CRL, WuXi deal will lead to “refinement” of operating units

By Nick Taylor

- Last updated on GMT

Related tags Crl Drug development

Charles River Laboratories (CRL) has admitted that areas of overlap created by the WuXi acquisition will lead to a “refinement of certain operating units” but is yet to disclose details.

Taking actions to deal with overlapping areas will improve operating efficiencies, CRL explained during a conference call with investors. For reasons relating to employees and competition CRL is refusing to disclose details of the magnitude of the actions or affected locations.

Speaking during the conference call, James Foster, CEO of CRL, presented slides showing that both companies have process scale up, research manufacture and bioanalytical and testing capabilities.

Details of the operating units affected by the acquisition will emerge as the joint integration team CRL and WuXi PharmaTech are forming assesses the logistics of combining the companies.

More services from fewer providers

Both Foster and Ge Li, CEO of WuXi, emphasised that clients, especially large pharma and biotechs, are increasingly looking to buy more services from fewer providers.

Recognition of this shift in the relationship between clients and service providers played a role in CRL deciding to buy and WuXi agreeing to the deal. Foster added that he hopes CRL will become more closely involved with the drug development process of large clients.

CRL believes the more comprehensive suite of services it will offer post-acquisition will make it better equipped to strengthen relationships with key clients and prosper in the changing pharma environment.

China, GLP and safety assessment

The deal will give CRL “an immediate, significant presence in China​”, explained Foster. CRL’s operations in China are “quite small​” and consequently it is keen to strengthen in a market Foster described as “the new drug development frontier​”.

Foster expects some safety assessment work to move to China but capacity limitations are currently limiting this. CRL believes there is more than 8m sq ft of suitable space in North America, compared to around 500,000 sq ft in China.

As the situation develops CRL may build additional capacity in China, according to Foster, but demand for work performed in North America is also expected to remain strong, possibly leading to expansions in this market.

Manufacturing and devices

By acquiring WuXi CRL will gain manufacturing capacity and, although the preclinical capabilities were the primary drivers of the deal, Foster believes this is a “really good addition to the portfolio​”.

CRL has looked at adding manufacturing capacity in the past, according to Foster. He added that CRL is not looking at manufacturing as a trial and told a questioner that the business situation is very different from the clinical operations it bought from Inveresk, only to sell two years later.

Also, the market for medical device services has changed since CRL exited the sector, explained Foster, and WuXi’s operations are sophisticated and in an excellent location.

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