All right. Good morning, everyone. Thanks for joining us this morning for the management presentation. My name is Max Smock, and I'm the research analyst here at William Blair, who covers Charles River. We're pleased to be joined this morning by COO, Birgit Girschick. And before we get into the presentation, I need to mention two things: First, the breakout session will be held in Richardson on the second floor, immediately following the presentation. And second, I'm required to inform you that for a complete list of research disclosures and potential conflicts of interest, please visit our website at williamblair.com. So again, very pleased to have Charles River here with us today, and with that, I'll turn it over to Birgit. Thank you.
Thank you so much, and thank you for your interest in Charles River Laboratories. I'm honored to give you a little bit of an overview about our company. Before I get started, please let me remind you of the Safe Harbor statement. So Charles River is the scientific partner of choice. We're working with clients from discovery and early-stage development through the safe manufacture of life-saving therapies. Charles River is a company of global scale and has a very attractive market position. We now have 21,000 employees, and of those, 2,600 are scientific professionals with advanced degrees, which really makes us the leading CRO in terms of scientific and technology platforms. We have over 2,000 clients with approximately 70% of revenue coming from the biopharma industry. We're close to our customers wherever they are located.
We have 150 locations in over 20 countries. We hold number one market position in research models, Safety Assessment, and Microbial Solutions , and continue to seek number one and number two positions in our other businesses. We're proud that we have supported over 80% of FDA-approved drugs over the last 5 years, and we're continuing to accelerate and grow our addressable market, which is now over $25 billion. We are a very diverse company, with 69% of our revenue being in North America, 26% in Europe, and the rest in the rest of the world. No client is more than 3.5% of revenue. We're working with companies in biotech, global pharma. We're working with academia, with governments, CDMOs, CROs, and other organizations.
Charles River is a good investment opportunity, which we have shown because of our proven financial results. Over the last five years, we have had a 12% revenue CAGR, as well as a 12, approximately 12% EPS CAGR. Our free cash flow, operating and free cash flow, has grown 9% CAGR, and our operating margin is approximately 21%. We are a very competitive organization and very differentiated from other competitors. This is because of our portfolio and our platform. We have three businesses. The first one, and I will continue to double-click into that in a little bit later, is Research Models and Services, which is the production of most widely used small research models. We're serving our client here from basic research all the way through non-clinical development.
Our second division is Discovery and Safety Assessment, where we're partnering with our clients for outsourced drug discovery, non-clinical development, and regulated safety testing services. We're supporting our clients all the way from basic research through clinical development in this business division, and certainly, our Manufacturing Solutions, where we're supporting clients in the manufacture of biologics and producing cell and gene therapy drugs ourselves. Here, we're supporting our clients from clinical development all the way to commercial manufacture. Our company has a very balanced revenue contribution from our divisions. RMS is approximately 19%, DSA approximately 63%, and manufacturing approximately 18%. All our divisions are growing and providing good, profitable non-operating GAAP contribution. We just recently reported our Q1 2024 performance and 2024 guidance.
I will not go very deep into the Q1 performance because we just talked about it, and you're all aware of it, but I wanna talk a little bit about the 2024 guidance here. We have guided to organic revenue growth of 0% - 3% for the year. We have stated that we're expecting a non-GAAP operating margin improvement of at least 50 basis points compared to 2023, and our non-GAAP EPS forecast is from $10.90- $11.40. Free cash flow, we are expecting to be between $400 million and $440 million. This is our guidance, and that's still valid, and we'll be happy to answer questions later on when we have individual meetings on that. Let me double-click a little bit into the segments.
So our research model segment is consistent of two offerings. One is the research products, which is really the largest high-quality source of small research models that is providing tools for our clients, as well as animals for our DSA business. So a very competitive synergy for us. In services, where we're offering clients everything from testing to vivarium rental services, so they can do their research with very little investment of their own. And I will talk about the CRADL business in a little bit. We are proud that approximately one out of every two research animal in the U.S. and in Europe comes from Charles River. So a very competitive business, very large, critical partner to our customers.
We're continuing to use digital transformation to become closer to our clients and make the buying journey easier. Growth drivers for this business, in the long term are, our services, particularly the CRADL business. So I just said, the CRADL business is a full-service, turnkey vivarium rental service, where our clients can come in, rent a room, rent a rack, do their work, short term. Some stay with us short term, sometimes long term. Really competitive offering. We now have over 30 locations on that. So really happy about this business. China still continues to be a good growth area for us, and, as I said, digital transformation really changes this business. Recent market conditions. So we saw some moderating demand during 2023 across most of the client segments.
