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Research Boom Behind HemaCare Acquisition

Following its $380 million acquisition of Northridge’s HemaCare last month, Charles River Laboratories has decided to keep former chief executive Pete van der Wal as general manager of the Southern California operation. Both companies are providers of biologic material for drug research, with Charles River Laboratories being in operation for more than 70 years with a global reach. HemaCare, on the other hand, was hailed as the San Fernando Valley’s top-growth public company last year. The company posted $19.5 million in revenues for the six months ended June 30, compared to $13.1 million for the same period in 2018. The company also jumped to a larger space in 2018, moving its headquarters from Van Nuys to Northridge. Because of such solid growth, Charles River decided to keep the location and staff as well, according to Colin Dunn, senior vice president of global research models and services for Charles River. Van der Wal deferred to management at Charles River when the Business Journal reached out to him for this article. “The Northridge facility is really integral to the growth of HemaCare, and integral to the product and the service that they’re offering. Clearly, it’s a very successful team of people on the Northridge site,” said Dunn. “It’s a very well set out space, very efficient, very attractive for employees.”’ HemaCare works with blood banks and clinics to create a network of tissue collection sites. The company can extract and ship blood samples needed for research projects and store samples which can be bought directly. Researchers can buy product directly on the company’s website, or bioproduct can be customized for each client. The Northridge space, located at 8500 Balboa Blvd., expanded HemaCare’s capacity from 16,500 square feet to 39,892, and has four clean rooms, isolation, cryopreservation and biobanking services. At the facility, HemaCare staff doubled its tissue collections. Within Charles River’s research models and services segment, Dunn plans to cultivate HemaCare’s success further. Happy investors For shareholders, the purchase price equates to $25.40 per HemaCare share, representing a 27 percent premium to HemaCare’s closing price on Dec. 13 and a 33 percent premium to its stock price over the last 60 trading days. HemaCare will add an estimated $50 million to Charles River’s 2020 consolidated revenue, with an estimated 30 percent growth annually in the next five years. For Dunn, happy clients equate to happy shareholders. If Charles River is able to accommodate more clients with the biomaterial offered through HemaCare, they in turn offer a more comprehensive solution as opposed to competitors. “HemaCare is really allowing us to be very differentiated in the industry, because of their donors and the customization with those donors and the cell processing that comes with that. And then the exposure to the cell therapy market, that is very important. There are more and more clients in this space,” explained Dunn. “All of those things combined, we’d expect that to support additional profitable growth for Charles River, and in that way, bring additional value for shareholders.” While there are no plans to replicate the Northridge facility in its entirety anywhere else, the company may open an additional site within a biotech hub in the Boston or Cambridge, Mass. region. “We’re currently working on plans with Pete on ensuring we continue the growth Northridge is generating, but having an additional site in a biotech hub,” added Dunn. Prior to the acquisition, Charles River was a strategic partner to HemaCare going back to February 2018. That relationship gave both sides the opportunity to get to know each other and test out how well everyone worked together. From that partnership, Dunn said it came to Charles River’s attention that, because they already had this strategic relationship, that they could effectively expand into the cell therapy sphere. “We saw this as a very interesting partnership and therefore that certainly came to our attention and Charles River has been clearly active in acquiring companies in various spaces,” said Dunn. “We see that (continuing) for the future of the biotech and biopharma industries and for successful patient outcomes, especially in oncology, and in due course in regenerative medicine.” Purchase history Prior to HemaCare, Charles River acquired six companies since 2016, including CiToxLAB for $510 million, MPI Research for $800 million and KWS BioTest for an undisclosed amount, according to CrunchBase. For Ernie Stern, an attorney and partner at the firm Culhane Meadows in Washington D.C. who specializes in mergers and acquisitions, this deal is based on the specifics of the life science industry. “That’s not uncommon. You’ve reached some sort of collaboration agreement and might support certain tests and trials,” said Stern. “That gives them the opportunity to say they like what they see, and progress has been made and they understand the progress better, and the people better, so that they can assess the risk better. … It gives them the opportunity to either make an acquisition or exclusive license, something that gives them the benefit of the risk they have undertaken.” In Charles River’s case, the partnership helped the company see how HemaCare could fill gaps in its ability to support clients. This is especially true in the cell therapy space, Dunn told the Business Journal. “We were always very impressed with the quality of the product, how they had grown their business, and the space in which they were operating, as well as the quality of the people we were interacting with,” said Dunn. “We believe that it is going to be for our clients a new entry point for working with Charles River, so we are very excited about that.” The Northridge facility’s access to donor and patient cells will help Charles River. Donor cells, for example, support processes linked with developing clinical product and manufacturing actual medicines. “What we’re doing is bringing the HemaCare product and their expertise in the process to our clients and our clients are already in the cell therapy space, so it’s really enabling them to move more quickly,” Dunn said. There’s less of a “handoff,” Dunn added, when a client deals with one rather than two suppliers of less raw material. “We have already had tremendous interest from clients,” finished Dunn. “We think it is going to bring a lot of excitement and they can see the value of Charles River and HemaCare combining expertise, teams, to really accelerate these very exciting cell therapy programs and bring new therapies for patients in areas of very high medical need.”

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