Covance Inc. (CVD), PAREXEL International Corporation (PRXL): Outsourcing Your Laboratory

Competitive position in the CRO market
Apart from Covance, the CRO market has two leading providers: Quintiles Transnational Holdings Inc (NYSE:Q) and PAREXEL International Corporation (NASDAQ:PRXL).

Quintiles provides drug development and associated laboratory services. The company operates through two segments, product development, and integrated health care services.

During the second quarter of 2013, backlog was $9 billion, and year-to-date book-to-bill ratio was 1.21 times. New business were up by 13%, around $1 billion, due to growth in product development. The company’s services revenue remained flat at $944.2 million, largely due to an unfavorable currency impact. The company expects to generate revenue growth from its services by 3.8% to 5.2% and increase its adjusted earnings per share of 10.2% to 15.8% in the coming period.

PAREXEL International Corporation (NASDAQ:PRXL) offers a wide range of clinical research, medical communications, consulting, and advanced technology products and services on a worldwide basis. It operates in three segments: Clinical Research Services, PAREXEL International Corporation (NASDAQ:PRXL) Consulting and Medical Communications Services, and Perceptive Informatics.

During the fourth quarter that ended June 30, the company’s net book-to-bill ratio was 1.21 times with new business of $559.2 million and backlogs of around $4.6 billion, up by 4.9% over the prior year. Services revenue also increased by 18% to $463.1 million as compared to prior year.

The company continues to have upside potential in clinical research services with differentiated product offerings. PAREXEL International Corporation (NASDAQ:PRXL) will generate revenue of $1.89 billion-$1.92 billion and an earnings per share of $1.95-$2.11 for the 2014 fiscal year.

Investment highlights
Covance has a well diversified portfolio of services across the early and late-stage development process. The company has a leading position in clinical laboratory services that will further enhance its offerings. Strong alliances with leading pharma companies such as Sanofi, Eli Liliy, Merck, and Kellogg provide long-term contract research services. In addition, a strong financial position provides comfortable positioning. Overall, the company has strong potential in the CRO services industry.

The article Outsourcing Your Laboratory originally appeared on Fool.com and is written by Kanak Kanti, De.

Kanak Kanti De has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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