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| BIOC > SEC Filings for BIOC > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
solutions, to pharmaceutical, biotechnology, medical device companies and other
organizations, including contract research organizations (CROs), engaged in
clinical trials.
Our medical image management services assist our clients in the design and
management of the medical imaging component of clinical trials. We have
developed specialized services and proprietary software applications that enable
independent radiologists and other medical specialists involved in clinical
trials to review medical image data in an entirely digital format and make
highly precise measurements and biostatistical inferences to evaluate the
efficacy and safety of pharmaceuticals, biologics or medical devices. Medical
imaging is used for clinical development of therapeutic modalities for use in
oncology, disorders of the musculoskeletal, central nervous, cardiovascular
systems, and in a variety of other disease categories.
Our core laboratory imaging services include the collection, processing,
analysis and regulatory submission of medical images and related clinical data.
Medical images are received from a wide variety of imaging modalities including
computerized tomography (CT), magnetic resonance imaging (MRI), radiography,
dual energy x-ray absorptiometry (DXA/DEXA), positron emission tomography (PET),
single photon emission computerized tomography (SPECT), quantitative coronary
angiography (QCA), cardiac MRI and CT, intravascular ultrasound (IVUS),
peripheral quantitative angiography (QVA), central nervous system (CNS) MRI and
ultrasound. The resulting data enables our clients and regulatory reviewers,
primarily the U.S. Food and Drug Administration and comparable European
agencies, to evaluate product efficacy and safety.
On March 24, 2008, we completed the acquisition of Phoenix Data Systems,
referred to herein as PDS, offering a comprehensive array of eClinical data
solutions to the pharmaceutical and biotechnology industries, including
electronic data capture, interactive voice response, reporting and data
management solutions focused on making the process of collecting and analyzing
data from clinical trials faster, easier and more reliable.
Our eClinical services offer a variety of customizable proprietary software
solutions that enhance pharmaceutical and biotech companies' ability to process
and store clinical data through the use of customized proprietary software and
hosting service. This technology improves data quality and allows our sponsors
to see the results of their clinical trials faster and more accurately than with
conventional paper-based methods.
Our sales cycle, referring to the period from the presentation by us to a
potential client to the engagement of us by such client, has historically ranged
from three to 12 months. In addition, the contracts under which we perform
services typically cover a period of three to 60 months and the volume and type
of services performed by us generally vary during the course of a project. We
cannot assure you that our project revenues will be at levels sufficient to
maintain profitability.
Our contracted/committed backlog, referred to as backlog, is the expected
service revenue that remains to be earned and recognized on both signed and
verbally agreed to contracts. Our backlog as of September 30, 2009, which
includes our medical image management and eClinical services, was $96.5 million
compared to $101.7 million at September 30, 2008.
Contracts included in backlog are subject to termination by our clients at
any time. In the event that a contract is cancelled by the client, we would be
entitled to receive payment for all services performed up to the cancellation
date. The duration of the projects included in our backlog range from less than
three months to seven years. We do not believe that backlog is a reliable
predictor of future results because service revenues may be incurred in a given
period on contracts that were not included in
the previous reporting period's backlog and/or contract cancellations or project
delays may occur in a given period on contracts that were included in the
previous reporting period's backlog.
We believe that the short-term market for our services has been adversely
impacted by pharmaceutical companies' response to overall economic conditions,
resulting in some contract decisions being delayed and major projects being
split into smaller components as part of a revised budgetary approval process.
On a long term basis, we believe that the recognition within the
bio-pharmaceutical industry of the operational efficiency and scalable
reliability of using an independent centralized core laboratory for analysis of
medical-imaging data and compliance with the regulatory demands for the
submission of such data will continue to drive demand for our services. We also
believe that rapidly growing recognition of the inherent advantages of eClinical
technology to standardize and accelerate reliable data flow from the clinical
trial sites to the clinical trial sponsor will further drive the adoption and
growth of our eClinical service offerings. We believe our eClinical services
favorably compare to the traditional process of manual data collection on paper
case report forms that are more susceptible to transcription and other data
entry errors. Our rebranding to BioClinica continues to be well received,
re-energizing our marketplace reputation for offering what we believe to be
"best in class" solutions for imaging and eClinical services for clinical
trials.
The Balance Sheet at December 31, 2008 includes Phoenix Data Systems, Inc.,
a Pennsylvania corporation, hereinafter referred to as PDS, due to the
acquisition of PDS by BioClinica on March 24, 2008. The Consolidated Statement
of Income for the nine months ended September 30, 2008 excludes the financial
results of PDS from the acquisition date of March 24, 2008 through March 31,
2008 due to the immateriality of PDS's results of operations for that period.
During the third quarter of 2009, the Company acquired two companies that
expand the range of products and services the Company offers in the clinical
trials services sector.
On August 27, 2009, BioClinica acquired the CardioNow unit of Agfa
Healthcare ("CardioNow"). CardioNow has developed a web-based system for the
secure transmission of medical cardiac images. The software was specifically
developed for and marketed to the invasive cardiology departments of hospitals
within the United States. BioClinica will integrate and enhance the current
CardioNow software and service to offer our clients a streamlined electronic
transport solution to facilitate the blinding, sharing, tracking and archiving
of medical images for multi-center clinical trials as part of our suite of
imaging services. The purchase price for CardioNow consisted of cash
consideration paid to Agfa Healthcare of $1 million. The Company paid the
purchase price for CardioNow with cash from operations. The financial results of
CardioNow for the third quarter are included in the consolidated statement of
income for the period ended September 30, 2009.
