Premier shows solid growth after US buy

By Kirsty Barnes

- Last updated on GMT

Related tags: Board of directors, Nervous system, Executive director

Premier Research has shown solid growth over the past year, spurred
on by the acquisition of a firm that gave it access to the
lucrative US market for the first time.

The financial results for the UK-based contract research organisation's (CRO) year to 31 January 2007, saw total revenues jump during the period by 154 per cent to £41.8m (€61.6m) - with the firm's newly-acquired CRO Scirex generating £16.0m of this figure. Premier bought Scirex in July last year, its largest acquisition to date, and the move was said by the firm to be "highly strategic in further accessing the important US market".​ Scirex, headquartered in Philadelphia, USA, has ten offices located across the US, London (UK) and Krakow (Poland). The CRO has experience in the same therapeutic areas as Premier Research, particularly in central nervous system disorders. ​ Meanwhile, although revenue growth was strong, Premier's expenses also shot up by 170 per cent to £34.4m, leaving the company with an operating profit of £7.4m and a pre-tax profit of £4.3m. Also, these figures do not include a £2.1m exceptional item that was said to "represent restructuring costs arising as a result of fundamental rationalisation and reorganisation following the acquisition in the year." "Following the acquisition we removed any duplicated resources and staff so the £2.1m was a result of staff contract buyouts,"​ Bernard Gallagher, departing CFO, told Outsourcing-Pharma.com. In addition, although profits doubled over those generated in the year ending 31 January 2006, the actual profit margin being made by the firm dropped by 5 percentage points. The company's net debt also doubled to £18.5m. "We have grown our business a lot over the past year and doubled the number of companies we are operating in and this has led to increased infrastructure costs and cut into our margins. As we continue forward we plan to improve efficiencies to grow our margins again,"​ said Gallagher. Looking ahead, Premier said it will continue to focus on "three of the highest growth areas in drug development"​ - oncology, central nervous system and anti-infectives - and to a lesser degree, paediatrics, "a specialised area with strong regulatory drivers".​ The firm also indicated that may also begin to target new areas of development within cardiovascular and respiratory disease as it continues to expand. "This is because we already have some experience in these areas so we want to expand upon this,"​ said Gallagher. In addition, Premier said that it was actively placing a larger emphasis on winning "larger value contracts"​, as well as "the more lucrative Phase III work". "Importantly, to mitigate against risk, we have ensured that there is no customer or project concentration by having a well spread business with over 240 current projects across more than 150 customers giving protection against individual project delays,"​ the firm added. "With no contract accounting for more than 10 per cent of revenues in any one year, this continues to provide us with recurring business."​ These strategies appear to be working - Evolution Securities analyst Michael Aitkenhead wrote in a recent research note: "The company has expanded both its client base and active contracts and in contrast to its UK peers (Synexus, Clinphone), Premier has been unaffected by a weak US dollar or major contract delays".​Meanwhile, Premier also announced some recent personnel movement within company. Financial controller Peter Kyle has now moved on to the role of chief financial officer (CFO), taking over from Bernard Gallagher, who has increasingly taken on more responsibility in the strategic development of Premier Research, and will become chief development officer. "We have a new stated acquisition policy moving formward and this will be my role to focus on exclusively,"​ said Gallagher. The company also noted that Guy Patrick, chief medical officer and a founder of the company, has become less involved in executive duties as the company has grown and will now relinquish his executive director position in order to "pursue other interests". ​ In addition, the firm stated it has appointed search consultants to help identify a new chairman - in the meantime, Steve Harris the remaining independent non-executive director will continue to act as the interim non-executive chairman.

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