Great. Good morning, everyone. I'm Todd Spencer, Corporate Vice President of Investor Relations at Charles River. I've been at the company for 20 years, including the last eight as head of IR, and I've had the opportunity to meet many of you here and work with you. So on behalf of the company, I am thrilled to Welcome you all to Charles River Laboratories' 2026 Investor Day. Before we begin, I'd like to go over a few housekeeping items. First, today's slide presentation can be found on the investor relations section of our website at ir.criver.com. The webcast will also be available on the same website for replay. Next, I'd like to remind you of the safe harbor statement, and the use of forward-looking statements, as well as that we'll be speaking primarily to non-GAAP financial measures covered under Regulation G.
You can find additional information on these disclosures in the slide presentation or on our investor relations website. We have a great lineup here for you today, focused on providing insights about our strategic vision, industry trends, and actions to drive long-term shareholder value creation. We will also update our long-term financial targets. We are pleased to have members of our senior management team here today to outline this for you, led by our CEO, Birgit Girshick. There is biography information that can be found on the investor relations section of our website and in the appendix of today's slide presentation. Birgit will begin by highlighting our refreshed strategic framework Pathway to Purpose.
She will then be followed by Dr. Namandjé Bumpus, our Chief Scientific and Innovation Officer, who will provide an overview of our innovative scientific capabilities and how we will continue to lead the future of integrated drug development. Our Chief Information Officer and Head of Global Shared Services, Mark Mintz, will then detail our efforts to modernize the company, and generate greater productivity and efficiency, and drive scalable growth. We will then have our first of two question and answer sessions. After a short break, our CFO, Glenn Coleman, will provide a financial overview and review our financial targets in detail. Then we'll hear from each of our business unit leaders about their respective growth strategies. Shannon Parisotto will provide an overview of our DSA segment. Kerstin Dolph will then discuss our Manufacturing Solutions segment, and Dr. Colin Dunn will provide an update of our RMS segment.
We will then have our final question and answer session. I will ask that you try to save your questions on our financial targets and our respective business unit trends until this portion of the agenda. We will also have a showcase and product demo in the back of the room, highlighting our digital capabilities and microbial solutions testing platform. Aaron, Laura, and Carolyn will guide you through that experience. So please feel free to stop by during the break or after the event concludes. They will be available until approximately 1:00 P.M. In addition to our senior management team, I would also like to welcome our Board of Directors here today, including our Chair, Dr. Martin Mackay.
Please use the QR code at the bottom of this slide for a direct link to our Investor Day microsite and slide presentation. The Wi-Fi information is also listed for those joining us in person today. If you need anything else, please look for me, Jess, Nancy, or Tara, who can provide any assistance that you need. Finally, I am pleased to announce that in lieu of giveaways at today's event, we have made a donation to a long-term charitable partner who provides assistance to children in foster care, including educational and veterinary scholarships named Foster Love. Before Birgit Girshick begins, we would like to share with you a short video that truly highlights the importance of the critical work that we do and for the patients whose lives we strive to improve. This is our motivation, our Pathway to Purpose. Thank you.
Drug discovery. It is amongst the hardest tasks that any human being can take on. No one person, no one function, no one division can do what we are trying to do alone.
As big as we are, we can't be good at everything. Charles River affords us the opportunity to tap into expertise that they are very good at, that we don't have to invest in.
We started working with Charles River. Very quickly we realized this is going to be a very special partner to us.
The scientists at Charles River are great. When we think of something we need done, given the range of its capabilities and the attitude, it's kind of the place we go.
They are with us in the trenches, as it were, as we bring these potential medicines into the clinic.
Charles River has worked on all of our products since day one.
Their scientists, their teams, they are extremely knowledgeable. They have curiosity to push the boundaries of their science and technology.
It's the intellectual engagement. It's the complementary know-how and expertise and capability to do things that don't exist inside of our walls.
Charles River gets it. They're not waiting to hear what we tell them to do. They're pushing us with ideas of things they think we should be doing, and that's an important dialogue, I think, among scientists to come up with new ideas.
It's those moments when the teams really dive in and try to help us solve the problems together that we really see acceleration of our programs.
People move quickly. You can get the management engaged very quickly.
The high level of scientific engagement and technical acumen.
They are agile decision-makers.
It's a very large company. But the culture is still a culture of a startup.
What I think we're getting is a global company who has expertise across the industry, somebody who works with world-class companies, and they're able to bring to bear all of that experience and expertise to the problems that we're trying to solve. They also do this with enormous integrity. That's the kind of partner that works for a serial innovation-oriented company like Vertex Pharmaceuticals.
If you think about the next chapter of Moderna, it is really about how do we scale? How do we scale in the world of AI? How do we go faster? How do we go cheaper? I think Charles River is an amazing partner. They have a scale, they have a mindset, and I think they are ready to get to the next level with us.
The goal is to either transform, if not cure these diseases in which we work.
At the end of the day, it is the patients who benefit because the science happens faster and smarter.
Every single piece counts towards a bigger mission.
The big why is the patient. How can we make a difference in the life of that patient?
This thing that we do, it would not be possible without a partner like Charles River.
Good morning, and thanks for being here for the Charles River Investor Day. We wanted to start with the voice of our clients because that is the reason Charles River exists. This video is a powerful reminder that our work matters. Our clients goals are our goals. Their mission is our mission, and their success is our success, but more importantly, benefits the patients. We are not just a service provider, we are a scientific partner. We are deeply involved in their work. You heard our clients describe our work as critical, as science at the highest standards, that we do work for them that they don't have internally. These kind of client relationships are the reason Charles River continues to involve and continues to differentiate itself. Science is becoming increasingly more complex, and our clients need partners with high science, rigor, and speed, and that is Charles River.
If I have not met you yet, my name is Birgit Girshick. I am the CEO of Charles River. I have spent nearly my entire career at this company for great reasons, and I know our strengths, but I also know where we need to move faster and be sharper. My focus as CEO is clear. I want to simplify the company, invest where we can win, and translate this into revenue growth, margin expansion, and long-term shareholder value creation. There are four things I want you to take away from today. First, we are a scientifically driven industry leader, and that position matters, and I think you just heard that from our clients.
Second, drug development is evolving and Charles River is evolving with it. NAMs and AI are very exciting, and they are technologies that allow us to differentiate ourselves even further. Third, we are actively modernizing our company.
We're doing this in a very disciplined manner, allocating capital to opportunities where we can win and have attractive returns. Fourth, most importantly, I have an exceptional team, and that team is highly focused on executing on our strategy, Pathway to Purpose. Over the next 25 minutes or so, I will outline where we're going and why I believe that Pathway to Purpose will accelerate shareholder value creation. Let me start with something basic, and that is who we are and why our position matters. We are the scientific partner of choice for early-stage research through clinical development. Simply put, we help our clients move faster, reduce complexity, and ultimately bring therapies to the patients more efficiently. Of all the slides, I think this is my favorite one. It shows our scale. We have currently approximately 18,000 employees, 2,000 of which are scientific professionals with advanced degrees.
That is talent at scale. Our footprint, with approximately over 100 sites in approximately 20 countries, allows us to work with our clients where they want us to work with them or need us to work with them. We support approximately 1,500 INDs a year. That is not just relevance. That shows criticality. We are diversified across clients, geographies, end markets, and capabilities, and we operate in an attractive addressable market that provides us with an incredible, resilient business model. The real message here is what the scale enables, and that is patient outcomes. We have supported over 80% of FDA-approved drugs over recent years. That shows our depth of our role in drug development and the confidence our clients place in us. It translates into long-standing relationships with the world's leading biopharmaceutical innovators.
This slide here shows how our segments work together and create something that is really difficult to replicate. I believe our biggest advantage is the breadth of our scientific platform. We have three segments that support our clients through research, through regulated development, into drug commercialization. I believe we support our clients at the highest value, highest dependency points, and because of our portfolio, reduce handoffs for our clients. Our Research Models & Services, or RMS division, is approximately 21% of revenue. The research models we provide enable discovery and development of new molecules. Our Discovery & Safety Assessment organization, or DSA, is 60% of revenue and is the core growth engine of Charles River. We help clients advance molecules into the clinic.
Our Manufacturing Solutions business is roughly 19% of revenue and provides mission-critical testing to support clinical and commercial manufacturing and is an interesting segment for us because of its highly reoccurring revenue streams. What's also important here to point out is that 60% of our revenues are generated from early stage or pre-IND work, and approximately 40% from post-IND work. This widespread revenue exposure provides resiliency, and I will get back to this point in a little bit. What you see here is depth and breadth and shows the continuity we provide to our clients, which allows us to deepen client relationships and earn the right to do more with our clients every single day. Being recognized as the scientific partner of choice didn't just happen by accident. We have taken deliberate actions to strengthen our global capabilities.
Today, we are focused on being more streamlined, simpler, and a faster-growing company. We are doing this by optimizing our portfolio, as you know, we already divested two of our businesses this year, and by investing in higher growth opportunities. We are also modernizing the company to improve client experience and to improve also our long-term earnings potential. Mark Mintz will provide you more details on the modernization efforts, which we named Create the Future.
Create the Future is a very focused top-down led, bottom-up executed initiative. Our priorities are straightforward. We are strengthening our competitive foundation by reinforcing scientific leadership, expanding client relationships, and leading with integrity. We are striving for the highest standards of regulatory compliance and animal welfare. Both are non-negotiable. We are modernizing how we operate by executing on Create the Future. We are doing this through automation, AI, digital workflows, all to improve client experience and margins.
We invest in higher growth areas, and you will hear about BioA, but also about differentiated scientific capabilities such as NAMs and for example, the PathoQuest acquisitions we completed earlier this year. These capabilities, this enhanced portfolio, will make us even more valuable to our clients. This allows us to deliver sustainable long-term shareholder value by being a stronger and disciplined company. This slide shows why I have confidence in our long-term outlook. We are already seeing attractive industry tailwinds, and as we know, the industry backdrop matters. But I believe that the direction that it is going particularly favors Charles River. Biopharmaceutical funding shows strong signals of stabilization and recovery. Outsourcing continues to be the norm and favors our comprehensive portfolio. More complexity in drug development through advanced modalities requires more testing, and that is more opportunity for us. Also, complexity rewards scientific depth, and that is Charles River.
We will continue to differentiate ourselves by investing in science and new technologies, including AI and new approach methodologies, or NAMs, and will shape how these tools are integrated responsibly into the drug development process by combining them with our deep biological understanding and our regulatory credibility. We are turning these industry shifts into competitive advantage. This is another slide I really like because all the arrows are going up. These positive trends on these slides are already taking shape across our industry. Biotech improved from the lows. Pharmaceutical R&D investments are healthy, and development activity, as seen here in FDA IND filings, are rebuilding. We are not assuming a straight line recovery. We are for sure not assuming a hockey stick. But as demand returns, Charles River is positioned to win because of our scale, our breadth, and our science.
We are operating in a $20 billion addressable market, which provides significant opportunities for growth. This growth opportunity is supported by several key drivers, some of which I already touched on. To summarize, the increasingly favorable funding environment, more demand for services because of complex modalities, and this increasing complexity favoring our specialty leadership, and new technologies like AI and NAMs that will allow additional differentiation of Charles River. We are going to continue to strengthen Charles River by executing on our strategic framework, Pathway to Purpose. This is the bridge of where we are today and where we are headed. Pathway to Purpose allows us to make sharper choices, aligning our organization behind what needs to be done, and holding us accountable. Pathway to Purpose has three pillars, modernize the company and industry, strengthen world-class scientific portfolio, and grow through a customized client-centric approach.
Today, you will hear how we are building a faster, digitally enhanced Charles River. You will hear how and where we invest in higher growth capabilities, and how we leverage AI and make a difference using NAMs. Pathway to Purpose allows us to execute on our vision to create a future where our purpose and our scientific courage defines the next standard of health, develops the next therapy, the next drug, and not just today, but for generations to come. Let me dig deeper, and let's start with modernizing our business, specifically our Create the Future initiative. We are already executing on becoming a simpler, faster, and easier-to-work-with company, internally and externally. Create the Future is the most important initiative to unlock value from our current platform, from our current business. It's about automation, AI, and digital tools to improve speed.
It's about simplifying how we work by improving workflows and reducing complexity. It's about optimizing our organization, including our support functions and how we utilize our staff. Create the Future will help us unlock approximately $300 million of incremental savings between 2027 and 2030, and that is in addition to the $300 million cost savings we implemented in recent years, primarily through restructuring efforts. This is not just about cost. It is also building a more competitive company. A simpler Charles River is a faster Charles River. A faster Charles River is a better partner, and a better partner for our clients translates into revenue growth. When we talk about modernizing, we cannot not address AI, if that was English, a topic that is on everybody's mind. Arguably, AI is the biggest change in our industry and an exciting tailwind.
We agree with many industry participants that AI will improve productivity and lower the cost of drug development. Lower cost will lead to reinvestment in more programs. More programs creates a bigger pipeline for us because the validation of these programs still requires testing and a regulatory process. Additionally, through internal efforts, we're leveraging the benefits from AI to improve our productivity, our science, and competitiveness. The team will provide examples throughout the day. We also have a couple of examples in the other room on showcase, so please feel free to check it out. Let me talk a little bit about strengthening the portfolio, which was the second pillar. An example of strengthening the portfolio is the effort to expand our BioA platform. BioA is one of the clearest growth opportunities in front of us.
If you're not familiar with BioA is required lab testing of biological samples required throughout discovery, preclinical, and in the clinical phase. Currently, we provide BioA mostly in the preclinical stage. We believe there is more demand for BioA because as complex modalities grow, more specialized analytical capabilities are required, and more endpoints are being tested. We are already seeing that. We also have clients who seek continuity. They're looking for one BioA partner from early stage through the clinic, and that is a real opportunity for Charles River. So we are currently expanding our capabilities and scale organically, and we might potentially through M&A. What does BioA do for our business if we expand it? It improves the business mix.
