Celsis operates three divisions, all of which felt the pinch a little in the third quarter, but the outsourcing unit – called Analytical and Development Services - is under the greatest pressure. It carries out laboratory testing for clients in the drug discovery, in-process and finished product stages.
The unit saw a “slower third quarter and is expected to complete the year down on last year’s performance,” said Celsis in its third-quarter interim management statement.
A little over a third of Celsis’ revenues and just 10 per cent of profit comes from its outsourcing business. Two-thirds of sales and 90 per cent of profit comes from Rapid Detection – which provides microbial testing systems - and In Vitro Technologies units, which provides liver cell products to the pharmaceutical industry to reduce the time and cost of drug discovery and development. The latter are now routinely referred to as the firm’s ‘core product divisions’.
In the first half of 2008 Analytical and Development Services brought in $10.1m, a drop of 14 per cent year-on-year which the company put down to a slower pace among pharmaceutical companies in manufacturing their products as they took a strategic decision to reduce their inventories to historical lows in light of the deepening recession.
This reduction in output directly impacted the amount of testing that is outsourced during the manufacturing process, an effect that was exacerbated by a delay of several large research contracts into the second half.
“A review which examines several strategic alternatives for the laboratory services businesses is currently being undertaken by the board,” according to Celsis, which said recently that if it did not achieve an improvement in the division it may be sold.
For the full year the company expects to “sustain its revenue position and deliver modest profit growth” thanks to the Rapid Detection and In Vitro Technologies product divisions.