May 5, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Raleigh, N.C.-based INC Research Holdings , a contract research organization (CRO), announced its first-quarter financial results after extensive restructuring.
The restructuring included 175 job cuts, including 30 in the Research Triangle Park area. The company employs 6,600 people worldwide, with 971 in the Triangle and 1,100 in North Carolina.
INC reported first quarter net service revenue of $249 million, up about 18 percent from $212 million in the first quarter in 2015. Total revenue for the quarter was $413 million, up from $308 for the same quarter in the previous year.
“INC is off to an excellent start in 2016 with our first quarter results driven by robust awards and a strong book-to-bill ratio,” said Jamie Macdonald, INC’s chief executive officer, in a statement. “We continue to strengthen our position as an innovative clinical development partner to our customers and remain focused on our goal to make INC Research the CRO of Choice for all of our stakeholders.”
The restructuring involved moving some of its therapeutic divisions into other business units. Net new business of $302.4 million were reported for the quarter, and adjusted diluted earnings per share grew 38.1 percent to $0.58 in the quarter.
The company also reported new guidance, increasing its full-year net service revenue from $1.02 billion to $1.03 billion, and shifted its diluted EPS guidance from $2.34 to $2.46.
On the same day, the company reported its quarterly earnings, two major company stockholders, Avista Capital Partners and Ontario Teachers’ Pension Plan, indicated a plan to sell 8 million shares valued at $380 million based on the closing share price on May 2.
The two groups have been primary shareholders, even when the company was privately held. INC went public in 2014, and since then the two investment groups have been unloading blocks of shares. As of March 31, they controlled 40 percent of the company, combined. The latest sale cuts that to 24 percent.
INC Research is currently trading for $43.95 per share.
On May 3, Robert Baird downgraded the company to a “neutral” rating, which previously had been an “outperform.” Analysts give the INC a consensus price target of $52.14. Six analysts gave the stock a “strong buy,” one gave it a “buy,” and two gave it a “hold,” according to Zacks Investment Research.
As a CRO, INC provides services from Phase I through Phase IV clinical trials, as well as global consulting services.
Recently there were rumors that INC Research was in talks with clinical diagnostics company Laboratory Corp. of America Holdings (LH) about a possible merger. The talks, if there were any, were considered preliminary. Both companies are headquartered in North Carolina. LabCorp is currently the largest clinical diagnostics company in the U.S. and possibly the world, now larger than the previous leader, Quest Diagnostics . LabCorp has a market cap of around $9.3 billion, compared to INC’s market cap of $2.7 billion.
LabCorp chief executive officer Dave King “said the priority for Covance (a LabCorp company) is growing the clinical business (which INCR would do,” said JPMorgan analyst Lisa Gill. “Management has left open the possibility of doing another significant deal following last year’s Covance acquisition, saying its plan to deleverage further and resume share repurchases in the second half of this year is contingent on merger-and-acquisition opportunities.”