This comes from the biopharma end market environment, and particularly in mid tiers. We expect growth in the research models business coming mostly from price in 2024, and we are expecting continued growth in our RMS services, particularly, as I said, in the CRADL business. I want to also point out that we will see financial fluctuations in the quarters for this business, and this is created by the timing of non-human primate shipments within China and from Noveprim. That is an acquisition we just made. So depending when we're shipping animals from these locations, you will see a little bit of an uptick versus not. Our DSA segment, the largest segment we have, has two arms to it.
One is the discovery services, which provides expertise in most therapeutic areas, particularly in oncology and CNS, and broad capabilities across small and large molecules, antibodies, and cell and gene therapy. Highly synergistic to our safety business, we're trying to get clients to work with us early and then move into Safety Assessment thereafter. Our Safety Assessment , as you all know, is the global leader in this space, and we do both non-regulated and regulated outsourced Safety Assessmen t. We have very few competitors in this space. It's a high barrier to entry, and we are known as highly scientific with providing the largest specialty toxicology offerings in many different spaces. We believe we currently hold about 30% of the market share and growing. Let me talk a little bit about the growth drivers.
In this business, we will continue to use M&A and technology partnerships to enhance our scale, innovative capabilities, and grow our therapeutic area expertise. We also believe that outsourcing in this space, both in discovery and safety, will continue to grow. We believe discovery is only outsourced 30% of the time, and Safety Assessment , 60%. Particularly when funding is a little bit more difficult, outsourcing actually grows. We have significant opportunities still with synergies between those two businesses, and we'll continue to leverage those. And in this business, too, we have a digital transformation underway, where we're providing our clients a quicker client journey, data at their fingertips, 24/7 access to their studies. They can see their milestones. They can see all their results.
So the time where it took 6 weeks to get a report to a client so they can see what they, what their results were are gone. We give our clients a cockpit, a way to manage their studies, even so that the studies were conducted maybe 1,000 miles away. So really happy about that, and a huge differentiator to our, competitors. Market conditions, DSA demand trends normalized throughout 2023, again, to large part in, the biotech funding environment. Our backlog in safety is now approximately 10%. That was at the end of Q1. And, maybe important to, to point out that we are also the, priority partner or the global partner for most of the pharma or all of the pharma companies.
DSA revenue growth to global biopharma clients has outpaced biotech in 2023 and 2024. So strong demand from there. We believe the market trends overall are stable. We believe that we will see market trends actually accelerate because of the biotech funding, and that expectation is for us in Q in H2 of 2024. And the reason we are confident about this is because we have seen some early trends. And again, it's early, it's a quarter of robust Q1 biotech funding and some improvement in our proposal activity and cancellations. Our Manufacturing Solutions segment has three separate businesses that work together synergistically. The first one being Microbial Solutions, which is best known for the endotoxin test kits, so they're rapid test kits used by basically every manufacturer in the world.
We also offer services in microbial identification and microbial detection. Our Biologics Testing Solutions business provides lot release testing and supports manufacture with basically conventional tests. Everything that is FDA, EMA, or other regulatory agency-required testing for the manufacturer of clinical and commercial drug manufacturing. Our Cell and Gene CDMO, we acquired a couple of years, maybe, yeah, two years ago, is a platform for gene-modified cell therapy, as well as plasma DNA and viral vectors. This business is highly synergistic with our Biologics Testing business and our Microbial Solutions business. Now, more than 50% of our clients in this space actually work across this portfolio. The synergies we expected when we bought the company are coming to fruition and really giving us a competitive advantage in this space. Again, long-term growth drivers.
We believe that the increased number of biologics in development, particularly in cell and gene therapy, will be a major growth driver for this industry. So again, we are focusing this Manufacturing Solutions , manufacturing division on biologics and advanced modalities, so really positioned for growth. And all the discussions about IRA and all that is just going to be helpful for us. We are continuing to invest in new technologies and in new regulatory accepted technologies for our businesses. So for example, we just invested in next-generation sequencing that will just got approved for replacing an in vivo test that we performed before. And then we're happy to see that our cell and gene therapy, CDMO, is gaining traction.
