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UPDATE 1-Charles River sees rise in demand, shares up
February 9, 2010 / 4:31 PM / 8 years ago

UPDATE 1-Charles River sees rise in demand, shares up

* Sees demand ramping up slowly after a lull period

* Says most of Q1, Q2 sales in backlog

* Says to use free cash flow for strategic deals

* Shares rise 3 pct

Feb 9 (Reuters) - Clinical research company Charles River Laboratories International Inc (CRL.N) said it expects demand to slowly ramp up as customers refocus their attention on the early stages of drug development.

The company, which posted better-than-expected results on Monday, said a majority of its first-quarter sales and a substantial portion of second-quarter sales are already in backlog.

“We view 2010 as the year of slow but steady recovery,” Chief Executive James Foster said on a conference call.

Contract research organizations, which did brisk business in the early days of the economic slowdown as drugmakers looked at cheaper outsourcing options to cut costs, were hit hard when a full-blown recession forced many smaller drugmakers to abandon some research completely.

However, Charles River expects a pick up in outsourcing of research and development activities.

“Ultimately, with limited growth in R&D dollars and pressure to improve their productivity, we believe that biopharmaceutical companies will continue to embrace strategic outsourcing,” Foster said.

Charles River expects free cash flow of $130 million to $150 million in 2010, compared with $138.7 million in 2009. With limited debt repayment obligations, it would put more money for strategic acquisitions, the CEO said.

The Wilmington, Massachusetts-based company also forecast capital expenditures of about $60 million to $70 million, down from $80 million it spent in 2009. [ID:nWNAB4958]

On Monday, Charles River posted fourth-quarter results above market estimates. [ID:nSGE6170LY]

Charles River shares were up $1.12 at $36.81 in late morning trade Tuesday on Nasdaq. (Reporting by Anuradha Ramanathan in Bangalore; Editing by Gopakumar Warrier)

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