ICON PLC (ICLR) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thanks for standing by. Welcome to the ICON plc conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we'll conduct the question-and-answer session. [OPERATOR INSTRUCTIONS]. As a reminder, this conference is being recorded, Tuesday January 13, 2004. I would now like to turn the conference over to Mr. Sean Leech, CFO of ICON plc. Please go ahead sir.

Good day, ladies and gentlemen and thank you for joining us on our second quarter fiscal 2004 conference call, covering results for the quarter and November 30, 2003. On the call today with me is Dr. John Climax, our Chairman and our Chief Executive Officer Mr. Peter Gray. Before I hand the call over to John, I would like to just make the opening customary caution statements in relation to forward-looking statements.

Certain statements in these opening remarks constitute forward-looking statements concerning the company's operations, performance and actual condition and prospect. Because such statements involve known and unknowns risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result a new information, future events or otherwise. Now with that said, I would like to turn the call over to John. John?

Thank you, Sean. Good day, ladies and gentlemen. Thank you for joining our conference call covering the results for our second quarter ended November 30, 2003.

Net revenue in the quarter was 73.2 million dollars, an increase of 37% over the same period last year. Of this, net revenues in the U.S. increased by 27% on the comparable quarter while Europe and the rest of the world increased by 60% over the same period. Excluding the impact of acquisitions, our overall net revenue growth was 21%. Year-to-date, net revenue was 142.1 million dollars, which represented a 42% increase over the comparable period. Of this, net revenues in the U.S. were up 30% and Europe and the rest of the world were up 70%. Excluding acquisitions, the net revenue growth was 25% for the six months of the year.

Turning now to our costs, direct costs were 40.1 million dollars for the quarter. Representing 54.8% of net revenue compared to 53.6% in the comparable period. SG&A and D&A costs were 33.8% of net revenues for the quarter. Compared to 34.6% in the same quarter last year.

Year-to-date, direct costs were 77.8 million dollars, which represented 54.7% of net revenue compared to 53.9% for the same period last year. SG&A and D&A costs were 34.1% of net revenue for the six months ending November 30, 2003 compared to 34.6% for the same period last year.

As a result, our operating income for the quarter grew by 33% over the same quarter last year, from 6.3 million dollars to 8.4 million dollars. Year-to-date, our operating income grew by 39% over the same period last year from 11.5 million dollars to 16 million dollars.

Our operating margin was 11.4% for the quarter. Compared to 11.8% in the same period last year and up from 11.1% last quarter. Year-to-date, our operating margin was 11.2% compared to 11.5% for the same period last year.

Our clinical business, which represents over 90% of our revenues continued to perform very well in the quarter. And grew its operating margins to 14.2% from 13.4% in the comparable period. As we indicated in our last conference call, our lab business continued to underperform, making a loss of 1.1 million dollars in the current quarter, a modest improvement on the 1.2 million reported in quarter one. As promised on our last call, I will make some more detailed comments about the last in a few moments.

Taxation was 25.8% of pretax income for the quarter compared to 60 -- 30.6% for the comparable period last year. Year-to-date, our effective tax rate was 26.3%, compared to 28.7% for the same period in fiscal 2003. As a result, net income for the quarter was 6.3 million dollars or 45 cents per share compared to 4.4 million dollars or 36 cents per share last year. Year-to-date, net income was 11.9 million dollars or 92 cents per share compared to 8.4 million dollars or 69 cents per share last year.

Turning now to our balance sheet, cash generated from operations was 6.6 million dollars in the quarter and capital expenditure was 4.3 million dollars. Payments made in respect of acquisitions totaled 11.5 million dollars in the quarter. Net of the 0.9 million dollars in cash and cash equivalents we acquired with Globomax.

Our DSOs were 69 days at the end of the quarter compared to 64 days at both the end of last quarter and the end of fiscal 2003. As a result of these factors, net cash at November 30, 2003 was 44 million dollars. New business awards were 84 million dollars in the quarter, offset by cancellations of 70 million dollars, resulting in net awards of 67 million dollars. This disappointing level of net awards was partially caused by the exceptionally high level of wins in the previous quarter. And in particular, by one very large study, which initially awarded absorbed virtually all of our then-available capacity. This caused us to decline some opportunities and limited our ability to put forward highly experienced teams for other proposals.

