May 10, 2017
(Last Updated: May 12, 2017 at 12:42pm PT)
By Mark Terry, BioSpace.com Breaking News Staff
Only a day after news that Waltham, Mass.-based contract research organization Parexel International was considering a sale, the company announced an extension of its restructuring plans. Part of the restructuring calls for 1,100 to 1,200 job cuts worldwide.
At the company’s May 3, third-quarter financial report, for the quarter ending March 31, 2017, Parexel’s founder, chairman and chief executive officer, Josef von Rickenbach, said, “In response to revenue shortfalls earlier in this fiscal year, we are right-sizing the organization. In January, we announced a restructuring program, and we are now expanding that program. All in, we expect total annual savings of $75-$85 million from our restructuring activities in Fiscal Year 2018. We remain committed to our longer-term goal of 14-16 percent adjusted operating margin.”
At this time, there are no specifics about where the job cuts will be. The company employs approximately 20,000 people worldwide. About half of them are employed in Massachusetts.
Parexel has three business units, Clinical Research Services, Parexel Consulting and Medical Marketing, and Perceptive. The Clinical Research Services division provides clinical trials management and biostatistics, data management, and clinical pharmacology, as well as related medical advisory and investigator site services. These are provided across a wide range of diseases, including cardiology, oncology, infectious diseases, neurology, allergy/immunology, endocrinology/metabolism, gastroenterology, obstetrics/gynecology, orthopedics, pediatrics, psychiatry, and transplantation.
The Consulting and Medical Marketing division provides drug development, regulatory, manufacturing compliance, business process consulting, staffing solutions, and marketing expertise. Perceptive offers a portfolio of products and services including medical imaging services, interactive voice response systems, clinical trials management systems, Web-based portals, systems integration, and patient diary applications.
According to the Wall Street Journal, Parexel has partnered with investment banks to broker a potential sale. There are hints that a group of activist investors, including Corvex Management, which has a large stake in Parexel, are considering buying the company.
Currently Parexel has a market cap of approximately $3.8 billion. If sold, it would likely go for more than $4 billion.
On April 26, another CRO, Covance , which is owned by LabCorp , announced plans to close a laboratory in Evansville, Ind. with the intention of laying off more than 100 employees. LabCorp had announced the day before that it was beginning cost-cutting measures in its CRO business after the Covance Drug Development unit’s revenue and earnings slipped in the first quarter of this year.
Covance’s revenue dropped 2 percent in the first quarter to $690.3 million.
For its part, Parexel reported third-quarter revenue grew 0.4 percent to $529.3 million, compared to $527.1 million in the same period in 2016. Income from operations was $29.9 million, or 5.6 percent of service revenue. GAAP net income for the third quarter was $17.8 million, or $0.35 per diluted share, compared to $47.9 million, or $0.89 per diluted share, for the previous year’s third quarter.
“Parexel’s financial results for the third quarter of Fiscal Year 2017 were in line with our expectations,” said Rickenbach in a statement. “We are encouraged by our outlook for revenue and overall operational performance in the fourth quarter.”
There is some speculation that the layoffs are in preparation for a sale, an attempt to make the company leaner.
