Parexel set for more Big Pharma business in 2015, even if Pfizer names 3rd CRO
In December, Parexel told Outsourcing-pharma.com it would hire 450 former GlaxoSmithKline (GSK) employees and create a dedicated business unit to service the firm in the US as part of its renewed strategic agreement.
This was confirmed by GSK, which said the contract research organisation (CRO) will be taking on R&D scientists previously engaged in in-house drug development activities at its facility in Research Triangle Park, North Carolina.
Parexel’s other major strategic contract is with Pfizer, whose work it competes for with fellow “alliance partner” Icon.
In recent months it looked as if Icon was winning.
Icon vs Parexel
In October a disappointing book-to-bill ratio prompted a 15% drop in share price and earned Parexel a grilling about its lacklustre revenue performance - relative to its Dublin rival - during its fiscal Q1 conference call.
In response, CEO Josef von Rickenbach said his firm had taken on a disproportionate number of in-progress Pfizer studies, explaining that many of these clinical trials had completed in the first half of 2014.
He contrasted this with Icon which he said had been awarded more ‘de novo studies’ that are ongoing and generating revenue.
“I think it's just normal ebbs and flows, nothing particular to be read into the relationship… And I think if there are any changes or dynamics, they are more explained in the way I just said.”
Only time will tell whether the dynamics do change in 2015, but with Icon busy running maturing studies it seems logical that Pfizer would at least look at awarding trials to its other strategic partner.
A third Pfizer CRO in 2015?
Last year, Pfizer told us it was exploring the idea of adding a third “alliance partner.” However, even if a new strategic deal is signed it is unlikely to impact either of the drugmaker's existing CROs according to Evercore ISI analysts Ross Muken.
He told Outsourcing-pharma.com that: “We have no insight to Pfizer intentions but see a modest probability of an additional partner being added.
“Pfizer already utilizes other vendors for specialized services outside Icon and Parexel. We view it is unlikely that it proves to be a negative for either player on an absolute basis,” Muken continued, adding that “If Pfizer adds an additional partner it is likely to be incremental to existing plans.”
Client mix
At around the time Parexel was stressing its good relationship with Pfizer, Icon was emphasising its expanding client base.
In October, the Irish contractor reported that while its biggest customer – Pfizer - still generated 31% of its revenues in 2014, 45% came from smaller customers in 2014 which was an increase on the 35% such clients contributed in previous years.
Icon attributed some of the wins to its acquisition of adaptive trials firm Aptiv in April.
According to Jefferies analyst David Windley Icon may be expecting a steady year of business from Pfizer, rather than further growth.
He said in a note to investors that “Icon needs to see growth away from Pfizer” adding that “in recent quarters, management has commented that bookings from non-Pfizer clients have increased in the mix.”
Windley said he also expects a third Pfizer CRO to be named this year adding that “we think the third alliance partner and Parexel should see Pfizer [business] awards in 2015.”