In addition, the level of cancellations at 17 million dollars was higher than our average and represents 4% of our opening backlog and 20% of awards in the quarter. It is important to note that there was nothing out of the ordinary in these cancellations and we believe they represent nothing more than normal volatility that runs in these cancellations levels from time to time. As a result of these factors, at November 30, 2003, we had 219 million dollars of backlog, which will be earned in the next 12 months. We estimate that this represents approximately 66% of current market forecast, which is a little lower than our normal average coverage.

Before I conclude my opening remarks, I would like to provide you with an update of our expectation for our central lab business. As we indicated in our last call during the quarter we carried out a review of our lab operations. We have completed the short-term element of this review. For this process, we have identified and eliminated annual costs of approximately 1.4 million dollars.

On the business development front, we continue to enjoy good success. During the quarter, our lab was awarded approximately 15 million dollars of new business, which allowing for 3 million dollars of cancellations, resulted in new net business of 12 million dollars for the quarter. This represents a book to bill ratio of 1.8.

With the cost reductions achieved thus far and a continued strong business development performance, we expect that our lab operations will return to profitability in the June to August period of this year, and if recent trends in business development for the lab continue, this time frame could accelerate.

Overall, we are very pleased with the results for the second quarter. Our clinical research business reported a stronger quarter and significant progress was made in our central laboratory business, which is now in a good position to improve its performance over the coming quarters. However, with the 67 million of net new business wins in the quarter, we need to improve our level of wins in the near-term to maintain our momentum. That concludes the opening remarks. I would now like to open the call up to questions.

Thank you, ladies and gentlemen. [OPERATOR INSTRUCTIONS]. Our first question comes from the line of Ian Hunter of Goodbody's Stock Brokers. Please proceed with your question.

Good afternoon, gentlemen. I was just wondering if you could tell us whether you're still comfortable with the guidance you're giving to market at the last quarter of revenues that are just shy of 300 million and 1.75 to 1.82 dollars per share earnings and if you could give us some indication what you feel the momentum is going to be going into '05 given the net new business wins?

Sean, will you take this?

Hello, Ian. In terms of guidance, I think we're comfortable with guidance as it currently stands. Our backlog is a little bit weaker than we would like, I think the guidance as we see is, we are content with. In terms of 2005, you know me well enough at this stage to know I don't give you any steer on 2005 rather than obviously with the our standard assumptions which is always been in place which is that we can see strong revenue growth in the 20% brackets. That's really the only guidance I would give you on 2005 at this stage, as you well know.

Yes, OK. Thanks. Maybe if I could ask another one. From an industry-wide perspective, has there been a slowdown in contracts you've been seeing from other companies in the sector? And is there any kind of relative buoyancy between the pharma and biotech sectors with one more blank than other at the moment with business coming forward?

Pete, will you take that?

Yes, John. Hello. In terms of what's going on in the marketplace, it continues to be quite strong in our view. To give you some numbers of that in the quarter-ended November, while our RFP volume was lower by 17% from the comparable quarter a year ago, in value terms, it was up 29 %. And on a year-to-date basis for the six months ended November, again, volumes were a little lower by 16%. But value on the six-month basis was up 25%. So we're continuing to see increasing values of opportunities even if volumes are little lower than a year ago. I think it's important to say, and we did say it last year, that we felt we were experiencing exceptionally strong volumes of RFP's in that particular year. So the comps that we're using here for volume are probably challenging. So it's not surprising that the sum total from the volume, but I think the most important message is the values are up significantly, 25% and 29% on a six and three-month basis. As between biotech and large pharma, we haven't seen any significant fallout in volume our value -- I'm sorry, in volume from large pharma and a significant increase in value for large pharma. For biotech, the volume has been down somewhat has been our experience.

