Quintiles shines again in Q3 with IHS leading the way

03-Nov-2014 - Last updated on 03-Nov-2014 at 10:12 GMT

Business as usual for the world's top CRO

Quintiles reported almost 14% growth in revenue, which was largely due to increasing revenue from its Integrated Health Services (IHS), which saw almost 35% quarterly growth.

In a conference call last week, CEO Tom Pike noted that the company booked $244m of net new business in IHS in the quarter, which contributed to an industry-leading backlog of $10.75bn as of September 30.

“Trial complexities and the mixture of projects results in a diverse backlog that may have more protocol amendments and a diversity of durations,” Pike said.

He also cautioned: “As we've said before, the commercial business within this segment can be lumpy throughout the year. While we continue to see strong demand for our services in this business, the timing of award and launches can vary, and renewals within this business are typically booked toward the end of the year.”

That caution comes as Quintiles also lowered its revenue guidance for the rest of the year by about $40m, though that is due mostly to “significant changes in foreign currency exchange rates,” according to CFO Kevin Gordon.

Pike emphasized the strength of the company’s late-phase business, “where we have significant differentiation and remain bullish on the market trends.”

Analysts also seemed upbeat on Quintiles’ quarter, with Citi analyst Garen Sarafian noting, “With strong commentary on market demand, an industry leading book-to-bill of 1.42x and solid expense control across both segments, we maintain our Buy rating on shares of Quintiles.”

Pike also noted net new business increased 47% compared to the same period in 2013, led by the five-year renewal of a significant contract in its clinical and data management functional resourcing services businesses. “In addition, we did another smaller sole-source deal with a midsized pharmaceutical company that we will not name,” he added on the conference call.

As far as geographic distribution of its work, Gordon noted that “service revenues has shifted slightly from the prior year, with the North America and Latin America region up slightly to 43%, the Europe, Middle East and Africa region down slightly to 36% and the Asia Pacific region was consistent at 21% of the total.”

Quintiles is also getting in on the action to fight Ebola. “In addition to some pioneering work in the rotavirus in India and with dengue in the developing world, we recently were awarded some important work on Ebola,” Pike said.

Commenting on an analyst’s question related to competitor Parexel’s difficulties in the last quarter, Pike seemed to indicate that business was progressing as usual for Quintiles.

“From our vantage point, there's no fundamental changes in the number of RFPs we're seeing, and we continue to have those senior management discussions that indicate that our customers are seeking innovative new ways to reduce development costs, improve productivity, improve outcomes. So in general, we don't see any fundamental change in terms of what we see,” he said.