Contract drug development company PRA International saw profits and revenues shrink in the second quarter of 2006, but said recent acquisitions would help the business grow in the remainder of the year.
Revenues came in a little below analysts’ forecasts at $70 million, while net income fell 20% to $6.8 million, but PRA hiked its revenue guidance for the year to $300 to $320 million, on expectation of good contributions from recently acquired Dutch company Pharma Bio-Research and India’s Sterling-Synergy.
PBR will contribute around 12% of sales this year, said the company in a conference call, adding that it expects earnings per share of $1.15-$1.26. In the second quarter EPS came in at 31 cents.
Chief executive Pat Donnelly said the acquisitions would make a big difference to the company’s prospects, as they expand the depth and breadth of services offered by the company and take it into fast-growing areas of the contract research sector.
The 85 million-euro acquisition of PBR makes PRA ‘one of the largest CROs in Phase I’, he noted, with 200 beds on two continents, and also takes it into new territory with the addition of a bioanalytical laboratory business.
The objective, said Donnelly, is to expand PRA’s portfolio outside its core focus on Phase II and II studies, which account for 80% of the business but are much more prone to cancellation than other trial phases.
Added to that, PBR’s expertise in metabolic studies, immunology and respiratory medicine complements PRA’s traditional focus on the oncology and central nervous system categories, which account for 60% of its business and are riskier, with a higher rate of cancellations than other therapeutic categories, said Donnelly.
Boosting PRA’s offering in earlier-stage studies – which are quicker to complete – and lab services means that it will be able to convert its backlog into revenue more quickly, he said. Meanwhile, the Sterling-Synergy acquisition gives PRA a larger presence in Asia and access to 24-hour data management services that can complement its clinical operations around the globe.
The company is also expanding its business in Phase IV and peri-approval studies, mainly via an increase in headcount, said Donnelly.
Second-quarter backlog was up 7% to $514 million, while new business awards rose by 27% to $127 million. There were $97 million in cancellations in the quarter, 70% of which was from a single oncology project, although this will impact 2006 sales by less than $2 million as most of the revenues for the project were due to be booked in 2007/08.
"With enhanced early phase development services, new laboratory services, expanded capabilities in Europe and India, and a business development model that continues to gain traction in the marketplace, we have additional platforms in place for future growth,” concluded Donnelly.