FDA’s Intent To Phase Out Animal Testing Requirement Weighs Down Charles River Stock: Retail’s Disheartened

Shares of Charles River Laboratories International, Inc. (CRL) traded over 3% lower on Friday morning after the U.S. Food and Drug Administration (FDA) announced plans to replace animal testing in the development of monoclonal antibody therapies and other drugs.

Morgan Stanley said that Thursday's FDA proposal "came as a surprise to most investors (and us) and clearly adds additional uncertainty" for Charles River Laboratories at a time when the company is "already grappling with multiple headwinds elsewhere," as per TheFly.  

Morgan Stanley views the company as "a key part of the eventual solution," given their preeminent status as the preclinical contract research organization of choice, even if the new status quo involved decreasing dependence on animal models.

Morgan Stanley reiterated its ‘Equal Weight’ rating on the stock and $184 price target.

Charles River provides products and services to help pharmaceutical and biotechnology companies, government agencies, and leading academic institutions accelerate their drug development efforts. The company also provides preclinical testing and clinical development services.

JPMorgan, which holds a ‘Neutral’ rating on the stock, opined that Charles River could see disruption from customers reassessing its preclinical strategies in the near term.

The firm acknowledged that it has been making significant investments in alternative methods for some time but said it is unclear if Charles River could maintain its leadership position in a preclinical market that uses significantly fewer animals.

TD Cowen analyst Charles Rhyee also said on Thursday that the new FDA announcement introduces a large overhang for CRL shares. Rhyee reiterated a ‘Hold’ rating and a $179 price target for the company.

In February, Charles River reported a full-year 2024 revenue of $4.05 billion, down from $4.13 billion in 2023. Adjusted earnings per share (EPS) for the year were $10.32, a decrease of 3.3% from $10.67 in 2023.

For 2025, the company expects adjusted EPS to fall further and within the range of $9.10 – $9.60.

On Stocktwits, retail sentiment about Charles River fell from ‘neutral’ to ‘bearish’ over the past 24 hours while message volume jumped from ‘extremely low’ to ‘extremely high’ levels.

CRL stock is down by 47% year-to-date and by nearly 61% over the past 12 months.

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