Mdso primer book

December 2015

Digital Healthcare / Healthcare Technology

Medidata Solutions (MDSO) Primer Book

Thesis: Our investment hypothesis on MDSO holds that the company remains

poised to be a long-term winner as the development of biopharmaceutical

products, specifically outsourced solutions, becomes more technologically

driven over time.

Steve Rubis (214) 706 - 9451 [email protected]

Stifel does and seeks to do business with companies covered in its research reports. As a result,

investors should be aware that the firm may have a conflict of interest that could affect the objectivity of

this report. Investors should consider this report as only a single factor in making their investment

decision.

All relevant disclosures and certifications appear on pages 21 – 24 of this report.

Medidata Solutions Primer Book

1

MDSO Investment Hypothesis

The Evolving Biopharma Business Model

Three Existential Questions for MDSO Investors

Cross Over Debates

Key Risks

The Electronic Data Capture (EDC) Market Opportunity

The FDA Regulatory Environment

The Evolving Productization Landscape

The Point to Platform Shift Value Proposition

MDSO mHealth Clinical Trial

Contract Research Organizations (CROs) and MDSO Utilization

Platform Customer Analysis

Customer Analysis

Company Statistics

Clinical Trial Statistics

Competition

M&A Opportunities

Model

Table of Contents


2

MDSO Investment Thesis

Sources: Stifel Research

The MDSO Investment Hypothesis

Our investment hypothesis on MDSO holds that the company remains poised to be a long-term

winner as the development of biopharmaceutical products, specifically outsourced solutions,

becomes more technologically driven over time.

We believe that as the FDA drives clinical trials toward complete digitization, prescription drug

pricing pressures require new ways of creating products, and precision / personalized medicine

leads to more complex therapies that outsourcing will focus less on people and more on

technology.

The Key Drivers of Our Investment Hypothesis, Include:


• Complete Digitization of Clinical Trial Data Submissions

A Strong EDC Market Opportunity

• FDA Digitization Makes Pen and Paper Obsolete

Evolving Biopharma Productization

• Pricing Pressure Disrupts Product Development

Evolution / Adoption of mHealth / Wearables

• Pricing Issues Drive Focus on New Opportunities

Platform Value Proposition

• FDA, Pricing Pressure, and Evolving Technologies Combine to Create a Strong and Sticky Value Proposition


3

The Evolving Biopharma Business Model

Old Clinical Trial and Product Paradigm

Clinical Trials

The major revenue growth lever of the old clinical trial paradigm revolved around price

What Types of Data?• Adherence

• Comparative Efficacy• Real World Efficacy

• Utilization

Drivers of the New Paradigm• $2.7T in Healthcare costs are driving cost rationalization

• $2.6B to develop a drug is unsustainable LT• CMS' push to outcomes based reimbursement

The Era of Biopharma Productization: We believe MDSO must illustrate new capabilities and a strong value proposition which revolvesaround the data requirements of an outcomes based reimbursement environment.

MDSO and the Era of Biopharma Productization

Statistical Significance ProductRevenue =

Price X Quantity

New Clinical Trial and Product Paradigm

ClinicalTrials

Statistical Significance

+Verification

ProductRevenue =

Price X Quantity + DATA

Price no longer represents the magical hammer of revenue growth, as biopharma companies must continuously prove their products worth in order to maintain pricing power.

Key Indicators of Changing Environment• Focus on mHealth - Roche, NVS, GSK, BIIB, et al.

• Rave + TSDV + mHealth, but what else?• Precision Medicine



4

We Believe MDSO Faces Three Existential Questions

Question 1: Is MDSO Well Positioned for Business Model Disruption in Biopharma Stemming

from Pricing Pressures?

Our View: We believe MDSO may be well positioned to benefit from looming business model

disruption stemming from outcomes driven pricing and reimbursement. Biopharma sponsors need

new and innovative ways to ensure product development meets outcomes requirements e.g.,

adherence, comparative efficacy, real world efficacy, and utilization. We believe the fully unified,

cloud-based platform of MDSO will help biopharma sponsors navigate the challenging environment.

Question 2: What Capabilities Does MDSO Offer to Biopharma Sponsor Clients to Help

Navigate Looming Business Model Disruption Due to Pricing Concerns.

