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Thursday, February 18, 2021 4:04:17 PM
https://ir.criver.com/news-releases/news-release-details/charles-river-laboratories-announces-fourth-quarter-and-full-9
From their webcast slides (between to 5:55 to 11:55)
"Cognate's Synergistic Fit:
"Biopharmaceutical clients are seeking to drive greater efficiency and leverage scientific benefits by working with fewer trusted partners who have broad, integrated capabilities."
Ideal for clients to be able to seamlessly conduct analytical testing, process development, and manufacturing for advice modalities with the SAME scientific partner."
Cognate & C> Growth Potential:
"Addressable market for Cognate's CDMO services currently estimated at ~$1.5B
- Expected to grow ≥25% annually over the next 5 years"
"Believe demand for Cognate's services will intensify as more C> programs progress into late-stage development and commercialization."
Cognate Financial Details
"Believe Cognate will meaningfully enhance our revenue and earnings growth potential and achieve our hurdle rates for investment returns
- Driven by market growth potential and emerging role of C> as treatments for oncology and rare disease, in particular"
Near the end of their presentation, (37:30)
"As a premier, C> CDMO, expect Cognate to:
- Boost the growth potential of our business
- Be increasingly accretive to non-GAAP EPS after Year 1"
"- Intend to provide a business update and details on longer-term outlook, including updated financial targets at a Virtual Investor Day in the Spring"
Minute 41 - questions begin... quite a few of them involve the Cognate purchase. This section is really worth a listen. Below are answers to some of the questions that stood out to me, but hearing the actual questions, and the more detailed context would be helpful to some.
Calls Cognate a "entering with this asset (Cognate) as a leader in the CGT (Cell and Gene Therapy) space, potentially the leader over time, so that sort of dove tails with the original comments that we made.
"Do think that the clients of Cognate's will be very pleased to see it in our hands because there's the uncertainty of being private equity owned, what's the future, what's the investment portfolio, so I do think the clients who are working with this company now in the clinic who's drugs are progressing nicely will have a high degree of confidence that if the drug makes it, that we could, and perhaps should be their commercial producer, so we like the sort of entry point here with a bunch of increased business with our access to clients, with their footprint, and with this being part of our overall portfolio."
"You're going to see RMS get back to kind of historical levels to 2021, and then I think it should prove particularly, since it has that attractive cell product aspect to it... we'll give you a deep definitive dive on that in the not-to-distant future."
"As Jim said, we do think we can get margin expansion this year, and we'll say more when we have the virtual investor day in the Spring."
"So the cap ex will not be insignificant in this business; it will be meaningful, but I don't think disproportionate to the growth potential of this business. This will be amongst, if not the highest aspect of our business so we'll have to invest ahead of it as we said earlier. Obviously there's a substantial install base that we're buying. You know, this business is principally GMP Cell Therapy Manufacturing and secondarily, the manufacture of plasma DNAs, and while the cap ex is substantial, it's less substantial than some aspects of contract manufacturing so we're not really going head to head, for instance, with thermo and catalent (?) that are more gene therapy manufacturing businesses. So it's difficult to vet, sort of, what the spend is versus what our's will be. It won't be insignificant, but it'll be a lower order of magnitude- one that we're quite confident we'll get substantial returns on, and that we've already obviously baked through our model... we'll give you clarity on it as soon as we close this deal."
NOTE: The CLR company guidance regarding their acquisition of Cognate points to more information coming at CRL's spring guidance.
https://edge.media-server.com/mmc/p/8rkw49z2
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