PharmaNet Stock Plunges 60% After Cancellations
PharmaNet Development Group’s shares plunged more than 60% to less than $10 a share in early morning trading after the contract research organization (CRO) cut its financial guidance for the year. The company expects a loss—instead of the previously predicted profit—following cancellations and postponements of projects by biotech and pharmaceutical companies.
"After the strong new business wins in the second quarter 2008, we are very disappointed with the level of late stage project cancellations and a significant project postponement that occurred in the third quarter," said Jeffrey P. McMullen, PharmaNet’s president and CEO. "We were able to recover in the second quarter 2008 from earlier cancellations and we are confident that our determined business development efforts and existing backlog will drive us to profitability in 2009.”
By late morning Friday, PharmaNet’s shares had recovered a bit, but were still down 55% at $10.43.
For its full year, the company now expects a loss of 25 cents to 58 cents a share, compared with its earlier estimate of earnings of 53 cents to 63 cents a share.
PharmaNet’s revenue is expected to be in a range of $358 million to $368 million, cut from a previous forecast of $390 million to $399 million.
The company’s cancellation rate for late-stage projects jumped to 32.7%, from 8.4% in July.
In its previous quarter, PharmaNet had made a comeback, swinging to a second-quarter profit and easily beating analysts' expectations. At the time, the company saw continued strong growth for the rest of the year as well as for 2009.
The company said the cancellations included $19 million of expected late stage direct revenue in the second half of 2008 from two contracts and a reduction of $6 million of expected early stage direct revenue from a postponement.