US-based contract research organisation (CRO) Kendle International reported an 11.4% increase in operating income to US$15.9 million for the third quarter ended 30 September. Net service revenues, which exclude reimbursable out-of-pocket costs, were 24.7% higher at US$124.8 million.
Operating income and net service revenues were slightly below the level of the second quarter, when they jumped 47.8% to US$16.1 million and 29.8% to US$127.0 million. Kendle also adjusted its full-year financial guidance, with a slightly less optimistic projection for net service revenues and operating margin but a higher forecast for diluted earnings per share (EPS).
In Kendle’s core late-stage clinical development segment, net service revenues for the third quarter climbed 18.7% year on year to US$110.9 million while operating income was 6.7% ahead at US$26.7 million.
The much smaller early-stage business was again boosted by the acquisition in early June of DecisionLine Clinical Research Corporation, a privately owned Canadian CRO specialising in Phase I studies. DecisionLine accounted for around 6% of growth in net service revenues across Kendle’s operations during the quarter. Early-stage revenues more than doubled (+139.5%) over the third quarter of 2007 to US$11.2 million and operating income in the segment spiralled from US$118,000 to US$1.21 million.
Net service revenues from support and other services grew by 36.1% to US$2.72 million but this segment recorded an operating loss of US$12.0 million, compared with a US$10.8 million loss in the third quarter of 2007.
On a regional basis, 50% of Kendle’s net service revenues for the latest quarter were generated in North America, against 51% in the same period last year. Europe’s share of overall net service revenues dropped from 41% to 37% while Latin America moved up from 5% to 9% of the total. The Asia Pacific region accounted for 4% of net service revenues in Q3 2008 and 3% in Q3 2007.
New business awards for the quarter hit a record US$212 million, 21% more than the in year-before period. Total business authorisations as of 30 September 2008 were US$1.0 billion, 16% higher than at 31 December 2007 and up by 22% year on year. Contract cancellations in Q3 2008 totalled US$38 million or 18% of gross sales. The net book-to-bill ratio for the three months ended 30 September was 1.4 to 1.
“Our impressive results for the quarter are a testament to the strength of our late-stage markets, the value of our business model and the expertise and determination of our associates worldwide,” commented chairman and chief executive officer Candace Kendle. “Coupled with our broad therapeutic and geographic reach, we believe we are well positioned to achieve our strategic growth initiatives and to meet our customers’ emerging outsourcing needs.”
Kendle’s guidance for net service revenues in 2008 is now US$485-US$500 million, compared with the previous projection of US$490-US$500 million. The CRO expects its operating margin for the full year to be 12.5%-13.5% (13-14% previously) and diluted EPS to reach US$2.10-US$2.25, above the range of US$2.00-US$2.15 quoted at the second-quarter stage.
