CRL to buy WuXi for $1.6bn

By Nick Taylor

- Last updated on GMT

Related tags: Revenue

CRL to buy WuXi for $1.6bn
Charles River Laboratories (CRL) is to acquire WuXi PharmaTech for $1.6bn (€1.2bn), creating a global CRO capable of offering fully integrated services from molecule creation to first-in-human testing.

The acquisition will expand CRL’s operations in China and the US and allow it to offer services spanning biology, chemistry and manufacturing. CRL believes this “revolutionises the contract research landscape​” and puts it at the forefront of the preclinical sector.

For the first time, our existing and potential clients will be able to obtain support for their early-stage drug development needs from one company with unparalleled scientific depth and breadth in chemistry and biology​”, explained James Foster, CEO and president of CRL.

WuXi has a significant presence in China, with laboratory services in this geography being the main driver of growth in recent financial results. CRL already operates a laboratory in Shanghai, China but the acquisition will dramatically increase its presence in a key market.

In addition, WuXi has chemistry expertise which will complement CRL’s existing biology capabilities, such as good laboratory practice (GLP) compliant toxicology services, to create a contract research organisation (CRO) with a wide ranging offering.

Consolidation

The deal fits with predictions that company’s in the CRO sector will consolidate, or find a niche, to remain competitive in the changing pharma environment. Consolidating gives CROs the breadth of services and geographic reach needed to be strategic partners to big pharma companies.

Furthermore, the acquisition will allow CRL to consolidate corporate infrastructure and realise operating efficiencies, leading to predicted pre-tax savings of $20m a year from 2011 onwards.

CRL believes revenue growth will also increase because of the combined company’s broader portfolio of services, larger global footprint and opportunity to sell upstream and downstream.

Q1 results

The importance of finding ways to boost revenues and cut costs was emphasised by CRL’s first quarter financial results, which were also released today. Net sales declined by 1.4 per cent, primarily because of a 10.6 per cent drop in revenues from the preclinical services division.

Falling sales and rising costs resulted in CRL posting an operating income of $29.5m. In the comparable periods of 2009 and 2008 CRL recorded operating incomes of $39.9m and $63.5m respectively.

Details of the deal

The deal was unanimously approved by the companies’ boards of directors. CRL has agreed to pay $21.25 per WuXi share, using $11.25 in cash and $10 of its common stock. The acquisition is subject to stockholder and regulatory approval and is expected to close in the fourth quarter

CRL and WuXi will form a joint integration team to assess to logistics of combining operations. Foster will continue to lead the combined company, which will retain the name CRL, and Ge Li, CEO of WuXi, will become president of global discovery and China services.

Related topics: Upstream Processing

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