As we move with our clients doing testing of their samples into the clinical stage, I just want to be clear, not clinical trials, but clinical sample testing, we participate in longer duration clinical programs. We also are able to retain clients towards commercialization. We are seeing synergies between our DSA and manufacturing solutions business, both of which are offering bioanalytical capabilities for different reasons. We are meeting client requests for high science bioanalysis at scale. Also importantly, we are building out our latest stage revenue exposure. As I said earlier, post-IND, and with that, we balance out our reliance on early-stage funding and further improve the resiliency of our business. Earlier today, a couple of minutes ago, I said that we are generating 60% of revenue pre-IND and 40% post-IND.
As we move more into the clinical phase, again, clinical testing, not clinical trials, we move this percentage from a 60/40 to an approximately 50% and 50% pre and post-mix. These reasons, plus an attractive growth outlook, make bioanalysis an attractive area for investment. Shannon Parisotto will talk more about bioanalysis in her session later today. I also want to address your questions regarding China. Geographic expansion allows an increase in our addressable market, certainly a benefit. We are interested in the Chinese market and specifically providing preclinical services to Chinese ecosystem participant. The market is of interest because of accelerating innovation. There is now a growing market of $1.2 billion - $1.5 billion for preclinical services. Charles River already has a meaningful presence in China, primarily through our RMS business, and we are serving the same clients that are in need of safety assessment capabilities.
This would be a natural extension for us. To support preclinical services in China, we would require local capabilities. We are evaluating opportunities if and when to enter the market while preserving strategic flexibility. We are taking a thoughtful and disciplined approach. If the right opportunity emerges, we will be ready. In the meantime, we balance this opportunity with a broader geopolitical risk, the competitive environment in China, and other investment options that come our way. NAMs is another exciting area. It is the right ethical and scientific direction and one that Charles River is committed to lead. What it is not, it is not one tool replacing another tool. It is the integration of in vitro, in silico, and in vivo to create stronger evidence and make better decisions. Today, drug development is grounded in traditional in vivo approaches, which has many benefits and remains essential.
NAMs, as they become available and useful, we believe will generate earlier and more predictive insight, so beneficial to everybody. Dr. Namandjé Bumpus will discuss how we help the industry to navigate this transition. We believe that NAMs will provide us with further scientific differentiation, stronger client relationships, and incremental revenue. I also want to talk about our growth strategy. Part of our growth strategy, we are redesigning the commercial journey from prospecting through expansion. Historically, our processes have been a little bit manual, a bit fragmented, maybe a bit transactional, and that has to change. We are building a data-driven, personalized scientific engagement model as outlined on this slide. The goal is simple, create and deepen client relationships because we are easier to work with. None of this works without our people and our culture. This is what the company is built on.
We're modernizing our company by putting emphasis on bringing our talent along. We are ensuring that our scientific leaders, today and in the future, are adequately supported, and we're providing differentiated experiences for our people so we can better retain them. Our culture is a culture of care, and that is reflected in how we support our talent, how we conduct science, how we see compliance and animal welfare. For our talent, we are ensuring our teams and people feel supported. For science, we ensure reproducibility of scientific outcomes. For compliance, we're maintaining the highest standards, and animal welfare is our top priority. This culture is also reflected in our leadership team. Many of them are here in this room, and many of them you will see their expertise in action today. I just want to say this.
This is a team with depth, a team with accountability, and a team with real operating experience. Together, we have 400 years of industry experience and 250 years or more of experience at Charles River. I'm extremely proud of this team, and because of them, I'm confident in our ability to execute. We also have a really experienced board that ensures that we are taking the right long-term views. They have expertise across the board. To name a few, they have expertise across biopharma innovation, finance, governance, and technology. Their perspective is extremely important to me as we execute on our strategy and maintain discipline in governance and capital allocation. Many of them are here today. Some are calling in virtually, and I want to thank them for their continued support and guidance. Everything that we just covered is connected to value creation.
The financial goals between now and 2030 are clear. Return to stronger growth with an expected CAGR of 5%-7%, expand margins to approximately 24%, and improve EPS at a low double-digit CAGR. Glenn Coleman, our CFO, will walk you through the financial framework and the assumptions, but the headline is simple. We have confidence in these targets. We know where the value is, we know what we need to do, and we are already executing on it. Let me close why I'm confident in Charles River and confident in growing shareholder value. Our advantage is not one product, not one capability or one trend. It is the combination of scientific and regulatory expertise, having an integrated platform, being a trusted mission-critical partner, and having an ability to provide our clients with the utmost reliability.
I believe we stand alone as a trusted partner with a unique combination of data expertise and global scale. We operate in an industry with high barriers to entry. Now, I will turn it over to the team who will discuss with you how we are putting our strategy into action. Dr. Namandjé Bumpus, our Chief Scientific and Innovation Officer, is up first to discuss how NAMs are shaping the future. Thank you.
Thanks. I probably could have waited a few seconds before I came up, but it's good to be here and be with all of you. As was mentioned, I'm Namandjé Bumpus. I'm the Chief Scientific and Innovation Officer. Before joining Charles River, I was at the FDA. First, I was Chief Scientist at FDA, reporting directly to the Commissioner. I had responsibility for cross-cutting regulatory science as well as other related areas. Then subsequently, I became the Principal Deputy Commissioner of the FDA, which is the number two role, the Deputy to the FDA Commissioner, working with the Commissioner to lead the agency day-to-day, doing everything to advance the public health mission of the agency through operational leadership and leadership or strategic initiatives. Before joining FDA, I was on the faculty at Johns Hopkins Medicine for 12 years.
Ultimately, I was an endowed full professor and Chair of the Department of Pharmacology and Molecular Sciences. I also spent time as the Associate Dean for Basic Research. I'm a molecular pharmacologist and bioanalytical chemist, so my lab did everything from very early non-clinical pharmacology toxicology through leading clinical studies and then bioanalysis. It's been exciting to bring all of that experience together in full service of our work here at Charles River. What brought me to Charles River? When I was at FDA, one of the programs I led that was very important to me was our cross-cutting NAMs program. They were going to introduce New Approach Methodologies or NAMs. So responsibility for that cross-cutting agency-wide NAMs program at FDA.
What became clear to me is that if we were going to move NAMs from discussion and concept limited use cases to a reality where they were truly and fully embedded across a drug development workflow, that it required leadership and leadership that really embodied both multidisciplinary scientific expertise in the relevant areas of science and understanding and expertise of the regulatory landscape, and that's Charles River. We are uniquely positioned to lead this next phase, this next frontier in non-clinical science, where the biology, the understanding of biology, is increasingly complex, more intricate, more layered, and where the products being developed themselves are more and more complex. With that in mind, we are bringing to bear the full strength of our scientific portfolio and our expertise into an integrated platform that Birgit introduced, and that's what we'll talk about today.
Just a few high-level things I want to highlight up front. One is that at the foundation of this, which many people may not know, but when you think about NAMs and the in vitro and in silico approaches that one might call a NAM, we have an industry-leading portfolio of in vitro and in silico approaches. We have a broad range of in vitro and in silico approaches across organ systems that really enables us to take this integrated approach, where we're taking those data, those insights, and integrating them with our in vivo studies to generate the opportunity for more robust decision-making for our clients and for regulators to make regulatory decisions.
So that means that what we're really centering in this approach is not one method alone or not one approach alone, but it's really an understanding of what is the evidence we need, what is the insight that we need, what information does someone need to make a decision, and how can we bring forward the most leading-edge scientific approaches to answer those questions? That is truly a differentiator for us, that integrated approach. As we present this to clients, we're hearing really positive, enthusiastic feedback. For instance, we talked about this approach, we presented our capabilities, and a leader in nonclinical research said to me, "This is music to our ears. It's exactly where we need to go." That's where we're going. What's the backdrop here? A few things going on. I mentioned we have the complexity, obviously, in scientific understanding and innovation around products.
There's also increasing demand, of course, for new tools, new tools in drug development. How can we be more predictive? With that, there's growing interest in in vitro approaches, of course, AI, we're hearing a lot about predictive analytics. At the same time, you have regulatory agencies globally in the discussion and really sharing perspectives, and it's evolving. This is an opportune time for us to really move forward and make an impact to this approach. How are we executing it? We're taking a multi-pronged approach to it that's both internal innovation and external thought leadership. I want to touch on those points. In 2024, we launched AMAP. This is really the umbrella that houses all of this work that we're doing around alternatives.
This is something we've been working on for a while and we're continuing to build and develop. In 2025, we launched the Scientific Advisory Board. This is a group of scientific leaders from across Charles River Laboratories working together shoulder-to-shoulder across business units to really advance our work, to set our strategy around NAMs, and now this integrated approach. Within that group, in connection with many of our scientists across the organization, we are constantly evaluating technologies externally, really keeping our finger on the pulse of the landscape. Because of our expertise in in vivo science, we're in a really great position to understand and think about which of these technologies are ready to go, which are ready to make an impact. We're spending time on that, and of course, we have our internal innovation we do as well.
Another thing that we're doing, I mentioned that external thought leadership. Because of all the experience we have, we have an opportunity, and I also believe a responsibility to ensure that there's external understanding among the public, among policymakers, among lawmakers of the science around drug development, of NAMs, the challenges, opportunities, and where we see things going. We're involved with policy groups and health policy think tanks. We're working with global regulators, giving them briefings on NAM, sharing our technologies with them frequently now, answering their questions around NAMs, giving them feedback on draft regulations. Similarly, working with other government agencies to think even about legislative proposals and weighing in there.
So with that combination of scientific innovation and that policy and regulatory and legislative insight that we're giving as well, and that collaboration there, we really are the leading company when it comes to NAMs space as far as our influence and influential nature on the overall NAMs discussion. What does this integrated approach really mean or look like? I mentioned it's bringing together in vivo, in vitro, and in silico, understanding that in vivo work remains foundational and essential to drug development. We need to understand the whole body context. We need to know, for instance, what a drug, an ingredient can do to the body, and then what the body can do to the drug. An example would be, for instance, developing a drug. You want to know where it might distribute in the body. That's important. Does it accumulate in an organ?
Because that can foreshadow, say, an adverse event. So say we do that in vivo study. The drug accumulates in the thyroid. We know that only because the in vivo context. An organ-on-a-chip cannot give us that insight. Now, we can use a cell-based model, in vitro model, an organ-on-a-chip, say, thyroid cells. We can treat them with that drug. Now, this experiment can tell us the drug got into the cells, but it doesn't tell us what the levels were relative to the rest of the body. We don't know if it accumulates there. But it can tell us that it got in. We can learn maybe what does it do to the cells when it's there? How does it get in? It gives us the mechanistic detail.
That's the integration, where the in vivo part tells us what's happening, and then the in vitro piece can give us more of that why and how and what's going on. Maybe even bring in in silico to help you then deconvolute those data and understand it more. This is the integration. And the power of it is that we maintain the rigor, we maintain the data that we need to really understand a product, understand an ingredient. But we can bring it to a level that gives more robust information and more potential for translation to that human situation. We're thinking about a first-in-human study, for instance, because we're bringing more of these data to bear and understanding from a whole animal to the more detailed cellular level.
Functionally, I mentioned to you that we have an existing in-hand broad portfolio that we've built, and we continue to build around in vitro and in silico approaches. It turns out we have over 220 of these assays and methods up and running, and we're already using them in various studies, and we're thinking about how do we continue to leverage and more fully leverage these approaches. These applications span a range of areas. We have cell-based tests, we have virtual control groups that we'll talk about more, and also we have demo here. We have our Retrogenix platform that's a really powerful approach to understanding, for instance, what off-target binding might be. We also have things that we're working through that are more emerging, but still they're being leveraged. Organ-on-a-chip, organoid technologies, AI-enabled predictive models.
This is what we have and where we are going and what we have been building, and of course, there are future applications that are further off scientifically for the scientific community in general, but where we still are looking and lending expertise and thinking them through and collaborating. Those are areas like whole body-on-a-chip systems, for instance, that create future opportunities potentially scientifically. But if we take these 220 methods that we already have across major organ systems and think about how do we use them in the most powerful way, what we have done is instead of thinking about each of them as individual tests, people often talk about NAMs, they think about individual tests, individual approaches. What we have thought about is that maybe these approaches, when used in concert and put together, actually are synergistic and provide data far greater than you could with any of them alone.
We are designing test batteries. These are batteries of in vitro and in silico tests being used in combination to address a specific area of biology. We choose those areas of biology because they are important to drug development, but we also think the science has advanced enough that we actually could put together a battery that would give decisional data. That is the key. We want decisions to be able to be made based on these data, programmatic as well as regulatory. This continues to expand, and we have more areas in this, but I wanted to give you an example and a sampling of where we are.
We have developmental reproductive toxicology, for instance, is an area, and we will double-click on it in the next slide, where we have a range of assays that we can bring together that we think can give very useful information that can speed up getting insight into this process and really help our clients make decisions faster around this specific area. There are others like carcinogenicity, which is, of course, very important to understand. We have in vitro assays, again, that can give data more quickly than an in vivo study to help making some decisions and informing potentially how you are designing your in vivo study. Cardiotoxicity, skin safety. Similarly, we have batteries of tests that, when combined, can answer questions in those spaces, and these are, again, areas of increasing importance in understanding a product, understanding ingredients.
