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Parexel tops analysts’ revenue, EPS expectations for Q2

By Zachary Brennan , 03-Feb-2014

Parexel narrowly beat investment analysts’ earnings per share and revenue expectations as consolidated service revenue hit $487.1m.

In commenting on the results of the quarter, Josef von Rickenbach, Parexel's Chairman and CEO said that the company has “further reduced the use of contract staff” as early phase clinical research “demand has picked up somewhat, especially in the patient portion of the business…and I'd like to note that early phase was also a contributor to margin improvement this quarter.”

He added on the early phase developments: “the potential is certainly there for substantial profitability.” 

Parexel saw similar growth last quarter as well.

As far as the company’s key growth driver – Perceptive Informatics – von Rickenbach said, “Some of the key differentiators for Perceptive Informatics products and services are the breadth, depth and scalability of our MyTrials platform which allows us to continue to add features and create value for clients... As we continue to evolve our eCRO model, technology will become an even stronger competitive differentiator for the company.”

He also responded to a question from an investment analyst on Perceptive, noting that its high margin expansion could be attributed to the scale of the program.

But von Rickenbach also told another analyst that in the second half of fiscal year 2014, revenue growth is “probably going to ebb even a little more,…[and] beyond that, I think it's going to normalize again.”

The company also seems to be diversifying its client base as the largest client in the December quarter represented 16% of revenue as compared to 17% in the second quarter one year ago, while the top five clients represented 46%, compared to 51% one year ago; and the top 20 clients represented 77% of the work as compared with 80% one year ago.

The company’s backlog hit $4.8bn at the end of the second quarter, which is an increase of 5.9% year-over-year.

In terms of sponsors restructuring their R&D programs and the impact that might have on the CRO industry, von Rickenbach said, “In our experience, restructurings and pipeline reprioritizations can sometimes, in the short term, decrease the level of clinical development outsourcing from a particular client. However, it appears at the current time that demand for clinical research outsourcing is solid.” 

As far as strategic partnerships are concerned, von Rickenbach noted that such awards “can be relatively lumpy. And in the second quarter -- I wouldn't say it was a particularly over-the-top strong quarter but it was basically a normal quarter.” 

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