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Medidata Solutions: The One Healthcare Stock That’s Not Sucking Up to Washington
by Louis Basenese, Advisory Panelist
Friday, September 25, 2009: Issue #1102
When it comes to the healthcare debate, let’s keep one obvious fact in mind: Expenses are out of control and must be reined in. That’s true with or without a massive reform bill.
And that plays right into the hands of Medidata Solutions Inc. (Nasdaq: MDSO).
The company is a leading provider of electronic data capture (EDC) and clinical data management systems (CDMS). In laymen’s terms, it helps drug companies go from the Dark Age into the Digital Age.
And it’s a transformation that we desperately need. Here’s why…
Anyone For a Tedious, Time-Consuming Paper Trail?
Roughly 75% of all clinical trials – the most critical function of drug companies, yet also the biggest drain on resources ($45 billion, annually) – are done on paper.
That’s right. Even in today’s high-tech world, in three out of four clinical trials, information for each patient is literally recorded on pre-printed paper, specifically a case report form (CRF). Ugh.
To make matters worse, each CRF isn’t typically uploaded to the main database for weeks. And it’s entered twice and screened for inconsistencies, which, ironically, only causes more data-entry errors.
From start to finish, it’s a cumbersome and antiquated process, with data taking four months to make it from observation into a database for screening and analysis.
Obviously, such a paper-intensive process results in significant complexity and cost. It’s a process long past due for an overhaul. And that’s where Medidata comes in…
Five Benefits of “Going Digital”
The company’s flagship product, Rave, allows customers to design testing protocols, in addition to capturing, managing and reporting clinical trial data through an easy-to-use, Internet-enabled platform.
So instead of the tedious (and error-prone) pen-and-paper rituals, researchers can enter data directly into any Internet-ready computer. Bingo. No waiting.
And as you probably suspect, going digital provides notable benefits:
- The data is instantly uploaded, screened, and available for analysis and even reporting to the FDA.
- Forrester estimates that EDC reduces the cost of Phase II trials by an average of 47% and Phase III trials by 54%.
- Data entry errors plummet 93% to 3.1 errors per 1,000 data points.
- Staffing requirements drop by 18%.
- The time in which data can be recorded, verified and analyzed sinks from an average of 10 weeks to just four days.
The last point is most crucial.
A Safe Way to Fast-Track Clinical Trials
With researchers able to gain almost real-time access to data, they can monitor interim results and abort clinical trials at the first sign that a patient’s health might be at risk. It also provides mid-trial leeway to alter the parameters – like dosage – to improve overall results.
Bottom line: Having data captured electronically safely accelerates the clinical development process and maximizes the commercial life of each drug. And in the process, it dramatically cuts costs and leads to safer drugs.
So it’s no wonder the market for such products is expected to triple in size in the next three years.
And the reason I’m so bullish on Medidata is simple: It’s already capitalizing on this growth potential…
Buy Now While Wall Street Snoozes
Medidata’s net second quarter revenue jumped by 32% to $8.3 million, compared to Q2 2008. That makes Medidata the fastest growing company in the EDC space. The company also reported a profit, compared to a loss last year.
In addition, it keeps adding customers to its existing blue chip and international client base, including Switzerland-based Roche.
Of course, few investors even know the stock exists, as it only went public in June. Fewer still understand its business enough to know that healthcare reform won’t impact it.
So before the rest of Wall Street catches on, now is an ideal time to buy.
Because rest assured, Wall Street will buy. Companies tapping into under-penetrated multi-billion markets, increasing profits, with a rock-solid balance sheet ($94 million in cash) don’t fly under the radar for long.
And this one is primed for more growth. As Medidata CFO, Bruce Dalziel, explains: “As a private company for nearly a decade, we have focused on building quality solutions for our customers, a global sales and services presence and, more recently, a robust public company infrastructure. Now that the majority of this scalable infrastructure is in place, we are focused on profitable growth.”
I recommend you position your portfolio to profit as Medidata helps rid the clinical trial process of wasteful spending. It’s just too bad it can’t do the same for Washington!
Good investing,
Louis Basenese
P.S. If you’re looking for more healthcare stocks that are immune to the outcome of reform in Washington, check out my latest Oxford Club report. It outlines four overlooked companies that I expect to head considerably higher in the next 12 months. They pay handsome dividends to boot.
- Healthcare M&A Activity: Three Healthcare Small Caps Primed For Takeovers
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- The Healthcare Debate: We’ll Stick to Earning Profits
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One Response to “Medidata Solutions: The One Healthcare Stock That’s Not Sucking Up to Washington”
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A former Wall Street consultant and analyst, Louis helped direct over $1 billion in institutional capital before joining forces with The Oxford Club.
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September 25th, 2009 at 10:00 am
Your attached article refers to a number of ‘cash machine’ securities. As a member currently receiving your reports, I would appreciate your identifying the companies to me and your providing the reports relating to these securities.
Thank you for your consideration.
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