PDI bought Group DCA a year ago to expand its portfolio of digital physician-engagement services. In the first half of 2011 DCA posted a $3.7m (€2.7m) operating loss and, although PDI cut the deficit in the third quarter, the unit continued to drag on results.
“Acquisition accounting is having, and will continue to have, a significant impact on reported results”, PDI wrote in its third quarter results. The $0.2m loss DCA posted in the third quarter wiped out the profit made by the legacy PDI business.
Analysts expect the DCA-related drag to continue into next year. “We believe the distorting effects of the acquisition-related accounting should dissipate in the next few quarters” John Kreger, equity analyst at William Blair, said.
DCA service revenue also fell short of analyst expectations. Kreger said: “[We] suspect this is merely a near-term delay rather than a signal that there is a fundamental issue within the Group DCA segment.”
Despite the current problems Kreger expects DCA to have a positive effect. “We believe the segment remains a solid grower and strategically very important to the consolidated results longer term”, Kreger said.
PDI grew sales by four per cent year-on-year but rising service costs and operating expenses offset the gains. Revenue guidance for the year is now $164m to $166m, $15m below analyst projections listed on Reuters.
Pipeline growth
In the third quarter PDI grew its pipeline “substantially” to more than $500m. “The growth of PDI's pipeline reflects the pharmaceutical industry's continued commitment toward realising greater cost synergies and gaining additional flexibility”, Nancy Lurker, CEO of PDI, said.
PDI expects pipeline conversion to drive sales growth of 20 per cent in 2012 and for the upwards trend to continue. Lurker said biopharm will drive growth by engaging in “more strategic and permanent outsourcing of key functional areas and key brands” to cut fixed costs.
Kreger also noted the strategic partnership trend seen in the contract research sector is moving into sales. “We expect partnerships will be announced in the coming year, as more large companies try to cope with the loss of patent protection on some of their largest products”, Kreger said.
In August PDI inked a $55m fee-for-service deal to provide a full range of commercialisation services for a knee pain treatment. As biopharm cut back in-house operations PDI hopes for similar deals and has hired John Parsons, formerly chief commercial officer at TopoTarget, to run the unit.