Weak pound benefiting UK CROs

16-Aug-2009 - Last updated on 17-Aug-2009 at 10:39 GMT

The British pound’s weakness compared to other EU currencies is benefiting UK-based CROs, according to Lab Research (LRI), which attributed the poor performance of its Danish business to the exchange rate.

In its second quarter financial results LRI said that the performance of the British pound compared to the Euro and Danish Kroner has increased competition from UK-based contract research organisations (CRO).

LRI believes that increased competition from UK-based companies resulted in revenues from its Denmark-based business declining by 29 per cent to CN$5.6m (€3.8m) in the second quarter.

The company may face further difficulties in the second half of 2009 because of a fall in its active backlog. For the whole business, which has divisions in Canada, Denmark and Hungary, the active backlog was CN$11.8m, down from CN$16m.

LRI claims to have experienced strong contract quotation activity in the quarter. However, changes in clients’ outsourcing activities have reduced the quotation to contract conversion rate and this has cut the active backlog.

Furthermore, LRI believes that negative perceptions regarding its Canadian banking relationship and liquidity position have impacted on business.

These issues have been resolved, according to Luc Mainville, CEO of LRI, who believes that the second quarter results “send a strong and positive signal” that will improve perceptions of the company.

However, LRI shares were down 11 per cent following the release of the financials. Shares closed on Friday at 40 cents, well short of its 52-week high of CN$6.50.

Mixed fortunes

The latest financial results saw LRI return to profitability, posting net earnings of CN$300,000 compared to a loss of CN$3m in the last quarter, but there was still a year-on-year decline.

Revenues in the second quarter fell by 14 per cent to CN$13.9m compared to the corresponding period of 2008 but LRI highlighted quarter-on-quarter growth as evidence of improvement.

LRI’s Canada-based business benefited from companies starting studies that they had previously delayed but year-on-year revenues still fell by three per cent to CN$6.8m.

The only geographic region to improve in the second quarter was Hungary, which generated revenues of CN$1.5m compared to CN$1.1m in the same period of 2008.

LRI attributed this improvement to increased business from Japanese clients as a result of the deal it signed with Media Services. Under the terms of the agreement Media Services, a Japan-based consultancy, targets its local pharma companies for LRI.

Furthermore, the Hungarian site gained good laboratory practice (GLP) recertification in November and LRI launched a new business development platform. LRI believes that both these factors helped increase revenues in Hungary.