Full Press Release Details
Dear Shareholders and Stakeholders
The challenging market conditions that prevailed during 2009 continued
into 2010 as our clients continued to seek ways to reduce costs and
national governments endeavoured to reduce healthcare budgets, including
pharmaceutical prices. For the full-year 2010 net revenue was $900
million compared with $888 million in 2009, representing an increase of
1.4% or 3.1% in constant currency terms.
Despite the market challenges, throughout the year we invested in
facilities, hired additional staff in Asia-Pacific and continued to
invest in our new strategic relationships. While these factors impacted
earnings, we believe that the fundamentals of our market remain strong
and ongoing investment is intended to position ICON for growth into the
Operating margins for the year were 10.2%, down from 13.1% in 2009
(excluding one-time net charges) which led to EPS of $1.44 per share
compared with $1.53 in 2009. Cash flow during the year continued to be
strong. Even with $31 million of investments in capital projects, our
net cash closing position grew to $256 million from an opening balance
of just under $200 million.
Alongside ongoing investment, our earnings for the year were impacted by
the disappointing performance of our Central Laboratory, which incurred
significant losses. It performed well in terms of building its backlog
(order book), partly from strategic relationships but also from
excellent business development efforts. However, the growth in bookings
translated to revenues much more slowly than forecast - hence the
losses. We renewed the management team during the course of the year and
they are focused on bringing the lab back to break-even as quickly as
possible. We are pleased with the progress they are making and expect to
return to profitability during the second half of 2011.
As 2010 progressed, the order book of the group continued to expand and
at the end of December our total backlog had reached $1.9 billion, which
is a rise of approximately 9% compared to the comparable figure a year
In business development terms it's clear that a lot of change has been
taking place in our market. Our customers' pipelines are being reviewed,
trimmed and renewed. Strategic relationships are being explored and
forged and at the same time, biotech funding has begun to flow again.
While we were able to forge new strategic agreements such as the one
announced with BMS, we do not think that ICON took full advantage of all
the opportunities 2010 presented and as a result we have made some
adjustments in our go-to-market approach as we respond to our customers'
desire for more expert and innovative input from CROs into their
development programmes. One example of this is the recent strategic
alliance with Boston Clinical Research Institute (BCRI), an Academic
Research Organisation based in Boston, Massachusetts. The alliance will
combine BCRI's respected leadership in clinical strategy, study planning
and academic relationships with ICON's experience in the execution of
global clinical trials.
Simultaneously, we continue to engage actively with major companies who
are seeking to reengineer their approach to development and we are
revitalizing our focus on biotech opportunities. Our recent announcement
of the strategic partnership agreement with Pfizer is a sign that our
efforts are having the desired impact in the market.
It remains evident that no single outsourcing model will dominate the
market; but rather each client will take their own unique approach. This
demands that ICON retains the flexibility for which it is renowned to
respond to these differing requirements. One of the ways we are
achieving this flexibility is by leveraging the services of our contract
staffing group, DOCS, which continued to perform well during 2010. By
combining the traditional strengths of our Clinical Organisation with
the resourcing flexibility of DOCS we have been able to develop creative
and cost effective research solutions for our clients.
The pace of globalisation continues to accelerate and during 2010 we saw
further evidence of this in our business. In 2010, 58% of our revenue
was generated from outside the United States, up from 54% in 2009. In
Europe, Middle East, and Africa revenue grew 2% to 47% of total revenue
and in Asia-Pac and Latin America revenue grew from 9% in 2009 to 11% of
the total in 2010. We continue to believe this trend is contributing to
a shift in market share to larger CROs that have the infrastructure and
expertise to manage global studies. During the year we made additional
investments to expand our global footprint including hiring more staff,
opening a new office in the Philippines and opening a new Central
Laboratory facility in China, as part of a joint venture with Fountain
Medical. We also extended our Asian capabilities through the formation
of an alliance with Tigermed, a Chinese CRO and recently announced a
similar agreement with Japanese CRO, ACRONET. During 2011, we will
continue to seek opportunities to enhance our global capabilities in the
regions of the world where our clients are looking to expand their
conduct of clinical research.
Quality remains at the heart of the ICON culture and during 2010 we
continued to make investments to enhance our quality management system.
These included investments in staff training and refinement of
operational policies and procedures.
We are also making a significant investment in our information systems.
These investments aim to generate better information for our staff and
clients and will enable us to link to our customers in more efficient
and innovative ways. This will not only enhance the quality of our
operational delivery, but will also support our clients' need for
operational efficiency. We are encouraged by the positive feedback that
we are receiving from our clients as we implement these systems.
During 2010 we continued to work cooperatively with the U.S. Food and
Drug Administration (FDA) to respond to the Warning Letter which we
received in December 2009 in relation to two studies monitored in 2004
-2006, and have implemented an action plan with the intention of fully
addressing their observations and concerns. We continue to review our
quality systems, seeking further ways to enhance quality oversight and
Despite the current near-term challenges in the Early Phase Clinical
market, we believe our clients will increasingly need strategic support
to help identify the most promising drug candidates in which to invest
and to decide which ones to "kill off" early in the development process.
In June, we opened a purpose-built translational medicine facility on
the redeveloped Manchester Royal Infirmary site in the UK. This facility