Charles River Laboratories' (NYSE:CRL) first-quarter results indicate that the provider of drug development products and services is riding a wave of strong demand for its offerings. Going forward, the company's range of services from drug discovery through clinical development should help it maintain stable growth over the long haul.
The firm announced that first-quarter revenue was $273.7 million, a 58.6% increase over the first quarter last year, while net income rose 56.8% to $27.6 million. The surge in the top and bottom lines was primarily driven by Charles River's purchase of Inveresk Research, completed last October.
Charles River is seeing robust demand for its two largest businesses, research models and services and preclinical services segments. In the research model area, the firm is optimistic about business overseas, where it has recently opened new facilities in anticipation of double-digit growth. Charles River likewise is responding to positive demand in the preclinical area with new capacity, as it recently opened new space in Montreal and expects to launch additional capacity in Edinburgh, Scotland, by the first quarter of 2006.
The one laggard in the group was the clinical services area, as new business signings in the last couple of quarters have been disappointing. However, the clinical services division is the smallest part of Charles River's business, constituting 11.6% of revenue in the first quarter. Further, Charles River indicated that it received a number of verbal contract awards in the first quarter, so performance should pick up.
Looking ahead, Charles River's chief objective will likely be to lock in dedicated capacity for its preclinical and clinical services business, along the lines of agreements signed by rival Covance (NYSE:CVD). Even without such deals, though, Charles River's diversified business portfolio looks like a formula for success.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
