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Completed Galapagos deal to boost 2014 sales by $70m for Charles River

By Dan Stanton , 02-Apr-2014
Last updated on 02-Apr-2014 at 15:43 GMT

Argenta and BioFocus will add approximately $70m (€51m) to Charles River Laboratories’ 2014 revenues, the firm and an analyst say.

Last month, the preclinical contract research organisation (CRO) announced it was looking to buy the two discovery services divisions from Belgium-headquartered biotech firm Galapagos.

This week the $185m (€134m) takeover has been completed, CRL announced, with Argenta and Biofocus adding predominantly in vitro capabilities to the firm’s existing in vivo discovery capabilities.

According to the US CRO the acquisition will increase its revenue from the $1.17bn recorded in 2013, by around $70m based on Argenta and Biofocus' perofrmance last year.

CRL's prediction was echoed by William Blair analyst John Kreger, who added he had increased CRL’s top-line growth rate from 3.6% to 9.8% for the year on the back of the acquisitions. “We are also increasing our 2015 revenue growth target to 5.9% from 4.1%, given a full-year benefit of the transaction,” he continued.

However, Kreger predicted the Argenta and BioFocus businesses to be less profitable than CRL’s core research models and services (RMS) business, reducing 2014 and 2015 consolidated operating margin targets to 17.4% and 17.9%, respectively. “Over time,” Kreger noted, “we expect margins to improve as cost synergies are realized.”

CRL, along with other CROs who operate in the early-stage services sector, has seen growth over a number of quarters, leading to hope the sector has recovered following 2008’s economic downturn.

The preclinical sector was badly hit as pharma shelved early R&D plans, but pharma’s search for new pipelines and the surge of biotech investment is driving this optimism within the industry.

As for CRL and the relevance of these acquisitions, the “management’s strategy to broaden its capabilities upstream into discovery services further solidifies its position as a global leader in early-stage development,” Kreger said.

Galapagos cut its 2014 revenue forcast.

The Belgian research services provider said it expectss sales of €125m in 2014, which is down from the €180m it had previously forecast, expolaining that the decline was "as a result of divesture of the Argenta and BioFocus operations."

The firm also said that it expects to end 2014 with €170m in the bank.

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