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

Quintiles

1.42

1.19

1.27

1.29

Covance

1.2

1.21

1.15

1.23

Parexel

0.88

1.16

1.16

1.16

Icon

1.21

1.22

1.22

1.29

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.”

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