Parexel International CorporationPRXL

Stock Research and Analysis

by Jeffrey Stafford

With back-to-back years of solid domestic growth under its belt, we're convinced Parexel International has taken the necessary steps to remedy problems in its United States operations. We think the company is well-positioned to take advantage of favorable Read more

Bulls Say

Parexel's focus on information technology, particularly in its Perceptive Informatics business line, may help it win new customers. Perceptive targets a more than $1 billion market.

The firm's global presence should serve it well, as clients are increasingly looking to conduct drug trials all over the world. Parexel's Eastern European and Asian operations give the company access to cheaper patient recruitment populations.

Parexel's early phase initiative seeks to close the gap in the company's existing service offering. An increase in early-stage trials would likely decrease the firm's overall cancellation rate, as Phase I trials are canceled less frequently than Phase II-IV trials.

Over the past several years, the company's revenue backlog, an estimate of future revenue, has expanded rapidly. Backlog has more than doubled from its 2005 level. Read more

Bears Say

The company relies heavily on a handful of top clients. In 2008, Parexel's five largest clients accounted for more than 30% of revenue.

More stringent regulatory standards for safety and efficacy could reduce clinical trials and increase industry cancellation rates.

Tough credit conditions could hinder the introduction of new drugs by smaller biotech companies, and the company experienced a $15 million charge related to a struggling client in 2008. A slowdown in R&D spending from biotechnology firms would hurt Parexel's sales.

As with all contract research companies, Parexel is vulnerable to litigation risk. Through June of 2008, the company has spent $1.8 million in legal fees and other costs related to patient adverse reactions in one of its Phase I clinical trials. Read more

Strategy

Over the past several years, the company has focused on improving its U.S. operations. With domestic sales back on track, we expect Parexel to emphasize its international infrastructure and late-stage Read more

Management

We're maintaining our C Stewardship Grade for Parexel. Josef von Rickenbach founded the company in 1983 and remains its CEO and chairman. We would prefer these roles were split, as separation leads to greater board independence, in our opinion. Furthermore, Read more

Profile

Parexel International is a global contract research organization with more than 60 locations in 50 countries, and about two thirds of sales generated outside the United Read more

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