Charles River boosts IT expenses to gain edge on outsourcers

By Nick Taylor

Charles River ($CRL) increased global IT spending by 20% in the second quarter as it continued investing to win strategic deals. And the policy is paying dividends, with execs calling IT a driver of market share gains in the quarter.

Faced with a faltering demand and a fierce competitive landscape, Charles River bolstered its IT infrastructure to gain an edge on CRO rivals. This strategy continued into the second quarter when global IT costs jumped 20% on efforts to meet the expectations of clients.

"They want to get online and see their data," CEO James Foster told analysts at today's investor meeting. Clients have two main demands from data shared online: It must be confidential and it must be available in real-time. IT investments are needed to meet both of these requests.

Charles River talked up its IT systems throughout the investor day, with execs telling analysts the capabilities help it win strategic deals. As early development demand is flat, Charles River looks to strategic deal-driven market share gains to drive growth. IT is key to the strategy and comes as other major CROs such as Quintiles and Parexel International tout their info tech capabilities to set themselves apart.

"The actions we have taken over the last four years to harmonize and standardize our preclinical sites have been instrumental in giving our clients the confidence to place work at multiple sites. Data is easily accessible and consistent, regardless of site," Foster said. IT assets played a role in an undisclosed Big Pharma choosing Charles River as its partner late in 2011. Foster views the strategic deal as a template for future partnerships and indications are that it is already recouping IT investments.

"The stronger top-line performance in preclinical services appears to have been primarily driven by the ramping strategic partnership," John Kreger, equity analyst at William Blair, told investors. Foster confirmed the importance of the deal, particularly for in-life models, at the investor day.

To meet the needs of the client Charles River has built a "quasi-unique" IT interface and expects to make similar investments for each strategic partner. Tailoring the IT system each time brings Charles River closer to its goal of becoming an integral part of clients' drug development teams.

- here's the company's quarterly report
- watch the investor day webcast