Charles River Laboratories has agreed to acquire HemaCare for $380 million, the companies said today, in a deal designed to expand the buyer’s capabilities by offering cell therapy developers and manufacturers a solution taking them from basic research through commercialization.

“In order to continue to enhance our ability to support our clients’ research efforts, particularly in biologics discovery and development, we are expanding our scientific capabilities in this emerging, high-growth market with the acquisition of HemaCare,” Charles River Laboratories chairman, president, and CEO James C. Foster said in a statement. “We greatly respect HemaCare’s scientific capabilities, which have enabled it to become a premier provider of cutting-edge research tools used in the development of these advanced medicines.”

HemaCare specializes in the customization of human-derived biological products and services for biomedical research, drug discovery, process development, and cell and gene therapy starting material.

Founded in 1978, HemaCare oversees a network of FDA-registered, good manufacturing practice (GMP)/good tissue practices (GTP)-compliant collection centers designed to ensure fresh donor material is available to customers and for use within the company’s GMP-compliant isolation laboratory.

HemaCare isolates human biological material— including peripheral blood, bone marrow, and cord blood—into various primary cell types for fresh and frozen distribution. HemaCare says it aims to directly enable customers to advance both autologous and allogeneic cellular therapies by supporting their commercialization efforts with apheresis collections.

The company provides leukapheresis process development material for FDA-approved immunocellular therapies that include Novartis’ Kymriah® (tisagenlecleucel), Kite, a Gilead Company’s Yescarta® (axicabtagene ciloleucel), and Dendreon Pharmaceuticals’ Provenge® (sipuleucel-T).

HemaCare’s cell therapy offerings range from customizable donor selection and upstream cell processing services to the supply of current good manufacturing practice (cGMP) human primary cells. As a result, HemaCare says, it can work with clients throughout the progression of their cell therapy programs and into commercial manufacturing, leveraging its cGMP-production capabilities.

“Strengthening the value proposition”

“Partnering with Charles River will strengthen the value proposition for our clients, enabling them to work seamlessly with one scientific partner to enhance the speed and efficiency with which they can advance their cell therapies,” HemaCare president and CEO Pete van der Wal stated. “The transaction will offer compelling value to our shareholders. This is an exciting day that will usher in a new era for HemaCare and my talented colleagues.”

Charles River said the addition of HemaCare is expected to expand a cell therapy solutions business that now represents approximately $100 million of Charles River’s annual revenue.

That’s a fraction of the $2.27 billion in annual revenue Charles River generated last year, a figure expected to grow by 15% to 15.5% this year. Last month, Charles River lowered that projected range of increase from 16% to 17%, citing foreign exchange rates and an expected lower “organic” revenue growth, defined as reported revenue growth adjusted for both acquisitions and foreign currency translation.

HemaCare is expected to add at least $50 million to Charles River’s 2020 consolidated revenue, the companies said, based on revenue from what are now HemaCare operations being expected to grow at least 30% annually over the next five years.

HemaCare finished 2018 with $28.5 million in revenue—up 41% from the previous year—and the successful relocation of its global headquarters within Los Angeles from Van Nuys, CA, to Northridge, CA, within a 40,000-square-foot facility at the 44-acre Harman Campus.

“Right place at the right time”

“HemaCare is in the right place, at the right time, with the right skill sets that are in high demand to profit from the multi-billion dollars biopharma and biotechnology companies are investing in the globally emerging immunotherapy, cell therapy, and regenerative medicine market,” van der Wal wrote in HemaCare’s 2018 Annual Report.

The purchase price amounts to $25.40 per share, a 27% premium to HemaCare’s closing price on December 13, 2019 and a 33% premium to HemaCare’s volume-weighted average stock price over the last 60 trading days.

The acquisition is expected to have no effect on non-generally accepted accounting principles (GAAP) earnings per share (EPS) in 2020, and increasingly add to them thereafter. After the third quarter, Charles River raised the low end of its projection of 2019 non-GAAP EPS to $6.50 from $6.45, while keeping the high end at $6.60.

Items excluded from non-GAAP earnings per share are expected to include all acquisition-related costs, which primarily include amortization of intangible assets, advisory fees, and certain third-party integration costs.

“HemaCare advances the development of life-saving cell therapies through the use of its high-quality cellular products that represent critical inputs to these therapeutics,” Foster added. “The addition of HemaCare’s innovative cell therapy products and services to our integrated, early-stage solutions will create a unique, go-to partner for clients to work with Charles River across a comprehensive cell therapy portfolio from idea to novel therapeutic.”

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