INC Research shares jump 10 percent on strong results

Shares of pharmaceutical services company INC Research rose 10 percent Thursday after the company reported adjusted net income in the second quarter that was two-and-a-half times that of a year ago.

The Raleigh-based company’s results breezed past Wall Street’s expectations.

INC’s revenue growth is leading the industry, and its bottom line also was boosted by improved margins in the second quarter, analyst John Kreger of William Blair & Co. noted in a research note.

INC reported before the markets opened Thursday that net service revenue totaled $227.4 million, up 11.7 percent from a year ago.

Revenue rose 14.4 percent if you exclude “higher-than-normal” contract changes that boosted year-ago revenue by $4.5 million, which the company said wasn’t really representative of its ongoing business. And revenue rose nearly 20 percent if you also exclude the negative impact of the strong U.S. dollar, which reduced revenue by $11.3 million.

Adjusted net income totaled $28.6 million, up from $11.1 million a year ago. Net income per share was 47 cents, up from 21 cents a year ago and 13 cents per share better than the consensus forecast from analysts.

“I’m pleased to report that we are continuing to maintain our strong momentum,” CEO Jamie Macdonald told analysts during a conference call.

Contract research organizations such as INC help pharmaceutical and biotechnology companies design and conduct clinical trials of experimental drugs and analyze the results.

INC’s net new business awards, a leading indicator of future revenue, totaled $259.9 million. That’s more than double the $103.4 million recorded in the second quarter of 2014, which was depressed by a $132 million contract cancellation “due to regulatory concerns of our customer,” Macdonald said.

Macdonald cautioned that net new business varies from quarter to quarter because they can be skewed by “a small number of relatively larger orders.”

Macdonald said a significant portion of the new business in the second quarter came from satisfied repeat customers and that INC is enjoying success winning contracts in “complex therapeutic areas” such as oncology.

INC has more than 900 workers locally and about 6,100 employees worldwide, an increase of about 300 over the past three months.

“We continue to add staff to support our growing business,” said Chief Financial Officer Greg Rush.

INC also raised its guidance for the full year. It now projects that annual revenue will range from $900 to $910 million, which would be an increase of 12.4 percent to 13.6 percent. Its previous guidance projected revenue would rise 9.9 percent to 13 percent.

It also raised its projection for adjusted net income growth for the year to 128.5 percent to 144.1 percent, up from 96 percent to 112.8 percent previously.

Shares closed Thursday at $47.62, up $4.46. INC shares have risen 85 percent this year.

This story was originally published July 30, 2015 at 10:25 AM with the headline "INC Research shares jump 10 percent on strong results."