The second quarter 2016 saw revenues of $434m (€390m) – an increase of 28% y-o-y - for Charles River Laboratories across all its business divisions, but in a conference call CEO Jim Foster marked out the firm’s manufacturing support and biologics businesses as key contributor.
“The biologics business reported a very strong year-over-year performance in the second quarter, with robust revenue growth as a result of strong demand for our biosafety and cell banking services,” he told stakeholders.
The sector supports the development of biologic drugs, and Foster attributed the growth – up 31% to $88m for the quarter - down to biologic and biosimilar drugs “which are representing an increasing proportion of drugs in development.”
Adding Stream to the River
With organic y-oy growth in the manufacturing business being around 13%, management was under no illusion that the firm has been bolstered by recent acquisitions.
The latest, announced in June, was the acquisition of Blue Stream laboratories, a bioanalytical firm which has added protein characterisation and cGMP assay validation technologies to CRL’s biologics and biosimilars development services.
“Although this is one of our smaller acquisitions, Blue Stream was a strategically important target, because its capabilities fit so well with ours,” Foster said yesterday.
“As a result of the acquisition, we can now provide a comprehensive portfolio, of both bioanalytical and biosafety testing services, with the ability to support biologic and biosimilar development from discovery through clinical phases and commercial manufacturing.”
Biotech bubble
The firm also attributed small and virtual biotech companies as a major driver for its revenue growth in Q2, and Foster remained confident the CRO would not be affected by either a drop in biotech funding.
“Even if biotech funding from the capital markets was to slow, we believe that biotech companies [have] sufficient cash on hand to fund research for a minimum of three years, a point of view which has been supported by a number of analyst reports.”
He added that cash positions are being reinforced by continued support from large pharma which is increasingly relying on biotech for new molecules, and while this has led to some consolidation in the industry, CRL has a large enough client - with the firm’s largest client represents less than 5% of revenues - to soften any negative impact.
“There's going to continue to be churn in our client base, there has been forever,” he said. “And our biotech clients will merge with one another and get bought, and occasionally some will go out of business, and every year hundreds more will start up.”
“All we can do is do the best quality work for them and even if companies get bought, it's likely that the buyer is a Charles River client and it's likely that we will continue to have the work.”