Charles River Laboratories International, Inc. (NYSE:CRL) Q4 2022 Earnings Call Transcript

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Operator: Thank you. Our next question will come from Dan Leonard with Credit Suisse. Your line is open.

Dan Leonard: Thank you for taking the question. I have a couple of follow-ups to Derik’s question at the start on what customers are doing with the NHP supply constraints. How actively are they pivoting to different models like many pigs or dogs? And are clients being more discriminating about NHP use in line with the recent FDA guidance? And then finally, is there any chance, Jim, that the heightened NHP concern reduces long-term demand for NHPs from biopharma as clients reconsider their NHP needs? And if that happens, what does that do to Charles River’s business opportunity? Thank you.

Jim Foster: Yes. Very smart and sophisticated question. Not an easy one to answer. I think that we all particularly given the complexity of NHP availability and by the way, it’s always been complex. It’s just more complex these days because of the sheer numbers. If there was an alternative species that was €“ yes. Let’s start with your pig question. You could produce them domestically, and they have litters as opposed to one offspring, and you could get significant numbers. The problem is €“ and by the way, we do a fair amount of swine work right now, mostly for dermatology and cardiovascular work. But it’s not a bad model. Several problems and several which is number one is there are not enough swine either. Number two is if you use sort of farm size one, that’s just too big.

And by too big, I mean, at that stage, drug companies have made a very small amount of the drug, which is classic extraordinary amount. So they’d like to put it in small animals. So if you put it in mice or rats, that’s obviously a small amount of drug. And the monkeys that we use are quite small as well. And plus it’s years and years and years of data using NHP. So I would say that swine is theoretically a long-term solution, but you’d have to have lots of elevation work done by our clients, accepted by the FDA and then a massive breeding operation, which we would undertake that. It just €“ it’s not around the corner. The utilization of NHPs and a small animal model, usually a rat, is required by the FDA and comparable organizations around the world.

So that’s unlikely to change. I think the essence of your question as well, that’s really interesting, but what if they’re not available, what happens. And you know that the FDA is the protector of the public safety. So they won’t do anything to impair safety, biologics of complicated drugs and I mentioned human proteins or artificial human proteins. And so you really want something that is closely aligned with a human being as possible. So I don’t see significant pivot out of that. And would it reduce demand? I mean, if you have a host €“ so let’s take the worst case that Cambodia never opens up. That would beg the question of would the FDA accept smaller numbers of animals per study than they do now. I don’t know the answer to that. And if they did accept that, would that be significantly €“ significant enough to give them enough data to approve the drug?

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