Parexel healthy in Q3 despite weak med comm business

By Emilie Reymond

- Last updated on GMT

Related tags Quarter Contract research organization

Parexel has announced healthy financial results for its third
fiscal quarter, despite another disappointing performance in its
medical communications business.

The US-based contract research organisation (CRO) reported that sales for the three months ending 31 March rose 25 per cent to $240m (€176m), while also recording a 41 per cent jump in operating income to $15.5m, from $11.2m in the same quarter last year.

In addition, Parexel said a strong performance in winning new business in the quarter had amounted to $369m. "During the quarter, we continued to execute well on the new business front, with healthy increases across all business segments and in all geographies," said Josef von Rickenbach, Parexel's CEO.

"The profitability of our operations in the United States is continuing to improve, and is on track with our expectations."

He continued, "We are also making good progress on the cash front.

Solid cash flow from operations has enabled us to pay down debt this quarter and has further increased the strength of our balance sheet."

In terms of geography, the CRO generated most of its revenue - 55 per cent or $105.8m - in Europe, an 18 per cent increase from the previous year.

Revenue within the US - which represented 38 per cent of total sales - was $71.7m, a 23 per cent jump from the same quarter in 2006.

Looking at the company's contract services, revenue increased 21.5 per cent to a record $191.2m, compared with $157.3m in the prior year period.

Parexel's contract service business includes the Clinical Research Services (CRS) segment, Parexel Consulting and Marketing Services (PCMS), and Perceptive Informatics.

Sales in the CRS segment climbed 27 per cent to $143.5m.

In contrast, the PCMS unit was, once again, the poor performer in the quarter.

Sales slightly fell to $29.7m, a 3 per cent decrease from $30.4 in the comparable quarter.

These results are similar to the ones the firm posted in the second quarter, which were released last January.

It seems that the actions Parexel took then have not had a positive impact on the performance of the segment yet.

At the time, von Rickenbach said that as the company continued to experience challenges in the PCMS segment, it "took steps" in the Medical Communications business, which were expected to result in improvement by the fourth quarter.

James Winschel, Parexel's chief financial office told earlier this year that the quarterly results for the PCMS were "disappointing" and as a result the company decided to reduce the number of staff.

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

"Now that we have realigned our resources, we are going to see improvements going forward," said Winschel.

The company was positive for the upcoming quarter, expecting service revenue to be in the range of $197 and $203m.

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