The contract research organization (CRO) sector continues its march toward consolidation of its biggest companies, with a pair of acquisitions totaling $1.5 billion announced since yesterday.
LabCorp today disclosed plans to buy Chiltern for approximately $1.2 billion cash, then fold the company into its Covance business segment, which the buyer acquired in 2014. The combined company will have about $10 billion in revenues—nearly half of which, or $4 billion, will come from CRO activity—and a broader focus on serving smaller as well as larger biopharmas.
“The addition enhances Covance’s offerings as a major partner serving the top 20 biopharma segment, and expands our current offering to include a dedicated focus on the high-growth emerging and mid-market biopharma segments,” Covance CEO John Ratliff said in a statement.
“Since LabCorp acquired Covance, we have grown the CRO business to nearly $3 billion in annual revenue. We now join with Chiltern to create a market-leading CRO, with more than 20,000 talented employees around the world,” Ratliff added.
More than half of those employees, approximately 11,100, will be based in the Americas once the companies combine. Another 7100 will be based in Europe, the Middle East, and Africa, and 2400, in the Asia-Pacific region.
Headquartered in Wilmington, NC, Chiltern focuses on providing CRO services to small and medium-sized enterprises, with a backlog of approximately $1 billion, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year projected at $95 million on approximately $550 million.
Chiltern has conducted more than 1800 studies across 87 countries in the last five years, and has more than 4500 employees worldwide, including Asia-Pacific and Europe; the company has European offices in Slough, UK.
The companies said their combination will add expertise and capabilities in oncology and other key high-growth therapeutic and specialty areas, by adding Covance’s expertise in late-phase development with Chiltern’s know-how in early clinical phases.
Chiltern’s operations are expected to expand Covance’s clinical development capabilities with full programmatic and robust functional service provider (FSP) offerings, including expanded clinical monitoring, biometrics, and safety FSP solutions, according to LabCorp and Chiltern.
“Joining LabCorp and Covance will allow Chiltern to expand its collaborative approach to bring better, more personalized therapies to market for patients every day,” added Chiltern CEO Jim Esinhart, Ph.D. “Customers will benefit from the expanded capabilities this provides, and our employees will have a greater opportunity to propel research into the future with strong, supportive partners.”
LabCorp said it expected to fund its acquisition of Chiltern through a combination of bank financing and bonds. The deal is expected to close in the fourth quarter, subject to regulatory approvals and customary closing conditions.
Looking Beyond Preclinical Phases
Separately yesterday, Evotec said it agreed to acquire Aptuit for $300 million cash from the private equity firm Welsh, Carson, Anderson & Stowe, which focuses exclusively on the technology and healthcare industries.
Evotec said the deal is designed to strengthen the buyer’s position as a top global provider of integrated outsourced drug discovery and development solutions by expanding its focus beyond early stages.
“Bringing together two major players in the drug discovery industry is a big step forward for Evotec to expand our unique focus in external innovation for Pharma, biotech, and foundations. We are very much looking forward to welcoming the employees of Aptuit within the Evotec Group after closing of the transaction,” Evotec CEO Werner Lanthaler, Ph.D., said in a statement.
While Evotec now offers integrated services up to delivering preclinical development candidates, it said it will be able through the Aptuit acquisition to extend its offerings through IND submission and beyond, to integrated drug substance and drug product and commercial manufacture.
Evotec says it plans to capitalize on “significant” cross-selling opportunities that exist with Aptuit—such as offering Evotec's existing partners preclinical and development services through Aptuit while adding complementary high-quality capacity in early-stage drug discovery.
Evotec added that it plans to offer drug discovery innovation services to Aptuit's customers through its EVT Execute drug development and collaboration platform, through which the company partners with biopharma giants or nonprofits to provide services on a fee-for-service basis only or through research fees, milestones, and/or royalties. Evotec’s seven EVT Execute alliances include partnerships with Boehringer Ingelheim, CHDI, Convergence Pharmaceuticals, Novartis, Roche, Shire, and UCB.
The deal will also allow Evotec to grow its EVT Innovate drug discovery platform, through which it joins with academic and industry partners to advance preclinical candidates toward future development by biopharmas in return for up-front payments, ongoing research fees, milestone payments, and royalties. Evotec cites more than 70 partnered product opportunities at clinical, preclinical, and discovery stages through EVT Innovate, including partnerships with Yale University, and Oxford University and its commercialization and investment arms.
Aptuit delivers IND-enabling services through its INDiGO® platform, which the company says is designed to reduce to 52 weeks the time drug developers spend from candidate nomination to regulatory submission, with smaller timeframes possible under certain circumstances. Through the acquisition of Aptuit, Evotec said, it will increasingly control and accelerate the IND submission of its partnered products.
Headquartered in Greenwich, CT, Aptuit offers scientific expertise across drug discovery, preclinical testing, and both drug substance and drug product manufacturing to biopharmas.
Aptuit has approximately 750 employees, most of them scientists, working across three discovery, development and manufacturing facilities in Europe (Verona, Italy; Basel, Switzerland; and Oxford, United Kingdom). Last year, Aptuit completed more than 1000 projects for over 400 customers, including small, medium, and large biopharmas.
Aptuit is projected to generate revenues this year of between €100 million and €110 million ($117.5 million to $129.3 million), after finishing last year with adjusted EBITDA of €11 million ($12.9 million) on revenues of about €88 million ($103.4 million).
“The operational management team and I look forward to continuing to offer customers an expanded set of solutions in discovery as part of the Evotec family as well as providing an end-to-end solution in candidate to IND (INDiGO) and Phase I to commercial integrated [chemistry and manufacturing controls] CMC needs,” added Aptuit CEO Jonathan Goldman, M.D. “Our customers and staff can be reassured by the continuity of leadership and commitment by Evotec to invest in planned growth.”