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Icon and Parexel: Pfizer-AZ merger will bring more business for CROs

By Zach Brennan , 05-May-2014
Last updated on 05-May-2014 at 15:04 GMT

Potential pharma mega-mergers a boon to CRO industry, Icon and Parexel say
Potential pharma mega-mergers a boon to CRO industry, Icon and Parexel say

A mega-merger between Pfizer and AstraZeneca would bring increased business to CROs say Icon and Parexel, if past experiences are to go by.

As Pfizer continues its attempts to acquire AstraZeneca - with the latest bid of £63bn ($106bn) being rejected on Friday - questions were asked to Icon’s management during last week’s conference call discussing Q1 2014 results as to how such a deal may affect business.

As Pfizer and Icon are in a strategic partnership, its potential deal with AstraZeneca could be particularly important moving forward. CEO Ciaran Murray said on the call it had been an interesting few days in the market, though this is at least the third time that there’s been some kind of consolidation.

It always leads to more outsourcing and more business for CROs,” he added, noting Icon has historically been a winner in these cycles. “While there’s a period of integration, pipelines and development will go on – there hasn’t been extensive disruption and there may be some scope for refinement of strategy.”

What we’ve seen with restructuring and consolidation, we’ve seen in the past, it’s ultimately resorted in increasing outsourcing penetration. It comes down to the specifics of each deal, though it ultimately provides opportunities for new business for CROs,” Murray said.

Whilst Murray noted that the company also works with AstraZeneca, he told investors “they’re not among our top five clients.”

Parexel Concurs 

Icon’s views on a possible Big Pharma merger were reflected by fellow contract research organisation (CRO) Parexel, who also have an ongoing strategic alliance with Pfizer and reported first quarter results last week.

Big pharma M&A has caused disruptions in the past but has led to higher outsourcing rates,” Parexel’s CEO Josef von Rickenbach told stakeholders.

However, he added he was not concerned by the dealmaking, noting, “the positives are higher if the mergers go through, as every time this happens, outsourcing goes bigger.”

Icon results

For Q1 of 2014, Icon reported that its net revenue increased 10% year on year to $349.6m, though that figure was about $2.5m less than what investment analysts predicted.

CFO Brendan Brennan said in the conference call that the top client concentration remained about the same when compared to last year, with slight increases for the company’s top 25 clients.

We’ve seen some funding flow into the smaller biotech and pharma companies and we’ve developed some good relationships with them over the last 12 months,” Murray added in Wednesday’s call.

The company’s backlog increased 11%, which “gives us a solid foundation upon which to build during the remainder of 2014,” Murray noted.

The acquisition of Aptiv Solutions for $144m last month is expected to close in the coming weeks, and will further differentiate Icon’s offerings. Aptiv’s presence in Japan and medical device offerings are key to the growth of Icon, Murray added. Since 2008, Icon has invested about $300m in acquisitions to boost scale and its offerings.

A couple of our current customers are already working with Aptiv and I think the use of adaptive trials will be useful” for others, Murray said.

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