Analyst says Parexel saw demand from small and mid-sized biopharmas decline in fiscal Q1

Analyst says Parexel saw demand from biopharmas decline in fiscal Q1

Parexel has seen small and mid-sized biopharma demand for development services decline in recent months according to an anaylst who attended the CROs presentation at the Jefferies Global Healthcare conference this week.

Parexel set up the biopharmaceuticals unit last summer in a bid to win more business from small and mid-sized biopharmaceutical firms and broaden its client base beyond its limited portfolio of Big Pharma strategic partners.

At the time COO Mark Goldberg told us the idea was to “apply best practices from our strategic partnerships and deliver them with the right scale, dedication and oversight to meet the needs of small and emerging [biopharma] companies.”

He suggested that although small and mid-sized developers biopharmaceutical developers control between 60 and 80% of the drug sector’s intellectual property, they need additional support.

“The fate of a smaller company may pivot on the success of a particular program, and we must execute with an urgency that is commensurate with the responsibility for success that we carry in these relationships.”

And the unit got off to a good start with double-digit growth in new business wins in fiscal Q4 2013. At the time CEO Josef Von Rickenbach said that: “We are pleased with the results of our diversification efforts with respect to small and midsized clients, and expect to remain competitive in this area of the market.”

However, in recent months this situation appears to have changed with the amount of new business Parexel has won from smaller biopharmaceutical firms slowing, according to analysts who attended the CROs presentation at the Jefferies Global Healthcare conference this week.

In an investor note summarising the presentation, analyst David Windley said: “[the BioPharm unit] fell well short of expectations in the September quarter” adding that “two sizeable deals went to competitors.”

“We believe that at least four strategic partners have hit maturity levels that will see their revenues flatten going forward. New project awards will essentially replace projects that are completing.

“Thus, growth depends on layering on new client relationships or ramping business with small-cap biopharmas.”