M&A hunt: Speaking at the Leerink Swann Global Healthcare Conference last week, James Foster, chief executive officer of Charles River Laboratories, indicated the company was actively looking for merger and acquisition targets in 2015.
Charles River Laboratories (CRL) is an early-phase contract research organization (CRO). The company recently released its fourth quarter and year-end earnings report. Charles River reported total revenue in 2014 of $1.3 billion, up from its 2013 reporting of $1.2 billion.
“I am very pleased to say that 2014 was an exceptional year,” said Foster in a statement. “Our financial results demonstrate what we’ve worked very hard to achieve: the strongest portfolio we’ve ever had, with the ability to support clients from target discovery through preclinical development; deep client relationships, where we are a respected partner; a streamlined organization, with the flexibility to respond to a changing industry and client requirements; and employees who are committed to providing exceptional service to our clients.”
This upswing was made despite the company announcing on Sept. 8, 2014 that it was laying off 26 to 30 employees as a result of a contract termination with the U.S. National Cancer Institute (NCI). The contract with the NCI was supposed to run until September 2016 to supply rodent models for cancer research. The NCIterminated the contract in September 2014. The contract was reportedly worth about $12 million annually.
According to last week’s announcement, Charles River Laboratories has already met with several companies to discuss a merger or acquisition.
“We have several serious conversations going on right now,” Foster said in a statement. “We’ll be disappointed if we don’t get some meaningful M&A done in 2015.” According to his statements at the conference, the company’s strategy will be to use cash for “strategic, accretive acquisitions, primarily upstream,” to “incentivize our clients to outsource more in that market.”
Charles River’s emphasie on CRO services for drug discovery is fairly new, but somewhat parallels the company’s original push into outsourcing toxicology services starting in 2000. The company acquired six small companies over six years in the toxicology arena and plans to use the same approach for drug discovery. Foster pointed out that about 10 to 15 percent of drug discovery is currently outsourced, but that “the same economic drivers driving toxicology and safety assessment will in time drive the outsourcing of drug discovery.”