September 8, 2014
By Mark Terry, BioSpace.com Breaking News Staff
Charles River Laboratories , an early-phase contract research organization (CRO), announced it will lay off between 26 and 30 employees. This news follows a decision by the U.S. National Cancer Institute (NCI) to end a contract with the company to supply rodent models for cancer research. The contact was reportedly worth approximately $12 million annually.
The original contract did not expire until September 2016, but the NCI terminated the contract as of September 2014. It’s not clear why the NCI decided an early end to the contract, although there is some speculation it is due to policy changes rather than budget cuts.
Charles River earned approximately $89 million over the life of this particular contract, and it is believed that about 76 of the 94 employees in the company’s Frederick, Maryland office were involved in support of the NCI contract.
This does put Charles River Laboratories in more direct competition with Harlan Labs. Harlan Labs recently merged with Huntingdon Life Sciencesin May of 2014. The merged entity has two operating divisions, Research Models and Services, and Contract Research Services. The merged companies are expected to generate about $500 million annually in revenue.
Aside from the loss of this NCI contract, CRL has otherwise had a good year. Their 2Q earnings were $0.97 per share, dramatically higher than the consensus of $0.75, and revenues were $341 million, up from the consensus of $328 million. In a late-August report, shares were up 42% from June of 2013.
The NCI moved some strains of animal models in-house. However, according to Birgit Girshick, corporate senior Vice President of Charles River’s research models and global biopharmaceutical services, indicated that 95% of the strains are only available through their company. Girshick said, Charles River has had an “extremely positive reception from grantees, who seem relieved that they can continue to get those models…[we] haven’t found anyone who’s looking to switch to another supplier.”
In addition, Charles River has changed some of its business models that will allow its customers to transition animal orders to the company without delay. This will allow researchers to avoid having to validate new animal models. Girshick said, “What we’ve done is converted the Frederick business to a full CRL site — grantees will have access to the same NCI models, which enables them to save time on validating animal models from another company.”
