On February 17, 2021 Charles River Laboratories International, Inc. (NYSE: CRL) reported that it has signed a definitive agreement to acquire Cognate BioServices, Inc., a premier, cell and gene therapy contract development and manufacturing organization (CDMO), for approximately $875 million in cash, subject to customary closing adjustments (Press release, Charles River Laboratories, FEB 17, 2021, View Source [SID1234575317]). The transaction is expected to close by the end of the first quarter of 2021, subject to regulatory requirements and customary closing conditions.

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James C. Foster, Chairman, President and Chief Executive Officer of Charles River Laboratories, commented, "Cognate BioServices presents a unique opportunity to expand into a high-growth, value-added sector of the CDMO market and enhance our ability to meet our clients’ needs in emerging areas of scientific innovation. This acquisition will be an exceptional strategic fit, adding to our comprehensive suite of early-stage research and manufacturing support solutions and enabling us to achieve our goal of establishing a single scientific partner to provide biopharmaceutical clients with an integrated solution to help accelerate their cell and gene therapy programs from discovery and non-clinical development through commercialization."

"Because of the synergistic fit with Charles River, the market growth potential, and the emerging role of advanced drug modalities as treatments for oncology and rare disease, we believe Cognate will meaningfully enhance our long-term revenue and earnings growth potential. We look forward to welcoming Cognate’s dedicated employees to the Charles River family," Mr. Foster concluded.

Cognate is a premier, cell and gene therapy CDMO offering comprehensive manufacturing solutions for cell therapies, as well as for production of plasmid DNA and other inputs in the CDMO value chain. The planned acquisition will establish Charles River as a premier scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research and discovery through CGMP production. Cognate has extensive experience producing various cell types and technologies used in cellular immunotherapy and immuno-oncology, regenerative medicine, and advanced cell therapy. Headquartered in Memphis, Tennessee, Cognate has operations in North America and Europe with over 500 employees.

Strategic Rationale

The acquisition of Cognate will expand Charles River’s scientific capabilities into the emerging, high-growth cell and gene therapy CDMO sector, establishing a comprehensive solution from discovery and non-clinical development through CGMP manufacturing in advanced drug modalities.

Expands Scientific Expertise into Major CDMO Platforms for Cell and Gene Therapies – Cognate offers its clients a broad portfolio of cell and gene therapy solutions across the major CDMO platforms, enhancing its ability to meet its clients’ evolving scientific needs. Its primary area of expertise is in CGMP cell therapy manufacturing, which processes a variety of cellular products and other starting materials to develop and produce allogeneic (donor-derived) and autologous (patient-derived) cell therapies. Cognate also produces plasmid DNA, which is a foundational tool used in the development of gene-modified cell therapies and gene therapies, as well as other CDMO inputs.
Complements Charles River’s existing portfolio and establishes a premier scientific partner for the development, testing, and manufacturing of advanced drug modalities – Biopharmaceutical clients are seeking to drive greater efficiency and leverage scientific benefits by working with fewer, trusted partners who have broad, integrated capabilities. The addition of Cognate will be complementary to Charles River’s existing, non-clinical capabilities, establishing a premier scientific partner for cell and gene therapy development, testing, and manufacturing, and providing clients with an integrated solution from basic research through CGMP production.

Cognate will be particularly synergistic with the Company’s Biologics Testing Solutions business. It will enable clients to seamlessly conduct analytical testing, process development, and manufacturing for advanced modalities with the same scientific partner, enabling them to achieve their goal of driving greater efficiency. Clients will also have access to the Company’s cellular products as the starting point for their cell therapy programs and will be able to work with Charles River through every step of the research and early-stage development process before moving into CGMP production with Cognate, accelerating clients’ speed to market for advanced drug modalities.
Enhances Charles River’s growth potential with increased exposure to a high-growth market sector – Cognate will immediately enhance Charles River’s growth potential by expanding its comprehensive platform of high-growth cell and gene therapy solutions. The addressable market for Cognate’s CDMO services – principally cell therapy and plasmid production – is currently estimated at approximately $1.5 billion and expected to grow at least 25% annually over the next five years. With a significant portion of cell and gene therapy programs in the preclinical phase, demand for Cognate’s services is expected to intensify as more of these programs progress into late-stage development and commercialization.
Expected to drive profitable growth and shareholder value – The acquisition is expected to generate attractive financial returns that are consistent with Charles River’s disciplined investment criteria. It is also expected to be meaningfully accretive to Charles River’s long-term revenue and earnings per share growth. Cognate is expected to generate annual revenue of approximately $140 million in 2021, and is expected to grow at least 25% annually over the next five years.
Additional Financial and Transaction Details

