Kendle back in black

The US-based contract research organisation (CRO) reported a sales jump of 60 per cent to $95.4m (€70m), almost as impressive as the growth rate seen in the fourth quarter, and operating income soared 71 per cent to $12.5m. New business awards were $150m, up 65 per cent on Q1 of 2006 and total business authorisations totaled $700m, the firm said, however, contract cancellations for the quarter were up by 8 per cent to $14m. Although direct costs also rose sharply by 60 per cent and selling, general and administrative costs increased almost as much by 50 per cent, the firm also managed to add a 1 percentage point increase to its profit margin. Despite these strong results, the firm was still left with a pre-tax profit that came in 13 per cent lower than the comparable 2006 quarter at $6.6m. The balance sheet was negatively impacted by an interest expense of $4.3m, along with a $1.7m charge for amortization of acquired intangible assets, which are both related to Kendle's purchase of a business unit from Charles River Laboratories in August. An undetermined interest expense of $1.9m was also listed on the balance sheet as "other." However, the CRO has made a recovery from its slide into the red in the fourth quarter when it reported a $1.8m loss on operations and an even greater $6.9m pre-tax loss. Much of the carnage to the company's bottom line in the fourth quarter was caused by the acquisition of the Phase II-IV Clinical Services unit of Charles River, under a $215m cash deal that closed in the third quarter but did not hit the balance sheet until the fourth quarter. The purchase has given Kendle new expertise in several lucrative therapeutic areas such as oncology, infectious disease, respiratory, cardiovascular and ophthalmology; a new and diverse customer base; and an increased capacity to deliver global clinical trials - elevating the company's competitive position to the world's fourth largest provider of Phase II-IV clinical services. Only the top three CROs, Quintiles, Covance and PPD, have been really dominant in this space so far.