Charles River Laboratories expects 2025 revenue “will decline organically” in a similar range as estimated last year, according to a company filing with the U.S. Securities and Exchange Commission (SEC) on Tuesday.
In its SEC filing, Charles River said that lower commercial CDMO revenue is expected to reduce consolidated revenue growth by approximately 1% in 2025.
“Charles River’s initial guide suggests that 2025 will be another rebuilding year for the company, with the potential rebound in demand previously expected in the second half of the year being pushed out to 2026,” Max Smock, equity research analyst at William Blair, wrote in a Jan. 14 note to investors.
The company said its CDMO business in 2025 will be impacted by lower commercial revenue, as a “cell therapy client has reevaluated its manufacturing network and notified Charles River that it would terminate its commercial agreement with the company to utilize another long-time CDMO partner.”
Charles River in 2021 acquired cell and gene therapy CDMO Cognate BioServices for approximately $875 million in cash. However, Tuesday’s SEC filing disclosed that overall cell and gene therapy customer demand “is not as robust as at the time of acquisition.”
Since acquiring Cognate BioServices in 2021 and other companies, Charles River said it has taken “significant steps” to enhance its CDMO operations, including establishing Centers of Excellence for cell therapies, viral vector, and plasmids, as well as investing in the commercial readiness.
Adding to its CDMO headwinds, Charles River said in the SEC filing that it also expects lower commercial revenue from another cell therapy customer.
“As a result of the CDMO business challenges, Charles River is currently assessing the recoverability of goodwill and long-lived assets for a potential impairment,” states the SEC filing, while noting “attractive, long-term growth opportunities exist” for its CDMO business including a “healthy pipeline of biotech clients with early-stage clinical candidates.”
Charles River CEO James Foster gave a presentation to the J.P. Morgan Healthcare Conference in San Francisco on Tuesday with a preliminary outlook for the year, and said the company plans to issue full 2025 guidance with its fourth-quarter 2024 financial results in February.
“The CDMO business has been a complicated one for us” from a technology and manufacturing point of view, Foster acknowledged. “We’ve had to sort of retool the companies that we bought.”
In his presentation, Foster said Charles River is “taking decisive action” — including right-sizing infrastructure — to manage through the challenging business environment, with the intention of emerging as “an even stronger and leaner partner for our clients when demand improves.”
The company has implemented a multi-year restructuring program that is expected to generate $150 million in cost savings in 2025 and approximately $200 million by 2026. Charles River is consolidating more than 20 smaller facilities that came from acquisitions, with most already in process, and is also cutting 6% of its headcount.