The way this looks with developmental and reproductive tox as an example, and I know there is a lot on this slide, but walk through it, and there are a couple of take-home messages. There are in vivo studies that you would do to look for developmental and reproductive tox, and you are thinking about things from gamete formation, placentation, all the way through, obviously, development. On this slide, what we are showing is kind of a breakdown of the biology of that. All of the things listed here that we have, embryogenesis, lactation, milk production, et cetera, are all spaces in the biology where a drug, an ingredient, a chemical, whatever you are looking at, could have an effect. These are all endpoints to measure. We have designed batteries around measuring these components.
For instance, we're thinking about endocrine disruption, so hormones, how they might be dysregulated and impact fertility, for instance. We have a combination of six in vitro and in silico approaches that we think can give you really detailed information there to begin to generate that evidence to make some decisions around your product. Similarly for each of these areas, we have them and we're continuing to build. This would be a test battery in a specific biological area and an example of our existing capabilities that our clients can leverage to move forward the decision-making and do this in conjunction with in vivo studies they may do to get even more mechanistic insight into the why. Why you see a certain outcome in vivo. These data can help you understand that and get some early data, again, you could potentially move forward with in your program.
In addition to those tools, of course, another thing in our toolkit is the abundance of data that we have and also our expertise. Having these data, but really the expertise both in the science and the regulatory to be able to fully leverage it. This is something that's a differentiator for us, and we're leveraging it in various ways, and one way is through our work on virtual control groups. Virtual control groups is another area where we lead. Essentially this is leveraging historical control data that we have from our in vivo animal studies and using a machine learning approach to curate those data and then use those data as a control for an in vivo study that we're doing. We still would have live control animals, but we're able to reduce that number of control animals through leveraging these data.
We performed some studies to validate this approach and shown that by using these virtual controls, you get concordance with the results you get based on live control. This is a really powerful example of utilizing data, using advanced in silico approaches to really bring ourselves to something that is in the NAM space. We'll continue to build this out, but it gives an example of, again, how we're bringing together all of this ability that we have and all of our expertise to really lead and advance the science and move things forward. We've been doing a lot of briefing of regulators on this approach and seeing a lot of interest from them in understanding more about it and hearing from us. I hope that what you take away from this is that we really are leading when it comes to this space.
We have the capabilities, the in vitro, the in silico, the in vivo, and we can bring it all together in a way that no one else is positioned to do in the way that we are. We're not only leading as far as that innovation, but we're coupling it with how can we ensure that we're really shaping public understanding, policy and lawmaker understanding around the capabilities of these approaches and the power of that. Taking a holistic approach to advancing NAMs and advancing this integrated platform. This brings a real competitive advantage. It's a differentiator for us. It creates opportunity for new touch points with clients, new areas to work together through this integrated approach, and so deepens our relationships there and certainly strengthens our interaction as scientific partners.
With that, I will pass to my colleague, Mark Mintz. I am very glad to be able to talk to you about this. Thank you.
Thank you, Namandjé. Good morning, everyone. I am Mark Mintz. I joined Charles River in 2021 and today serve as Executive Vice President, Chief Information Officer, and Head of Global Shared Services. I have spent 30-plus years delivering technology-enabled solutions and large-scale transformation programs, including as a founding member of McKinsey Digital Labs and a leader of its enterprise architecture practice. At Charles River, I am responsible for technology and shared functional and operational services that enable us to execute our strategy more effectively. Today, I would like to spend the next 10 minutes or so discussing how we are modernizing our operating model to support scalable growth and bring the modernized pillar of our Pathway to Purpose strategy to life. I joined Charles River to lead our digital transformation, and it is very exciting for me to evolve that into a full modernization of the company.
There are four key messages I would like to highlight. First, we are modernizing our operating model to improve scalability, agility, and client experience. Second, we are creating a simpler, faster, and more connected experience that deepens client relationships and helps make Charles River the preferred partner for our clients. Third, we are leveraging AI and digitization to improve execution and accelerate operational efficiencies. Finally, through the recently introduced Create the Future program, we have been and will continue to implement initiatives to drive sustainable productivity, positive operating leverage, and margin expansion. Together, and what I find most exciting about this, is that these actions are creating a more agile and scalable Charles River that is easier for our clients to work with and better positioned for long-term growth.
As Birgit discussed earlier, Create the Future is the most important program we are executing to unlock the value across our portfolio, and modernization is a core element of our Pathway to Purpose strategy. We have already established a strong foundation, and Create the Future represents the next chapter of modernization and our efficiency journey. Our objective is to modernize the enterprise by increasing integration and standardization while simplifying operations and reducing complexity. In doing so, we are creating a more scalable operating model, improving productivity and operating efficiency, and building the digital foundation for future innovation. Most importantly, we expect these initiatives to deliver measurable results. We have been working on the implementation of many of our Create the Future initiatives for several months and are pleased with the progress that we have made and are encouraged by the future benefits that it will unlock.
From 2027 through 2030, we are targeting at least $300 million of cumulative incremental savings. This is not simply a one-time cost program. It is a structural transformation designed to improve how work gets done and support sustainable growth and margin expansion over time. By combining a more modern operating model with clear financial accountability, we can create meaningful operating leverage across Charles River. Create the Future is organized around three primary focus areas. The first is AI digitization and automation, where we're accelerating productivity through AI-driven, digitized, and automated processes. I'll double-click into this on the next slide. The second, workflow simplification, is where we're reimagining and standardizing enterprise workflows. The third is enterprise optimization, where we're optimizing support functions through standardization and centralization to improve resource allocation and increase scalability. An important point to note is this is an enterprise-wide effort.
As the charts show, we expect savings to be generated across businesses and corporate functions through a combination of labor utilization, asset rationalization, and procurement, totaling, as I said before, at least $300 million of incremental future savings by the year 2030. The diversity of savings is important because our opportunity is not dependent on any single action or function. We are in process of optimizing utilization and use of key resources, including capacity and people, streamlining processes, and automating and digitizing many of the functions that haven't been already. This reflects a broad portfolio of initiatives designed to create durable improvements while maintaining the quality, compliance, and client service standards that are foundational to Charles River. Let me bring this to life by showing how we're transforming workflows and systems across the enterprise.
Our work is centered on three areas: AI enabling and automating processes, digitizing enterprise workflows, and connecting systems and data. Within AI enabling and automating processes, we're using AI to continuously improve on how we work across businesses and support functions. This includes things like AI-assisted scientific reporting and study design, AI-enabled commercial and financial processes, and end-to-end AI-assisted IT project delivery based on reimagined workflows. We're also streamlining critical systems and data sources and harmonizing and standardizing our data to enable better decision support across functions. Lastly, the AI-enabled and automated processes, along with our improved data assets, are being made accessible by digitizing high-value workflows, expanding on our investments into Apollo, our digital client engagement platform that we launched several years ago, transforming study startup, execution, and reporting, and automating lab and manufacturing operations. Importantly, this is not technology for technology's sake.
It is about redesigning work to improve speed, consistency, productivity, and the client experience. We have identified more than 15 core business processes for simplification, expect more than 33% of the transformation value to be enabled through digital investment, and have more than 50 AI-enabled projects to drive the transformation. Together, these initiatives create a stronger digital and operational foundation that we can scale across Charles River. Apollo is a tangible example of how digitization can improve both the client experience and our operating model. I encourage you all to stop by the demo booth to see Apollo firsthand. I'm hopeful you'll see for yourselves why often we hear from clients that the Apollo platform is a true differentiator and a strong consideration of why they choose to work with Charles River. Today, Apollo supports multiple points across the client journey.
Clients can purchase research models through e-commerce, manage their CRADL end-to-end vivarium operations, access real-time DSA study progress and data insights, and for biologics testing, submit and track samples and testing milestones all the way to receiving their reports digitally. We have strong engagement on Apollo with 18,000-plus client users benefiting from the platform, a net promoter score of 55 compared with industry benchmarks of 30, and approximately 92% of users that could use Apollo do use Apollo. Today's capabilities are only the beginning. Over time, we intend to expand Apollo into a connected digital access point across the entire client journey. That includes the productivity-driven AI and automation, like the AI-assisted reporting and commercial workflows I previously mentioned, scientific AI to support scientific applications, insights, and decision-making, and all controlled with strong AI governance to address security, controls, data privacy, and regulatory considerations. Why does this matter?
Because a more connected digital experience powered by our investments in AI and Apollo make Charles River easier to work with, improves transparency, and enables clients to access more of our capabilities through a single trusted partner. Quite simply, Apollo helps translate the breadth of our scientific platform into a simpler and more integrated client experience. This DSA case study shows the benefits of modernization in practice at a detailed level. It's also a great example of how we are combining the key areas of focus to create modern and simplified experiences as it touches on how we are applying AI, digitization, and workflow simplification, two of the three key focus areas I discussed earlier. Historically, paper-based processes required repeated data entry and verification while multiple handoffs limited visibility and created unnecessary complexity. We're replacing that experience with one single connected digital interface from study design through final reporting.
Clients can benefit from customized protocols, real-time study visibility, and a more streamlined review process. Behind the scenes, connected systems eliminate manual handoffs and duplicate data entry, while digital data capture and automated quality checks can reduce errors and cycle times. As I mentioned previously, we're also creating AI-assisted and automated reporting and SEND processes, which improve scalability and efficiency while maintaining the quality and regulatory rigor our clients expect. SEND is the standard format required for certain non-clinical data submissions to the FDA. So digitizing that process is especially important for both efficiency and compliance. Importantly, these tools enable our scientists to spend more time on scientific interpretation and less time on administrative work. For clients, that means a faster, more transparent, and more connected study experience. For Charles River, it creates greater scientific and operating leverage.
This is exactly the type of modernization we expect to improve quality, strengthen client relationships, and support sustainable growth and margin expansion. Let me wrap up by returning to the four messages I shared at the outset. We're modernizing our operating model to improve scalability, agility, and client experience. We're creating simpler, faster, and more connected experiences for our clients. We're leveraging AI and digitization to improve execution and operational efficiency. Through Create the Future, we're translating those capabilities into sustainable productivity, operating leverage, and margin expansion. This is an ongoing transformation, but we have a committed roadmap, measurable objectives, and a strong foundation from which to execute. We're building a more modern and scalable Charles River that is better positioned to serve clients and deliver long-term shareholder value.
With that, I'd like to invite Birgit, Glenn Coleman, and Namandjé Bumpus back to the stage to join me for Q&A, after which Glenn will dive deeper into a financial overview. Thank you.
Great. Thank you, Mark. As Mark said, we'll now start our Q&A session. If you could just state your name and firm for everybody on the webcast, that would be appreciated, and wait until you have one of the two mics before asking a question. Thank you.
Thanks. Ann Hynes with Mizuho Securities. During your presentation, you talked about a few inorganic opportunities related to China, related to bioanalysis. Can you just go into deep, like the type of opportunities that are out there, maybe valuations, size that you're thinking of? Any more detail on the inorganic opportunities would be great. Thanks.
Yeah. Let me start with the bioanalysis. So we're currently executing on five organic expansions, and these are ongoing, and they will be executed on over the next couple of years. As I said, we would be interested in a potential acquisition in this space. It's too early to tell on what the size of a potential target is, what valuations are. We're obviously looking at the market, but it's always difficult to determine when those targets are available and when we could execute on those. What I can tell you is that we are looking for high science, complex modality players in the field that complement our capabilities and our scale. But as I said, too early to tell exactly what the valuations are and the size of it.
The same with China, as I said earlier in my remarks, is we are evaluating what are the opportunities, what are potential entry points. But at this point, we're taking a measured approach on looking at opportunities and really making sure that we're taking a disciplined approach, maintaining strategic flexibility and weighing that with other opportunities that we have, such as BioA. A bit too early to tell.
Justin Bowers from Deutsche Bank. Good morning and thank you for hosting us. In terms of the operating model transformation and the $300 million of targeted savings from that, can you help us think through the timing and the pacing of that? Is that ratable or more front half, second half loaded via the 2030 targets? How do you think about harvesting that savings versus reinvesting in the business?
Right. Glenn will have a whole session on that. Do you want to say anything upfront?
I would just say that the way we've sequenced the savings is pretty even and linear throughout the plan. A lot of the low-hanging fruit around the previous cost savings efforts that have taken place is no longer with us. We're dealing with now implementing AI, automation, investments required to generate the savings. It will take us a little bit longer to get to some of these savings, but I would just say, think of it more in a linear fashion. We may be able to get a little bit more savings in the front half of our five-year plan, but I'll cover more of that in just a few minutes.
Yeah, thanks. Charles Rhyee with TD Cowen. Maybe a question for Dr. Bumpus. You showed examples of an integrated approach between in vivo, in vitro, and in silico, and that can provide more information than maybe any one method by itself. There's clearly been discussions, a potential move to zero animal studies in the future. Just curious, and also in your longer-term opportunities on that slide, you listed whole body-on-chip and AI-based virtual human trial simulations. Maybe can you talk about what you think that future state looks like, and is there a time when we can move completely away from animal studies and certainly how you think the agency is approaching this currently? I know there's potential pilots going to be launched. Any comments there would be helpful. Thanks.
Mm-hmm. Yeah. So I can certainly speak from my expertise and experience, and what I always tell people, quite frankly, is I don't see us being able to move away from animal testing, in vivo testing in my lifetime, which I hope will be quite longer. Because there's really a need, again, to understand that whole body context, and we cannot currently replicate that in cell-based models. So often, I'll try not to get too much of my cell-based area I should talk about, but often when people talk about, say, organ-on-a-chip, say we're talking about liver-on-a-chip. There's an issue with, for instance, cell sourcing, where you get the cells. So you get them from someone kind of postmortem, or you get them from a liver resection. Someone had cancer, there's a resection. So you're getting those cells.
