Quintiles Transnational Holdings Inc. Q recently published a report that claims patients participating in clinical research attain higher level of satisfaction. Patients surveyed revealed that research participation not only saved healthcare costs but also improved engagement in their health and overall quality of care.
Clinical trials and research are prerequisite in the new drug development process. Biopharma and healthcare companies generally engage contract research organizations (CRO) like Quintiles to carry out the clinical research study.
Per data from Industry Standard Research (ISR), the CRO industry is projected to value $27.8 billion by 2016. We believe that the fast growing market presents significant growth opportunity for Quintiles driven by its innovative technology and international expansion.
Most recently, Quintiles was named the industry leader in Phase I services by ISR. The company was also recognized as the most preferred Phase I service provider by the biopharmaceutical industry across North America, Europe and Asia. In September, ISR named Quintiles the market leader in Phase IV services for the third year in a row.
Business research and consulting firm Frost & Sullivan awarded the “Asia Pacific Contract Research Organization Company of the Year” title to Quintiles, based on innovation, customer service and growth. The company’s continued expansion in Asia-Pacific markets like China, Japan and South Korea promises to drive further growth.
Meanwhile, Quintiles reported third-quarter 2015 results that failed to cheer investors despite strong earnings growth. The company reported earnings of 94 cents per share, which surged 44.6% on a year-over-year basis and comfortably surpassed the Zacks Consensus Estimate of 81 cents.
Total revenues increased 1.8% (8.3% at constant currency) to $1.42 billion. Net new business was $1.16 billion, which translates to a book-to-bill ratio of 1.06. The company reported a trailing 12-month book-to-bill ratio of 1.27 across the business and 1.36 in product development. Backlog increased to $11.75 billion at the end of the quarter.
Segment Details
Service revenues were up 3.1% to $1.09 billion, primarily on higher product development revenues – up 5% (9.4% at constant currency), partially offset by a 2.1% decline (up 5.5% at constant currency) in Integrated Health Services revenues.
Product Development net new business totaled $971 million, which translates to a book-to-bill ratio of 1.20. The constant currency revenue growth was driven by solutions and volume-related increases in core clinical services, clinical solutions and services provided on a functional resourcing basis and clinical trial support services.
Quintiles completed the Q Squared Solutions joint venture in Jul 2015. Quest Diagnostics DGX has 40% share in the joint venture.
The Integrated Healthcare Services net new business totaled $193 million, which translates to a book-to-bill ratio of 0.68. The results was impacted by a large cancellation for commercial services in North America and lower net new business for commercial services in Japan and in real-world and late phase research services.
The constant currency revenue growth was driven by increases in real-world and late phase research services, offset by a decline in commercial services in Europe due primarily to the conclusion of an agreement to distribute pharmaceutical products in Italy.
Guidance
Quintiles forecasts constant currency service revenue growth in the range of 8.6%–9.2% for full-year 2015. Adjusted earnings are expected in the range of $3.27–$3.33 per share, representing growth of 21.1%–23.3%.
Zacks Rank & Key Picks
Quintiles carries a Zacks Rank #2 (Buy).
Other favorably ranked stocks include MedAssets MDAS and PRA Health Sciences PRAH. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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