In a move to advance its position in the fast-growing
outsourced discovery services market,
Charles River Laboratories International, Inc
) entered into a definitive agreement to acquire the contract
research organization (CRO) services division of Galapagos
The CRO division of Galapagos NV includes the businesses of
Argenta and BioFocus. Located in the U.K and the Netherlands,
both these businesses specialize in integrated drug discovery
services from target discovery through the delivery of
clinic-ready candidates to a broad range of pharmaceutical and
biotechnology companies. This will enable Charles River to engage
its clients earlier in the drug discovery process.
Both these businesses have a deep in vitro expertise which
includes medicinal chemistry and target discovery. In addition,
their expertise in invitro biology along with therapeutic area
expertise in respiratory, inflammation, oncology diseases will
also benefit Charles River.
Charles River will pay $179 million (based on current exchange
rates) for the acquisition. The purchase price also includes
future performance payments of up to $7 million.
Charles River expects to merge these businesses with its
Research Models & Services (RMS) segment. Both Argenta and
BioFocus generated combined sales of $87 million in 2013. Sales
are expected to grow by 10% in 2014.
Charles River expects to close the acquisition early in the
second quarter of 2014. The acquisition is expected to add
approximately 6% to the top line and 10 cents to the bottom line
in 2014. With the addition of these businesses, the RMS segment
will account for 24% of total company sales compared to 18% on a
standalone basis. The company also expects synergies from the
acquisitions in 2015 and beyond.
We are positive on the acquisition. The acquisition will place
Charles River as an early-stage CRO with a full range of services
from target discovery to Investigational New Drug (IND) filing,
including significant capabilities in medicinal chemistry and in
The client base for both these businesses include global
biopharma companies, mid tier, biotech and emerging companies as
well. As a result, the acquisition will also advance the
company's position as a market leader in the growing market for
out-sourced discovery services.
Currently, Charles River carries a Zacks Rank #3 (Hold).
Others stocks that look attractive include
Envision Healthcare Holdings, Inc.
Parexel International Corp.
). While ICON plc and Envision Healthcare carry a Zacks Rank #1
(Strong Buy), Parexel holds a Zacks Rank #2 (Buy).
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