Speaking on Wednesday during a breakout session at JP Morgan’s Healthcare Conference in San Francisco, James Foster, president and CEO of CRL, told investors the company would “need to have a meaningful amount of business before we open it, but it’s a facility we will re-open because there’s so much going on in the life sciences industry these days.”
He added that biotech companies in the Boston area have said in recent talks that they’re interested in the site due to its proximity to the area. “Two to three large clients could say they want to open it” and pay for the space, Foster said.
“We’re looking at different scenarios of how and when to do that…we won’t open it and have it be a big drag on our P&L [profits and losses],” he added.
The site closed in 2010 due to low demand, which resulted in the loss of nearly 300 jobs and reduced the company’s operating costs by about $20m.
The re-opening of the site would be another clear indicator that CROs’ preclinical businesses are back on track to pick up steam after a series of down years in the late 2000s.
“We’ve had excess capacity [in the preclinical business] since 2009, though industry indications are that preclinical industry ended 2014 at about 70%” capacity, he said, noting the company is “considerably higher now…we would open smaller amounts of space to meet increasing demand and we can open it relatively quickly.”
As far as pricing, Foster said the situation “is stable” and the company doesn’t have to be the lowest bidder to win a contract. “We’re finding lots of clients are willing to pay for quality, science and responsiveness,” he added.
From 2009 through 2011 the company saw declining revenue in its toxicology business, and only in 2013 and 2014 did the revenue see an increase, he said, though he remains “confident we can see” high single digit growth as there’s “still a fair amount of space in the system.”
Client Shift
Meanwhile, Foster also noted that the company’s client makeup has shifted over the past couple of years and now relies more heavily on academia and government contracts, and biotech companies are now represented more than big pharma clients.
“We have seen all clients embrace some kind of outsourcing, and typically for a better value proposition,” he added.