RESEARCH TRIANGLE PARK, N.C. – February 4, 2003 – Quintiles Transnational Corp. (Nasdaq: QTRN) today announced financial results for the quarter and year ended Dec. 31, 2002. Earnings per share on a diluted basis for fourth quarter 2002 were $0.19, which exceeded analysts' estimates of $0.18, and net income for the quarter was $22.6 million. Earnings per share on a diluted basis and net income for fourth quarter 2001 were $0.60 and $72.6 million respectively, including certain non-recurring events. In fourth quarter 2001, Quintiles recognized a non-recurring pre-tax net gain of $84.7 million that included a gain on the sale of WebMD common stock less a write-off of goodwill and other assets. This gain is included in the $0.60 earnings per share reported in fourth quarter 2001.
Gross revenue for fourth quarter 2002 was $510 million, compared with $483 million for fourth quarter 2001. Net revenue for fourth quarter 2002 was $407 million, compared to $411 million for fourth quarter 2001. Net revenue is equal to gross revenue less reimbursed service costs. Contribution for fourth quarter 2002 was $185.3 million vs. $178.2 million for the same quarter in 2001.
For the year 2002, gross revenue was $1.99 billion, compared with $1.88 billion for 2001. Net revenue for 2002 was $1.59 billion, compared to $1.62 billion in 2001. For 2002, net income was $127.3 million, or $1.07 per share on a diluted basis, compared to a loss of $33.8 million and a loss of $0.29 per share for 2001.
Schedules 3 and 4 of this press release present the company's annual statements of operations in the format anticipated to be filed in its Annual Report Form 10-K submission.
"Our ongoing enhancements in quality and efficiency produced substantially improved contribution margins from our business groups in 2002 and have driven our solid growth in profit," said Quintiles Chief Executive Officer Pam Kirby, Ph.D. "Net new business wins in our Product Development group increased in the second half of 2002 relative to the first half. Our Commercial Services group increased its profitability despite a decline in revenue. Our strategic investment group, PharmaBio Development, achieved important business wins. Our new and ongoing strategic partnerships with Lilly, Columbia Laboratories and Kos Pharmaceuticals demonstrate our innovative service capabilities."
Quintiles Transnational Chief Financial Officer Jim Bierman said: "Cash flow from operations for the fourth quarter and the year were $77 million and $246 million, respectively. This is another indication of our continued emphasis on executing the fundamentals of our business. With $681 million in cash and debt investments and only $41 million in debt, our financial position provides us with the resources to continue to grow our business and our innovative partnering opportunities with pharmaceutical and biotech companies."
For the second half of 2002, net new business totaled an estimated $665 million. This includes $25 million of internal backlog representing services the PharmaBio segment has contracted with our Commercial Services group relating to commercial rights and royalty agreements services. Net new business in the second half of 2002 increased 15% compared with the first half of the year, resulting in a backlog on Dec. 31, 2002 of approximately $1.7 billion, including $87 million of PharmaBio Development-generated internal backlog. The net new business amounts for 2002 and backlog amounts do not include targeted royalty revenues of $500 million to $1.0 billion from PharmaBio Development arrangements finalized in 2002.
The company announces the following financial target ranges for 2003:
* Net revenue of $1.55 billion to $1.65 billion
* Net income of $59 million to $74 million
* EPS on a diluted basis of $0.50 to $0.62
All targets do not take into account expenses that may be incurred related to the activities of Quintiles' Special Committee of the Board, which was formed to examine strategic alternatives for the company.
As previously announced in 2002, Quintiles entered into a contract with Eli Lilly and Company to support Lilly in its commercialization efforts for Cymbalta™ (duloxetine hydrochloride) in the United States. Since the Food and Drug Administration has not yet approved Cymbalta, the timing of the launch of the product is uncertain. This launch may have a significant impact on Quintiles' financials as a result of the contract's size and the fact that, as the company has previously mentioned, expenses related to the contract will likely exceed revenue from the contract in the early stages. The company's financial targets assume that Cymbalta is launched in 2003, but this is speculative. Neither the FDA nor Lilly has provided any public guidance on any approval or launch date. If the launch occurs later than Quintiles' assumptions, then the effect of incurring expenses later could move Quintiles' net income and earnings per share targets for 2003 higher.
For its Product Development group, Quintiles is targeting single-digit percentage net revenue growth in 2003, returning to market growth in 2004 and beyond. Revenue growth in this group in 2003 is targeted to be predominantly in the latter half of the year.
"We continue to see positive trends in our Product Development business, which I believe are being driven by our ongoing quality initiatives and focused business development efforts," said Kirby. "Industry activity in early stage clinical research bodes well for more Phase III and IV trials in the medium to long term. Quintiles' global capabilities in these areas are very strong."
Net revenue for Quintiles' Commercial Services group in 2003 is targeted to be essentially the same level as 2002. The company targets revenue growth for the Commercial Services group for 2004 and beyond, partially driven by the targeted effects of the company's PharmaBio Development transactions.
For PharmaBio Development, Quintiles' strategic investment group, the company is targeting substantial 2003 revenue growth. PharmaBio Development generates revenue primarily from commercial rights and royalties on customer products in return for Commercialization or Product Development services.
On November 11, the Special Committee of the Quintiles Transnational Corp. Board of Directors announced that it had rejected a proposal by Pharma Services Company, a newly formed company wholly owned by Dennis Gillings, Ph.D., Quintiles' chairman and founder, to acquire all outstanding shares of Quintiles common stock. The Special Committee, which has not made any determination as to whether a sale of the company or any other alternative, which may include keeping the company independent, best serves the interests of Quintiles and its shareholders, continues its process.
Quintiles Transnational's fourth quarter and full year 2002 financial briefing will be held at 10 a.m. EST on Wednesday, Feb. 5.
Quintiles Transnational helps improve healthcare worldwide by providing a broad range of professional services, information and partnering solutions to the pharmaceutical, biotechnology and healthcare industries. Headquartered near Research Triangle Park, North Carolina, Quintiles is a member of the S&P 500 and Fortune 1000. For more information visit the company's Web site at www.quintiles.com.
The schedules attached to this release are an integral part of this release. Information in this press release contains "forward-looking statements" about Quintiles. These statements involve risks and uncertainties that could cause actual results to differ materially, including, without limitation, uncertainties arising in connection with the Special Committee's process, including the possibility that the company will be sold or that transactions recommended by the Board of Directors following the Special Committee process will not be approved or completed, and that in the case of a sale of the company, investors might no longer be able to freely trade the company's shares in a public market, the risk that the market for our products and services will not grow as we expect, the risk that our PharmaBio transactions will not generate revenue or profit at the rate or levels we anticipate or that royalty revenues under the PharmaBio agreements may not be adequate to offset Quintiles' upfront and ongoing expenses in providing sales and marketing services or in making milestone and marketing payments, our ability to efficiently distribute backlog among project management groups and match demand to resources, actual operating performance, variation in the actual savings and operating improvements resulting from previous restructurings, the ability to maintain large customer contracts or to enter into new contracts, changes in trends in the pharmaceutical industry, and the ability to operate successfully in new lines of business. Additional factors that could cause actual results to differ materially are discussed in the company's recent filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K, its Form 8-Ks, and its other periodic reports, including Form 10-Qs.