The issue becomes with prediction that you're either dealing with cells from someone that has died or tissue that maybe is unhealthy. You harvest those cells. They're actually dying now in culture. All that to say, it makes it difficult for these methods to be fully predictive. Then, even still, you're looking at what's happening in those cells at that moment. It's not telling you how something that's made in those cells might travel to another organ and have an impact. Because we know in these organs, drugs can be metabolized. They're changed. So you need that interplay, and we just don't have a way to do that other than an in vivo model. With whole body-on-a-chip or even people are connecting chips to kind of flow to each other, but that's a simulation. Again, where do the cells come from? What stress have they already been under?
They already have some dying, some toxicity. That's going to then skew your result. So they're just not fully predictive, and we can't extrapolate it yet to a whole body context. So I think this hybrid approach that we've talked about is really what we're going to continue seeing in the future. We want to advance the in vivo and in silico approaches to give us more insight, I think, into the in vivo, more of the detail, but we need these in vivo models. But certainly, we're doing things like reducing the controls as much of a 3Rs approach as we can take while upholding the rigor of the science.
Okay. I think I'm next. Hi, Dave Windley with Jefferies. As a father of an alum, I feel like I'm an investor in Johns Hopkins University, so go Hop. Dr. Bumpus, I have a follow-up question for you on that. The 3Rs have been around for a while. I'm sure in your career, you've seen the evolution. My curiosity, I guess, is in light of a couple of decades of efforts to reduce animals in studies that have had some impact and some success, how are NAMs accelerating or not? Are they just extending that line? Are they accelerating that line? What are you seeing as you're now in a position to talk to sponsors and clients from a commercial standpoint? How do you think your former boss and that regime have accelerated the adoption of NAMs? That's my first question, please.
I think that this integrated approach we're taking is going to help us get that acceleration. The issue becomes when you focus on, which much of the discussion has been, this idea of a NAM that's going to suddenly replace something, and we can get all the data and endpoints we need. I think that's what's limiting because it's not reflective of the science. As I was trying to hint to, again, even though there's maybe more scientific detail than to share, the models themselves, the in vitro models themselves, have flaws. Because, again, it's where are we generating the material? Where are we getting material? So that's an impact. Then you think about in silico AI, well, it's only as good as the data we put in, and still, there are so many things that we don't know, we don't understand.
We don't have data around certain endpoints. Of course, you have even quality and reproducibility issues around those lines. We can't use AI to fully predict and reproduce this. We need the in vivo part. I do think that there are places where you see traction, skin tox models. We have very good data there. There are opportunities, certainly. Things I mentioned, like the Retrogenix platform. That currently is being used in lieu of animal studies in several instances to look at that off-target potential binding. Virtual control groups, another way to think about how do we, even though we're doing animal studies, reduce that control group to as minimal as possible as we can scientifically. So I think those are the key opportunities.
The other quick thing I'll say, I know that this discussion's really been roaring for a little more than a year, but this has been going on a long time. FDA, even before my time, was talking about NAMs and trying to advance NAMs. It's something that's been ongoing and that we have not seen fully take over because it's science and it's going to evolve slowly. But this is not new. It's been happening and evolving, and we're going to continue to try to push it forward.
Great. Appreciate that emphasis. Birgit, this one's for you. It seems like there's a natural tension between as you become a bigger organization and trying to standardize operations while still being nimble to the customer, so kind of avoiding the creation of our way or the highway type standardized structures. How do you manage through that tension as you're trying to standardize the business? Thanks.
Yeah. Great question, David. This is really the heart of Create the Future. What we're looking for is taking complexity out of our processes, making the processes more flexible using technologies like AI that allow us. So take, for example, report writing. We struggled with automating this for a decade now because we have 6,000 clients, and everybody wants their mannerisms in a report. But now with AI technology, we are actually able to be as flexible as the client wants to because we can use those kind of tools to really customize how we're approaching the client. So our third pillar is growing through a client-centric approach, and client centricity is all about flexibility, working with them in how they need us to work. So it's eventually less about how our process works, and it's more about how we feed our process into their processes.
It becomes more about the data feeding right into their data lakes and into their cloud systems and less about a report, more about the insights. This is the heart of the question that we ask ourselves every single day. If you so choose to, and you go out to the showcase, we have some people out there who work with our clients every single day to design those processes, design the digital tools with their feedback. So it's literally in step with our clients.
Thank you.
Christine Rains from William Blair. Thank you. As we've seen and you've spoken to today, there's obviously not going to be an overnight substitution for NAMs. Have you seen or do you expect to see a near-term shift towards shorter duration of NHP or other animal studies? If so, net, do you think the NAMs Charles River currently offers could offset the impact of this headwind on the bottom line? Thanks.
Yeah. Just to summarize what Namandjé said before, and you can chime in then afterwards. This has been ongoing for three decades. It's 3Rs. Right now, NAMs is a bit of a buzzword. We are the leading edge bringing those technologies in. They have to be part of a regulated process. Otherwise, they cannot function on its own. Any technology that is out there that can help the client make better insights is something that is on our radar screen. As we bring those in, yes, there could eventually be further reductions of animals. That's the goal. That's the right ethical and scientific direction. But you saw on the slide that Namandjé showed, that DART slide- how many technologies it takes, how many assets it takes, how much insight it takes.
As we bring those along, these multitude, a variety of technologies that we will bring in, we believe will offset or maybe even add to the revenue that we are generating. But again, we're far away from this being really material. But we're committed to lead this, and we are working on this every single day.
Hear, hear.
Yeah.
Hi. Elizabeth Anderson from Evercore. Could you talk a little bit more about your interest in China? Obviously, you do have a business in there, a little bit more focused on models. Are you looking to serve Chinese biopharma? Is it for international companies that are working in China? Are there certain areas that are more or less appealing? Could you maybe go into that in a little bit more detail? Thanks.
Yeah, happy to. Our interest is to build on our research models business in China that is serving the Chinese ecosystem, meaning anybody located in China, biotech, Chinese pharmaceutical companies, even global pharmaceutical companies located in China. It would be providing preclinical services to this customer segment. As I said before, we are evaluating. We will take a really disciplined approach. That will take some time. There's nothing imminent, but if there's a target that we feel is the right target for us, we will be ready for it. In the meantime, we will balance that with other investment opportunities.
Great. Luke Sergott with Barclays. Just want to talk a little bit about the LRP and the 5-7 you guys talked about. The market's been growing, I'd say probably mid-single digit plus right now. It's on pace for that. You have upside from more biotech funding, more investment there. You guys are leaning further into some of the higher growth aspects of bioanalysis. You guys are talking about that. You have NAMs coming on. Talk about, I guess, where the conservatism is baked in to get to that range where it's, "Okay, this could go wrong here or there," and it gets to the bottom end.
Yeah. Luke, can I ask you to wait till the next Q&A because Glenn
All right.
has a spectacular session about that, so I do not want to take anything away from that right now.
All right. I guess if I can get another one in, then.
Go ahead.
In spirit of everybody asking about the NAMs, I think one of the big questions is everybody's trying to figure out, "Oh my god, this is how much of the wet lab is going away," or
Yeah
This is how much of their business is going away." But you guys have arguably the largest NAMs portfolio in the world.
Yeah.
Right? 220 capabilities. So maybe give us some context of when those projects and capabilities come online and how much of the work was cannibalized, and how much has actually turned into more supplemental work and creating more work for yourselves.
Yeah. Let me frame it a little bit differently. NAMs is not a separate business model. It's not a separate business of Charles River. It is an integration into our safety assessment studies. As of today, those 200-something assays that Nimanshi showed on her slide are in use, and they are part of our safety assessment revenue. As we will bring in more NAMs, they will become part of that same safety assessment revenue that you're currently seeing. We believe because there is a lot of validation, a lot of hybrid studies, that there actually might be some revenue opportunities. But we don't think this is going to change the trajectory of Charles River over the short term. Just let us continue to be the leader, take science first, implement them.
It's part of the safety assessment business, and actually also part of our manufacturing solutions business. As you know, we acquired PathoQuest, which is a typical, a great NAMs technology that is helping our manufacturing solutions, providing our clients with options there. We will continue just to integrate that. As we see a material impact, positive or negative, we obviously will provide that information. But at this stage, we see this as an add-on. We'll add some revenue generation because it's assays that we do in addition, but it will be part of that safety assessment business. Thank you.
Do we have any other questions? Sounds great. Now it's time for about a 15-minute break. Just a reminder, feel free to check out the showcase and product demo in the back, and we'll be back in about 15 minutes. Thank you
Hello, everyone. If you could just take your seats, we're going to begin in about a minute or less. Thank you.
Good morning. Welcome back from the break. It looks like most people made their way back to their seats. It's very good news because we have a very exciting session coming up where the business leaders are going to be taking you through their growth plans, how they're going to be improving their financial performance. But first, I'm going to go through a financial overview of our long-range plans. Before I do that, I want to introduce myself to many of you I have not met and reintroduce to those that I've already met. My name is Glenn Coleman. I'm Chief Financial Officer at Charles River Laboratories. I've been with the company now for a little over five months.
I joined Charles River Laboratories because of its strong leadership position in both the preclinical and non-clinical space, the breadth and depth of our portfolio, differentiated scientific capabilities, and really wanting to be part of an exciting chapter in the company as we go through this next phase of transformation, which should lead to meaningful long-term shareholder value creation. I bring over 35 years of financial and operational experience working largely in global healthcare companies. Previously, I spent 10 years as public company CFO at Integra LifeSciences, Premier, Inc., and Dentsply Sirona, all of which are in the healthcare space. I also have operational experience and spent three years as Chief Operating Officer at Integra LifeSciences, where I led all the commercial, manufacturing, and clinical functions.
In my various roles, I've also led numerous transformations, have been part of many transactions, including completing over 20 acquisitions, supported several divestitures, and completed two public company spin-outs. I want to start with four key messages and takeaways from my presentation. First, we expect to accelerate our growth and profitability by executing on our Pathway to Purpose strategy. I'll provide more details on our long-range financial targets in a few minutes, but we believe that Charles River Laboratories is at an inflection point for accelerated growth and profitability starting in the second half of 2026. Second, a key way we plan on accelerating our growth and profitability is investing in high-return opportunities, both organically and through acquisition, that are focused on BioA geographic expansion, especially outside the U.S. and Europe. You saw earlier from Birgit's chart, we only have 7% of our sales coming from rest of world.
That represents a great opportunity for us. Then areas where we can differentiate with innovation through our scientific capabilities. Third, we have plans to significantly expand operating margins through productivity improvements, automation, modernization, leveraging AI, and centralizing and standardizing certain corporate functions. These plans are expected to reduce costs by at least $300 million over the next four years, which will allow us to not only generate margin improvement, but also reinvest for faster top-line growth. Fourth, we will continue to be disciplined with our capital allocation strategy. Our primary focus will be on organic growth opportunities, while at the same time maintaining a strong, flexible balance sheet for strategic and accretive M&A.
This is all enabled by strong free cash flow generation by the business, access to low-cost capital, and maintaining a low leverage ratio, which currently sits around 2.5 x net debt to EBITDA. Listed here are my top three priorities as CFO and the framework for our operating and capital decisions. It starts with strengthening and building on our financial discipline and having clear financial transparency, accountability, and execution of our long-range plans. A large part of that discipline is driving the next phase of our transformation, which I previously mentioned, and that is largely through automation in the DSA segment and centralization of certain functions across the company. Lastly, deploying capital to high-return investment areas such as bioanalysis, regulated testing, NAMs, topics you are going to hear about throughout the morning. These areas should allow us to advance towards our long-term sales CAGR targets.
Well, this is clearly one of my favorite charts for obvious reasons. It highlights the outstanding record and history of delivering exceptional results over the long term at Charles River. This slide shows the financial performance over the last 10 years, from 2015 through 2025, with double-digit CAGRs for revenue, operating income, and non-GAAP earnings per share. You can see here, this led to these financial numbers tripling in size over that 10-year period. You can also see we got very healthy cash flow CAGR of 9%. A point of note, though, is our revenue CAGR of 11%. It was largely driven by organic growth, which grew 7% over this 10-year period, and that was complemented with about four points of growth coming from acquisitions.
I mention this because during time periods where we have seen a favorable industry and macro backdrop, we have shown the ability to grow organically in the mid to high single-digit range. We are confident that we have sustainable revenue growth, largely driven by four factors: market recovery, investments in higher growth opportunities, commercial excellence, and geographic expansion. Starting with market recovery, we are seeing improving biopharma and biotech funding trends, as evidenced by our net book-to-bill ratio that has been greater than one for the last three quarters. In fact, in our most recent quarter in Q2, we had the highest net book-to-bill ratio in nearly four years at 1.19 times. Biotech funding over the last 12 months reached $100 billion, and that was just shy of the peak that we saw during the pandemic. We are also seeing stronger proposal volumes over multiple quarters.
We have now had three sequential quarters of proposal volume increases. Most recent quarter, a double-digit increase year-over-year, and obviously, that is a very positive trend. What also is positive is we are seeing our capture rates being stable or even going up a bit, which means we are winning more in the market. Investments in faster-growing areas should also provide a framework for faster growth. This includes complex modalities and large molecules, which should lead to higher value studies in the DSA segment. In addition, the expansion plans for our bioanalysis business should enable us to increase our scale in faster growth preclinical and clinical applications. The manufacturing segment should also see a benefit from the rollout of our next-generation quality control testing solutions.
Our commercial go-to-market strategy will also help support sustainable growth as we implement a more disciplined pricing model, leading to modest price increases in the future, while at the same time increasing our share of wallet as we leverage our scientific leadership and differentiated capabilities. We will selectively expand our footprint in attractive markets so we can be in places that support our clients when and where they need us. Birgit also mentioned that earlier. That is really important. All this leads to a more durable, faster-growing portfolio, shifting towards higher value capabilities. Listed on the next slide are the structural actions we are taking to improve our operating margins and our earnings power. I am not going to go into each of these in a great level of detail, but there is one I wanted to highlight.
