Charles River cuts guidance as sales fall
Contract research organisations (CRO) have felt the knock on effects of big pharmas problems and biotech’s funding shortages. This has been most pronounced in the preclinical sector with Covance, and now Charles River, reporting a decline in revenues from these services.
In its third quarter results revenues from Charles River’s preclinical services (PCS) division decreased by 24 per cent year-on-year, bringing in a total of $176.6m (€119.6m), as a result of reduced demand, pricing pressures and lower capacity utilisation.
To counteract these problems Charles River has been restructuring its operations, most recently laying off 115 employees from its wholly-owned subsidiary in Montreal, Canada, and it expects these measures to result in cost savings of $40m in 2009.
Following the recent layoffs Charles River said it had expected that companies would have fully resumed R&D projects by now but this is yet to occur. The CRO elaborated on this in its results, stating that it expects the situation to worsen this year and consequently has cut its guidance.
Charles River expects an upturn in demand to begin in the second quarter of 2010 when it believes clients will have improved visibility and companies will have dealt with mergers and healthcare reform.
PCS operating income down 67%
The challenges detailed above were felt most severely by Charles River’s PCS division which experienced a year-on-year decline in operating income of 67 per cent, slipping to $10m.
This decline continued the trend seen during the first nine months of 2009, over which time operating income is down by 55 per cent on 2008 and revenues have fallen from $524.9m to $416.7m.
Charles River’s research models and services (RMS) division also experienced lower demand, particularly for toxicology, but the acquisitions of MIR, Piedmont and Cerebricon and growth in sales to academia ensured revenues only slipped by 1.4 per cent to $163.3m.
