After rocky period, Datatrak stabilizes, plans steady growth Mayfield Hts.-based software maker endures its own trial
http://www.crainscleveland.com/article/20110328/SUB1/110329882/1053/TOC&Profile=1053After rocky period, Datatrak stabilizes, plans steady growthMayfield Hts.-based software maker endures its own trialBy CHUCK SODER4:30 am, March 28, 2011A software company based in Mayfield Heights that almost collapsed two years ago has figured outhow to make money again. Now it just has to make more. Datatrak International Inc. announced last week that it turned a profit in 2010, its first profitable year since 2005.… In previous years, Datatrak on multiple occasions lost more than a million dollars in a singlequarter.Not only did Datatrak turn a profit in 2010, but it made money in all four quarters, and its backlog ofcontracts in hand grew to $11.2 million as of Dec. 31, up 18% from $9.5 million at the end of 2009.“2009 was a restructuring year. 2010 was a stability year. 2011 is going to be about responsiblegrowth,” Mr. Birch said.Datatrak today has 53 employees, including 19 in Mayfield Heights. The company’s staff should growthis year as it expands its sales, marketing and product development efforts as well as a new divisioncalled Datatrak Consulting and Clinical Services, Mr. Birch said.The company is in the process of looking for an office in the Raleigh, N.C., region that already is hometo six employees who work for the consulting division; that division is helping a handful of clients useDatatrak’s software and manage and analyze data from their clinical trials. The company also has 17people at an office in Bryan, Texas, and another 11 in outside sales.Datatrak would use profits to finance the expansion, Mr. Birch said. He doesn’t want to sell moreshares on the open market because he believes Datatrak’s shares are undervalued. The company’sshares were selling for 84 cents on the Pink Sheets Electronic Markets at the close of business lastWednesday, March 23.Back from the brinkThe price still is too low for Datatrak to get back on the Nasdaq Stock Market, which delisted thecompany in mid-2009 after the amount of stockholders’ equity in the company dropped below $2.5million. But since Datatrak was delisted, the stock has more than doubled in value.
The company has been through a lot. At the start of 2007, its stock was valued at $5.06 a share and ithad 117 employees — more than twice as many people as it employs today.The company narrowly avoided filing for bankruptcy, Mr. Birch said. In December 2008, two monthsbefore a deadline, Datatrak reached an agreement that allowed it to avoid paying off $3 million inpromissory notes to some former shareholders of ClickFind Inc., a Bryan, Texas-based softwarecompany it acquired in February 2006. Datatrak didn’t have the cash to make that payment.In January 2009, Mr. Birch replaced Jeffrey Green as Datatrak’s CEO. Since then he has revamped thecompany’s sales strategy, putting more focus on selling its software through contract researchorganizations that run clinical trials for pharmaceutical companies and other medical productdevelopers. That approach — which Datatrak competitors have been using for years — is producingearly results, Mr. Birch said. The company also now allows customers to sign contracts for multipletrials at once, he said.Datatrak faces larger competitors, but Mr. Birch said he believes it has an advantage because itssoftware is a “unified” system built to manage several aspects of a clinical trial. Some competitors sellsystems with fewer capabilities, while others have had to acquire multiple companies and thenprogram their technologies to work together.Patent protectionMr. Birch aims to keep that advantage: In a patent infringement lawsuit filed March 4 in the U.S.District Court in Cleveland, Datatrak accused Medidata Solutions Inc. of New York of building a similarsystem. Mr. Birch said Datatrak owns a patent that should prevent Medidata from unifying data frommultiple databases.The filing is “the first step” in Datatrak’s plan to protect its intellectual property, Mr. Birch said, addingthe company plans to review what competitors are doing.It’s important for Datatrak to protect its patent because its software gives it an advantage overcompetitors, said Ken Nagy, senior technology analyst for Zacks Equity Research’s Boston office. Thatadvantage should grow over time, Mr. Nagy said, adding that he expects new laws and regulations tomake clinical trials more complex.Though 2010 was not a year of “crazy top-line growth,” Mr. Nagy said, Datatrak is making money andwinning clients. He expects the company’s stock price to hit $3 a share within 12 months.“Explosive growth will come,” he said.