Charles River Laboratories International, Inc.
) recently completed its previously announced acquisition of 75%
ownership in Vital River for $27 million.
The acquisition deal was announced on October 30, 2012 and is
expected to contribute more than 1% to the top line in 2013 while
being slightly accretive to the bottom line.
Vital River is a commercial provider of research models and
related services in China. The company has been a licensee of
Charles River for the last ten years.
The acquisition will provide Charles River with access to
high-quality research models and associated services for drug
discovery and development in the emerging market of
Charles River expects demand for research models in China to
grow significantly in the coming years driven by consistent
expansion of drug development initiatives in academia, government
and biopharmaceutical companies. The company expects to capture a
sizeable market share for research models in China which is being
touted as the third-largest pharmaceutical market in the
The acquisition will also make Charles River the exclusive
global partner for the distribution of model creation services
which are offered through Beijing Vital Star Biotechnology.
These services include humanized model creation utilizing
inducible pluripotent stem cell and other technologies.
Charles River is on the lookout to strengthen its product
portfolio through acquisitions and partnerships. In August 2012,
Charles River acquired Accugenix, Inc. for $17 million to expand
its endotoxin and microbial detection (EMD) portfolio of products
The company also signed a partnership deal with
AstraZeneca ( AZN ) in
October 2012 to accelerate growth in the core safety assessment
Charles River is currently in talks with several large biopharma
companies and expects to convert a few of these discussions into
deals in 2013. These deals will support growth in 2013.
However, we were disappointed by the company's earnings guidance
for 2013 (provided in December 2012) which was well below
expectations even though revenue guidance was in-line with
expectations. Consequently, almost all the analysts providing
estimates for the stock have lowered their estimates for 2012 as
well as 2013.
We prefer to remain on the sidelines at this juncture and hence
have a Neutral recommendation on Charles River which carries a
Zacks #3 Rank (Hold). Right now, MedAssets,
Inc. ( MDAS ) looks attractive with a Zacks #1 Rank
(Strong Buy). ASTRAZENECA PLC (AZN): Free Stock Analysis
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