Charles River accelerates China plans; reports profit jump

By Kirsty Barnes

- Last updated on GMT

Related tags: Charles river, Preclinical services, Percentage point

Charles River Laboratories has reported another profit jump in its
Q4 2007 financial results and has also stepped up its China plans
as the demand for its preclinical services in the country are said
to be "robust".

In an analyst call related to its fourth quarter results, Jim Foster, company president, chairman and CEO said that it is now speeding up its facility expansion programme in China, where it is constructing a new 50,000 square foot laboratory, and is expecting to begin offering good laboratory practice (GLP) preclinical services from the country by the middle of this year instead of the first quarter of 2009. Charles River has been operating in China since mid 2007 when it forged a joint venture with a local firm Shanghai BioExplorer, which it later actually acquired. Interestingly, Foster insists that to date, the company is not seeing its business in China coming from international customers who are offshoring the work to them in a bid to save money. Foster clarified that its customer base is not domestic Chinese drug firms either. Instead, the preclinical services the company performs in China are "to support the clients that we have elsewhere in the world", in North America and in Europe, but whom also have a base in China. These firms seek them out for services on discoveries that are made locally, "where they're going to want a preclinical task force locally as well",​ said Foster. Meanwhile, for the fourth quarter of 2007, the contract research organisation's (CRO's) sales increased 17 per cent to $318.0m from $271.7m in the comparable 2006 period. Operating income grew to $52.1m, up from 45.2m in the previous year, as did pre-tax profit which came in at $51.1m compared to $44.5m. Charles River attributed the profit gains primarily to the higher sales. Sales for the Research Models and Services (RMS) segment were $145.2m in the fourth quarter of 2007, an increase of 13.7 per cent from the fourth quarter of 2006. At the same time the segment's operating margin increased 1.5 percentage points to 27.1 per cent. "Sales growth was driven by strong demand for research models in the United States and Europe, worldwide Transgenic Services, and In Vitro products",​ the firm said. In the CRO's slightly larger Preclinical Services (PCS) unit, fourth quarter sales climbed 20 per cent year-over-year to $172.9m. "Continuing strong demand for general and specialty toxicology services from pharmaceutical and biotechnology customers"​ was the primary factor which contributed to the sales growth. However, the segment's operating margin simultaneously declined 2.9 percentage points to 16.0 per cent. "As expected, the additional costs associated with the transition to the new preclinical facilities in Massachusetts and Nevada and the negative impact of foreign exchange in Canada resulted in lower operating margins for the PCS segment",​ the firm said. Looking forward, Charles River said it plans to boost its workforce by around 800 employees during the year - equivalent to an increase of around 10 per cent.

Related topics: Preclinical Research, Preclinical

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