Phase Forward, Inc. (PFWD)

Phase Forward (PFWD) provides the software and services to assist clients in improving the efficiency of their clinical trials. The company offers a suite of applications: InForm, Clintrial and Clintrace.

PFWD earlier reported Q3 revenue of $43.2 million, up 23% from a year ago and up 5.1% quarter over quarter. Gross margin came in at 58.9%, up from 57.9% in the previous quarter. Operating margin came in at 17.2%, up from 15.7% in the prior quarter.

Going forward, for full year 2008, management expects to report revenues of $168-$169 million, up 25%-26% from 2007. Management has also narrowed its guidance for EPS. On a GAAP basis, EPS is now expected between $0.30 and $0.31, down from the earlier estimate of EPS around $0.34-$0.35 (non-GAAP EPS is expected at around $0.48-$0.49).

The Clarix acquisition appears synergistic for the company and it seems that the company is on track to meet its goals. We upgrade our rating to a Buy with a target price of $18.00.