Charles River Laboratories International, Inc. · NYSE:CRL
Charles River Laboratories International — J.P. Morgan 31st Annual Healthcare Conference (January 2013)
31 slides from Charles River Laboratories International's conference presentation, Jan 8, 2013
Slide 1: J.P. Morgan 31st Annual Healthcare Conference
J.P. Morgan 31(st) Annual Healthcare Conference January 8, 2013 James C. Foster Chairman, President and CEO Thomas F. Ackerman Executive Vice President and CFO [C] 2013 Charles River Laboratories International, Inc.
Slide 2: Safe Harbor Statement
Safe Harbor Statement Caution Concerning Forward-Looking Statements. This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "anticipate," "believe," "ex
Slide 3: Charles River Snapshot
Charles River Snapshot [] A leading in vivo biology company * $1.14B in net sales(1) [] Unique portfolio of products and services focused on the research and development continuum for new drugs [] A multinational company with ~7,500 employees worldwide * ~64 facilities in 15 countries Client Base(1)
Slide 4: Our Role in Drug Development
Our Role in Drug Development Only CRO with a portfolio that spans the early-stage development platform from research models through preclinical development IND NDA Ability to work with clients at the earliest stages when critical decisions are made, and move downstream with them through preclinical
Slide 5: Our Leading Early-Stage Portfolio
Our Leading Early-Stage Portfolio Non-GLP/ Discovery 9% Leading global franchises in research models and preclinical services 5 Sales percentages are based on CRL FY 2011 net sales.
Slide 6: A Leading Global Franchise: Research Models and Services
A Leading Global Franchise: Research Models and Services [] Global leader in breeding and distribution of research models * Largest selection of the most widely used strains in the world * 1 of every 2 models sold anywhere in the world comes from Charles River [] Strategically located in close proxi
Slide 7: A Leading Global Franchise: Research Models and Services
A Leading Global Franchise: Research Models and Services [] Premier provider of services which support the use of research models in discovery / development of new molecules * Services represent ~31% of RMS revenues (FY2011) [] Genetically Engineered Models and Services (GEMS ) * Contract breeding a
Slide 8: Discovery Services
Discovery Services [] Combining our discovery, research models and regulated safety assessment expertise enables us to offer clients an early-stage value proposition that no other CRO can match * Enables clients to reduce multiple suppliers, in favor of a strategic research partner who can offer an
Slide 9: A Leading Global Franchise: Preclinical Services
A Leading Global Franchise: Preclinical Services [] A global leader in regulated safety assessment services [] Providing clients with expertise for integrated drug development * Non-GLP efficacy studies * Safety studies including general and specialty toxicology [] Inhalation, infusion, developmenta
Slide 10: A Leading Global Franchise: Preclinical Services
A Leading Global Franchise: Preclinical Services [] Our Biopharmaceutical Services (BPS) business is a global leader in safety testing and manufacturing support for large molecules [] Global platform supports clients in both North America and Europe [] Biotechs are primary developers of large molecu
Slide 11: Endotoxin and Microbial Detection
Endotoxin and Microbial Detection [] The only FDA-approved in vitro non-clinical endotoxin test * Used for lot release testing and in-process quality measurement [] Strategy is to enhance our position as the premier provider of rapid microbial identification and endotoxin detection products and serv
Slide 12: Key Competitive Advantages
Key Competitive Advantages [] Scientific expertise * Broad portfolio of early-stage products and services * Continued investment in our capabilities to maintain and enhance our leadership in in vivo biology * ~400 science professionals with advanced scientific degrees * Consistent positive feedback
Slide 13: Key Competitive Advantages, cont.
