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Mixed fortunes for major CROs in Q1

Published on 07/05/10 at 08:30am

Leading contract research organisations (CROs) reported a mixed bag of financial results for the first three months of 2010, although the underlying trend seems to suggest growth in the sector is stuttering back to life.

US firm Parexel led the charge with a 10% hike in revenues to $291 million - in what was its fiscal third quarter, led by its clinical research services business. Operating profit recovered to $25.8m, a little down on the same period a year ago, but would have risen 13% without restructuring charges. Backlog - orders that have been booked but are still outstanding -improved to $2.38 billion, up 17% year-on-year. The performance "clearly demonstrates a return to growth", according to chief executive Josef von Rickenbach.

Faring less well was Covance, which saw revenues grow 9% to $482m but operating profit fall 5.5% to $53m in the first quarter. Early development and clinical research services put in a good showing, but were held back by Covance's central laboratory division which experienced delays in new projects. The company lowered its full-year earnings guidance as a result of the performance, as well as costs relating to its earlier decision to shut down two under-performing facilities. The CRO now expects full-year revenues to rise 5%-8%, down from its earlier forecast of 10% growth.

Irish CRO Icon was unable to muster a revenue increase in the first quarter, with sales flat at $219m, but did manage a small increase in operating profit to a little over $22m. The year had started "solidly", according to chief executive Peter Gray, who added that there are signs of firmer demand after a reduction in booking levels and higher cancellations during 2009. "We believe the conditions for a return to growth are coming into place," he said, adding that net new business wins for the quarter had totalled $265m.

PPD 's first-quarter revenues fell 5% to $347m, while increased expenses drove its operating income down 61% to $26m from $67m a year ago. Despite the shrinkage the firm's chief executive David Grange said "requests for proposal activity improved [and] cancellations and adjustments decreased to a normal level" in the first quarter. PPD's investment in new capacity, including a new R&D centre in China to provide clinical monitoring services and acquisitions of Excel Pharmastudies and BioDuro in 2009, were the main reason for the declining profitability.

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