Healthcare slows down at Cognizant in Q2

By Phil Taylor

- Last updated on GMT

Related tags Pharmaceutical companies Pharmaceutical industry Pharmacology

IT infrastructure and business process services firm Cognizant has cut back its full-year financial forecasts on signs that the downturn in the economy is starting to bite at some of its major clients, particularly those in the healthcare sector.

The company has trimmed its sales forecasts down to $2.81bn for the year, “due to the spread of caution among our client base​,” said Francisco D'Souza – Cognizant’s president and chief executive, in a conference call.

Total revenues came in at $685m in the second quarter, up a third and well ahead of guidance, but healthcare is showing signs of weakness with one of Cognizant’s top-five clients planning to scale back spending in the latter half of the year. Net profit rose 26 per cent to $104m.

Cognizant’s healthcare and life Sciences practice employs 10,000 professionals including doctors, pharmacologists, physicians, biomedical engineers, pharmacists, biostatisticians and medical writers, and provides "domain-aligned consulting, IT, business process and analytics solutions​" according to the firm.

D’Souza sees a trend emerging in which companies are “reassessing their budgets, reprioritising spending and elongating decision cycles​” as a consequence of decreased business confidence. This was particularly a feature of the healthcare division, he added, and pegged back revenue growth to 3 per cent in the second quarter.

Spending amongst our life sciences customers was weak as they pulled back plans ... due to the economic environment and also the tremendous pressure facing that industry, resulting from drug safety, government, and regulatory issues​,” he added.

Cognizant has particularly strong relationships with the payer end of the healthcare sector – such as insurance and benefits companies Aetna and Molina Healthcare - but has also signed big deals with pharmaceutical companies.

In March, for example, the group signed a $95m, five-year agreement with AstraZeneca in which it will provide centralised clinical data management services for all of AstraZeneca’s global clinical development. Three months before that it signed a similar wide-ranging deal with Merck & Co.

In June, Cognizant was ranked 11th in a survey by Healthcare Informatics of business providing healthcare IT services. That represented an advance up the rankings that was achieved by a hefty increase in its healthcare and life sciences unit of late.

In October 2007, for example, the firm paid $135m for MartketRx, a company which provides analytics, market research, and software services and counts the 20 largest pharmaceutical companies and four of the five top biotechnology firms as its clients.

And in April it formed an alliance with Japanese firm CTC Laboratory Systems, which provides IT services covering drug discovery and clinical development and works with 20 of the top 30 pharmaceutical companies in Japan.

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