Parexel, Covance report financial gains

By Kirsty Barnes

- Last updated on GMT

Related tags: Cent, Quarter, Revenue

Parexel and Covance have both reported strong financial gains in
their quarterly results, as the clinical services industry remains
heated.

For the three months ended March 31, 2008, Parexel saw its third quarter revenue grow 28.3 per cent to a $245.3m, a record sum for the contract research organisation (CRO). On a segment basis, revenue for the third quarter consisted of $191.5m in the company's Clinical Research Services (CRS) unit, $33.5m in the Consulting and Medical Communications (PCMS) business, and $20.3m in the eclinical arm, Perceptive Informatics. During the period Parexel also reported an operating income of $22.7m, compared with the $15.5m in operating income generated in the comparable 2007 quarter of the prior year - an increase of 46.8 per cent year-over-year. Meanwhile, the firm saw its pre-tax profit rise to $23.1m, up from the $15.8m generated in the prior year's third quarter. On another positive note, Parexel said its backlog increased 37 per cent year-over-year to total $1.9bn during the quarter. "From our perspective, industry dynamics remain positive. Our backlog is within reach of the $2bn mark, with healthy levels of new business wins from all three of our business segments contributing to this quarter's results​", said Josef von Rickenbach, Parexel's chairman and CEO. "The new business proposal pipeline is robust, and the strength of our competitive position gives us confidence that we will continue to win significant levels of new business​." As such, the company said it expects to generate service revenue in the range of $255m to $265m in the fourth quarter. Covance​ Meanwhile, rival CRO Covance reported its first quarter results, where the firm witnessed a revenue increase from $376.9m to $434.0m year-over-year. At the same time, the company also experienced a 20.6 per cent increase in operating income and a "record operating margin performance" of 15.2 per cent, up from 14.5 per cent, with the growth being "led by toxicology and chemistry services​". Segment wise, Covence's Early Development unit saw its revenues grow 12.7 per cent to $202.0m, its operating income rise 15.8 per cent to $50.6m and its operating margin increase to 25.0 from 24.4 per cent in the comparable year-ago period. The firm said that its current US toxicology room renovations are expected to be completed in the second quarter, bringing additional capacity, after which point the company expects "strong sequential revenue growth​" in this area of the business. Meanwhile, Covance's Late-Stage Development unit witnessed a 17.5 per cent revenue growth to $210.4, an operating income increase of 33.1 per cent to $38.9m and at the same time, the profit margin climbed to 18.5 per cent, from 16.3 per cent in the first quarter of 2007. Covance said that this segment's growth was led by "outstanding performances​" in its central laboratory business, which delivered revenue growth in excess of 30% in the quarter due to an increase in kit volumes and a strengthening of the Swiss franc, as well as its clinical development business. Commenting on the results, Covance's chairman and CEO Joe Herring said that although the first quarter revenue was "solid​", it was "not indicative of the robust business environment we are currently experiencing."​ "As an example, early in the second quarter, we were awarded a three-year, dedicated capacity toxicology agreement with a minimum contract commitment of $66m. We were also selected as the primary provider of clinical development services by a top-ten pharmaceutical company and we expect significant 2008 orders from this agreement​," said Herring. "Beyond these examples, our pipeline of opportunities is larger and more strategic than at any time in company history. Some of these opportunities are unprecedented in scope, combining multiple service lines in both our Early and Late-Stage Development segments​."

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