Icon Q2 Revenue Up as Early Phase Work Continues to Slow
Quarterly revenue at the Dublin-based CRO grew 20% to $334M, though the company’s top client represented 23% of its revenue, compared to 18% for last year, while the top five clients represented 53% of revenue, up from 48% last year.
CEO Ciaran Murray said in the conference call last week that gross bookings for the quarter equaled “the highest level that we've ever recorded." He also noted the backlog "remains healthy at $2.87 billion, and this gives a 77% forward coverage of the next 12 months revenue expectations.”
Since the last call, one of the company’s partnerships with a top sponsor has been renewed and “the second one is in a very advanced stage,” he said.
CFO Brendan Brennan said that company is continuing to focus on its late-stage business, which was “somewhat offset by weaker than planned performance in our early phase business,” according to a transcript of the call.
Higher-than-expected cancellations were also driven by the closure of one large study, Murray said. He noted it was cancelled “due to safety issues for the [same] drug that was actually identified in a different study.”
Early Phase Struggles
Icon’s gross margin in the quarter remained relatively high but “suffered because of performance in our early phase business,” Murray said. “The early phase market continues to evolve, and we're seeing an increasing trend for more targeted studies that go directly into patient populations rather than the traditional healthy volunteer studies.”
Recent acquisitions of clinical research sites also reveal how this trend is evolving and CROs are reacting to market forces.
Icon is also reducing work at its Phase I CPU (Clinical Pharmacology Unit) in Manchester, UK, in preparation for transitioning it into the new translational medical unit under development on the site of Manchester Royal Infirmary, which it expects to open in early 2014, Murray added.
“We have a good offering there in San Antonio in North America with a Phase I clinic,” he noted, adding that the company is looking to meet the needs of the market, although early trial work represents only a small fraction of the company’s business.
Second Half of 2013
Icon expects its margins to grow slightly less quickly in the second half of this year than in the first half, largely due to slowdown in early phase work and as the ramp-up of new partnerships starts to flatten out.
“So while we expect revenue to continue to grow in the second half of the year, it will not grow quite as quickly as we have seen during the first half,” Murray said. “So we expect margin to continue to expand in the second half of the year but at a lower rate than we've seen in the first half of the year.”