Medidata faces market hurdles, Goldman says

Competition is mounting in the clinical trials software game, and drug developers are expected to temper their R&D spending in the coming years. These are two challenges that face major electronic data capture provider Medidata Solutions ($MDSO), according to a Goldman Sachs analysis cited by

Medidata chief executive Tarek Sherif has been vocal about the market opportunities for his company as a result of Phase Forward's integration with tech giant Oracle ($ORCL). Yet Goldman expects Medidata to encounter greater competition, with Oracle making progress with its integration of Phase Forward, reported. Goldman has begun coverage of Medidata's stock with a "sell" rating.

Yet a bigger challenge for Medidata and its competitors like Oracle might be slowed growth in pharma R&D budgets in the coming years. Goldman targeted R&D spending to grow at a 2% annual rate for the next four years, compared with 9% annual growth between 2004 and 2010. Another negative trend for Medidata in the analysis was the increase in clinical trials outsourcing, given that the company's percentage of business that comes from CROs is lower than the percentage of trials the contract research groups are capturing.

Medidata has already taken action to grab a larger chunk of the CRO market, with the New York-based company's acquisition last month of Clinical Force, which provides clinical trial management systems (CTMS) software to contract research organizations and other clinical researchers.

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