Contrasting early phase performance for CRL and Covance in Q3

08-Nov-2011 - Last updated on 08-Nov-2011 at 13:23 GMT

Charles River Laboratories (CRL) continued to experience low demand for preclinical services in Q3, while Covance's early-phase business saw revenue growth.

First up is CRL whose third quarter results show that net sales from continuing operations increased 2.5 per cent to $277.6m (EUR201m) with operating income reaching $37.1m, up from the $6.5m posted in the comparable quarter last year.

However, within this revenue from CRL’s preclinical services business declined, falling nearly 5 per cent to $106.1m, while the contribution from its research models business increased 7.7 per cent to $175m.

The contract research organisation (CRO) said the fall in preclinical revenue - which continues the pattern seen in previous quarters - was due to “to a continuing preponderance of shorter term, less complex studies in the sales mix, as well as fewer GLP safety assessment studies.”

It highlighted falling demand from small and mid-tier biopharmaceutical as a key factor, contrasting this with its business with larger biopharmaceutical clients which it said was stable in the quarter.

CRL also set out its plans to try and combat this decline – explaining that it will reduce its headcount by 2 per cent over the next three months, with the majority of the cuts being in its PCS business.

“This action is expected to generate annual savings of approximately $7,500 beginning in 2012. We anticipate recording severance and other costs of approximately $3,500 in the fourth-quarter of 2011.”

Covance early phase gains

Covance also saw topline growth in the quarter, posting net revenues of $543.3m which is an increase of 13.9 per cent on the year earlier three month period.

However, unlike CRL, this topline growth was matched by both Covance’s business segments. Early-stage development services generated $240.2m, up 16.3 per cent, and the firm’s late-stage business brought in $303m, which was an increase of around 12 per cent.

Covance said the early phase growth was “Driven by the results from our new Alnwick, UK and Porcheville, France sites. In addition, analytical chemistry, North American toxicology, and clinical pharmacology each experienced strong year-on-year growth.

For the late stage it said: “Growth over both periods was primarily driven by the continued strong performance in clinical development coupled with a weaker US dollar. Foreign exchange provided 800 basis points of year-on-year revenue growth.”

But despite this Covance lowered its full-year earnings estimate to $2.70 a share from the $2.60 to $2.80 it predicted in the summer results season.