Phase Forward Reports Third Quarter 2006 Results.

WALTHAM, Mass. -- Phase Forward Incorporated (NASDAQ: PFWD), a leading provider of data management solutions for clinical trials and drug safety, today announced its financial results for the third quarter of 2006.

Revenues for the third quarter of 2006 were $28.0 million, a 26% increase from $22.2 million in the third quarter of 2005. Within total revenues, InForm[TM] license, application hosting and other related revenues were $19.7 million, an increase of 37% from $14.4 million in the prior year period.

Bob Weiler, chief executive officer and president, remarked, "We are very pleased with the company's performance in the third quarter. We believe the EDC market continues to gain momentum, as evidenced by the growing diversity of new and existing customers that are driving Phase Forward's growth. Our existing customers continue to sign up for additional trials, while customers adopting EDC for the first time are turning to Phase Forward as their partner of choice due to our product and services leadership position and proven track record."

Weiler added, "In addition to our positive outlook for 2006, we are increasingly optimistic about our long-term opportunity. Our recent International Users Conference generated record attendance and interest levels in our suite of solutions remains high. Moreover, we believe the recently issued report from The Institute of Medicine may lead to heightened regulatory pressure on life sciences companies as it relates to the required level of safety testing and analysis, as well as potentially increasing the number of overall trials conducted over the lifetime of a drug or solution."

For the third quarter of 2006, GAAP income from operations was $2.8 million, compared to $2.2 million in the third quarter of 2005. GAAP net income was $2.9 million, or $0.08 per diluted share, for the third quarter of 2006, compared to $2.2 million, or $0.06 per diluted share, reported in the third quarter of 2005.

For the third quarter of 2006, non-GAAP income from operations was $4.0 million, representing a margin of 14.2% and an increase of 66% from the prior year period. Non-GAAP net income was $4.1 million, or $0.11 per diluted share, for the third quarter of 2006. This represented an increase of 75% from non-GAAP net income of $2.3 million, or $0.07 per diluted share, for the third quarter of 2005.

The attached table presents a reconciliation of GAAP to non-GAAP income from operations and net income and net income per share applicable to common stockholders for the third quarter of 2006 and 2005.

Cash, cash equivalents and short-term investments were $65.6 million at the end of the third quarter, an increase of $1.8 million from the end of the prior quarter. Total deferred revenue was $48.1 million at the end of the quarter, down slightly from the end of the prior quarter and an increase of 24% on a year-over-year basis.

Business Highlights

* Massachusetts General Hospital signed a multiyear arrangement for the use of InForm on an NIH sponsored registry trial that is expected to be conducted over a period of seven years.

* Mitsubishi Pharma signed on as a new customer for the use of the InForm solution on an ASP basis, with an initial order of three separate clinical trials.

* Genzyme, an existing customer of Phase Forward, signed up for the use of InForm on an ASP basis for a key Multiple Sclerosis study.

* In the first full quarter of the CRO Advantage Program, the company signed new customers such as MedPace and Research Triangle Institute, while conducting follow-on business with existing CRO customers such as PharmaLink and Quintiles.

* GleneaglesCRC, an Asian-based contract research organization, selected Clintrial[TM] for use in their Clinical Data Management units in Singapore, the Philippines and China. In addition, GleneaglesCRC will offer localized support for the InForm solution, providing support for Chinese-speaking and Korean-speaking customers among a range of regional services.

* The company released two Clintrace[TM] related product releases including version 4.1 of the Clintrace adverse event tracking and reporting system and version 2.0 of the Electronic Case Submissions Module (ECSM). Clintrace 4.1 features reporting capabilities that are the result of tight integration with Cognos, Inc.'s ReportNet product and compliance with the FDA's new MedWatch 3500, while ECSM streamlines the exchange of electronic case safety information with regulatory agencies, affiliate offices and trading partners.

Financial Outlook

The following statements are based on current expectations and the company assumes no obligation to update or confirm them. These statements are forward-looking and inherently uncertain. Actual results may differ materially as a result of the factors identified below and the factors identified in our public filings made with the Securities and Exchange Commission, or other factors.

