Parexel has started the new financial year in good shape with an impressive net book-to-bill ratio of 2.18 for the fourth quarter of fiscal 2010.
The US-based contract research organisation (CRO) cautioned, though, that recruitment activity to service its backlog and the trend towards strategic partnerships in clinical research would hold back revenue and earnings growth during the first half of the new year. All the same, the company has raised its revenue guidance for the year ahead as well as the bottom end of its earnings projection.
Consolidated service revenue for the three months ended 30 June 2010 rose by 19.4% to $295.3 million. It was flattered by a downward adjustment of $16.9 million to revenue in the fourth quarter of fiscal 2009.
These charges related to the ClinPhone Interactive Voice Response component of Parexel’s technology division, Perceptive Informatics, and to purchase accounting for ClinPhone, the UK-based clinical technology specialist acquired in August 2008. Otherwise, service revenue in the latest quarter would have been up by 11.7% year on year.
Operating income for the quarter was 3.0% higher at $20.1 million but included US$8.1 million in restructuring and special charges. Without these, operating income jumped 44.5% over the fourth quarter of fiscal 2009.
Net income more than doubled to US$12.9 million or more than tripled to US$19.1 million on an adjusted basis. Diluted earnings per share were US$0.22 for Q4 2010 (US$0.32 on an adjusted basis) versus US$0.11 in the year-before quarter.
The most dynamic segment of Parexel’s operations in the latest quarter was Perceptive Informatics, where service revenues more than doubled to US$38.3 million from $16.0 million in the fourth quarter of fiscal 2009 and gross profit ballooned from US$1.61 million to US$18.0 million.
Revenues from Clinical Research Services grew by 12.2% to US$225.4 million, generating gross profit of US$82.5 million, 11.4% more than in the same quarter last year. Parexel Consulting & Medical Communications Services reported service revenues of US$31.6 million, up by 3.3%, and gross profit 18.0% ahead at US$13.1 million.
Parexel registered a backlog of US$2.681 billion at year-end, 23.2% more than at the close of fiscal 2009. It included gross new business wins of US$723.8 million in the fourth quarter, cancellations of US$78.8 million and a negative impact of US$50.1 million from currency translation. The net book-to-bill ratio was 2.18 for the final quarter and 1.53 for the whole of fiscal 2010.
State of change
“Our industry is clearly in a state of change, as clients engage in outsourcing at a more strategic level, and concentrate their outsourced clinical development activities with fewer providers,” commented Josef von Rickenbach, Parexel’s chairman and chief executive officer.
“We have a healthy portfolio of pending proposals, and we believe that we are well positioned to continue to capitalise on our success in the marketplace,” von Rickenbach added. The CRO also remains “keenly focused” on quality of execution, he noted.
“We have started to hire and train new employees to support the projects in backlog, which we expect will continue in the first half of the fiscal year. As a consequence of this recruitment activity and the nature of strategic partnerships, we expect a slower ramp of revenue and earnings in the first half of the fiscal year, and an acceleration in the second half.”
Parexel is projecting consolidated service revenues of US$1.265 billion to US$1.310 billion for fiscal year 2010, and earnings per diluted share (EPS) in the range of US$1.22 to US$1.32. The previously issued guidance was for service revenues of US$1.245 billion to $1.290 billion and for EPS of US$1.20 to US$1.32.
