Larry Birch Reveals DATATRAK’s Quarterly Results Highest Since 2008

DATATRAK [OTCQX: DATA] continues its recovery with its highest quarterly sales since 2008.  The company attributes its growth in sales to a number of factors including greater stabilization where a previous administration failed to deliver on many fronts. OneMedRadio’s interview with CEO Larry Birch describes the continued progress for this provider of advanced software systems for the clinical trials industry.  With reported revenue of  over $2 million in the last quarter, Birch is confident his team is creating  a powerful company with a “better technology than its competitors.”

Revenue for the second quarter of 2011 increased 13% to $2,133,000 compared to $1,881,000 in the same period of 2010. The gross profit margin remained relatively stable at 84% for the three months ended June 30, 2011 compared to 85% for the three months ended June 30, 2010.

In addition, DATATRAK has expanded its sales force to reach more people with the idea that “the more people that see the software, tend to love it, and buy it.” A significant portion of R&D budgets are used for the outsourcing services offered by the CRO industry. Birch contends that “Even in a market facing reduced R&D expenditures and rising clinical trial costs, DATATRAK is continuing to set milestones in its company history.” A candid discussion with him uncovers the strategy of the “new” DATATRAK.

Brett Johnson: Welcome from New York. This is Brett Johnson with OneMedRadio. Today, we are with Larry Birch who is the CEO of DATATRAK International, symbol DATA on the OTC QX. DATATRAK just released their quarterly results and Larry Birch has joined us today. Larry, welcome.

Larry Birch: Thanks, Brett.

BJ: So, Larry, can you tell us a little bit about the quarter that just ended?

LB: DATATRAK had a really exceptional quarter and was indicative of exactly what we said we were going to do over two years ago when we began the restructuring efforts in the company. Now, as we move out of that into a more stable and, frankly, growth-oriented mode, the results are speaking for themselves. This quarter, we recorded a revenue of over $2 million, which is the highest revenue quarter we’ve had since 2008. We also contracted over $4 million in new sales in the quarter, which is the highest quarter of new contracted sales in over five years. In fact, Brett, I’ll tell you, we sold more in Q2 than we sold in all of 2009, which I think is an incredible thing.

That balanced with the cash infusion that we received this quarter from a partner company that bought a lot of data from us and with that cash we now are going to use that. In fact I would tell our shareholders, we basically had a non-dilutive fundraising so that allows us the ability to continue our investment in new sales people, new marketing programs, new software development initiatives to build out our product line. In fact, we’ll talk about the marketing initiatives later and we productized our business and really allowing us to start to accelerate that growth curve and the contracted sales.

I expect that as we move into 2012 and 2013, we will see the effects of these new contracts and how that will begin to accelerate our revenue. So again, with our margins, every quarter we reinvest as much as we can–maybe even a little more profit into hiring new folks, creating new programs, building up our business, and really becoming a real force in the e-clinical landscape. What I can tell you is DATATRAK is back as a great player in this space.

BJ:    To what do you attribute the recent increase in sales?

LB: Well, I think since we stabilized the company our customer base is very happy about that. We sell to pharma companies that are looking for partners who are going to be here for the long term and clearly with our financial picture we are, so that’s great. But they’ve always wanted to buy a better technology and frankly we have a better technology than our competitors have and so what I would tell you is that to a great extent on a head-to-head comparison, we tend to win and so that’s great.

By the way, you need folks to actually get out there and sell. We’ve expanded our sales force. We have many more people, feet on the street, if you will. We have much more sophisticated marketing programs today in the lead generation so we’re getting our software in front of more people. And again, I’ve always believed that the more people that see our software, frankly they fall in love with it and they tend to buy it. So it’s really a confluence of a lot of efforts, superior R&D, superior marketing initiatives and now, feet on the street selling the product. It’s a long process because we’re selling — these are long sales cycles but we’re starting to see the results of that and as I said, if this trend continues over the next several years, we’re creating a very powerful company.

