Charles River Laboratories reported a 53.5% jump in net income from continuing operations during the second quarter, reflecting several recent acquisitions and demand growth, as well as changes in currency exchange rates that prompted the company to raise its revenue growth guidance for this year.
Charles River finished the second quarter with net income from continuing operations attributable to common shareholders of $54 million, up from $35.2 million for Q2 2016, on a generally accepted accounting principles (GAAP) basis.
The company generated $469.1 million in revenue from continuing operations, up 8.1% from $434.1 million a year earlier. Charles River has raised its revenue guidance for 2017, increasing the projected range of revenue increase this year from between 7.5% to 9% to between 8.5% and 10%.
Second-quarter diluted earnings per share (EPS) were $1.12, up 53.4% from $0.73 in the year-ago quarter, on a GAAP basis. The company left unchanged its GAAP EPS estimated range for this year of $4.18 to $4.33, as well as its non-GAAP estimated EPS range of $5 to $5.15.
“The positive factors which contributed to the strong start to the year continued in the second quarter of 2017. Demand for our products and services remained robust, as clients chose to partner with Charles River to take advantage of our strong portfolio and scientific expertise,” Charles River chairman, president, and CEO James C. Foster said in a statement.
The company’s results reflected in part a rise in the GAAP operating margin for the Discovery and Safety Assessment (DSA) segment, to 20.5% from 14.6% in Q2 2016.
The increase was due in part, to more favorable foreign exchange rates and lower costs associated with the acquisition and integration of WIL Research, Charles River said. Charles River purchased WIL Research last year for approximately $585 million, in a deal designed to enhance the buyer’s global footprint, scientific capabilities, and access to growing market segments.
For DSA, revenue from continuing operations rose 14% year-over-year, to $252.1 million in Q2 2017, with the acquisitions of WIL Research and Agilux Laboratories contributing 6.9% to DSA revenue growth, Charles River said. Last September, Charles River disclosed its $64 million acquisition of Agilux, a CRO focused on integrated discovery small- and large-molecule bioanalytical services, as well as drug metabolism, pharmacokinetic, and pharmacology services.
“Organic” revenue growth
“Organic” revenue growth—reported revenue growth adjusted for acquisitions and foreign exchange—rose 9.3% for the DSA segment. The revenue increase was driven primarily by demand from mid-tier biotechnology clients, and higher sales to global biopharmaceutical clients, Charles River said
Charles River also benefited from growth in its Manufacturing Support segment, whose revenue rose 5.8% year-over-year to $93 million in the second quarter. Of that growth, Charles River’s acquisition of Blue Stream Laboratories contributed 1.9%, though growth was reduced 4.8% due to the selloff of its CDMO business to Quotient Clinical, a deal completed in February.
However, Manufacturing enjoyed organic revenue growth of 10.1%, due to increased demand in the company’s Microbial Solutions and Biologics Testing Solutions businesses—while the segment’s GAAP operating margin increased from 30.8% to 31.2%.
Charles River saw revenue dip for its Research Models and Services (RMS) to $124 million, down 0.8% over Q2 2016, with the company blaming foreign currency rates.
Organic revenue growth for the segment was 1%, primarily due to higher sales of research models in China and in the Insourcing Solutions and Genetically Engineered Models and Services (GEMS) businesses—though growth was partially offset by lower revenue in the Research Animal Diagnostic Services (RADS) business that helped deflate the RMS segment’s GAAP operating margin from to 27.1% in the second quarter from 28.3% a year earlier.
“By leveraging the investments we have made, and new ones we intend to make, we will continue to differentiate Charles River as the CRO partner of choice, which is the foundation for our future growth,” Foster added.