Our View: We believe MDSO needs to illustrate the value proposition associated with new and

current capabilities that will help biopharma sponsors navigate business model disruption stemming

from outcomes based reimbursement and pricing. Currently, MDSO provides quite a bit of

benchmarking and analytical insight around trial site performance. In our view, cloud-based

platforms with robust intelligence regarding a certain portion of the platform are typically able to

replicate such intelligence around additional portions of the platform.

Question 3: Has the MDSO platform value proposition strengthened in FY15 due to new new

products (TSDV and Patient Cloud)?

Our View: We believe the development of Targeted Source Data Verification and the Patient Cloud

(mHealth) provide the strongest platform value proposition in recent memory. We believe the

combination of Rave, TSDV, and Patient Cloud seems well positioned for the significant focus on

mHealth and more efficient clinical trials among clients. We believe the FDA clinical trial data

submission backdrop provides a further tailwind.

Three Existential Questions for MDSO Investors



5

Debate 1: Will FDA’s Digitization of Clinical Trial Data Submissions Positively Impact MDSO?

Our View: We believe the FDA’s focus on completely digitizing the clinical trial data submission process

provides a significant tailwind that will help push many sponsors toward platform adoption, especially in light

of the strong value proposition linking Rave, TSDV, and Patient Cloud.

Debate 2: Does the FDA Fully Support the Use of mHealth in Clinical Trials?

Our View: We believe the FDA is quite interested in the utilization of mHealth in clincial trials. We believe

the recent symposium hosted by MDSO and the New York Academy of Sciences illustrated this view. The

industry realizes mHealth may provide a tool to capture more holistic data. Additionally, mHealth remains

important given the number of patient driven clinical trial end points.

Debate 3: Is the MDSO Clinical Cloud Too Expensive?

Our View: We recognize that the MDSO clinical cloud may be expensive to biopharma sponsors and CROs

operating at the lower end of the market. Nevertheless, we believe strong utilization among top 50 pharma,

additional platform deals, and continued rescue activity suggest the platform exhibits strong value despite

apparent price concerns.

Debate 4: Can the Market Continue to Support Mid-Teens EDC (Rave) Growth?

Our Take: We believe the FDA’s push to completely digitized clinical trial data submissions provides a

tailwind to EDC growth. We provide more detail on the “Electronic Data Capture (EDC) Market Opportunity”

slide below.

Debate 5: Is MDSO’s TAM More Limited Than Investors Believe?

Our Take: We believe MDSO’s TAM is likely between $4B and $5B, whereas the company’s long-term TAM

may be $8B to $10B or more. We believe the company established the NT and LT TAM opportunities at its

2013 Investor Day meeting. Based on competitor commentary, we believe MDSO’s TAM estimate for

mHealth, roughly $1B, may be conservative.

Debate 6: Are Negative Industry Participant Comments Believable?

Our Take: We believe investors should be skeptical of negative industry participant comments regarding

MDSO. In our view, the negative commentary put forth by shorts is often biased by CROs or entities that

compete with MDSO.

MDSO Cross Over Debates



6

MDSO Key Risks


The Key Risks to Our MDSO Investment Hypothesis

Long-Term Growth Rate Trajectory

• A key concern among many investors revolves around MDSO’s long-term growth rate

• Historically, management pointed to 20% y/y to 25% y/y revenue growth

• Investors are concerned management may revise the growth range lower e.g., 17% y/y to 23% y/y

Professional Services Revenues

• The primary source of recent fundamental underperformance stems from professional services revenues

• Professional Services revenues are less predictable due to longer cycle times at CROs

Biopharma R&D Funding

• A major deceleration or decline in R&D funding across biopharma sponsors would lead to fundamental performance pressure at MDSO

Clinical Trial Starts / Activity

• We believe clinical trial starts are a key indicator for MDSO

• Clinical trial starts have increased each year since the mid-2000s

• 2015 may mark the first year clinical trial starts decelerate

Lack of Value-Add Product Innovation

• A primary differentiating factor around the MDSO story revolves around product innovation

• MDSO became an industry leader by innovating more than previous market leaders

• The company must continue to evolve the platform forward to meet the needs of the new pricing environment, as well as more complex products (precision medicine)


7

The Electronic Data Capture (EDC) Market Opportunity


Key Controversy: MDSO bears continuously point to the belief that the EDC market is fully penetrated and

cannot provide continued growth to MDSO. We believe the EDC market opportunity remains attractive and

can continue to support growth.

