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harmaNet Development Group, the financially battered contract research organisation (CRO) that recently agreed to a merger with affiliates of private equity firm JLL Partners, reported net revenues (excluding reimbursable out-of-pocket expenses) of US$85.0 million for the fourth quarter of 2007, down by 7.9% year on year.

Earnings from continuing operations for the latest quarter were US$3.06 million, a 4.7% improvement, but net income dived 59.2% to US$1.64 million and diluted earnings per share were US$0.08 compared with US$0.21 in the fourth quarter of 2007.

As in the third quarter, moreover, the results were preliminary and subject to an as yet undetermined non-cash impairment charge reflecting the decline in the company’s market capitalisation during the fourth quarter. In the previous quarter, PharmaNet sustained a non-cash impairment charge of US$210.6 million related to goodwill and indefinite-lived assets.

Analysts polled by Thomson Reuters had expected the CRO to do worse in the fourth quarter, projecting a loss of US$0.04 per share and revenues of US$84.5 million.

In the full year, though, PharmaNet came in below its own revenue guidance, moderated for the second time last September in the face of cancellations or postponements of clinical development projects in the company’s late-stage segment and a lower than expected sample volume of early-stage business.

The CRO recorded net revenues of US$357.7 million for 2008, down by 1.3% on the previous year. The revised guidance had been for direct revenues of US$358-US$366 million.

Much more severe was the shortfall on PharmaNet’s amended forecast for diluted earnings per share (EPS) in the full year. These were expected to show a loss of US$0.25-US$0.58, whereas the reported figure was a net loss of US$11.11 compared with diluted EPS of US$0.68 in 2007.

Early-stage decline

Lower early-stage revenues were mostly to blame for the revenue decline in the fourth quarter, PharmaNet said. Direct revenues in this segment dropped by 21.9% to US$31.0 million, mainly due to lower volume and pricing in laboratories and clinics.

Currency translation shaved around US$5.3 million off early-stage revenues in the fourth quarter. Operating income in the segment dwindled by 78.3% to US$1.03 million, while the operating margin was 3.3% compared with 12.0% in the fourth quarter of 2007.

Direct revenues from late-stage development activities were 2.7% ahead at US$53.9 million for the quarter, with foreign exchange having a positive impact of around US$0.6 million. Operating income was 66.5% higher at US$10.1 million and the operating margin improved from 11.5% to 18.7%.

PharmaNet had a project backlog of US$507.7 million as of 31 December 2008, compared with backlogs of US$521.6 million at 30 September 2008 and US$457.4 million at the end of 2007.

The quarter-to-date book-to-bill ratio was 0.8 at 31 December 2008 against a book-to-bill ratio of 0.4 at 30 September 2008. As of 30 December 2008, PharmaNet’s year-to-date book-to-bill ratio was 1.1.