AI and automation are areas that we expect to drive meaningful cost reduction and efficiency to the organization. The largest impact areas will include report writing, scheduling, workforce planning, and digital pathology. Shannon is going to get into this in much more detail when she talks about modernizing the DSA segment. This not only has a benefit for us in terms of productivity and efficiency, this also has a huge benefit for our clients in that it reduces the cycle time for drug development. Moving to the balance sheet, our strong balance sheet and free cash flow generation help support our long-term strategy and provide us the flexibility we need to invest organically and also grow through acquisitions. We currently have a $2 billion credit facility that can be upsized to $2.5 billion if needed, with an accordion feature.
At the end of June, we have drawn approximately $1.1 billion on our senior secured credit facility. We also maintain about $1.5 billion of senior notes with maturities starting in 2028, bringing our total debt to roughly $2.6 billion. Our weighted average interest rate on our total debt is just above 4%. We currently have available liquidity of about $1.1 billion, consisting of cash on hand and the available borrowings under our credit facility. In terms of leverage, which we defined as net debt to EBITDA, we are in a very good place. Our current leverage ratio is 2.5 x, right at the midpoint of our targeted long-term range of 2x - 3 x. That being said, there may be temporary periods where we exceed 3x for certain strategic investment opportunities, but we would work to quickly de-lever with our strong free cash flow generation.
We have minimal debt coming due in the next two years, but we will likely begin to look into refinancing some of our senior notes, probably within the next 6 - 12 months, depending upon acquisition activity and if there are favorable conditions in the capital markets. It is likely that this refinancing will be a headwind to earnings per share of about $0.20 to $0.25, assuming that we refinance in a similar like for like fashion. That assumes that we would refinance with another senior note to take out the current senior note. Obviously, that is due to higher interest rates, and we have considered this impact in our long-term earnings per share targets that I will share in just a moment. Let me shift gears and discuss our capital allocation priorities.
Historically, if you look back over the last four years, between 2022 and 2025, we've generated over $1.7 billion of free cash flow. Our capital allocation has been very balanced, with 36% used for CapEx, 26% used for M&A and strategic partnerships, 20% used to repay debt, with the remainder returned to shareholders in the form of share repurchases. Having said that, we saw a much higher concentration of share repurchases in the past few years as we bought back $750 million of stock between 2024 through 2026, which includes approximately $300 million in the first six months of 2026, under our previously board-approved $1 billion share authorization program. in 2026, we also spent over $500 million on the acquisitions of K.F. (Cambodia) Ltd. and PathoQuest.
Looking forward, our capital allocation will continue to be largely focused on accretive M&A and strategic partnerships in the fastest-growing areas that were mentioned earlier.
In addition, we expect to invest in CapEx at a rate of 5%-6% of sales, and that includes supporting the automation and digital transformation savings that were referenced earlier. The largest majority of the spend, about two-thirds, should be supporting growth initiatives such as our BioA lab expansions. Birgit Girshick mentioned earlier, we are doing currently five expansions in the BioA business. Then we should have about one-third supporting maintenance and lifecycle management. We will also be opportunistic around our share repurchases while managing our debt levels to ensure we have adequate liquidity and a net leverage to support our long-term plans. Since M&A is a top priority, let me just spend a few minutes on the criteria we use in evaluating acquisitions. We look at companies or targets that strengthen our leadership in attractive growth areas.
In many cases, this gives us more scale, so we could be more competitive. Companies that add differentiated regulated testing capabilities, such as bioanalysis or in vitro and in silico technologies, expanding into priority end markets and geographies where we can profitably grow, and then enhancing our scientific depth. The key financial metrics and hurdles we assess, including achieving a return on invested capital above our weighted average cost of capital before year five, and you can think of that as above 10% today. The deal should be neutral to accretive to non-GAAP earnings per share in the first full year and in line or accretive to our long-term organic sales growth targets.
Ideally, the acquisition targets meets all of these criteria, but that may not be the case in all situations, depending upon the strategic importance of a deal or timing of integration activities, which in certain deals may have more back-end loading of synergy savings. Charles River Laboratories has an M&A strategy that we believe will enhance shareholder value through a seasoned and experienced M&A team that has deep industry and financial expertise. This team is led by Joe LaPlume. I know many of you know Joe, and he's been the head of our corporate development and strategy team since 2014 and done a remarkable job at helping the company build through M&A and positively influencing our strategy. We've acquired approximately 20 companies over this past decade under Joe's leadership, including several safety assessment acquisitions that have contributed to us becoming the leader in preclinical drug development.
I wanted to highlight three of our more recent acquisitions. Our recent acquisitions of our two non-human primate suppliers in Cambodia and Mauritius, as well as PathoQuest, demonstrate that we are focused on strengthening our portfolio, particularly as it relates to our core competencies. The acquisitions of K.F. (Cambodia) Ltd. and Noveprim do just this. They support the growth of our DSA segment and also give us unique competitive advantage in the marketplace, as we have operational control over this critical supply source that will only grow in importance as drug development and demand continues to trend towards biologics and complex modalities. The transactions are also providing a meaningful margin benefit as we capture more of the profit from lower sourcing costs.
It is interesting that earlier this year, when we announced the acquisition of K.F. (Cambodia) Ltd., we also announced that we acquired a long-term strategic partner, PathoQuest, a next-generation sequencing or NAMs approach to manufacturing quality control testing. While our clients reliance on traditional drug development methods have not changed, we will continue to invest in our scientific depth and innovation capabilities and will do so in a disciplined manner. We are committed to this, deploying capital using a disciplined, results-oriented framework and creating long-term shareholder value through our M&A strategy. Before I get to our long-term financial targets, let me just update you on our 2026 guidance. We issued a press release this morning, and we reaffirmed our 2026 full-year guidance for revenue, operating margin, and non-GAAP earnings per share. However, we indicated that we expect to be at the upper end of our guidance range for both revenue and non-GAAP EPS.
This comes on the heels of our full-year guidance raise on our second quarter earnings call last month, where we increased the guidance for organic revenue growth by about 150 basis points or $60 million, increased our non-GAAP EPS by $0.25 at the midpoint, and also increased our free cash flows by $25 million due to the operational outperformance year to date and expectations of an improving demand environment for the second half of the year. Earlier, I had mentioned that we expect to see an inflection point in the second half of the year. Organic sales declined in the first half of the year by 0.7%. However, we expect organic growth in the low single digits or maybe even slightly better in the second half of the year to arrive at our full-year revenue guidance of about 1% organic growth.
The second half of the year run rate is more indicative of what we would expect for the full year 2027. Now we are going to introduce our long-term financial targets. We have established these new long-term targets that take us through the year 2030, which we believe will drive long-term shareholder value with successful execution. Let me just give you, though, some context on how we set these targets. First, we believe these are very reasonable, they are achievable, they are all things that we are currently executing on. I use a football analogy, there are no Hail Marys in these numbers. There are no moonshots in these numbers. In fact, I would tell you there are certain potential tailwinds and upsides that could drive us to the higher end of the range or even above that we have not included in these targets.
What would be a couple of those items? We heard earlier about AI. Early discovery investments in AI, driving costs down, driving more programs through the drug development cycle, driving more filings of INDs, all things that will benefit Charles River's business. We haven't included these in the targets because we're not seeing it yet in our business. But we would certainly expect this to be a structural tailwind for us over the five-year plan. Another area of potential upside could be pricing. We've only built in modest price increases in our long-range plans.
If we continue to see the strong demand that we've seen over the last couple of quarters, if we continue to see capacity go up in our facilities, if we continue to see supply constraints, that would all lead to potentially more significant price increases, and we have not included those in our plan. Acquisitions, also another potential area of upside. Obviously, acquisitions themselves are not included in our organic plans, but some of the assets that we are looking at, like in the bioanalysis space, are faster-growing assets and could be accretive to these numbers once they become part of our organic business, which is 12 months post-acquisition. With that being said, let's now move to our 2030 financial targets that are highlighted by a 5%-7% organic sales growth CAGR, largely driven by improvements in end market demand and continued strong commercial execution.
We expect a gradual improvement in 2027 from the growth rates in 2026, with our expectation that we will see revenue growth in this range starting in 2028, assuming the underlying positive market trends continue. Non-GAAP operating margin, which includes the cost savings initiatives mentioned earlier, is expected to be approximately 24% in 2030, representing on average a 75 basis point improvement each year. Non-GAAP earnings per share is expected to have a low double-digit CAGR over the 2027-2030 period, and that includes an assumption of a slightly higher tax rate, and also higher interest costs due to the expected refinancings of our senior notes that I mentioned earlier. A further breakdown of our revenues and non-GAAP operating margin by segment are shown on this slide.
Starting with DSA, we expect the revenue growth CAGR to be pretty much in line with the overall company average at 5%-7%, with non-GAAP operating margins of at least 27% by 2030. The fastest growing area, no surprise, is bioanalysis, but most of the volume growth in DSA is expected to come from our core toxicology business. Non-GAAP operating margin improvement of over 100 basis points compared to our 2026 projected results is largely expected to be driven by lower sourcing costs of non-human primates, driven by our recent acquisition of K.F. Cambodia, modest pricing improvements, and cost reductions driven by automation. Manufacturing is expected to be the fastest growing segment, with a 7%-9% sales CAGR and operating margins greater than 40% by 2030.
Revenue growth from the core businesses should see high single-digit growth due to microbial next-generation product launches and continued growth in recurring revenue from cartridge sales, while biologics testing revenue growth led by increases in large, complex modalities. The expected non-GAAP operating margin improvement is over 400 basis points compared to our projected 2026 margins, with the CDMO divestiture representing over half of that improvement. RMS has a 2%-4% targeted revenue growth CAGR, with a stable non-GAAP operating margins in the mid-20% range through 2030. Consistent with historical trends, we are assuming a mid-single digit volume decline in North America, with price increases and favorable mix expected to offset these declines. The targeted revenue growth is expected to come from continued strong growth in China and an improvement in our government, academia, and our CRADL businesses.
Unallocated corporate costs are expected to be about 5% of revenue in 2030, and that is a decline of about 100 basis points from where we expect to land in 2026. This slide shows the impact of key drivers of organic revenue growth from our current 2026 revenue guidance. The majority and over half of the overall company improvement is expected to come from the DSA segment, with the drivers outlined including a continued improvement in biopharma and biotech demand. We also expect manufacturing to be a key contributor to overall company growth post the CDMO divestiture, since it is a segment that is expected to have the highest organic revenue growth with strong contributions from both our microbial and biologics testing businesses. The RMS growth will largely be driven by continued improvements in China, along with a recovery in the government, academia, and CRADL businesses.
I would just say most of that recovery is planned in the outer years of our plan. Moving to margin expansion, as I referenced earlier, we expect to see an improvement in margins of about 75 basis points on average over the next four years, which drive our margins to be around 24% by 2030. In 2027, we expect the operating margin improvement to be higher than the average over the period, largely due to top-line leverage, new cost savings initiatives, and the full year benefit of acquisitions and divestitures completed in 2026. The key to generating an approximate 300 basis point improvement in operating margin by 2030 is achieving our revenue goals, as we anticipate both price and volume leverage to be meaningful contributors to our margin expansion.
We also expect the improving demand environment to lead to modest price increases over the next four years, which will be a larger driver to margin improvement than volume, since pricing primarily drops straight through to margin. In addition, we plan on executing the next phase of transformation savings, which should largely offset the annual headwinds we see for inflation and merit increases. We have also assumed additional investments needed to support our growth plans, largely in support of our commercial organization as well as our DSA segment. All these lead and should lead to a faster-growing company with margin expansion. In summary, we believe that Charles River is well-positioned to create long-term shareholder value. We are positioned to win with our scale, differentiated scientific capabilities, strong commercial execution, and a broad and comprehensive portfolio, all of which driven by a leadership team that is focused on execution.
We have an attractive and improving financial profile that is supported by recent favorable macro and industry trends that we expect will lead to accelerated growth and profitability with targeted goals by 2030 of 5%-7% sales CAGR, about 24% operating margins, and consistent double-digit earnings per share growth. This will be supported by investments in core high-return areas and delivering on the next phase of transformation that is expected to yield over $300 million of savings over the next four years and be a key catalyst to our margin expansion. These future plans are all supported by a strong balance sheet and a business that generates very healthy free cash flows. We will also continue to be very focused on having a disciplined capital allocation strategy. Thank you very much.
Now I have the pleasure of introducing our next speaker, Shannon Parisotto, Executive Vice President of our Discovery and Safety Assessment business. Shannon?
I agree. We should start walking back there a little bit. We can make our way up there. So thank you, Glenn, and good morning, everyone. I'm Shannon Parisotto, and I've been with Charles River for more than 25 years in leadership roles that include both finance and in operations. Today, I lead the global Discovery and Safety Assessment business with a unique perspective on how we have evolved and the exciting opportunities we have ahead of us. I'd like to spend the next 15 minutes or so highlighting what DSA supports with regards to the broader strategy that Birgit laid out earlier. There are four key messages that I would highlight. First, we're extending our unmatched breadth, depth, and scientific expertise to increase our leadership in safety assessment. Second, we're helping clients accelerate development timelines in enabling faster decision-making.
Third, we're leveraging our global scale to provide enhanced client support and mitigate risks. Finally, we're deepening our client relationships through more integrated solutions that accelerate more drug development. Together, these advantages provide a strong foundation for the next phase of DSA's growth. Let me start with the foundation of DSA, which is our leadership in outsourced safety assessment. We are the global leader in this market with approximately 33% of the share of outsourced in vivo safety assessment. We have comprehensive GLP and non-GLP capabilities. Each year, we support approximately 1,500 IND programs across a broad range of therapeutic areas and modalities. Our scale gives clients access to deep scientific expertise, flexible capacity across our global network, and the experience that comes from supporting a significant number of development programs every year.
