Optimizing Clinical Trials: Concept to Conclusiontm
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2010 MEDIDATA SOLUTIONS MEDIDATA ANNUAL REPORT Optimizing Clinical Trials: Concept to ConclusionTM TWO THOUSAND 10ANNUAL REPORT At Medidata Solutions innovation is the key driver of our value. Medidataa Solutions is a leading global providerr of SaaSS clinical developmentdevelopmenen solutionsns that enhance the effiffi ciencyciee of customers’ clinical trialss from conceptncept to conclusion. Foror over 11 years, Medidata has consconsistentlys broughtught next-generationnext-gener innovationovation to the life sciescienceien industry to lower the total cost of clinical developmentevelopmen with technology that addressessses strategy and planning, resource management, study design and start-up, and study execution.cution. Tarek A. Sherif, Chairman & Chief Executive Offi cer Dear Medidata Shareholder: In our fi rst full year as a public time in our history. Our industry- company, we strengthened our leading tools are helping our clients position as the leading independent remove barriers to their productivity, SaaS (Software as a Service) vendor reduce the total cost of global in clinical development. By providing clinical development and accelerate By enabling our customers transformational clinical technology the time to bring life-enhancing drugs to optimize their clinical solutions, we generated strong top- to market. line growth, particularly from mid-size trials from concept to pharma and biotech customers and I am exceptionally proud of the way our CRO (contract research organiza- Medidata’s customer-facing teams conclusion, we are well tion) partners. We also experienced serve as trusted advisors to our dramatic bottom-line growth, with clients, emphasizing collaboration positioned to continue record earnings highlighting the and committing to their success. excellent operating leverage in our Medidata’s strong execution on our driving profi table business model. Looking to the clients’ behalf has been a foundation growth. future, we are very excited about the of our success and is driving our potential opportunities in our industry. market leadership. By enabling our customers to optimize their clinical trials from concept to Today, our customers are working in conclusion, we are well positioned to a very dynamic global environment continue driving profifitable growth. shaped by many internal and external pressures. Clinical development and 2010 was a year of important the life sciences industry are being milestones for Medidata. In the past reshaped by mergers, acquisitions, decade, product innovation has been payor pressures, budget constraints, a key driver of value for us, and last increasing trial complexity and deeper year we executed on an aggressive focus on proof of safety. In the face upgrade and new product launch of these changes, Medidata is in an schedule. We introduced products excellent position to continue to build that provide new, different and better shareholder value by supplying the processes for clinical development, most advanced technologies to this enabling more effective decision- increasingly effifi ciency-focused sector. making. We also released more product upgrades than at any other Our Growth 2010 was a record year for Medidata both operationally and financially. One key to our success is that our Operationally, we improved our products are responsive to the market penetration, ending the year evolving challenges our customers with a record 219 customers, up from We continued to face. This focus drove Medidata’s 173 in the prior year. We once again healthy sales growth in 2010. In the benefifitted from strong customer gain share past year, we continued to gain share loyalty and revenue retention, which in the large, growing and strategically was over 98%. This can be attributed in the large, growing important clinical technology market. to superior customer service, the New enterprise deals, contract quality of our software and our highly and strategically renewals with top global companies reliable infrastructure. and new customers all contributed important clinical to our growth. We finished 2010 with record technology market. revenues of $166 million, an increase In 2010, our solutions were embraced of 19% year over year. Improved by customers across all sectors and revenue mix allowed us to achieve geographies. In particular, we record gross margins of 69%, a five- generated signifificant new business percentage point increase from the through our CRO partners, from the previous year. This resulted in gross expansive mid-market and from profifits for the year of $111 million, an academic research centers. Unlike increase of $21 million. Non-GAAP some of our competitors, our operating income* increased $15 mil- products’ confifigurability, scalability lion to $39 million, compared with $24 and flexibility allow us to target million in 2009. The improvement in opportunities beyond the traditional our operating profifitability was a direct large biopharma customer base. result of our growth, scalable busi- ness model and success in controlling operating costs. We expect these trends to continue in 2011. Optimizing Clinical Trials: Concept Medidata Designer® Medidata Designer® Optimal study design through guided protocol development informed Optimal study design through highlight of key trial procedures by industry benchmarks and data collection, allowing reduction of unnecessary steps Medidata InsightsTM Medidata Grants Manager® Advanced reporting and analytics driving informed decision-making Comprehensive industry data-driven system for accurately for enhanced operational effi ciency, utilizing industry-wide data and rapidly developing investigator grant proposals, and effi ciently completing site negotiations Medidata CRO Contractor® Data-based planning and management tool optimizing outsourcing budgets for research sponsors TOTAL REVENUES GAAP OPERATING INCOME NON-GAAP OPERATING INCOME* ($ in millions) ($ in millions) ($ in millions) $166 $39 $140 $23 $24 $106 $9 We continue to innovate $(4) $(16) and are redefi ning markets with our new, 200820092010 2008 2009 2010 2008 2009 2010 diff erent and better *Non-GAAP operating income excludes the impact of depreciation, amortization of purchased intangible assets and acquisition-related charges, and stock-based compensation expense. See investor.mdsol.com for reconciliations to generally accepted accounting technologies. principles (GAAP) for the non-GAAP fi nancial measures included in this annual report. A copy of this information can also be requested free of charge by contacting the company’s investor relations department. Our Strategy We continue to innovate and are redefifining markets with our new, A keen understanding of our different and better technologies. customers’ goals helps to focus our Our solutions are designed to strategic direction and strengthens combine information sharing with our competitive position in the a high degree of interoperability, industry. The biopharmaceutical optimizing each stage of a clinical trial. industry spends approximately $53 Medidata products address workflflow billion annually on clinical trials, but ineffificiencies, reduce redundant data less than $2 billion on technology entry, make data management more such as ours. Medidata’s goal is to effificient and allow easy interchange ensure that money spent on our for all clinical trial data. technology has an exponential impact on savings and leverage from the balance of the $51 billion investment. Conclusion Medidata Designer® iMedidataTM Optimal study design through collaboration tool, accelerates Clinical portal that provides single-sign on for all Medidata design cycle time and improves standards compliance studies, streamlining access to the electronic data capture and management system as well as other software across multiple iMedidataTM studies and organizations Clinical portal that enables rapid training and activation of study doctors and sponsor staff through streamlined administration Medidata Rave® and access to on-line courses Industry-leading electronic data capture, management and reporting platform that streamlines clinical trials, minimizes data Medidata Rave® redundancies and enables collaboration across the study team, Industry-leading electronic data capture, management and with tools that enable effi cient study monitoring and capture reporting platform with powerful study build tools facilitating and reporting of safety events rapid study development, confi gurable for trials of all sizes, complexities and languages Medidata BalanceTM Next-generation randomization and trial supply management Medidata BalanceTM fully integrated with the data capture and management system Next-generation randomization and trial supply management for effi cient execution at study sites with powerful simulation capability that enables users to design sophisticated studies without intensive programming For example, the Medidata Designer® Our Future protocol authoring tool helps our customers begin their trials with focus Our SaaS model, favorable business on the end goal. It has been estimated mix and increasing scale drove signififi- that up to 30% of data collected as cant operating leverage and resulted We are well positioned specifified by protocols is never used in record earnings in 2010. In 2011, for an FDA submission. By providing we will continue to focus on the to further strengthen a solution to help our customers growth opportunities in our core understand the potential impact of markets, while driving adoption of our our