Market volatility continues to hurt Kendle International Inc. (NSDQ:KNDL) as the contract research organization saw its profits plummet 82 percent in the third quarter.
The company “remains cautious” in its short-term outlook for the CRO industry, due to market volatility, CEO Candace Kendle said in a conference call with analysts today.
Third-quarter net income came in at $1.5 million, or 10 cents per share, according to a statement from the company. That beat analysts’ expectations of 4 cents per share. Revenues dropped 16 percent to $113 million.
Exceeding analysts’ projections likely pushed the company’s stock higher in early trading today. The company’s shares surged 13 percent to $10.70.
Kendle stressed that she’s “not pessimistic” about her company’s long-term outlook and sees reason for optimism as it expands relationships with existing customers and forges partnerships with new ones.
One bright spot for the company was India, where its operations have doubled in size recently. Kendle expects that growth to continue because the company has received “significant interest” in doing more work for several customers in India, Kendle said.
Kendle is mired in an awkward spot between the biopharmaceutical industry’s first and second tiers — and likely will remain there until it sells itself or makes a big acquisition. A sale seems the more likely outcome, judging from its balance sheet. At the end of the third quarter, Kendle had $17 million in cash on hand, down from $53 million at the end of the year. The company’s position hasn’t gone unnoticed by investors. Shares closed Monday at $9.51, down 56 percent from a 52-week high.
Goldman Sachs is maintaining its “sell” rating and $8.50 price target on Kendle.
Going forward, the company expects to maintain its focus on controlling costs. Selling, general and administrative expenses declined 8 percent to $33 million in the quarter, but Kendle admitted the company still has work to do in that area.
“We realize our SG&A expenses are out of line for a business of this size,” Kendle said. The company has about 3,400 employees, with nearly two-thirds outside the United States.