Charles River moves forward with plans to re-open Massachusetts preclinical site
“We have significant interest from biotech clients to open Shrewsbury as we’re the closest CRO to many of them,” CRL CEO James Foster told investors in the company’s quarterly earnings call on Wednesday. The company now has a devoted team looking at the site’s re-opening, though initially the site will open for non-GLP (Good Laboratory Practice) services.
“Once it’s open, it’ll be more real to our clients and then we’ll assess the demand for GLP toxicology services, but that’ll be a second step that we won’t make until demand is ready,” Foster said.
He estimated that it will probably take a couple of years “to hire staff, put back some of the equipment, validate equipment and train staff.”
The site, which included about 300 jobs, was previously closed in 2010 due to lack of demand.
The announcement comes as Charles River still has capacity to fill at other sites. Foster specifically mentioned space at the company’s preclinical site in Reno, NV, that still needs filling, as well as “small pockets of space in a few other areas that need to fill.”
Earnings
The developments in capacity in expansion come as Charles River has seen steady growth in its earnings. Revenue for the company increased in this latest quarter almost 14% from Q4 in 2013, driven by the Discovery and Safety Assessment and manufacturing support segments. Acquisitions in the early development space in 2014, which include Argenta, BioFocus, and ChanTest, contributed 9.3% to consolidated Q4 revenue growth.
And Charles River might not be done with M&A as Foster noted to investors in the call that the preclinical sector is ripe for further consolidation “based on input we have from conversations with other companies, and given the fact that consolidation appears to be predictable in our business. Like many service-providing businesses, there’s strength of scale and expectations from clients.”
Consolidation in the sector also appears to be playing to Charles River’s strengths as Foster told investors that the Covance-LabCorp merger is already providing opportunities as “movement of competitors to new ownership can be concerning to clients.” He added that the deal “bodes well for us to engage with additional clients.”
And as far as where pricing trends appear to be headed, Foster added that the “pricing environment feels slightly better,” and he said he remains “guardedly optimistic” that they’ll continue to improve.
“We’re not the at the lowest price point most of the time,” Foster said, noting that clients seem willing to pay a premium for Charles River’s services.
Meanwhile, Foster said the company is pushing for more strategic relationships with larger pharma and biotech clients. He said the company has reached out to the heads of all large pharma R&D heads “to expand current deals and get new ones” and that most of the clients appear poised to forge deals that span the breadth of Charles River’s product lines.
