Shares of Charles River Labs (CRL) crashed 28% after the U.S. FDA (Food and Drug Administration) announced plans to phase out the need for animal testing in developing drugs like monoclonal antibodies. The market’s reaction signals rising concerns about CRL’s future revenue and growth, given the company’s heavy reliance on animal testing services. As the FDA shifts toward alternative methods, investors re-evaluates the long-term prospects for one of Charles River’s core business segments. Year-to-date, CRL stock has declined by 45%.
FDA Rethinks Drug Testing Rules
The FDA’s new plan aims to change how research companies test new drugs by moving away from animal testing. Instead, it will use newer, human-like methods such as AI models and lab-grown human cells. These changes aim to make drug testing faster, safer, and cheaper. For context, companies and universities use animal testing to check if drugs are safe and work well, especially before starting human trials.
This shift, called New Approach Methodologies (NAMs), immediately starts for new drug trials. FDA leaders say it’s a big step that helps both public health and animal welfare. The agency will also use real-world safety data from other countries with similar health rules.
TD Cowen Warns of Headwinds for CRL
Following the news, TD Cowen analyst Charles Rhyee reiterated his Hold rating on CRL stock with a price target of $179. Rhyee believes the FDA’s move could significantly affect Charles River’s Discovery & Safety Assessment segment. Although the transition may take several years, he sees this shift as a major “overhang” on the stock.
Is CRL Stock a Good Buy?
On Wall Street, analysts have maintained a neutral stance on CRL stock. According to TipRanks, CRL stock has received a Hold consensus rating, with 14 Holds assigned in the last three months. The average price target for Charles River shares is $171.54, suggesting a potential upside of 71% from the current level.
