Parexel strong book-to-bill 'reassuring' for CRO demand, says analyst

By Dan Stanton

- Last updated on GMT

Parexel is set to report net book-to-bill ratio of 1.4 for the quarter ending December 2014
Parexel is set to report net book-to-bill ratio of 1.4 for the quarter ending December 2014

Related tags: Contract research organization

Parexel’s improved book-to-bill ratio is a reassuring sign for the company and the CRO industry as a whole, according to a William Blair analyst.

In an SEC filing​ published after the market closed Monday, contract research organisation (CRO) Parexel said it “expects to report a net book-to-bill ratio in excess of 1.4 for the December 2014 quarter [Q2]” ​ahead of tomorrow’s presentation at the JP Morgan Healthcare Conference in San Francisco.

Book-to-bill ratio is gross new business wins - fewer cancellations - divided by the quarter’s consolidated service revenue, and is widely used in the CRO industry as a measure of demand for such services, with a figure above ‘1’ indicative of a large backlog of contracts.

This announcement “will likely be met with a positive investor reaction given concerns on Parexel’s performance and industry fundamentals coming off of a weaker than expected FYQ1,”​ Evercore ISI analyst Ross Muken.

William Blair analyst John Kreger added described this news as “reassuring”​ after Parexel reported a ratio of 0.88 for a successive first fiscal quarter back in September, and said this is indicative of continued demand in the CRO sector.

“For the group overall, aggregate bookings as a percentage of revenues for the clinical CROs improved modestly in the third quarter and Parexel’s disclosure adds further support to the view that broader demand trends remain robust,”​ Kreger said in a note.

The table below shows the net book-to-bill ratio for the top public CROs for the quarters ending:


Sep 14

Jun 14

Mar 14

Dec 13





















Pfizer and strategic partners

More volatile quarterly results have been put down to “longer decision cycles regarding pending proposals with strategic partners,” ​Kreger added. Parexel’s top five clients accounted for 47% of its revenue in 2014, according to the CRO’s annual report​.

The top client, Pfizer, individually accounted for 16% of FY2014 business, but Parexel competes with a second preferred partner – Icon – and, if the rumour mill is to be believed, the Pharma Giant is looking to sign a third alliance partner.

Muken said he was anticipating “incremental commentary from management on the status of Parexel’s strategic partnership with Pfizer,”​ in tomorrow’s talk, “given the view that Icon is now servicing more of the Pfizer book and industry chatter that Quintiles had potentially won business with Pfizer as a third strategic CRO provider.”

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