Losses continued to build at etrials Worldwide, the troubled US supplier of eClinical software and services, in the third quarter of 2007.
The company, which is emerging from a period of turmoil that saw the departure of its former chief executive officer John Cline and moves to put the business into turnaround, recorded an operating loss of $1.49 million for the three months ended 30 September, compared with an operating profit of $178,331 for the third quarter of 2006. Net service revenues, which excluded reimbursable out-of-pocket costs, fell by 7.0% to US$4.14 million in the quarter.
In the second quarter of 2007, etrials sustained an operating loss of $1.54 million versus a $185,384 loss in the year-ago quarter, despite net service revenues jumping 25.3% to $5.20 million.
The company did its best to put a positive spin on the latest set of results, saying the decline in revenues was down to the timing of project starts and new contracts. The sharp contraction in gross margins for the third quarter – 42.7% compared with 63.4% in Q3 2006 – was mainly due to the increased costs of personnel “added to enhance our operational efficiency and capacity”, etrials explained.
During the quarter Peter Benton, who was brought in as interim chief operating officer in July with a brief to improve the company’s growth outlook and restructure its operations, took the position on a permanent basis. In addition, Chuck Piccirillo was appointed as vice-president of product development, charged with “identifying and implementing applications that can be immediately useful and cost-effective for our customers”, etrials noted.
New contract growth
The company also pointed out that, despite the overhaul aimed at transforming it into a more responsive, service-oriented organisation, etrials managed strong growth in new contracts with “minimal” cancellations during the third quarter. New contract awards were worth $4.9 million, 23% more than in the second quarter, and cancellations came to less than $200,000.
“We remain committed to becoming the leading supplier of eClinical solutions to the middle market, the highest growth segment that aligns well with our comprehensive, enterprise-based applications,” commented president and chief executive officer Chip Jennings. “We firmly believe that etrials is on the right track to mark steady gains in financial and operational performance next year.”
In the fourth quarter etrials is expecting a modest year-on-year increase in net service revenues and a loss comparable to that in the latest quarter before non-cash stock-based compensation expense. The net loss for the third quarter was $1.31 million or $0.12 per diluted share against net income of $391,487 or $0.03 per diluted share in the third quarter of 2006. Results for both the 2007 and 2006 quarters included around US$0.3 million in non-cash stock-based compensation expense.
Over the next three quarters etrials aims to invest in additional staff for operations, sales and product/tool development, it noted. The company does not anticipate realising the benefit of these investments until the second half of 2008.