Based on the anticipated completion of the acquisition by the end of the first quarter, Cognate is expected to add approximately $110 million to Charles River’s 2021 consolidated revenue for the partial year. The transaction is expected to be neutral to non-GAAP earnings per share in 2021, and accretive thereafter. Items excluded from non-GAAP earnings per share are expected to include all acquisition-related costs, which primarily include amortization of intangible assets, advisory fees, certain costs associated with efficiency initiatives, and certain third-party integration costs.

The acquisition and associated fees are expected to be financed through Charles River’s existing credit facility and cash. The Company is evaluating further optimizing its debt structure which could be used to finance the acquisition and for general corporate purposes.

Cognate is expected to be reported as part of Charles River’s Manufacturing Support segment.

Advisors and Cognate Ownership

Gordon Dyal & Co., LLC is acting as the exclusive financial advisor to Charles River. Davis Polk & Wardwell LLP is acting as Charles River’s transactional legal counsel, and Weil, Gotshal & Manges LLP is acting as antitrust counsel. Dark Horse Consulting Group, Inc. is acting as Charles River’s strategic advisor.

Cognate is supported by its majority shareholder, EW Healthcare Partners, as well as minority shareholders, Medivate Partners, BlackRock, and a sovereign wealth fund. Morgan Stanley & Co. LLC is acting as the exclusive financial advisor and Kirkland & Ellis LLP is acting as legal counsel to Cognate and its shareholders.

On February 17, 2021 Charles River Laboratories International, Inc. (NYSE: CRL) reported its results for the fourth-quarter and full-year 2020 and provided guidance for 2021 (Press release, Charles River Laboratories, FEB 17, 2021, View Source [SID1234575301]). For the quarter, revenue was $791.0 million, an increase of 14.4% from $691.1 million in the fourth quarter of 2019.

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Acquisitions contributed 2.1% to consolidated fourth-quarter revenue growth. The impact of foreign currency translation benefited reported revenue growth by 2.0%. Excluding the effect of these items, organic revenue growth of 10.3% was driven by contributions from all three business segments.

On a GAAP basis, fourth-quarter net income attributable to common shareholders was $143.2 million, an increase of 78.2% from net income of $80.3 million for the same period in 2019. Fourth-quarter diluted earnings per share on a GAAP basis were $2.81, an increase of 74.5% from $1.61 for the fourth quarter of 2019. The increases in GAAP net income and earnings per share were driven primarily by higher revenue, operating income, and venture capital investment gains. GAAP earnings per share included a gain from the Company’s venture capital and other strategic investments of $1.01 per share in the fourth quarter of 2020, compared to $0.22 per share for the same period in 2019. The Company’s venture capital and other strategic investment performance has been excluded from non-GAAP results.

On a non-GAAP basis, net income from continuing operations was $122.1 million for the fourth quarter of 2020, an increase of 22.0% from $100.1 million for the same period in 2019. Fourth‑quarter diluted earnings per share on a non-GAAP basis were $2.39, an increase of 18.9% from $2.01 per share for the fourth quarter of 2019. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue and operating income, as well as a benefit from non-operating items, including a lower tax rate.

James C. Foster, Chairman, President and Chief Executive Officer, said, "2020 was an extraordinary year, in which we were able to successfully navigate the challenges of the COVID-19 pandemic and reinforce our position as the leading, non-clinical CRO. Our strong financial performance reflects the resilience of our business model and the robust demand environment, which was driven by clients intensifying their use of strategic outsourcing and partnering with us to move their critical research programs forward. Our focus on enhancing the value that we provide to clients has made us a trusted partner, and we expect that the robust demand trends will continue. As a result, we believe we are well positioned for an excellent start in 2021."

Mr. Foster continued, "We are pleased to be expanding our early-stage research and manufacturing support portfolio into the complementary, high-growth cell and gene therapy CDMO sector. The planned acquisition of Cognate BioServices will create a premier scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research through CGMP production. We believe this strategic expansion of our portfolio will be highly synergistic with our existing capabilities, particularly for biologics testing. It will enhance our ability to achieve our long-term financial goals and deliver greater value to both clients and shareholders."

