Charles River doubles down on CNS research with Brains On-Line buy

Little progress has been made in drug development for central nervous system diseases, even less when we zoom in on neurodegenerative disorders, but that doesn’t necessarily deny opportunities. Charles River Laboratories, for one, is investing more in the field by purchasing CRO Brains On-Line.

"[T]he world’s premier provider of microdialysis for CNS research," in the words of Charles River, Brains On-Line provides preclinical contract research services in CNS and offers in vivo efficacy and pharmacokinetics testing for analysis of drugs in the brain.

Already an industry leader offering a wide range of neuroscience R&D services, Charles River is paying €18 million ($21 million) to snap up the small-cap CRO, which has operations in San Francisco, the Netherlands and Germany. Additional payments of up to €6.7 million are possible if future performance of the business is better than expected.

A brief look-back at recent developments in CNS shows a not-so-rosy picture. Take multiple sclerosis as an example. Of course, there’s the success of Roche’s Ocrevus, but MS expert Biogen last year discontinued development of the phase 3-to-be amiselimod and decided to advance opicinumab on the back of a phase 2 failure. Celgene’s ozanimod met its primary endpoint in a pivotal trial but missed a secondary disability endpoint.

Research into neurodegenerative diseases like Alzheimer’s and Parkinson’s is also notoriously filled with disappointments. Not to mention the fact that GlaxoSmithKline is shutting its global neuroscience R&D hub in Shanghai in just a few months, cutting several programs amid a major shakeup championed by new CEO Emma Walmsley.

Then why did Charles River decide to double down on such a risky area? Charles River Chairman, President and CEO James Foster’s comments during the company’s second-quarter conference call Wednesday may offer a clue.

When answering a question about impact from pharma companies’ restructuring, Foster said: "For the biggest drug companies, it’s a constant process of focusing beyond therapeutic areas where they can distinguish themselves, and maybe getting rid of therapeutic areas where they can’t, vis-à-vis the competition … And, some of that’s going to have to do with widdling back their R&D infrastructures and organizations … To some extend it’s accelerating the outsourcing trend." Foster said that as more companies cease to do early tests internally, it could mean more business for Charles River, which specializes in early-stage drug research.

Charles River’s revenue from continuing operations for the second quarter was $469.1 million. Its acquisitions of Agilux Laboratories, WIL Research and Blue Stream Laboratories contributed 3.9% to an overall 8.1% revenue growth for that quarter, while the offloading of its CDMO business to Quotient Clinical in February dealt a 1% setback for the reported growth.