Speaking at the Jefferies Global Healthcare conference last week, Foster noted that big pharma is really looks to wind down their pipelines, which will lead to more flexible relationships with their outsourcing partners, and “most want to take 100s of R&D partners down to one or two.” He added that what Charles River sees in a year or two in terms of early phase testing, is more than the big pharma sees in a decade. Strategic relationships represented slightly more than 25% of total sales in 2013 for Charles River.
In addition, the company is seeing more revenue from mid-tier biotech clients than from big pharma as biotech “continues to be the research driver for the industry.”
“The biotech companies are the discovery engines for pharma so we expect this will continue to be a nice business for us,” Foster said. “I’ve had interesting conversations with clients across the board – all the big drug and biotech companies where we’re focusing want to have increasingly larger relationships. As they take large R&D facilities offline for the last half dozen years, we become their toxicology or in vivo pharmacology facility.”
He also noted there’s been a big push from academia where an increasing number of molecules are being developed. Academia “was always about 25% of our business, but now we’re getting more work” in the area as academic centers are developing their own compounds.
About one of every two research models sold anywhere in the world comes from Charles River, he added, noting the company is looking to have a combination of insourcing and outsourcing where they can share resources.
Foster also honed in on the company’s recent acquisitions of Argenta and BioFocus, noting that with their early target identification, sophisticated medicinal chemistry, and a range of in vitro testing, Charles River has been able to increase “the nature of conversations with clients to engage with them earlier. We can understand the molecule as well or better than the clients do now,” he said, noting that they picked up additional therapeutic area expertise with the deal in respiratory.
“We’re increasingly in the go and no-go business with regards to compounds – how long should they continue to invest in, whether it should go into the clinic, and with this largest portfolio, we can make the decision earlier in the process,” Foster said.
Endotoxin and microbial detection services still represent the company’s fastest growing market as CRL has the only FDA-approved in vitro non-clinical endotoxin test. Foster said the company’s strategy is “to enhance our position as the premier provider of rapid microbial identification and endotoxin detection products and services to the biopharmaceutical industry.”
Charles River is still looking at acquisitions to expand the scope of its early-stage portfolio and supplement organic growth, Foster said. A lot of the companies are VC-owned and prices are full but fair these days, he added.