High operating costs left Icon’s central lab business with a $4.6m (€2.9m) loss for the period and a further $3m attributed to charges related to its programme of cost-cutting measures.
CEO Peter Gray explained the central lab business did not convert revenue as quickly as forecast, and revealed that further action would be taken to reduce operating costs.
However, the unit’s shortfall came as no surprise to the Irish contract research organisation (CRO), which has anticipated losses for some time after year-on-year net business awards began to decline in the fourth quarter last year.
This decline, coupled with other charges, saw the firm’s operating income drop from $30.4m in the comparable quarter last year, to $17.6m in the reported period.
Despite this, Gray, was upbeat about the latest financial results, stressing the growth of the firm’s trial business in the three months leading up to September as a basis for his optimism.
“Our clinical business had another solid quarter and gross new business awards were in line with expectations at $317m (€227.9m).”
“Overall,” he continued, “Icon remains in a strong position and continues to invest in its business in order to benefit from the opportunities that are arising as our customers transition to new development models.”
Market reaction
Lauren Migliore, a Morningstar analyst, was somewhat disappointed by Icon’s slight rise of revenue, saying it “came in below our expectations,” though adding, “We’re keeping our fair value estimate intact as Icon’s core clinical trial business continues to show improvement.”
Migliore added, “While the market for drug development services remains choppy in the near term, we believe outsourcing will rise over the long run, as evidenced by a recent increase in strategic deals among some of the world’s largest drugmakers.”
She believes global contract research organisations - such as Icon - are “positioned to benefit most significantly from this trend.”