 

BJ: Can you talk a little bit about the sales cycle and then also about the sort of length of these contracts?

LB: Well, it depends on the stage. You know, DATATRAK is a full service eClinical company. What I mean by that is that there are companies that will specialize in early phase, mid phase, late phase trials. We specialize in all of them. There are companies that have applications that may only hit one or two parts of the process of clinical trials. As we’ve talked about in the past, DATATRAK views the clinical trial process as not many processes, it’s one process with many complex components. And so in terms of the product base, our competitors sometimes are selling a variety of different things.

So the customers that we’re looking at and I review clinical trials and I talk about this a lot is in terms of they’re like snowflakes. They all look the same, but they’re all very, very different. But we actually have the ability to customize the way we sell and our product and the services that we accompany those products with and the services we can bring to the table with our CRO partners and help them sell as well. We can tailor that so that frankly each individual snowflake can be managed the way a customer wants to be managed and designed and a trial built that our customer thinks will accelerate their drug timeline in this identification process we call a clinical trial.

BJ: You talked a little bit in our last interview about the NTT Data agreement and you mentioned that also in your press release. Can you talk a little bit about that project?

LB: Well our relationship with NTT Data is very strong and NTT is a great company globally specifically in Japan, but it’s a global enterprise. They have contracted with us again to build out their business in Japan so it’s an expansion of the current agreement. In Japan, they also are looking to move into additional markets. So again, breadth is good, breadth of opportunities in which to sell.

They’re moving into post marketing studies in Japan so we’re actually building an application for them using our unique software application to help them in that marketplace. With this better, new opportunity to sell, a new product, a new differentiator product to that marketplace on top of the clinical product that are already selling, I would expect their growth to increase quite rapidly. That’s good for us because we fully expect to expand our relationship with NTT over time and maybe faster than we have in the past. Growth is a very dynamic thing that lifts off all ships for sure.

BJ: So in terms of investors, why is now, in your view, a good time to buy the DATATRAK stock?

LB: I think it’s a great time. You know, our company is still saddled with the past. We had a previous administration of our company that failed to deliver on many fronts. It was a company that was difficult to deal with and customers didn’t like it.

I was meeting today with a senior executive from an IT company who had worked with one of the top two CROs in the country and she years ago had been involved in a process with DATATRAK and we failed to get a deal because of the complexity of dealing with the old DATATRAK. Today, she wants to do a transaction with us and sort of reinitiate herself to the DATATRAK story because she always said the technology was the best in the industry, but the company was difficult to deal with. So that’s what created the stock price decline that we’re suffering from today and the delisting, etc.

Well the new DATATRAK is easy to deal with. We’ve got a great product. As I’ve told you, we deal with trials and we treat them like snowflakes, everyone being unique and precious and we help our customers to manage those individual nuances in a way that safely accelerates their drugs to market. So with that new approach and as again we’re seeing the result of that. The stock price is lagging behind that just as when our stock price was higher, it was lagging behind the problems the company had. The stock was at whatever, you know, many dollars per share when the company probably wasn’t worth it, it was on a downward track.

Today, we’re on an upward track and so the stock price is lagging performance. So, I would argue that especially with the market with the turmoil we’ve seen over the last few weeks, this little company called DATATRAK maybe one of the better investments in the marketplace. Because you can look at our very really results, see our very real progress, look at our market cap in relation to revenue and our contracted backlog and frankly, I believe we’re a bargain.

BJ: It sounds like it. Well Larry, thanks so much for joining us and congratulations on the solid quarter and the growth in sales. We’ll be looking to follow your progress in the coming months.

LB: Thank you very much, Brett.

BJ: That’s Larry Birch, CEO of DATATRAK, symbol DATA on the Over-The-Counter QX. Brett Johnson signing off from OneMedRadio in New York. Thank you.

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