Little is known. But what’s there is tantalizing. Parexel International has offered to buy ClinPhone. ClinPhone has rebuffed the overture for now. Matters may go no farther.

A merger of the two firms, now hypothetical, would change the conventional wisdom about how services and technologies should be combined in clinical trials. A combination of Parexel and ClinPhone would join two top solutions for interactive voice response (IVR) systems. It would fill a notable gap in the software portfolio of Parexel’s Perceptive Informatics division, which holds the top clinical trial management system (CTMS) but lacks an electronic data capture (EDC) solution.

Entry Point

ClinPhone, for those new to the party, is the world’s top IVR firm, with (last time we asked) 750 employees. The company often has hundreds of trials ongoing at once (at perhaps $175,000 per trial). It has also been buying or internally developing a CTMS, an EDC system and tools for drug supply management.

At the unknown moment of Parexel’s offer, ClinPhone’s shares may have been trading at about half the price they are now. The current price rose sharply after the news of a potential merger, but remains significantly below its level upon its debut on the London Stock Exchange.

Recent Jump

Parexel offered cash, and its financial statements (as of December, 2007) show just $63 million of it—a third of what Phase Forward, another firm down the street in Waltham, Mass., keeps under its mattress. At their new price, nearly 100 pence, ClinPhone shares might be just outside Parexel’s reach. Parexel may have tried to take advantage of a steep drop in ClinPhone’s price after a 2007 service disruption that the company discussed with customers and investors.

Did Parexel See An Opportunity?

Looking ahead, IVR projects are increasingly being combined with other technologies. (Both Parexel and ClinPhone consider themselves experts in such projects.) The blossoming of IVR seems likely to serve as the underpinning of adaptive clinical trial designs. A combined company might have a significant edge in the services and technologies around adaptive trials.

A Parexel-ClinPhone deal also raises at least seven questions about the direction of outsourcing and software in clinical trials. We hope readers smarter than ourselves will offer their own analysis or in the comment box below.

How would Parexel explain the deal to other CROs?

Today ClinPhone can approach CROs of all sizes in good faith. It is a technology firm. It doesn’t compete with CROs. (That presumably is why Kendle, a large CRO, chose ClinPhone last year.)

Could Parexel sell its technologies and services to fellow CROs? Could it say to its competitors, “Honestly, we’re only handling technology.” Would that be credible? Could Burger King buy beef from McDonald’s? Or would Parexel give up on collaborating with CROs and instead focus, exclusively, on assisting sponsors of research? Does Parexel’s bid reflect the early seeds of sponsor-side frustration at dealing with so many suppliers on every trial?

Is there an anticompetitive or anti-trust aspect to a Parexel-ClinPhone deal?

Should sponsors of clinical trials be worried that two top solutions for IVR and CTMS might evolve into a monopoly when combined? What sort of pricing power would Parexel have?

How important was the DataLabs element in Parexel’s thinking?

ClinPhone acquired DataLabs, a California EDC provider, late in 2006. The company’s approach of unifying clinical trial technologies (a model pioneered by Clarix, DataTrak, etrials, and several other firms) seems intuitively appealing. Could Parexel knit together its own offering, combining its own CTMS and the ClinPhone suite?

Is software chopped liver? Does everything come down to customer service that can grow or “scale” globally?

If all it were interested in was another IVR or EDC system, Parexel could have selected one of several dozen small firms and easily concluded a transaction. It speaks volumes about ClinPhone’s still sterling reputation for service that Parexel chose to pursue it. Could other technology firms be acquisition targets for CROs?

Is becoming the IBM of clinical trials a viable objective?

We’re old enough to remember when IBM sold personal computers with its own doomed operating system, OS2. IBM misjudged the ascendance of Microsoft, the importance of software. Plus a few other things. Despite such miscalculations, IBM transformed itself into a services giant. Could Parexel (or, say, United Biosource) announce to clients: “We have a new strategy. We may not have invested in EDC with any enthusiasm at first. But we’re plunging into it now, buying a company called ——.” Under this strategy, one or two CROs would be technology-driven and dominate that business in the same way that IBM towers over IT consulting services for large companies.

What does Dennis Gillings think?

Does the owner/manager of Quintiles believe technology will forever be secondary? That services will always trump software? If so, he (and other large CROs) might wait to see which EDC firms prosper and which stumble. If he needs to buy an EDC or IVR system later, prices might drop.

Wouldn’t it be easier and more strategic for a CRO to buy Octagon Research?

Acquiring Octagon Research (which owns a lower-tier EDC platform) could be an easier way to lock up additional technologies and services than buying ClinPhone. Uniquely, as far as we know, the company has invested in up- and down-stream technologies used in the clinical research process. It can help clients record clinical data at sites. After the data have been analyzed, Octagon’s technologies can transmit reports and documents to regulatory agencies. Octagon is also a longtime supporter of a key industry standards organization, CDISC, which is an FDA-blessed effort to facilitate data exchanges between industry and government.