Phase Forward, the US-based company that specialises in data management solutions for clinical trials and drug safety, lifted its operating income by 7.0% to US$4.39 million in the third quarter of 2008 as revenues climbed 23.3% to US$43.0 million.
The growth was markedly slower than in the second quarter, when revenues were up by 29.5% year on year and operating income jumped 32.4%. Phase Forward’s president and chief executive officer, Bob Weiler, said the operating profit was better than expected, though, while earnings per diluted share (EPS), expressed in non-GAAP (Generally Accepted Accounting Principles) terms, were in line with the company’s guidance.
The year-on-year decline in non-GAAP EPS, from US$0.16 to US$0.12, was mainly due to an increase in Phase Forward’s tax rate from 10.3% in the third quarter of 2007 to 36.2% in the latest quarter, Weiler added. On a GAAP basis, third-quarter EPS were US$0.08, down from US$0.13 in the year-before quarter.
Service revenues grew by 36.7% to US$30.0 million in the latest quarter, while licensing revenues were marginally (0.4%) higher at US$13.0 million. InForm licensing, application hosting and other related revenues were US$32.7 million, up by 28.2% and accounting for 76% of overall revenues in the third quarter.
The business highlight of the quarter was the acquisition of Clarix LLC, a provider of fully Web-integrated interactive response technology, for US$40 million in cash. Phase Forward also struck a multi-year extension agreement with Eli Lilly, which has used the former’s InForm electronic data capture (EDC) solution in more than 200 clinical trials since 2001.
In addition, Phase Forward signed up new InForm ASP (Application Service Provider) customers across a range of business segments, including Advanced Clinical Research, BrainsGate, BioMarin, Kendle, Vertex and the United Therapeutics subsidiary Lung RX.
For the full year, Phase Forward is projecting non-GAAP revenues of US$168.0-US$169.0 million and operating income of US$26.9-US$27.5 million on the same basis.
Non-GAAP EPS are expected to be between US$0.48 and US$0.49, while GAAP EPS are forecast at US$0.30-US$0.31, including a purchase accounting adjustment for the assumed Clarix deferred revenues and backlog at fair value, non-cash expenses associated with stock-based compensation, and amortisation of intangible assets.
