US-based contract research organisation (CRO) Parexel International pushed its operating income up by 47.7% to $20.5 million in the second quarter ended 31 December 2007, outstripping the company’s strong first-quarter growth as consolidated service revenues jumped 32.2% to $238.7 million.
The increases in service revenues (which excluded reimbursement revenues) and earnings per diluted share (up 25% to US$0.40) were ahead of analysts’ estimates for the quarter, and Parexel’s stock rode to a new 52-week high on the news, closing at $57.63.
The CRO again raised its guidance for consolidated service revenues in fiscal 2008, which are now expected to come in at $935-$955 million, based on recent exchange rates. The previous full-year revenue guidance was for $890-$920 million, while the forecast for earnings per diluted share in fiscal 2008 has moved up from $1.75-$1.81 million to $1.78-$1.83 million.
In the first quarter, operating income was $16.5 million, a 46.0% improvement over the same period of fiscal 2007, and consolidated service revenues were 26.1% higher at $208.1 million.
Parexel’s relatively minor Consulting and Medical Communications Services (PCMS) business, which was something of a black spot in fiscal 2007, continued its return to health in Q2. Service revenues climbed 14.9% to $32.5 million, while still making up a smaller proportion of overall revenues compared with last year’s second quarter (13.6% versus 15.7%). Gross profit from PCMS activities however, rose by an encouraging 47.4% to $11.1 million.
In the mainstay Clinical Research Services (CRS) segment, service revenues grew by 37.9%, expanding the business’ share of total service revenues from 73.4% to 76.6%. Gross profit for the second quarter was $60.1 million, 36.1% above the fiscal 2007 period. The technology division, Perceptive Informatics, Inc (PPI), generated service revenues of $23.4 million, 18.8% more than in Q2 2007 but accounting for 9.8% of the revenue total against 10.9% in the year-earlier period.
Asia-Pacific boost
In geographical terms, there gains in all regions but particularly from the emerging Asia Pacific business, which was boosted by the $50.9 million acquisition of Taiwan-based CRO Apex International Clinical Research in October 2007. Service revenues from Asia/Pacific countries more than doubled to $17.7 million in the second quarter, while revenues from Europe, Middle East and Africa were 27.1% ahead at $128.0 million and the Americas generated $92.9 million, up by 30.9%.
There was also robust growth in Parexel’s order backlog, which was worth $1.78 billion as of 31 December 2007, 41% more than at the end of Q2 2007 and 13% more than at the end of Q1 2008. Gross new business wins were $486.8 million in the latest quarter and cancellations came to $40.1 million. With service revenues of $238.7 million in Q2 2008, the net book-to-bill ratio (net new business divided by revenue) for the quarter was a very promising 1.87.
The CRO is expecting consolidated service revenues of $240-$250 million and earnings per diluted share of $0.42-$0.44 for the third quarter. “In combination with the current favourable outsourcing market, our proven capabilities to compete for and win significant levels of new business leave us well positioned to further improve operating margins and drive profitable growth as we go forward,” said chairman and chief executive officer Josef von Rickenbach.
