Parexel laying off 300 & cutting 25-30% of Phase I capacity

03-May-2011 - Last updated on 09-May-2011 at 09:30 GMT

Parexel is cutting up to 30 per cent of Phase I capacity and around 300 staff in response to changes in early phase demand.

Sponsors now want a greater proportion of early phase trials to use patient populations, as opposed to healthy volunteers. In response, Parexel is cutting 25 to 30 per cent of its early phase capacity and focusing resources on areas of growth within Phase I.

“We believe that the market for healthy volunteers is not going to be growing much, whereas the market for patient studies is growing more”, said Joseph von Rickenbach, CEO of Parexel, in a conference call with investors. Certain therapeutic areas are also growing more.

After a turbulent period in the wake of the financial crisis Parexel believes the shift away from trials in healthy volunteers is permanent, or at least demand will be lower for the foreseeable future.

“I think historically some of the studies that were done…were probably premature. Clients are streamlining their development plans and conducting studies as needed to get to the next stage”, said Rickenbach.

Capacity cuts will be accompanied by around 300 layoffs. In a regulatory filing Parexel said it will cut three per cent of its 10,350 workforce. Parexel confirmed to Outsourcing-Pharma that around 300 positions will be affected.

Parexel is in the middle of “sensitive discussions” so was unwilling to disclose further details of the cuts. Rickenbach said if certain units or activities could be repurposed, as opposed to closed, Parexel would consider the opportunity.

Hiring offsets layoffs

Despite the layoffs Parexel plans to grow its headcount in the next quarter. Rickenbach said by the end of June staffing levels would be 10,500, or possibly even more.

Early phase cuts will reduce Parexel’s headcount to around 10,050 so Outsourcing-Pharma believes at least 450 people will be hired this quarter. Parexel confirmed to Outsourcing-Pharma that this figure is approximately correct.

Hiring is focused, for now, on late stage clinical research services across geographies and functions. The hiring push comes as strategic alliances begin to advance beyond the consulting stage.

“Parexel insists it has reached what it classifies as an inflection point – the point at which a number of strategic projects will begin to ramp, creating some meaningful revenue growth”, said David Windley, equity analyst at Jeffries & Co, in a note to investors.

Shares in Parexel recovered slightly from an initial plunge to close down 15.03 per cent at $22.96 (€15.44).