EUR 850.00 For Business Accounts Only

Morningstar | CRL Updated Forecasts and Estimates from 18 Jan 2019

After transferring coverage of Charles River Laboratories, we are maintaining our fair value estimate of $95 per share and our narrow moat rating. We continue to believe that the business relies on the competitive advantages of its animal research model business. About one of every two research models used worldwide comes from Charles River, and the company has developed a reputation for quality and expertise. The complexities of breeding and transporting genetically modified models in addition to the nature of preclinical trials results in high barriers to entry, intangible assets of expertise and brand power, and high switching costs associated with research model use. As a result, we think Charles River will maintain its leading position in both research models and preclinical services.

The company has also benefited from strong growth in both preclinical and manufacturing services, riding the recent boom in biotech funding and increase in drug candidates. We note that the double-digit top-line growth of recent years--helped by acquisitions--is unlikely to continue far past the near term as the research model market continues to mature and the fervor in biotech funding eventually subsides. However, we believe that research models will continue to be an integral part of the drug development process, and we believe biopharma players will continue outsourcing preclinical trials.