That is important because as drug development becomes increasingly complex, clients need partners that can combine specialized science with reliable execution of scale. Overall, our unmatched breadth and global scale is a significant competitive advantage for us. Our 2025 revenue is comprised of 40%, which occurs during the clinical phase of development, and 60% during the preclinical phase. With investments, we intend to shift this to a 50/50 split. I want to emphasize, as Birgit did, this is not clinical trial work, but work in support of that phase. Our client segment is over 50% biotechs and over 30% large biopharma. Our revenue is spread across Europe, Canada, and the U.S. Our leadership position provides a strong foundation for long-term growth that we see in DSA. From 2027 through 2030, we are targeting 5%-7% organic revenue growth with non-GAAP operating margins above 27%.
Before anyone asks, although you will still ask, we need roughly a 1.1 net book-to-bill to achieve this target. Although there are other factors that can influence the timing of revenue growth, such as conversion rates, delays, change orders, et cetera. We expect to see an improving biopharma funding environment that supports this growth. Our opportunity is not dependent on the market recovery alone. We have meaningful growth levers that are within our control. We can improve capacity utilization across our network, we can expand our BioA capabilities, strengthen our supply chain oversight, and further utilize AI, automation, and digital tools to increase productivity and accelerate IND-enabling timelines. Together, these actions support our long-term objectives for both the revenue growth and the margin expansion, and we are well-positioned to achieve our targets and benefit from the evolving client requirements right now.
Several long-term trends are changing what clients need from their development partners. Programs are becoming more complex as biologics, cell and gene therapies, and other advanced modalities become a larger portion of the pipeline. With development timelines accelerating, demand for faster and a more integrated scientific decision-making is needed. AI and other technologies are creating opportunities to improve how development progresses, and clients increasingly want a strategic outsource partner that can provide specialized expertise at scale. All these trends play directly to our strengths and create a meaningful opportunity across approximately a $13 billion addressable market. Our breadth of scientific expertise, our integrated capabilities, investments in new technologies, and global scale position us to help clients manage greater complexity while advancing their programs more efficiently. That creates an opportunity to meet demand through deeper client partnerships.
As Birgit discussed, our Pathway to Purpose strategy is organized around three priorities: modernize, strengthen, and grow. Within DSA, modernize is about improving speed, productivity, quality, and the client experience. Strengthen is about directing investments towards differentiated science and attractive higher growth opportunities. Grow is about utilizing those capabilities to deepen the client relationships and expand our participation across the development life cycle. Let me show you how each of these priorities looks in practice, and I will begin with modernize. We are modernizing DSA across three primary areas: scientific workflows, digital capabilities, and our operations. Within scientific workflows, we are benefiting from AI and automation to accelerate activities such as toxicology reviews, pathology, reporting, and scheduling.
We're also digitizing the scientific and client experience with Apollo, which hopefully you guys have had a chance to see or at the end of this can go out and take a look at it, and our digital pathology work and standardized data. Across our global network, we're improving utilization, strengthening our critical processes, and standardizing how all the work gets done. Importantly, modernization isn't about just the reduction of costs. It's about improving speed, improving quality, productivity, and capacity while also creating better experiences for our clients. We're already beginning to see tangible examples of that in practice now. AI and machine learning is an important part of the modernization effort in DSA. We're applying AI and machine learning capabilities today in specific workflows where they can create tangible benefits.
Virtual control groups, which you've heard several times now, is a great example of this, where we are using curated historical control data and have demonstrated the potential to reduce the number of control animals while maintaining our scientific rigor. AI-assisted reporting can automate report preparation and reduce activities that were taking hours down to minutes. Our AI-enabled digital pathology is helping us accelerate review timelines and improve the workflow efficiencies in this area. When we combine these tools with our scientific depth and our integrated execution, we can translate all this into a better client experience and additional revenue opportunity for us. Modernization is about making the business we have today better. Strengthen is about where we invest to extend our scientific leadership and improve our growth profile.
One of our largest opportunities, as few have heard, is bioanalysis, where we're extending further into the clinical post-IND programs. This will go ahead and extend our leadership in the complex modalities. We're also investing in emerging scientific approaches, including advanced cell models, AI-enabled applications, complementary in vitro capabilities, and areas like their virtual control groups. At the same time, we're strengthening the portfolio by concentrating investments in categories where we believe we can lead and reallocating resources away from lower priority offerings. Where it makes strategic and financial sense, disciplined M&A can accelerate our entry into attractive capabilities or geographies. Collectively, these investments are shifting DSA towards a higher growth, higher value opportunity. Another important example of strengthening the business is our approach to non-human primate sourcing. Our acquisitions in Cambodia and Mauritius increased our internal capacity, improved model availability, and strengthened operational control of our supply chain.
Today, we have reached our long-term target of approximately 80% of the non-human primate supply is being internally sourced at Charles River. That provides greater control, scale, and reliability while strengthening the model quality, biosecurity, and regulatory oversight in this area. It also reduces our dependency on external supply. We have improved reliability and control of supply for our clients while supporting better economics for ourselves. Let me spend a little bit more time on bioanalysis because as you've heard, we believe this to be one of our most attractive long-term growth opportunities. As Birgit discussed earlier, demand is increasing as biologics and complex modalities become a larger part of development pipelines, and the testing associated with this extends into clinical development.
We already have deep scientific expertise and very strong client relationships across the non-clinical development, giving us an attractive foundation that our clients are asking us to extend into clinical. Our strategy has several components. We are expanding our physical footprint to support continued growth in both non-clinical and clinical. We are deepening our scientific expertise. In addition to our organic investment, we have a disciplined M&A strategy to add capabilities and capacity. By increasing our capacity in clinical programs, we can support clients further along the development life cycle. We expect these actions to grow the BioA revenue organically from approximately $300 million in 2025 to $450 million in 2030. By extending further into clinical development, we can stay with our clients' programs longer. We can increase our share of the wallet and shift DSA towards a higher growth, higher value revenue stream.
Now, the grow pillar brings these investments back to the client. We see opportunities to expand and further deepen relationships with leading biopharma companies across increasingly complex development programs. We are also tailoring our approach for emerging biotechs, and we have solutions such as Fast Track that can accelerate IND readiness for our clients. At the same time, we are investing in capacity and readiness to give clients greater confidence in study initiations timelines. We are connecting capabilities across the development life cycle to provide more integrated solutions for our customers. Ultimately, our goal is very simple, make Charles River easy to work with. That means greater visibility, faster execution, and access to more of the scientific capabilities our clients need from a single trusted partner. Let me wrap up with why we believe that DSA is uniquely positioned to win. Our advantage is not based on any single capability.
It is a combination of deep scientific and regulatory expertise, unmatched depth and breadth of capabilities, global scale and infrastructure, speed and execution, and long-standing client relationships. Those advantages are very difficult to replicate, and they become increasingly valuable as drug development is becoming more complex. Very important is we are now combining that strong foundation with a more modern operating model and focusing our investments in higher growth science. We believe that positions us to strengthen our leadership and safety assessment, expand our participation throughout the drug development timeline, and deepen our client relationships so that we can deliver sustainable growth and improved profitability over time. We are excited about the opportunity ahead and confident in the role that DSA will play in Charles River's next phase of growth. With that, I will turn it over to Kerstin Dolph to discuss our manufacturing solutions segment. Thank you.
Thank you, Shannon, and good morning, everyone. For those of you I haven't met, I am Kerstin Dolph, and I lead our manufacturing solutions business. I have been with Charles River for 25 years, and during this time I had the opportunity to view our business from a variety of different perspectives. I started my career in finance with Charles River Germany, and moved from there into operational leadership positions with research models and services, biologics testing, and across manufacturing.
Today, I will walk you through why we believe this business is positioned for durable growth, and most importantly, increasing value for our clients and shareholders. We will discuss how we are leveraging our leadership positions to capitalize on secular growth drivers, like the increased number of biologics and the drug development pipeline. We have sharpened our portfolio, and I will explain how that increased our focus on top line growth and operating margin.
We've also been working on expanding our client relationships, which will increase our share of wallet across Charles River. As we're executing our Pathway to Purpose strategy, manufacturing solutions allows our business to be more balanced as we're expanding our role from discovery and pre-clinical more towards clinical and commercial. All of this combined gives us high confidence in the long-term financial targets that Glenn shared earlier. Manufacturing solutions includes two highly complementary businesses, microbial solutions and biologics testing, which make up our comprehensive manufacturing quality control testing portfolio. Microbial solutions provides mission-critical quality control testing products for the pharma manufacturing market, and to a smaller extent, for other markets like consumer care. In terms of lines of businesses, Endosafe supports endotoxin testing, which are essentially bacterial fragments that can contaminate the manufacturing process.
Accugenix provides microbial identification and strain typing services, which can be helpful when determining the root cause of a contamination. Celsis enables rapid contamination detection for in-process testing and product release. The common thread across both of these businesses is that they're embedded in regulatory workflows. Once a method is qualified, an instrument is installed, or a manufacturing process is fully validated, it becomes quite expensive, difficult, and risky to switch. With biologics testing, we're one of the few providers who can offer all different aspects of lot release testing, including product characterization, biosafety testing, and potency assessment. All of this combined drives high client retention and recurring revenue streams. As an example, about 65% of our microbial business comes from recurring consumables.
I will not spend a lot of time on this slide here, but main takeaway is that we're quite balanced from a client segment perspective, and we have meaningful growth and presence in APAC and rest of world that we are working on expanding further. From my perspective, this is probably the most important slide in my presentation, as our manufacturing business today looks significantly different from what we had five years ago. The CDMO divestiture didn't just simplify our portfolio, it revealed the strength of two exceptional businesses that were previously embedded in a broader operation. Today we're more focused, we're growing faster, we're generating stronger operating margins, and we're building deeper client connections. Since the CDMO divestiture, we have been able to significantly improve our financial growth and margin targets.
We've been working on increasing our share of wallet with our existing clients, but we're also leveraging DSA's leadership position to generate additional testing opportunities. Shannon talked earlier about bioanalysis, and that represents a direct connection back to manufacturing solutions. Once a method is established in a GLP type setting, certain information can be transferred into GMP method development for commercial product release. That provides a client with a more seamless solution and approach, and it keeps the relationship within Charles River. Manufacturing solutions also allows us to shift our focus more towards clinical and commercial programs, where historically, revenue streams have been more durable and less cyclical. About 90% of our revenue comes from clinical and commercial programs. We have high confidence in achieving our long-term financial targets, 7%-9% organic top line growth from 2027 to 2030, and exceeding 40% non-GAAP operating margin by 2030.
There's four key growth drivers that I would like to walk you through. First, we will continue to focus on core markets, and as clients expand their commercial programs, the need for testing is going to increase, in particular for the biologic manufacturing. We will participate in next generation biologics, including ADCs and biosimilars. A lot of therapies are moving or coming off patent, so there's an increased focus right now on biosimilars, particularly in APAC. From a geo-opportunity perspective, we have the ability to add additional capabilities at our existing APAC locations in a very cost-effective way. We're focusing here on key modalities including biosimilars, and we also believe that we will see significant benefit from the increased investment in the U.S. manufacturing market for onshoring by the pharmaceutical segment.
Lastly, we will continue to push for growth and client conversion towards our existing instrument and equipment platforms, which will lead to that recurring downstream consumables revenue. Our Pathway to Purpose strategy provides the framework to convert our market position into shareholder value. We modernize to increase productivity, we strengthen by expanding our scientific portfolio, and we grow by making it easier for our clients to do business across Charles River. We continue to invest in digitalization and automation of our existing laboratory operations, which positions us to reduce our turnaround times further, elevate service levels, and increase efficiencies. We strengthen by expanding our world-class scientific portfolio by providing our clients with more optionality and greater flexibility. Whenever required, also with custom solutions, especially around the newer, more complex modalities that are entering the space.
When it comes to NAMs and manufacturing, that represents a differentiator for us as we're offering the new and innovative technologies in addition to the more traditional testing approaches. In a regulated environment, any sort of transition requires a robust set of comparability data, so we are uniquely positioned here to support our clients through this journey. Our clients are also looking for a more integrated approach, and an example here would be that with the increased investment in U.S. manufacturing expansion, any new manufacturing spaces that are being commissioned, they require EMPQ testing. That is a service that is being provided by our Accugenix lab. So we're talking to the client very early on, and then we're able to support them later down the road with microbial equipment services and biologics testing. The biggest opportunity in front of us is productivity.
While a lot of other life sciences businesses require significant expansion and physical capacity in order to grow, we have the ability to unlock meaningful capacity by modernizing the way we work. We will continue to invest in our instrument platforms, including the Nexus 200, and I would like to point also to our demo area here because we have a video there, and you can see the instrument there, at least virtually. We also, I hope you saw that we also recently announced with a press release, the launch of our fully automated cartridge manufacturing line at the Charleston facility. That is a significant milestone for the microbial business as it will increase productivity further, and it will also improve product quality through greater batch-to-batch consistency.
Digitalization is something the market and our clients have been demanding for a while, and we have been working on that since years. We continue to evolve with the end vision to entirely remove paper from our workflows. I think the benefits here are clear, but just picture a handwritten quality record. Depending on someone's handwriting, that can be quite challenging. Having data available in a digital form makes it obviously easier for us to make it accessible for clients through our manufacturing Apollo platform. Currently, we are shifting our focus a little bit more towards e-commerce for microbial, and the nice thing here is that we are going to be able to build on what has been developed for research models and services, and Colin Dunn is going to talk about that in a little bit. Lastly, operational discipline.
