Ladies and gentlemen, thank you for standing by, and welcome to the Charles River Laboratories Fourth Quarter and Full Year 2022 Earnings Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to our host, Todd Spencer, Vice President of Investor Relations. Please go ahead, sir.

Thank you, and good morning, and welcome to Charles River Laboratories fourth quarter and full year 2022 earnings and 2023 guidance conference call and webcast. This morning, I am joined by Jim Foster, Chairman, President and Chief Executive Officer; and Flavia Pease, Executive Vice President and Chief Financial Officer. They will comment on our results for the fourth quarter of 2022 as well as our financial guidance for 2023. Following the presentation, they will respond to questions. There is a slide presentation associated with today’s remarks, which will be posted on the Investor Relations section of our website at ir.criver.com. A webcast replay of this call will be available beginning approximately two hours after the call today and can be also accessed on our Investor Relations website. The replay will be available through the next quarter’s conference call. I’d like to remind you of our Safe Harbor. All remarks that we make about future expectations, plans and prospects for the company constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated. During this call, we will primarily discuss non-GAAP financial measures, which we believe help investors gain a meaningful understanding of the core operating results and guidance. The non-GAAP financial measures are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations on the Investor Relations section of our website. I will now turn the call over to Jim Foster.

Good morning. Before I speak about our strong fourth quarter results, I want to provide an update on the non-human primate or NHP supply situation. As many of you are aware, there has been an ongoing industry-wide investigation into NHP imports from Cambodia. On February 17, we received a subpoena from the U.S. Department of Justice related to an investigation into the Cambodian NHP supply chain. We have been informed this investigation related specifically to shipments of NHPs received by Charles River from our Cambodian supplier. We intend to fully cooperate with the U.S. government. Once the Department of Justice concludes its investigation, we believe it will find that any concerns with respect to Charles River are without merit. As we have stated before, we are committed to ensuring our operations are fully compliant with all U.S. and international laws and regulations. And we maintain risk-based supplier due diligence, audit and management practices to help ensure the quality of our supplier relationships and compliance of applicable laws, including the status of the NHPs we import. Based on ongoing investigations and a heightened focus on the Cambodia NHP supply chain, in recent months, we have voluntarily suspended planned future shipments of Cambodian NHPs until such time that we and the U.S. Fish and Wildlife Service can develop and implement new procedures to reinforce confidence that the NHPs we import from Cambodia are purpose-bred. This will take time to implement and the duration of which is unknown. The investigation in current NHP supply situation will result in study delays in our Safety Assessment business. By way of background, NHPs are the most scientifically relevant large model for the regulatory required safety testing of biologics drugs as mandated by the FDA and other international regulatory agencies. Biologic drugs cannot be approved for commercial…

Thank you, Jim, and good morning. Before I begin, may I remind you that I’ll be speaking primarily to non-GAAP results, which exclude amortization and other acquisition-related adjustments, costs related primarily to our global efficiency initiatives, gains or losses from our venture capital and other strategic investments, a gain on the sale of the Avian Vaccine business and certain other items. Many of my comments will also refer to organic revenue growth, which excludes the impact of acquisitions, divestitures, foreign currency translation and the 53rd week in 2022. My discussion this morning will focus primarily on our financial guidance for 2023. We’re very pleased with our fourth quarter results, which included revenue and earnings per share that outperformed our previous guidance, including quarterly revenue exceeding the $1 billion level for the first time. Our 2023 guidance ranges reflect multiple scenarios with regards to the estimated impact from the NHP supply constraint, as Jim outlined, the impact of which is expected to result in reported revenue growth of 1.5% to 4.5% and organic revenue growth of 4.5% to 7.5% in 2023. Notwithstanding the NHP supply situation, our outlook reflects sustained underlying trends in most of our businesses and a resilient funding environment. We expect non-GAAP earnings per share between $9.70 and $10.90, reflecting meaningful headwinds associated with both NHP supply and non-operating items. I will not provide too many more comments on the NHP supply impact since Jim covered it. So, I’ll focus my comments on the other headwinds, which include the impact of the Avian Vaccine divestiture, a higher tax rate and increased interest expense. In combination, these non-operating headwinds will reduce earnings per share by approximately $1.20 to $1.40 for the year, partially offset by an FX benefit to earnings per share of up to $0.25 in 2023. These…

[Operator Instructions] And our first question will come from Derik De Bruin with Bank of America. Your line is open.

