Cyprotex diversifies after losing biggest customer

MACCLESFIELD-based drugs testing company Cyprotex reported a 43% increase in revenues to £3.5m during the first half of 2011 despite the loss of its biggest customer.

The company, which acquired US-based competitor Apredica in August last year, said that its earnings before interest, tax, depreciation and amortisation (EBITDA) also increased by 57% to £261,000, although a decision by its biggest customer to close its UK research facility impacted on pre-tax profits.

The company made a pre-tax profit of just £658, compared with £50,481 in the same period last year.

Cyprotex chairman Steve Harris described the firm’s revenue growth as “impressive given the general decline in drug-discovery R&D spending”.

Cyprotex offers both in-vitro and computer-simulated testing of new drugs to gauge potential toxicity problems, working largely with major pharma companies.

The firm said it had realigned its sales and marketing team in a bid to broaden its customer base, and that this had already begun to pay dividends. The number of new customers it deals with at its Macclesfield HQ increased to 38 (21), while it also gained 36 new customers at its US base.

Four of these new customers are likely to provide annual revenues of more than £250,000 each.

As a result, the company said that its reliance on a handful of big customers was waning. Its biggest customer was responsible for 22% iof all sales in 2009, but by the end of this year it expects that figure to drop to 11%.

The company also said that it has been investing significantly in a new product line which is expected to launch at a US conference within the next couple of months.

Harris argued that although the recent trend by drug discovery firms to cut research and development spend had impacted negatively on the business in the short-term with the loss of its biggest customer, it would prove to be a positive for Cyprotex in the longer term as more drug discovery companies decide to outsource the type of ADME Toxicity and other tests being carried by the firm.

“It is also causing early-stage drug discovery to shift to smaller, more innovative and cost-efficient firms, with the larger pharmaceutical firms obtaining the intellectual property of the smaller firms at a later point in development. All of these are long-term positive trends for Cyprotex.

“Revenue growth for the first half of 2011 has been strong with a substantial increase in our new customer base.  

“If the current rate of growth continues, we believe that the company is on course to return to our long-term trend of increasing revenues and profitability.”