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $156.7 million in the fourth quarter of 2020, an increase of 19.3% from $131.3 million in the fourth quarter of 2019. The HemaCare and Cellero acquisitions completed in 2020 contributed 11.2% to fourth-quarter RMS revenue. Organic revenue growth of 5.2% was driven by higher revenue for research models services, particularly Genetically Engineered Models and Services (GEMS), as well as higher sales volume for research models due to accelerated demand in all geographic regions, particularly in China. Global demand for research models improved both on a year-over-year and sequential basis, as clients returned to normalized order activity in all geographic regions following COVID-19-related disruptions earlier in the year, principally in the second quarter.

In the fourth quarter of 2020, the RMS segment’s GAAP operating margin decreased to 21.9% from 23.0% in the fourth quarter of 2019, primarily due to acquisition-related amortization costs associated with HemaCare and Cellero. On a non-GAAP basis, the operating margin increased to 25.1% from 24.6% in the fourth quarter of 2019. The non-GAAP operating margin increased primarily due to operating leverage from higher sales volume in the research models business, as well as the benefit of operating efficiency initiatives.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $495.0 million in the fourth quarter of 2020, an increase of 12.7% from $439.2 million in the fourth quarter of 2019. Organic revenue growth of 11.3% was primarily driven by robust demand from global biopharmaceutical and biotechnology clients in both the Discovery Services and Safety Assessment businesses.

In the fourth quarter of 2020, the DSA segment’s GAAP operating margin decreased to 18.4% from 19.1% in the fourth quarter of 2019. On a non-GAAP basis, the operating margin decreased to 23.2% from 25.6% in the fourth quarter of 2019. The GAAP and non-GAAP operating margin decreases were driven primarily by increased costs due in part to higher performance-based compensation expense, as well as the study mix in the Safety Assessment business.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $139.3 million in the fourth quarter of 2020, an increase of 15.5% from $120.6 million in the fourth quarter of 2019. Organic revenue growth of 12.4% was led by robust demand in the Biologics Testing Solutions (Biologics) business. Both the Microbial Solutions and Avian Vaccine businesses were also significant contributors to fourth-quarter revenue growth.

In the fourth quarter of 2020, the Manufacturing segment’s GAAP operating margin increased to 35.3% from 34.4% in the fourth quarter of 2019. On a non-GAAP basis, the operating margin increased to 37.3% from 37.2% in the fourth quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from higher revenue in the Biologics and Avian Vaccine businesses.

Full-Year Results

For 2020, revenue increased by 11.5% to $2.92 billion from $2.62 billion in 2019. Organic revenue growth was 7.0%.

On a GAAP basis, net income attributable to common shareholders was $364.3 million in 2020, an increase of 44.6% from $252.0 million in 2019. Diluted earnings per share on a GAAP basis in 2020 were $7.20, an increase of 42.0% from $5.07 in 2019. On a GAAP basis, the Company recorded a gain from venture capital and other strategic investments totaling $1.50 per share in 2020, compared to a gain of $0.30 in 2019.

On a non-GAAP basis, net income from continuing operations was $411.5 million in 2020, an increase of 23.1% from $334.4 million in 2019. Diluted earnings per share on a non-GAAP basis in 2020 were $8.13, an increase of 20.8% from $6.73 in 2019.

Research Models and Services (RMS)

For 2020, RMS revenue was $571.2 million, an increase of 6.3% from $537.1 million in 2019. Organic revenue growth declined by 3.3%, principally due to the impact of the COVID-19 pandemic.

On a GAAP basis, the RMS segment operating margin decreased to 18.0% in 2020 from 24.9% in 2019. On a non-GAAP basis, the operating margin decreased to 22.0% in 2020 from 26.2% in 2019.

Discovery and Safety Assessment (DSA)

For 2020, DSA revenue was $1.84 billion, an increase of 13.5% from $1.62 billion in 2019. Organic revenue growth was 9.4%.

On a GAAP basis, the DSA segment operating margin increased to 17.7% in 2020 from 16.0% in 2019. On a non-GAAP basis, the operating margin increased to 23.4% in 2020 from 22.0% in 2019.

