Driven by double-digit growth in its main product development services business, Quintiles reported better-than-expected second-quarter results.
The Durham-based company, which issued its earnings before the markets opened Wednesday, also boosted its earnings-per-share guidance for the full year. But it dialed back its 2016 revenue projection in the face of disappointing results from its commercial sales segment.
Quintiles, the world’s largest pharmaceutical services company, announced in May that it was merging with healthcare information giant IMS Health Holdings in an all-stock deal valued at $23 billion.
The combined company, Quintiles IMS Holdings, will have dual headquarters in Durham and Danbury, Conn., and will be led by Ari Bousbib, the chairman and CEO of IMS. Quintiles CEO Tom Pike will be vice chairman and Dennis Gillings, Quintiles’ founder, will be lead director on a board that will consist of six directors named by each company.
That deal, which is expected to be consummated in the fourth quarter, has gotten mixed reviews from analysts but investors seem to have warmed up to the deal. Quintiles shares closed Wednesday at $75, down 45 cents from the previous day; its shares closed at $69.10 the day before the merger was unveiled.
Quintiles’ service revenue rose 8.6 percent to $1.17 billion; revenue rose 7.9 percent after adjusting for currency fluctuations.
Adjusted net income rose 14 percent to $112.5 million, or 93 cents per share. Analysts polled by Bloomberg News had been projecting 90 cents per share.
Net new business signed up during the quarter, a leading indicator of future revenue, rose a robust 24.4 percent.
Contract research organizations such as Quintiles help pharmaceutical and biotech companies test experimental drugs and analyze the results. In addition to offering product development services, Quintiles also assists its customers with selling and marketing prescription medicines after they win regulatory approval.
Quintiles’ product development business, which Pike described during a conference call with analysts as the company’s crown jewel, posted a 13.2 percent increase in revenue. It accounted for 76 percent of total revenue.
But the commercial sales business’s revenue fell by 3.8 percent. Pike said commercial sales is a “lumpy” business that was affected by contract cancellations.
“As indicated in our guidance, you should not expect a full turnaround in commercial (sales) this year,” Pike said.
Quintiles said Wednesday it expects revenue for the year to rise between 6 and 7 percent this year, down from growth ranging from 7 to 8.5 percent that it previously projected. But it raised its guidance for earnings per share to $3.78 to $3.88, up from a range of $3.70 to $3.85 previously.
IMS Health also reported second quarter results that exceeded analysts’ expectations Wednesday. Revenue rose 8.1 percent to $802 million. Net income totaled $24 million, down from $47 million a year ago; the company said the decline was principally the result of higher restructuring charges.