Kendle operating income falls 48 per cent in first quarter

05-May-2010 - Last updated on 06-May-2010 at 09:13 GMT

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Operating income at Kendle fell by 48 per cent in the first quarter, driven by a dip in net revenues, but the CRO is encouraged that improvements in April suggest the market is improving.

Market difficulties remain for the contract research organisations (CRO), demonstrated by a year-on-year fall in operating income from $8.1m (€6.4m) to $4.2m at Kendle, but the firm highlighted some positive trends.

"Our customers would appear to be at the end of their pipeline realignments and merger-related disruptions and are settling into selection of CRO partners”, explained Candace Kendle, chairman and CEO of Kendle.

This stability, coupled to clients’ desire to use outsourcing to improve cost efficiency, gives Kendle reason to be “encouraged about the latter half of 2010 and 2011”.

Kendle added that new business awards in April, outside the first quarter reporting period, were more than $50m, compared to $89m in the first three months of the year. Furthermore, cancellations amounted to $52.8m in the first quarter but under $1m in April.

Current difficulties

These trends could imply financials will improve in coming quarters but at the moment difficulties remain. Net revenues in the first quarter fell by 17 per cent to $90.2m, although net income increased year-on-year from $886,000 to $1.2m, largely as a result of a drop in income taxes.

Also, backlog is yet to return to earlier levels. In the first quarter backlog amounted to $768m, compared to $930m in 2009. However, new business awards improved year-on-year, rising from $72m in 2009 to $89m this year. In the first quarter of 2008 new business awards were $180m.

Kendle noted that new business awards accelerated throughout the first quarter of 2010, and this trend has continued into the second quarter, giving reason for optimism.