Charles River Sees Limited Impact From NIH Cuts, Tariffs, Drug Pricing

Charles River Laboratories International Inc. CRL stock is trading lower on Wednesday after the company released second-quarter 2025 earnings.

The life science tools company reported:

Revenue of $1.03 million, a marginal increase of 0.6% year-over-year, beating the consensus estimate of $984.65 million.
The impact of foreign currency translation increased reported revenue by 1.2%. Excluding this impact, revenue declined 0.5% on an organic basis.
Operating margin decreased to 9.7% from 14.8% in the second quarter of 2024. Net income reached $52.3 million, or $1.06 per share, a decrease from net earnings of $90.0 million, or $1.74 per diluted share.
The decreases were primarily driven by higher amortization expense related to accelerated amortization of certain CDMO client relationships, costs associated with the company’s restructuring activities, and certain third-party legal and advisory costs.
Adjusted operating margin increased to 22.1% from 21.3%.
Adjusted earnings were 3.12 per share, up 11.4%, surpassing the consensus estimate of $2.50.
Revenue for the Research Models and Services (RMS) segment was $213.3 million, an increase of 3.3% year over year.
Organic revenue increased by 2.3%, primarily due to higher revenue for large research model products and research model services, including the Genetically Engineered Models and Services (GEMS) and Insourcing Solutions businesses.
Revenue for the Discovery and Safety Assessment (DSA) segment was $618 million, down 1.5%.
Organic revenue decreased by 2.4%, primarily driven by lower sales volumes for discovery and regulated safety assessment services.
Manufacturing Solutions' revenue reached $200.8 million, up 4.4%.
Organic revenue increased 2.9%, primarily driven by higher revenue in the Microbial Solutions business, which was partially offset by lower revenue in the Biologics Testing business.

Animal Endangerment Allegations

Last year, animal rights group PETA urged securities regulators to investigate Charles River Laboratories for allegedly misleading investors about its sales and purchases of long-tailed macaques, widely used in pharmaceutical research. The company faced accusations of importing thousands of non-human primates illegally and sourcing some from firms linked to an international smuggling ring, as well as falsely labeling monkeys sold to clients.

However, in July, the U.S. Fish and Wildlife Service cleared the company's shipments from late 2022 and early 2023 as legal, and the U.S. Department of Justice recently informed Charles River that both the grand jury and civil investigations into these shipments have been closed.

Charles River Raised Outlook

The company expects 2025 revenue to decline between (2.5)% and (0.5)% compared to the prior range of 5.5%-3.5% on a reported basis and organically down by 3%-1% (4.5% and 2.5% prior).

Charles River raised its fiscal year 2025 adjusted earnings from $9.30-$9.80 to $9.90-$10.30 compared to the consensus estimate of $9.60.

Conference Call Takeaways

Charles River stated that the effects of government funding reductions, including at the U.S. National Institutes of Health (NIH), have been minimal.

It expects that the loss of commercial CDMO revenue will reduce the growth rate of manufacturing solutions by less than 500 basis points in 2025.

The company states that the biotech environment is stable; however, when combined with smaller biotech companies, it remains more cash-constrained, partly due to the funding slowdown.

Mid-sized biotechs are performing better; many can support their R&D programs without external funding.

The company has not observed a significant impact on client spending patterns resulting from tariffs or concerns about drug pricing.

Price Action: CRL stock is down 4.82% at $159.42 at the last check on Wednesday.

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