Parexel said revenues rose 14 per cent to $324m in the quarter, with profit pegged back at $5.2m, less than half the same period of 2007. However, the CROs shares closed the day up $2.22 at $9.58 after it raised its full-year guidance on revenues to around $1.1bn.
The results are particularly impressive given that Parexel lost a small biopharma client during the quarter after it filed for bankruptcy, leaving the CRO as a “major creditor”, according to chief executive Josef von Rickenbach. Parexelrecorded $15m in pre-tax reserves in the second quarter for anticipated wind-down costs and bad debt expense.
“We will consider our options with respect to recovery,” he told investors on a conference call yesterday. And with the economic downturn restricting funds available to companies, he said the firm is also carrying out a review of its portfolio to check its exposure to work sponsored by “non-revenue-generating clients.”
Parexel closed the quarter with a backlog of approximately $2bn, including $459m from new business authorisations, but von Rickenbach said there are signs of developing softness in the market.
“In the second quarter we saw an unusually high level of pending proposals being withdrawn,” he said. “Clients also seem to be taking longer to make up their minds.” However, he also described a shift in customer mix in favour of big pharma companies which favours full-service CROs like Parexel.
Parexel’s Clinical Research Services division increased its revenues around 10 per cent to $201m, driven by strength in the late stage portion of the business, said chief financial officer James Winschel.
Early-stage clinical services have been under pressure with several quarters in succession with demand from big pharma client contracts declining, offset to some degree by demand from smaller companies which “continues to hold up quite well.”
Quarterly service revenue at Parexel Consulting and Medical Communications Services was down around 2 per cent to $32m as a result of the sale of Barnett Educational Services to Cambridge Healthtech Institute in April 2008.
As expected, the integration of ClinPhone gave a lift to Parexel’s eClinical business Perceptive Informatics, with revenues up 84 per cent to $43m, swelled to the tune of $20.5m by ClinPhone’s contribution.