Parexel’s cancellations double as profit growth stalls

27-Apr-2009 - Last updated on 28-Apr-2009 at 10:18 GMT

Parexel posted a doubling in cancellations in Q3 of its fiscal year, with profits remaining flat as an eight per cent boost in service revenue was offset by higher operating expenses.

Contract research organisations (CRO) have been hit hard by project cancellations, with PPD and Kendle recording unprecedented levels, and Parexel has also suffered.

Parexel’s cancellations rose to $95.8m (€73.5m) in Q3, up from $49.5m in 2008, and new business remained flat at around $425m. These figures are indicative of the challenges facing CROs but Josef von Rickenbach, Parexel’s CEO, is positive about the results.

He said: “The company’s positive quarterly results were a clear reflection of the determined focus by our employees to control costs and achieve both our financial and operational targets.

“I am proud of our staff’s ability to grow service revenue and expand operating margins in today’s challenging environment. In addition, we were able to generate a very respectable level of new business wins in the quarter, despite some market headwinds.”

The financial market has responded favourably to the results, which included an increase in profit forecasts for 2009 that helped the company’s share price gain 15 per cent.

Service revenue growth slows

Despite the difficulties facing CROs Parexel managed to post a 7.8 per cent increase in service revenues, taking it to $264.5m. However, this is a considerable slow down compared to Q3 2008 when service revenues grew by 28 per cent.

In addition the company’s costs and expenses grew by four per cent to $284.5m but Rickenbach believes that efforts to control this “have been paying off” and that further initiatives are underway.