Research business lifts Charles River in 2Q

By Phil Taylor

- Last updated on GMT

Related tags Charles river Pharmacology

Charles River Laboratories saw its operating income advance 16 per cent to $77m in the second quarter on strong demand for its research services division, and also announced a $53m deal to buy a German contract service organisation.

Sales rose 15 per cent to $352m for the quarter, with the firm’s research models and services (RMS) unit leading the charge with a 20 per cent hike to $178m, helped by improved capacity utilisation and “robust” spending by pharmaceutical and biotechnology companies, according to CEO Jim Foster.

We believe this broad-based growth is evidence of our clients' greater focus on discovery of new therapies​,” said Foster in a conference call. Production of research models was the largest contributor to the second quarter sales growth, he noted, with inbred and immunodeficient mice driving growth and “supporting our thesis that pharma and biotech companies are increasingly focused on drug discovery.​”

Within this business unit, consulting and staffing services (CSS) did particularly well, helped by the ongoing contract with the US National Cancer Institute. Charles River officially opened a facility in Maryland on June 10 to serve this contract and other customers in the mid-Atlantic region of the US.

Charles River’s preclinical services (PCS) division managed to hike sales by a little under 10 per cent to $179m, on strong demand for general and specialty toxicology , as well as demand for Phase I services at the company’s Clinical Services Northwest unit, acquired at the end of 2006.

Profits were pegged back however by costs associated with the transition to a new preclinical facility in Nevada, less favourable study mix and some study delays, as well as capacity constraints. While the Nevada and Massachusetts toxicology facilities performed well for Charles River, those in Montreal and Edinburgh saw sales slippage, and Foster said he expects that trend to continue in the third quarter.

However, “based on our backlog we expect improvement later in the year​,” said Foster, adding “although we may see fluctuations in demand from time to time, we continue to expect that pharmaceutical and biotechnology companies will expand their strategic outsourcing as the best alternative to improve the efficiency and effectiveness of their drug development efforts.​”

Tackling capacity constraints, particularly in Montreal, are a focus for Charles River and to that end the company is planning to speed up the construction of an animal testing facility in Sherbrooke, Quebec, that is now due for completion in early 2009 and will employ around 1,000 staff.

Another facility due to open in Shanghai, China, in the third quarter is running late but should be offering non-Good Laboratory Practice (GLP) functions by the end of the year, added Foster, with GLP services following in early 2009.

NewLab BioQuality adds to biopharmaceutical services business

On the same day as its results announcement, Charles River said it had agreed to buy privately-held German firm NewLab BioQuality, which provides safety and quality control services to biopharmaceutical clients.

NewLab, with projected revenues in a range of $20-$23m for 2008, will sit well alongside Charles River’s biopharmaceutical services business covering the development and manufacture of biologic drugs.

The BPS unit carries out cell bank manufacture from research through full-scale production, and provides testing to determine the potency of biologics, drug product release testing, and clinical-scale vaccine manufacture. NewLab will add to Charles River’s process validation capabilities, as well as consulting services and stability testing programmes

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