Celsis

Pharmaceutical support group Celsis is suffering as pharmaceutical industry clients cut back on research and development spend.

While recently released annual results to March showed stable group sales at $52.5m (£32m) and pre-tax profits up 22% to $12.8m, the company revealed at its annual meeting that the new year had got off to a bad start, with Celsis' two most profitable divisions, Rapid Detection and In Vitro, experiencing 'a slowdown in trading'.

Chairman Dr Jack Rowell revealed that the largest division by revenues, Rapid Detection, whose systems help pharmaceutical and consumer companies including Colgate Palmolive and GlaxoSmithKline to quickly detect contamination in their raw materials, ‘had a slow start to the quarter, but has regained momentum in June with strong instrument sales.’ Trading results for the year to-date are ‘behind last year’.

Furthermore, In Vitro, which helps ‘Big Pharma’ shorten the time it takes to develop drugs and with Rapid Detection makes up over 90% of Celsis' profits, has been even more badly affected. It has, says Rowell, ‘experienced a slow down in trading, particularly in Europe, and is significantly behind last year as the pharmaceutical industry continues to realign itself following recent consolidations and R&D spending reductions’.

Thankfully, outsourced laboratory testing arm Analytical Services is providing some stability, having experienced ‘sustained trading’ in the first three months of this year. With new management and sales personnel installed here, the board is ‘confident in the resilience of this increasingly efficient, customer focused business’.

Although Big Pharma are under more pressure than ever to reduce costs, they also seem to be cutting back spending on out-sourcing companies like Celsis. Its shares, first tipped here in 2003 at 23.5p and last December at 159.5p, have stumbled from a recent 204p high and now might be the time for long-time holders to take profits.