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ICON sees revenues rise in 2009

Published on 01/03/10 at 09:23am
ICON headquarters

Contract research organisation ICON saw its revenues increase 3% to $888 million last year and says it is "positive, though cautious" about the operating environment for the business in 2010.

The fourth-quarter also saw a 3% revenue hike to $227 million, with operating income rising 12% to just under $30 million, said ICON's chief executive Peter Gray, who also noted that cancellations had "moderated somewhat" compared to previous quarters.

Contract research organisations (CROs) have seen their businesses held back by high cancellation rates of late, mainly stemming from the impact of merger and acquisition activity in the pharmaceutical industry, delays in projects by sponsors to conserve funds, and a reduction in financing for smaller drug developers.

ICON's cancellations in the fourth quarter equated to $33 million while for the full-year they totalled $250 million, according to Gray.

"2009 was a challenging year for the industry and for ICON," he told investors and press on a conference call.

The impact of significant pipeline review was a clear negative for the outsourcing sector, he said, but on the positive side led to "new thinking in relation to pharma and CRO relationships, and an acceleration in discussions about a more strategic approach to outsourcing".

2010 is likely to be challenging too, he said, but as a result of these new strategic relationships the latter half of the year should see a resumption of good growth.

Margins at the business also improved from 11.5% to 13.1%, and Gray noted that the company’s backlog - orders that have been booked but are still outstanding - is currently standing at around $1.84 billion, up from $1.75 billion a year ago.

Around $689 million of that backlog is expected to be earned in the next 12 months.

That backlog, coupled with a healthy balance sheet with more than $255 million in cash, means that ICON "has entered into 2010 in a good position", said Gray.

For 2010 ICON is expecting to make revenues in the range of $890 million to $940 million.

ICON’s FDA warning letter

Meanwhile, Gray provided a little additional information about the circumstances surrounding a warning letter sent by the US Food and Drug Administration (FDA) in December 2009 relating to two studies of an antibiotic it conducted between 2004 and 2006.

"We responded to the FDA in January and we expect to meet with them in the near future," he said.

The company has initiated a review of its quality processes as a result, and will have "a significant spend on quality initiatives during 2010", he added.

The letter - a heavily censored version of which is available on the FDA website here - covers areas such as a failure to ensure proper monitoring of clinical investigations and a failure to ensure that the investigation was conducted in accordance with the general investigational plan and protocols.

Turning to investment plans at ICON, Gray said the CRO intends to continue its international expansion with the opening of offices in India and Turkey and boosting its central laboratory capacity through a joint venture in China which will see a small lab open near Beijing during the coming year.

2010 will also see the company complete its investment in its new hospital-based phase I unit in Manchester, UK.

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