Kendle’s operating income falls; cutting jobs in Q1

25-Feb-2010 - Last updated on 25-Feb-2010 at 10:34 GMT

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Kendle posted a 37 per cent drop in operating income in 2009 and will lay off employees this quarter in response to the market’s “continued volatility” and late stage cancellations.

Delays and cancellations have troubled contract research organisations (CRO) over the past 12 months and the situation is predicted to continue into 2010. Market uncertainty has prompted Kendle to not reinstate its guidance at this time.

The CRO also said it will lay off some employees in the first quarter to balance staffing levels with customer demand and sales. Kendle is yet to reveal details of the lay offs, such as numbers or locations, but expects the measures to deliver savings of up to $18m (€13m) in 2010.

Demand appears unlikely to improve in the short-term after new business awards in the fourth quarter fell by 17 per cent compared to the comparable period of 2009. Kendle received $134.7m of new orders in the most recent period, which is also less than in the third quarter of 2009.

The annual results lack figures for the value of delayed and cancelled contracts but do state that they resulted in the company’s net book-to-bill being 0.8 to 1.0, compared to 1.0 to 1.3 at this time last year.

Delays and cancellations, particularly of late stage contracts, are also listed as factors motivating the lay offs. Kendle’s total expenditure fell by 17 per cent for the year, despite a $10.1m restructuring charge, and the lay offs should help further reduce this.

The restructuring charges include $3.8m incurred in the fourth quarter for the impending lay offs. Kendle anticipates that on an annualised basis the cuts will generate savings of up to $23m.