Boring Portfolio


Quintiles Q2 Call

Q&A, Continued

By Dale Wettlaufer (TMF Ralegh)

ALEXANDRIA, VA (September 1, 1999) -- This is a continuation of my notes from the Quintiles Transnational (Nasdaq: QTRN) Q2 conference call (RealMedia link). The first parts are available by clicking below:

QTRN Q2 Conference Call, Part 1
QTRN Q2 Conference Call, Part 2
QTRN Q2 Conference Call, Part 3

Below is the question and answer period, continued, and I expect to finish this up Friday.

7. Not willing to update Quinternet projections outside of what is implied in other guidance the company has provided. The company is carrying on numerous strategic discussions in regard to this segment. It will take some time to make business projections out of that. The company may provide further insight on that in September.

Rachel Selisker: On margins, we do see margins floating upward, particularly as we start winding down Y2K efforts. We're also seeing some efficiencies in our business units. As it relates to the Envoy transaction, we may have some savings there. Overall, as our business migrates more toward the Internet platform Dennis talked about, that certainly you can expect margins to increase because the costs associated with certain services do come down somewhat.

(About three minutes of discussion regarding the Quintiles-Envoy merger followed. I'm leaving that off of these notes.)

8. Greg Connors, Sr. Vice President of Strategic Planning & Investor Relations: Year-over-year, the medical real-time business is one of the fastest growing medical transaction businesses right now.

In regard to pricing, we haven't seen any material change in pricing so far on a year-over-year basis. On a sequential basis, we don't expect a change going forward for the rest of the year.

9. Dennis Gillings: On beating estimates, the company believes it is delivering very high EPS growth. "We think the growth we're delivering, particularly in the healthcare sector, is enormous, and we're very comfortable with that and we're confident we can keep that up for a very long period of time.

10. Question: Your strategy of increased scale certainly seems to be paying off. A competitor today echoed your sentiment that scale and global reach definitely matter in the marketplace. I was wondering if you could help quantify for both CRO (contract research) and CSO (contract sales) businesses what percentage of your new business in the quarter and going forward involve either global contracts or what percentage of the wins was scale a deciding factor for Quintiles. As a follow-up, are there any unique characteristics to those contracts, either being longer in duration or risk-sharing types of contracts? Does fewer vendors for your customers mean increasing price leverage for them, which could impede margin expansion by you?

Dennis Gillings: It's hard to quantify your question. I think it's fair to say that our more profitable projects are global, particularly in our CRO segment. I think as you become more global, you have access to higher profitability. With respect to unique characteristics, we do have an ability to place clinical trials with the right physician centers and we do have an ability to target physicians appropriately with our knowledge-rich sales calls, which I mentioned.

Given our ability to do that, we are finding a greater amount of business discussion in those areas, and I think that is the synergy driving a lot of our growth and that's why our growth is being maintained and is consistently faster than our competitors', because I don't think it would be possible to grow like we are if we didn't have all the things I keep talking about regarding our Quinternet platform and our informatics. I don't believe the [stock] market understands that at the moment, but I think if the market did a careful comparison of our growth rates compared with competitors' and looked at reasonably sized competitors, they would find that self-evident and a continuing thing.

We think we have good pricing -- we think there are people in the industry that are priced even higher, so we don't ever come out at the very highest level. We come out in the top quarter. Yes, customers are seeking fewer vendors and no, we're not seeing any greater pricing pressure than we've ever seen, and I think it's fair to say our margins generally are beginning to creep upwards and we do expect that to continue because of our ability to leverage technology to a greater degree and provide information to add more value, so if there are pricing pressures that emerge, the worst that will happen is that we think we can offset them, however, we think we're going to do better than that and we think our margins will tend to tick up, particularly in Q4 and next year.

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