Thank you for attending the conference. I'm Dave Windley with Jeffrey's Healthcare Equity Research here in the States. I identify that since it is a global conference. We're very pleased to have all of you here. Also, very appreciative of Charles Rivers' consistent and regular attendance through now multiple, now we can say two leadership regimes. Jim was in the seat for an awfully long time, and now Birgit Gierschik has taken over as CEO just recently. So thank you for being here. I think you were going to make a few remarks about recent performance. I'll let you do that.

Yeah, thank you. Thanks, Dave, for having us. Really excited to be here. Also really excited taking on the role of CEO. It's a huge privilege for me, and particularly following Jim after all his years. So, yeah, I just wanted to update a little bit on what my focus areas are. What we are looking to do is making Child Server simpler, better margins, and better growth. We just rolled out our strategy, Pathway to Purpose. I touched on that in our earnings call a little bit, and we are already executing. So we have divested two of our businesses. Our European early discovery businesses, that divestiture completed on May 22nd, and our CDMO and cell supply business was divested on May 6th. We have also started to execute or executing on cost savings that will help us to improve margins. We are delivering this year over $100 million of cost savings, cumulative over the last few years. that translates to $300 million. And this year, we are between the divestitures and some acquisitions, as well as our cost savings. We will deliver 120 to 150 basis points improvement. Touching on some of the acquisitions, we have completed an acquisition of KF Cambodia, which is a non-human primate farm in Cambodia, securing the non-human primate supply for us and our clients, making us the only provider of safety assessment solutions for our clients in the Western world with our own primate supply and the only one who can guarantee it, and also provides us with good margin expansion. We also acquired PasoQuest, which is a names provider Supporting the reduction of animals Particularly in the in vivo lot release testing A couple other things to maybe touch on We have continued to do stock repurchases In Q1 we have done about $200 million Versus stock repurchases Translating to about $650 million since 2024 So an important and balanced capital allocation approach and yesterday we have reaffirmed our guidance so with that I'm handing it back over to excellent

all right fantastic so I certainly noted in your in your first quarter results and and the releases I'll say the first thing I noted was the deck was only 25 pages instead of 50 pages but in in the deck some emphasis on a few things speed agility maybe further integration of the business and more cost savings and you just touched on some of those as you think about um those speed agility you know maybe particularly the cost savings how do you plan to use those yeah so um you kind of

framed it really, really nicely. So what we want to do is become simpler, faster, more efficient for our clients, more competitive because of our timelines, but also more automated and digitized. A use of AI, everybody talks about it, is also second nature within Charles River.

So we are driving a lot of it is competitiveness, timelines, being a better and even more critical partner to our clients but we're also looking to be a better margin company okay so we should i mean very simply you've you've got cost outs that if dropped through would improve margin you want to do some of that but you also want to redeploy that in a way to be more competitive in the market Do you have a rule of thumb or an algo about how you're thinking about applying those or how to divide that bucket of opportunity?

Yeah, so for this year, as I said, we have 120 to 150 basis point margin improvement. For the second half of the year, we have clear sight to about 500 basis point margin improvement. For our long-range financials, it's a little bit early to tell. We have actually an investor day in September, where we'll touch on that quite a bit more. For now, looking at the $300 million cumulative cost savings that we have done over the last recent years, think about 50% are durable and sustainable. 50% were more about taking volumes out.

And if we grow, as we grow, and as we accelerate growth in the second half of the year, some of that will come back. so it's a mix of it um and we will give a lot more um details and guidance on that um in september okay um let's let's move forward into the businesses a little bit but but focusing on technology um the to me the ai debate in the market that is affecting so many companies and particularly you know cro is more on to me it seems like the clinical end of the spectrum maybe nams are the you know are the ai to to animal testing what's the competitive landscape there and how do you think about um who are the players to actually develop these names

