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Charles River Laboratories to Acquire Galapagos’ Argenta and BioFocus Service Operations for up to €134 million

Galapagos
24 Mar 2014
Lois Manton-O'Byrne, PhD
Executive Editor

Industry news

Total cash consideration of up to €134 million

  • €129 million cash payment
  • Earnout of €5 million upon achievement of revenue target after 12 months

Proceeds to be used to progress Galapagos’ pipeline

  • Four Phase 2 patient data readouts expected over next 15 months
  • Delivery of multiple Phase 1 studies and candidates in 2014

Galapagos retains target discovery capabilities for its R&D and alliance operations.

Management guidance for 2014 Group revenues (including Argenta and BioFocus revenues Q1) of €125 million and year end cash of €170 million.


Galapagos NV (Euronext: GLPG) announces the signing of a definitive agreement to sell the BioFocus and Argenta service division operations to Charles River Laboratories International, Inc. (NYSE: CRL) for a total consideration of up to €134 million. The transaction is subject to customary closing conditions and is expected to close early in the second quarter of 2014.

“We are pleased to sell the Argenta and BioFocus divisions to Charles River, one of the premier life science service providers in the world. These newly acquired capabilities are fully complementary to the services provided by Charles River, and Charles River therefore provides a logical and excellent home for Argenta and BioFocus,” CEO Onno van de Stolpe commented. “With this transaction, Galapagos transforms from a hybrid drug discovery service and pipeline company into a research and development biotech focusing on developing innovative drugs for unmet medical needs. We have created significant value in building our service activities, and BioFocus and Argenta have greatly contributed to our current pipeline. The time has now come to move into the next phase of the Company with our focus on the pipeline, and to let Argenta and BioFocus continue their success under the wings of Charles River. We would like to thank the employees of Argenta and BioFocus for their contribution to Galapagos’ success over the years. We wish them the very best within Charles River.”

Details of the transaction
Charles River acquires all service operations of BioFocus and Argenta in the UK and The Netherlands. The acquisition includes all client contracts, order pipeline, premises, equipment, and further obligations of BioFocus and Argenta. All employees of BioFocus and Argenta will move into the Charles River organization upon completion of the transaction, which is expected to occur early in the second quarter of 2014, subject to customary closing conditions. David Smith will join Charles River as Corporate Vice President, In Vitro Discovery Services and lead the transition.

Charles River agrees to pay Galapagos immediate cash consideration of €129 million. Upon achievement of a revenue target 12 months after transaction closing, Galapagos will be eligible to receive an earnout payment of €5 million. The purchase price implies a multiple of approximately 2 times 2013 sales and approximately 12 times 2013 adjusted EBITDA.

Galapagos agrees to retain 5.4% of the €129 million cash consideration in an escrow account for 15 months.

Charles River is a global leader in drug research services, with over 7700 employees and 2013 revenues of $1.17 billion. The acquisition affords Charles River further vertical integration into a high growth outsourcing area, fully complementary to its existing offering and in line with its announced growth strategy.

Galapagos retains target discovery and assay development capabilities in Leiden for its R&D and alliance operations. Post-transaction, Galapagos will have three R&D sites in Mechelen, Belgium (headquarters), Romainville, France, and Leiden, the Netherlands. Galapagos also retains Fidelta, a fee-for-service operation based in Zagreb, Croatia. In total, Galapagos employs over 400 staff.

Outlook 2014
Management guides for €125 million in Group revenues in 2014 (lowered from €180M as a result of divesture of the Argenta and BioFocus operations), and a year-end cash position of €170 million.

Webcast presentation
Galapagos conducted a conference call open to the public today at 10:00 Central European Time (CET)/5:00 AM EDT, which was also webcast. Go to www.glpg.com to access the webcast.

Links

GalapagosCompany website

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