Charles River snaps up Galapagos' CRO biz for $179M

Charles River Laboratories ($CRL) is looking to pad its preclinical prowess, inking a $179 million deal with drugmaker Galapagos for two CRO subsidiaries and a chance to expand its in vitro biology expertise.

Under the deal, expected to close next quarter, Charles River will hand over $179 million up front and up to $7 million in performance payments in exchange for Argenta and BioFocus, contract researchers that brought in $87 million in sales last year. Charles River figures its new acquisitions will grow another 10% in 2014, adding about 6% to its projected annual sales of $1.3 billion.

Galapagos' two CROs specialize in medicinal chemistry, target discovery and complex in vitro biology, Charles River said, and the deal will add more than 340 scientists to its ranks of preclinical experts. While end-to-end giants like Quintiles ($Q) and Covance ($CVD) strive to cover every stage of development, Charles River has entrenched itself in the early-phase segment, and this acquisition will only deepen its dominance of the preclinical market, CEO James Foster said.

"Argenta and BioFocus' upstream in vitro capabilities will be an excellent fit with our in vivo expertise and will enable us to engage with our clients earlier in the drug discovery process," Foster said in a statement. "This enhances the value we can provide to our clients because it allows them to outsource integrated drug discovery and early-stage development programs to a single provider."

Meanwhile, for Galapagos, the move allows it to cash out of the CRO world and redouble investments in its pipeline, which includes collaborations with GlaxoSmithKline ($GSK), AbbVie ($ABBV) and Johnson & Johnson ($JNJ). The Belgian biotech endured a setback earlier this month when GSK pushed pause on a study of the Galapagos-partnered lupus drug GSK2586184, casting doubts on a treatment that had already run into trouble in ulcerative colitis.

Once the deal is wrapped, Galapagos Services CEO David Smith will stay at the helm of Argenta and BioFocus, joining Charles River as vice president of in vitro discovery services. The acquisition also gives Charles River outposts in the U.K. and the Netherlands.

- read Charles River's statement
- check out Galapagos' announcement (PDF)