P Rospectus S Ummary
Prospectus Summary This summary highlights information contained elsewhere in this prospectus but might not contain all of the information that is important to you. Before investing in our common stock, you should read the entire prospectus carefully, including the “Risk Factors” section and our historical and pro forma condensed consolidated financial statements and the notes thereto included elsewhere in this prospectus.Unless otherwise indicated, the information contained in this prospectus assumes that the underwriters’ option to purchase additional shares is not exercised.
Medidata Solutions, Inc.
Our Business
We are a leading global provider of hosted clinical development solutions that enhance the efficiency of our customers’ clinical development processes and optimize their research and development investments. Our customers include pharmaceutical, biotechnology and medical device companies, academic institutions, contract research organizations, or CROs, and other organizations engaged in clinical trials to bring innovative medical products to market and explore new indications for existing medical products. Our solutions allow our customers to achieve clinical results more efficiently and effectively by streamlining the design, planning and management of key aspects of the clinical development process, including protocol development, CRO negotiation, investigator contracting, the capture and management of clinical trial data and the analysis and reporting of that data on a worldwide basis. Our customers rely on our solutions to safely accelerate the clinical development process and maximize the commercial life of their products. Our diverse and expanding customer base currently includes 21 of the top 25 global pharmaceutical companies measured by revenue and many middle-market life sciences companies, as well as CROs through our ASPire to Win program. In 2007, and in the nine months ended September 30, 2008, Johnson & Johnson, AstraZeneca, Amgen, Astellas Pharma and Takeda Pharmaceutical were our largest customers measured by revenue.
Our principal offering, Medidata Rave, is a comprehensive platform that integrates electronic data capture, or EDC, with a clinical data management system, or CDMS, in a single solution that replaces traditional paper-based methods of capturing and managing clinical data. In addition, our on-demand, hosted technology platform facilitates rapid and cost-effective deployment of our solutions on a global basis. We have designed our Medidata Rave software to scale reliably and cost-effectively for clinical trials of all sizes and phases, including those involving substantial numbers of clinical sites and patients worldwide. We also offer applications that improve efficiencies in protocol development and trial planning, contracting and negotiation through Medidata Designer, Medidata Grants Manager and Medidata CRO Contractor.
We derive a majority of our revenues from Medidata Rave application services through multi-study arrangements for a pre-determined number of studies. We also offer our application services on a single-study basis that allows customers to use our solution for a limited number of studies or to evaluate it prior to committing to multi-study arrangements. We support our solutions with comprehensive service offerings, which include global consulting, implementation, technical support and training for customers and investigators. We invest heavily in training our customers, their investigators and other third parties to configure clinical trials independently. We believe this knowledge transfer accelerates customer adoption of our solutions.
For 2007, we generated $86.3 million in revenues, a 71.0% increase over 2006 revenues of $50.5 million. For the nine months ended September 30, 2008, we generated $84.8 million in revenues, a 37.6% increase over revenues of $61.6 million in the comparable period in 2007. Our business model provides us with a recurring revenue stream that we believe delivers greater revenue visibility than perpetual software licensing models.
The Opportunity for Clinical Trial Solutions
The traditional process of capturing and analyzing data in clinical trials relies on pre-printed, paper case report forms to submit data from the clinical trial sites to the clinical trial sponsor. Each case report form is manually checked for accuracy at the clinical site and subsequently entered into a computerized CDMS. Inconsistent, questionable, or missing data items are identified and must be addressed by facsimile, mail or hand-delivered document exchange. Each change in data requires documentation. These paper-based processes result in significant complexity and cost. Key limitations include:
Compared to traditional paper-based data collection, EDC technology provides substantial benefits at all stages of the clinical development process and has become widely accepted across the industry. However, we believe that most clinical trials are still conducted using the traditional paper-based format. We believe the total annual market opportunity for EDC solutions is in excess of $1.4 billion.
Despite the increased efficiency provided by EDC, early generation solutions have typically faced the following challenges:
The Medidata Solution
Our solutions allow users to accurately and efficiently design clinical trials and capture, manage and report clinical trial data through an easy-to-use, Internet-enabled platform. We believe our solutions provide our customers with the following benefits:
Our Growth Strategy
Our strategy is to become the global standard for application service solutions for EDC and complementary technologies for the clinical development process. Key elements of our strategy include:
Risks Associated with Our Business
Our business is subject to a number of risks of which you should be aware before making an investment decision. Those risks are discussed in “Risk Factors” beginning on page 8.
Corporate Information
We were organized as a New York corporation in June 1999 and reincorporated in the State of Delaware in May 2000. Our principal executive offices are located at 79 Fifth Avenue, 8th Floor, New York, New York 10003, and our telephone number is (212) 918-1800. Our website is located at www.mdsol.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider that information to be part of this prospectus.
The Offering
Summary Consolidated Financial Information and Other Data
The summary consolidated statement of operations data presented for each of the years ended December 31, 2005, 2006 and 2007 and the summary consolidated balance sheet data as of December 31, 2006 and 2007 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the years ended December 31, 2003 and 2004 and the summary consolidated balance sheet data as of December 31, 2003, 2004 and 2005 were derived from our audited consolidated financial statements which are not included in this prospectus. The summary consolidated statements of operations data presented for the nine months ended September 30, 2007 and 2008 and the summary consolidated balance sheet data as of September 30, 2008 were derived from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus. The results of operations for the nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the full year ending December 31, 2008.
On March 17, 2008, we acquired Fast Track, a provider of clinical trial planning solutions, including software, proprietary contracting data and professional services. The consolidated statement of operations data for the nine months ended September 30, 2008 includes the impact of the acquisition of Fast Track beginning on the date of acquisition. The consolidated statement of operations data for the prior periods do not include the impact of the acquisition of Fast Track. The information contained in this table should also be read in conjunction with “Use of Proceeds,” “Capitalization,” “Selected Consolidated Financial Information,” “Unaudited Pro Forma Statements of Operations,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes thereto, all included elsewhere in this prospectus.
Consolidated Statement of Operations Data
Consolidated Balance Sheet Data
Notes to Summary Consolidated Financial Information and Other Data
On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS No. 123(R), requiring us to recognize expense related to the fair value of our stock-based compensation awards. We elected the modified prospective transition method as permitted by SFAS No. 123(R). Under this transition method, stock-based compensation expense for the fiscal year ended December 31, 2006, includes compensation expense for all stock based compensation awards granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, or SFAS No. 123, and compensation expense for all stock based compensation awards granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).