Charles River Laboratories (CRL) has taken further steps to address weak demand in its Preclinical Services (PCS) business by unifying the PCS operations with its better-performing Research Models and Services (RMS) unit under a new regional management structure.
The re-alignment will “enhance our ability to provide clients with a seamless and integrated portfolio of the essential products and services required to support their drug development programmes”, CRL said.
While the PCS and RMS operations will now effectively be managed as one business on a regional basis, CRL does not expect its financial segment reporting to change after the reshuffle.
Rather, the aim is that “strengthening the linkage” between the PCS and RMS businesses will “lay the foundation for continued process improvement and enhanced operating efficiency across our portfolio”, enhancing CRL’s status as “the world’s premier early-stage contract research organisation”, the US-based company noted.
The performance of CRL’s preclinical services unit has consistently lagged behind that of the research models segment of late, prompting a string of cost-cutting and other initiatives in an effort to restore momentum to the PCS business.
In the second quarter of 2011, net sales for the RMS segment were up by 6.6% year on year while PCS sales from continuing operations declined by 9.3%.
Charles River blamed the latter result mainly on persistent soft demand for PCS services from large pharmaceutical clients as well as the impact of sales mix, which continued to be weighted more heavily towards short-term studies.
Last December, CRL announced it was pursuing “strategic alternatives for certain non-strategic or underperforming Preclinical Services assets”.
The company had already said in January 2010 that it would suspend by the middle of the year operations at its US PCS facility in Shrewsbury, Massachusetts. In the third quarter f 2010, CRL announced it was closing down a leased satellite PCS facility in Laval, Canada.
As it indicated in its last set of results, the company has now closed its PCS facility in China, as well as suspending operations at the Massachusetts site, while it plans to dispose of another US PCS facility in Arkansas.
Combined operating losses from the PCS units in China, Massachusetts and Arkansas during the second quarter of 2011 were US$2.66 million, compared with US$3.48 million in the same quarter last year.
The rationale behind unifying the RMS and PCS businesses is that one should provide a gateway to the other as part of a more comprehensive regional or global offering.
“As our clients continue to transform their business models, we must evolve with them,” commented James Foster, chairman, president and chief executive officer of Charles River Laboratories.
“Unifying these two businesses will improve client access to our extensive in vivo expertise and enable us to provide more flexible solutions to their drug development needs,” Foster added. “These solutions can be structured either globally or regionally, depending on the clients’ requirements.”
The combined PCS/RMS businesses will now be managed “primarily” in two regions, North America and Europe/Asia, CRL noted.
Davide Molho, currently head of the global RMS business, will assume the role of corporate executive vice president and president, North American Operations at CRL. He will be responsible for overseeing the unified RMS and PCS businesses in North America.
Jörg Geller, CRL’s corporate senior vice president of Japanese operations and Select Research Model Businesses is promoted to corporate executive vice president and president, European & Asian Operations, responsible for overseeing the unified RMS and PCS businesses in Europe and Asia.
CRL also moved Nancy Gillett, corporate executive vice president and president of Global Pre-Clinical Services, into the newly created role of corporate executive vice president and chief scientific officer, where she will provide “senior-level scientific guidance and oversight to Charles River’s global businesses”.
In her new position, Dr Gillett will ensure that “scientific excellence remains at the forefront in supporting our customers”, while maintaining “oversight and ongoing involvement in scientific aspects of our merger and acquisition activities”, CRL added.