We have spent a lot of time and effort, increasing regulatory compliance in this business, getting it from a clinical CDMO into a commercial CDMO. And I'm happy to say that, our Memphis site received U.S. and EU approval to manufacture Vertex Casgevy, which is the first gene editing, edited therapy targeting severe sickle cell disease. So something that we're extremely proud of. Recent market conditions, we believe that Biologics Testing and Microbial Solutions , will rebound in 2024. And the reason is, for our microbial business, we saw some stocking up in COVID and some de-stocking last year. The buying behavior of our customers are now rebounding to prior to COVID behaviors, and with that, we'll see some acceleration of demand.
Biologics Testing just sees a really good number of samples coming in for testing proposals, so, very upbeat about those two businesses. Our cell and gene therapy CDMO has shown great growth last year and earlier this year, and, again, the commercial products will just help us garner more interest in this space. There are two things important with CDMOs. One, they can make your product, and number two, they can pass the regulatory inspection. So, really positioned well. We will continue to enhance the value of Charles River to our clients and to our shareholders. We will continue to do that with disciplined M&A. It's M&A continues to be our top long-term priority.
We have slowed down a little bit over the last couple of years because we wanna digest our CDMO acquisition, but I think we're getting quite good at this. And just give you a data point, we invested $4.5 billion in over 25 acquisitions since 2012, and that will continue. Strategic partnerships, we talked about that quite a bit. That's a way for us to get access to innovation, access to technologies that are either synergistic or maybe new in the market, that allow us to test drive it, to offer it to our clients, to see if it works. Is it synergistic? We will continue to do that, and if it really is successful, we actually generally acquire those businesses.
So we have 20 active partnerships right now, and some of them, you see here, Distributed Bio and SAMDI Tech, were two partnerships that worked out well, and we acquired them. And then there's three that I'm listing here, Deciphex, PathoQuest, Valo, all have absolute direct synergies and revenue-generating power for Charles River and are really working out great. We also will continue to do venture capital investments. The ultimate goal here is to have access and be a partner, very early stage, to VC-backed biotech companies, generally before they even have a name, and that works out well. We have now approximately 10% of our annual revenue coming from these VC-backed companies, and it has a good average annual return on the investment. That's another good positive sign here.
I did touch a couple times on digital transformation. So we started that journey two and a half, three years ago. We have made great strides. We're moving now from building capabilities, building base platforms into really synergistic, competitive platforms. And we will see quite a bit of efficiency coming from this digital transformation over the next years. We committed ourselves to an operating margin improvement of 150 basis points between 2023 and 2026. Our digital transformation will be a primary driver of that. We also wanna continue to be the gold standard of outsourcing, and we are always looking to see which platforms in our digital transformation can make it easier for the client and faster for the client.
So scheduling tools, proposal tools, things that really can change the speed at what we can now do for our clients are the focus here. And then the third bucket is enhancing speed and execution for our clients. Decision-making tools. Apollo, that I mentioned, is one platform that will drive that. Quicker insights, quicker data, really making sure our clients know how the results were, when is the study going on, is being executed, and what are the results? So, big transformation going on, and you will see a lot more coming in the next few years on that. We also have a very strong commitment to corporate citizenship.
We believe that it's important for our company because it will engage the employees, it will engage the clients, it's the right thing to do, and it gives us a license to operate. We bucket our corporate citizenship into four pillars. The first one is accelerate life-saving therapies. That is our mission of the company. This is showcased by the fact, again, that we worked on more than 80% of drugs approved by the U.S. Food and Drug Administration over the last few years. We will continue to grow this. We will continue to accelerate how drug development is being done, working with our clients, but also investing in our own productivity and our own efficiency through digital transformation, but also through process improvement. We're leading with integrity.
Proud to say that we are now 45% women and minority representation on our board, and we are becoming, or became a signatory to the UN Global Compact in 2023. We also established the Office of Responsible Animal Usage, which is an office within our company, reporting directly to the board, that focuses on the utilization and the reduction of animals in drug development. We are a service organization, so the most important resource we have is people, and we're doing a lot of things to engage, motivate, and ask our employees to stay. And some of those are employee resource groups, which will help our employees to connect with other employees, but also to be mentored and developed. We now have 11 of those, and we have 4,000 employees participating.
Proud to say that we have 42% women in executive leadership, which I think is quite, amazing, and that we have equitable pay practices with less than 1% gap in pay. We all are responsible to protect our planet, and are particularly proud to say that we achieved 100% renewable electricity across our global sites ahead of our 2030 goals. So, way ahead of schedule. Wanna touch real quickly on a initiative that we launched, formally launched, about a month ago. It's called AMAP. It's the Alternative Methods Advancement Project. Everything needs a little bit of a short form, otherwise it's too much of a mouthful.
