|Parexel CEO Josef von Rickenbach|
CRO giant Parexel International ($PRXL) posted quarterly gains in sales and net income, but a dip in new business spooked investors, dropping the company's shares as much as 17% on Wednesday.
Revenue came in at $529.1 million for the first quarter of Parexel's fiscal 2014, a 14.4% jump over the same period last year, and profits leapt 72.3% to about $26 million. However, net new business came in at just $394 million for the quarter, a nearly 30% drop-off from Q2 that has investors worried about Parexel's ability to make its full-year guidance. The company figures it'll make about $1.9 billion in revenue for fiscal 2014, good for up to 10.2% annual growth.
"New business in the quarter was less than anticipated due to lower new business flow from some strategic partners, delayed client decisions with regard to some of our pending proposals and a win rate that was lower than expected," Parexel CEO Josef von Rickenbach said in a statement. "Nevertheless, our outlook for new business remains very positive. We entered the second quarter with a high level of pending proposals, and have had a good start with respect to wins thus far in the month of October."
Despite the decline in new contracts, Parexel kept sales humming last quarter, growing its service revenue 13.8% to $449.2 million. Clinical research services jumped 11.9% to $332.6 million, while Parexel's fast-growing eClinical arm Perceptive Informatics grew 28.3% to $63.1 million and its consulting sales increased 10.5% to $53.5 million.
Still, none of that was enough to placate investors, and, after closing at $54.85 on Tuesday, Parexel's share price dropped as low as $45 on Wednesday before settling at around $46.50.
Now, if Parexel is going to meet its revenue goals, it'll need to keep that double-digit growth moving. Over the past year, the CRO has spent hundreds of millions to expand its offerings in IT and consulting services, and von Rickenbach said he believes Parexel has the building blocks it needs to come through.
"I am excited about the opportunities that are in front of us as one of the world's leading biopharmaceutical services companies," he said. "Outsourcing penetration rates have ticked up; we are capturing share from smaller competitors; and there is healthy fund flow into small and emerging biopharmaceutical companies."
- check out Parexel's results