Parexel International Corporation

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PAREXEL International Corporation

195 West Street
Waltham, Massachusetts 02451-1111
U.S.A.
Telephone: (781) 487-9900
Fax: (781) 487-0525
Web site: http://www.parexel.com

Public Company
Incorporated: 1983
Employees: 5,000
Sales: $710 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: PRXL
NAIC: 541710 Research and Development in the Physical Sciences and Engineering Sciences

PAREXEL International Corporation is one of the world's leading contract research organizations, serving the pharmaceuticals, medical research, biotechnology, and healthcare industries. Parexel has positioned itself as one of only a few contract research organizations capable of providing a full-range of services on a global scale. As such, the company operates through four primary business segments: Clinical Research Services is the company's largest unit, generating 72 percent of company $615 million in service-fee revenues in 2006. Through this segment, Parexel is present in every area of the clinical research outsourcing market, including Phase I to IV clinical trial capacity, as well as project, site, and data management; patient recruitment; bioanalysis; and medical services. Through its clinical research operations, Parexel has participated in the development of nearly all of the top 50 drugs available at the midpoint of the first decade of the 21st century.

Of the other three segments, the Parexel Consulting unit offers services including product development and regulatory services, as well as compliance and risk management, clinical and manufacturing quality assurance, and related consulting activities. This unit produced 19 percent of Parexel's service-fee turnover in 2006. The company's youngest segment, Perceptive Informatics, Inc., is pioneering the application of advanced computer and automation to clinical research. This unit added 9 percent to company sales. The company's fourth segment is its Medical Marketing Services wing, which boosted the company's total turnover to $710 million in 2006. This unit comprises the company's scientific publications unit, including Cambridge Medical Publications and Barnett Educational Services, publishers of such titles as the Journal of International Medical Research and Parexel's Bio/Pharmaceutical R&D Statistical Sourcebook. This unit also provides a range of other medical education communications services, including event and exhibit planning and patient assistance programs. Parexel has grown strongly since its founding in 1983 through a combination of organic growth and a long string of acquisitions. This has enabled the company to establish a global network of offices in 36 countries. Parexel is particularly strong in Europe, which accounts for 58 percent of the group's turnover; the United States adds 36 percent to company sales. Parexel is listed on NASDAQ and is led by a cofounder, chairman, and CEO.

SENSING OPPORTUNITY IN THE EIGHTIES

Parexel—the name was adopted from that of the Swiss-born alchemist and physician Paracelsus—was founded in 1983 by organic chemist Dr. Anne B. Sayigh and Josef von Rickenbach, a native of Switzerland with an MBA from Harvard University and experience in the research and development and consulting sector gained at Schering-Plough Corporation and ERCO (the future ENSECO). Parexel was initially established as a regulatory affairs consultant, providing assistance in order to guide to small research companies through the complex U.S. Food and Drug Administration (FDA) process regulating research and clinical trials approvals. The company also began publishing its own newsletter, the U.S. Regulatory Reporter, establishing the basis for its later medical marketing unit.

The company's consulting services remained its main focus, however. While Parexel worked with a number of large-scale pharmaceuticals and medical equipment companies, many of its earliest clients were clinical research organizations (CROs), competing for clinical trial contracts in the relatively new contract research market. Parexel soon earned a solid reputation in this relatively new market, successfully helping several of its clients through the FDA's clinical trials approval process. During this time, the company recognized a growing trend in the industry. Drug companies had initially tended to outsource only for toxicology and preclinical studies. By the mid-1980s, however, an increasing share of their outsourcing business was for the clinical trials themselves.

Parexel decided to take advantage of this trend and established itself as a CRO in its own right, winning its first clinical trials contracts by 1985. The company began hiring a team of researchers, building up a staff of 65 by the late 1980s. By 1987, Parexel's annual sales had reached $3 million.

