CRL to halt preclinical ops in Shrewsbury on low demand

By Gareth Macdonald

- Last updated on GMT

Related tags Supply and demand

US CRO Charles River Laboratories (CRL) will halt operations at its preclinical services (PCS) facility in Massachusetts until demand for early-stage drug development recovers.

The contract research organisation (CRO) said the move, which will result in the loss of nearly 300 jobs at the Shrewsbury site, will improve the margins, reduce operating costs by around $20m and "balance global capacity with demand.​"

Like many companies in the sector CRL reported falling demand for its services in 2009, particularly in its PCS business which saw sales for the nine months ended September 26 drop 20 per cent to $490.5m.

In order to combat this decline CRL implemented a series of cost cutting and capacity reduction measures during the year, starting in February​ when it reduced its workforce at preclinical sites in Wilmington and Arkansas.

And, while the middle of 2009 was more positive with CRL buying PPD's Piedmont​ research centre and reporting that its preclinical business had stabilised​, the cost cutting programme continued.

In October​, CRL broadened the restructuring efforts to its human trials business and cut 115 jobs at its Canadian subsidiary ClinTrials BioResearch, again citing falling demand as the basis for the move.

CEO James Foster said that the plan to suspend operations in Shrewsbury, which is due to come into effect by the end of the summer, is the next stage in this process.

He explained that: “The extended softness in preclinical market demand for the last fifteen months has resulted in excess capacity throughout the contract research industry and in our own global network of PCS facilities​.”

Preclinical recovery

Despite the planned suspension, which will cost the firm around $7m in severance pay and associated costs, Foster was confident demand will improve over the next 12 months.

Based on fourth-quarter preclinical business trends consistent with our expectations and positive early indications for the first quarter, we continue to believe the preclinical market will begin to show some improvement in the second quarter of 2010​.”

CRL is not due to report its full 2009 results until February 8.

Related topics Preclinical Research Preclinical

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