All right. Thanks very much.

OK.

Our next question comes from the line of Chris McFadden, Goldman Sachs, please go ahead with your question.

Thank you, John, Peter and Sean. Chris McFadden, Goldman Sachs. Could you talk a little bit about environmentally what you saw in terms of the contracting activity level perhaps after the end of this particular fiscal period as we got into the end of the year and perhaps a spate of contract activity out of some of your customers as they closed out their year-end contracting environment?

We're all fortunate, Chris, in that having a quarter ended November means that the month of December is your first month of your quarter and certainly what we saw this year was if anything the U.S. is picking up all the bad habits of Europe and beginning to take longer vacations around Christmas time that has traditionally been the case. That's a preamble into saying we saw a flurry of activity in the early part of December and then things went pretty quiet for the last couple of weeks of December. January has opened up strongly but we're only 11 or 12 days into January, 13 days into January, so we premature-- to make predictions based on that. I think, our own assessment of the marketplace, as I said, is volumes were a little lower in the periods to November, but values were significantly up. The flurries that occurred in December was pretty encouraging and the activity in the first week or so of January is pretty encouraging as well. So the overall takeaway we have is the market is robust and the companies that were quiet last year and Pfizer obviously was the one everyone talked about, has not really picked up yet. There were predictions it would pick up in the second half of calendar 2003. We were skeptical about that and I think our skepticism was well-founded. We are encouraged to believe that the volumes from Pfizer will begin to pick up in the next few months.

Thank you, Peter. As a follow-up, if I might, Sean commented earlier about the full year EPS guidance. Can I ask you to be a bit more detail and talk about your operating profit margin guidance. You talked in the past about a range of 11.1 to 11.3. John talked about some of the cost control initiatives in the central labs business and of course clinical labs continue to look strong. So can you talk a bit more specifically about what margin trends look like as you look forward?

Sean?

Hello Chris, in terms of where the guidance is right now it is about a 11.1 to 11.3, but the range is slightly up above that as the lab progresses. We expect the lab to improve reasonably healthy in Q3, but we're a little gun-shy in terms of just moving guidance on the base of one quarter. We still need to sustain our business wins which we believe we can do. But just in terms of shifting guidance at this stage, I think it would be reasonable and conservative just to leave them at the 11.1. Actually, in fact it's the 11.3 mark, Chris, I would be content with.

One final question if I may, one, could I get you just to repeat what the operating results on the margin line were for the central lab in this most recent quarter. We missed that in the opening comments. And then, in the last call, we talked about shifting from a bit of a revenue to a cost focus. And John articulated some of the cost takeout you think you've identified. One of the other businesses --issues of the central lab has been a little bit of a lag between seeing projects come on line and then actually seeing the flow-through to recognize revenue. Can you just perhaps update us or comment on some of those timing issues and do you feel like you're increasingly refining and better forecasting how some of those kicks come back into the P&L? Thank you.

Sure. I'll try to give you a bit of color, Chris and just sort of answer wore questions in an overall context. In terms of your specifics the revenue in the lab in the quarter was 6.6. John didn't refer to that and about an operating loss of just under 1.1 million dollars. In terms of the wins, they've been very good. Yes, we were seeing some lags in terms of when a study was won and when revenue was started to flow through. I think we're still seeing similar lags, but obviously we worked our way through the dip in those and the backlog basically takes on same level of profile throughout. And therefore, I wouldn't be expecting to see any further dips because of that. I think in terms of our visibility into the revenues they've become solids. I have seen numbers for December which would validate our optimism in terms of how the lab performs and as Peter has intimated, December in the U.S. has taken on the bad habits of Europe. Going into the holiday season, a strong December number is a good indication of the remainder of the quarter because it looks like the shorter months due to the holiday season. So I think all told, I think there's still a time scale to go through in terms of strong levels of business wins. I think our outlook lab is pretty positive at this point.

Let me pause there. Thanks for the detail, everyone.

Our next question comes from the line of John Kreger from William Blair. Please proceed with your question.