What Is Electronic Data Capture (EDC)?

• EDC represents a computerized system that facilitates the collection of clinical trial data in an electronic

format.

• EDC can increase data accuracy and decrease time to collect data associated with clinical studies

• EDC systems are beneficial for late-phase (phase III to IV) studies

Our Key Assumptions Regarding the EDC Market

• We believe by mid-2017 all new clinical trials will be electronic

• Today, approximately 70% of clinical trials are digitized

• We believe MDSO represents between 40% and 50% of these digitized trials

Our View of the EDC Market Opportunity Today

The EDC Market

We Believe MDSO can 1. Take Share from

Competitorsand

2. Take Share from Undigitized Trials

Undigitized Trials = 70%

MDSO Represents Between 40% and 50% of digital trials

Digitized Trials = 70%

Competitors Represent Between 20% and 30% of digital trials

All Trials Must Be Digital By Mid-2017


8



The Regulatory Environment

FDA and digitization of clinical trial data submissions

• Two major deadlines are driving the digitization of clinical trial data submissions

• 12/17/16 – required data standards

• 5/5/17 – eCTD

• Digital data submissions continue to increase: 55% in FY13, 64% in FY14, and 71% FY15 (as of Sept.)

FDA Comments on mHealth from NYAS conference

• Mobile technologies have enormous potential to make new physiological measurements

• Remote transmission of data may change the way trials are done

• There are no regulatory restrictions to use of these technologies

• The questions to be answered relate to meaningful clinical effects and reliability of the data

FDA pilot for EHR to EDC connectivity

• The FDA continues to evaluate efforts to seamlessly link EDC to EHRs

FDA May Look to Do More with Digital Trials

• Think Efforts Around Fraud and Waste

32

17

5

16

48

24

54

84

Endpoints in NDAs 2007 - 2015 (n = 280)

127

248

55 63 6481

189

Endpoints in Studies 2007 - 2015 (n = 611)


9

The Evolving Productization Landscape and the Impact of Pricing

What Seems to Be Driving the New Clinical Trials Paradigm?

Complex Therapeutic Environment

• Product development collaboration

• Precision medicine

• The need for an Enterprise Resource Planning (ERP) for clinical trials

• Several companies (INC Research, Merck, and Novartis, et al.) see technological

innovation associated with clinical trials coming from non-CROs

• Pricing Pressures

• Hepatitis C – Viekira Pak versus Harvoni

• PCSK9 inhibitor drugs – Amgen and Regeneron

• Indication specific pricing

• Greater emphasis on risk sharing monetization structures

What Types of Data?• Adherence

• Comparative Efficacy• Real World Efficacy

• Utilization

Drivers of the New Paradigm• $2.7T in Healthcare costs are driving cost rationalization

• $2.6B to develop a drug is unsustainable LT• CMS' push to outcomes based reimbursement

New Clinical Trial and Product Paradigm

ClinicalTrials

Statistical Significance

+Verification

ProductRevenue =

Price X Quantity + DATA

Price no longer represents the magical hammer of revenue growth, as biopharma companies must continuously prove their products worth in order to maintain pricing

power.

Key Indicators of Changing Environment• Focus on mHealth - Roche, NVS, GSK, BIIB, et al.

