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Charles River buys 2 firms in bid to strengthen R&D

Charles River Laboratories International Inc. said Thursday it will pay $179 million to buy a pair of European drug-targeting businesses that will help it expand its capabilities as a contract research organization for pharmaceutical and biotechnology companies.

The acquisition of Argenta and BioFocus, two British units of Dutch drug maker Galapagos NV, will allow the Wilmington company to offer clients early-stage “in vitro” tests for drug targets, using cellular systems and computer simulations, along with the animal tests it already provides to firms that make drugs to treat cancer and other diseases. That, in turn, will enable the clients to make quicker decisions about whether to take drugs to clinical trials.

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“It gives us a broader, much more comprehensive portfolio than any other contract research organization in the world,” said Charles River Labs chief executive James C. Foster.

The deal, expected to be completed this spring, would be the largest by Charles River Labs in nearly a decade. The company had moved to expand into contracted early-stage drug discovery in 2010 when it agreed to buy China’s WuXi PharmaTech Inc., a competitor to the Galapagos companies, for $1.6 billion. But that purchase was upended by hedge fund JANA Partners and investment firm Neuberger Berman, which together owned more than 13 percent of Charles River Labs and objected. They have since sold their stakes in Charles River Labs.

While Charles River Labs projected the smaller acquisition of Argenta and BioFocus would boost its global sales by 6 percent this year, it won’t immediately add jobs in its home state of Massachusetts, where the company has about 1,000 of its 8,000 worldwide employees.

In the short term, early-stage drug targeting will continue to be done at Argenta and BioFocus sites in and around Cambridge, England, for European and North American customers. That includes many Boston-area biopharmaceutical companies and university research labs, Foster said. Argenta and BioFocus together have about 380 employees.

Many biopharma companies, operating on tighter budgets, have been outsourcing later-stage research and development and clinical trial management for years. More recently, they have begun to farm out earlier stage drug discovery activities to contract research organizations like Argenta, BioFocus, WuXi, and Albany Molecular Research Inc. Such companies seek to identify drug targets — proteins or nucleic acid where medicines can bind — a key step in the process of developing drugs to treat cancer, inflammation, and respiratory, metabolic, and central nervous system disorders.

“This is a smart move by Charles River,” said analyst Greg Bolan, managing director at investment bank Sterne Agee in Nashville, Tenn. “It’s going to enable them to dig deeper into the research and development budgets of their current customers and new customers.”

As drug makers and biotech companies have scaled back on in-house research, many of the brightest drug discovery scientists have migrated in recent years to companies like Argenta and BioFocus, where about 40 percent of the employees have PhDs.

“It’s no longer a good use of the resources of pharma companies and large biotechs to do this work,” Foster said, “because we do it as well or better at significantly lower prices.”

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.

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