Manufacturing Support (Manufacturing)

For 2020, Manufacturing revenue was $515.4 million, an increase of 10.8% from $465.1 million in 2019. Organic revenue growth was 10.4%.

On a GAAP basis, the Manufacturing segment operating margin increased to 35.2% in 2020 from 31.3% in 2019. On a non-GAAP basis, the operating margin increased to 37.4% in 2020 from 33.9% in 2019.

Planned Acquisition of Cognate BioServices

In a separate press release today, Charles River announced that it has signed a definitive agreement to acquire Cognate BioServices, Inc. for approximately $875 million in cash, subject to customary closing adjustments.

Cognate is a premier, cell and gene therapy CDMO offering comprehensive manufacturing solutions for cell therapies, as well as for production of plasmid DNA and other inputs in the CDMO value chain. The planned acquisition of Cognate will establish Charles River as a premier scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research through CGMP production.

Cognate is expected to generate annual revenue of approximately $140 million in 2021. By expanding into this high-growth sector, Cognate is expected to enhance Charles River’s growth potential by generating at least 25% compound annual revenue growth over the next five years. Cognate will be reported as part of Charles River’s Manufacturing Solutions segment.

2021 Guidance Excluding Cognate BioServices

The Company is providing the following revenue, earnings per share, and free cash flow guidance for 2021 excluding the financial impact of the planned acquisition of Cognate. The 2021 revenue growth outlook reflects a continuation of robust client demand trends, as well as a favorable comparison to last year’s revenue impact from the COVID-19 pandemic. Earnings per share in 2021 are expected to benefit from higher revenue and modest operating margin improvement, partially offset by a higher tax rate.

Footnotes to Guidance Table:

(1) The contribution from acquisitions reflects only those acquisitions that have been completed.

(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions and foreign currency translation.

(3) GAAP EPS guidance does not include an estimate for future gains or losses from venture capital and other strategic investments. Potential gains or losses are expected in 2021, but the Company does not forecast the future performance of these investments. Any future gains or losses would be excluded from non-GAAP results.

(4) These adjustments are related to the evaluation and integration of acquisitions, and primarily include transaction, advisory, and certain third-party integration costs, as well as certain costs associated with acquisition-related efficiency initiatives.

(5) These items primarily relate to charges of approximately $0.10 associated with U.S. and international tax legislation that necessitated changes to the Company’s international financing structure.

(6) Reconciliation of the current 2021 free cash flow guidance is as follows: Cash flow from operating activities of $595-$615 million, less capital expenditures of approximately $180 million, equates to free cash flow of $415-$435 million.

2021 Financial Impact of Cognate Acquisition

Based on the anticipated completion of the acquisition by the end of the first quarter of 2021, Cognate is expected to add approximately $110 million to Charles River’s 2021 consolidated revenue for the partial year. With this contribution from Cognate, Charles River’s reported revenue growth guidance is expected to increase to 16% to 18% for 2021.

The transaction is expected to be neutral to non-GAAP earnings per share in 2021, and therefore, is not expected to have a meaningful impact on the Company’s non-GAAP earnings per share guidance. Items excluded from non-GAAP earnings per share are expected to include all acquisition-related costs, which primarily include amortization of intangible assets, advisory fees, certain costs associated with efficiency initiatives, and certain third-party integration costs.

Webcast

Charles River has scheduled a live webcast on Wednesday, February 17th, at 8:30 a.m. ET to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link. You can also find the associated slide presentation and reconciliations of GAAP financial measures to non-GAAP financial measures on the website.

Non-GAAP Reconciliations

The Company reports non-GAAP results in this press release, which exclude often-one-time charges and other items that are outside of normal operations. A reconciliation of GAAP to non-GAAP results is provided in the schedules at the end of this press release.

On February 17, 2021 Y-mAbs Therapeutics, Inc. (the "Company" or "Y-mAbs") (Nasdaq: YMAB), a commercial-stage biopharmaceutical company focused on the development and commercialization of novel, antibody-based therapeutic products for the treatment of cancer, reported the pricing of its public offering of 2,439,025 shares of its common stock at a public offering price of $41.00 per share (Press release, Y-mAbs Therapeutics, FEB 17, 2021, View Source [SID1234575281]). The gross proceeds from the offering, before deducting underwriting discounts and commissions and estimated offering expenses, are expected to be approximately $100.0 million. All of the shares are being offered by Y-mAbs. In addition, Y-mAbs has granted the underwriters a 30-day option to purchase up to an additional 365,853 shares of common stock at the public offering price, less the underwriting discounts. The offering is expected to close on February 22, 2021, subject to the satisfaction of customary closing conditions.