Into the late 1980s, the company, under von Rick-enbach's management, adopted a new strategy targeting its full-scale entry into the CRO market. For this the company set two objectives. First, Parexel sought to develop itself as a full-service operation capable of covering the full range of clinical research services. Second, the company, recognizing the increasing trend toward the internationalization of the pharmaceuticals market, sought to establish itself as a multinational service provider.

While organic growth was to play an important factor in Parexel's future expansion, the company adopted an aggressive acquisition strategy. In this way, the company supported its organic growth objectives through the expansion of it core capabilities. One of the first of the company's many acquisitions came in 1988, with the purchase of Boston-based Consulting Statisticians Inc., which provided Parexel with expertise in the areas of biostatistics and data management. This was followed in 1989 by the purchase of the Clinical Trials Analysis division of the McDonnell Douglas Corporation, providing Parexel with operations in London and its first entry into the international market. Another important acquisition of the group's early period was that of Barnett Associates, in Philadelphia, Pennsylvania, which added clinical, training, and information systems capabilities in 1990. Also in that year, Parexel opened an office in San Diego, California, expanding its clinical research services presence in the United States.

By 1991, Parexel began to emerge as one of the fastest-growing and most ambitious CROs. In that year, the company finally gained its own Phase I clinical trial capability through the purchase of Arzneimittelforschung GmbH, based in Berlin, which was one of the top CROs in the European market. In this way, the company was able to begin offering clinical trial services in Europe for the first time. The Arzneimittelforschung purchase also boosted Parexel's revenues by some $15 billion. Yet the German market soon fell into a temporary slump—because of the reform of the German healthcare system. Meanwhile, in the rest of Europe, and elsewhere, the CRO market was gaining increasing momentum.

COMPANY PERSPECTIVES

Mission—Combine the strength of our expertise, experience and innovation to advance the worldwide success of the Bio/Pharmaceutical and medical device industries in preventing and curing disease. Vision—PAREXEL strives to be: The premier provider to the Bio/Pharmaceutical and medical device industry for development and commercialization of new medical therapies worldwide.

Parexel continued to build up its operations into the middle of the decade, establishing new clinical research facilities in Raleigh–Durham, North Carolina, in 1994. The following year, the company expanded its international network, opening offices in Kobe, Japan; Milan, Italy; and Sydney, Australia. By the end of 1995, the company's sales neared $60 million.

PUBLIC OFFERING IN 1995

Parexel geared up for the next phase in its development, launching a public offering on NASDAQ in 1995. The company then launched a new acquisition drive, while continuing to expand its international presence. Through 1996, the company completed four important acquisitions. The company acquired another Massachusetts-based company, Sitebase Clinical Systems, adding its remote data-entry software in order to speed up Parexel's clinical-trial data handling. The company next turned to France, buying Caspard Consultants, building up the group's clinical trial monitoring and analysis capabilities. The acquisition of Washington, D.C.-based State and Federal Associates Inc. not only added to Parexel's consulting, marketing, and sales effort, it also gave it control of Tel Aviv, Israel-based Lansal Clinical Pharmaceuticals. That operation enabled Parexel to extend its clinical trials range to include Phase I to Phase IV trials.

By the end of the decade, Parexel's sales neared $350 million. The company had continued its acquisition drive, adding Rescon Inc., another medical marketing consultancy based in Washington, D.C.; Colorado's Perceptive Systems Inc., which added its high-resolution image optical recognition software to help further accelerate the group's clinical trials analysis effort; and Boston's Kemper-Masterson, a regulatory consulting firm providing validation and compliance services. At the same time, Parexel strengthened its international presence, buying Sheffield Statistical Services, PPS Europe Ltd., and Genesis Pharma Strategies in the United Kingdom; a stake in Belgium's IRIS Group; Groupe PharMedicom in France; and Logos GmbH and Infomed, both in Germany. The company also acquired the Netherlands' Mirai BV, a full-service CRO with operations in seven countries, including the Eastern European and Asian markets.