• Rave + TSDV + mHealth, but what else?• Precision Medicine



10

MDSO and the Point to Platform Shift Value Proposition

The MDSO Point-to-Platform Shift

• The Shift Entails a Long Cycle; One Year Plus• We See the Possibility for Three Platform Deals in FY15

Clinical Trials MDSO Modules

Initial Agreement

First Expansion: More Trials

Second Expansion: More Products

Third Expansion: All Clinical Trials

Fourth Expansion: Enterprise Customer

Final Expansion: Platform Customer

Single Trial Single Product (Likely Medidata Rave)

Single Trial Works;Expands to Several Trials

Still Single Product (Likely Medidata Rave)

Running Several Trials on MDSOMultiple Products; Likely Rave + Another

Module (Coder, Gateway, Balance)

Client Now Runs All Clinical Trial Volume on MDSO Platform

Multiple Products; Likely Rave + Another Module (Coder, Gateway, Balance)

Client Runs Most, If Not All Trial Volume on MDSO

Client Utilizes Core Products (4 Total):Rave + Gateway + Coder + Balance

Client Runs All Trial Volume on MDSO

Client Utilizes All MDSO Modules:Rave + Gateway + Coder + Balance +

TSDV + Patient Cloud

The Evolving Client / MDSO Relationship

Initially, An Interesting, But Not Must Have Solution• Competitors May Do Some Modules Better

Over Time, Evolves Into a Must Have Solution• Drivers - Pricing, Complexity, Efficiency



11

MDSO mHealth Clinical Trial

Analyzing MDSO’s MOVE-2014 Clinical Trial – mhealthclinicaltrials.com

MDSO sponsored a study to illustrate the value of mHealth technology within clinical trials

• Equipped patients with a Fitbit Flex and iPhone

• Provided a mobile app to capture diary and quality of life data (Patient Cloud)

• Over eight weeks, MDSO tracked the effect of sensors, wearables, and apps on health

outcomes in overweight people with Type 2 Diabetes

The MOVE-2014 Results: MDSO illustrated that studies can successfully instrument patients in

a clinical trial

Data Quality

• Higher Visibility of Data Led to Higher Data Quality - Outliers may be a function of device

quality issues

• Calculated sleep efficiency and illustrated implausibility of an outlier

• Verified an outlier of 35,000 steps in a single day

Patient Compliance

• Compliance is an Important Data Quality Check – High Compliance Associated with Wearing

a Tracker; Sleep Mode Was a Problem

• Subjects wore devices over 90% of the time

• Subjects failed to put devices in sleep mode consistently

• Subjects were mostly compliant around completing questionnaires via a mobile app

Observations

• mHealth Data Yields Many Possible Clinical Insights – Data Correlations Exist

• Pain vs. BMI: highest levels of pain resulted in lowest BMI reduction

• Analyzed a subject cluster who achieved both blood glucose and BMI reduction to

understand phenotypic (behavioral) characteristics on results

Sources: Company documents and mhealthclinicaltrials.com


12

CROs Continue to Utilize More of MDSO

• MDSO product density among CRO partners continues to increase over time

• We estimate Inc Research, Theorem Clinical, and PRA International are MDSO platform customers

• While CRO adoption / utilization of Rave remains strong, CROs are increasing adoption of Coder,

Balance, TSDV, and the Patient Cloud

Contract Research Organizations (CROs) and MDSO Utilization

1

1

1

4

7

9

20

7

10 Products

9 Products

8 Products

7 Products

6 Products

5 Products

4 Products

3 Products

2 Products

1 Product

0 Products

CRO Product Density of MDSO Modules

43

5

16

13

11

2

7 7

MedidataRave

MedidataRave Safety

Gateway

MedidataCoder

MedidataDesigner

MedidataGrants

Manager

MedidateBalance

MedidataCTMS

MedidataTSDV

MedidataPatient

Cloud

CROs Using Medidata Producs (n=43)

From June to October, CRO utilization of Rave, Coder, Grants Manager, Balance, and Patient

Cloud increased.

The MDSO CRO Opportunities

1. CRO customers seem to be adopting more of the

MDSO cloud.2. MDSO enterprise / platform CROS seem to be

increasing

We estimate MDSO has roughly two to six enterprise clients and roughly one to three platform CRO clients.



13

MDSO Platform Customer Analysis


Biopharma Sponsors Contract Research Organizations (CROs)

Johnson and Johnson

Alcon (subsidiary of Novartis)

GlaxoSmithKline

Platform Deals Delayed to 4Q15, Our Guess:Astellas - INC Research Cust.

Otsuka - INC Research Cust.

