Quintiles IPO rumors were brewing for months but if you’re wondering why now is the right time for a filing, take a look at the financial performance of the Durham contract research organization’s publicly-traded peers.

It’s earnings season and last week Ireland-based ICON (NASDAQ: ICLR) reported 2012 revenue of $1.12 billion, an 18 percent increase compared to 2011. New Jersey-based Covance (NYSE: CVD) last month reported that its 2012 revenue reached $2.36 billion, up 5.7 percent. Massachusetts-based Parexel (NASDAQ: PRXL), which operates on a different financial calendar, reported in January that its fiscal second quarter revenue was $422 million, up more than 26 percent compared to a year ago.

Shares in all three of these public CROs closed Friday near their 52-week highs. The CRO industry is rebounding and the numbers show it.

“We’ve had a bullish outlook for the CRO industry for several years now,” said Lauren Migliore, an equity analyst who covers the CRO space for Morningstar. “That’s based on the CROs’ ability to cut the cost of clinical trials as well as (cut) the time.”

While a pharmaceutical company puts its name on the package of an approved drug, CROs do much of the behind-the-scenes work testing those drugs in the lengthy and expensive clinical trials that precede drug approval. Pharma companies have increased their outsourcing of this work in an efforts to slash costs and wring more efficiencies out of the drug testing process. Big Pharmas’ cost-cutting zeal has been a boon to CROs.

The current CRO industry growth contrasts the steep dropoff in work during the economic doldrums of 2008 and 2009. When the bottom fell out of the economy, pharmas clamped down on drug development, which shut the flow of work to CROs. Pharmas froze their drug development activity choosing instead to focus on late-stage drug candidates closer to possible regulatory approval.

“Now we’re beginning to see pipelines unfreeze and the natural course of drug development pick up,” Migliore said.

A rising financial tide lifting public CROs would also buoy Quintiles stock.

The $600 million offering (though that figure could change) is the second IPO for Quintiles, which first went public in 1994. Founder and then CEO Dennis Gillings led other investors in taking the company private again in 2003. A second Quintiles IPO would help other companies in the Research Triangle, said Steve Paladino, CFO and partner of Scale Finance, a company that provides financial services to startups. Not only does a public offering bring investor attention to the region, investors who profit from an IPO tend to recycle their money into investments in other companies.

Public CROs haven’t seen their stock prices recover to 2008 levels (although Parexel is close) but share prices have been climbing. Migliore declined to comment specifically on Quintiles’ registration statement until Morningstar completes its report and makes it available to its clients. But she notes that the filing comes at a time when CROs are recovering and their share prices are rising.

Standard & Poor’s projects Quintiles will have mid- to high-single-digit revenue growth in 2013, which is consistent with revenue growth projections from Covance and ICON. The difference is that Quintiles has more revenue. Much more. Quintiles dwarfs its peer group with $3.7 billion in 2012 revenue, a 12 percent year over year increase, according to the company’s filing.

The S&P’s December report, its most recent on Quintiles, based its assessment of the company on “strong industry growth trends and Quintiles’ 2012 backlog growth.” “Backlog” is the CRO industry’s term for forthcoming clinical trial work that pharmas pledge to a CRO. But until it happens, it’s not yet revenue. While a large backlog is perceived as a sign of CRO strength, there’s risk. Trials can get canceled.

Still, Quintiles has a lot more of this work lined up. In its filing, Quintiles says its backlog was $8.7 billion as of Dec. 31, 2012. By comparison, Covance reported a $6.6 billion backlog at the end of 2012. ICON reported a $2.8 billion backlog. Parexel’s backlog stands at $4.5 billion.

Quintiles’s filing paints a picture of growing pharma R&D spending where a growing portion of that money will pay for outsourced services provided by CROs. The company estimates that clinical development spending outsourced to CROs in in 2011 was $16 billion and will grow to $22 billion by 2015.

The big money to be made for CROs will come from strategic partnerships they are increasingly striking with pharmaceutical companies. More than simply taking on outsourced clinical trial work, these structured deals give a CRO a greater stake in the development and even the commercialization of a drug. CROs that have an array of services as well as global scale are best positioned to strike these deals, Migliore said.

S&P expects the growth of strategic partnerships will shift market share from smaller CROs to the global players. That leaves these partnerships to a small group of large CROs: ICON, Covance, Parexel, Wilmington-based PPD, and the biggest of them all – Quintiles.

[QUINTILES ARCHIVE: Check out more than a decade of Quintiles stories as reported in WRAL Tech Wire.]