Charles River to buy WuXi PharmaTech for US$1.6bn

Transaction will ‘revolutionise’ the contract research landscape

Charles River Laboratories, a US-based clinical research company, has agreed to buy WuXi PharmaTech, a Chinese pharmaceutical outsourcing services provider with operations in China and the US, for US$1.6bn.

The deal will create the first global contract research organisation (CRO), offering fully integrated research and drug development services from molecule creation to first-in-human testing.

‘We regard this as a transformational transaction that sets a new standard in the outsourced drug development services industry,’ said James Foster, chief executive of Charles River.

The combined company will retain the name Charles River with Foster as chief executive and offer an expanded portfolio of products and outsourced services to multinational pharmaceutical, biotechnology and medical device companies.

Dr Ge Li, who founded WuXi in 2000, will become corporate executive vice president and president of a new global discovery and China services division of the new entity. In addition, Dr Li and two other WuXi directors will join the board of Charles River.

Shanghai-based WuXi has around 4,000 staff and reported sales of about US$270m last year.

‘This combination represents a true win-win scenario that significantly expands the global reach and growth opportunities for both companies,’ said Dr Li.

‘As a result of this transaction, Charles River will be able immediately to expand its presence in China and avail itself of WuXi’s expertise in chemistry services, while simultaneously, WuXi will be in a position to accelerate its good laboratory practice (GLP) toxicology capabilities.’

Charles River, based in Wilmington, Massachusetts, employs around 8,000 people worldwide. It is already a leading provider of animals for laboratory testing and reported sales of about US$1.2bn last year.

The company expects to achieve pre-tax cost savings and synergies of approximately US$20m on an annualised basis, beginning in 2011.

Charles River also anticipates revenue growth as a result of a broader portfolio of products and services, a larger global footprint and the opportunity to sell upstream and downstream to the client base.

Under the terms of the agreement, Charles River will offer a combination of cash and stock for WuXi. Each share of WuXi’s stock will be exchanged for $11.25 in cash and $10.00 of Charles River common stock.

The companies anticipate closing the deal by the fourth quarter of 2010.

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