CEO Tom Pike said in the conference call that the company continues to see “strong demand” from pharma and biotech companies on the product development side of Quintiles as new business grew 22% in that segment.
Large pharma companies continue to make up the CRO’s (contract research organization) largest wins for the quarter on the product development side, although Pike noted the company is happy to continue serving smaller biotech companies “given the increase in funding that I think we've all generally seen in that segment.”
“Overall, we believe that marketplace dynamics remained strong for the larger CROs and Quintiles in particular,” Pike said, according to a transcript of the call. “We're seeing an increase in overall RFP [Request for Proposal] volumes which supports our belief that the industry is growing by 5% to 8%. At the same time, we're both generating and seeing customer interest and more complete strategic partnerships.”
And although Quintiles exceeded the estimate of David Windley, equity analyst at Jefferies, on earnings per share by more than 10%, quarterly bookings did not meet expectations, he said in an investor note.
CFO Kevin Gordon noted some cancellations in the quarter, adding, “Coming off two 1.5 quarters of book-to-bill is a good place for us to be, and now 1.36 for the full year-to-date is also pretty good, it's clearly above our five-year average and adds more of the backlog to drive the growth rates that we're going to expect in the future.”
Bookings still grew year-over-year by 13% to a little more than $1B, according to Windley.
Integrated Healthcare Services
Quintiles also saw lower-than-expected growth in its Integrated Healthcare Services sector. Pike noted that within that segment the company experienced a slower sales environment within the commercial services businesses.
Ross Muken, equity analyst at the ISI Group, said in an investor note that the “strong growth” in product development was “countered by softness” in the IHS sector.
Windley, however, said that despite the “weaker-than-expected revenue” in the IHS sector, “margin improved an impressive 290 bps sequentially to 5.7%. We were modeling 4.0%.”
Gordon also noted that there may be layoffs in this sector as the company expects to “reduce anticipated overcapacity in selected areas in the Integrated Healthcare Services segment.”