Key Competitive Advantages, cont. [] Flexibility * Every client -- whether global biopharma, mid-tier biotech, academic or government institution -- has individual requirements which need to be addressed [] Believe flexibility was a critical decision factor that resulted in leading global pharmas ch
Slide 14: Changing Biopharma Industry
Changing Biopharma Industry [] Due to patent cliff, biopharma companies are trying to create a more efficient drug development model [] Manifested in numerous changes * Rationalization of therapeutic areas * Elimination of molecules earlier in the process * Closure of capacity and headcount reductio
Slide 15: Inflection Point for Strategic Partnerships
Inflection Point for Strategic Partnerships [] We have no doubt that we are at an inflection point with regard to outsourcing by large biopharma companies * Discussions concerning additional strategic partnerships are ongoing [] This is a moment in time when we can take significant market share and
Slide 16: Strategic Relationship Dynamics
Strategic Relationship Dynamics [] We have expanded relationships with the majority of our large biopharma clients * Strategic partnerships; enterprise agreements; preferred provider relationships [] These structured relationships incentivize large clients to purchase more across our entire early-st
Slide 17: Mid-Tier Biopharma Clients
Mid-Tier Biopharma Clients [] Mid-tier presents a significant opportunity to drive sales growth [] Most of the mid-tier biopharma companies maintain limited in-house capabilities [] Many of these clients outsource to a single provider, so our value proposition is equally compelling for them as it is
Slide 18: Academic/Government Clients
Academic/Government Clients [] Academic and Government clients expected to be an important contributor to growth in 2013 [] A considerable portion of sales to these clients is based on long-term contracts, which mitigates the effect of funding constraints * Models are also low-cost tools which repre
Slide 19: 2013 Guidance
2013 Guidance(1) (from Continuing Operations) Net sales growth, constant currency 3%-5% Vital River ~1% Net sales including Vital River (CC) 4%-6% GAAP EPS $2.45-$2.55 Non-GAAP EPS $2.80-2.90 Free Cash Flow $165-$175M Capital Expenditures ~$50M [] PCS sales growth expected to be slightly higher than
Slide 20: 2013 Operating Margin Outlook
2013 Operating Margin Outlook [] Expect 2013 non-GAAP operating margin to be similar to the anticipated 2012 level [] 2013 operating margin drivers Price, Volume and Mix + + Profit Improvement Program savings + + -- Expect ~$20M in incremental cost savings in 2013 Annual cost increases [] [] [] - Me
Slide 21: Growth Drivers - Organic
Growth Drivers - Organic [] Key organic growth drivers: * Strategic Partnerships: Flexibly utilizing our unique portfolio to support the individual needs of large biopharmas * Discovery Research Services (DRS): Large-scale in vivo outsourcing capabilities in multiple therapeutic areas * Endotoxin an
Slide 22: Growth Drivers - Acquisitions
Growth Drivers - Acquisitions [] Intend to supplement organic growth with selective acquisitions to expand our business in several areas, including: * Upstream as clients seek to outsource earlier stages of their R and D programs * Expand the capabilities or technological expertise of our current gr
Slide 23: Accugenix Acquisition
Accugenix Acquisition [] Acquired the premier global provider of cGMP-compliant contract microbial identification testing for $17M in cash * In 2013, expected to add ~1% to net sales and be slightly accretive to both GAAP and non-GAAP EPS [] Strengthens the EMD portfolio of products and services wit
Slide 24: Vital River Acquisition
Vital River Acquisition [] Acquired a majority ownership (75%) of Vital River, one of the largest commercial providers of research models and related services in China for ~$27M in cash * In 2013, expected to add more than 1% to net sales and be slightly accretive to both GAAP and non-GAAP EPS [] Es
Slide 25: Building for the Future
Building for the Future [] Internal goals: * Enhance our in vivo biology portfolio to provide the broadest support throughout our clients' early-stage drug development process * Acquire select assets that either expand the products or services we can offer our clients, or give us a footprint in new
Slide 26: Building for the Future, cont.
Building for the Future, cont. [] External goals: * Focus on gaining market share by offering scientific excellence in innovative and flexible arrangements that meet each client's specific needs * Listen to our clients and forge stronger relationships as a partner, trusted for science, efficiency an
Slide 27: Appendix
Appendix —— 27 charles river
Slide 28: Reconciliation of Sales Guidance
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF SALES GUIDANCE (from Continuing Operations) Fiscal Year Ended December 28, 2013E Net sales growth, reported 2.5% - 4.5% Impact of foreign exchange Approx. 0.5% Net sales growth, constant currency (before Vital River acquisition) 3.0% -
Slide 29: Reconciliation of GAAP to Non-GAAP EPS
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP EARNINGS PER SHARE (EPS) Guidance for the Twelve Months Ended December 28, 2013E 2013E Guidance GAAP EPS Estimate $2.45 - $2.55 Add back: Amortization of intangible assets $0.21 Operating losses(1) $0.04 Convertible de
Slide 30: Reconciliation of Free Cash Flow
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF FREE CASH FLOW (NON-GAAP) (dollars in thousands, except per share amounts) Fiscal Year Ended December 28, 2013E Net cash provided by operating activities $215,000 - $225,000 Less: Capital expenditures ~(50,000 Free cash flow $165,000-$
Slide 31: Accelerating Drug Development Exactly.
Accelerating Drug Development Exactly. [C] 2013 Charles River Laboratories International, Inc.