Icon earnings miss guidance as cost rise outstrips sales uptick

16-Feb-2012 - Last updated on 16-Feb-2012 at 12:01 GMT

Fourth quarter earnings at Icon missed analyst estimates and its guidance as an uptick in sales failed to offset rising costs.

Icon has accelerated hiring to support its strategic deal with Pfizer and the imoact was felt in a double-digit year-on-year cost increase. Revenues were up five per cent but still fell short of expectations.

Ciaran Murray, CEO of Icon, focused on backlog growth in his comments. “I am encouraged with our performance. Net new business awards were $308m (€237m), representing a book to bill of 1.3. This resulted in a year-end backlog of $2.3bn, up 19 per cent on December 2010”, Murray said.

In the third quarter Pfizer added to backlog growth at Icon and could also have played a role in the more recent new business. Icon was uncertain when the Pfizer deal would begin adding significant revenues and this was reflected in its wide fourth quarter earnings per share (EPS) guidance range.

EPS guidance for the fourth quarter ranged from $0.08 to $0.28. Actual EPS in the quarter was $0.07. In November Icon warned that a slower than hoped revenue ramp, possibly attributable to a slow transition of work from Pfizer, was likely to leave fourth quarter EPS at the low-end of the range.

New CFO

Icon used the results to confirm Brendan Brennan as its chief financial officer (CFO). Brennan has been acting CFO since October, when Murray was named CEO, and has been a senior member of the Icon finance team since 2006.

The quarter was Murray’s first full reporting period since stepping up from CFO to succeed Peter Gray as CEO. A month after Murray took charge Icon also changed its clinical research president, hiring Steve Cutler to replace Alan Morgan.

Murray has worked at Icon since 2005 and his promotion was well received. However, the turnover of senior staff has worried some analysts. “We view the degree of management turnover as concerning given Icon’s current positioning”, Eric Coldwell, equity analyst at RW Baird, wrote.

BeijingWits acquistion

Fourth quarter results come a day after Icon completed its acquisition of Chinese CRO BeijingWits Medical Consulting. The deal gives Icon clinical development capabilities and 100 staff in Beijing, Shanghai, Chengdu, Guangzhou, Wuhan, and Hong Kong.

Murray said: “The acquisition of BeijingWits enhances our current capabilities and reflects our on-going commitment to building our presence in China. BeijingWits…brings to Icon a strong leadership team, experienced staff, and good relationships with local investigator sites and regulatory bodies.”

Icon entered China in 2005 and has expanded organically and through partnerships. In 2011 Icon opened an office in Shanghai and the year before it allied with Tigermed, a China-based CRO, to add scale in the country.