Parexel feels effects of adding ClinPhone

By Phil Taylor

- Last updated on GMT

Related tags: Von rickenbach, Clinical trial

Parexel has trimmed back its earnings guidance for the first quarter of fiscal 2009 as it starts the process of integrating ClinPhone, which the company bought for £91m (€114m) last month.

The acquisition will dilute earnings to the tune of 4 to 6 cents per share for the full year, with 1 or 2 cents of that impact coming in the first quarter ended September 30. An additional 2 cents will come off earnings per share (EPS) in the first quarter, related to the write-off of assets, loan fees and other costs.

The firm is now predicting EPS of $0.20-$0.21 foe the first quarter, down from $0.23-$0.25, with full-year EPS now $1.09-$1.17 down from $1.15-$1.25.

In addition to the costs associated with integrating ClinPhone, Parexel said the weak US dollar was also a factor in the downgrade, although this was partially offset by improvements in the underlying operating performance.

On the upside, Parexel is now predicting consolidated service revenues of $270m-$280mfor the first quarter, a $10m range increase on its prior guidance. For the full-year it now expects to bring in $1.215bn-$1.245bn. The ClinPhone acquisition is expected to contribute $10m-$14m in service revenue during the first quarter and $95m-$105m in the full year.

Parexel has been indulging in an acquisitive streak of late, buying Apex of Taiwan last year and California Clinical Trials Medical in 2006 to expand its capabilities in Phase I trials as well as in Asia. With ClinPhone now in the portfolio boosting Parexel’s technology offering, a reasonable question to pose would be where next for the CRO?

In answering that question, Josef von Rickenbach, chairman and CEO of Parexel, said the first priority right now is to make sure that these recent investments are successfully integrated. “There is still a lot to do,​” he said, adding that “for now the strategic remit is well laid out​.

In 2000, Parexel was a pioneer in establishing its own clinical IT business, Perceptive Informatics​,” said von Rickenbach.

ClinPhone provided “a great fit​” for Parexel, he added. The purchase brought in an in-house electronic data capture (EDC), an additional clinical trial management system (CTMS) suited for small and mid-sized clients, which sits well alongside Parexel’s own IMPACT system aimed at larger customers.

Of course, ClinPhone's initial competency – and still the backbone of its business – is its interactive voice response (IVR) systems and services. Trial sponsors are increasingly asking for systems which integrate EDC with IVR and other interactive technologies, and von Rickenbach said the new eClinical entity, which will operate under the Perceptive brand, will be well-placed to deliver.

At the core, clinical research is primarily about data and information, so its unsurprising that applying more sophisticated IT can bring many tangible benefits to the clinical development process, such as patient recruitment, randomisation and the distribution of trial drugs to sites​”

Thomson CenterWatch's recent 2007 Survey of Investigative Sites in the US​, identified EDC technologies as the number one area of potential for best preventing future delays in clinical trials. Meanwhile, analysts have estimated that 20 per cent of clinical studies around the globe are now being conducted using EDC and predict a complete transition from paper based systems within a decade.

ClinPhone has had a few operational issues to deal with of late, including the challenge of its acquisition of DataLabs and telephone outages that impacted orders in 2007, but the performance of the firm has been improving over the last six months, said von Rickenbach.

Cost saving

There will be some cost and revenue synergies resulting from the ClinPhone acquisition, for example the company had an office in Parexel’s hometown Boston that will no longer be needed, said von Rickenbach. Cost savings will accrue over a couple of years, he added, but would not be drawn on a figure, saying that this was factored into the revised guidance.

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