Charles River: Fair Value Estimate Lowered Due to More Conservative Growth After FDA Announcement

We have completed a review of the US Food and Drug Administration's plan to reduce animal testing, which could affect Charles River Laboratories' business, and our fair value estimate for the firm is no longer under review. The FDA's shift away from animal toxicity testing has been decades in development, but new FDA Commissioner Marty Makary is putting a stronger emphasis on the effort. The FDA's road map encourages drug developers to use artificial intelligence models and lab-grown organoids to predict drug behavior. We have lowered our fair value estimate to $155 per share from $215 to account for more conservative revenue growth in the low single digits during our 10-year forecast period. To account for heightened risk for narrow-moat Charles River, we have increased our Morningstar Uncertainty Rating to High from Medium. We still think shares are trading at an attractive entry point, about 30% below our fair value estimate.