CNS, oncology, complex trials boost INC Research’s Q1 growth

By Zachary Brennan

- Last updated on GMT

CRO INC Research saw its net service revenue increase by 14.5% to $211.5m in Q1, which was considerably higher than analyst expectations and driven by particularly strong growth in trials around CNS (central nervous system), oncology and other complex therapeutic areas.  

The company said the growth was the result of increasing new business awards over the last 18 months, a lower cancellation rate and favorable revenue mix – all helping INC’s stock to rise more than 17% on Monday. The company also slightly raised its revenue and EPS (earnings per share) guidance for the rest of the year. 

I think the market has stayed pretty much where it’s been for the last few quarters​,” CEO Jamie Macdonald told analysts Monday in terms of pharma and biotech clients’ pipelines and funding. 

The company’s backlog of $1.6bn as of March 31, 2015 matched the backlog from last year, while net new business awards were $255.5m for Q1, which was less than the $280.9m for the same quarter last year. 

Trials in CNS, oncology and other complex therapeutic areas represent 67% of INC’s backlog, Macdonald noted. These complex areas represent about 60% of Phase III drugs in development, he added. 

New business awards vary and continue to vary, and there could be a large number of orders in any given quarter, Macdonald said, adding that the quarter’s book-to-bill ratio was at 1.2, which was down from last quarter’s​ 1.5. 

We believe we can continue to win a significant portion of new awards from repeat customers​,” Macdonald said, noting encouraging ongoing discussions with one of its largest clients, for whom INC is already its functional service provider for the past three years, though that’s not an exclusive partnership. INC is looking to evolve into a more traditional full service arrangement with this client. 

INC won three new full service studies in Q1 of 2015, he added. “We also continue to have a very diverse customer base with our top five representing only 36% of revenue in Q1 of 2015​,” which was down from 37% for Q1 and FY 2014, he said. 

Secondary Offering, DrugDev collaboration​ 

In addition to its earnings, INC announced that it has filed a registration statement with the SEC (Securities and Exchange Commission) relating to a proposed secondary offering of up to 9.2m shares of its Class A common stock by certain of its existing stockholders, including affiliates of Avista Capital Partners, affiliates of Teachers' Private Capital, the private investment arm of Ontario Teachers' Pension Plan Board; and certain current and former employees of INC Research. INC will not receive any of the proceeds from the sale of the shares. 

The company also recently announced it will become the first CRO to complete integration with and implementation of DrugDev’s SiteCloud platform, the same technology used by TransCelerate’s Investigator Registry (launching later this year) and the Investigator Databank, to facilitate more efficient feasibility, site selection and study start-up processes. 

Clare Grace, VP of site and patient access at INC, told Outsourcing-Pharma.com, "The SiteCloud platform has several key advantages over others:

-              It allows for very easy and more efficient sharing and comparison of investigative site data among different organizations.  This is particularly useful for a CRO that has different partners with different requirements.

-              It has extremely flexible firewalling, which again creates efficiencies when processing data with clients.

-              Most importantly, it allows investigators access to the same data, enabling them to update and validate the data​."

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