Charles River Laboratories International, Inc.
) recently signed a three-year collaboration agreement with
) to work on the latter's outsourced regulated safety assessment
and development drug metabolism and pharmacokinetics (DMKP).
The agreement is expected to end in 2015. AstraZeneca started
transferring projects to Charles River Labs earlier this year, a
process that will be completed by early 2013. The incremental
sales under the agreement may rise up to 1% of Charles River's
We note that Charles River Labs has been pretty active on the
deal-making front over the past few months. In August, the
company acquired privately held Accugenix, Inc. The acquisition
was valued at approximately $17 million. The acquisition has
boosted the company's in vitro (endotoxin and microbial
Erstwhile Accugenix, a world leader in cGMP compliant contract
microbial testing services, has provided microbial identification
services to various industries including the biopharmaceutical
and medical device industries.
Charles River expects the acquisition to have no impact on
2012 earnings, which are expected in the range of $2.60-$2.70 per
share. In 2013, the acquired business will account for 1% of
sales and be slightly accretive to earnings.
We are encouraged by the company's recent acquisitions and
agreements. We believe that the AstraZeneca agreement is a
positive move by the company.
Moreover, the Accugenix acquisition is in line with Charles
River's strategy of boosting its vitro business through product
extensions and acquisitions over the next few years. We are
pleased with the company's efforts of expanding the in vitro
business, which is its fastest growing business.
We currently have a Neutral recommendation on Charles River.
The stock carries a Zacks #2 Rank (Buy rating) in the short
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