Shares of PharmaNet Development Group Inc. tumbled to their lowest level in more than five years Friday after the clinical development services company slashed its full-year forecast, citing a new spate of canceled contracts.
PharmaNet now expects to report a loss in 2008, and reduced its revenue expectations for the second time. The company reported $19 million in canceled contracts for the year, which will cut its long-term backlog by $58.3 million.
The stock lost more than half its value Friday, as investors digested the news. Shares sank $11.79, or 51.1 percent, to $11.27. Earlier, the stock slumped to $9, its lowest price since May 2003.
The company also said revenue was being affected by delays related to a laboratory project postponement, lower sample volumes and foreign currency exchange rates.
PharmaNet also suffered through a spate of cancelations in the fourth quarter of 2007 and first quarter of 2008.
In a client note titled "Nobody's luck is this bad," Jefferies & Co. analyst David Windley downgraded the stock to "Underperform" from "Buy," and slashed his price target to $15 per share from $27.
"The company has clearly not solved execution and cost control problems, blow-up quarters are becoming all too familiar, and visibility is severely limited," he said. "This is not just bad luck anymore."
Robert W. Baird & Co. analyst Eric Coldwell noted that the company lost more business than it booked between July 1 and Aug. 31. He said the Princeton, N.J., company's second-quarter bookings "astounded," but said the company could be at risk for more cancelations if most of those bookings were with a single large client.
Coldwell cut his price target on the company to $12 from $27, but maintained his "Neutral" rating.
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