yeah um obviously a very important scientific and ethical question and direction and something that Child River is utmost committed to implement and to lead. So we have utilized NAMS for literally two decades. It's been part of our three-hour program, Reduce, Refine, Replace. In 2024, we actually formalized AMAP, Alternative Methods Advancement Program, which was our signal to the outside world that we are heavily investing in new technologies, methods, technologies, digital technologies, to make an impact on the reduction of animals in research. In 2025, we have established a scientific advisory board. We have brought in a fantastic high-level leader from the FDA, Dr. Bambus, who is leading our scientific advisory board and leading our strategy. That includes development of NAMS. So we're actually playing in that field, but also the in-licensing, partnering, and M&A. And I already touched on PASAQuest 1, one example, a great example of NAMS technologies that we just acquired. If you look at the industry itself, There are probably what we found over 1,000 companies that are focusing on the development of NAMs, many still in the very low majority stage, many not validated, many with a very narrow context of use, and many with great promise. We have brought in technologies, and we're using them for our clients as in licensing. We have done other M&A. So, for example, we have brought the retrogenics technology platform in. So we will continue to evaluate that landscape and often work with those companies to see if we can validate and scale up that technology. To me, and I think that's really the reality, eventually it will not be about technology the race who is competing best in this space will be all about integration and there's no other company that is really well positioned other than a large scale safety assessment provider like Charles River so we will lead that space so Birgit let's let's hover on the integration so when you when you use that word in that context can you bring that to life a little bit in terms of what you mean yeah happy to so think about names not as a straight replacement of an animal so it will never be a technology where you're saying this this technology will replace a rat or a mouse what it is is NAMS technologies will provide us answers that we can use to assess a risk or a an outcome and then decide if we do an animal study thereafter or if our clients will go back to the drawing board and trying to find a better molecule or a better compound before they take it ahead. In some cases, like in virtual control groups, for example, that we are developing, we have certain studies where virtual control groups can be applied and thus reducing the need for animals in the study itself. In other cases, It will give us additional information, making the scientific outcome maybe better, more translational, and allowing the clients to move their programs into the clinic and managing their clinical trials better and thus having a better effectiveness and better success rate. So names will need to be integrated into the safety assessment workflow. They need to be part of a safety assessment study. They need to be run under the regulatory framework. They need to be validated that they give you the same results or better results than using other methods. And that's when I talk about integration. There is never going to be a NAMS business unit at Childs River.

There's never going to be a competitor that offers NAMS but not safety assessment solutions. got it very helpful so I do think you hit on the point really well there that that we who have never run an animal study don't understand all the nuance to it and so the thinking tends to jump to well and a name will replace a full study and I think what you're suggesting in actuality is it it replaces a part of the continuum not not the full battery yeah you're completely right it will answer some questions, a question.

Sometimes you need several technologies to answer a question, but the technologies will become better, and we will have kind of a surrounding in vitro or in silico environment that is part of the safety assessment continuum.

And then another vertex on this is kind of the service line impact or applicability where, for example, in PathoQuest, I think that one is more of a manufacturing environment application, right?

And so, you know, not as core to your, you know, animal testing focus, how should we think about, I don't know, breadth or where your focus is in trying to to bring these capabilities in yeah that's a really good point so animals are used not only in safety assessment they're used in early research in the lead up to safety assessment studies but also in lot release so meaning every batch that is manufactured that goes into a human in either clinical or commercial has to be tested for being free of contaminants such as viruses or bacteria. Some of the conventional methods are using animals. And this is an area that we are at most focused on because there is a lot of animals being used in this phase. And so what we have done over time, actually starting with the introduction of our End2Save franchise, finding better ways of making sure that those Those drugs that are manufactured are free of those contaminants. So the path request technology is a next-generation sequencing technology, and that will replace eventually the use of animals for this specific use case.

Let's move into perhaps somewhat more traditional questions in your core business, DSA. So demand seems to be – there are indicators that would suggest that demand should be improving. I think you're seeing some of that, but describe what you are seeing in the demand environment right now from DSA.

