Pharmaceutical services giant Quintiles upgraded its projections for 2014 revenue and net income after posting first-quarter results that easily exceeded Wall Streets expectations.
During a conference call regarding the Durham-based companys first-quarter performance, CEO Tom Pike also stressed that the possibility of a new wave of consolidation among Quintiles customers drug companies wont hurt its performance going forward.
The larger the companies get, the larger the CROs need to be to service them, Pike said.
CROs, or contract research organizations, help drug companies test experimental drugs and analyze the results. Quintiles, which has 28,200 workers worldwide and 2,300 in the Triangle, is by far the worlds largest CRO.
Quintiles released its first-quarter earnings before the markets opened Thursday. Its shares closed at $48.76, up $1.63. The stock has risen 5 percent this year.
Quintiles surpassed the $1 billion revenue mark for the second consecutive quarter, generating $1.005 billion in revenue in the first quarter, up 8 percent from a year ago. Adjusted net income totaled $90.9 million, or 68 cents per share, an increase of 58 percent.
Were off to a great start in 2014, Pike said. We continue to see strong demand for our serves and solutions across both of our (business) segments.
In addition to its CRO business, Quintiles integrated healthcare services, or IHS, provides sales forces that promote pharmaceutical companys products to physicians. Revenue from that business declined 6 percent last year but rose 6 percent in the first quarter.
IHS is back on the growth side of the ledger, Pike said.
John Kreger, an analyst at William Blair & Co., was upbeat about Quintiles performance.
We are encouraged by another quarter of strong results and guidance particularly the return of growth within IHS and reiterate our outperform rating on Quintiles, Kreger wrote in a research note. An outperform rating is the equivalent of a buy.
With regard to pharmaceutical industry consolidation, Pike pointed out that the diversity of Quintiles customer base is one of its strengths.
Quintiles has more than 500 customers, and no single customer accounts for 10 percent or more of its revenue. In addition, 51 percent of the companys new business has been coming from outside of large pharma, he said.
Pike said that the cost-savings benefits that drug companies enjoy when they outsource clinical trial work to CROs will hold the industry in good stead.
We expect more outsourcing after this kind of disruption than before because you get management looking at their cost structures, he said.
Consolidating companies will be reluctant to cancel clinical trials that are already under way because there are negative consequences to halting trials for non-scientific reasons, Pike said.
That includes possibly jeopardizing relationships with physicians contracted to conduct the trials. In addition, drug companies can actually breach ethical norms by halting a study that already has begun.
However, Pike said, consolidating companies could temporarily freeze the awarding of new contracts while they sift through their portfolios of experimental drugs.