Charles River and Covance post Q3 losses and announce job cuts

CRL, which saw quarterly sales drop 7 per cent to $276m and operating income fall 88 per cent to $5m, said it will cut its workforce by 300, close its leased Laval, Quebec preclinical facility and consolidate discovery and imaging services at its site in North Carolina.

The contract research organisation (CRO) attributed much of the decline to $30m in charges related to its abandoned takeover bid for China’s WuXi PharmaTech and lower demand for preclinical development services.

Similarly Covance, which despite revenue increasing 3 per cent to $513m swung into a $77m operating loss, said it will consolidate its North American toxicology testing business and close its facility in Virginia with the loss of 200 jobs.

The New Jersey-headquartered firm also cited lower demand for early-stage services, specifically toxicology testing, as the reason for its earnings decline, explaining that lower revenues from this part of its business had offset gains made by its chemistry and clinical pharmacology businesses.

Additionally, both CROs reported declines in clinical development revenues for the period, with the contributions from CRL’s research models and services (RMS) unit and Covance’s late-stage division dropping 2.5 per cent to $159.3 and 3 per cent to $270m, respectively.

Both companies also issued gloomy 2010 forecasts. CRL now expects sales to be 5 per cent lower than last year, down from the 2 to 3 per cent decline it predicted previously.

Covance meanwhile predicted that sales for the 12-months ending December 31 will be flat “reflecting market conditions in toxicology and, in late-stage development, the slower start-up and cancellations of clinical trials​.”

Hope​

But, despite the gloomy figures and full year forecasts, both CRL and Covance managed to retain some optimism.

CRL CEO James Foster said: “We are steadfast in our belief that global pharmaceutical companies will ultimately reinvigorate their early development pipelines and increasingly choose to outsource development​.”

Covance chief Joe Herring struck a similar note, citing his firm’s recently​ announced 10 year accord with French drug maker Sanofi Aventis as a cause for hope.