Parexel had successfully raised itself to the top ranks of the worldwide CRO market by the end of the 1990s. In 1999, however, the company announced its intention to merge its operations with the then number two company, Covance Inc. The combined company would have created a global giant, with revenues of more than $1.2 billion. In the end, however, the companies agreed to terminate the merger. The following year, Parexel was hit hard by the cancellation of a contract with Novartis, which forced the company to lay off some 500 of its 4,600 employees.

FULL-SERVICE CRO LEADER IN THE NEW CENTURY

Parexel quickly bounced back, however. In 1998, the company had established a new business unit devoted to introducing advanced technologies into the clinical research market. In 2000, the company spun its advanced technology group off into a new business, called Perceptive Informatics. The company continued to restructure its operations, especially by adding to its management, including the creation of new chief operating officer and chief financial officer positions. New acquisitions included Farmovs, a South African-based CRO with a 93-bed Phase I capacity. By then, the company had also added another 23 beds in France, buying CEMAF SA, in Poitiers.

KEY DATES

1983:: Parexel is founded as a regulatory affairs consultant by Josef von Rickenbach and Dr. Anne B. Sayigh.
1985:: Parexel enters the clinical research organization (CRO) market.
1988:: Completes first acquisition, of Consulting Statisticians in Boston, as part of strategy to establish full-service CRO operations.
1991:: Acquires Arzneimittelforschung GmbH, in Germany, entering clinical trials market in Europe for the first time.
1995:: Parexel goes public on NASDAQ.
1996:: Acquires Lansal in Tel Aviv gaining Phase I to Phase IV capability.
1999:: Attempts failed merger with rival Covance Inc.
2000:: Establishes dedicated advanced technologies unit, Perceptive Informatics.
2004:: Acquires minority stake in Apex International Clinical Research, based in Taiwan.
2005:: Company restructures U.S. operations as geographic focus shifts to Europe.
2006:: Completes largest acquisition to date of California Clinical Trials Medical Group.

Acquisitions remained an important part of Parexel's expanding range of capabilities, in addition to its shifting geographic focus. In the mid-1990s, the United States accounted for 70 percent of group revenues, but by the middle of the first decade of the 2000s, Europe had become the company's largest market, generating 58 percent of its service-fee revenues. In 2002, the company had completed the $15.4 million purchase of the United Kingdom's PW Pharma Systems. This was followed by a move into the Far East, through a purchase of a minority stake in Apex International Clinical Research Co. Ltd., a Taiwan-based CRO active in Korea, China, Hong Kong, Singapore, Malaysia, Thailand, and Australia. In 2004, Parexel returned to Germany, buying 3ClinicalResearch AG, adding its expertise in Phase I and IIa proof-of-concept studies, including 80 beds and two sleep research laboratories. Also that year, Parexel boosted its presence in India, forming a strategic collaboration with that country's Synchron Research Services. Next, Parexel added to its South African operations with the purchase of QdotPharma, a CRO with a 32-bed Phase I and IIa clinical capacity.

By 2005, the shift in Parexel's geographic operations led it through a restructuring of its U.S. operations. The company was far from abandoning its U.S. growth efforts, however, and continued to seek new acquisitions in that market. In 2004, for example, Parexel bought Integrated Marketing Concepts, based in Pennsylvania, boosting the company's marketing unit. In 2006, the company completed one of its largest acquisitions to date, paying $65 million to acquire California Clinical Trials Medical Group. That purchase helped raise Parexel's total bed count to more than 400, giving it one of the largest Phase I trial capacities in the world.

Yet 2006 also brought the company into the international spotlight when a trial it was conducting at Northwick Park Hospital in London went wrong, resulting in permanent health consequences for six test subjects. Parexel was criticized for certain of its test practices, yet the company was also acknowledged to have been acting within guidelines. Publicity surrounding the test helped raise public interest in the CRO sector and, surprisingly, in turn helped to boost the number of volunteers for clinical trials.

By then, Parexel had transformed itself into one of the world's largest and fastest-growing CROs, with service-fee revenues of $615 million, and total revenues of more than $700 million. With operations in 36 countries, Parexel was positioned to maintain its role as a major partner for the increasingly global research community.

M. L. Cohen