Hello, guys. Can you talk about your current utilization rates in the U.S. and Europe? It sounded like from the beginning of the call that perhaps unusually high utilization after winning this substantial contracts hurt your new business efforts? Has that been rectified what you consider to be normal staff utilization so that you can go out and competitively win the business?

John, there's a complicated answer to that one. Utilization is something we measure based on people working on active projects for revenue is being earned from them and commitment of staff is based on having projects awarded to us which may not have yet have started but where the staff get ring fence because it is imminently starting. You have to convince the client that you have the staff and I'm sure that you do not based on switch, in other words, that you don't promise them some staff and then give them some different staff and therefore the answer to your question is two-fold. Utilization in the quarter as the margins will suggest was pretty good. In the states 88%, in Europe 85%. And for a very satisfying for us to see, a high levels of utilization being achieve on the both sides of the Atlantic and that has contributed to the operating margins of the core business exceeding 14% in the last quarter. And the problems that the major contract posed for us is when initially awarded in July, it was of substantially of higher value than the value we ultimately reported in our September quarter. And the client was very gong ho about when that was going to start, they wanted all the of the staff available then. And they actually got us for a period of time working with all of that staff. And then the game began to change; a lot of uncertainty came into the size of the project and when it was going to start. And that was actually very disruptive to us. Now, we believed through that we would be able to manage our way through the disruption. But, in mind sight effectively what it did to us was. We were not putting forward the people who were ring fence for that project when it was full size were not put forward to other opportunities we were getting presented with at that time and as a consequence, our win rate on those opportunities was significantly lower than it otherwise had been had we been able to access some of the staff that got ring fenced.

When the project ultimately, when it became clear as to what size the project was going to be we had staff then available which we had originally believed would not be available but those opportunities had already been proposed to clients and the clients had already formed opinions or views as to who they were going to give the project to and western in a disadvantaged position, in changing their minds, if I can put it that way. Ultimately, therefore I'm saying that project because of a lot of chopping and changing and delays and profile changes created a degree of uncertainty in the staff that we had available during the quarter which hampered ability to win business. The blow of business itself was good. Our win rate wasn't as good as we would like it to be because of the factors I just outlined. I'm sorry that's so complicated an explanation, but I hope you understand what I'm saying.

Yes, I think so. Just to add on to that. So, now going forward has that large project reached a point of stability that you can now go out and with a fairly high degree of assurance know the availability staff you've got to bid on?

We have known the available staff we have now since early November. We're pretty clear on that. Since then, we've been in a better position, but the latter half of the quarter, November, December, business flows were not as strong as they had been in the earlier months of the first part of this financial year. And that was a little disappointing, but as I said to Chris McFadden's question earlier, it had picked up again, December did have some good opportunities. We have a lot of big defenses in the month of January that have rolled over from proposals we put in late November and December. We have a positive outlook at how the business will pan out during this quarter.

Great, thanks and one last unrelated question. I don't mean to quibble with 21% in terms of your organic revenue growth. I believe that had been trending more in the 25 to 30% if you look at prior quarters. Can you just dye that state data a little bit? Is there anything in particular going on? Such as business mix that would cause that number to come down to the low 20s?

All comes back to the same answer. The major project, because of changes in it, and because of the staff that got ring fenced that ultimately didn't go on the project and therefore didn't ultimately generate revenue meant that the rate of growth and revenues in the quarter was not as strong as it would otherwise have been.

Great. Thanks very much.

Our next question comes from the line of David Marshall from NCB Stock Brokers. Please proceed with your question?

Good afternoon gentlemen, if I could just ask for a little color on the profile backlog and in terms of timing of the new business wins in the quarter. And I suppose where I'm coming from in terms of you know where those new business wins fall. Is it mostly within the next 12 months or is a lot of it longer term? Maybe if I could just follow up with a question then maybe regarding pricing. Don't shirk on this, Peter, but some of your peers have commented they expect margins to tweak down in fiscal, 2004. I'm wondering if you have seen any pricing pressure coming in from pierce?

