Charles River To Acquire WuXi

Seeking to broaden its portfolio of services, Charles River Laboratories has agreed to pay $1.6 billion for Shanghai-based WuXi PharmaTech. The deal is aimed at creating a one-stop shop for drug industry customers by combining WuXi’s chemistry expertise with Charles River's clinical support capabilities.

Bringing WuXi into the fold enables Charles River to offer services ranging "from chemistry to man"--from the earliest stages of drug discovery to the first tests of a promising compound in humans, the company says. After the deal closes, Charles River will have roughly 12,200 employees. Combined 2009 sales were about $1.5 billion

Research service providers are under pressure as major drug firms pare back R&D and biotech companies retrench from last year's financial crunch. Sales at Charles River dropped 11% to $1.2 billion in 2009, and earnings fell 22% to $156 million. In January, the company decided to close its preclinical services facility in Shrewsbury, Mass., eliminating 300 jobs.

WuXi, meanwhile, has grown by leaps and bounds in recent years. Founded by Ge Li in 2000, the contract research organization (CRO) has more than 4,000 employees and last year posted sales of $270 million.

Importantly, buying WuXi gives Charles River an immediate presence in China at a time when drug firms are increasing their activities in the country. "Partnering with the leading CRO in China gives us an immediate, significant presence in what is considered by our clients to be the next frontier for drug development," CEO Jim Foster told investors in a conference call.

In addition to chemistry research experience, WuXi has facilities in China for making active pharmaceutical ingredients (APIs). Foster called API manufacturing "a significant new service from Charles River that supports the growing trend by our clients to outsource manufacturing to China."