Charles River's income slides on flat sales

Charles River Labs ($CRL) saw its net profits decline about 2.3% last quarter, as rising costs negated 1.8% revenue growth.

Sales came in at $291.2 million for the pre-clinical CRO, above $286 million in the same period last year but not enough to offset an increase in charges, leaving Charles River with $25.9 million in net income, down from $26.5 million.

On the quarter, Charles River's flagship research models and services business declined about 0.4% to $182.5 million, while preclinical services grew 5.8% to $108.7 million in revenue.

CEO James Foster blames the tepid quarterly results on biopharma clients' early-year research cuts, but Charles River is expecting a turnaround once drugmakers get their budgets in order and seek out cost-efficient outsourcing.

"As our clients further endeavor to enhance the efficiency of their research and development efforts, they are increasingly seeking more flexible outsourcing solutions for their essential, early-stage services," Foster said. "As the in vivo biology partner of choice, Charles River is uniquely positioned to benefit from this inflection point in biopharmaceutical outsourcing."

Charles River is sticking to its earlier revenue guidance, expecting full-year sales growth between 4% and 6%, excluding the impact of foreign currency.

The CRO is counting on some of-late dealmaking to pick up annual revenue, particularly the $27 million it paid for a majority stake of China's Vital River--a deal it expects to increase sales about 1%--and a partnership with AstraZeneca ($AZN) the company predicts will add another 1% to 2013 revenue.

- read the CRO's financials