Charles River Laboratories (CRL) Barclays 28th Annual Global Healthcare Conference summary

Demand environment and industry trends

• Demand closely tied to biotech funding, with recent signs of recovery after a prolonged trough; Q4 and early 2024 were strong.

• Big pharma has stabilized after pipeline recapitulation, while biotech shows pent-up demand awaiting sustained capital inflows.

• Bookings and proposals are flat to up, cancellations have normalized, and backlog is healthy at about nine months.

• R&D budgets are at least flat, with expectations for increased IND filings as capital markets improve.

• Venture capital and big pharma are accelerating funding cycles, supporting a positive outlook.

Technology, AI, and efficiency

• Significant investments in technology aim to reduce paperwork and increase operational speed.

• AI and NAMS (new alternative methods) are seen as complementary, mainly accelerating discovery but not replacing core wet lab work.

• Data sharing remains a challenge due to client reluctance, slowing AI adoption.

• AI's impact is expected to be gradual, potentially taking a decade to become transformative.

• Validation for regulatory acceptance is a major hurdle for AI and NAMS in safety studies.

Portfolio strategy and acquisitions

• Recent acquisitions across all segments have added $200 million in revenue, focusing on core strengths and vertical integration.

• Divestiture of the CDMO business is expected to improve margins and refocus on core operations.

• New deals include a NAMS company for biologics and an NHP supply business, both expected to enhance margin and supply certainty.

• Vertical integration in NHPs ensures quality, supply, and operational control, supporting client needs.

• Ongoing investments in R&D and targeted acquisitions are guided by internal and board-level committees.