First part of the question, nothing unusual in the timing of those projects, of the win ps in the quarter, David and no particular long ones. The average duration we don't have them. We don't keep, we don't try to record what the average duration of the whole pot will be, but there are no projects that we won in the quarter that are of exceptionally long duration. Nor, I think it's important to say, are there any exceptionally short duration either. Therefore they're more likely to pan out along the average which we tend to call, which we tend to regard as between 21 and 27 months or thereabouts. OK?

OK. And in terms of the overall backlog, which I suppose is at 27 point out would that reflect the norm?

Absolutely. It's the usual profile. All right?

OK. Yes.

And in terms of pricing pressure, I mean the answer is no, we haven't seen pricing pressure. We don't, as we've said ad nauseam, we don't see ourselves as competing on price in this marketplace. It goes back to maybe one of my earlier answers. Winning business is about having experienced teams of people to put forward to clients to meet their needs for particular project. And what hampered us in the last quarter was the uncertainty about this major project made it more difficult for us to put forward the best teams we possibly could for given opportunities. We have not been discounting any pricing. We do not believe that would be in our interest in the short-term or in the long-term and we're not seeing any evidence in the marketplace that business that we have lost has been lost on price. What we've seen in the market place is business that we've lost has been lost because we weren't able to put forward as experienced a team as we would otherwise like to have put forward.

OK. Super. Thanks very much.

Our next question comes from the line of Dave Windley with Jeffries and Companies. Sir proceed with your questions.

Hello Thanks for taking the questions. I have several. First of all, is it possible, Peter, to quantify the amount of business, say maybe the dollar value of the RFP's times, your hit rate or something like that, that you feel like you had to effectively turn away because of the consumption of resources by the other the large contract?

It shows that the smart answer to that, Dave it's probably possible to quantify it but I haven't done it or we haven't done it. I can think of - I can think with certainty of two significant size projects that we did not win which we would have expected to win, because ultimately the client had concerns about whether we had the resource available to do the project. One of the down sides of that major win was also there was lots of scuttlebutt out in the marketplace about the fact that icons were fully committed. Clients got to hear about that, and we were getting questions from clients during the quarter about did we have the resources available to meet their needs and no matter how often one does protest if that idea has got into our client's mind, it can be difficult to overcome it and I just say there were certainly two significant opportunities valued somewhere between 20 and 25 million I think combined that we would be pretty confident that we would otherwise have won had it not been for these issues. There were plenty more, but I can immediately identify in my mind too.

OK, and along the competitive front, are there as some of maybe the private players that are building up some size beneath the radar screen to the public market, are there any new competitors vying for what you would term, you know, international or global phase 2, 3, 4 type business in the last six months or so, is it the same group of players?

There are a number, it could be a difficult to answer Dave, because it depends on who you count and who you don't. There are a number of privately owned CRO's of reasonable size who have always been there, thereabouts and who from time to time we see them as competition on a particular project. Don't see any change in that. Don't see any new emerging fresh new submarines out there with torpedoes waiting to get us or anybody else. I just think it's -- the marketplace hasn't changed significantly and the players are still the players.

Great. And question probably for John, as you have eliminated costs in the lab, is that something that we should expect through the next couple of quarters between now and your target date for reaching profitability to be a relatively smooth improvement in margin in the lab? Or is there a reason why that should be front or back end loaded?

I'll take that one, Dave.

Sure.

If that's OK. We expect -- well it depends on your definition of smooth. I think the current quarter we're expecting to see a reasonably substantial improvement, and again as John said in his comments, as soon as the business wins, that business wins trends continue reasonably on line, I think it would be smooth from there. And as he said in his comment, our current forecasts are that we return to profitability in the quarter beginning June. And if business trends continue to be as strong as they've been for the last couple of quarters, we could get there a little sooner than that.

OK. Couple of house keeping items. DSO's taking up a little bit. Is there a particular reason for that or just kind of normal seasonal volatility?