Yeah, topic I'd much rather talk about. So demand has been stabilizing for us. We're seeing good signs of improvement. So our biotech bookings in the last two quarters have been the best. in over two years. We are seeing mid-size to large biotech and later stage programs getting really good funding, some of that even mega funding, which indicates there's a lot of cash out there. Where we still would like to see some improvement is in biotech company formation, so that indicates that the funding in early phase and small biotech isn't quite there yet, which impacts one of our business units specifically, which is Cradle. But overall, we are quite happy with what we are seeing so far. Pharma, for the most part, is through their restructuring, repriorization of pipeline. We saw quite a bit of an uptick of bookings last year that has very much stabilized. Revenue is up for global biopharma in the first quarter, and very happy to say that our proposal volume is up in both segments, high single digits. What I'm most excited about is that our KPI trends indicate a return to growth for our DSA segment, so seeing really good momentum there, and that is something that we are building on. now that return to growth can you give us a sense of the trajectory so you're seeing this build um is that a return to growth that you think happens by the end of 26 pushes out into 27 i think guidance maybe implies that that happens kind of at the tail end of this year yeah so a little early to talk about 2027 but uh we are seeing a gradual improvement in our dsa segment

um so we're looking at growth for h2 yeah um within this this global construct china has become a more active um geographical participant in global drug development you have your you know vital river acquisition from years ago and your participation in the models um sale market in in china but but not in your services businesses for the most part how are you evaluating entry into the China market with services, and what are the pros and cons of doing it?

Yeah, really good question. So yes, we have our research models and services business. It's a leader in China. It is operating fully under Chinese leadership. It is a provider for Chinese biotech, pharma, government, academia, and CROs. So a very high reputation in China, very strong franchise for us, and a foundation that we feel we can build on. You're absolutely correct that our services portfolio is not represented right now in China, and with the uptick in innovation in China, was the emergent of really good growth and a biotech industry that is growing and bringing out a lot of innovative drugs and has a good portfolio, it becomes a market where we feel that it's an addressable market that we feel that we should potentially play in. Now, we are evaluating the market. We're looking to see, making sure that we understand all the geopolitical challenges in there, looking to see what our competition is, who the clients are, getting them to know. And a little bit early to tell, but obviously there is interest from our side, and we will eventually build on our foundation in research models in this marketplace.

It's interesting to me to think back. like the foundation of the company was in research models i mean that's where i guess the elder dr foster started the business um and then through a period of of kind of 90s and acquisitions added on the services business and so china kind of sets up in the same way do you think it's given the experience that the that the company now has in services is it is it a market that you could you could add that organically or do you think it makes more sense to acquire um to to add that capability yeah so we we're obviously evaluating the potential for both um but because it's a

regulated space it requires quite a bit of capabilities so drug development safety assessment is extremely complex with a very high amount of different protocols and expertise needed. It takes quite a bit of time to build something organically. We have done it a few times in different locales. So M&A goes a lot faster. So we're abounding both, but obviously M&A would give us a quicker entry.

Okay. um if we if we move on to nhp supply as a topic you mentioned the kf acquisition crl has now done a couple of of deals in that market with nova prim as well uh how do you how should investors think about your ability to supply your volume of trials with your vertically owned farms is that a hundred percent less than a hundred percent how should we think about that relative size?

Yeah, so we did acquire the farm in Mauritius a few years ago and then KF Cambodia just earlier this year. Our goal and where we currently are is that about 80% of the supply of non-human primates that we believe we require for safety assessment studies comes from our own farms. This gives us the ability to scale up and scale down. It gives us also the ability to continue to work with trusted and contractually negotiated third-party providers to really give us all the different sources that we require for the studies, but also the maximum amount of scaling up, scaling down, flexibility of when animals are coming in. So we are at that goal, and we believe that gives us the best ability to execute our studies and guarantee supply for our clients.

Thank you for that.

