Previously announced restructuring charges addressing difficulties in its Early Phase business plunged US-based biopharmaceutical services company Parexel deeper into the red during the fourth quarter of its fiscal year.
But there were also strong new business wins during the quarter ended 30 June 2011 and Parexel expects to be back in profit over the course of fiscal 2011, as more mature strategic partnerships start to kick in, productivity improves and restructuring takes hold. Accordingly, the company has raised its revenue and earnings forecasts for the full year.
Operating income for the fourth quarter of fiscal 2011 was US$1.56 million, down by 92.3% on the same quarter last year. It included restructuring charges of US$8.92 million, of which US$4.3 million went on facility-related costs, US$1.5 million on severance costs and US$3.1 million on impairment charges related to exited facilities.
Even without the restructuring charges, and those incurred in the fourth quarter of fiscal 2011, Parexel’s operating income for the latest quarter would have been down 62.8% year on year to US$10.5 million.
At the third-quarter stage in May, the company announced a US$15.0 million restructuring programme, focused mainly on its faltering Early Phase operations and including a 3% cut in staffing. At the same time, Parexel said it was ramping up staff recruitment in its wider Clinical Research Services business to prepare for growth in the pipeline.
Third-quarter results also included a US$144,000 restructuring charge, related primarily to severance costs in addition to those arising from the restructuring programme announced or implemented by Parexel in the third quarter of 2010 at a cost of US$4.1 million.
Net loss, revenues
The company recorded a net loss of US$0.03 per diluted share in the latest quarter, compared with net earnings of US$0.22 per diluted share in the three months ended 30 June 2010.
On an adjusted basis, Parexel reported earnings per diluted share of US$0.10 for the fourth quarter of 2010, which was above the analyst consensus of US$0.07 per share quoted by Thomson Reuters.
Consolidated service revenues rose by 5.2% to US$310.5 million in the latest quarter, although stripping out foreign exchange fluctuations reduced the year-on-year growth to 1.1%. The revenue figure was ahead of the average analyst forecast for Q4, which was US$305.0 million.
Backlog at the end of fiscal year 2011 came to US$3.44 billion, an increase of 28.5% over the end-of-year backlog for FY 2010 and of 8% over the third quarter of fiscal year 2011.
The latest figure included gross new business wins of US$675.1 million in the fourth quarter, cancellations of US$107.2 million, and a negative foreign-exchange impact of US$1.7 million. The net book-to-bill ratio was 1.83 for Q4 and 1.51 for fiscal year 2011 overall.
Uptick in activity
“We were excited to see an uptick in activity from clients in the small and emerging biopharma segment in the quarter, and we expect to continue to win our fair share in this market segment going forward,” commented Josef von Rickenbach, chairman and chief executive officer of Parexel.
He assured investors that the steps taken by Parexel during fiscal 2011 had “created a solid foundation for our future. We have been building a company based on robust processes and systems, which we believe affords us long-term sustainable advantages that enable us to deliver strong returns to our clients and shareholders alike”.
The focus during the current fiscal year will be on revenue growth, successfully executing quality projects for clients, and pushing up operating income by reaping further the benefits of productivity and efficiency initiatives, von Rickenbach added.
“We plan to continue making judicious investments by adding to our talent base to meet current and future project needs,” he said.
“We anticipate that as the year progresses, some of the more mature strategic partnerships will hit their stride. We also anticipate that we will achieve a restoration of our profitability over the course of the year, as productivity starts to improve and as a variety of initiatives and the previously-announced restructuring bear fruit.”
FY 2012 guidance
Parexel is projecting consolidated service revenues in the range of US$1.355 billion to US$1.395 billion for fiscal 2012, with earnings per diluted share coming in at US$0.95 to US$1.14, and adjusted EPS at US$1.05 to US$1.24.
The previously issued guidance for FY 2012 pitched service revenues at US$1.340 billion to $1.380 billion, while EPS were expected to be in the range of US$0.93 to US$1.10 and adjusted EPS (excluding the impact of restructuring and related charges) to reach US$1.05 to US$1.22.