A bit of seasonal volatility in there, Dave. Unfortunately, if our year-end was in December, we would be flow-flew cash as we were today. But a little bit of volatility in there. We're still pushing some process issues, which we would hope on the longer term to improve us. We were disappointed with the 60 million dollars, but there's nothing specific to talk to in there other than timing and seasonality.

OK, two more small one and I promise I'll jump off. Head count in US and Europe and finally FX contribution to revenue growth.

The FX contribution to revenue growth is about 8% and the head count between Europe and US was 1425 in Europe and the rest of the world is then about a little over 1,000.

OK, thank you.

Our next question comes from the line of Steve Unger from Bear Stearns. Please proceed with your question.

Hello, just a follow-up on that last question. It looks like your head count actually declined from last quarter and has grown I guess roughly about 10% year-over-year. Why is it if there's increased amount of deal flow and that your having resource issues that we haven't seen head count expand in the quarter?

Year over year 10%, I would think is not an accurate characterization, Steve. But Sean is bitterly looking at our notebook here to validate that one.

But there was a decline in the quarter.

There was a small decline in the quarter, partially driven by steps we took in the lab to reduce our cost base, which included a reduction in head count. The factors that I was talking about in terms of that major contract, what happened as I said was our capacity was fully committed at one stage and then capacity became available. So, we effectively stopped hiring in the United States during the course of the quarter because suddenly capacity, we didn't think we had, we had. And how you adjust for that business is you stop hiring and you try to replace that capacity. Europe head count did increase in the quarter but the lab went down as the states stayed static and the overall effect was a small decline in head count.

OK, so then you're not finding it difficult to find staff at the moment and that in the coming quarters, we should see that head count grow at kind of historical levels of around 20%.

Absolutely no difficulty in getting staff. As we, I think explained when we tried to talk about how the dynamics of this business operates. You know, the levers that we have to work in the business, our business wins and head count and utilization. And if we can manage those three levers, then we manage the profitability of the business. Clearly, if your business wins are not as strong as you wanted them to be, then one of the levers you use, you do not increase your head count as rapidly or at all depending on the circumstance. So we've just been use the levers.

OK. And then, we haven't spent a lot of time talking about the acquisitions. You've made three, it looks like three significant acquisitions over the last 12 months. Could you go through each of those and give us a sense as to how those businesses are doing and how they're growing?

Sure. The first one was made actually over a year ago, October of 2002. And that was the BPA-MCS acquisition in New York. BPA got integrated into our clinical business in the States. We no longer have a separate division of BPA as was our plans. It is part of our clinical operation in the US. But we are pleased with what we got out of that acquisition; we're satisfied with the contributions we've made to our US clinical operations. MCS, which is the contract staffing business has not been as robust in its performance as its vendors hoped and therefore it's not tracking necessarily to achieve all of the earn-outs that they would have hoped for. It is tracking closer to where we expected it would track. And there was I suppose a differential between what the vendors believed it could do and what we believed it could do and it's tracking closer to what we believed it could do. We're pleased with how it is going, we are pleased with the progress we are making there in a different business segment and after one year, it would be too early to call us and the next acquisition was Medeval, a fade one in one unit in Manchester, which we made in late January of 2003. And that business is performing well. We've been very satisfied with how it has performed under our ownership. As you know, phase 1 had a higher degree of volatility in it than phase 2 and phase 3. We've been very pleased at the way in which the volatility of that business has been managed as the business wins have continued to develop and grow, and that they are continuing to increase their capacity utilization and again just about a year after acquisition we are very pleased with how that business is performing and we're seeking ways to continue to develop it. John, anything you would like to add to that?

No, no, that sounds good.

I asked John because John has taken personal interest in developing that business and overseeing the integration of that business into ICON. The third, which we acquired in, Sean, help me, October. Was Globomax, which is a consulting business based in Baltimore specializes in providing a high-level of strategic vice to companies in drug development, has been a resounding success to date, but I should be careful about using terms like resounding success. We've only owned it for four months. But we're very pleased with how it has integrated into our other consulting businesses and to date, the performance of that business we're very pleased with.

