Parexel stock falls about 15% as strategic partnerships slow down

By Zachary Brennan

- Last updated on GMT

Revenue slows down for the CRO
Revenue slows down for the CRO

Related tags Strategic partnerships The quarter at tropicana

Struggling strategic partnerships and lower conversion rates from its backlog have caused Parexel stock to bottom out slightly, though executives remain optimistic on the second half of this year.

Josef von Rickenbach, Parexel Chairman and CEO, clarified on the conference call Thursday “that the fact that revenue and bookings were soft this quarter are disassociated​.”

He added: “Revenue grew 9.4% year-over-year in the quarter but came in lower than expected, partly due to seasonality at the beginning of our new fiscal year.  In addition, first quarter revenue conversion from backlog was lower as a result of a shift in our backlog to projects in the start-up stages, and a few large trials achieving their study objectives ahead of schedule.”

Analysts also questioned Parexel’s book-to-bill, which is generally a good metric to measure a CRO’s progress in its partnerships.

Garen Sarafian, analyst at Citi, noted that the Parexel book-to-bill should be in the spotlight, adding, “An increase in strategic partnerships has naturally created greater volatility in this metric through the greater concentration of clients, something we’ve highlighted previously and occurred to PRXL late last year, when a 0.88x metric was followed by a strong 1.34x the next quarter. Further, awards outside of partnerships are cited as remaining solid, which suggests this is client specific, not broad-based​.”

Pfizer Relationship

Tim Evans of Wells Fargo also grilled von Rickenbach specifically over the fact that Parexel’s peers are not seeing the same downturn in strategic relationships and he honed in on the company’s relationship with Pfizer, noting that Parexel competitor Icon is seeing an uptick in revenue from the strategic partner.

Von Rickenbach clarified that the strategic relationships are not just about Pfizer and that it’s “more broadly based​.” Pfizer remains Parexel’s biggest client, he added, noting that when the relationship started, Parexel was awarded trials already ongoing, which means they ended sooner and “it’s fair to say a significant proportion ended in the course of the last fiscal year…our competitor [Icon] got more de novo studies which are now coming more fully into production, so revenue is going up​.”

“Pfizer would be in there but they wouldn’t sway” the business one way or the other, von Rickenbach said.

Overall, he said, the strategic partnerships are seeing normal ebb and flows. “Strategic partnerships will likely be fine in terms of new business, and this may very well pick up​,” he added.

He also mentioned that smaller biotech and pharma companies are taking longer in their decision cycles on pending proposals, which means new business awards have slowed.

This is not the new normal – there’s a lumpiness to these new awards and clearly this was a low point​,” von Rickenbach added.

Related news

Show more

Related products

show more

Using Define-XML to build more efficient studies

Using Define-XML to build more efficient studies

Content provided by Formedix | 14-Nov-2023 | White Paper

It is commonly thought that Define-XML is simply a dataset descriptor: a way to document what datasets look like, including the names and labels of datasets...

Overcoming rapid growth challenges with process liquid preparation

Overcoming rapid growth challenges with process liquid preparation

Content provided by Thermo Fisher Scientific - Process Liquid Preparation Services | 01-Nov-2023 | Case Study

A growing contract development manufacturing organization (CDMO) was challenged with the need to quickly expand their process liquid and buffer preparation...

Related suppliers