On September 15, 2009, BioClinica acquired substantially all of the assets
of Tourtellotte Solutions, Inc. ("Tourtellotte"). Tourtellotte provides software
applications and consulting services which support clinical trials in the
pharmaceutical industry. The purchase price for Tourtellotte was $2.1 million in
cash. Pursuant to the acquisition agreement, the Company agreed to pay up to an
additional $3.2 million in cash and 350,000 shares of our common stock based
upon achieving certain milestones, which include certain product development and
revenue targets. (the "earn-out"). The fair value of the cash earn-out of
$2.8 million has been recorded as a liability and the fair value of the 350,000
shares of $1.3 million has been classified separately within stockholders'
equity as contingent consideration for a total purchase price of $6.2 million as
of September 30, 2009. The Company used cash from operations to fund the cash
purchase price for Tourtellotte. The financial results of Tourtellotte for the
third quarter are included in the consolidated statement of income for the
period ended September 30, 2009.
Recent Accounting Pronouncements
On September 30, 2009, BioClinica adopted FASB ASC 105, Generally Accepted
Accounting Principles, ("FASB ASC 105"). FASB ASC 105 establishes the FASB
Accounting Standards Codification TM (Codification) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. FASB ASC 105 and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of FASB ASC 105 had no impact on
the Financial Statements.
On June 30, 2009, BioClinica adopted FASB ASC 855, Subsequent Events, ("FASB
ASC 855") issued by the FASB to account for and disclose events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued, otherwise known as "subsequent events." Specifically,
FASB ASC 855 sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The adoption of FASB ASC 855 had no
impact on the Financial Statements as management already followed a similar
approach prior to the adoption of this new guidance.
On June 30, 2009, BioClinica adopted FASB ASC 270, Interim Reporting, ("FASB
ASC 270") issued by the FASB to fair value disclosures of financial instruments.
FASB ASC 270 requires a publicly traded company to include disclosures about the
fair value of its financial instruments whenever it issues summarized financial
information for interim reporting periods. Such disclosures include the fair
value of all financial instruments, for which it is practicable to estimate that
value, whether recognized or not recognized in the statement of financial
position; the related carrying amount of these financial instruments; and the
method(s) and significant assumptions used to estimate the fair value. Other
than the required disclosures, the adoption of FASB ASC 270 had no impact on the
Financial Statements.
On January 1, 2009, BioClinica adopted FASB ASC 820, Fair Value Measurements
and Disclosures, ("FASB ASC 820") issued by the FASB to fair value accounting
and reporting as it relates to nonfinancial assets and nonfinancial liabilities
that are not recognized or disclosed at fair value in the financial statements
on at least an annual basis. FASB ASC 820 defines fair value, establish a
framework for measuring fair value in GAAP, and expand disclosures about fair
value measurements. This guidance applies to other GAAP that require or permit
fair value measurements and is to be applied prospectively with limited
exceptions. The adoption of FASB ASC 820, as it relates to nonfinancial assets
and nonfinancial liabilities, had no impact on the Financial Statements. These
provisions will be applied at such time a fair value measurement of a
nonfinancial asset or nonfinancial liability is required, which may result in a
fair value that is materially different than would have been calculated prior to
the adoption of FASB ASC 820.
On January 1, 2009, BioClinica adopted FASB ASC 805, Business Combinations,
("FASB ASC 805") issued by the FASB to accounting for business combinations.
While retaining the fundamental requirements of accounting for business
combinations, including that the purchase method be used for all business
combinations and for an acquirer to be identified for each business combination,
FASB ASC 805 defines the acquirer as the entity that obtains control of one or
more businesses in the business combination and establishes the acquisition date
as the date that the acquirer achieves control instead of
the date that the consideration is transferred. These changes require an
acquirer in a business combination, including business combinations achieved in
stages (step acquisition), to recognize the assets acquired, liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions.
This guidance also requires the recognition of assets acquired and liabilities
assumed arising from certain contractual contingencies as of the acquisition
date, measured at their acquisition-date fair values. Additionally, FASB ASC 805
requires acquisition-related costs to be expensed in the period in which the
costs are incurred and the services are received instead of including such costs
as part of the acquisition price. The adoption of FASB ASC 805 resulted in a
charge of $560,000 ($355,000 after-tax) in mergers and acquisitions related
expenses on the accompanying Consolidated Statements of Income for acquisitions
completed in the third quarter of 2009.
On January 1, 2009, BioClinica retroactively adopted changes to FASB ASC 805
issued by the FASB on April 1, 2009 to accounting for business combinations.
These changes to FASB ASC 805 apply to all assets acquired and liabilities
assumed in a business combination that arise from certain contingencies and
requires (i) an acquirer to recognize at fair value, at the acquisition date, an
asset acquired or liability assumed in a business combination that arises from a
contingency if the acquisition-date fair value of that asset or liability can be
determined during the measurement period otherwise the asset or liability should
be recognized at the acquisition date if certain defined criteria are met;
(ii) contingent consideration arrangements of an acquiree assumed by the
acquirer in a business combination be recognized initially at fair value;
(iii) subsequent measurements of assets and liabilities arising from
contingencies be based on a systematic and rational method depending on their
nature and contingent consideration arrangements be measured subsequently; and
(iv) disclosures of the amounts and measurement basis of such assets and
liabilities and the nature of the contingencies. These changes were applied to
acquisitions completed in the third quarter of 2009.
On January 1, 2009, BioClinica adopted FASB ASC 350, Intangibles - Goodwill
and Other, ("FASB ASC 350") issued by the FASB to accounting for intangible
assets. FASB ASC 350 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset in order to improve the consistency between the
useful life of a recognized intangible asset outside of a business combination
and the period of expected cash flows used to measure the fair value of an
intangible asset in a business combination. The adoption of FASB ASC 350 had no
impact on the Financial Statements.
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