Charles River Laboratories, Wilmington, MA, announced yesterday that it was acquiring Shanghai-based Wuxi Apptec Tech for $1.6 B in cash and stock. This apparently represents the largest foreign takeover of a Chinese company.
Charles River, with $1.2 B in 2009 sales, will add $270 M in sales from Wuxi, 4000 employees, and over 1.8 M sq. ft. in lab space in China. Wuxi also has 3 significant operations in Atlanta, Philadelphia and St. Paul, MN with R&D and manufacturing capability.
Chas River also picks up state-of-the-art, large animal testing capability, including monkeys, and gains access to testing facilities in Shanghai, Suzhou and Tianjin in China - where laboratory and labor costs are a bargain.
Jinsong Du, an analyst at Credit Suisse, states "This is a vote of confidence that China will be the main location for drug R&D outsourcing in the future." He also notes that Chas River gets to take out a competitor with this acquisition.
Because major new drugs may require 15 yrs of development time at a cost exceeding $1.5 B, a growing number of Big Pharma are trying to find ways to cut costs and speed development through the pipeline. Many are moving their research and development, manufacturing and clinical trial work to places like India and China due the current cost advantages.
"This transaction revolutionizes the contract research landscape by creating the only global contract research organization, or CRO, to fully offer integrated research and drug development services from molecule creation to first-in-human testing," said President & CEO James C. Foster of Charles River. Charles River can now offer services in the US, EU and China. Foster says "...many of our clients consider China to be the new frontier for drug development."
The deal likely couldn't come too soon for Charles River as they reported Qtr 1 earnings fell well short of expectations and were 22.4% below last year. Sales were down to $297.4 M in Qtr 1 2010 versus $301.5 M in Qtr 1 2009.
Financial details of the acquisition can be found here and were obtained from Charles River's website.
Posted by Bruce Lehr April 27th 2010