Buying the related Shanghai-based contract research organisations (CRO) gives WuXi a presence in 15 Chinese cities to advance the clinical expansion strategy it outlined in August. WuXi wants clinical capabilities to help western biopharm enter the Chinese market.
“This acquisition provides WuXi an existing clinical development service capability and infrastructure that WuXi will expand and strengthen”, Ge Li, chairman and CEO of WuXi, said.
In September Outsourcing-Pharma reported that WuXi planned to enter clinical trials through a small acquisition and then invest to grow operations. Growing the business is expected to be a gradual process.
“We caution that it will take time to build out the capabilities and train the necessary personnel to grow the business”, David Windley, equity analyst at Jefferies & Company, said. Windley expects WuXi’s expansion to include hiring “additional individuals with specific clinical trial experience”.
WuXi must also establish and strengthen relationships with hospitals. “All clinical trials in China must be carried out in a hospital. This requires strong relationships with the hospitals and Chinese key opinion leaders”, Windley said.
Takeover targets
The CROs, MedKey Med-Tech Development and Jiecheng Med-Tech Development, were both founded by David Xi. WuXi will retain Xi as its executive director of clinical operations. Combined the CROs have 80 employees and operations in 15 cities in China.
WuXi declined to disclose financial details of the deal but Windley estimates the total transaction value is between $10m (€7m) and $20m. Adding clinical rounds out WuXi’s service offering and Windley expects future acquisitions to be small and focused on specific niche capabilities.
A busy month
Acquisition of the two clinical CROs comes 10 days after WuXi’s takeover of Abgent, a provider of biological research reagent products and services. WuXi said the deal adds “new product lines of biological research reagents” and analysts have speculated how these assets will be used.
“We expect Abgent to supply reagents internally to WuXi’s discovery biologics division [and it] could become a reagent supplier to WuXi’s pharmaceutical and biotech customers”, Liping Cai, research analyst at William Blair, said.
In contrast Windley downplayed the research reagent angle and emphasised the antibody production expertise at Abgent. “WuXi is building out its expertise in the biologics arena, so that it can be a player in the emerging biosimilar market”, Windley said.