The contract research organisation (CRO) posted a less than impressive set of Q1 financials, with profits falling 42 per cent to $25m (€18.7m) and operating income down 37 per cent to $39m, but said that this was in line with forecasts.
CEO James Foster explained that “softness” in the CRL’s research model and preclinical services businesses had dominated the period, but said that: “pricing, inquiry levels and bookings appear to have stabilised.”
He added that although demand for preclinical services for the rest of the year is hard to predict, CRL “will achieve the sales and earnings guidance [targets]…previously provided for 2009.”
For the full year CRL expects net sales to drop by between two and seven per cent and earnings per share (EPS) to be in the $2.30 to $2.60 range.
Foster’s comments differ significantly from those made by CRO rivals like Kendle, Parexel and PPD, which have all recently lowered their expectations for the year on the strength of weak Q1 order books.
Covance comparison
Perhaps the most useful comparison is with Covance which, despite being a bigger firm than CRL, also tends to focus on the early drug research and preclinical end of the CRO sector.
On April 30, Covance reported disappointing Q1 income of $27m, down 46 per cent and cut its EPS projection to between $2.50 and $2.70, which is in line with CRL's expectations.
The similarities continue. CRL’s optimism about its 2009 order book is also in keeping with upbeat comments made last week by Joe Herring, Covance’s CEO, who said that: “bottoming of demand is underway.”
In fact the only real difference between the two firm’s expectations for the year is the fact that Covance had to restate its guidance at all.