Phase Forward’s steady growth continues, an impressive feat for one of the larger technology companies in the industry.

The company reported a 26 percent rise on revenues of $28 million. There was a 37 percent jump in a variety of revenues related to its electronic data capture (EDC) program, InForm. The EDC niche represents 70 percent of what’s coming into the company, Phase Forward reported.

The company is poised to exceed $120 million in annual revenues for 2006, dwarfing most competitors. It is also profitable. Once allowances for stock options and other GAAP charges were tallied, profits rose 25 percent, from 6 cents per share to 8 cents.

In a statement about the quarter, CEO Bob Weiler said: “We believe the EDC market continues to gain momentum, as evidenced by the growing diversity of new and existing customers that are driving Phase Forward’s growth. Our existing customers continue to sign up for additional trials, while customers adopting EDC for the first time are turning to Phase Forward as their partner of choice.”

In the most recent quarter, the company added Boston’s elite teaching hospital, Mass General, as a customer for a registry; and Mitsubishi Pharma came aboard as a new customer. Merck is now running nine trials with Phase Forward on an application service provider (ASP) basis, and the recent financial period saw the first revenues from that big company arrive.

As the company told investors earlier in the month, flagship customer Glaxo SmithKline is moving all trials to EDC. Serono and Schering-Plough begin all new trials with EDC; Lilly and Quintiles have each done 100 trials using Phase Forward technology.

On the conference call with financial analysts in late October, Weiler was his usual buoyant, optimistic self. “We continue to execute against our strategy of selling to all customers of all sizes,” he said. “Business was strong. Our momentum remains strong.”

One advantage, the company says, is a list of reference customers who can vouch for good experiences. At the company’s recent user conference in Las Vegas, Weiler said, several big pharma customers reported faster than expected rollouts of EDC.

“Many of the incremental buyers [of EDC] will want to go with a proven provider,” Weiler said. “Phase Forward has a major advantage. We’re able to cite company after company after company that has begun installations and are tracking above the number of installations they had hoped for.”

The EDC market is ripening, he suggested, with decision-cycle times shrinking. “It’s not about if people are going to do EDC,” Weiler said. “It’s when and how they are going to do EDC.”

That niche, he estimated, is about two years ahead of the drug safety market. There Phase Forward is especially well-positioned, with its own technology and tools acquired from Lincoln Technologies.

The unknown question is whether some Phase Forward customers will increasingly prefer other commercial safety solutions, develop their own in-house, or want to use the linked Phase Forward safety and EDC products. Said Weiler: “We’re encouraged by the safety market in general and how the safety market is going to play with InForm.”

Catching up with Phase Forward in the drug safety arena could be especially difficult for some competitors: the number of companies specializing in the field is small. Phase Forward already owns the Lincoln Technologies software that the FDA helped to design, and SAP just snapped up a stake in one of the leading alternatives.

At the same time, Phase Forward has chosen not to follow the example of a few rivals such as etrials, ClinPhone, and United Biosource, which have combined EDC with electronic patient diary or interactive voice response (IVR) tools—another rapidly growing segment of the clinical trial technology market.

With 60 percent of revenues coming from services (and the remainder from licenses) Phase Forward’s financial statements illustrate the extensive amount of customization that many sponsors of clinical trials require. On the conference call, the company estimated that Glaxo will spend as much on services as it did on the original license fees.

That’s good news for Phase Forward shareholders, and an indication that Glaxo holds the technology supplier in high regard. But for the industry at large, revenues from services can feed sentiments that EDC still costs “too much” or that the business model of the EDC vendor community remains immature.

Phase Forward itself recently estimated that the average hosting fee for one trial is $325,000 over 17 months, according to a slide in this recent presentation to investors. The larger truth is that starting a clinical trial using EDC is never going to be as simple as opening a spreadsheet. The value of clean trial data, ready to be analyzed by statisticians shortly after the conclusion of a trial, is difficult to calculate in dollar terms.

So with all flavors of EDC, at least for the next few years, either the sponsor of a trial or a subcontractor will be delivering varying amounts of custom programming. In time, that tailoring eventually becomes less extensive, but quantifying the benefits of EDC (in financial or operational terms) has proved elusive.

Even so, the Waltham, Mass. company has an impressive backlog ($185 million as of December, 2005), a considerable cash hoard for acquisitions ($65.6 million), not to mention a toe being dipped in non-industry research projects.

In a public health research study with the Aurum Institute in South Africa, Phase Forward is supplying technology for a study of tuberculosis in 60,000 gold miners.

That research is funded by the charity supervised by Microsoft’s Bill Gates and (while not being done with 21 CFR Part 11-compliant rigor) is one of the first occasions Phase Forward has publicly discussed a paperless trial.

Looking ahead, Weiler touted the company’s forthcoming trial design functionality, to be added to InForm next year. “This will be a competitive product,” Weiler said. “Our customers that are aware of all our offerings say this is leaping ahead.”