Parexel Lowers Forecast After Client Reneges
Funding difficulties have caused the sponsor of a large clinical trial to pull out of a contract with Parexel, which will negatively affect the CRO’s second quarter and full-year 2009 financial results.
Parexel has been running a large global phase III clinical trial for the client, an unnamed small biopharma company, since September 2007.
“The client appeared adequately funded, had been paying their bills, and indicated to Parexel that it had secured venture-backed financing to cover its commitments. However, their financing syndicate unraveled as a result of the global financial crisis, and they were unable to close a planned financing round under their committed capital agreements,” said Parexel chairman and CEO Josef von Rickenbach in a company release.
Parexel expects this contract cancellation and related bad debt will have a negative impact on its diluted earnings per share in the range of $0.14 to $0.16 for the quarter ended December 31, 2008. The company will release its Q2 results January 26.
Parexel has reduced its expected consolidated service revenue for the second half of the fiscal year 2009 by $6 million as a result of this contract termination.
The CRO now expects its fiscal year 2009 consolidated service revenue will be in the range of $1.08 billion to $1.11 billion, down from the company’s previous guidance range of $1.1 billion to $1.13 billion.
According to a release, Parexel has reviewed backlog and receivables and does not expect there to be any similar material losses forthcoming. The company does not foresee layoffs or restructuring related to this loss.
In late afternoon trading Tuesday, Parexel’s share prices were down 3.29% to $8.81.