Charles River Laboratories International (CRL) Q3 2026 Earnings Call: Q&A Summary

Q: Elizabeth Anderson with Evercore ISI asked for qualitative commentary on the operational drivers and pace of improvement leading toward the 5% to 7% growth range by 2028.

A: Birgit Girshick, Chief Executive Officer, responded that forward-looking metrics like proposals, gross bookings, and net book-to-bill support a gradual return to growth, noting that current growth is volume-driven and pricing power will take time to materialize.

Q: Elizabeth Anderson with Evercore ISI also asked about the trajectory for AI-discovered molecules to move from the discovery phase into safety and clinical testing.

A: Birgit Girshick, Chief Executive Officer, stated that AI-discovered molecules are currently in very early stages and that within two years nearly all companies will use AI, which is driving overall sector interest and funding.

Q: Ryan Halsted with RBC asked how to gauge what portion of bookings and book-to-bill is driven by the improving biotech environment versus artificial intelligence.

A: Birgit Girshick, Chief Executive Officer, explained that trying to split bookings between AI and non-AI is difficult because most discovery companies use AI in some form, with AI primarily serving to drive overall interest and investment in the sector.

Q: Luke Sergott with Barclays asked about the dollar value per program for native AI biotech customers compared to legacy customers and potential near-term disruption.

A: Birgit Girshick, Chief Executive Officer, noted that AI-discovered molecules are very early stage and that once programs enter the validation and safety testing space, the regulatory requirements and dollar amounts per program remain the same.

Q: Ryan Halsted with RBC asked how meaningful virtual control groups are expected to be across customers.

A: Birgit Girshick, Chief Executive Officer, answered that while virtual control groups represent a great milestone for reducing animal usage and providing better scientific insights, they will largely even out in revenue compared to regular control groups.

Q: Luke Sergott with Barclays asked about tighter NHP supply trends and exposure across RMS and DSA as pricing dynamics play out.

A: Birgit Girshick, Chief Executive Officer, noted that approximately 80% of estimated NHP usage is covered by internal farms, providing a competitive advantage, and that while supply is tight in China, Charles River has enough supply to meet long-range financial targets.

Q: Justin Bowers with Deutsche Bank asked about trends in therapeutic areas like vaccines and infectious disease, and whether top 10 pharma is increasing preclinical investments.

A: Birgit Girshick, Chief Executive Officer, stated that interest is high in biologics and complex modalities like mRNA and antibody-drug conjugates rather than vaccines, and confirmed that global biopharmaceutical clients have increased work coming out of restructuring activities.

Q: Dave Windley of Jefferies asked about progress in bioanalytical services across preclinical and clinical phases.

A: Birgit Girshick, Chief Executive Officer, highlighted that clinical and preclinical bioanalysis share the same platform and assays, and noted ongoing organic expansions to increase capacity.

Q: Dave Windley of Jefferies also asked why lower NHP sourcing costs did not show up more in gross margins and inquired about narrowing discounts on bids.

A: Glenn Coleman, Chief Financial Officer, explained that gross margin will see benefits in the fourth quarter from Cambodia NHP sourcing and lower fringe costs, and noted that 10-Q filings reflect a non-GAAP tax release reserve reversal. Birgit Girshick added that narrowing discounts indicates a move toward regaining pricing power, though it will take time to flow into revenues.

Q: Casey Woodring with JPMorgan asked how capacity expansion and utilization are being managed in light of anticipated demand from artificial intelligence.

A: Birgit Girshick, Chief Executive Officer, stated that the company has adequate space and empty expansion areas available for in vivo work due to past volume declines, while bioanalytical capacity is currently being expanded to meet higher growth.

Q: Casey Woodring with JPMorgan also asked whether seasonal booking trends from the third to fourth quarter will hold.

A: Birgit Girshick, Chief Executive Officer, responded that bookings are often higher in the fourth quarter compared to the third quarter, supported by healthy proposal levels and strong capture rates.

Q: Jared Haase with William Blair asked for incremental examples of modernization efforts that can move the needle financially or operationally.

A: Birgit Girshick, Chief Executive Officer, cited the automation of LAL reagent production lines, which increases capacity by 14% and reduces resource needs, and the Apollo Orchestrate platform, which digitizes workflows in the biologics business.

Q: Jared Haase with William Blair also asked if pricing is a mechanical relationship designed to cover inflation or requires customer negotiation.

A: Birgit Girshick, Chief Executive Officer, explained that while some rate cards are automatic, the majority of proposals involve point-in-time interactions and negotiations with clients regarding inflationary increases and service value.

Q: Yujin Park with Baird asked whether pricing increases in small models can offset volume declines or if academic and government markets need to improve.

A: Birgit Girshick, Chief Executive Officer, noted that price has historically been used to offset research model volume declines, but a return to growth in services like cradle is also needed.

Q: Charles Rhyee of TD Cowen asked if the third-quarter book-to-bill is a clean number without divestitures and whether mid-single-digit DSA growth will continue into 2027.

A: Glenn Coleman, Chief Financial Officer, confirmed that divestitures are no longer in backlog numbers, making the 1.09x book-to-bill a clean number. Regarding 2027, he stated that visibility into the second half of the year is needed and that operational resource availability is being managed before commenting further on growth rates.