In a form 8-K filed with the SEC on January 6, 2017, the contract research organization (CRO) announced its plan to restructure operations had been approved by the chairman and CEO and the corporate VP and interim CFO.
Per the SEC filing, the restructuring is part of a plan “to improve the productivity and efficiency of the company, simplify the organization, and streamline decision-making, thereby enhancing client engagement.”
The initiative is set to be company-wide.
“Parexel is taking steps to reduce costs in parts of the business,” a company representative told us. “In certain instances, this will include eliminating some positions. This difficult decision was made in a thoughtful, sensitive manner.”
According to the filing, the program could result in pre-tax charges in the range of $25m to $35m.
Of these charges, $24m to $32m will be “employee separation costs” with approximately $1m to $3m in “other costs.”
Garen Sarafian, Vice President, Healthcare Technology and Distribution at Citi Research, told us the restructuring program “isn’t entirely surprising,” from a company that is trying to improve its operating margins.
“Not surprisingly, within a clinically-focused CRO that’s more asset-light, $24-$32 million will be what they deem to be ‘employee separation costs,’” explained Sarafian. “You would expect that to be one of the leading areas.”
The SEC filing did not mention any facility or office closures that may and may not play a role in the proposed cost savings, Sarafian noted.
The restructuring is the second over the past two years, as the Massachusetts-based CRO previously eliminated 850 positions in 2015.
However, as Sarafian explained, the 2015 restructure was “more of a margin accelerating program.”
As Outsourcing-Pharma.com reported at the time, the company hoped to achieve annual pre-tax savings between $50m and $60m once the restructuring was completed.