Charles River Laboratories stock falls on weak 2025 revenue outlook

WILMINGTON, Mass. -- Shares of Charles River Laboratories (NYSE: CRL) fell 5% as the company projected a decline in organic revenue for 2025 similar to the decrease estimated for 2024. The company's preliminary outlook, disclosed ahead of the 43rd Annual J.P. Morgan Healthcare Conference presentation, pointed to several headwinds including lower demand from biopharma clients, pricing challenges, and foreign exchange rates.

The Wilmington, Massachusetts-based company, known for its preclinical and clinical laboratory services, expects demand from its Discovery (NASDAQ:WBD ) and Safety Assessment (DSA) clients to remain consistent with the trends observed in the second half of 2024. However, global biopharma clients are experiencing constrained spending due to restructuring programs and pipeline reprioritization efforts, which is anticipated to affect Charles River's revenue adversely.

Additionally, the company foresees a stable to slight improvement in demand trends from biotech clients, similar to those in 2024. Despite cost savings from restructuring and other efficiency initiatives, the non-GAAP operating margin for 2025 is predicted to be modestly below the estimated 2024 level. The company plans to issue full 2025 guidance with its fourth-quarter 2024 financial results in mid-February 2025.

The CDMO business update revealed that a cell therapy client has decided to terminate its commercial agreement with Charles River to work with another long-time CDMO partner, which will impact the revenue negatively. Furthermore, lower commercial revenue is expected from another cell therapy client. Although Charles River has made significant investments in its CDMO operations since 2021, the demand for cell and gene therapy client services has not been as robust as anticipated at the time of acquisition. The company is currently evaluating the recoverability of goodwill and long-lived assets for a potential impairment due to these challenges.

Investors are reacting to these revelations with concern, as the company's stock price reflects the anticipated revenue decline and the impact of various headwinds on its financial performance. Charles River Laboratories remains focused on its strategic initiatives and long-term growth opportunities, particularly in its CDMO business, despite the current setbacks.

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Source: Investing.com