Charles River Laboratories ‘weathers COVID challenges’ to see healthy growth

Charles River Labs has seen its revenue edge up despite COVID challenges as it looks to buy up cell therapy services provider Cellero.

For the second quarter, revenue was $682.6 million, an increase of 3.8% from $657.6 million from the year-ago period, although much of this growth, 3.2%, came from acquisitions and 0.8% from foreign exchange; cutting these out, organic revenue growth was 1.4%.

This was driven by its Discovery and Safety Assessment and Manufacturing Support segments, but dragged down, inevitably, by its Research Models and Services (RMS) segment,  due to the COVID-19 pandemic.

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Drilling down into the RMS numbers, revenue for the segment was $116.5 million in the second quarter, a drop of 14.3% from $136.1 million in the second quarter of 2019. Its HemaCare acquisition, signed off right at the start of the year, bumped up revenue by 4.7%, but organic revenue declined by 18.4%, “principally due to the impact of the COVID-19 pandemic, which reduced total RMS revenue by approximately $35 million in the second quarter.”

The CRO explained of the disruptions: “The COVID-19 pandemic had a meaningful impact on worldwide demand for research models due to closures and reduced on-site activities at the research sites of academic institutions and biopharmaceutical clients in North America, Europe, and Asia, as well as demand for HemaCare’s cellular products.

“RMS clients in each region began to gradually resume activities at their research sites during the second quarter, particularly in Europe and Asia, which resulted in an improvement in client ordering trends in June.”

In August, CRL also penned a deal to buy up Cellero, provider of cellular products for cell therapy biopharmas, and will complement Charles River’s HemaCare biz, which provides human primary cells and leukopaks for researchers. It will become a part of its CMS unit, with Charles River spending $38 million in cash on the deal.

Following the acquisition of Cellero, the CRO expects revenue growth for human-derived cellular products, including HemaCare, of at least 30% annually over the next five years, beginning from next year.

“As anticipated, we experienced challenges related to COVID-19 in the second quarter, principally in the RMS segment; however, the resilience of our business model enabled us to weather these challenges extremely well,” said James Foster, chairman, president and CEO.

“This resilience is demonstrated by our second-quarter financial performance, which widely exceeded our expectations. We were also pleased that clients of our research models business began to gradually resume activities at their research sites during the second quarter, which was earlier than anticipated.”

Foster added that he sees the COVID-19-related headwinds becoming “more moderate than previously anticipated,” and would thus be increasing its revenue growth and earnings per share guidance for 2020. “We believe the global scale, broad scientific capabilities, and flexible outsourcing solutions of our leading, early-stage portfolio continue to differentiate us in the marketplace and are enabling us to withstand the initial challenges of the COVID-19 pandemic,” he said.

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