INC Research

Theorem Clinical

PRA International

Platform deals have been a major focus since 2012. Deals have been slow to materialize due tolong sales and transformation cycles at sponsor and CRO clients. In our view, the platform value

proposition seems much stronger with the inclusion of Targeted Source Data Verification (TSDV)and the Patient Cloud (mHealth). We think the regulatory and price environment now lends

clinical trial outsourcing to technology more than ever.

An Overview of Key MDSO Platform Customers

Platform Value Proposition = Rave + TSDV + Patient Cloud +

Significant Interest in mHealth (Roche, Novartis, GSK, Biogen, et al.) +FDA clinical trial data submission digitization efforts


14

MDSO Customer Analysis

Penetration Stats

• 5 of top 50,

roughly 10%

• Top 50

penetration is

66%

• Top 50 Direct is

54% penetration

• Top 50 via CRO

is 18%

penetration

Rank Company Direct User CRO Relationship At Least One Relationship

1 Novartis YES YES

2 Pfizer

3 Roche YES YES YES

4 Sanofi YES YES YES

5 Merck

6 Johnson & Johnson YES YES

7 GlaxoSmithKline YES YES

8 AstraZeneca YES YES

9 Gilead Sciences YES YES

10 AbbVie YES YES

11 Amgen YES YES

12 TEVA YES YES

13 Bayer YES YES

14 Eli Lilly YES YES YES

15 Novo Nordisk

16 Boehringer Ingelheim

17 Takeda YES YES

18 Bristol-Myers Squibb YES YES

19 Actavis

20 Astellas Pharma YES YES

21 Baxter International YES YES

22 Biogen YES YES

23 Merck KgA

24 Mylan YES YES

25 Daiichi Sankyo YES YES

26 Celgene YES YES

27 Otsuka YES YES

28 Allergan YES YES

29 Les Laboratories Servier

30 Shire YES YES

31 Abbott Laboratories YES YES

32 Sun Pharmaceutical

33 Valeant

34 CSL

35 Eisai

36 UCB

37 Fresenius

38 Chugai Pharmaceutical YES YES

39 Menarini YES YES

40 Grifols

41 Aspen Pharmacare YES YES

42 Hospira

43 Sumitomo Dainippon YES YES

44 Mitsubishi Tanabe

45 STADA

46 Mallinckrodt YES YES

47 Endo International YES YES

48 Alexion YES YES

49 Lundbeck YES YES

50 Kyowa Hakko Kirin YES YES

Sources: Company documents and Stifel Research


261 275 287316

333 350 358 363 379397

420437

462486

516539 572

27.6%27.3%

24.7%

14.9%13.8% 13.4%

17.3%

20.4%21.9% 22.4% 22.9% 23.3% 23.8%

0.0%

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10.0%

15.0%

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Clie

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(Y

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Medidata Solutions Client Trends

Clients Client Growth (Y/Y)

92104

120133

147163

178195

218

236

259

282304

329

372

32%33%

36%38%

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52%54% 56%

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Clients Are Adopting Multiple Solutions

Multi-Product Customers Multi-Product Penetration

15

MDSO Company Statistics



16

Clinical Trial Statistics

Changes in Protocol Complexity 2002 2012 Change

Number of End Points 7 13 86%

Number of Protocol Procedures 106 167 58%

Number of Eligibility Criteria 31 50 61%

Number of Countries 11 34 209%

Number of Investigative Sites 124 196 58%

Number of Patients Randomized 729 597 -18%

Number of Data Points Collected per Patienta 500,000 929,203 86%

115 120

413460

129 143

714780

Protocol Readyto FPFV

Protocol Readyto Drug Available

Protocol Readyto LPLV

Protocol Readyto Data Lock

Me

dia

n D

ays E

lap

se

d

Simple Complex

2.42

2.6

3.6

2.3

6.9

5.6

6.8

8.5 8.3

Overall Phase I Phase II Phase III Phase IIIb/IV

Amendments and Changes Per Protocol

Amendments Changes Per Amendment

43%

52%

37%

30%

38%

Overall Phase I Phase II Phase III Phase IIIb/IV

Protocol and Amendment Timing

Amendments



17

Pen and Paper / Homegrown Systems

• Many companies use proprietary legacy systems and rely on cobbling together disparate systems

that are not often easily connected

Contract Research Organizations (CROs)