Hi, good morning. Thanks for taking my question. Jim, I’m just curious, what are your customers doing that – in the biotech space and elsewhere to – in terms of their studies? I mean, is – are other vendors having similar delays on some issues? Basically, are you at risk of losing business because other vendors have better access to some of the model systems?

Tough to comment on the competition, Derik. I guess my overarching comment would be, number one, we are a much wider scale. Number two, we have different supply sources and different capabilities. But I would say that with regard to Cambodia, where 60% of the animals come from, we are all at least temporarily foreclosed from bringing new animals in and utilizing them on studies in the United States. So you want to extrapolate this and say this is an industry issue, a relatively profound one because drugs aren’t going to move through preclinical and into the clinic. Biologics are not going to move unless they’re tested on large animals, and it’s has to be NHP. So we are – our focus now is to work with Fish and Wildlife to come up with a collaborative methodology that they’re in agreement with, and we can execute to show parentage, which is sort of the underlying issue here. It’s going to be some sort of laboratory assay that we’re developing, but we have to be able to do that quickly and cross a large population of animals. The – just to reset the table for you, the irony is that demand is really significant for us. I can’t comment on the competition, but I assume similarly. So demand is exceptional. We’re well staffed. Capacity’s in a good place. We actually have enough animal supply in terms of our relationships with the various suppliers that we have where we either own a piece or have a long-term contract. And we’ve hit this unanticipated speed bump with Fish and Wildlife. They’re saying that they’re concerned about parentage. So I don’t – I can’t guarantee anything. I don’t think this is a situation that we’ve been concerned about losing share. It’s a situation of…

Great. And that was sort of my next follow-up on this one is like how closely are FDA and Fish and Wildlife working together? I mean, do they clearly understand the importance of what this is? And is there – did you get any sort of suggest an all-in timing on when this would be resolved or what the milestone we need to see?

I mean, the timing is hard only because they’re pretty much consistent that we prove parentage. By the same token, Fish and Wildlife absolutely understand how these animals are used and the critical nature of them. I know that the various government agencies have been in conversation with one another on the outlook of the world through a different lens. But it’s going to be essential to move drug development forward for hundreds of clients and drugs that we have a resolution. So we’re off working on that. We’re off with an open dialogue with Fish and Wildlife about what exactly they need. And we have to explain to them that the reality of it’s going to take some time to get this up and running, but we’re well intentioned that we have deep science on our own. We’ll collaborate with some others to get this up and running. And we’ll provide these tests, which – yes, that’s the basis of this whole situation to prevent wild animals being used in biomedical research.

Thank you.

Sure.

Thank you. Our next question will come from Eric Coldwell with Baird. Your line is open.

Thanks very much. On the subpoena, are there any additional details you can provide on the timing of the receipt, what DOJ perhaps might think, they have come across that would drive this? And then can you confirm that the incremental margin on the rough $80 million to $160 million revenue headwind is about 50% to 60%? That’s what’s embedded in the guidance. And then third, could you talk about the supply expansion you’ve – to what extent you’ve been able to achieve supply expansion beyond Cambodia? Is there any additional detail you could – would be willing to provide on countries of origin, new suppliers, increases with existing non-Cambodian suppliers? Is there anything you can share to let us know what might be the ultimate outcome if, let’s say, worst-case scenario Cambodia doesn’t reopen?

Sure. Subpoena is relatively recent, Eric. And we’re a subject here, meaning that they want to get information from us. Just to back up, that another Cambodian supplier was invited in November. That’s not somebody that we work with. And so we take a couple of our competitors to work with, and that started the whole questioning and to prove for the methodology. And so they are now looking at all of the suppliers in Cambodia, one of whom we get our monkeys from. We were just there and audited that, I guess, I should say, without sort of weighing in on what the government thinks. So doesn’t think that we believe it’s a professionally run operation from a veterinary point of view, from a nutritional point of view, from a housing point of view, from a shipment point of view. And it’s a big farm. And they take our advice and counsel really well. So we feel that we have some end point and some auditing capability with them. We believe that as this DOJ investigation continues, we’re confident that they’ll conclude that any concerns they have with regard to Charles River are without merit. We don’t believe we did anything wrong. To the contrary, we always fully comply with U.S. and international laws. So we’ll work closely with them. We’ll be collaborative. We’ll be transparent. We will take the high road in terms of coming up with a solution that works for them, works for us and probably will work for other providers and competition, which is great. The supply thing is – I mean, it is what it is, Eric. It’s frustrating. We worked really hard over the last, I’d say, COVID years, so probably three years now, maybe four particularly after China closed out in 2018…

Thanks, Jim and good morning Eric. Yes, our EPS guidance obviously assumes different scenarios as we mentioned in our prepared remarks. Obviously, the revenue loss drops down at a fairly high rate initially. But I’ll prefer not to comment on the specifics.

