Charles River performs well in Q2

By Kirsty Barnes

- Last updated on GMT

Related tags: Cent, Better

Charles River Laboratories posted healthy financial results for its
second quarter, with both business units performing well.

Pre-tax profit climbed to $53.1m (€38.6m) - a 23 per cent improvement year-over-year - while operating profit rose 19 per cent to hit $56.7m, and operating margin crept up 0.7 percentage points to 18.5 per cent. However, income from continuing operations was only $37.8m, up 15 per cent - the company has been undergoing a phase of business restructure in order to refocus itself on its core competencies of laboratory animal medicine and preclinical services and as part of this it sold its Phase II-IV clinical services business and shut down its Interventional and Surgical Services business. Meanwhile, the contract research organisation's (CRO) total sales for the quarter were $307.4m, a 15 per cent addition to the comparable 2006 quarter. The Preclinical Services segment was the stronger performer, with sales up by 19 per cent to $163.6m, partly through improved capacity utilisation at its toxicology facilities, said the company. In particular, Charles River's recent acquisition of Northwest Kinetics - which provided the CRO with its first Phase I clinical trials facility in the US - accounted for 5.5 per cent of the quarter's sales increase and the firm said this site performed "considerably better"​ than expected, as "the new capacity is growing quickly".​ Meanwhile, the segment's operating profit rose 22 per cent to $27.4m; and operating margin edging up slightly by 0.4 percentage points to 16.8 per cent. In an analyst conference call, Jim Foster, company president and CEO, said that all the facilities in the segment, except in Massachusetts, reported a higher operating margin, as a result of "the combination of greater capacity utilisation… the cost saving initiative implemented last year, our fourth generation six-signal process and sales mix".​ However, overall segment profit margin was dragged down by the new facility in Shrewsbury, Massachusetts, which was "significantly affected" by transition and start-up costs. Charles River has been exiting from its facility in Worcester, Massachusetts and moving to the new site in Shrewsbury, a move which is due to be completed by the end of the year. As part of this, the company is planning to improve the sales mix at the Shrewsbury site, which involves an expansion of services to include a greater proportion of long-term development work. Meanwhile, the company's Research Models and Services unit was also solid. While sales were only up by 9 per cent to $143.8m, operating income climbed 19 per cent to $45.3m and operating profit gained 1.4 percentage points to rest at 31.5 per cent, which was attributed by the firm to higher sales, improved efficiency from last year's cost saving initiatives, and process improvement efforts. Foster described the segment growth as "quite broad-based with significant contributions from the US and European research model transgenic services and in vitro products"."We were extremely pleased to see sales of research models in the United States for the industry ride faster than the 10 per cent we recorded in the first quarter. Sales of immunodeficient mice were quite strong, which we attributed at least in part to increased focus on discovery and oncology drugs; sales of outbred rats and inbred rats were robust due to an increased drug developing effort. The US sales trends were echoed in our European business",​ he said. Foster indicated that worldwide transgenic services sales were better than anticipated, with the growth being driven by a continuing focus on the use of transgenic models as discovery tools. "However, cost pressures of pharmaceutical companies have offset the growth in the past, and may do so again. We have conducted extensive discussions with customers to try and determine whether the growth will continue, but have not been able to identify a discernible trend,"​ said Foster.

Related topics: Preclinical Research, Preclinical

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