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J.P. Morgan, Morgan Stanley and BofA Securities are acting as the joint book-running managers for the offering. Kempen & Co and H.C. Wainwright & Co. are acting as co-managers for the offering.

The prospectus and prospectus supplement relating to the offering may be obtained, when available, from: J.P. Morgan, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY, 11717, or by telephone at (866) 803-9204; Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, Second Floor, New York, New York 10014; or BofA Securities, NC1-004-03-43,200 North College Street, 3rd Floor, Charlotte, NC 28255-0001, Attn: Prospectus Department, or by email at [email protected].

The shares of common stock described above are being offered by Y-mAbs pursuant to its shelf registration statement on Form S-3 (Reg. No. 333-234034), including a base prospectus, that was declared effective by the SEC on October 15, 2019. The securities are being offered only by means of a prospectus supplement and accompanying prospectus forming a part of the effective registration statement. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

On February 17, 2021 Cleveland BioLabs, Inc. (NASDAQ: CBLI), an innovative biopharmaceutical company developing novel approaches to activate the immune system, filed a registration statement on Form S-4 (the "Registration Statement") with the U.S. Securities and Exchange Commission (SEC) in connection with its previously announced merger agreement with Cytocom Inc., a leading biopharmaceutical company creating next-generation immune therapies that deliver immune homeostasis (Press release, Cleveland BioLabs, FEB 17, 2021, View Source [SID1234575249]).

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The Registration Statement is not yet in effect. However, the Registration Statement, including the proxy statement/ prospectus contained therein, contains important information about the proposed transaction and the parties to the transaction. The filing represents an important step toward Cytocom and Cleveland BioLabs’ intended combination of their businesses to become a single, publicly-traded company. The parties expect that the common stock of the combined company will trade on the Nasdaq Capital Market under the symbol "CYTO," and that the merger will potentially close during the second quarter of 2021.

As previously announced, the combined company will include a shareholder base comprised of legacy Cytocom shareholders, legacy Cleveland BioLabs shareholders and legacy ImQuest Life Sciences shareholders. Immediately following the merger, legacy Cleveland BioLabs shareholders are expected to own approximately 39% of the outstanding shares of the combined company on a fully diluted basis and legacy Cytocom shareholders (including former ImQuest shareholders) are expected to own approximately 61% of the outstanding shares of the combined company on a fully diluted basis.

The proposed merger between Cleveland Biolabs and Cytocom, and Cytocom’s intended acquisition of ImQuest Life Sciences, have the potential to create a transformative growth opportunity for Cytocom, as well as the shareholders of both Cleveland BioLabs and ImQuest Life Sciences.

Following completion of the proposed business combination, Cytocom’s experienced management team will become the management team of the combined company. Michael K. Handley will serve as President and CEO of the new Cytocom. The combined company’s board of directors will be composed of up to seven members, consisting of three individuals designated by Cleveland BioLabs, two of whom will be current board members Randy Saluck and Lea Verny and the third of whom will be designated at a later time, and four individuals designated by Cytocom, three of whom will be Michael K. Handley, Taunia Markvicka, and Steve Barbarick, and the fourth of whom will be designated at a later time.

On February 17, 2021 Kura Oncology, Inc. (Nasdaq: KURA), a clinical-stage biopharmaceutical company committed to realizing the promise of precision medicines for the treatment of cancer, reported that it will report fourth quarter and full year 2020 financial results before the open of U.S. financial markets on Wednesday, February 24, 2021 (Press release, Kura Oncology, FEB 17, 2021, View Source [SID1234575231]). Kura’s management will host a webcast and conference call at 8:00 a.m. ET / 5:00 a.m. PT that day to discuss the financial results and provide a corporate update.

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The live call may be accessed by dialing (877) 516-3514 for domestic callers and (281) 973-6129 for international callers and entering the conference code: 8581798. A live webcast and archive of the call will be available online from the investor relations section of the company website at www.kuraoncology.com.