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Charles River Buys WuXi

I don’t think we saw this one coming: Charles River Labs has announced that they’re buying WuXi PharmaTech. They’re paying about a 28% premium over Friday’s closing stock price – Charles River’s CEO will stay on, and WuXi’s founder (Li Ge) will serve as executive VP under him.
Charles River, which is strong in the animal-testing end of the business, has apparently decided that Wu Xi is one of their biggest competitors (I’d agree) and has decided to try to stake out a leading position in the whole contract-research space. It’s interesting to me that the folks at Wu Xi bought into this reasoning as well, although (since they’re a publicly traded company here in the US), a lucrative stock offer can be its own argument. One now wonders, though, about the company’s statements on re-staffing some of their US labs when economic conditions improve. . .

15 comments on “Charles River Buys WuXi”

  1. RB Woodweird says:

    Charles River: 777 employees, about $300 million revenue in 2009.
    Wu Xi: (according to NYT) 4000 employees, $270 million revenue.
    What is the policy in China re terminations? I know of some companies in which business units have branches in the US and also in countries where it is virtually impossible to lay anyone off. So when headcount is to be reduced, guess where the hatchet falls?

  2. mikeymedchem says:

    Stunning. Absolutely.

  3. John says:

    Bob, I think your numbers are just for the preclinical research services? The 2009 CRL annual report lists 8000 employees and $1.2B revenue. So CRL gets about twice as much revenue per employee as Wuxi (no surprise here).
    CRL has an announced strategy of becoming a one stop shop for outsourced pharmaceutical research services, so I am inclined to see this as a move to pick up discovery chemistry, something they have had little or no capacity in previoiusly. But I could not readily find any info on what percentage of Wuxi’s revenue comes from chemistry these days. Anybody know?

  4. Mike says:

    It’s funny that on the WuXi website it does not mention the Charles River is buying WuXi pharmatech, but rather the two companies are ‘combining’.
    “CHARLES RIVER LABORATORIES AND WUXI PHARMATECH TO COMBINE, CREATING THE FIRST GLOBAL CRO OFFERING FULLY INTEGRATED EARLY-STAGE DRUG DEVELOPMENT SERVICES TO CLIENTS WORLDWIDE”
    http://ir.wuxipharmatech.com/phoenix.zhtml?c=212698&p=irol-news&nyo=0

  5. jon says:

    This will be a disaster for CRL. The fact that Wuxi took the first offer means they will cash in and be gone as soon as their obligations under the purchase agreement are over, and CRL will be stuck trying manage a massive operation in China. Good luck with that. Any big pharma bean counter will tell you when a pharma company buys or sets up a Chinese operation, but the time they instill all of the culture and beauracracy of a US/European company, there is no price advantage. Just a language barrier and a very long plane flight

  6. You're Pfizered says:

    I’m surprised this hasn’t garnered more posts here, given the way the industry is moving, and WuXi’s role therein.
    Wonder what this means for over-all costs for their services. CRL can’t really afford to hike the prices up too much, not with the competition they’ve got.

  7. milkshake says:

    wonder if Charles River is planning to have a try at their own medchem research…

  8. pc says:

    Costs, especially labor costs though still way below western standards, are rising there. RMB will likely gradually appreciate as well. Their competitiveness brought by low costs is diminishing, albeit still attractive at the moment. Maybe these folks are cashing out this way. Look for them trying to get their hands on the real deal, drug R&D that is, in the not-too-distant future. It’s a gold mine, with the backing from government.

  9. noname says:

    This move surprised me. I always predicted WuXi would be the kernel of the first major indigenous Chinese pharma company, with the financial backing of some giant Chinese conglomerate. The PRC government wants an innovative native biopharm industry. That is why they’ve encouraged both the CRO model and the creation of Chinese R&D branches of BigPharma. All this expertise was supposed to lead to the creation of Chinese pharma, and WuXi I thought was a candidate for this next step. This move, I believe, is a blow to that vision, insofar as I don’t see CRL radically changing its business model. Maybe PRC will continue as a service center for another decade before it begins to find its own drugs for international market. Its too bad really, because the eventual transformation from service to internal development will narrow the outsourcing cost saving.

  10. PorkPieHat says:

    I share the same sentiments as “noname”. Both the Bioduro purchase by PPD and WuXi’s purchase by CRL were surprising for the same reasons…opportunities for service companies to go solo in drug discovery and development. This model of service model to independent provider model has worked in the IT, energy and automobile sectors in China, among others. Could this mean some sort of PRC government takeover being sensed by these companies at some point soon? Are the principals in the companies taking their exit while they can? And what will these acquisitions do to what were robust US-based service providers for our industry?

  11. processchemist says:

    An hypothesis: the building of a number of native CROs is maybe marginal in reaching the target of a chinese big pharma player, because of the low associated technology acquisition – in my experience the flow of technology is usually from the outsourcing partner to customer. Chinese structures of western big pharma or other western companies maybe are perceived as more effective in bringing know how in China (I’ve seen some leads buyed in China from small western biotechs: not impressive at all, to put it gently).

  12. Xu Li says:

    Dr Ge Li is a brilliant man who turned around the CRO industry. In a short span of 10 years he built a company to rival the largest US CRO companies. This is not a small feat. It will make entrepreneurs like us leap to great heights. Why are the US companies doing so badly. Its because of poor management and greed from Senior executives. The US has lost its advantage and will cease to be a superpower.

  13. Fidel says:

    In a span of 10 years Dr Ge Li built a $1.6 billion company employing 4000 people. In the same time Derek Lowe fiddled away his time

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  15. Grisel Tokay says:

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