Parexel reports impressive profit

By Emilie Reymond

- Last updated on GMT

Related tags Cent Clinical trial

Parexel has announced encouraging financial results for its second
fiscal quarter, despite 'disappointing' performance in its medical
communications business.

The US-based contract research organisation (CRO) reported that sales for the three months ending 31 December rose 21 per cent to $180.5m (€139m), while also recording a substantial 31 per cent increase in operating income to $13.9m, from $10.6m in the same quarter last year.

These figures are just a confirmation of what the company was expecting. Parexel's CEO Josef von Rickenbach was very confident about the shape of his company during a JPMorgan Healthcare conference earlier this month as he revealed 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 the company's business.

The globalisation of clinical trials has had a positive impact on Parexel's business and the company has been developing its business outside the US to meet the demand - as a result, the CRO currently generates the highest percentage of revenue growth outside the US.

In its quarterly results, Parexel said that 57 per cent of total sales came from Europe and 7 per cent from Asia while 36 per cent comes from the US.

What is more, Parexel pinpointed cost cuttings in selling, general and administrative (SGA) expenses - which consist of the combined payroll costs and advertising expenses a company incurs - as a favourable factor in the quarter's results.

The company managed to keep SGA expenses relatively down, as these costs only increased 14 per cent while profit increased 21 per cent in the quarter.

"We have not taken any specific actions as far as SGA costs are concerned but we have been prudent, and it has had an impact on the results,"​ James Winschel, Parexel's chief financial officer told

Meanwhile, operating margin for this quarter stayed stable at 7.7 per cent compared to 7.1 per cent last year.

Looking at the company's segments, the Clinical Research Services (CRS) business - which represents 70 per cent of Parexel's revenue business - posted sales of $132.5m, a 22 per cent increase from $108.9m in the second quarter last year.

The Perceptive Informatics (PII) segment, which represents 10 per cent of total revenues, generated $19.7m, a massive 44 per cent jump from $13.7m in the previous year.

In contrast, the Consulting & MedCom Services (PCMS) segment, which represents just over 15 per cent of total sales, generated $28.3m, a 4 per cent increase.

"While we continue to experience challenges in the PCMS segment, we took steps this month in the Medical Communications business to better align our resources with current market dynamics, which I believe will result in improvement in PCMS by the fourth quarter,"​ said von Rickenbach.

Winschel told that the quarterly results for the PCMS were "disappointing"​ and as a result the company took a number of steps to improve things, in particular staff reduction.

Winschel said Parexel had to make redundancies in the segment this month which were not reflected in this quarter's results.

"Now that we have realigned our resources, we are going to see improvements going forward. In addition, we won new business in the MedCom services segment,"​ said Winschel.

Looking forward, Parexel said it anticipates achieving revenues in the range of $730m for the fiscal year of 2007 and also expects a steady improvement in margins to reach 8 per cent for the current fiscal year.

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