The project delays and more restrained spending that are now a familiar characteristic of the clinical research environment took their toll on eResearch Technology (ERT), the US-based supplier of centralised electrocardiograms (ECGs), eClinical technology and electronic patient-reported outcomes services, during the first quarter of 2009.
ERT’s net revenues fell by 29.4% year-on-year to US$23.8 million in the quarter, while operating income dived 60.7% to US$3.3 million and earnings per diluted share were US$0.04 versus US$0.11 in the first quarter of 2008. The company, which recently undertook a corporate rebranding, has lowered its financial guidance for 2009 to reflect the more difficult operating environment.
Backlog as of 31 March 2009 was US$157.0 million compared with US$151.4 million a year previously. The annualised rate for contract cancellation was 22.4% in the first quarter of 2009 against 19.3% in the fourth quarter of 2008 and 15.6% in the first quarter last year.
President and chief executive officer Dr Michael McKelvey said the results were in line with ERT’s expectations, as expressed in the financial guidance it gave last February, when net revenues were projected at US$21.0-24.0 million and EPS at US$0.01 to US$0.04.
The marked decline in first-quarter revenue was largely due a sharp drop in Thorough QT business, reflecting the ability of companies to delay running these cardiac safety trials until later in the drug development cycle, “though current regulatory guidance ultimately requires that they be performed”, McKelvey noted.
Routine revenues (i.e., from Phase I to Phase IV trials) also took a hit, “as a result of the larger percentage of our past business being booked in Phase III trials, which are longer-term trials and thus take longer to turn into revenue, as well as a slower rate of spending by our pharmaceutical and biotechnology clients”. However, the company’s gross margin percentage stayed above 50% (50.4% in Q1 2009, 52.5% in Q1 2008) and ERT made good progress on its strategic priorities during the opening quarter, McKelvey added.
“We continue to be successful in winning new and expanded exclusive or near-exclusive long-term enterprise partnerships with large clients, which should positively impact our future levels of new booking activity,” he commented. “We successfully launched two significant efforts aimed at expanding industry penetration of centralised ECGs by focusing on how centralisation of ECGs can reduce our clients’ costs. We began to see the results of our new marketing programmes in increased market awareness.”
Despite the challenging economic and financial environment, “we feel that the fundamentals of our industry remain strong and that we are successfully positioning ourselves for additional growth in the future”, McKelvey said.
The guidance given in February for net revenues of US$105-US$125 million in 2009 has now been moderated to US$100.0-US$115.0 million. ERT has lowered its forecast for diluted EPS in the full year from $US$0.25-US$0.43 to US$0.20-US$0.35.