What it is, it's a formalization of what we have done actually for many years, but we felt we need to focus it maybe a little bit more and be a little bit more public about it. So we are aiming AMAP at initiatives dedicated to developing alternatives to reduce the reliance on animal testing. So what we're looking to do is have more scalable, more sustainable drug development practices. We have invested, over the last four years, $200 million as part of our M&A, as part of our partnerships in organic development, and we are going to invest an additional $300 million over the next five years into things that will help us to find more sustainable practices, but they also will be revenue generating. Wanna give you a couple examples in that space.
So this morning, we actually announced that we are collaborating with Sanofi on a safety study using Virtual Control Groups. What are Virtual Control Groups ? Every animal study needs a control group, animal control group, and what we are going to do is use historical data, parameters that we established. It's an AI, machine learning-based algorithm instead of animals. We're working with multiple clients on this. We're working with regulatory agencies on that. This is something that we have established organically, internally for the last year. I'm very happy to see it come to fruition. We also will continue to invest in in vitro alternatives, mostly through partnerships, a little bit internally, and we are collaborating heavily with stakeholders in the industry, including regulatory agencies, on how we can drive this better.
So this is something that we are very proud of. We're very committed to the three R's, which is replace, reduce, refine, and reducing animal usage in drug discovery. So this is an absolute long-term initiative. This is not going to happen over the next few years. This is a journey that Charles River will be on, probably forever, but it is an area that we feel is important for us and for the industry. So I talked a lot about very different stages and initiatives to drive shareholder value, to drive client value in our organization. So let me just take one minute to summarize it. We will continue to strengthen our portfolio through M&A, through partnerships, and looking at our businesses and growing them organically.
We will enhance speed and efficiencies of our own organization, and with that, we will continue to accelerate drug development and decisions of our clients. We'll do that through digital transformation, we'll do it through science, we'll do it through study design, and collaborating with the FDA. Technology will be a big part of this. We are making investments in AI and machine learning. Virtual Control Groups is one, but we also have partnerships in that space, where we're learning and exploring how AI and machine learning will change our business, and how we can be part of that, and make AI and machine learning an opportunity. We will promote innovation. We've just talked about replacements for animals, but there's also innovation to make drug discovery more efficient.
And last but not least, but very importantly, we will continue to advance our culture, culture of Charles River, but also the culture in the industry, and be a good citizen, corporate citizen in the geographies where we work and where we live. And we will do that through providing meaningful work, developing our employees, some donations, a lot of hours of that our employees donate, and other activities. And with that, I would like to thank you for your time.
Perfect. Yeah, well, we have two minutes, Birgit, so maybe I'll sneak it, just a quick one in on the-
Sure.
News from this morning and the efforts you're making to move away from animal testing. Can you just talk about how you think about the timeline for replacing animal testing? And then, what are the biggest hurdles today? Is it more an issue of the technology is just not where it needs to be in order to replace that testing, or is it more getting the FDA on board in terms of their willingness to embrace some of these new alternatives?
Yeah. Great question, and thanks for asking that. So, just to reiterate, the announcement this morning was specific to Virtual Control Groups, which is one initiative and one effort of driving, finding ways to do drug development securely, safely, efficiently, without, with a reduction of animals. We believe that this is a very long journey, so you probably 10, 20, 30 years. But if we can make, if we can have some areas where we can reduce the amount of animals, why not do that? And so that is the driver for what we are doing. The reason there isn't more activity or more success right now is that the technologies don't exist.
So the FDA is very open to accepting data of any kind of alternatives that are available, but particularly in the safety space, particularly in the toxicology space, there is just nothing else that will allow a review of safety of a drug. I think we will see better results in discovery, and I think there are some technology out there that I believe that we can help utilize a little bit more, may that be organ-on-a-chip or things like that. And you will see us talking more about that and maybe starting to use it a bit more with our clients. But overall, I think, again, a long-term initiative, and I think safety will be way behind discovery in that space.
Perfect. Yeah, it's really helpful. Thank you. Thank you again for joining us today, Birgit, and for the presentation.
Thank you.
That was super helpful. Thank you, Todd, for setting this up. And, again, breakout will be held in 10 minutes, in Richardson on the second floor. So thanks again.