Charles River: Putting FVE Under Review After FDA Announces Plans to Phase Out Animal Testing

Charles River Laboratories’ shares declined 28% on April 10 following the US Food and Drug Administration’s announcement to reduce reliance on animal testing for drug development, in favor of alternative methods such as artificial intelligence-driven models and lab-grown human organoid systems. While this development could pose meaningful long-term headwinds for the company, we do not anticipate a material impact on near-term revenue or margins. We expect regulatory implementation to unfold gradually, and adoption of new methods by drug developers will likely proceed with caution. We are putting our Charles River's fair value estimate under review while we assess how this regulatory landscape evolution will affect long-term cash flows.