Charles River Laboratories M&A Activity Analysis: A Differentiated Strategy Delivering Results

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From its early days as one the first suppliers of animal models for research in 1947, Charles River Laboratories (CRL) has developed into a brand supporting the Pharma industry’s drug discovery and development programs. CRL’s market penetration is such that it can claim to work with all of the world’s top drug makers in some aspect via its extensive range of products and services.

The key to its success has been a well planned and orchestrated M&A strategy, which focuses on providing its client base with additional products/services that align with their discovery and development goals. CRL’s latest acquisition was the $800M purchase of MPI Research in February 2018. What differentiates CRL is its philosophy of pursuing acquisitions of both large and small organisations. This strategy that stands in stark contrast to several competitors, who seek to dominate channels to market and offer scale benefit returns via an M&A strategy focused on large value acquisitions.

The CRL strategy over the last 5 years have acquired a number of value-added services including:[/vc_column_text][vc_row_inner][vc_column_inner][vc_raw_html]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[/vc_raw_html][/vc_column_inner][/vc_row_inner][vc_empty_space][vc_column_text]

Charles River Laboratories: Company Segmentation & Revenue Streams

Just where will CRL go for its next acquisition will be influenced by the performance and dynamics of each of its three core business segments: Discovery & Safety Assessment, Research Models & Services, and Manufacturing Support. Chart 2 below shows the revenue percentage breakdown for each of CRL’s segments:[/vc_column_text][vc_row_inner][vc_column_inner width=”1/4″][/vc_column_inner][vc_column_inner width=”1/2″][vc_column_text]

[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/4″][/vc_column_inner][/vc_row_inner][vc_column_text]CRL’s Discovery & Safety Assessment segment represents 52% of overall revenue, with growth driven by the increased outsourcing trend within the pharmaceutical industry. CRL’s Research Models & Services segment is responsible for 27% of revenue despite a lower overall demand, there is an increased requirement for speciality and humanised models. CRL’s Manufacturing Support segment is responsible for 21% of revenue, with growth being driven by increased demand for microbial testing and increasing development of biologics & biosimilars. Additionally, there is a stable demand for SPF eggs used in live virus production.

Potential Future Acquisition Targets

Given CRL’s current service coverage, the Discovery & Safety Assessment and Manufacturing Support segments are likely to be sufficient for the time being, leaving the Research Models & Services as potentially the next segment of focus for M&A activity. Considering the increasing demand for speciality and humanised models, there are number of organisations, largely at early stages of development, that could be of interest to CRL:[/vc_column_text][vc_row_inner][vc_column_inner width=”1/6″][/vc_column_inner][vc_column_inner width=”2/3″][vc_column_text]

Company	Core Offerings
	In vitro 3D InSight™ Tumor Microtissues.
	In vitro models of complex human biology through perfused 3D cell‐based assays and enabling products.
	Tissue-engineered microenvironments of human organs as an alternative to traditional in vitro tools and animal models in scientific research and drug development.
	Designs and develops functional, three dimensional human tissue for medical research and therapeutic applications.
	Human iPSC-derived cells into physiologically relevant microtissues with accelerated cell maturity that mimic the native organ tissue.
	Physiological, cell-based microchip platform that provides a morphologically and biologically realistic microenvironment allowing real-time study of cellular behaviour, drug delivery and drug discovery.
	Predictive cardiac tissue models.

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InSphero Licensing Deal

CRL recently announced that it will license its collection of patient-derived xenograft (PDX) tumors to InSphero. Additionally, CRL will leverage InSphero’s proprietary 3D cell culture technology to further extend and complement its pre-clinical services, using in vitro 3D InSight™ Tumor Microtissues derived from its existing PDX collection. Should this collaboration prove to be successful, an acquisition of InSphero would seem highly likely, however only time will tell if CRL will choose this route.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_empty_space height=”10px”][vc_column_text]

For more cutting edge analysis of the latest bioproduction developments, check out Evolution Executive Search’s “Future of BioManufacturing” series:

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