PRA struggles after major contract woes

By Kirsty Barnes

- Last updated on GMT

Related tags: Contract research organization

As PRA International's profits tumble on the back of a major
contract loss, coupled with ongoing delays in its biotech
contracts, the company has introduced new project efficiency
measures and is focusing on increasing its international presence.

Revenue was down six per cent to $69.2m (€54.2m) for the first quarter of this year, while costs remained the same, causing a profit dive of 23 per cent and a profit margin dip of 2.5 per cent.

At the same time, working capitol has shot up 262 per cent on the comparable quarter in 2005 to $51.2m, suggesting the company's internal workings have also taken a downward spiral.

The cancellation of a major clinical program played a large part in the company's troubled performance; however, the nature of the contract and the reason for its termination were not disclosed. Timing issues and continued contract delays from the company's biotech clients was also cited as drag on profits.

Because of the complex nature of biotech projects, these types of contracts tend to get delayed quite often, for various reasons such as funding issues, or the decision to remove a compound from clinical trials back into preclinical analysis, or a regulatory issue, company spokesperson, John Lewis told Outsourcing-Pharma.com.

"Because half of our business comes from biotech clients - more than any other major CRO - we are exposed more to these unpredictable contracts,"​ said Lewis.

"Ideally we try and overcome these project delays by juggling resources effectively but sometimes it is impossible and we find ourselves with staff sitting idly waiting for a project to start, causing a rise in overheads."

Although these projects tend to be less predictable, Lewis said they provide a "good overall business for the company and we have no plans to change the core focus of the business."

Historically PRA has always dealt with a large biotech client base as this industry overlaps with its two core areas of specialty - oncology and the central nervous system.

"In addition we have a large pool of scientists that can offer more specialised advice to biotechs than any other CRO,"​ said Lewis.

"Our business model and balance sheet remain sound, and we are carrying no debt. We will now continue to execute our strategic plan for long term success,"​ said Pat Donnelly, PRA president and CEO in a news release.

As part of its strategy, PRA has decided to place its focus on global expansion in the hope of reviving profits, and made its first move by recently acquiring its first company in India - contract research organisation (CRO) Sterling Synergy Systems.

The deal, expected to close in the second quarter, opens the budding Indian market up as a new business location for PRA, providing the company with additional clinical operations in Mumbai, a data management centre in Pune and a preferred provider arrangement with the Indian Cooperative Oncology Network.

The firm is also busy implementing new internal measures to improve operating efficiency and cut costs.

"For example, we have just started using FlexDMS, a data management system that allows us to do electronic data capture (EDC) and convert paper data into an electronic format,"​said Lewis.

"We feel this will be an extra benefit to us and our clients, speeding up the way we turn around and deliver data, while reducing our overheads."

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