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news.Charles River Laboratories (CRL) has decided to suspend operations at its Preclinical Services (PCS) facility in Shrewsbury, Massachusetts, untill the middle of 2010, when ongoing in-life studies will have been completed. Charles River plans to resume operations when global preclinical market conditions improve and the company requires additional capacity.
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The suspension of operations at the facility is expected to reduce operating costs by approximately $20m in 2010, with an annualised run-rate of approximately $25m. As a result of this decision, the company expects to record charges of approximately $7m, primarily in the first quarter of 2010, for severance and related costs.
The company said that both the charges and any losses associated with the PCS Massachusetts action will be excluded from non-GAAP results. The company has not completed its impairment analysis for the facility at this time. The company anticipates that suspension of operations will likely result in some loss of revenue in 2010, but expects to retain the majority of the business and provide the services at other PCS sites.
James Foster, chairman, president and CEO of CRL, said: “Based on fourth-quarter preclinical business trends consistent with our expectations and positive early indications for the first quarter, we continue to believe that the preclinical market will begin to show some improvement in the second quarter of 2010. However, the extended softness in preclinical market demand for the last fifteen months has resulted in excess capacity throughout the contract research industry and in our own global network of PCS facilities.
“We have thoroughly evaluated the anticipated demand and our available capacity, and determined that the leaner infrastructure will improve our PCS operating margin while providing us with sufficient capacity to meet the expected upturn in demand for preclinical services in the biopharmaceutical industry.”