Hurt by a slump in its drug-testing services business and continuing restructuring costs, profits for Charles River Laboratories International Inc. fell 18 percent during its September quarter.
The Wilmington, Mass.-based clinical research outsource firm said net income for the three months ended Sept. 30 was $37.3 milllion, or 57 cents per share, on $297.5 million in sales. That compares with $45.5 million in net income and $342.2 million in sales during same period last year.
CEO James Foster said biopharmaceutical companies have been slow to commit to studies of new products during the current economic slump. Clients eventually will need to restock pipelines, Foster said, but appear content to wait for the industry to absorb several big mergers and for Congressional efforts to reform healthcare.
Sales in the company’s pre-clinical service segment fell 24 percent from a year ago, declining to $134.2 million. Overall, segment revenues are off 20 percent so far this year. The falloff was less steep in Charles River’s research model segment, sliding $2.4 million, or 1.4 percent, to $163.3 million.
During an analyst conference in late September, Charles River executives said that although recent deals such as the Wyeth-Pfizer and the Merck and Schering-Plough mergers are on track to close by the end of the year, they aren’t expecting much of a thaw in spending on new-drug development until 2010.
Those remarks foreshadowed the company’s Nov. 2 announcement that it was lowering its guidance for the rest of the year. Charles River now expects overall sales to fall as much as 11 percent in 2009, with earnings in a range of $1.70 to $1.74 per share, down 16 cents per share from its previous forecast.
Earlier this year CRL began cutting jobs in its preclinical unit, as part of broader cost-cutting efforts, and laid off additional employees last month. The cuts should yield annual savings of about $30 million, but required an additional $2.5 million in severance costs during the quarter. Plant closings in Arkansas and Scotland, along with write-downs for older equipment and other impairment charges, shaved another $3 million from the bottom line.