PharmaNet Shares Get Hammered

OKLAHOMA CITY -- While other healthcare companies posted some weak metrics on Thursday, PharmaNet PDGI may have suffered through the worst quarterly checkup of all.

Once again, PharmaNet has been hit hard by cancelled orders for clinical drug trials. As a result, the Princeton, N.J.-based company swung to a first-quarter loss, badly missing Wall Street estimates. Its stock plunged 30% to a new 52-week low of $16.80 on the news.

Even Smith & Nephew SNN and Cigna CI, plagued by their own quarterly setbacks, escaped that kind of pain.

Indeed, PharmaNet itself hasn't looked this weak for years. In late 2005, the company found itself fighting for survival after Bloomberg raised serious questions about its early-stage drug trials. Since then, the company has reinvented itself -- even adopting a new name -- as it shifted its focus more to late-stage drug trials instead.

Now, however, both of PharmaNet's core businesses appear to be hurting. After reporting heavy cancellations of early-stage trials last quarter, PharmaNet followed up on Thursday with troubling news of cancellations in its late-stage business as well. All told, PharmaNet clients have cancelled almost $60 million worth of late-stage trials during the past two quarters alone.

PharmaNet's first-quarter results took an especially hard hit. Direct revenue, excluding reimbursed out-of-pocket expenses, inched up just 2.4% to $86.8 million in the recent period. On average, analysts were looking for much higher revenue of $94.6 million.

Still, PharmaNet's bottom-line miss proved even worse. The company swung from a profit of $6 million a year ago to a loss of $10.1 million, or 53 cents a share, in the latest period. Thus, the company fell well short of Wall Street's forecast of a solid 30-cent profit for the quarter.