As trials become more global and complicated, “the large will get larger,” Garen Sarafian, Vice President, Healthcare Technology & Distribution, Citi Research, told Outsourcing-Pharma.com.
This growth is being driven by the need for CROs that can conduct trials spanning various countries and in emerging markets – which Sarafian said will likely create a bifurcated market of small niche players and large players.
“The mid-size CRO market will not be very robust,” he added. However, Sarafian expects activity in the mid-size markets, as companies look to gain scale in order to compete.
Ultimately, there’s no indication that outsourcing will see any slowdown, regardless of nearer term funding dynamics.
“Even if research and development slows does not mean the CROs cannot grow,” he explained. “There is still room to take share from in-house and from smaller players.”
Sarafian explained that the CRO space overall operates on multi-year trends, and while some used to get concerned from quarter to quarter, CROs don’t manage on this timeline: “they manage the pipeline for multiple years at a time,” he said.
“The trends impacting CROs are multiple years in duration,” Sarafian added.
Parexel’s service revenue was up 3% at $538.6m.
On the company’s earning call, Josef H. von Rickenbach, Chairman and CEO said the fourth quarter “capped a productive Fiscal Year 2016.”
“Looking ahead, we expect continued success in Fiscal Year 2017 and beyond,” he said. “We believe that the environment for new business continues to be encouraging, as the market for biopharmaceutical services continues to grow.”
As Outsourcing-Pharma.com previously reported, Parexel recently announced CFO Ingo Bank’s resignation in a Securities and Exchange Commission (SEC) filing on July 15, explaining that he was leaving “in order to take a senior leadership role in a another company.”
While analysts have questioned the timing of Bank’s departure (which happened after the end of Parexel’s financial year) Sarafian doesn’t believe that it was a matter of the number being at risk at all.
“He did a fine job, and I think that this was an opportunity for him to go back to Europe,” said Sarafian.
An interim CRO has been appointed while the company looks for a replacement. Sarafian said that the last search for a CFO took around eight months. He added that he hopes Parexel finds a replacement “sooner rather than later,” although the company shouldn’t be penalized for the situation.
Sarafian said that PRA is “pretty much firing on all cylinders.”
The company reported double-digit revenue and earnings growth, as well as a 21.1% increase in net new business when compared to the second quarter of 2015.
PRA also disclosed a new client relationship on its earnings call, and while it has not been formally signed, the company is investing in staffing and training.
Colin Shannon, PRA’s CEO said, “Our continued strength in net new business is a reflection of the quality and differentiation of our services, and we are well-positioned to drive future growth.”
Quintiles service revenues were $1.17bn, which represents growth of 8.6% for the three months ended June 30, 2016.
“Our team executed well in the second quarter, and we are very pleased with our diluted adjusted EPS growth of 19.2%, service revenue growth of 8.6%, and our 1.41 book-to-bill ratio,” said Quintiles CEO Tom Pike.
However, Sarafian expressed some concerns surrounding the company’s merger with IMS Health. “The benefits by their own admission are medium to long term,” said Sarafian.
As Outsourcing-Pharma.com previously reported, the merger seeks to combine the two companies’ data sets in order to expedite clinical trials.
While Sarafian said that “the rationale behind the merger still doesn’t seem to make complete sense,” he added that “Quintiles is a solid CRO.”
INC Research reported net new business awards of $302.1m and $604.4m for the three and six months ended June 30, 2016, respectively.
The company has also added 39 new client relationships in the quarter, with 64 added this year to date.
According to David Windley, CFA, CPA, Equity Analyst at Jefferies LLC, new customers have accounted for 16% of year to date awards, up from 6% in FY15.
Windley also addressed the news of CEO Jamie MacDonald stepping down, commenting that while it came as a surprise, MacDonald left “with a clean transition to a new budget year.”
MacDonald’s departure will be effective Oct. 1. The company’s current COO, Alistair MacDonald, no relation, will become the new CEO.
According to CEO Ciaran Murray, “Through a consistent focus on our strategic plan we achieved a record level of net business awards of $502 million and grew our backlog by almost 9% over last year.”
In late June, Icon expanded into government sponsored research through its acquisition of Clinical Research Management (ClinicalRM). As Outsourcing-Pharma.com reported at the time, the acquisition followed the company’s resign with Pfizer, a three-year agreement under which Pfizer has the opportunity to extend the term for up to two additional years.
According to Windley, Icon’s top five clients, including Pfizer, represent 45% of the company’s business. However, he added the at the company has “excelled at winning work outside of the top 5 clients.”