Charles River Buys Argenta, BioFocus in Up to $179M Deal

Charles River Laboratories said today it will acquire the CRO services division of Galapagos—including the Argenta and BioFocus businesses—in an up-to-€134 million (approximately $186 million) deal designed to strengthen the acquiring CRO at a time when more biopharmas are outsourcing their drug discovery and preclinical services, by strengthening its offerings earlier in the drug development process.

Charles River will pay Galapagos €129 million cash (about $179 million) plus up to €5 million (about $7 million) in payments based on future performance. The acquisition is expected to close early in the second quarter, subject to customary closing conditions.

Argenta and BioFocus are both based in the U.K. Both businesses provide early drug discovery services that include medicinal chemistry, target discovery, and complex in vitro biology, as well as offer therapeutic area expertise in respiratory, inflammation, oncology, and CNS disease. The companies generated a combined €63 million (about $87 million) in 2013 sales, a figure expected to grow about 10% this year.

Charles River reasons that adding the early-stage capabilities will prove attractive to companies seeking a single provider for outsourced drug discovery and early-stage development programs. Argenta and BioFocus have discovered and developed more than 50 drug candidates for a variety of biopharmas from emerging companies to global giants.

“It’s precisely in line with our strategy to build a broader portfolio of essential products and services which support the drug discovery and development continuum, and the increasing virtualization of the biopharmaceutical industry,” James C. Foster, Charles River’s chairman, president, and CEO told investors this morning during a webcast to discuss the acquisition. “This is an exceptional fit with our in vivo therapeutic expertise, and should create a valuable service capability for those clients who want to outsource integrated drug discovery and early-stage drug development programs to a single provider.”

“It would enable us to engage with clients earlier in the discovery process. We believe this is important because it will enhance our ability to support the ongoing virtualization of discovery across the spectrum of entities that are involved in the process of discovering new drugs,” Foster added. “We believe that for those companies we share, there’s an opportunity to increase the amount of work that these clients do with Argenta and BioFocus,” Foster added.

Argenta and BioFocus have 340 scientists—150 of them Ph.D.s—among their total combined workforce of 380 employees. David Smith, currently CEO of Galapagos Services, will continue to lead Argenta and BioFocus at Charles River in the position of corporate vp, in vitro discovery services.

Foster said the acquisition is expected to add about 6% to Charles River’s net sales in 2014.

Charles River said it expects to fund acquisition and associated fees through its existing, Euro-denominated revolving credit facility, as well as through cash held in non-U.S. subsidiaries. The company said it expects to use at least $70 million of cash on hand for acquiring Argenta and BioFocus.