In an earnings call on Tuesday, Icon CEO Ciaran Murray downplayed the addition of PPD, noting that it’d been known, though not publically, for “quite some time,” adding, “I think it's fair to say that when we all signed up for this partnership, if we'd known the extent of outsourcing and the volume, that we probably would have put, as suggested, three suppliers there in the first place.”
With 125 ongoing global projects with Pfizer over the next few years, Icon has a lot to lose if its relationship with Pfizer turns sour, though that doesn’t seem to be the case, according to Murray.
“The contract expires in the middle of next year and we will discuss it seriously with them at the end of this year, but I would expect it to be renewed in the first half of next year,” he added.
Analysts continued to grill Icon on its relationship with Pfizer as Murray defended his company, noting, “We've a lot of backlog with them, as you can imagine, which will burn to revenues over the next three years to four years.”
But he also cautioned that the Pfizer account “is maturing and is not growing to the same extent that it did over the first few years, which is entirely to be expected and entirely in our forecasts.”
Murray also wanted to make clear that about 40% of Icon’s business comes from outside large pharma clients.
In addition, analysts questioned Icon’s central labs position, which they seem to think aren’t really competitive with the top central labs providers – Quintiles and LabCorp’s Covance.
Q1 Results
For Q1, the company reported net revenue growth of 11% compared to the same quarter last year, while income from operations also grew to $66.7m or 17.2% of revenue, which compared to $43m or 12.3% for the same quarter last year.
Earnings guidance for FY 2015, meanwhile, has been increased from a range of $3.45 - $3.60 to a range of $3.60 - $3.70, while revenue has decreased from a range of $1.6- $1.675bn to a range of $1.6-$1.65bn.
Despite the corrections and beating Wall Street expectations, the company’s stock fell by more than 8% on Tuesday.
But Murray said the conversion of projects to revenue is expected to pick up in the later quarters of this year as one of the features of the partnership models Icon has worked with is that the CRO is involved much earlier in the process with sponsors.