PPD up in Q4 while CRL continues to see low demand

By Gareth Macdonald

- Last updated on GMT

Related tags Contract research organization Income Revenue Charles river laboratories

PPD and Charles River Laboratories (CRL) finished 2010 with very different quarters, each posting results that illustrate trends within the CRO sector.

PPD sees Q4 revs and earnings up; CEO to step down

First up US contract research organisation (CRO) PPD, which reported positive set of Q4 financials.

Revenue for the three months ended December 31 was $388.5m, up 8.7 per cent on the comparable period in 2009, while operating income reached $47.5m from $25m a year earlier.

The gains were driven by growth in both clinical development, which saw revenues climb from $256.7m to $276.9m, and laboratory services, which contributed some $81m, up $10m on the year-earlier quarter.

The results continue the trend seen in Q3 when PPD reported that gains in emerging markets and reorganisation efforts helped it turn around the drop in operating income it recorded in the first six months of the year.

The figures also match the optimistic outlook PPD issued in January when it said it was confident about 2011 based on the fundamentals of the contract research sector.

In a separate announcement today, PPD said that current CEO David Grange will retire before the firm’s next annual general meeting in May.

The firm said it will “promptly initiate a search internally and externally for a successor,​" and added that current executive chairman Fred Eschelman will take on the role on an interim basis until a replacement can be found.
CRL’s Q4 hit by low preclinical demand

CRL sees continuing low preclinical demand

The Q4 picture was very different at CRL, which posted a loss as a result of charges related to the possible sale of underperforming preclinical units in China and the US.

The deficit for the period was $343.6m, down from the profit of $17.6m it recorded a year ago. Revenue for the last three months of 2010 was also down, falling nearly 3 per cent to $281.7m.

The contribution from CRL’s research models and services business was down 0.6 per cent to $168m while its preclinical services unit generated revenue of $113m, down 6 per cent.

CRL said that: “The PCS sales decline was due primarily to slower demand for our services from our large pharmaceutical clients, as well as less specialty toxicology in the sales mix.”

And, according to James Foster, this low demand is set to continue in the opening three months of 2011 who said: “We expect our first quarter results will be less robust than the fourth quarter of 2010, as our clients work through the normal process of prioritizing projects and determining their use of external resources.

But despite this, and repeated calls that CRL should consider a sale to private equity investors, Foster was upbeat about the CROs prospects for the next 12 months.

We remain confident in our business prospects for 2011 and are reaffirming our 2011 sales and non-GAAP EPS guidance​,” citing the sequential growth of the firms research models and preclinical services business as being indicative recovering industry demand.

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