Parexel’s second quarter financial results, released late Monday, reflect the ill effects of negative foreign exchange rates and a recently terminated contract.

The Waltham, Mass.-based contract research organization (CRO) reported an increase in service revenues for the second quarter of 2009 compared with the prior year, but year-over-year profits were cut by more than half from $11.5 million in the second quarter 2007 to $5.2 million for the quarter ended December 31, 2008.

Service revenues increased 15.6% to $275.8 million for the second quarter of fiscal year 2009, up from $238.7 in the prior year period.

"With regard to our outlook for the current calendar year, I remain cautiously optimistic. While we may experience a slow-down in the small biopharma client segment due to the current condition of the financial markets, I believe that this impact may be offset by an increase in outsourcing levels from larger clients,” said Parexel chairman and CEO Josef von Rickenbach in a company release.

Earlier this month, funding difficulties caused the sponsor of a large clinical trial to pull out of a contract with Parexel, and the sponsor subsequently filed for bankruptcy protection. Parexel terminated its contract with the client and recorded $15 million in pre-tax reserves in the second quarter for anticipated wind-down costs and bad debt expense related to impaired accounts receivable.

Parexel's share prices were up 26% to $9.30 in morning trading.