This is all about network harmonization and providing clients with greater flexibility. We also believe that AI scheduling is going to be a game changer for us as it will add additional capacity. All of these initiatives are being executed under the Create the Future framework that Mark Mintz introduced this morning. They are designed to increase the throughput in our facilities while elevating service level and responsiveness, and without the need to significantly invest into physical footprint expansion.
This will be a very important contributor to operating level over time for us. Strengthening our portfolio does not mean that we have to develop every single technology ourselves. We are taking here a very diligent approach, and we are making decision based on what has the highest payback and return for Charles River. When it comes to internal development, there is 2 different avenues, internal R&D as well as lifecycle management.
Lifecycle management is everything associated with our Endosafe instrument platform. It is about launching next generation versions, applying technological advancements and software enhancements. When it comes to internal R&D, an example would be, a client coming to us with a program that involves a new therapy or a new modality, and we are often asked to develop a method here that is going to be then used for a commercial product release. New and emerging technologies, we like to, or we have frequently applied strategic partnerships. Solutions often already exist, just not at the required scale, or they do not meet regulatory requirements, and that is where our expertise and our client connections can contribute largely. I think our showcase scenario for strategic partnership is PathoQuest. It started once upon a such, and then we recently announced the M&A transaction.
Birgit Girshick already mentioned it earlier, it adds next gen sequencing services to our portfolio, which represents an animal-free alternative to certain in vivo testing. Just like we discussed, because we provide the in vivo testing as well as the next gen sequencing services, we have the ability to support our clients through the transition. We have done a lot of research in the field, and we published several papers, and we have the regulatory expertise to be a true partner. The increased need for speed is something that comes up in almost every single client conversation. We talked about the more seamless and integrated approach, but making data easily accessible is just as important, and that is where our manufacturing Apollo platform comes into play. We have an 80% adoption rate, which is quite high, and clients use it for things like sample submission, sample tracking, and results review.
We have very positive feedback, and we will continue to evolve and add additional functionality over time. The most important takeaway from this slide is that despite the major changes that are currently happening in the manufacturing market, we see increasing value from our existing capabilities. New and emerging therapies, including biologics and cell and gene therapies, will continue to enter the space and require custom solutions. Having until very recently been in the CDMO space, I think we are positioned here uniquely as a solution provider. We know exactly the challenges our clients are facing because we have been in their shoes until very recently. These newer and more complex modalities also have a higher regulatory rigor. We have an exceptional regulatory track record, and we are getting frequently inspected by regulatory authorities like FDA, EMA, and other global agencies.
We talked about NAMs and that representing a differentiator and opportunity for us in manufacturing solutions. With USD 766 million in annual revenue last year and a USD 5 billion addressable market, we have some meaningful headroom to grow beyond the actual market growth. By leveraging our number one position in endotoxin testing and our robust and comprehensive portfolio across manufacturing as well as Charles River, we are well positioned here to aggressively penetrate this market and take additional share. The Nexus 200, again, in the demo area, virtually, the video, that has been developed as our first commercially available, fully automated endotoxin testing platform. This instrument brings together a lot of the themes that I talked about today. When in operation, it does not require any human interaction, so there is tangible value on the Charles River side as well as for our clients.
The savings are estimated at about nine weeks per analyst per year, and clients also reported a reduction in invalid rate from 4.5% to 1.5%. The reason I am sharing this case study with you is not just about the instrument, it is about our innovation model. We are identifying bottlenecks on the client side, we are developing innovative, differentiated solutions. We are driving the adoption and then end up with the recurring consumables revenue later down the road. To bring it all together, we operate in a mission-critical, regulated environment with high client retention and recurring revenue streams. We have several different avenues to increase our share of wallet as clients expand their commercial programs. With our focus on digitization, automation, and operational diligence, we will see productivity increase along the way.
While all of this is going on, the increased investment in biopharma manufacturing market in the U.S., the newer, more complex modalities that are entering the space and requiring custom solutions, and NAMs representing a differentiator for us. We have significant opportunities right in front of us. We have high confidence in our long-term financial targets, 7%-9% organic top-line growth from 2027 to 2030, and exceeding 40% non-GAAP operating margin by 2030. But most importantly, manufacturing allows Charles River to truly differentiate from other CROs as we are expanding our relevance beyond preclinical and more towards commercial manufacturing, and we are unlocking this additional value stream across the drug development life cycle. With that, I thank you for your attention, and I hand it off to Colin. Thank you.
Thank you, Kerstin, and good morning, everyone. I am Colin Dunn, and I lead our Global Research Models and Services business. I originally joined Charles River in 1998 before leaving to work for a major pharmaceutical company. I returned in 2008 to lead business in Europe, eventually in Asia, and then globally. Originally trained and practiced as a veterinarian, I earned a PhD in virology. I conducted postdoctoral work, and during that period, I became familiar as a user of Charles River research models. As well, I became very familiar with the needs of the scientists and their demands in the workplace. I have directly experienced how research models have been used and how that has evolved over the past 30 years. RMS has evolved alongside those needs. We combine an industry-leading research model portfolio, a broad range of specialized scientific services.
We have a global infrastructure and increasing digital capabilities that let the clients conduct the research more efficiently. Today, I would really like to discuss how we are building on that foundation to drive durable growth and attractive returns. There are four main things that I would like to be able to highlight here, and RMS has been the market leader for some decades. That was built out of tremendous competencies and expertise in production under discipline and operations. We are now leveraging a differentiated global footprint to provide proximity and access to clients wherever they conduct their research. Notable in this are our capabilities to partner with biopharma. Especially in that is how we have the CRADLs and the specialized turnkey vivaria space across the key biohubs globally.
This ensures startups and biotech are able to access specialized vivarium services, or indeed, for the larger global biopharma players to operate with much more improved efficiency. Finally, we have driven our client-centric focus with several digital tools and an e-commerce platform that Erin as our digital experience Vice President is able to demonstrate outside so that we are easier to work with. These advantages position us as a critical partner in biomedical research. Why is RMS business essential for our clients? At its core, RMS provides a foundation that enables researchers to discover and develop new medicines using both large and small research models. This is a bridge that goes from fundamental discoveries about genes through to how those encode and how they work as targets in drug discovery and drug development. We are the global leader in this endeavor.
Close to 50% of RMS revenue is now in an array of services. These range from the CRADL vivaria through to GEMS that allows researchers to validate what these new targets and their research actually do. In RADS, we allow veterinarians to understand their colony health and biosecurity. In sourcing solutions, we are able to support clients to manage their vivarium space more efficiently. Our RMS business is actually at a value crossroads. The crossroads where the foundational academics are able to spin out their biotech, and where that biotech is able to validate the value of its assets to global pharma. No one client, no competitor, no government is able to replicate all of this. It forms the foundation of our strategy, and we will talk about that in a moment. First, I will mention our revenue breakdown.
Some of the critical revenue metrics demonstrate quite a lot about our business and the market we operate in. Our research models remain about 50% or just over 50% of our revenue, but the strength of the services illustrates where more of our expertise is demanded around specialized models. Our client segment mix has always been diverse, but note 40% of it is from the public sector, and that reflects the very core use of research models in the very fundamental type of research that only governments with academics conduct. Note the spread of the revenue and its global nature, which highlights the mission-critical nature of what we do wherever it is in the world. Very importantly, that also reflects the strength of RMS in China.
We've always taken a disciplined approach to plan for what is happening in the market whenever it comes to our strat plan and really try to understand what's going on with the demand curve. This has enabled us to grow the total value of the business by continually right-sizing our footprint in our operations and upskilling in everything we do around operational excellence. At the same time, we've significantly invested and expanded in China. For more than a decade, our team have enhanced their reputation there. Globally, we continue to invest further in services, particularly around, for example, CRADL, and ensured that more penetration of the higher value research models, which help the mix of our portfolio are able to be used by those biotechs.
Such actions have ensured resilience in our recurring revenue base, kept up with our cash flow while bringing strategic value across the total portfolio, thanks to the access of critical models for DSA and for manufacturing. The research landscape continues to change, but we retain the trust of our clients as a mission-critical partner. That track record of trust enables us to have confidence in the long-term financial framework that we're presenting today. From 2027 through to 2030, we're targeting 2%-4% organic revenue growth while maintaining the non-GAAP operating margin in the mid-20s range. There's several assumptions underlying that that Glenn Coleman has already highlighted. First of all, China is a key growth driver, and we will continue to expand there. Also our CRADL, the CRADL business, we anticipate continued improvements.
Thirdly, we will have disciplined pricing for the research model portfolio that helps overcome the structural changes that impact the total volumes in that business. Mixed with that is also the product mix, the higher value models driving the value. Also then with Create the Future, we're continuing to drive the productivity and offset all of this volume headwind by maintaining profitability. Into that mix, as Shannon Parisotto has illustrated with the non-human primates, more of that inventory is going into DSA, meaning fewer of it is available for commercial sale in RMS. Importantly, taken together, the targets reflect our ability to take actions within our portfolio in response to all the market changes, and we are continuing to improve our productivity, but also we can focus our growth in those areas of the portfolio where we see the greatest opportunity.
Mark and Birgit and others have highlighted the Pathway to Purpose strategy, and I think in RMS, modernize is very focused on our digital capabilities behind automation, our ability to leverage our data to help our productivity, and with all the tremendous improvements with the client experience. Again, you can see out there with the demonstration of the commerce platform and Apollo for CRADL. Strength is all about our ability to improve our scientific portfolio through the specialized models and services to support the scientists in increasing complex research. Grow is about deepening those client and scientific relationships through the tailored services that we offer wherever that may be in the world. All of these efforts synergize to help differentiate us and bring value across all the client relationships.
Taking a think about some of where the modernization, and taking it down the client-centric lens, much of this effort has been solved on solving the buyer journey for the research models. That started by solving how we digitized our inventory for those users. That created connection back to Charles River because we made it easier to order, easier to understand the availability, and simplified and took away some of their administrative steps. Internally, we've been continually improving our operational efficiency by being able to digitize data entry, whether that is at the bench or actually cageside. Furthermore, we have been able to scale that across regions by making better use of our global infrastructure. Finally, we're enabling future innovation through stronger data foundation. Better use of the enterprise data is creating opportunities to apply AI and analytics to support decision-making and just improve our operational performance.
Our proximity to the clients goes beyond the physical. It goes into the digital space as well. The client requirements continue to evolve. We see that all the time with expectations, for example, about welfare, the ethical basis of what we do, the complexity of the models, how they wish to work on a global basis. All of this aligns with the investments we're making. The specialized services and the focus of that in CRADL and GEMS, our expertise with veterinarians and the level and quality of animal care, and the biosecurity standards. That's now gathered under the digital umbrella of Apollo, which enables automation and acceleration. Our leadership is the strong foundation to deepen these client relationships, and they capture the growth as their requirements continue to evolve. Let me bring the digital journey to life with some real examples.
Historically, ordering research models was a very manual process involving eyes on animals and often lots of telephone calls. We made huge strides to fix that through digitizing the inventory to account for aging and normal biological variation. Today, we've now digitized the experience for the users by enabling them to access all the model specifications through the e-commerce tool that operates 24/7. Their ability to access those specifications is also lined up with their scheduled delivery days. Whenever they enter an order in the system, 90% of such submitted orders are automated and order confirmations come out just about instantaneously. That includes their bespoke pricing, and it builds up their order history. This makes the e-commerce offer more than simply a storefront to browse. This enables the scientist to schedule and plan their work and not focus on administrative steps.
I believe that makes their stickiness to our ordering processes much improved, and also it puts us front and center to gain a greater share of their wallet. Our ICM tools for the GEMS business offer something similar. They get to see the milestones in breeding projects, and they get to understand when the cohorts of animals they need are eventually available from those specialist breeding programs. Then in Apollo for CRADL, the clients are able to do their training in advance and also to get their protocols to run the animal work into that system before day one of their occupancy, so they are ready to go right away. Let me wrap up by saying why we believe RMS remains uniquely positioned to continue to win.
Our advantage lies with our market leadership, the broad and the deep research model portfolio, the array of services to the clients that no other client in this domain would be able to match. That covers a global footprint that includes the global bio hubs. Our expertise in operations and welfare is now underpinned by a strong digital prowess for the benefit of those end users. These factors make our success extremely difficult to replicate. This ensures our durable growth, the strong margin profile, and cash generation going into the future. In turn, the clients can remain confident that we will sustain the investment that they need to continue to do the work that is so critical for the future of research. With that, I invite all of today's speakers back onto the stage for the Q&A, and thank you for listening.
Great. Thanks, everyone. We will now have our final Q&A session. We will just wait for the speakers to get back up on stage. I think we are going to, since we asked Luke to delay his question to the second Q&A, I think we are going to start here with him.
Really test your agile if I switched. I am going to stay with that first one. I guess on the LRP, as you guys walk through the different business segments, we see plenty of opportunity there to drive the upside. Just talk about some of the investments you guys need to make to get there, but also where the conservatism is baked in for the different segments or the overall business, or if it is out on the macro to get you to that lower end, because it feels like we are quickly moving to the upper end in the out years.
Glenn, you want to take that?
Sure. If I look at the investments required to drive the growth in our long-range plans, a lot of it is going to be around supporting automation, modernization, and our digital transformation. We have pretty large investment required to drive that. I would say the other area that we highlighted was BioA, and we're doing a number of lab expansions. We have five ongoing right now. That's obviously critically important to make sure we continue to support the growth we're expecting to see from that business, which is high single-digit growth. That's how we think about some of those investments. Obviously, we're going to continue to look at other areas of investment to expand in potentially places like China, with our RMS business, where we're seeing very fast growth and things of that nature.
