NEW YORK (GenomeWeb News) – Charles River Laboratories has signed a definitive agreement to purchase Galapagos' BioFocus and Argenta service division operations for a total consideration of €134 million ($187 million), the companies announced today.
Located in the UK and the Netherlands, BioFocus and Argenta provide integrated drug discovery services with a focus on in vitro capabilities and particular expertise in medicinal chemistry, target discovery, and "complex in vitro biology, as well as therapeutic area expertise in respiratory, inflammation, oncology and [central nervous system] diseases," Wilmington, Mass.-based Charles River said in a statement.
BioFocus' capabilities include assay development and screening; target discovery; structural biology; fragment-based drug discovery; and others. Services offered by Argenta include assay development and screening; biomarker identification and pharmacodynamic evaluation; structural biology and biophysics; hit identification; and others.
"The acquisition will position Charles River as a full service, early stage contract research organization with integrated in vitro and in vivo capabilities from target discovery through preclinical development," Charles River said.
In a separate statement, Galapagos CEO Onno van de Stolpe said the deal transforms his firm "from a hybrid drug discovery service and pipeline company into a research and development biotech focusing on developing innovative drugs for unmet medical needs."
As part of the deal, Charles Rivers will acquire all service operations of BioFocus and Argenta, including all client contracts, order pipeline, premises, equipment, and further obligations of the two businesses. All employees of BioFocus and Argenta will transfer to Charles River upon completion of the deal, expected in the early part of Q2 2014.
Galapagos is keeping its target discovery and assay development capabilities in Leiden, the Netherlands for its R&D and alliance operations, it said.
BioFocus and Argenta combined have more than 340 scientists, Charles River said. Galapagos Services CEO David Smith will move to Charles River, where he will serve as corporate vice president of In Vitro Discovery Services and continue to head BioFocus and Argenta.
Under the terms of the agreement, Charles River will pay Galapagos €129 million upfront and potentially €5 million upon the achievement of a revenue target 12 months after the closing of the deal. Galapagos will retain 5.4 percent of the €129 million cash consideration in an escrow account for 15 months, it said.
The deal is anticipated to "enhance" Charles River's sales growth rate and be accretive to its 2014 non-GAAP EPS by about $.10, the firm's President and CEO James Foster said. In 2013, BioFocus and Argenta had combined sales of €63 million, and the sales growth rate for the two businesses is estimated to be about 10 percent in 2014.
Charles River is financing the purchase through a combination of borrowings under its existing Euro-denominated revolving credit facility and cash held in non-US subsidiaries, it said.
In 2013 Charles River generated revenues of $1.17 billion. It has 7,700 employees.
According to the ISI Group's Ross Muken, the purchase is in line with Charles River's strategy to expand its portfolio. "By offering customers a full suite of discovery and early stage capabilities, [Charles River] can effectively position itself as a one-stop shop for biopharma customers," he said in a research note today.