CRL Charles River Laboratories International Inc

Charles River Laboratories International Inc. (CRL) recently announced that it will combine its Research Models and Services (RMS) and Preclinical Services (PCS) businesses into a single unit. The newly aligned business will run operations in North America and Europe/Asia.

Dr. Nancy Gillett will be the Chief Scientific Officer of the global businesses. Dr. Davide Molho will be the Corporate Executive Vice President and President for the North American Operations. Moreover, Dr. Jörg Geller was promoted to Corporate Executive Vice President and President for the European & Asian Operations.

Management believes this alignment will enable the company to provide more flexible solutions to its clients to meet their drug development needs. The financial segment reporting is not expected to change as a result of the alignment.

Sales in Charles River’s RMS and PCS segments have been light since the last few quarters. In the second quarter of this year, the revenue from the RMS segment was $178.4 million, up only 1.3% over the prior-year period excluding the 5.3% gain from foreign exchange. Strong sales of In Vitro products and RMS services were offset by weaker sales of toxicology services and research models. The PCS segment recorded revenue of $110.1 million, down 12.2% excluding the positive impact of foreign exchange. Revenues were affected by an unfavorable sales mix comprising a greater proportion of shorter-term studies and general toxicology. Continued soft demand from large pharmaceutical clients also negatively impacted revenues.

Our Recommendation

We currently have a Neutral recommendation on Charles River. The stock carries a Zacks #2 Rank tantamount to a short-term Buy rating.

Despite consistent performance in the RMS segment, the PCS business fails to show any definite sign of recovery, thus keeping us on the sidelines.

 
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