Media Coverage
Phase Forward Turns Profitable
Phase Forward Turns Profitable
Bio IT World
February 23, 2005
Like it or not, Phase Forward is the grand old man of the clinical technology arena and a beloved target for many younger companies trying to muscle in and sell software to pharma. So its newfound prosperity will be both hopeful and discouraging to observers. The news heralds both pharma's growing demand for technology and Phase Forward's lead in supplying this stuff.
Earlier this month, Phase Forward reported that annual revenues were up 19 percent (to $74 million) for the 2004 period. That sort of growth is sustainable, says president and CEO Robert Weiler. "The revenue numbers can continue to grow in the 20 percent range," he says. "It's all about the adoption rate. We're starting to see the elusive takeoff of EDC [electronic data capture]. It was a very, very good year."
It's hard to argue with that. The company turned modestly profitable. During 2004, Phase Forward also signed a large, demanding enterprise customer in GlaxoSmithKline (GSK). The British company did an extensive examination of Phase Forward and wanted to make sure Phase Forward could help it meet an ambitious schedule to make a transition away from paper-based trials.
Phase Forward has also continued to sign up academic and contract research organizations. It raised $37 million in the public equity markets. Finally, the company is able to invest heavily in its own platform, putting a respectable 16 percent of revenues into research and development.
Still, there were some cautionary notes. The company lowered the estimates of the anticipated growth in its order backlog. And Weiler acknowledges that some customers are hesitating about whether to invest in commercial software at all. That adds up to a more tempered outlook than some of his competitors, which would be delighted to grow to the size Phase Forward has already attained.
Much of the sponsors' uncertainty, Weiler relates, is tied to ongoing concerns over what, if anything, Washington will do to beef up the monitoring of drug safety. "Safety now clearly is a focus," says Weiler. "You have Congressional hearings. You have possible legislation. It forces the industry to look at what they're doing around safety. It's going to be the end of 2005 before they sort this out."
Even that focus on safety is not necessarily unfortunate, he says, as it has drawn attention to Phase Forward's integration of EDC software and tools to report adverse events.
A new version of Clintrace, the company's safety product, was released last September. "We are seeing a large pickup in activity around that product," says Weiler. "People are asking, 'How does your safety product integrate with EDC?' " Not surprisingly, he says the answer is: Phase Forward can tie together EDC and safety far more seamlessly than most of the rest of the industry.
On the technology front, Weiler says the company's EDC application, InForm, will soon have new reporting functionality. It's an error, Weiler says, to assume that all of his customers are encouraged to use InForm in concert with the complementary Clintrial program for managing data.
At least one large customer usually bypasses the clinical data management program altogether, piping the data directly into other programs for analysis. Says Weiler: "This perception that our competitors put out, that you have to have this huge backend thing, is totally inaccurate." That's not to say many big customers won't use his Clintrial package for the foreseeable future, having built other applications or workflows around the clinical data management system.
We pointed out that a number of Phase Forward's smaller clinical technology rivals are claiming significantly higher growth rates. In some cases, archrivals to Phase Forward say they are growing twice as fast as the Waltham, Mass., concern.
Weiler has seen the same press releases, which typically cite a growth figure without noting a hard dollar number or baseline number from which the growth occurred. "It is difficult to get a handle on a company that puts out partial numbers," Weiler says. "The GSK deal is bigger than all of our competitors' revenues combined."
And what of the still-heavy investment in internal, proprietary software development in pharma?
Weiler concedes that, in pharma, the dollar amounts spent on homegrown solutions remain significant. But he believes the tide is turning, as it always has with other big, complex software niches (think customer relationship management or enterprise resource planning). As each vendor community grows in competence, and the expertise of, say, shoe companies developing their own software reaches its natural limit, a shift occurs.
"Once the vendors become stable and solid, the buy vs. build equation flips," says Weiler. "The companies say, 'We're not in the business of building software.' I believe that flip has occurred."
He reminds us of the decision by General Electric to invest in Microsoft Outlook/Exchange. "After that," he continues, "you saw tremendous acceleration in everybody buying Outlook and Exchange. They said, if 'GE is doing it, it must make a lot of sense.' In retrospect, when we look at the inflection point, we will look at GSK. We'll look back on this as a bellwether event."