved revenues and a 55.2% reduction in direct costs. The company, which saw its operating losses multiply more than five times to US$15.8 million during Q2, recorded net income of US$3.03 million for the final quarter versus a US$2.29 million net loss in Q4 2007. It helped that Datatrak was relieved of a US$3 million debt obligation for the quarter.

Net losses for the full year were US$16.8 million, up from US$10.9 million in 2007. Operating losses were US$19.5 million (US$11.0 million in 2007) and revenues dropped by 16.4% to US$8.83 million.

Backlog – i.e., the remaining value of signed contracts or authorisation letters to start providing services – was US$11.4 million as of 31 December 2008, compared with US$13.0 million one year earlier, and now stands at around US$10.1 million.

“During the last 18 months, we made great strides to strengthen Datatrak’s positioning through the re-organisation of leadership, right-sizing of our business and renewed focus on our customers,” commented Raymond Merk, chief financial officer and chief operating officer. “We are pleased to say that many of these initiatives began to bear fruit in the fourth quarter … While we realise there is still work ahead of us, we are encouraged by our progress to date.”

Laurence Birch, board chairman and interim chief executive officer – the last incumbent, Dr Jeffrey Green, stepped down in January – described the last year as “a game changer for Datatrak”, in which the company “completed the heavy-lifting stage of our re-organisation efforts, which bolstered Datatrak’s financial position, matching its cost structure with current backlog levels and anticipated revenues, as well as strengthening our management team”.

In the current year, the company would focus exclusively on maximising operational performance, Birch added.

“At the heart of this shift will be re-establishing and strengthening our relationships with existing and potential clients with the goal of addressing their needs in electronic data collection,” he explained. “While the current economic climate has impacted the clinical trial industry, we are a leaner organisation today than we have been historically, and believe we have the agility to navigate through this difficult environment.”

One encouraging sign highlighted by Merk was that NTT DATA Company, Datatrak’s value-added reseller in Japan, had just begun the second year of a US$2.1 million, five-year agreement and had already sold eight clinical trials to four different clients.

“This is just another example of the power of our software in a fragile world economy,” Merk said. “While raising additional capital may be a possible avenue in 2009, our improved performance, coupled with our virtually debt-free balance sheet, makes Datatrak a much stronger company financially then it was twelve months ago.”

Less encouraging was the departure of another senior manager. Matt Delaney, who has been interim president since May 2008, has “decided to step down from his position with the company to pursue other opportunities”, Datatrak announced.

Nasdaq listing extension

It also noted that Nasdaq has now given the company until 1 June 2009 to demonstrate compliance with the requirements for continued listing on the US exchange. Following a hearing on 8 January, the Nasdaq Hearings Panel granted Datatrak’s request for continued listing subject to the condition that, on or before 1 June 2008, it demonstrates compliance with the market’s US$2.5 million minimum stockholders’equity requirement or one of the alternative criteria for continued listing.

Last June, Nasdaq informed Datatrak that it faced delisting unless the company complied with the exchange’s Minimum Bid Price Rule by 8 December 2008.

The company was subsequently notified in August that it was out of compliance with Nasdaq Marketplace Rule 4310(c)(3), which requires a minimum of $2,500,000 in stockholders’ equity, or a market value of $35,000,000 in listed securities, or $500,000 in net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years.