CRL reports preclinical growth; may benefit from Big Pharma R&D cuts
The contract research organisation (CRO) announced total net revenue of $292m (€213m) for the quarter, with net income up 41% on the same period last year, sitting at $31.2m.
Within the preclinical business the company “outpaced the industry,” according to Jeffries’ analyst David Windley, with net sales up 4.2% to $119m for the quarter.
In a conference call discussing the results (transcript here), CEO James Foster told stakeholders the increase in preclinical services segment reflected “market share gain, as well as improved demand from both large biopharmaceutical and mid-tier clients.”
He also spoke about last year’s acquisitions of Vital River and Accugenix - adding research model services (RMS) and Endotoxin and Microbial Detection (EMD) respectively - as continuing factors to the upward growth in the preclinical sphere that has been evident in the past two quarters.
Furthermore, the increased demand is allowing CRL’s capacity to be well utilised, Foster said, adding he was confident pricing would follow suit and enable the firm to increase operating margins, without putting off clients:
“We have recently won RFPs for which we are not the lowest bidder,” he said. “As global biopharmaceutical companies reduce their infrastructure in favour of reliance on CROs, they do not want to compromise on scientific expertise.
“While price is an important consideration, expertise and quality are most often considered more critical.”
One pharma company who has recently announced it was cutting back its R&D is Merck & Co. (known as MSD outside North America). When asked whether such examples as this were viewed positively or negatively by CRL, Foster refused to comment on either Merck or any particular client, but did say such cuts were a “fact of life for all of us.”
He said: “Net-net, we see this as an opportunity to provide an increased range of services for large clients who used to do most of the work internally. And we think they'll provide some very good opportunities for us.”
