Clinical trials technology company Science 37 went public during the Covid-19 pandemic, a time when drug developers readily embraced technologies that enable drug study participation from a patient’s home. Decentralized clinical trials are still part of the biopharmaceutical industry’s present and future, but Science 37 fell short of the rapid and sustained growth it projected. The company is now going private in a deal that’s a fraction of a valuation that once topped $1 billion.
Science 37 has agreed to be acquired by privately held eMed, the companies announced Monday. Miami-based eMed is paying $5.75 cash for each share of Research Triangle Park, North Carolina-based Science 37. That price represents a 21.3% premium to the firm’s closing stock price last Friday, but it amounts to a valuation of just $38 million.
Founded in 2014 by physician-scientists co-founders who shared a vision for site-less clinical trials, Science 37’s technology offering includes software that serves as an intermediary between a clinical trial participant and a trial investigator. This interaction had historically been done at a clinical trial site. Recorded on paper, the information was later entered into a data capture system. Science 37’s technology handles the entire process with a mobile app that walks the patient through informed consent and other aspects of a clinical trial. Science 37 does not run clinical trials. Rather, it supplies its technology to customers that include pharma and biotech companies as well as contract research organizations.
Science 37’s rise coincided with two trends: growing adoption of decentralized clinical trial software and the boom in SPAC mergers. The 2021 merger deal that took Science 37 public valued the company at more than $1 billion, which represented 5.8 times the $182 million in revenue it projected for 2023 revenue, according to an investor presentation. For 2021, Science 37 reported $59.6 million in revenue, a more than 151% increase over sales in the prior year. But the $70.1 million in 2022 revenue was well short of the $100 million it had forecast at the time of the SPAC merger.
Similar to contract research organizations, a key metric for Science 37 is backlog, which represents anticipated revenue for work that has been contracted but has not yet been completed. Backlog is not recognized as revenue until work is complete. The minimum contractual value of this work changes due to additions and modifications to contracts, and in some cases cancellations. Science 37’s 2022 annual report shows an $84.7 million decrease in this measure, called net bookings. That’s a 51% decline from the prior year.
Science 37 attributed the decrease in net bookings to longer sales cycle timelines, two Covid-19 contract cancellations, and one repeat customer hitting enrollment sooner than expected. That impact continued into 2023, reducing the ability of Science 37 to convert the contracted into revenue. The company’s $44.3 million in revenue reported for the nine months ending Sept. 30, 2023 represents an 18.2% decrease compared to the same period in 2022.
The 2021 merger deal infused Science 37 with $235 million. In the investor presentation, the company said the new capital would support geographic expansion and the pursuit of M&A opportunities. But today, the vast majority of Science 37’s business continues to come from the U.S. and the company does not list any newly acquired technologies, according to its annual reports.
“After an extensive review of opportunities available to Science 37, we believe that eMed provides the greatest value to our stockholders, customers, patients, and employees” CEO David Coman said in a prepared statement. “Stockholders will receive a premium, trial sponsors will gain greater access to patients, faster enrollment, and confidence in the company’s capital position, and our employees will be able to continue to pursue the existing mission of the company.”
Science 37’s board of directors has unanimously approved the acquisition. The company also said shareholders holding about 44% of common stock have already agreed to support the deal. When the transaction closes, Science 37’s technology offerings will become part of the portfolio of eMed, a telehealth and diagnostics company whose digital technology enables patients to complete testing in their homes. Similar to Science 37, eMed can attribute much of its growth to Covid-19. The company developed the first at-home, digital point-of-care Covid-19 test in 2020. Its offerings now also include test kits for the flu, urinary tract infections, and more.
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