Charles River Laboratories has signaled it intends to expand its cell and gene therapy contract development and manufacturing organization (CDMO) activity by announcing plans to acquire Vigene Biosciences for up to $350 million.
The deal, announced yesterday, is intended to broaden Charles River’s presence to include each of the major CDMO platforms for cell and gene therapy.
Vigene will add to Charles River’s offerings in viral vector and plasmid DNA production. Earlier this year, Charles River bolstered its cell therapy portfolio when it acquired Cognate BioServices for approximately $875 million cash, in a purchase completed March 29.
“Our goal is to become our clients’ scientific partner of choice for advanced drug modalities from discovery and nonclinical development to CGMP manufacturing,” James C. Foster, Charles River’s chairman, president, and CEO, said in a statement.
Headquartered in Rockville, MD, Vigene was founded in 2012 by senior scientists with expertise in the fields of virology and gene therapy. The company’s primary area of expertise is cGMP viral vector manufacturing for gene therapies and gene-modified cell therapies. Vigene also has significant expertise in adeno-associated virus (AAV) cGMP production, as well as for other major viral vectors, including lentivirus.
In addition, Vigene offers research-grade and cGMP plasmid DNA used in the development of viral vectors for gene-modified cell therapies, gene therapies, and vaccine production. The company’s product offerings also include ready-to-ship genome-wide human cDNA ORFs on adenoviral or lentiviral vectors, AAV shRNA constructs, pre-made control GFP viruses, AAV biosensors developed in partnership with Janelia Research Campus, and AAV alpha-synuclein vectors developed in partnership with the Michael J Fox Foundation.
Besides further growing its gene therapy CDMO capabilities—which expanded to the U.K. and Sweden with its Cognate purchase, Charles River reasons that Vigene will also support its existing, U.S.-based cell therapy production capabilities and establish an end-to-end, gene-modified cell therapy solution.
According to Charles River, the addressable market for cell and gene therapy CDMO services—principally for cell therapy, plasmid DNA, and viral vector production—is currently estimated at approximately $2.5 billion globally and is expected to grow at least 25% annually over the next five years.
For clients, Charles River added, its acquisition of Vigene will enable them to seamlessly conduct analytical testing, process development, and manufacturing for advanced modalities with the same scientific partner, resulting in greater efficiency and faster speed to market for advanced drug modalities.
Series of acquisitions
The Vigene purchase continues a series of acquisitions for Charles River in recent years that has seen it buy Cognate, contract research organization (CRO) Retrogenix for $48 million in March; antibody partner Distributed Bio for up to $104 million in January, and cell therapy CDMO HemaCare for $380 million in 2019.
Charles River agreed to acquire Vigene for $292.5 million cash, subject to customary closing adjustments—plus up to $57.5 million in contingency payments tied to achieving milestones.
Charles River said it anticipated Vigene’s operations will add to its long-term revenue and earnings per share growth. Vigene is expected to generate annual revenue of $30 to $35 million this year, and grow at least 25% annually over the next five years.
Vigene is expected to be reported as part of Charles River’s Manufacturing segment, which grew 19.7% year over year during the first quarter, to $146.5 million from $122.4 million.
Vigene is expected to add approximately 50 basis points to Charles River’s reported revenue growth rate in 2021. In reporting Q1 results May 4, Charles River increased its projected “organic” revenue growth range, adjusted for acquisitions and foreign currency translation, to between 12% and 14%, from between 9% and 11% in its initial 2021 guidance released in February.
For all of last year, manufacturing revenue rose 11.5% over 2019, to $2.92 billion from $2.62 billion.
The Vigene transaction is expected to be neutral to non-GAAP earnings per share (EPS) in the first full year after the acquisition closes, and accretive thereafter. Charles River also raised its non-GAAP EPS estimated range to between $9.75 and $10, from between $9 and $9.25.
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, certain costs associated with efficiency initiatives, and certain third-party integration costs.
Charles River said it expected to finance the Vigene acquisition and associated fees through its existing credit facility and cash.
The transaction is expected to close at the start of the third quarter, Charles River said, subject to regulatory requirements and customary closing conditions.