William Blair & Company, L.L.C.
March 2009

We believe electronic data capture (EDC) vendors are positioned to benefit from the broad trend across the pharmaceutical industry to redesign the way drugs are discovered and tested. In recent years, as clinical trials have grown in size, complexity, and geographic reach, the inefficiency of using multiple processes to collect data has been magnified. Thus, we are not surprised to see many of the top pharmaceutical companies and CROs (such as GlaxoSmithKline, Merck, Novartis) move toward using EDC in 100% of their trials.

Given demonstrable cost and time-saving advantages, coupled with biopharmaceutical companies’ dire need to reduce time to market and cut excess costs, we believe EDC adoption has clearly reached a tipping point and we expect adoption to continue to ramp up quickly over the three to five years.

To test this theory, as a part of our CRO survey conducted toward the end of 2008 and early 2009, we included two questions dealing specifically with EDC adoption and the vendor of choice. We were surprised to see that nearly 45% of our respondents (n=18) already conduct more than 50% of their trials using EDC technology, and that three years from now, 85% expect to use EDC in 50% or more of their trials. Perhaps less surprising is that the two vendors identified most often as partners of choice were Phase Forward and Medidata.

Quantifying Market Growth—EDC Market Model

Our research of the EDC market indicated that there is a dearth of good data on the size of the market and the potential growth opportunity that exists. As a result, we have built a market model to estimate the current opportunity and future growth rates. In our view, three components to the growth of EDC-related spending will shape the industry in the coming years—new clinical trials, trial costs, and penetration rates—and we have incorporated these factors into our market model.

Based on our assumptions for trial growth, costs, and adoption rates, we believe the EDC market will grow roughly 15% per year through 2012—which compares with the 30%-35% growth reported by industry participants over the last few years. We believe the total addressable market (assuming 100% penetration) in 2007 was roughly $1 billion and expect that market to grow to roughly $1.4 billion in 2012. Taking penetration rates into account, we believe the 2007 market opportunity was roughly $330 million and expect it to increase to roughly $745 million in 2012, a CAGR of 15%.