The CEO of Charles River said asset transfer strategic deals make little “rational sense” to clients or CROs.
Since Covance acquired the Greenfield, Indiana facility from Eli Lilly in 2008 CROs (contract research organisations) have often reported the availability of asset transfers. However, CROs have turned down most of these offers and Charles River Laboratories is likely to continue declining the assets.
“We have a situation or two where people are looking at asset transfers. They're often in geographic locales where we are not. Maybe five or six years ago, we would be all over them, but it just doesn't seem to make any rational sense”, James Foster, CEO of Charles River, told investors last week.
Foster said the low productivity at some sites on the market means the deals make little sense for the client or CRO. “We would hope that they would get on with their own business of shutting and repurposing the site and dealing with the social issues related to their internal staff”, Foster said.
As biopharma companies close in-house facilities Charles River expects to benefit from toxicology capacity edging closer to demand. The decision by Covance to close its site in Chandler, Arizona is also a positive for Charles River.
“Anytime anybody takes out a significant amount of space, I think that's directionally good for all of us as a whole. And as you've heard us say before, the continued reduction in capacity, particularly by our clients, I do think is critical”, Foster said.
While Charles River has little interest in available asset transfers it is looking to expand its capabilities through acquisitions. Foster has spoken of interest in takeovers, particularly in the discovery sector, since August but is yet to ink a deal.
Price is one obstacle. “Some of the price expectations are a little unreasonable, unrealistic, I would say, and disappointing”, Foster said. Despite this a takeover team at Charles River is taking a quick look at several deals a week and investigating some of these opportunities more thoroughly.
“There are several things that we're seriously looking at and talking to sellers about, and they would improve both the portfolio and our capabilities to support clients in ways that they want and we currently, perhaps, fall short in a couple of areas”, Foster said.