Charles River Laboratories announced a shortfall in shipments of monkeys used for research on Wednesday that weighed on its 2023 outlook, and CRL stock toppled.
The U.S. Department of Justice is currently investigating several shipments to Charles River from its Cambodian supplier of nonhuman primates, or NHPs. These are monkeys Charles River sells for medical research. In response, Charles River said it's suspending NHP shipments from Cambodia at this time.
The suspended shipments will have a roughly $80 million to $160 million impact on Charles River's sales this year, Evercore ISI analyst Elizabeth Anderson said. Charles River's profit outlook also missed.
"Well, this is not the 2023 outlook we were looking for," Anderson said in a note to clients. "Results in the quarter were broadly fine, but the focus of today's report and call will be on the outlook."
On today's stock market, CRL stock tumbled 10.1% to close at 219.09.
CRL Stock: Earnings Guide Widely Lags
During the fourth quarter, Charles River earned $2.98 per share, minus some items. Earnings advanced almost 20% and beat expectations for $2.75 a share, according to FactSet.
Sales also rose 21.5% to $1.1 billion, ahead of estimates for $1.04 billion. Charles River noted sales grew with the help of an additional week in the fourth quarter and the acquisition of Explora BioLabs. However, divestitures and foreign currency also weighed on growth.
For the year, the medical supplier expects sales to grow 1.5% to 4.5% on a strict, as-reported basis. CRL stock analysts called for $4.12 billion in sales, which equals a 3.6% rise. Charles River expects organic sales growth of 4.5% to 7.5% in 2023.
Further, the company expects full-year adjusted earnings to come in at $9.70 to $10.90 per share, well below forecasts for $11.37.
PETA Calls For Deeper Investigation
Charles River noted the outlook reflects the impact of nonhuman primate supply constraints.
"At Charles River, we are committed to conducting ethical, regulatory-compliant business practices, to being good corporate citizens and to the humane treatment of the research models under our care," Chief Executive James Foster said in a written statement.
People for the Ethical Treatment of Animals, an animal rights organization commonly known as PETA, called on the Justice Department to extend its investigation to Charles River's customers.
"If Charles River Laboratories has trafficked monkeys to U.S. laboratories or violated other laws, it should be stripped of its license to import them and pay for the sanctuary placement of all those involved," PETA primate scientist Lisa Jones-Engel said in an emailed statement.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