All right. Thank you. Our next question will come from Sandy Draper with Guggenheim. Your line is open.

Hey Sandy, are you on mute? We can’t hear you.

Yes. Thanks, Todd. So just a quick follow-up on NHP and then my bigger questions on the CDMO business. But to make sure I understand it correctly, you’ve decided, Jim, to stop. But were you ordered to stop taking on primates from the supplier to this resolved? And basically is this – you’re waiting from signals from the Food and Wildlife or the FDA and so your hands are tied? Or once you think things are clear, you can make the call? So I just want to make sure I understand that. And then the bigger question is just on clearly encouraging signs on the CDMO in your guidance. Going back to the miss in 2022, is this just a function of time and that you’ve sort of gone through that 12 months of just rebuilding the pipeline that you had that sort of the air pocket? Or has demand actually gotten better? Thanks.

Yes. So on the Fish and Wildlife situation, so there was all sorts of contradictory and probably erroneous information about what Cambodia was doing after this first farm was invited back in November. So the initial ruling was that the Cambodian government just closed down exports, which was we don’t believe was ever true. So Cambodia is – from their end, is open for business. We’d like to shift the animals, we’ll provide the paperwork. The U.S. government is saying, you can’t bring them in yet. And the ones that you have in country, and we have some in country, you can’t use yet until we sort of work out and ensure that they are indeed purpose-bred. So no. So I don’t think it’s – I don’t think we can just do what we want. I mean, there’s always permitting. There are these site permits that one has to get and then they – when they – so canceled, you can go ahead and utilize the animal. So just your prevalence, I guess our hands are tied, but we’re trying to look at that positively that it’s within our control to get them untied. They’re just going to sort of wait for us to make a proposal on how we can prove they’re purpose-bred. So as I said, that’s like 100% of our focus right now in our control. And obviously, the faster we do it, the faster they will allow us to utilize the animals. CDMO business is an interesting one. As we’ve spoken to consistently for a while, now integration has been complicated. The science is quite complicated and new. And we really had to re-staff all three of the companies, the major companies that we bought from kind of top to bottom, senior management, sales, regulatory, et…

Thanks for the update, Jim.

Pleasure.

Thank you. Our next question will come from Elizabeth Anderson with Evercore. Your line is open.

Hi guys, thanks so much for the question. I was wondering if you could comment, it seems like you based on the guidance that you gave for the full year on NHPs that you probably have enough supply domestically to get you to this sort of fourth quarter at least between the Cambodia and non-Cambodian supply. So if that’s something you could comment on. And then secondarily, can you talk about the impact of potentially follow-on work after NHPs? It seems like maybe is that something that you guys have accounted for in the guidance? Or is that something that would maybe impact 2024 more than 2023? Thank you.

Yes. So we have some supply, for sure, Elizabeth. So we have – we do a lot of NHP work in the U.S., but we also do – I mentioned Europe that we have other suppliers for European operations. We have other suppliers for the U.S. We had monkeys in countries, some of which our hands are tied at the moment, but some of which our hands aren’t tied. And I don’t want to peel it back too finely, but I think that we have a sufficient supply for a while, and then it begins to wind a little bit. We’re just going to have to have conversations with our clients about their priorities and what they really need to be done quickly and try to match their priorities and the cadence of their drug development pipelines with availability of space and NHPs. So yes, to some extent, we’ll have sufficient supply. And to some extent, we won’t. And hopefully, as we’ve indicated in our prepared remarks today and in the numbers in our guidance that we’ll be off and running in the back half of the year. We’re continuing to take orders and book orders certainly into 2024. I don’t want to comment on what the impact is in 2024. We’re early in the first quarter of 2023 except to say that our hope would be to resolve this problem because we have sufficient supply if the U.S. Fish and Wildlife Service and the other regulatory agencies will let us use them so. And just given the importance of the work, we have to figure it out. We’re confident that they will listen. They understand the importance. We’re also confident they don’t have a lot of options. Very few of our clients have internal toxicology capacity. And even if they did, they can’t get the NHPs either. And we have perfectly capable competitors, but they have limited infrastructures, and they have limited access to NHPs as well. So just given our scale and prominence, we have to resolve it. And we’re hopeful that people will work with us and understand that we’re doing everything in good faith and want to come up with a scientific solution that satisfies everybody’s expectations and demands.

