Clinical trials globalisation strengthens Parexel

By Emilie Reymond

- Last updated on GMT

Related tags: Von rickenbach, Clinical trial, Josef von rickenbach

There are currently three key market trends that play to Parexel's
strengths and one of them is the globalisation of clinical trials,
the company's CEO claimed during a healthcare conference earlier
this month.

Parexel's CEO, Josef von Rickenbach, took the opportunity, during a JPMorgan Healthcare conference held in San Francisco on 10 January, to demonstrate how the increasing clinical trials activity in the US and Western Europe and the resulting increased competition for patients in many therapeutics areas has had a favourable impact on Parexel's business.

According to von Rickenbach, this competition for patients is driving more and more biopharmaceutical companies to conduct clinical trials in multiple jurisdictions and satisfy the regulatory requirements in those locations to increase the potential market size for their product.

"Today, regions like Russia, Latin America, and Eastern Europe often provide easier, faster and more efficient access to patient recruitment, and also at a lower cost,"​ said von Rickenbach.

"This may also assist companies who wish to launch their new product concurrently in several major healthcare markets and in order to maximise the market penetration of their product."

And Parexel has not wasted a second in taking advantage of the situation by further developing its business outside the US and, as a result, the contract research organisation (CRO) currently generates the highest percentage of revenue growth outside the US.

"Sixty four per cent of Parexel's revenue for the three months ended September last year came from outside the US,"​ said von Rickenbach.

To put things into context, Parexel's biggest public competitor, Kendle International, generated about 42 per cent of its revenue from outside the US.

Parexel attributes its ability to catalyse this trend mainly to its presence through more than 50 locations across 40 countries. According to von Rickenbach, that way, the firm "can recruit patients rapidly and cost-effectively even for the largest and most challenging trials."

"Operating around the world allows us to perform activities in the most optimal locations, at the lowest cost,"​ said von Rickenbach.

Von Rickenbach said the firm has started to use its global spread to reduce fixed cost structures in high cost regions and migrate certain activities to lower cost locations.

"As a result of these and other activities, our operating income has already started to improve significantly, increasing to approximately $41m (€32m),"​ he said.

However, von Rickenbach also attributed the company's new business success, in part, to strong demand from small and emerging biopharmaceutical firms.

In the US alone, there are now over 1,000 of these companies and some analysts say that the biotech and small pharma now represent as much as 50 per cent of the global intellectual property (IP) pipeline.

"Many of these companies have made a strategic business decision to limit their infrastructures and therefore are relying more heavily on outsourcing,"​ explained von Rickenbach.

"The breadth and the depth of our products and services are obviously attractive to these companies."

Unsurprisingly then, more than 50 per cent of the firm's new business wins over the last several quarters has come from this segment.

And von Rickenbach is confident that biotech and small pharma companies will continue to provide his firm with a significant source of growth for new business opportunities and wins.

Looking forward, he said he expected Parexel's competitiveness in the marketplace to continue to bring strong revenue growth.

"We anticipate achieving revenues in the range of $730m for the fiscal year of 2007 and we also expect a steady improvement in margins to reach eight per cent for the current fiscal year."

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