IPO for Clinical Trial Software Provider

Phase Forward, a startup provider of data management software tools for clinical trials, filed for an $86 million initial public offering on March 15. Other than Oracle Corp., Phase Forward is one of the only enterprise software competitors with a solution for the management of clinical trials data.

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So far, life sciences companies have been slow to adopt any form of electronic data capture (EDC) software. Technology market research firm Forrester Research Inc. estimates that in 2002, 97 percent of clinical trial data was collected on paper. In that year only 8 percent of clinical trials used EDC software. But by 2006, Forrester is expecting that proportion to have grown to one-third.

Even with this reluctance, Phase Forwards products are proving relatively popular. The company has more than 300 customers, including 11 out of the 15 major pharmaceutical companies. In November, Eli Lilly and Co. signed a deal to expand its commitment from Phase Forwards electronic data capture solution, InForm, to include its Clintrial clinical data management system as well. According to the press release put out at the time, Eli Lilly hopes that by managing its data more effectively it will increase the flexibility and scalability of its global clinical trial research efforts.

In combination, InForm and Clintrial form a clinical trial data management environment that handles collection, consolidation, analysis, reporting, and preparation for submission and archiving. This integration then allows adverse events noted during the collection of clinical trial data to be automatically routed to another Phase Forward product, Clintrace, a safety reporting and tracking system.

Software licenses and application hosting services each comprised about a third of the companys revenue last year, with the remainder coming from customer support and consulting services. On revenues of $62 million, Phase Forward lost $6.7 million in 2003. Revenue was up only 3 percent over the year before. Customers based in North America account for slightly more than two-thirds of its revenue, with European companies representing 30 percent and Asia the remaining 5 percent.

Although the company was briefly profitable in the third quarter of last year, company officials dont expect consistent profitability in the near-term. Phase Forward is devoting considerable resources to integrating all three of its software systems onto a Microsoft-based platform that will run on an Oracle database.

Since its inception in 1997, the company has garnered about $72 million in venture capital investment. Its largest investors – and shareholders – are Atlas Venture which holds 17.5 percent of outstanding shares, North Bridge Venture Partners with 17.4 percent and Thomas Weisel with 10.3 percent.