April 21, 2009 / 3:12 PM / in 10 years

UPDATE 2-Kendle shares tumble 61 percent on weak outlook

* Shares tank to a four-year low

* At least two brokerages downgrade the stock

* Q1 cancellation rate more than 45 pct (Adds analyst comments, updates share price)

By Anand Basu

BANGALORE, April 21 (Reuters) - Shares of Kendle International Inc KNDL.O fell as much as 61 percent to a four-year low on Tuesday, a day after the provider of clinical development services to biopharmaceutical firms said it would miss analyst expectations for the first quarter.

Shares of the Cincinnati, Ohio-based company were down $11.10 at $10.26 in afternoon trade, after earlier touching a low of $8.28. The stock was the biggest percentage loser on Nasdaq.

Kendle, citing “unprecedented biopharmaceutical industry conditions,” said on Monday it would not meet analyst expectations for the quarter due to large project cancellations, project delays and significant reduction in new business signings.

Kendle’s announcement has also put pressure on shares of other clinical-research service providers like Pharmaceutical Product Development Inc (PPD) PPDI.O, which is scheduled to report its first-quarter results later in the day, and Parexel International Corp PRXL.O.

However, Piper Jaffray analyst Sean Wieland said while “Kendle’s disappointment is certainly not a positive data point for clinical research organizations (CROs)... I don’t think it’s necessarily a bellwether indicator.”

Larger CROs stand to benefit at the expense of smaller ones — like Kendle — as the market shifts toward bigger, more strategic outsourcing deals, Wieland said.

Wieland cut his price target on Kendle shares to $11 from $21, while two other analysts downgraded the stock.

Raymond James lowered its rating on Kendle to “market perform” from “strong buy,” while Robert W. Baird & Co cut the stock to “neutral” from “outperform.”

“Without clear catalysts and with uncertainties mounting, we are moving to the sidelines and temporarily suspending our estimates and price target,” Baird said in a note to clients.

In a regulatory filing, Kendle said its cancellation rate in the first quarter was more than 45 percent, compared with its prior forecast of 18 percent, adding that there had been a significant increase in price pressure in the market.

“In this new environment we feel that price has become the primary predictor of business award.”

Shares of Parexel were trading down more than 17 percent at $9.25 on Nasdaq, while PPD stock was down 6 percent at $21.85. (Editing by Mike Miller, Himani Sarkar)

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