For the fourth quarter of 2006, the company expects revenues to be between $29.2 and $30.0 million. The company expects non-GAAP operating income to be between $3.8 and $4.3 million, with non-GAAP EPS between $0.11 and $0.12. GAAP EPS is expected to be between $0.07 and $0.08, including non-cash expenses associated with stock-based compensation expense and the amortization of intangible assets.

For the full year 2006, the company expects bookings to be between $120 and $130 million and revenues to be between $ 105.6 and $106.4 million. On a non-GAAP basis, operating income is expected to be between $12.9 and $13.4 million, with non-GAAP EPS between $0.37 and $0.38. GAAP EPS is expected to be between $0.26 and $0.27, including non-cash expenses associated with stock-based compensation expense and the amortization of intangible assets.

Conference Call

The company plans to host its investor conference call today at 5:00 pm EDT to discuss its financial results for the third quarter and its outlook for the fourth quarter and full year of 2006. The investor conference call will be available via live web cast on Phase Forward's web site at www.phaseforward.com under the tab "Investors." To participate by telephone, the domestic dial-in number is 800-260-8140 and the international dial-in is 1-617-614-3672. The access code is 87855941. Investors are advised to dial in at least five minutes prior to the call to register. The web cast will be archived until November 24, 2006.

About Phase Forward

Phase Forward is a leading provider of integrated data management solutions for clinical trials and drug safety. The company offers proven solutions for electronic data capture (InForm[TM]), clinical data management (Clintrial[TM]), clinical trials signal detection (CTSD[TM]), strategic pharmacovigilance (WebVDME[TM] and Signal Management), adverse event reporting (Clintrace[TM]) and applied data standards (WebSDM[TM]). In addition, the company provides services in the areas of application implementation, hosting and validation, data integration, business process optimization, safety data management and industry standards. Phase Forward's products and services have been utilized in over 10,000 clinical trials involving more than 1,000,000 clinical trial study participants at over 230 organizations and regulatory agencies worldwide including: AstraZeneca, Boston Scientific, Dana-Farber Cancer Institute, Eli Lilly, Food and Drug Administration, GlaxoSmithKline, Merck, U.K. Medicines and Healthcare Products Regulatory Agency, National Institutes of Health, Procter & Gamble, Quintiles, sanofi-aventis, Schering-Plough Research Institute, Serono and Servier. Additional information about Phase Forward is available at www.phaseforward.com.

Certain statements made in this press release that are not based on historical information are forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements relating to, among other things, Phase Forward's expectations and assumptions concerning management's forecast of financial performance, the performance of Phase Forward's products and services, future business and operations plans of Phase Forward's customers, the ability of Phase Forward's customers to realize benefits from the use of Phase Forward's products and services, and management's plans, objectives and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond Phase Forward's control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things, changes in our customers' industries; our ability to convince prospective customers to adopt our solutions; competition; changing customer requirements; governmental regulation; our ability to maintain profitability; fluctuations in our operating results; long sales and implementation cycles; our dependence on a limited number of customers or suppliers; product performance; third party service interruptions or delays; technology failures; our ability to maintain customer relationships and contracts; our ability to retain and hire skilled personnel; our ability to protect our intellectual property rights; product liability or intellectual property infringement claims brought against us; acquisitions; our ability to manage our rapid growth; our ability to obtain capital when desired on favorable terms; and the volatility of the market price of our common stock. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Phase Forward undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise. For additional disclosure regarding these and other risks faced by Phase Forward, see the disclosure contained in Phase Forward's public filings with the Securities and Exchange Commission including, without limitation, its most recent Quarterly Report on Form 10-Q.

Non-GAAP Financial Information

Phase Forward provides non-GAAP income from operations, net income, and net income per share applicable to common stockholders data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Phase Forward's management believes these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the comparable GAAP results, which are attached to this press release.

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