Phase Forward buys Clarix for $40m

Clarix’ web- and phone-based IRT system is used to randomise patients into trials, manage inventory of medications so that drugs are available to subjects as required, and operational management and reporting in clinical trials that allow sponsors to fine-tune recruitment as the study progresses.

Bob Weiler, Phase Forward’s CEO, said in a conference call that the company had a lot of experience in integrating various IRT systems with its own InForm electronic data capture (EDC) product, and that Clarix’ offering stood out as being the best.

“The majority of Phase II and Phase III studies require patient randomisation and related medication supplies management, and IRT is the predominant solution for automating these processes​,” said Weiler.

Adding an IRT system to InForm could have a dramatic effect on revenues, he predicted. A typical trial using InForm brings around $400,000 into Phase Forward’s coffers, but adding IRT as a module would add another $150,000-$200,000 to the tally. And that will sit alongside Clarix’ existing standalone IRT business, which can be sold to sit alongside rival EDC packages, he added.

Pressure to bring drugs to market quicker and more cheaply, coupled with increasing complexity in clinical trials, is prompting many more pharmaceutical developers to turn to technologies that can make the trial process more efficient, such as automating the initial patient randomisation to the various treatment arms in a study, assigning patient identification tags and issuing the appropriate medication. This central approach to supplying the drugs to patients can also reduce wastage.

With a plethora of rival technologies and vendors now operating in the eClinical space, there has been a concerted move towards consolidation in the sector, as working with multiple vendors can be complex, costly and resource-intensive.

Fragmented sector ​

Overall, the global IRT market is growing at around 15 per cent a year and is currently valued at $250m, currently led by ClinPhone which had a 35 per cent market share ahead of its acquisition by Parexel International last month. Weiler believes that in time Clarix’ IRT system could take a 40 to 50 per cent slice and become the biggest player.

Meanwhile, behind ClinPhone there are a crowd of competitors jostling for position. Parexel’s own IRT division, Perceptive Informatics, has a 9-10 per cent share, according to Weiler, with all the other players (Fisher, Aptuit and certain other CROs) in single digits. The picture is similar to that for EDC a few years back, until a wave of consolidation left a much smaller group of providers tackling a market of around $1bn.

Like EDC before it, the demand by customers to simplify their working practices will spur a deconstruction of the IRT market, and having a market leading EDC product will stand Phase Forward in good stead to benefit from that process.

“Integration of EDC and IRT solutions is increasingly being requested by our customers​,” said Weiler. And unlike EDC, it tends to be much easier to switch from one IRT to another, so the hurdle for Phase Forward of migrating its EDC customers to Clarix’ IRT from another system should not be too high.

That said, by adding its own IRT Phase Forward is also placing itself into competition with some of its customers, namely the CROs which call on the firm for EDC but have their own IRT systems.

These systems already work alongside InForm, but Weiler believes that the level of integration is key – the closer the fit, the lower the cost and the easier it is to set up. In effect, IRT can become a component of EDC, rather than a separate product.

Having both web and phone capabilities is critical in an IRT as the market is evolving inexorably to web-based systems, and the efficiency of that integration is one of the factors that attracted Phase Forward to Clarix’ product. Other players with technology that debuted when telephony was king, such as ClinPhone, have had to adapt their offerings, while Clarix has been web-integrated from the off.

Clarix' CEO Jagan Wanninayake said that the company’s customers now process the majority of their transactions via the web. Its systems have been translated into 55 different languages and dialects and are in use by over 45,000 users in 62 countries, including clinical trial teams at three of the top five and 11 of the top 25 pharmaceutical companies.

For Clarix, with sales of just $2.7m last year, gaining access to Phase Forward’s global sales network should accelerate growth. In its own right Clarix should see sales advance to over $6m in 2008, with the Phase Forward effect driving sales still further through 2009, adding $15-$15m to revenues in that year. That represents a 100 per cent increase on the sales predicted if Clarix were to remain independent.

For comparison, Phase Forward’s revenues were $79m in the first six months of 2008. The company said Clarix’ IRT business would start being accretive to earnings in the second half of 2009.

Fresh from closing the Clarix deal, Phase Forward is already looking at other acquisition targets, according to Weiler. While the firm would ordinarily shy away from buying service-type companies, it is interested in adding to its technology base, looking for companies that have a similar customer base and whose products help automate clinical trial processes.