Operating profit for the six months to June 30, fell 58 per cent to £22,525 ($36,884), which CEO Anthony Baxter told Outsourcing-pharma.com, was due to the impact of the loss of Cyprotex’ largest and most profitable contract and its decision to invest in toxicology capabilities.
Revenue for the period was, in contrast, much higher with sales climbing 43 per cent to £3.54m thanks largely due to the contribution from its US toxicology testing business Apredica, which it acquired in August last year.
The firm also said it signed 38 new testing contracts in the six month period, including a ‘major’ one with the US Environmental protection Agency (EPA).
Baxter said he was ‘delighted’ with Cyprotex’ performance and predicted that “2012 will be a year of significant profits” achieved through reducing operating costs and “generally looking at how we run the business.”
He went onto explain that this would involve greater use of technologies to automate and streamline processes such as data handling, which he described as being highly labour intensive.
In vitro toxicology
Baxter also forecast tha in vitro toxicity testing would become an increasingly important growth driver.
The firm entered the field of in vitro toxicity testing, where cell cultures are used in place of animal models, when it bought Apredica which owned Cellumen and its CellCiphr assay platform.
Baxter said that: “Pharmaceutical firms keen on optimising their early R&D investment are bringing toxicology test into the drug discovery cycle even earlier to determine if a candidate has any potential toxicity issues as soon as possible.”
This trend he explained is driving interest in in vitro toxicology which is more predictive of a candidate compound's performance in humans than traditional animals models.
This is in keeping with Baxter decision, earlier this year, to join a number of industry peers and sign a letter expressing concerns about the continued reliance on animal models for toxicity testing.
Analyst reaction
Cyprotex’ H1 results were generally well received, particularly the revenue growth the firm achieved during the period
In a research note Shawn Manning from Singer CM said: “We reiterate our positive view on the stock, although note that the company [Cyprotex] now clearly needs to reassure investors by restoring operating margins whilst maintaining growth.
Manning cited the firm’s partnership with drug transporter firm Solvo, the new product it plans to launch later this year and expansion of its US operations as key part of this reassurance.