• Both MDSO competitor and MDSO client

• CROs face the prospect of losing share to technology based solutions

Oracle / Phase Forward

• Prior market leader (Phase Forward) in Electronic Data Capture (EDC)

• Largest competitor next to MDSO

• Strength lies in ability to tie clinical trials seamlessly to financial systems

Parexel Informatics (Perceptive Informatics)

• Data and applications for clinical trials

• Primary products include: EDC, CTMS, ePRO, RTSM, and medical imaging

BioClinica

• eClinical solutions provider

• Core products include: EDC, CTMS, RTSM, RBM, and Optimization

Medrio

• Cloud-based eClinical solutions provider focused on the Phase I trial market

Datatrak

• An early player in EDC whose product suite now primarily focuses on EDC plus CTMS, Trial Design,

Medical Coding, Randomization & Trial Supply Management, Safety, and Training

Omnicomm

• eClinical solutions provider focused on Phase I trials

Veeva Systems

• Veeva Vault – eTMF and expansion into study start-up and Vault RIM

Competition



18

M&A Opportunities

We believe innovation in clinical trials represents a major area of investment focus for venture capital.

Additionally, biopharma sponsor companies continue to talk about the need to completely re-configure

product development. While we see MDSO as a leading innovator, we believe they will likely look to

acquire technology, as well. As of September 30, 2015, MDSO held $492.9 million in cash and cash

equivalents.

Interesting M&A Opportunities for MDSO:

We have no knowledge of any M&A negotiations or discussions between Medidata Solutions and any

of the identified potential parties. In addition, the probabilities outlined below are based on our

estimates

CTMS (Clinical Trial Management System): While MDSO attempted to improve its offering in CTMS with a

tuck in acquisition in 2011 (Clinical Force), we see CTMS as the Achillies heel of the platform. We have even

heard of a company (Abbvie) look to Salesforce for CTMS; Salesforce does not provide a specific CTMS

solution.

goBalto: Provider of next generation solutions that facilitate a simpler and more efficient study start-up

process. Essentially a tool that optimizes electronic Trial Master File (eTMF) and Clinical Trial Management

Solutions (CTMS) functions.

Medrio: eClinical software vendor primarily focused on the EDC market for phase I trials. Medrio might

represent a tuck-in acquisition that would help MDSO in the phase I trial market. The company has facilitated

1,000+ studies across 500 clients since 2005.

ePatientFinder: Software provider that helps healthcare providers learn about and direct relevant patients to

clinical trials. The solution utilizes algorithms to match physicians with treatments relevant to patients based on

EHR data.

Virtual Clinical Trials: The focus on leveraging technology to bring clinical trial research to the patient’s home

and local health system.



19

MDSO Model


Medidata Solutions, Inc. (MDSO)Statement of Income($ in 000s, except per share) FY FYE FYE FYE 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 E

FY Ends Dec 2014 2015 2016 2017 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15

Subscription 280,041 343,954 415,496 496,518 63,811 68,947 71,547 75,736 78,749 83,929 88,878 92,398

Professional Services 55,030 56,096 59,462 63,624 12,829 14,276 14,449 13,476 13,691 14,155 14,235 14,015

TOTAL REVENUE 335,071 400,050 474,958 560,142 76,640 83,223 85,996 89,212 92,440 98,084 103,113 106,413

Subscription 45,576 49,252 61,078 64,350 11,086 11,221 11,413 11,856 11,473 12,354 12,489 12,936

Professional Services 39,344 41,725 44,002 46,285 9,713 9,753 9,582 10,296 10,703 10,557 10,304 10,161

Cost of revenues (excludes D&A) 84,920 90,977 105,080 110,636 20,799 20,974 20,995 22,152 22,176 22,911 22,793 23,097

Gross Profit 250,151 309,073 369,878 449,507 55,841 62,249 65,001 67,060 70,264 75,173 80,320 83,316

Research and Development 71,757 93,842 112,860 134,434 17,789 17,311 17,677 18,980 21,911 22,519 24,192 25,220

Sales and Marketing 83,435 102,845 119,515 137,235 20,732 20,425 21,004 21,274 24,318 25,724 25,881 26,922

