Question-and-Answer Session
Operator
Thank you. (Operator instructions) Our first question today comes from Randall Stanicky from Goldman Sachs.
Randall Stanicky – Goldman Sachs
Okay. Thanks guys for the questions. Just two, first Bill, then Joe, a bigger picture question, but Bill, there’s still $15 million from Lilly recognized in 4Q, and then as you think about the contribution that you have baked into the outlook for 2009, are we still thinking about an incremental $55 million? And then to the extent that you can maybe update us on some of the thoughts around margins, I think you did just over 21% in Early Development this quarter, how do we think about that trend as we move into the back half of the year?
Bill Klitgaard
I think the way we categorize the Lilly project is to talk about the ten years being $160 million a year on average, but it is kind of ramping up throughout the year. So the first few years, or the first year, is going to be a little less than that. The $15 million in Q4, therefore, if you multiply it by four, it would be around $60 million. I think we are looking at something which is greater than that in 2009, but it is going to be ramping up throughout the year. So I don’t we gave – I spoke to that number as I recall for 2009, but it should be ramping up above the?
Joe Herring
Well, Bill, what we said is 2009 looked like $150 million and that we gave them the credit for? so 2009 is $135 million, in minimum commitment, right. And the $15 million in Q4 was only Greenfield. There was obviously other Lilly volume in central lab and clinical and GLP tox and clin pharm that we have, had in Q4, and continue to have in 2009.
Randall Stanicky – Goldman Sachs
From a profitability perspective, does the margins on that business, does that ramp as the revenue comes in? I guess how do we think about the margin as the business comes in relative to what you talked about was low 20s I think for this quarter and the next ramping to sort of mid 20% operating margin range for the back half of 2009?
Bill Klitgaard
I think there is two or three things there going into the overall margins for Early Development. We mentioned in Q1 there is three items. First of all in Q4, we had Q4 08, we had a transition payment from Lilly which won’t repeat in Q1. Secondly we had the closures of two clinical pharmacology units in Q1, and third, we have the opening of the Greenfield facility in Q1. So all those will be pushing margins down. I think we indicated upper teens for Q1 margins in Early Development. But you’re right, it should be trending back towards more normal levels by year-end.
- To read the full transcript on Seeking Alpha, click here »
