By Deb Borfitz
May 8, 2009 | What reputable products and a succession of management teams couldn’t do for etrials Worldwide its soon-to-be owner most likely can: boost stagnating sales and stem the red ink. The beleaguered clinical trials software company agreed to be acquired by cash-positive Bio-Imaging Technologies in a $10 million deal expected to consummate in mid-June, the publicly traded companies jointly announced on May 5.
Bio-Imaging Technologies entered the electronic data capture (EDC) business with last year’s purchase of Phoenix Data Systems (PDS) and recently began doing business under the name BioClinica, says President and CEO Mark Weinstein. The addition of etrials doubles the client base for EDC to about 80 trial sponsors.
There are plenty of cross-selling opportunities on both sides, says Weinstein. etrials has electronic patient dairies as part of its EDC platform and BioClinica does not. etrials also has “stand alone” interactive voice and web response technology. Conversely, BioClinica has data management expertise and imaging data integration that etrials has historically lacked. A hybrid, integrated EDC platform will emerge in a couple of years.
The acquisition would make BioClinica the top mid-tier EDC player, behind Phase Forward and Medidata, with $33 million in annual EDC revenues. Weinstein estimates that would give BioClinica three times the market share of the next closest competitor. Future growth is expected as big pharmaceutical firms decide to outsource rather than own EDC. “We help run a study and leave, so there’s no hardware or software to buy,” he says. “We think that’s the model of the future.”
The market for e-diaries will be “substantial” within three to five years, adds Weinstein, citing 2007 guidance by the Food and Drug Administration (FDA) making paper-based diaries on pivotal studies hard to justify. The FDA has already approved several drugs based on studies in which patient-reported outcomes were the primary endpoints. Mounting drug safety concerns further support the trend.
According to documents filed with the Securities and Exchange Commission last fall, etrials was actively looking at “strategic alternatives” for restoring value to the company that was considered a top player until revenues began plummeting three years ago. Board members intended to spend $20 million from a 2004 reverse merger to buy other companies, says Weinstein, but they burned through most of the available cash sustaining operations.
The new CEO replaced the management team and was subsequently fired. Yet another new management team was brought in last fall, headed by current President and CEO M. Denis Connaghan. In January, etrials filed a lawsuit against two of its former executives and their new employer (Belgium company Unithink) on charges that they stole trade secrets and violated confidentiality agreements.
All of the corporate upheaval has made etrials’ EDC platform almost impossible to sell to the risk-averse pharmaceutical industry, says Weinstein. With a solid track record and $15 million in the bank, debt-free BioClinica may well be the white knight for etrials. BioClinica offers industry-leading imaging core lab services as well as a respected EDC product line and employs 450 people.
Compared to the $40 million Phase Forward paid for Clarix last September, or even the $24 million BioClinica paid for PDS last March, the $10 million price tag on etrials is a veritable bargain. The deal is primarily for stock rather than cash, says Weinstein, and the 100 people etrials employs will be retained. “We’re not a technology company, but a technology-enabled service business. That takes good people. And that’s how we differentiate ourselves.”