AstraZeneca deal not new for CRL, but still good news

Charles River Laboratories' deal with AstraZeneca may only formalise an existing relationship but a second Big Pharma accord is good news for the CRO say analysts.

The 'new' strategic partnership - which establishes Charles River as AstraZeneca's preferred safety and DMPK services supplier until 2015 - was announced yesterday, despite the fact the Anglo-Swedish drugmarker started transferring work earlier this year.

This lack of surprise coupled with the limited financial implications for Charles River - the contract research organisation (CRO) predicts the work will only add an incremental 1 per cent to 2013 revenues - meant the news was met a muted, if generally positive, response.

Garen Sarafian, VP of healthcare technology and distribution at Citi Research, said: "While today’s news is encouraging, it is modest in size and we suspect already included in mid-year guidance given work was already being transferred earlier in 2012."

He told Outsourcing-pharma.com that: "What will be important for CRL now is to ensure the two publicly announced partnerships are up and running smoothly and exceed expectations. In doing so, they may be able to utilize them as reference clients on future preclinical partnership opportunities."

A similar assessment was made by Ross Muken, senior managing director at ISI Group, who told us: "AstraZeneca had been a historical customer for Charles River and thus this is an expanded agreement. We look for this to grow over time given Astrazeneca’s need to refocus on discovery."

Both analysts suggested that the CRO is unlikely to need to invest to support the deal, with Muken explaining that: "I think they [Charles River] continue to have plenty of capacity to meet demand despite the series of closures we saw over the past 2 years."

John Kreger from William Blair & Company agreed, telling investors that: "We are encouraged that Charles River has now signed two significant strategic deals in the past year, further suggesting that the company is gaining market share in early development/preclinical at present and the trend toward more outsourcing is in place throughout the drug development spectrum."

The deal - coupled with the agreements signed with China-based CRO Pharmaron earlier this week - also suggests that AstraZeneca has more preclinical work to outsource.