Quintiles acquisitions start to pay off in Q1

By Zachary Brennan contact

- Last updated on GMT

Quintiles acquisitions start to pay off in Q1

Related tags: Revenue

CRO Quintiles’ recent purchases of oncology and medical device specialist Novella and EHR service firm Encore Health Resources are starting to reap new benefits for the world’s largest CRO, the company reported in its earnings call on Wednesday.

Driving the company’s growth in the quarter was its Integrated Healthcare Services’ segment, which saw service revenues at constant currency grow 29.3% or $68.8m during Q1, compared to the same period last year, including $19.4m from the Encore acquisition.

CEO Tom Pike also noted a steep increase in net new business Novella, which saw as much as a 40% increase in business over last year. Pike said in the conference call with investors, “You are seeing a real benefit from us taking a CRO that was an independent smaller CRO and then embedding it within our larger enterprise​.”

But Quintiles, like many of its competitors, is still finding trouble with unfavorable foreign currency exchange. Service revenues were $1.03bn, which represents growth of 2.5% over the same quarter last year, but which includes an unfavorable foreign currency impact of $59m compared to the same period last year.

This foreign exchange impact is really dramatic​,” Pike said, adding, “But let me just restate what he said, we added $316m more of new backlog than revenue burned. This increase was offset by $496m of negative foreign exchange revaluation​.”

The revenue growth, more generally, was the result of increases in commercial solutions in Japan and North America, along with growth in real-world and late phase research services. This growth was partially offset by a decline in commercial solutions in Europe due to the conclusion of an agreement to distribute pharmaceutical products in Italy and lower commercial services. 

The complexity of trials has extended the projects somewhat, also impacting start-up time lines and revenues​,” Pike said. “Given the new business wins that we've had, we expect to see more growth in the second half of the year in product development​.”

He also expanded on the ways that trial complexity is shifting the landscape for Quintiles as “the start-ups are a little bit slower than they've been due to more protocol amendments, the diseases and the pathways are a little bit more complex than they were, so there will be more interaction with regulatory agencies through that period of time​.”

And although Quintiles stock was down slightly on the day, analysts seemed to think the results were in line with expectations.

Biosimilar Opportunity

Pike also noted in his comments that biosimilars “are becoming more of an opportunity for CROs than perhaps we expected or analysts expected a few years ago​.”

The major drivers for these growth opportunities, he said, are that bioequivalency “is a little more complicated than expected and so you are seeing an increase in the size of the studies that are taking place, associated with the biosimilars​.”

In addition, there are more sponsor companies in the biosimilars space than Pike said he expected, so “instead of seeing two or three biosimilars, you might see five, six, or seven. And so, we're actually seeing this as a positive force in Phase I and obviously Phase III studies which is the two places that you tend to see it​.”

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