General and Administrative 69,111 81,873 90,242 109,228 17,046 17,373 17,865 16,827 20,569 21,943 19,143 20,218

Other 5,784 0 0 0 0 0 4,880 904 0 0 0 -

Operating Income 20,064 30,513 47,262 68,610 274 7,140 3,575 9,075 3,466 4,987 11,104 10,956

Interest Expense (15,368) (15,817) (15,297) (15,297) (3,781) (3,827) (3,849) (3,911) (3,958) (3,997) (4,038) (3,824)

Interest Income 1,814 2,624 2,956 2,956 395 420 465 534 534 612 739 739

Other Income, Net 4 (22) 217 60 34 (28) 0 (2) (34) (34) 3 43

Pretax income 6,514 17,297 35,137 56,328 (3,078) 3,705 191 5,696 8 1,568 7,808 7,913

Income Taxes 422 6,202 14,072 22,559 (1,263) 1,409 30 246 (149) 55 3,127 3,169

Tax Rate 6.5% 36% 40.0% 40.0% 41.0% 38.0% 15.7% 4.3% NM 3.5% 40.0% 40.0%

Net Income, pro forma, cont ops 6,092 11,095 21,065 33,770 (1,815) 2,296 161 5,450 157 1,513 4,681 4,744

Basic EPS, pro forma, cont ops 0.12$ 0.21$ 0.39$ 0.61$ (0.03)$ 0.04$ 0.00$ 0.10$ 0.00$ 0.03$ 0.09$ 0.09$

Diluted EPS, pro forma, cont ops 0.11$ 0.20$ 0.37$ 0.59$ (0.03)$ 0.04$ 0.00$ 0.10$ 0.00$ 0.03$ 0.08$ 0.08$

Shares outstanding

Basic 52,558 53,720 54,318 54,933 52,109 52,457 52,772 52,895 53,257 53,647 53,933 54,043

Diluted 54,338 56,333 57,072 57,687 52,109 54,828 55,069 55,347 55,658 56,191 56,687 56,797

Cash EPS (before stock comp) 0.74$ 0.87$ 1.13$ 1.43$ 0.11$ 0.17$ 0.20$ 0.25$ 0.17$ 0.22$ 0.25$ 0.24$

Adjusted EBITDA 74,236 92,038 115,957 144,846 12,508 18,379 21,200 22,149 17,689 21,760 25,957 26,632 Percentage of Revenues

Gross profit, pro forma 74.7% 77.3% 77.9% 80.2% 72.9% 74.8% 75.6% 75.2% 76.0% 76.6% 77.9% 78.3%

Research and Development 21.4% 23.5% 23.8% 24.0% 23.2% 20.8% 20.6% 21.3% 23.7% 23.0% 23.5% 23.7%

Sales and Marketing 24.9% 25.7% 25.2% 24.5% 27.1% 24.5% 24.4% 23.8% 26.3% 26.2% 25.1% 25.3%

General and Administrative 20.6% 20.5% 19.0% 19.5% 22.2% 20.9% 20.8% 18.9% 22.3% 22.4% 18.6% 19.0%

Operating Income 6.0% 7.6% 10.0% 12.2% 0.4% 8.6% 4.2% 10.2% 3.7% 5.1% 10.8% 10.3%

Adjusted EBITDA 22.2% 23.0% 24.4% 25.9% 16.3% 22.1% 24.7% 24.8% 19.1% 22.2% 25.2% 25.0%

Year / Year Growth Rate

Net Sales 21.0% 19.4% 18.7% 17.9% 21.2% 22.3% 21.2% 19.6% 20.6% 17.9% 19.9% 19.3%

Subscription 22.9% 22.8% 20.8% 19.5% 26.0% 22.4% 23.5% 20.3% 23.4% 21.7% 24.2% 22.0%

Professional Services 12.5% 1.9% 6.0% 7.0% 1.8% 21.8% 11.1% 16.2% 6.7% -0.8% -1.5% 4.0%

Adjusted EBITDA 10.5% 24.0% 26.0% 24.9% -12.0% 5.1% 16.4% 28.1% 41.4% 18.4% 22.4% 20.2%

