The 1M1M Deal Radar 2010: Nextrials ,Pleasanton, California

Nextrials offers a hosted software solution for the data collection and project management of clinical trials. Prism, its award-winning electronic data capture (EDC) solution, has been used at over 1,200 research sites around the world to streamline clinical research and bring products to the market faster.

The San Ramon, California-based company was founded by a group of researchers in 1999. The company’s creation was inspired by the convergence of two separate events. While working at Genentech, Lecia Shaffer and Anthony Costello put together the FDA filing for the drug Herceptin, used to treat breast cancer. They struggled with the required volumes of paper and experienced the headaches of the first generation of data collection software products. They recognized the growing potential of the Internet and realized that it provided the foundation for a hosted solution for the collection of clinical data. At the same time, biochemist Jim Rogers was trying, unsuccessfully, to convince his CEO that the Internet could be harnessed to facilitate the project management challenges associated with highly dispersed clinical trials. He felt insulted when his CEO told him it was a dumb idea but to build a prototype so the company could claim to be innovative. The three founders spent two days holed up in Jim’s house outlining their vision for Nextrials. Soon after starting the company, they hired Robert Lyons to program the software. Lyons proved invaluable in converting the vision to software, and he was soon added as a partner and a founder.

The company’s flagship product is Prism, an SaaS solution for clinical trial management and EDC. Its features include inventory management, lab data management, interactive subject screening and randomization, safety data management and serious adverse event reporting, query management, real-time project management status alerts, e-mail alerts, and business intelligence functionality. Depending on the complexity of the client’s database, using Prism it takes about two weeks to design that database, compared to the eight-week industry standard. Data is typically 99.99% clean. According to Rogers, the average cost to develop a new drug is over $1 billion, and it takes up to 12 years to complete the clinical trials process, obtain approvals and deliver the drug to market. Prism can cut this time and save on costs and labor. The latest version of the product is supported on the iPhone and the iPad, an important improvement, says Rogers: “With its bigger screen, imaging power and a number of medical applications in development, the Apple iPad is expected to quickly advance the idea of entering data at the bedside for use in both clinical trials and a patient’s permanent electronic health record (EHR).”

An analyst at IDC Health Insights puts the EDC market at $568 million for 2010. Once the industry has reached maximum adoption (~95% of clinical trials), the market is expected to exceed $1 billion. Nextrials’s sweet spot in the market are the small and mid-sized biotech and medical device companies. They conservatively represent about 30% of clinical trials, so the prime market size is about $170 million in 2010 with an eventual size of over $300 million. However, Nextrials says that as it advances its e-clinical software, particularly around integration with EHR, its solutions will be more attractive to large pharma companies and that portion of the market will open up more. Developing solutions for patient recruitment and drug safety reporting will also significantly increase the addressable market.

There were a number of players in the clinical trials management solution market when Nextrials was founded. A few of the companies that had significant funding, such as Phase Forward and Medidata, focused almost exclusively on larger companies and their larger research budgets. In its early years, Nextrials served the small to mid-sized biotechnology and medical device markets. The marketing strategy was simple: work with smaller institutions because they are often the industry’s innovators and, as such, they better appreciate the value of e-clinical tools such as Nextrials’ Prism. They also appreciated the high level of service that Nextrials as a smaller vendor was able to give.

The company credits its ability to compete head-to-head against the established EDC and clinical trial management companies to the strength of Prism’s design, the expertise of the management team, a strong customer focus, and its 99.99% uptime/reliability. Life science IT mirrors the industry it supports, says Nextrials. Large pharma companies are notoriously poor innovators, often looking to nimble biotech companies for new products or innovations like the use of EHR for clinical research.

From its inception, Nextrials has been self-funded and has been profitable for nine of its eleven years. Over the past five years, the company has averaged 45% annual growth and has been listed on the Inc 5000 for the past three years. The 2008 award was based revenues of $4.6 million in 2007 and a growth rate of over 155%. By 2009, the global economic crisis had a ripple effect on Nextrials and the rest of the industry because biotech companies cut back on research as their funding became uncertain. Nextrials was able to make the necessary adjustments to its cost structure to post a profit with $4.9 million in revenue. The company has already seen a turnaround in the industry and expects over 10% revenue growth in 2010 as the industry recovers. It expects higher growth rates in subsequent years.

Nextrials is in discussions with a number of potential investors. The company says the market is interested in healthcare IT and recognizes the value in utilizing EHR for clinical research. Nextrials plans to use the investment to further develop its EDC/EHR solutions for patient recruitment, study data collection, and drug safety reporting. The ideal investor will have access to life sciences companies who can benefit from these solutions.

The goal is to grow by taking on outside investment to accelerate the development of EHR-related solutions that will increase the addressable market. Nextrials plans to expand its EDC market and increase market share by offering EHR-enabled EDC to give it an advantage over competitors that do not offer this next-generation tool.

Nextrials has worked with over 30 clients from small biotech and medical device startups to large pharmaceutical enterprises. Its software has been used at over 1,500 clinics and hospitals in more than 30 countries. Many of the sites are in Central/Eastern Europe, Russia and South America, which are are high-growth areas for clinical research. Some customers are AcuFocus, ArQule, EKOS, GlobeImmune, Generex, Pfizer, Shire, and Syndax.

Nextrial says that its eventual exit will likely be through acquisition. Possible suitors include healthcare companies that are looking for an entry into the life sciences market, large outsourcing companies in the industry that want to add technology solutions to their offerings, related life science companies looking to consolidate technologies into a broader software suite, or possibly a competitor that wants to incorporate the existing business and gain access to new EHR/EDC tools being developed.

Recommended Reading
Many Health Professionals Buying iPad, But its Effect on Healthcare Still in Question (from HealthLeaders Media)
Deal Radar 2009: DecisionView
Deal Radar 2009: WaveMark

This segment is a part in the series : The 1M1M Deal Radar 2010