Parexel delivered another strong quarter of growth in revenue and operating profits, ahead of analysts’ estimates, for the three months ended 31 March 2013.

The company also bolstered its capabilities in the market-access space by acquiring Heron Group, a life sciences consultancy that provides evidence-based commercialisation services to biopharmaceutical companies throughout the product lifecycle.

Parexel’s service revenues for the third quarter of Fiscal Year 2013 (excluding reimbursement revenues) were US$454.5 million, up by 27.7% over the same quarter in 2012. Liquent, the regulatory specialist acquired by Parexel towards the end of last year, contributed US$9.3 million.

Analysts polled by Thomson Reuters were looking for revenues of US$438.10 million, according to RTTNews.

Operating income

Operating income for the latest quarter, which included a restructuring charge of US$732,000, was 29.7% higher year on year at US$36.6 million.

Diluted earnings per share (EPS) were US$0.50 in the third quarter versus US$0.38 in the year-before period (+31.6%).

Without the restructuring charge, and ignoring a restructuring charge of US$1.81 million in the third quarter of Fiscal Year 2012, EPS for the latest quarter were 51.5% ahead year on year at US$0.50.

The Thomson Reuters analysts had expected diluted EPS of US$0.4 without any special items.

Research Services lead

Growth in service revenues during the third quarter of 2013 was led by the Clinical Research Services segment, which reported revenues up by 30.0% year on year to US$342.4 million.

The technology segment, Perceptive Informatics, generated revenues of US$61.5 million (+24.7%) for the quarter, while Parexel Consulting & Medical Communication Services delivered service revenues of US$50.6 million (+16.9%).

Parexel’s backlog at the end of March 2013 was around US$4.50 billion, an increase of 6.6% on year.

It included gross new business wins of US$759.7 million in the third quarter, cancellations of US$220.6 million, and a negative impact from foreign exchange rates of US$123.5 million.

The net book-to-bill ratio for the third quarter of 2013 was 1.19.  

Maturing backlog

According to Josef von Rickenbach, chairman and chief executive officer of the US-based biopharmaceutical services organisation, the third-quarter results reflected “a maturing backlog and a move into a more normalised project implementation environment”.  

The integration of Liquent has “proceeded smoothly and as expected”, von Rickenbach noted.

Parexel remains committed to its goal of achieving earnings per share growth in the range of 44% to 48% for Fiscal Year 2013, “driven by continued revenue growth, effective cost management, margin expansion, and the previously announced stock buyback”, he said.

FY 2013 guidance

The company has raised its full-year revenue guidance to between US$1.72 billion and US$1.730 billion, from a range of US$1.695-US$1.71 billion previously.

Earnings per share for the whole of FY 2013 are now expected to be US$1.51 to US$1.55, compared with US$1.39 to US$1.47 previously.

That includes the impact of acquiring Heron Group, which is projected to contribute between US$3.0 million and US$4.0 million in service revenue for the fourth quarter of Fiscal Year 2013, and between US$11.0 million and US$14.0 million for Calendar Year 2013.  

The Heron acquisition is expected to have a neutral effect on earnings during the remainder of Calendar Year 2013.

Heron acquisition

Parexel paid around US$24 million, adjusted at closing to reflect Heron’s cash, indebtedness and working capital balances, for the privately owned UK company.

The acquisition may cost an additional US$14.2 million over twenty-six months if specific financial targets set for Heron are met.  

Founded in 1999 and working with more than 50 biopharmaceutical and life sciences companies worldwide, Heron offers expertise and methodologies over a broad span including strategic market-access planning; systematic reviews; economic modelling and evaluation; pricing; reimbursement strategies; global value-dossier writing; and engagement with Health Technology Assessment authorities.