Charles River shows Q1 profit growth

By Kirsty Barnes

- Last updated on GMT

Related tags: Preclinical services, Charles river, Percentage point

Charles River Laboratories has again witnessed a profit growth, as
it reports its first quarter results for 2008.

For the quarter, the contract research organisation's (CRO's) revenues increased 16 per cent to $337.7m, with both its Research Models and Services (RMS) and its Preclinical Services (PCS) business segments generating "strong sales growth... as pharmaceutical and biotechnology companies invested in basic research and increased their strategic use of outsourced drug development services​", the firm said. Operating income grew to $63.5m, up from 54.7m in the previous year, as did pre-tax profit which came in at $62.0m compared to $52.8m. Charles River attributed the profit gains primarily to the higher sales. Sales for the RMS segment were $168.6m in the first quarter of 2008, an increase of 17.8 per cent from the comparable 2007 period. At the same time the segment's operating margin increased 0.2 percentage points to 33.1 per cent. "Sales growth was broad based, with strong global demand from pharmaceutical and biotechnology companies for research models and services, as well as Endotoxin and Microbial Detection (formerly In Vitro) products​", the firm said. In the CRO's slightly larger Preclinical Services (PCS) unit, first quarter sales climbed 14.1 per cent year-over-year to $169.1m. "Continuing strong demand for general and specialty toxicology services from pharmaceutical and biotechnology customers​" was the primary factor which contributed to the sales growth, said Charles River. However, as happened in the fourth quarter, the segment was impacted by the additional costs associated with the transition to a new preclinical facility in Nevada, US, along with the negative impact of foreign exchange in Canada. As a result, the PCS operating margin simultaneously declined 2.0 percentage points to 13.8 per cent. Commenting on the results, James Foster, company chairman, president and CEO said: "The year is off to a very strong start, with double-digit organic sales growth, excluding foreign exchange, in both of our business segments​". "We are continuing to see robust demand from pharmaceutical and biotechnology customers for the essential products and services that we provide, as they endeavor to discover new therapies and increasingly adopt strategic outsourcing as a more efficient and cost effective means of drug development​". He also reinforced the fact that Charles River is "aggressive investments​" to expand and strengthen its infrastructure, to better positioned itself to meet clients needs. Indeed, in February the company revealed that it plans to boost its workforce by around 800 employees during the year - equivalent to an increase of around 10 per cent. It also announced that is had stepped up its China plans as the demand for its preclinical services in the country are said to be "robust​". At the time, Foster said that it is 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​".

Related topics: Preclinical Research, Preclinical

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