Slowdown affecting rebranded eResearch Technology

By Phil Taylor

- Last updated on GMT

Related tags: Revenue, Income

Cardiology and eClinical specialist eResearch Technology missed analysts estimates of sales and earnings in the fourth quarter of 2008, but still posted a near-14 per cent increase in operating profit.

eResearch Technology – which is being rebranded as ERT – said revenue was $30.1m, up 4 per cent from a year ago but almost $4m shy of the third-quarter tally. Operating income came in at $8.6m, well up from a year ago but still below the $10.5m posted in the third quarter of 2008.

The familiar litany of delayed decision-making by sponsors – which seems to be affecting just about all the companies in the CRO space – was also a feature of the ERT’s fourth quarter, said CEO Michael McKelvey.

Revenues at the firm’s cardiological testing unit - which provides Thorough QT testing on an electrocardiogram to assess the cardiovascular risk of medicines - saw the largest drop, he said. There were also smaller declines affecting ERT’s Phase I-IV trials business, as well as in site support revenue.

QT testing is a requirement of regulatory approval but can be done at any point in the development process before filing, noted McKelvey. So while companies may be delaying studies now, it is still likely that they will come through in the next couple of years.

He pointed to the December 2008 guidance issued by the US Food and Drug Administration (FDA) that requires sponsors to evaluate cardiac safety risk of all therapies for type II diabetes as clear evidence of the underlying strength in the QT business.

Meanwhile, ERT’s eClinical business, which has seen declining sales in recent quarters, benefitted from a small uptick, mainly on the back of the performance of its electronic patient-reported outcome data (ePRO) product. Overall, eClinical Revenues came in at $2.6m for the quarter.

On the plus side, new bookings were $45m in the fourth quarter, up 15 per cent and characterised by “a marked shift toward a higher percentage of new bookings in Phase III and Phase II and a lower percentage of new bookings for Thorough QT and Phase I studies​,” said McKelvey on a conference call.

For 2009, ERT is anticipating net revenues of $105m to $125m, a little below analyst estimates and reflecting the fact that the company is “operating in an economic and financial environment that is as difficult as we have ever seen​,” said McKelvey.

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