The contract research organisation (CRO) clocked in $376m (€280m) of revenues, up 12.5% year-on-year, whilst net income grew 54% to $41m for Q2 2014. The results were enough to ensure analysts to continue to back Icon as a top pick within the CRO sector.
In a conference call to discuss results last week, CEO Ciaran Murray said the quarter had seen growth both from its strategic partners– five customers who make up 51% of Icon’s sales – and from its straight-up contract business.
“During the quarter we had a very exciting expansion of one of our existing strategic relationships,” Murray told investors. “On top of that, we have developed a couple of new partnerships, which will drive revenue into next year.”
However, despite these new contracts, “there has been no fundamental shift over the last number of quarters in our bookings concentration,” Murray said.
“It’s just a question of - in one quarter - the timing of the award and the planning of the trial,” he continued. “We have seen amount of $100m, $150m, or $200m come into backlog at a particular time from larger customers, then none might come in the next quarter.”
The Pfizer Factor
For the quarter, 28% of total sales came from its “top client.” In 2011 Pfizer announced it had selected Icon as one of two strategic CRO partners and, according to Jefferies analyst David Windley, “the year-on-year growth from Pfizer was responsible for over half of Icon’s consolidated total.”
However, “Pfizer will likely be less of a growth engine in the second half 2014 as Icon begins to lap more difficult comps [comparable same-store sales],” he continued to note, adding it was encouraging to “see evidence of more growth driven by non-Pfizer clients.”
M&A
The quarter also saw the firm acquire Aptiv Solutions for $144m, meaning Icon ended the quarter with around 11,000 employees.
COO Steven Cutler told stakeholders the integration had thrown up no surprises and the firm adds its adaptive technology to Icon’s operations.
“The adaptive design is the area of the business that we are seeing a lot of interest in from customers and we have some real experts in the business now that can drive that.”
The firm also signalled it was still on the hunt for acquisitions and additional technologies.
“We have over the past number of years made about 12 bolt-on acquisitions. We believe that’s a good strategy,” Murray said. “We prefer this to large risky value destroying acquisitions and we have a list – a list of things we are looking at - that we think will add to our value and continue to enhance our delivery of value to shareholders.”