Kendle benefits from early-stage research push
Shares in Kendle leaped more than 13 per cent on the day to a little over $45 as investors reacted favourably to an 48 per cent hike in operating income to $16m, and have since continued to climb, reach $47.62 by the close on Friday.
Revenues were boosted to the tune of 2 per cent – or around $2m - by Kendle’s June acquisition of DecisionLine Clinical Services, a privately owned CRO based in Toronto, Canada, according to chief operating officer Chris Bergen.
The small but fast-growing early-stage business – identified as a key growth area for Kendle - was 55 per cent ahead of last year’s quarter at $8.6m, with two-third of the increase coming from DecisionLine and the remainder coming from strong results at Kendle’s bioequivalence operation in Morgantown, West Virginia.
DecisionLine added Phase I trial capabilities in central nervous system disorders, to complement Kendle’s exisitng clinical pharmacology unit in Utrecht, Netherlands.
Phase I growth is expected to outpace the broader outsourcing market at approximately 15 percent annually, according to the firm’s CEO Candace Kendle, who said this, “coupled with the expected growth in discovery and preclinical pipeline, will translate to better demand for early-stage services” in the future.
Revenue in the late-stage operation was strong at more than $116m, up 29 per cent and mainly coming from a hike in billable hours.
There was a healthy 19 per cent hike in Kendle’s North American business, but European and Asia-Pacific revenues advanced by a third and Latin American revenues “more than doubled,” said Bergen, reflecting the increasingly internationalised nature of the contract clinical research market.
Kendle’s operating margin improved to 12.7 per cent of net service revenues, compared with an 11.1 per cent margin a year ago. For the full year the company is projecting net service revenues in the range of $490m to $500m.
Discussing the potential of Kendle’s business in the future, Kendle said: “the market opportunities for our service remain very strong, with outsourcing penetration projected to reach an estimated 25 to 35 per cent by 2011.”
She added that with the acquisition of Charles River’s xxx operations now behind the company the attention has switched to expanding the early-stage business and geographic expansion in Latin America and Asia Pacific but also Eastern and Central Europe.
Kendle reiterated the importance of size and reach in contract research, which has been driving consolidation in the sector.
“Scale really does matter,” she stressed. “If you’re going to work with the major pharmaceutical companies that have cardiovascular, oncology, and CNS drugs in the pipeline, they want to know that you will have depth in that level of experience that you have available team members, and that you have the geographic reach in those therapeutic areas.”