Operating Income -16.0% 52.1% 54.9% 45.2% -96.1% -19.2% -62.3% 1165.0% -30.2% 210.6% 20.7%

Pretax Income -64.6% 165.5% 103.1% 60.3% -142.1% -58.2% -97.4% -57.7% 3988.0% 38.9%

Net Income -63.4% 82.1% 89.9% 60.3% -131.8% -55.0% -96.9% 836.4% -34.1% 2807.5% -13.0%

Diluted EPS -64.5% 81.8% 85.0% 59.5% -127.3% -60.0% -100.0% 900.0% -25.0% -20.0%

Guidance from Company

Subscription (Revised as of 3Q15) $336.0M to $345.0M $84.4M to $93.4M

Professional Services Revenues (Revised as of 3Q15) $56.0M to $57.0M $13.9M to $14.9M

Total Revenue (Revised as of 3Q15) $392.0M to $402.0M $98.4M to $108.4M

GAAP Operating Income (Revised as of 3Q15) $28.0M to $31.0M $8.4M to $9.9M

Adjusted EBITDA $90.0M to $96.0M $24.6M to $27.6M

Adjusted Non-GAAP Net Income $47.0M to $50.5M

Source: Company Reports and Stifel estimates

Steve Rubis - (214) 706 - 9451

Updated: October 27, 2015


20

Bibliography of Pertinent MDSO Notes

A List of What We Believe to Be Our Most Relevant Research on MDSO

10/27/15 – MDSO: 3Q15 Better Than First Thought; Long-Term Thesis Intact; Attractive Entry Point

10/23/15 – Digital Health Check-Up: Why We Think the World May Be Changing

10/14/15 – Digital Health Check-Up: Mobile Health Conference Helps Frame MDSO Platform Value

Proposition

10/12/15 - MDSO: Does It Make Sense to Scale in Current Environment? We Say Yes; Maintain Buy

9/30/15 - MDSO: What We Learned at SCDM 2015 About EDC and Digitization

9/30/15 – Digital Health Check-Up: Thoughts from SCDM and the Digitization of Clinical Trials

9/25/15 – Digital Health Check-Up: Connect 2015 and the Internet of Medical Things (IoMT)

9/21/15 - MDSO: Fundamentals Unchanged; EDC Remains Sticky; mHealth Continues to Evolve; Buy

9/14/15 – Digital Health Check-Up: The Digital Health Investment Roadmap for 2H15 and Beyond

8/4/15 – MDSO: CRO 2Q15 Commentary Suggests Strong 2H15 for MDSO; Reiterate Buy

4/17/15 – MDSO: 1Q15 Preview; the Era of Biopharma Productization; CRO Product Density; Buy

2/1/15 – MDSO: Revisiting the Impact of NVS / QCOM Life Announcements; 4Q14 Preview, Maintain Buy

6/16/14 – Initiating Coverage of Medidata Solutions with a Buy Rating; Drug Trial Cloud


21

Disclosures

Important Disclosures and Certifications

I, Steven A. Rubis, certify that the views expressed in this research report accurately reflect my personal

views about the subject securities or issuers; and I, Steven A. Rubis, certify that no part of my

compensation was, is, or will be directly or indirectly related to the specific recommendations or views

contained in this research report. Our European Policy for Managing Research Conflicts of Interest is

available at www.stifel.com.

For a price chart with our ratings and any applicable target price changes for MDSO go to

http://sf.bluematrix.com/bluematrix/Disclosure?ticker=MDSO

The rating and target price history for Medidata Solutions, Inc. and its securities prior to February 25, 2015, on

the above price chart reflects the research analyst's views under a different rating system than currently utilized

at Stifel. For a description of the investment rating system previously utilized go to.www.stifel.com.

Stifel or an affiliate is a market maker or liquidity provider in the securities of Medidata Solutions, Inc..


22

Disclosures

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BUY – We expect a total return of greater than 10% over the next 12 months with total return equal to the

percentage price change plus dividend yield.

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percentage price change plus dividend yield.

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is unknown when the outlook will be clarified. SUSPENDED may also be used when an analyst has left the firm.

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Within the last 12 months, Stifel or an affiliate has provided investment banking services for 19%, 7%, 5% and

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23

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