Pain continues for PharmaNet in Q4

JLL Partners is poised to acquire the contract research organisation and will be faced with the prospective of reviving a company that saw its Q4 net income fall to $1.6m, down from $3.8m in the corresponding period of 2007.

This figure for 2008 does not include the non-cash impairment charge, which is a result of the decline in the PharmaNet’s market capitalisation during the Q4 2008. The charge for Q3 was $210m.

These charges have played a role in driving down PharmaNet’s performance in 2008, which saw the company post a net loss of $215m, down from a profit of $12m in the preceding year.

However, although the charge exacerbated PharmaNet’s problems it was a symptom of difficulties the company was already facing. Net revenues for 2008 were $451m, down from $470m in the previous year, in part because of a rise in cancelled and postponed contracts.

In Q4 PharmaNet’s late stage segment was hit by $11.9m in cancellations, with its early stage business losing an additional $3.5m of anticipated business. Cancellations are common place for CROs but PharmaNet has had been affected particularly badly in 2008.

In the first eight months of 2008 almost a third of Pharmanet’s contracts resulted in cancellations, far exceeding the typical rate in the industry of 15 to 20 percent. This could be merely an unfortunate run of luck but financial markets have been merciless, sending PharmaNet’s share value plummeting from over $40 at the start of 2008 to a low of $0.68.

This has allowed JLL Partners to come in with an offer of $5 a share, which, if PharmaNet can recapture its previous success, could prove to be shrewd business.