And then just on the MCS acquisition, originally the contract staffing model was supposed to help you have more flexibility in your resource management. Would you say that, that is occurring or would you say that, that may not be as like what you originally thought?

Absolutely. It has been. That has been occurring, throughout the period since we acquired the business up until a couple of months ago, we were enjoying very strong levels of business wins and very rapid start-ups of projects and MCS was providing us with contract staff on an ongoing basis to help us ramp up projects in a rapid way. Obviously, in an environment where we are not hiring currently and where we're seeking to win additional business to ensure that we maintain high levels of resource utilization, MCS is less important to us in that regard. But in certainly in the first ten months of calendar 2003, MCS was of considerable benefit to us.

OK. And then I'm sorry to ask you this again, but what's the central laboratory revenues in the quarter?

6.6 million, Dave.

6.6 million?

Yes.

OK. Great. Thank you very much.

Our next question comes from the line of Leon Sphinx of (inaudible).

Hello?

Yes, your line is open.

Actually, I think my question has already been answered. Thank you.

[OPERATOR INSTRUCTIONS]. Our next question comes from the line of Peter Folly from Marion Stock Brokers. Please proceed with your question.

Good afternoon, gentlemen. I just have one or two questions. Just under the large project and booked 142 new business wins in the last quarter and part of that was because of that large contract. Subsequently did that revised in value downward and is that part of the reason why the new business wins are down in this quarter? I though you were saying there was some uncertainty start dates and so on. I'm just wondering is that the case? And also just on your new business wins, how quickly are we likely to see ICON reporting book to bill ratios of 1.2, 1.25 times? Can we expect somewhere aren't 70, 75 million levels for the next couple of quarters? Moving on, you've had to turn down a few projects in this quarter, has that damaged your credibility with your clients and are you seeing them unwilling to look for tenders from yourselves from clients? Or are your relationships sounds? And finally, can you just give us the impact of Globomax in the actual cause on revenues and operation profits?

OK. Peter. That's a lot of things you've given me there. The first one, your question was about that large contract and whether the value of it and adjustment to the value of it impacted on the current quarter. The answer to that is no. The wins, just to correct you, the wins last quarter that we reported in September were 134 million and we reported at that time that there was one major contract valued at 70 million included in that. At the point that we were, that we were reporting to you in late September, only days before had the value clarified at around 70 million. Although since then, the timing of some of that has changed significantly, but the value has not changed. So that did not in itself impact on the level of wins in the current quarter. But it did impact upon the forward 12 month revenue forecast because of changes in timing that were involved in that. That was your first question. Now I'm trying to remember what your second one was.

My second one was on how we can see the book to bill ratio return to kind of 1.2,1.25 times -

We would be disappointed if it doesn't return to an excess of one-time book to bill in the current quarter. I don't see -- I don't see it languishing at, you know, high 60's, low 70's. In the near term anticipate and expect that we're going to see stronger than that in the current quarter and beyond.

We could see it in the 80s?

We would be very keen to see it in excess of the 80s.

OK. And then just moving on to -

The next one was I think client relations and if we had turned down business did that have any impact on our relationships with those clients. The way in which one turns down business is one does not overtly turn down business. And handling that particular conundrum is a very sensitive exercise that we handle very sensitively. And the net result is any client with whom we have to adopt such a strategy, we have not seen any adverse effects and we continue to see business opportunities coming from them. And lastly, your question, and Sean are going to ask you down through the Globomax and what revenue impact they had in the quarter.

In the quarter, Peter, it had revenues of just over 2.8 million in terms of acquired revenues. Obviously we integrated that with some of our own consulting businesses, but the acquired revenues was 2.8 million in the quarter.

Roughly about a 10% margin or so on that, isn't there?

(inaudible) obviously still got some integration costs coming through but through in the sense since the quarter which was guidance.

OK. Can I just ask the different profile of the cancellations with one particular client or just, you know, coincidence that we the all came together and whether you have subsequently whether any of those projects have restarted in this quarter?

