Despite investor fears that the biotechnology industry might dial back research-and-development spending this year, pharmaceutical services giant Quintiles is projecting it will enjoy solid revenue growth in 2016.
“We are seeing acceleration in the CRO side of the business coming out of 2015 and into 2016 and now have over $12 billions of backlog,” CEO Tom Pike told analysts during a conference call Thursday. CROs, or contract research organizations, help pharmaceutical and biotech companies test experimental drugs and analyze the results. Quintiles’ CRO business accounts for 75 percent of its revenue.
With biotech stocks depressed, some investors are worried that will translate into cutbacks in R&D spending that would hurt companies like Quintiles. That, in turn, has hurt CRO stocks.
But Pike said that Quintiles “is seeing a lot of activity in the biotech sector still. There are industry reports out there that say they have at least a couple of years of funding.”
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Pike said he viewed Quintiles, the largest CRO, as “a great house in a good neighborhood.” Durham-based Quintiles is one of the Triangle’s largest employers with more than 2,500 workers; its worldwide workforce exceeds 36,000.
Durham-based Quintiles released fourth-quarter earnings that exceeded analysts’ expectations on Thursday and projected that 2016 revenue would rise 7 percent to 8.5 percent after adjusting for currency fluctuations. Revenue from the company’s CRO business is expected to rise 10 percent this year after currency adjustments.
Adjusted net income for the year is expected to amount to between $3.70 to $3.85 per share. Analysts have been projecting adjusted net income of $3.70 per share.
Revenue for the fourth quarter rose 6.1 percent to $1.13 billion; revenue rose 9.4 percent after adjusting for currency fluctuations.
Adjusted net income totaled $111.4 million, or 90 cents per share, up 21.3 percent from a year ago. Analysts polled by Bloomberg News had projected adjusted net income of 87 cents per share.
Quintiles is the third CRO to report “solid” fourth-quarter results, “with no sign of demand slowing,” William Blair & Co analysts John Kreger noted in a research note. He added that the CRO industry “is poised to deliver solid results over the next few years, driven by steady growth at large pharma and very strong growth from biotechs who are flush with cash.”
The Triangle is the epicenter of the CRO industry. Two other large, publicly traded CROs headquartered here, INC Research and PRA Health Sciences, haven’t yet reported fourth-quarter results.
Quintiles gets one-fourth of its revenue from helping companies sell and market prescription medicines after they gain regulatory approval. Revenue from that business fell 2.3 percent in the quarter; after adjusting for currency fluctuations, revenue rose 2.2 percent.
That business “continues to be a little lumpy, as it always has been,” Pike said.
For all of 2015, Quintiles generated $4.33 billion in revenue, up 3.9 percent. Revenue rose 9 percent after adjusting for currency fluctuations.
Adjusted net income for the year rose 18.5 percent to $418.9 million, or $3.33 per share.
Quintiles shares were trading at $58.48, up 13 cents, Thursday morning. Its shares have fallen 15 percent this year.