Charles River seeing more strategic relationships, CEO says

By Zachary Brennan

- Last updated on GMT

Charles River seeing more strategic relationships, CEO says

Related tags Charles river Drug

As Big Pharma and biotech companies continue to outsource more of their work, one of the leaders in the preclinical and discovery space – Charles River Laboratories – is seeing more strategic relationships with both large and small clients, CEO James Foster told investors on Tuesday.

Collaboration is the watch word of the industry… everyone is working with whomever they need to to get drugs to market​,” Foster said at the Jefferies 2015 Global Healthcare Conference. “I think the clients would acknowledge pricing is fair and reasonable for CROs, particularly in the preclinical space, especially as capacity [on the Big Pharma side] is getting tight, and clients are impatient to wait too long to start new studies​.”

He noted a recent conversation with the head of R&D at a large pharma company who he asked what the proportion of drugs developed or discovered internally versus externally was, and the executive told Foster that it doesn’t really matter at this point as long as they get the best possible drugs.

We have strategic relationships with a whole range of clients, which now represents about 30% of our total revenue, and we have several conversations going on right now so we anticipate that will increase​,” Foster added.

The indication of an increase in Charles River Laboratories’ strategic relationships follows a recent report from the Tufts Center for the Study of Drug Development saying sponsors are relying on a mix of strategic and transactional relationships​, as well as internal work, to bring drugs to market.

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David Windley, an analyst with Jefferies, questioned Foster on the prevalence of the strategic relationship discussions, and Foster said, “We have multiple conversations going on right now, some of them to re-up and expand deals...They tend to be driven by safety assessment or discovery, sometimes both…particularly over the last three to four months. They have a lot to do with clients thinking seriously about reducing infrastructure, selling space, closing space or repurposing it, and when they’re ready they tend to move relatively quickly​,” particularly with “very large pharma and biotech​.”

The relationships also have a variety of duration, he added, with the longest lasting five years. He also noted that in some preferred partner relationships, Charles River is seeing value propositions that are “just as good or better​” than in strategic relationships.

More and more clients don’t want to work with a lot of providers,” ​Foster said, noting the company intends to broaden its portfolio, particularly on the discovery side with M&A.

Foster pointed to one recently-finished strategic partnership that was “a re-up​” of a previous deal, and ended up being larger than the original deal. He noted that the pricing is getting better, especially as Charles River gets more aggressive in its bidding process.

The comments come as Charles River stock fell nearly 10%​ after its latest quarterly results were unveiled.

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