Last year’s acquisition of Charles River Laboratories’ Phase II-IV clinical services business took some of the edge off a vigorous performance by Kendle International in the second quarter.
The US-based contract research organisation (CRO) reported record net service revenues of US$97.8 million for the quarter, 57.5% more than in the same period last year. Operating income was also on a roll, shooting up by 70.1% over the second quarter of 2006 to US$10.9 million.
That was despite depreciation and amortisation costs of US$3.63 million compared with US$1.78 million in last year’s quarter. Notably, Kendle sustained a US$1.04 million charge for the amortisation of acquired intangibles related to the deal with Charles River, which was completed in August 2006.
It was at the net income level, though, that the acquisition – which hoisted Kendle to the number four position in the Phase II-IV segment worldwide – really hit hard. The main culprit was interest expenses of US$4.33 million against US$51,000 in Q2 2006, most of it servicing debt incurred to finance the purchase of the Phase II-IV business. As a result, pre-tax income for the second quarter came in at US$US$6.58 million, 3.3% down on last year’s quarter, and net income was just 1% ahead at US$4.33 million.
Kendle also reduced its full-year guidance for earnings per share (EPS) by US$0.18 to US$1.32 to US$1.52, mainly reflecting a non-cash charge for the write-off of term debt financing fees. Guidance for net service revenue in the full year remains in the previously stated range of US$400-US$420 million, with the expectation that revenues will be “at the lower end of this range”.
North America and Europe are still firmly the hub of Kendle’s contract research operations. During the second quarter, 50% of net service revenues came from North America, 42% from Europe, 5% from Latin America and 3% from the Asia Pacific region.
New business awards were worth US$165 million in the quarter, nearly double the tally in the second quarter of 2006. Contract cancellations came to roughly US$13 million. Total business authorisations, consisting of signed backlog and verbally awarded business, stood at US$758 million as of 30 June 2007, 8% up on 31 March 2007.
Chairman and chief executive officer Candace Kendle said the CRO’s ability to build strategic relationships was increasingly being recognised as a key differentiator. Kendle was recently named ‘Top CRO to Work With’ in the Thomson CenterWatch 2007 survey of US investigative sites.
The company “has never been stronger and we look forward to the remainder of 2007 with great confidence”, Dr Kendle said.