Clinical research group Charles River is expanding its Asian footprint with a $1.6 billion purchase WuXi PharmaTech, a key player in China's thriving drug development market. It will be the largest foreign takeover of a Chinese company, according to Bloomberg.

 

Charles River will pay a premium to WuXi shareholders of 28 percent over the company's April 23 closing share price of $16.57 and is expected to help Charles River achieve pre-tax savings of $20 million annually through operating efficiencies, the company says. If both company's shareholders approve the deal, it is expected to close by the fourth quarter of 2010.

 

“This transaction revolutionizes the contract research landscape by creating the only global contract research organization, or CRO, to offer fully integrated research and drug development services from molecule creation to first-in-human testing,” says James Foster, president and CEO of Charles River.

 

The deal allows the Wilmington, Massachusetts company to immediately expand its presence in China while helping Shanghai's WuXi accelerate its good laboratory practice toxicology capabilities, says Ge Li, WuXi's CEO. Li will become a corporate EVP and president of global discovery and China services for Charles River.

 

“We have to be very close to our clients, particularly in our research model business. So proximity is a competitive advantage,” Foster told investors at Barclays Capital Global Healthcare Conference in March, about a year after his company expanded to Shanghai.

 

“We're quite confident that China is going to be an important and large growth market for us and the life sciences industry generally,” he said. In 2009, companies including Genzyme, Roche, Merck Serono and Lonza proved that point by spending millions on building Chinese R&D centers.