Mixed fortunes at Icon & Covance in Q3
Many contract research organisations (CRO) have struggled in recent quarters because of the economic downturn and tightening budgets but there were claims in recent financials that things were improving.
However, third quarter results from Icon and Covance suggest that the sector is yet to exit its slump. Covance continued to grow its revenues, rising to $493.7m (€329.9m) from $467.4m a year ago, but its operating income fell by 17 per cent to $57.8m.
This decline is a result of difficulties at Covance’s early stage business. Net revenues from the sector slipped by 8.8 per cent and operating income tumbled by 59.1 per cent to $22.4m.
Covance attributed this fall in operating margin to a decline in the level of study activity, delays, start-up losses at its facility in Chandler, Arizona, US, lower early development pricing and staffing levels above current demand.
Revenues and operating income are expected to decline further in the fourth quarter due to lower demand but there were positives in Covance’s results, with its late-stage division continuing to grow.
Operating income from the late-stage business grew by 55.6 per cent to $68.9m, underpinned by revenues that increased to $278.9m from $224.7m a year ago. Furthermore, the company’s total backlog grew year-on-year by 12.8 per cent to $4.79bn.
Icon chairman “very pleased”
In contrast to Covance Icon managed to increase its operating income in the third quarter. Lower costs and expenses helped operating income rise from $27.1m to $30.4m, despite a 2.3 per cent decline in revenues.
Icon reported higher than normal levels of cancellations but raised its earnings guidance for 2009. John Climax, chairman of Icon, commented: “Our growth in margins, operating income and earnings was very encouraging”, declaring himself “very pleased” with the company’s results.
