Parexel Backlog May Indicate Future Revenue Boom

By Zachary Brennan

- Last updated on GMT

Parexel Backlog May Indicate Future Revenue Boom
CRO Parexel’s massive backlog could position the company for continued revenue growth moving forward, top executives said at recent conferences.

Josef​ von Rickenbach​, chairman and CEO of Parexel, said at William Blair's 33rd Annual Growth Stock Conference last week that an increase in pharmaceutical outsourcing is going to “benefit larger CROs​” as the market share for the top ten CROs, including Parexel, is expected to grow from 56% in 2012 to 63% by 2016.

In March, the company reported that its backlog was about $4.5B, which represents a 6.6% increase year-over-year. Von Rickenbach said the higher-than-expected backlog levels attest to the fact that the company “can deliver high levels of predictable work​.”

Similarly, James Winschel, SVP and CFO of Parexel said at the Goldman Sachs 34th​ annual Global Healthcare Conference that the “tremendous​” backlog gives the company “more elbow room​” to operate.

Competitive Pricing

In particular Winschel noted the competitive nature of bidding for strategic partnership deals and how that can impact a CRO’s backlog. For example, in December he said Parexel competitor “Quintiles got more aggressive​” as part of an effort to “beef up its backlog​” in advance of its IPO (initial public offering)​.

He also noted some regrets regarding previous announcements of partnerships, especially as mid-sized CROs won a larger share of the smaller biopharma contracts. Some of the mid-sized companies used the announcements against Parexel, Winschel said, though he noted the tables have turned somewhat as sponsors have realized some of the mid-sized CRO do not have the global capacity that larger CROs have, and that some of the smaller CROs’ mergers caused “integration issues​.”

Asia Expansion

In addition, Parexel has made significant inroads in Asia, especially Japan. Winschel said the company is “winning substantial amounts of business in Korea and Taiwan,” while in Japan, Parexel is taking advantage of a massive increase in outsourcing. Two years ago, about 10% of pharma and biopharma companies in Japan outsourced work, and now that percentage “is up to 25%, and it’s likely to increase to 40-45% range​,” Winschel said.

Japense regulators were frustrated by the lag between when drugs were approved in the US and when they were approved in Japan, and therefore lessened the requirement for local clinical studies by allowing the use of studies from other Asian countries. Winschel said Japanese CROs CMIC and EPS were not “well-positioned to go into those other [Asian] countries​” and therefore Parexel saw significant growth from Japanese sponsors.

New CFO, $450K Salary

Winschel is also preparing for retirement and will be replaced by Ingo Bank as Senior VP and CFO on Sept. 1.

Bank will receive an annual base salary of $450,000, a signing bonus of $500,000, and an annual incentive bonus opportunity of up to 55% of his base salary, according to an SEC filing​.

Ross Muken, an analyst at ISI Group, said in an investor note that Bank is “a seasoned CFO with 18 years of finance, operations, and corporate development experience in a variety of industries​.” In addition, his global perspective “will be valuable given PRXL's growing presence in international markets​.”

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