No the cancellations were pretty diverse. It was quite a wide array of cancellations; and it's funny how these things work. For a long time, the last six or seven quarters, I think we've had pretty low levels of cancellations. The number of times people have said to me in phone calls, you must be due a bad one, I wish the bad one hadn't come in the quarter that it has come, but it did. I don't think there's anything particularly significant about it. I think what it is you know a statistical spike. We expect, you know, there's nothing unusual in the level of cancellations and we expect it to return to more normal levels in the quarters ahead.

OK. And nothing in this current quarter has -- that trend hasn't continued at this quarter.

That trend is not continued in the current quarter. We're not anticipating any of the things that were canceled will reactivate. I think they're all pretty much, there are solid reasons why they're no longer going ahead and we're not anticipating that any of them will return.

OK. Great. Thank you.

Our next question comes from the line of Jack Gorman -- please proceed with your question.

Thank you. A couple of my questions have been answered already by previous participants. But just maybe two to firm up on. Sean, I think you mentioned the dollar impact. I just wanted to confirm what that impact you mentioned was on revenue or net income and I suppose right now I'm looking for a net income impact if there was any? And secondly, just on Medeval just wondering your thoughts in terms of rolling out phase one units into the U.S., has there been any further developments or has been there any opportunities that have come across your desk that might be of interest to you in that area?

Let me take the second question first. In relation to the phase 1 unit in the U.S., we've looked quite widely. What is very prevalent in the U.S. is a lot of feed and bleed groups. But pure clinical pharmacology are few and far between. So we are continuing to look and we are seeing some of these opportunities within pharma companies who have clinical pharmacology units and may be thinking of divesting it. So that's an approach that we are looking at. At the same time, we are also exploring the possibility of growing it organically. But it's something that we are focused on. But just remember, Jack, we've just bought the phase 1 group about a year ago. And we would like to get that consolidated first.

Yes, OK.

And the question on exchange, Jack. gains -- let me be more specific because everyone describes this differently. If we recast this quarter's results using last year's exchange rate, we gain about 600,000 dollars on the operating income line.

OK.

The affect in our P&L was immaterial. It was very small.

OK. That's great. Thanks, Sean.

Our next question comes from the line of Dave Windley from Jeffries and company. Please proceed with your question.

Hello. Thanks for taking this, the follow-up here. Clarification on the forward-looking tax rate, Sean, what do you expect that to be?

We're taking it down a bit lower in the current quarter, Dave. I'm expecting that we probably -- I don't have my guidance in previous times was between 25 and 27. I think somewhere in the 24 to 26 range is where I would be expecting it now. I think that probably fits with where it's actually been for the last couple of quarters.

And then, a previous question about the I believe the question was the nature of the backlog and was it normal front-end loaded. I wanted to make sure I understood the answer to that. Normal or front end loaded, I wanted to make sure I understood the answer to that question as not being front end loaded or I'm sorry, I just didn't quite follow the question and the answer, if you know which one I'm referring to? I believe it was -

Yes the question was does it show -- does the backlog have the normal profile. And answer I gave was yes, it has the normal profile. And the normal profile is front end loaded. So yes, it is front end loaded as you would expect. And just for everyone's clarity here, Dave, normally, obviously, if you've got 66% or 70% of the next 12 months revenues in backlog, the profile of that is something in the 90% and the next quarter and the quarter we're now in, something in the 70s to 80s in the following quarter and so on and the profile continues to be that type of profile.

All right. OK. Understood. Thank you very much.

Mr. Leach, there are no further questions at this time.

Thank you very much. There seem to be no more questions. I would like to thank you all for joining us today. It has been a very good quarter for us. With our clinical trial business again delivering margin improvements and strong growth. Our acquisitions have performed well. And the outlook of our lab business has shown continued improvement. Clearly, this positive were offset somewhat by the lower levels of new business wins. However, our RFP flows continued to be good and we have recently added some new preferred vendor relationships with major pharmaceutical companies which should in time lead to further strength in business opportunities. We are very focused on capitalizing on these. Thank you again.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.