Canceled COVID studies hit Science 37's earnings, but FDA's diversity drive offers potential

The cancellation of two COVID-19 studies had a negative impact on Science 37’s first quarter, but the trial tech firm sees an opportunity in the push for more diverse study populations.

An 18% year-over-year drop in adjusted gross profit to $3.2 million for the first quarter of 2022 had been expected and was primarily due to the impact of the two large COVID-19 study cancellations, the Los Angeles-based company said. It also blamed the cancellations for net bookings falling to $30.6 million for the quarter, compared to $40.7 million for the same period in 2021.

“The larger of the two COVID studies was from a non-pharma company which we do not traditionally target, and the smaller of the two was as a result of drug efficacy which will happen from time to time across the clinical trial industry,” Chief Financial Officer Mike Zaranek told analysts on a May 9 earnings call.

The CFO pointed out that Science 37’s cancellation rates were less than 10% for 2021 and that the 15-month rate through the end of the first quarter of 2022, including the two COVID-19 cancellations, was 17%.

A company spokesperson confirmed to FierceCRO that both trial cancellations occurred in the first quarter of this year. In a previous earnings call in March, Science 37 revealed that the abandoned projects were worth around $20 million.

Decentralized demand and diversity drive

The cancellations aside, Science 37 CEO David Coman outlined a positive forecast for the rest of the year on the May 9 call, citing the 50% year-over-year increase in first-quarter revenue—to $18.7 million—and positive dynamics in the remote trials sector as indicators.

“Demand for clinical trials that include components of decentralization now outpaces demand for fully traditional clinical trials,” Coman said.

The CEO also predicted that Science 37 would win business as trial sponsors and CROs come under pressure to ensure study populations are diverse.

“The FDA released new draft guidance last month requiring race and ethnicity diversity plans to be submitted by sponsors with specific measures to enrol underrepresented racial and ethnic populations,” Coman said. “This is a widespread industry problem, given biases derived as a result of a limited number of traditional clinical trial sites that are geographically constrained to recruit from their existing patient populations.”

Science 37’s operating system, which enables the company “to recruit just about any patient anywhere, regardless of location,” can resolve this issue and has enabled it to recruit three times the proportion of diverse patient populations across trials it has conducted to date, Coman said.

These dynamics have informed Science 37’s investment plan and will continue to do so, the CEO said. “We continue to make significant strides on enhancing our commercial efforts, extending our leadership position through investments in our operating system, and positioning the company for long-term profitability without the need to raise additional capital,” he said.

The company ended the first quarter with a pipeline at record levels, which represented “significant year-over-year growth,” Coman said. “This is as a result of the investments we've made to expand our commercial presence and leverage our CRO partnerships.”