Phase Forward, the US-based company specialising in data management solutions for clinical trials and drug safety, hit or exceeded analysts’ targets for income and sales in the fourth quarter of 2009, with revenues jumping 22% year on year.

But the company’s share price dropped sharply on the results, as financial projections for the current year lagged behind the analyst consensus. Phase Forward remains upbeat, though, citing its diversification – in line with market trends – from core electronic data capture (EDC) services to an ‘end-to-end’ integrated clinical research suite (ICRS).

“We believe Phase Forward’s market share lead in EDC and status as the only true ICRS vendor at this time position the company well to sustain and potentially increase revenue growth as the market evolves toward purchases of integrated applications and end-to-end ICRS offerings,” commented Bob Weiler, chairman and chief executive officer.

Combined licence and service revenues in the quarter ended 31 December 2009 were US$58.8 million, up by 21.7% over the same period of 2008. On a non-GAAP (Generally Accepted Accounting Principles) basis, fourth-quarter revenues were 21.0% higher at US$59.4 million. That excluded a US$597,000 purchase accounting adjustment to record deferred revenues and backlog assumed in acquisitions at fair value.

Last year saw a string of acquisitions, with Phase Forward snapping up Maaguzi LLC, a US company specialising in web-based electronic patient reported outcomes (ePRO) and solutions for late-phase clinical studies; the Interactive Voice & Web Response Services (IVRS/IWRS) business of contract research organisation Covance; and Waban Software, a US-based supplier of platform solutions for automation and compliance in clinical data analysis and reporting.

Analysts polled by Thomson Reuters had expected fourth-quarter revenues of US$58.7 million (analyst projections typically ignore special items). The analyst consensus for Q4 earnings per share (EPS) was US$0.13 and this is what Phase Forward reported on a non-GAAP basis, matching the non-GAAP diluted EPS figure for the final quarter of 2008. From the same perspective, operating income rose by 16.2% to US$8.7 million in the latest quarter.

GAAP operating income for the three months to December was US$539,000, 84.0% below the year-before period. Phase Forward blamed the decline primarily on non-cash expenses relating to a US$2.3 million impairment charge and a US$700,000 increase in the amortisation of intangible assets resulting from acquisitions.

On a GAAP basis, diluted EPS were flat in the fourth quarter of 2009, compared with net income of US$0.06 per diluted share in the same period of 2008.

Crucial yea

Weiler said 2009 had been “one of the most important years in the history of our company. We took major steps to evolve Phase Forward from the leading EDC vendor to the first end-to-end provider of an integrated clinical research suite spanning EDC, IRT [interactive response technology], data and statistical analysis platforms, safety and ePRO/late solutions”.

The company is already starting to see the benefits of its expanded offering and “[we] believe our early lead in providing an end-to-end ICRS offering will become increasingly important moving forward”, Weiler added.

Recent business highlights have included:

- Continued strong growth during the fourth quarter for Phase Forward’s IRT offering. Buoyed by a combined EDC/IRT agreement with Dow Chemical, IRT-related revenues were up by more than 130% year on year.
- A multi-year agreement with the Drug Development Office of Cancer Research UK, standardising on Phase Forward’s InForm GTM (Global Trial Management) solution.
- A multi-year agreement with global drug development services provider PharmaNet Development Group, under which PharmaNet is offering Phase Forward's InForm GTM solution to its customers worldwide.
- Non-GAAP revenues from business with contract research organisations grew by 30% year on year in the fourth quarter.

Phase Forward’s current guidance for 2010 foresees non-GAAP revenues of US$240.0 million to $248.0 million, and non-GAAP EPS of US$0.54 to US$0.60. GAAP EPS are projected at US$0.26 to US$0.32.

The analyst consensus quoted by Thomson Reuters was for full-year income of US$0.63 per share on revenues of US$256.5 million.

“As we begin 2010, we expect Phase Forward to deliver solid financial results, characterised by low to mid-teen revenue growth and a continuation of the recent trend of margin expansion,” Weiler commented.