Charles River CEO Says AI-Designed Drugs Cost The Same To Safety-Test — And Pricing Power Is Still Missing
CEO Birgit Girshick expects no pricing benefit until at least the second half of next year, and says growth is almost all volume.
Charles River Laboratories, which supplies the research animals, testing services and quality-control products drug developers use before human trials, sees no change in per-program spending from AI-designed molecules, CEO Birgit Girshick told analysts on the company's third-quarter earnings call Wednesday. She also said the company has not yet regained pricing power.
No discount for AI-designed drugs
Pressed by a Barclays analyst on a small group of bears who expect near-term disruption, Girshick said AI-discovered molecules are early-stage work, such as target identification and molecule design. That may disrupt chemistry, she said, an area the company divested earlier this year, so she expects no revenue impact.
The programs that follow still need validation and safety testing. "From a dollar amount of per program, there is no difference for us," she said, whether or not the molecule is AI designed.
AI platform companies, she said, often bring more programs than conventional biotechs, because the only way to prove a platform is with volume. "If you have 20 programs, 15 of those succeed, you have a big, strong selling point," she said. She described the effect as qualitative rather than quantitative.
Asked by an RBC Capital Markets analyst to separate AI-driven bookings from the rest, she said the exercise would be "extremely manual and not an accurate science," because nearly every discovery company now uses AI.
Volume, not price, is driving growth
On the same call, Girshick said growth is almost entirely volume-driven. The company is trimming discounting in its safety-assessment proposals, she said, while holding its win rate. It is not yet seeing any lift to revenue from price. Assuming trends hold, management does not expect a pricing benefit until at least the second half of next year, as newly booked studies work through the backlog.
The backlog in that business, Discovery and Safety Assessment, rose to $2.03 billion, up from a year earlier and from the prior quarter. Net bookings climbed 32% from a year earlier to $652 million, and the net book-to-bill ratio, a measure of new orders against work completed, was 1.09 times. Organic revenue in the segment grew 5.9%.
Company-wide, third-quarter revenue rose 4.7% organically, and adjusted earnings per share of $3.09 rose 27%. Management raised its full-year adjusted earnings outlook to $11.35 to $11.55.
The road to 2028
Chief Financial Officer Glenn Coleman said the company will give 2027 guidance with fourth-quarter results in February. He expects gradual growth improvement in 2027, with revenue growth reaching the 5% to 7% target range starting in 2028, assuming favorable market trends continue.
The company's market value was $16.8 billion after Wednesday's report.
Girshick said the company's research models segment, where academic and government clients make up nearly 40% of revenue, still has headwinds to work through before growth reaccelerates.
Sources
- Charles River Laboratories Stock Pulls A Bear Move As Rats And Mice Retreat | Investor's Business Daily — investors.com
- Charles River Q3 Earnings & Revenues Top Estimates, Stock Rises — Yahoo Finance
- Charles River Laboratories beats top-line and bottom-line estimates; updates FY26 outlook | Seeking Alpha — seekingalpha.com
- Charles River (CRL) Reports Q3 Earnings: What Key Metrics Have to Say — Yahoo Finance
- Charles River Laboratories (CRL) Tops Q3 Earnings and Revenue Estimates — Yahoo Finance