And Birgit, can you quantify or give us a range, a window of the difference in cost structure for you sourcing in the open market versus breeding and raising your own yeah so it's it's a little more complicated when you look at our the Nova Prim acquisition because they were JV before so there were some benefits that we had previously what we had sized back then and now with Kiev is that we will have a consolidated margin improvement of about 50 basis points for each of the deals. But most importantly, again, for us is the secure supply, the ability to invest in those farms, making sure that we have the animal welfare standards that Child's Rivers require and the logistic, the compliance. so um the the cost benefits are nice to have the security of supply and the control over those farm is the ultimate uh goal here so i want to take a minute to go back to the to to invoke the earlier commentary about your cost saves and how that affects competitiveness so you now have the ability through supplying your own nhps to probably have a competitively differentiated

cost structure you mentioned you know certainty of supply is also a factor is the certainty of supply strong enough in the client's mind that that is a competitive differentiator and you win business for that reason or do you use the the cost structure benefits to also be more price competitive to win more market share good question so our clients what they need most is a guaranteed supply they need the animals when they need to run the studies they need the flexibility and they also need to make sure that the animals come in at the right health the right weight

and with the right compliance so our again our focus is on delivering to our clients the best and most critical research animal possible, and that's the focus.

Okay, so in terms of maybe before I leave DSA, in terms of your interest in participating in the D part of DSA, you divested as part of some of the recent deals, you divested pieces of discovery. Help us understand where you do and where you do not want to compete in discovery.

Yeah, so we divested certain European discovery assets. That deal was actually completed this May. What we were looking at is businesses that are where the market has either structurally changed, where we are underscaled, where our clients have a lot of choices, and we are not necessarily the number one choice. So those are the areas such as chemistry, but also a few other ancillary businesses. We are refocusing into the space of more regulated work, where we have the highest dependency and highest value solutions for our clients. So we are here to answer their most complex and most time-pressing questions, and that will be our focus. Okay.

Moving on to RMS, that business is expected to be down low to mid-single digits in FY26. Within that portfolio, can you help us understand which are the under and over-performing businesses within that perspective?

Yeah, so our research models and services business, because of where the industry is going in terms of 3Rs, has a gradual decline of volumes for decades, and this will continue. This year, I should also say, this business is historically and is still now getting good pricing, which offsets a lot of the volume declines. Plus, we always have been able to add on solutions in which we are very competitive and very attractive to our clients, such as the cradle business, where we're providing a vivarium solutions business, or adding to our research models portfolio and bringing in higher value, more complex animal models that will drive the revenue growth. This year, this business is impacted by three discrete areas. Number one is our North American research model volume, mostly impacted by academia and government. The volumes are stable, but not growing where we normally see that. We are relating that back to the uncertainties in academia and government. and even so we believe that these will resolve itself and we're already hearing that our forecast and our guidance right now assumes that we have stable volumes there but not growing another area I already touched on is our cradle business cradle business is focused highly on biotech startups companies that may not even have a company name yet that need a space to do their research and And our demand in that area has been lagging. So we have consolidated a lot of the space. We are right-sized, but we're not seeing that revenue uptake. And then certainly by non-human primate volumes, from some of our own farms, we are actually selling animals directly to third party customers because we either cannot use the animals, like in China ourselves, or because we have contractual obligations. and that volume fluctuates at times, and this year is a little bit down on the volumes compared to 2025. We do believe that RMS structurally is going to be growing again eventually, but this year we're guiding down.

Okay. In the time we have remaining, let's move to manufacturing and touch on that a little bit. That business pre-CDMO was a very attractive margin business in the mid 30s. CDMO now divested. We are still waiting to see what that profile looks like. We don't have a clean quarter yet. Can you help us with what the manufacturing margin should be is and should be? In other words, can it continue to grow.

Yeah, I'm happy to. So it's a critical mission division for us. Very important. Great margins and great reoccurring revenue stream, which was really good growth opportunities. The remaining two businesses, our biologics testing and my growing business, have not structurally changed at all. So you will see, even in Q2, a margin uplift.

And we expect this business to go back to historical margins so again it's it's a great business to have and we're looking forward to uh the time post cdmo in that margin profile so to attempt to pin you down a little bit we would i would look at historical margins in the late 20 teens in the 34 to 35 36 range is that is that what you think of when you call it historical historical margins let me say above 30 so okay all right very good I think we're out of time thanks everybody for your attention enjoy the rest of the conference thank you