Friday, October 17, 2008

Clinical trials pave the way for tech consolidation

By Stephen DeSantis

Waltham-based drug development services firm Phase Forward Inc.’s recent $40 million acquisition of Clarix LLC, a clinical technology company, follows a series of similar buyouts that could signal a wave of consolidation as big firms in the electronic clinical trial space buy up niche players, industry experts say.

In June, Waltham’s Parexel International Corp. bought a London-based clinical technology player called Clinphone for $182 million with plans to integrate it into Parexel’s Perceptive Informatics unit.

Last year, Boston-based clinical data management firm ARS Inc. was purchased by Premier Research, a clinical research organization in the U.K. Experts cite various reasons for the developing trend, but economic and business factors lead the way.

“The consolidation we’re seeing today is the effect of the dramatic reduction of capital due to the state of the economy; companies are finding it difficult to attain additional funds,” said Robert Weiler, Phase Forward’s CEO. 

Weiler also attributed these consolidations to an ever-present need of bio-pharmaceutical firms to cut costs.

Customers of eClinical technology are driving these technology buys as well.

Clinical technology companies like Phase Forward (Nasdaq: PFWD) help drug developers and CROs manage studies electronically, versus using time-consuming and error-prone paper forms. Until about five years ago, collecting thousands of bits of patient information during the course of a pivotal trial was primarily done by hand using pen and paper. Even now the drug development industry’s adoption rates for such tools are not yet universal.

As drug developers and CROs began their long road toward “paperless” studies using electronic data capture (EDC) tools — in Phase Forward’s case it was its InForm product — the companies realized their customers also needed to use smaller vendors for various related eClinical needs. This is forcing clients to work with multiple vendors on one project, said Martin Young, vice president of corporate development at Phase Forward. Young was instrumental in the acquisition of Clarix.

“As with a lot of technologies, within the (eClinical) market it’s often the customers that mandate the use of particular solutions,” he added.

Both Clinphone and Clarix were interactive response technology (IRT) businesses that focused on clinical trials. Their tools, either web- or phone-based, collected information from patients or trial conductors remotely.

“Customers are seeking the consolidation and simplification of solutions and vendors, and the integration of EDC and IRT solutions is increasingly requested,” said Jagath Wanninayake, founder and former CEO of Clarix.

There are other niche local players that could be the next acquisition targets. Patients and clinicians can also use handheld PDA-like devices to input critical information in the course of the trial.

Electronic patient outcome firms like Charlestown-based PHT Corp. and CRF Inc. in Waltham specialize in those areas and work directly with drug developers and CROs. Other firms like Cambridge-based Akaza Research focus on clinical management software.

“With these companies you can assume customers want those technologies embedded into one platform. Intuitively you can see all these things eventually coming together,” said Bret Jones, an analyst who follows firms in the clinical trials industry at Boston-based investment firm Leerink Swann LLC.