Drug research provider Parexel's shares slide after weak bookings

Wednesday, 30 Oct 2013 | 12:54 PM ET

Oct 30 (Reuters) - Parexel International Corp's shares fell as much as 18 percent after the drug research services provider said it struggled to win new contracts when rivals reported strong results and raised their forecasts.

Bookings fell to $394 million in the first quarter ended Sept. 30 from $481.1 million a year earlier, the company said. Robert W. Baird & Co analysts said the bookings were about 30 percent below their expectations.

Parexel Chief Executive Josef H. von Rickenbach, on a conference call on Wednesday, blamed a "particularly competitive" environment in gaining business from small and emerging biopharmaceutical companies.

The CEO, however, said the company entered the second quarter with a high level of pending proposals.

"It is hard for us to see Parexel getting much traction before next report - we would focus elsewhere," Baird's Eric Coldwell wrote in a note.

Competitors Covance Inc and Charles River Laboratories International Inc on Tuesday reported quarterly results ahead of analysts' expectations and raised their full-year forecasts as demand increased for contract research.

Drugmakers are increasingly using the services of contract research organizations to cut down on in-house R&D work and rein in costs as they adjust to a tight regulatory environment for reimbursements and increased government austerity.

Top pharmaceutical firms are also under pressure to rejuvenate their portfolios with new drugs, to replace those whose patents have expired or are due to run out soon.

Merck & Co, which accounted for 12 percent of Parexel's consolidated service revenue in fiscal 2013, unveiled a plan earlier this month to eliminate about 8,500 jobs, half of which would be from research and development.

Parexel's other big customer, Pfizer Inc, has also steadily pruned its research spending to focus on more productive areas of development and offset losses from patent expiries.

Parexel's stock fell to a more than four-month low of $44.95, before recouping some losses to trade at $46.67 at 12:34 p.m. ET. More than 3.2 million shares changed hands, nearly 9 times their 50-day moving average.

(Reporting by Zeba Siddiqui and Esha Dey in Bangalore; Editing by Sriraj Kalluvila)

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