The world of outsourced drug research and development might get a lot smaller. Charles River Laboratories International is aiming to buy the Chinese R&D services firm WuXi PharmaTech for a whopping $1.6 billion, the companies announced this morning.
Wilmington, MA-based Charles River (NYSE:CRL) reported that it plans to gobble up Shanghai-based WuXi in a deal that values WuXi (NYSE:WX) at $21.25 per share, a 28-percent premium on the firm’s closing stock price on April 23. Charles River is offering to buy WuXi for a combination of cash and its common stock. The deal requires shareholder approval and is slated to close in the fourth quarter of this year, according to the companies.
The buyout would significantly expand Charles River’s global presence in the outsourced R&D market both in the U.S. and China. WuXi has more than 1.8 million square feet of drug R&D space in China, as well as three sizable research and manufacturing centers in Atlanta, Philadelphia, and St. Paul, MN, according to its website.
“This transaction revolutionizes the contract research landscape by creating the only global contract research organization, or CRO, to offer fully integrated research and drug development services from molecule creation to first-in-human testing,” said James Foster, Charles River’s chairman and CEO, in a statement. Under the terms of the merger deal, Foster would be chief executive of the combined entity, and WuXi’s CEO, Ge Li, would be a corporate executive vice president and be president of the company’s operations in China.
WuXi is one of the fastest-growing competitors in the outsourced drug R&D world, fueled by China’s growing population of Ph.D.s and scientists, the Wall Street Journal reported yesterday. (The Journal article, published yesterday, gives a decent overview of both companies’ capabilities.) Drug companies are expected to increase their use of CROs as they continue to trim the size of their own R&D organizations to reduce expenses and focus more resources on the marketing end of the pharmaceutical business.