That's how we kind of think about the investment piece of it. In terms of upsides, and I'll just start with margins. I think the biggest upside we have is probably within the DSA segment and margins there. We talked about margins greater than 27%. A lot of the things we have not included in our plans that could be tailwinds would largely benefit DSA. That could be additional significant price increases. It could be additional cost reductions, automation. I think a lot of the sourcing that we're doing, we'll have to see how that plays out. But right now, if I were to characterize our margins as where we would potentially see upside, would be the DSA segment.
Okay.
Hey, Glenn, thanks. This is Mac Etosh from Stephens. Maybe just following up on the previous question and maybe the margin cadence through 2030. I do appreciate all the incremental aspects that you've highlighted. If you look at the second half run rate that you all pointed to for 2026 and factoring that forward through 2030, it seems like there's a number of offsets that might kind of move you through that transition. I was wondering if you could just double tap on the expected cadence. Then secondly, do you see the 2030 margins as maybe a four, considering some of the upsides you're highlighting? Thanks.
Yeah, a lot to unpack there. As I think about our operating margins this year, we have a significant improvement factored into the back half of the year. If you look at how the year is laid out, roughly 18% in the first half of the year, 23% in the back half of the year. So a 500 basis point improvement, and so we feel very good about that. That's the cadence for this year. I would just be very cautious and advise against using our Q4 run rate as an exit run rate to use as a jumping-off point for 2027. There's a lot of reasons behind it, but I would just highlight a few. Number one is we see significant reduction in our fringe benefits in Q4, and so that drives our costs lower.
Second would be the favorable mix that we expect in the NHP part of our business in DSA. Where we source the NHPs from, very important in terms of our margins, and we're expecting a significant amount of the sourcing to come from Cambodia in the fourth quarter. So the mix is going to be extremely favorable here in Q4. So you take that coupled with seasonality in our manufacturing business and some other things. Do not use Q4 as a jumping-off point for next year. I did comment that for 2027, we would expect the margin improvement to be above the average of 75 basis points over this LRP. A reason behind that and why we're confident in saying that right now is we do expect to see a nice tailwind coming from the full year benefit of acquisitions and divestitures here in 2026.
So we'll see an additional benefit next year. We do expect to see some of the cost initiatives come through that we highlighted as part of the $300 million transformation that we're embarking on. We've already started a lot of that work, and we're counting on execution to get a lot of that done. That'll drive some margin improvement for us, and we're going to start to see some leverage on the P&L. But I would also just be cautious not to get too far out in front of this margin expansion story because we are going to have to make some investments to ramp resources to support these revenue growth rates that we're seeing, especially in the DSA business and supporting our commercial organization. But listen, our margin story is moving all in a very good direction, right?
If you look at year-over-year, this year versus last year, we're guiding to 120 - 150 basis point improvement. We're already indicating we expect to be above the average of 75 basis points next year, and we're very confident that these numbers have some potential upside to them. But that's the way to think about our margin progression and sequencing.
Hey, Glenn. It is Eric Coldwell with Baird. That is a good jumping-off point. I want to hit on that last topic specifically. You have frequently repeated 2027 margin up more than the four-year average LRP margin expansion goal. The Street is already up 200 basis points next year. I am hoping we can put a finer point on, are you comfortable with that level? I know it is early for 2027 guidance, but you have talked about the second half of 2026 looking more like 2027 a couple of times, things like that. I just want to level set and make sure that, as good as this overall long-term plan is, and it sounds conservative maybe long term, but is the Street in a good spot now?
Yeah. Listen, I do not think we are going to make any more comments on 2027. I think we gave a couple of qualitative comments just to give you directionally where we think we are going to be. We still have to see how Q3 plays out. We have another full quarter in Q4. We want to see how these net book-to-bill trends continue. We want to see how pricing evolves over the next four or five months. I do not think we are ready to make any further comments on 2027. We will give our usual guidance in the February timeframe. But again, we feel very good about the work we are doing to expand our margins, but we are not going to make any specific comments on where the consensus numbers are or anything for 2027.
Okay. One more tack onto that. You mentioned pricing in DSA could be an opportunity longer term. We actually know that some of your competitors quit cutting prices 6- 12 months ago. Some have actually started raising prices. There has been this ongoing debate about the supply issues in China, and we can go on and on. The market is coming back. Historically, we would see and expect price expansion in DSA at some point, especially after an extended downturn where a lot of players cut capacity, so you get this demand-supply imbalance. Have you seen pricing going up? Are you starting to take pricing at this point? If not, when might that potential show up, and what would be the driver of it?
Shannon?
Yeah. I will go ahead and take that one. I think that what is important about pricing in DSA is the fact of the conversion. What we see and what is going out in proposals and the time that it takes to go ahead and convert that into our backlog number, net book-to-bill that you see, and when that becomes revenue and stuff, what we would expect to see is start seeing pricing in the second half of 2027, emerging from the decisions that we have been making now in the last several months with regards to pricing.
Yeah. Charles Rhyee with TD Cowen. Maybe just to follow up with that on the pricing, obviously that's the largest portion of the organic revenue targets within DSA. Maybe can you help us understand maybe the mix, though, between pricing and volume as you think about those two, particularly as we move through the timeframe? Does it become maybe more pricing later on in the cycle? Because I think you've talked recently about pricing being more of a second half next year item. Is that something we could start to see in pricing coming back, at least in the bookings metrics, as we get through the back half of this year?
Yeah. I think the way we've laid out our long-range plans is about a third of the overall revenue growth is coming from pricing and two-thirds volume is the way to think about it. As Shannon mentioned, though, any pricing improvements that we're seeing now, we wouldn't see in our numbers until the second half of next year. We haven't seen it yet, right? So we're optimistic that we will start to see better pricing, especially as capacity continues to increase, demand continues to increase. We're not seeing it yet, but we at some point could potentially see some increases. That's why we're very, I'll say, conservative in our plan here. We wanted to build in modest price increases and allow for opportunity and upside if it ends up being more significant. But that's the way we've kind of laid out the pricing and volume in our plans.
Shannon, anything to add?
Yeah. I would just add on to that one thing I would emphasize is that when you look at our long-range financial targets, we have not put any sort of hockey stick at the back end of that with regards to pricing. So I would characterize as we move through this for that modest pricing that we have factored in, it's really keeping pace with inflation market that we have. So I would anticipate that continuing more at a steady level throughout our plans once we get to the second half, is how we've built it.
Go ahead.
Elizabeth Anderson from Evercore. Maybe on the topic of NHPs, I think you guys had commented NHP models grew like 7% in 2024, maybe 10% in 2025. How is the actual usage growth trending, and how are you thinking about that as part of the long-term guide? Then maybe more specifically on NHP pricing, does that 27% margin target include flattish pricing on the NHPs, or is there any specific embedded assumption there? Thank you.
Yeah. Let me unpack a couple of those. When you look at NHP pricing, we've seen years where we've seen sharp increases. It's not a linear situation. As the modalities are becoming more and more complex, we anticipate that we will need more and more of the non-human primate model. As a component of that, we use between 10,000 to 15,000 non-human primates a year here in DSA. As part of our long-range financial planning is that we do plan to increase capacity, because as modalities are going to get more complex, we anticipate using a higher portion of them for that as the complexity increases. With regards to the pricing on non-human primates and the buzz that happens around China and other places of the world, it's all going to be dependent on supply and demand, right?
The non-human primate is a component of the IND or post-IND programs that are being worked on. When we look at our capability, our opportunity to perhaps take market share and gain more capacity, we'll take pricing into account with that, and have a balanced approach for how we project, and that's what we've factored in right now.
So on a volume perspective, it is in that long-term DSA 5%-7%, like on a volume basis?
Yes.
Okay.
Now. Okay. This is a Shannon, Colin question that relates to what you just talked about, Shannon. Colin, your footnotes, there is a note that NHP trajectory will be down low double digit percent in RMS predominantly in 2027 and 2028 because of more use of those animals in DSA. How is that going to happen? Help me to understand the mechanism. In other words, how are you getting them out of China for DSA to use them?
Go ahead.
Go ahead, Colin.
It's because with the Noveprim, they're not coming out of China.
Okay.
With the Noveprim acquisition, there were legacy contracts and so on. Then it's the flexibility with how they could be made available in DSA.
Okay. Noveprim, non-Charles River use and Noveprim, those legacy contracts are flowing through RMS today, and they will wind off.
Correct. Yes.
Got it. Okay. Birgit, this one's probably for you. On bioanalytical, as I understand it, the opportunity for you that you've talked quite positively about today is increasingly complex assays that create, I guess, time and risk to tech transfer to another provider as the program moves into clinical. Help me understand how I guess the logic in my mind would be that servicing that with increasing organic footprint of your existing bioanalytical operations would make the most sense, and acquiring another footprint would create a tech transfer that introduces the same risk to the client. Help me understand why an inorganic strategy can work in bioanalytical.
Yeah. An inorganic strategy can work because the targets that we would be looking at would be doing preclinical and clinical already. So it is basically just adding scale for what we are doing and just looking at providers that do high science, high complexity, and already are serving both markets.
Okay. That's great. Glenn, a quick one for you. On kind of a mixed question, do you expect BioA either now or over the trajectory to be a higher margin contributor to DSA? Similarly, microbial and biologics within manufacturing, which one's the faster grower? Which one's the higher margin? Thanks.
Yeah. On the latter part of the question, microbial, biologics, they're both growing pretty equally there. Microbial has slightly higher margins overall, but very healthy businesses, both growing very nicely. The first part-
BioA growth?
Yeah. BioA, again, is a faster-growing part of our business. It also has high margins as well, so it should be accretive to our business as we go forward. Even some of the acquisition targets we are looking at would be accretive to our business.
Great. Thank you.
Thank you.
Christine Rains , William Blair. Not a big focus of your presentation today, but at your last Investor Day, you noted that more than half of clients using discovery services continue to use Charles River for safety assessment. Given your recent divestiture of certain discovery assets, have you seen any impact on that pull-through? Stepping back, how are you thinking about the role of discovery within Charles River today, as in, do you see future opportunities to streamline the portfolio as AI reshapes the early discovery process? Or do you even see potential opportunities to selectively invest or acquire more differentiated capabilities? Thank you.
Yeah. I will take the first part, and then Shannon can take the second part. So with the divestiture of discovery, that number is impacted because we have a much smaller footprint. The service that we have are much closer related to the safety assessment footprint, and there is some pull-through, or also is supporting some of the preclinical safety assessment decision-making. But overall, we have de-emphasized our discovery footprint, and that obviously does impact that number. However, I do not think it impacts how many clients we are working with, if that makes sense, because we are just a leader in safety assessment, and we have those established relationships, and we continue to have those established relationships in other parts of the business, like our research models business. Shannon, you can add anything.
Yeah. I would just say that many of our clients that were safety assessment clients would choose to work with our discovery units, and I would perhaps characterize it that way rather than a linear downstream impact of clients. I would also emphasize that the businesses that we have chosen to go ahead and keep within our portfolio are very complementary to us, and they really embrace what our long-term strategies are in discovery and stuff. So it is the Retrogenix platform that is already embracing more of the NAMs technology and stuff. So we see these as being complementary to decision-making, higher level of science and stuff that we can go ahead and give to our clients. So I do not see any further rationalization with regards to that, as these assets are going to be very important to our portfolio.
All right.
Hey, thanks very much for the question. Tucker Emmers from UBS here. I wanted to ask about the outlook for 2027 on organic revenue growth rate. This does improve from 2026 level, but maybe not quite the 5%-7%. Can you maybe just talk through which parts of the portfolio are still in a recovery phase, maybe slowly trending to the long-term target, versus the ones that are maybe a little bit ahead of schedule that would push higher 2027 growth?
Glenn, do you want to start diving in?
Sure. I would say first and foremost, we are not going to give 2027 guidance yet on organic revenue growth. I think our comments are second half of the year, more indicative of what to expect next year. Second half of the year will be the low single digit, maybe even above that, in terms of what we would expect to get to our full year numbers of about 1% organic growth. I think the improvements that we are seeing are largely coming right now in the DSA business. Obviously, if you look at the net book-to-bill trends are all pointing in a positive direction. The proposal volumes are also looking very good. Our capture rates are also up. I would say the improvement to expect in terms of faster organic growth next year would certainly come from DSA.
Manufacturing will obviously also be better next year because of the divestiture of the CDMO business. That has been a headwind for us this year. At post divestiture, you are going to see much better growth rates as we exit this year. So on a full year basis manufacturing, you are also going to see a pickup in terms of the revenue growth for next year. But that is just qualitative comments. We are not going to give any more quantitative guidance for several more months. Thanks.
Perfect.
Great. Do we have any more questions? One last question from the room? That's it? All right. We'll turn it over to Birgit for her closing remarks now. Thank you.
All right. Thank you, and thanks for spending the day with us. I think you heard where we are headed. I think you heard how we are positioning ourselves. Charles River operated in a challenging environment over the last several years, but we remained profitable, and we focused on what matters most, and that is continuing to position ourselves when demand returns. Clearly, Charles River is well-positioned. We have long-term attractive market opportunities. There's a stabilizing demand environment, and we have a unique integrated platform for our clients. We're modernizing, we're optimizing, we're making the business better, and we are investing with discipline. These targets reflect both confidence and accountability. They're grounded in what we are executing today and clear opportunities at hand. As we look toward 2030, the goal is simple, and that is to become a margin improved, faster growing company in creating durable shareholder value.
This, I believe, is our moment, and this is why you should invest in Charles River. Thank you for joining us today. Every industry has a moment where they need to reimagine what is possible, how they operate, who they are in the future. This is our moment.
Our moment to harness technology.
Our moment to bring science together.
Our moment to grow our people.
Our moment to partner like never before.
Our moment to redesign how science gets done.
Our moment to build trust.
Our moment to lead with discipline.
Our moment to deliver with precision.
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This is our moment to