ALS rethinks stake in pharma R&D business Nuvisan

afr.com:

ALS is evaluating its minority stake in troubled European drug research business Nuvisan, contemplating an exit or even taking full control of the asset, after the clinical outsourcing business delivered an unprofitable half.

Shares of ALS rallied on Tuesday on a more upbeat outlook. PHIL CARRICK

Group chief financial officer Luis Damasceno revealed he would be leaving in January, having missed out on the chief executive job, and indicating he will forgo a controversial retention bonus worth more than $800,000.

Shares in ALS, which tests everything from drugs to gold, rallied 6.3 per cent to $11.35 on Tuesday after reporting a positive outlook for key segments for the upcoming financial year.

But cutbacks in spending on drug research and development and tougher economic conditions were partly blamed for the laboratory testing giant revealing a hefty margin squeeze.

ALS posted a 9.4 per cent drop in profit for the six months to September 30 of $134 million. The company argued underlying profit, which strips out costs such as software development or start-up expenses, fell a more modest 1.9 per cent to $158.4 million.

Carter Bar analyst Peter Drew said the result was solid, overall: “You can see they’ve controlled costs well,” he said.

The life sciences division suffered a 2.01 percentage point fall in margins, despite an improvement in areas such as environmental testing.

“The margin contraction reflects the challenging economic environment and reduced new product development in the pharmaceutical business,” ALS said. That included a reduced level of funding for new drugs, with such funding normalising to pre-pandemic levels, ALS said.

The commentary matches that given earlier this year by testing rivals such as