Thank you. Our next question will come from Jacob Johnson with Stephens. Your line is open.

Good morning. This is Mac on for Jacob. Just a quick one for me. Are there any areas of your business where the funding environment actually drives additional demand or outsourcing? I think CRADL is perhaps one of these areas?

Yes. CRADL for sure. CRADL’s – I don’t want to overstate it. I’d say it’s a relatively recession-proof business and kind of the pure-play outsourcing move for – we thought it was only going to be small companies. It’s a whole range of countries. It’s quite interesting, but for everyone at the moment who might not want to build de novo space, add on to the current space, just hold on to the capital and at least small amounts of space from us, use our people either in large measure or a small measure. I think that business is going really well. Look, our whole thesis – I mean the whole basis of the bargain with Charles River is that we can be your outsourcing partner. You use our people and our space as if they’re your own. We’ll invest in technology and capacity consistently. We’ll help you get your drug into the market or at least tell you that it shouldn’t get into the market because of high levels of toxicity or whatever, lack of efficacy. So I think that so much of what we do, all of the Research Model Services are pure outsourcing. All of our discovery and safety work is pure outsourcing. And so is the biologics work. And so – and everything that we’ve added through M&A over the last decade or even two decades has been about providing a large cohesive portfolio to – so somebody can literally give us a drug and say, please tell me, file my IND and get this thing to market. So obviously, it’s somewhat correlated to the availability of cash. I would say that our biotech clients, in particular, are very judicious and thoughtful about the way they spend money. So they tend not to move forward unless they think they have enough money to at least get their drug minimally into the clinic and actually to proof of concept. And we’re still hearing very little from our clients about concern about access to capital and how that would impair or slowdown both the demands from us and ability to spend. So yes, we think our – and if they have those concerns, and they’re just not articulating it, I think our portfolio is quite helpful for them. And yes, I would agree that CRADL is kind of the top of the list.

Thank you for taking my question.

Sure.

Thank you. Our next question will come from Patrick Donnelly with Citi. Your line is open.

Hey guys, thank you for taking the questions. Jim, can you maybe just talk through the timeline of how this all played out? I mean, obviously, you put out the 8-K, I think it was mid to late this November, sorry. And then December, there were mixed reports. Cambodia was shut down, then it wasn’t a few days later. And obviously, you guys got the subpoena just a few days ago. So can you just talk about when you guys started to realize, hey, this might be a real disruption, and this is going to shut down and just trying to get a sense in terms of how quickly you could prepare for this and just how it played out internally would be helpful. Thank you.

Sure. When the information came public about the indictment in November of a supplier in Cambodia that was the first time we know anything about – any concern about Cambodia. Just to remind you all this probably around the same percentage of our animals, our NHPs were coming from China up until that point. We had pretty wide scale supply agreements from China, and then the Chinese government closed those exports down in favor of keeping those monkeys in country. And we and our competitors pivoted to Cambodia, which has essentially the same type of animals or the same genetic background. So we knew that the research community would be fine with them. They also didn’t really have a choice. But it’s similar background. So we’ve been working hard to validate our supply sources by visiting them, by telling them what our kind of requirements were from an operational point of view. We’ve been quite pleased with them. We’ve been quite pleased with the quality of monkeys. As I said earlier, we had probably the best – not probably, we had the best year in the company’s history for our Safety Assessment business in fiscal 2022, really strong demand way out a year or 1.5 years and escalating price points and market share gains. And so we were feeling very good coming into this year as we were locking down our operating plan, and this came up literally out of the blue. And then as you say, I can’t put a finer point on it than what you said. All sorts of rumor is tough to verify. But Cambodia closed, no it’s not closed. Great, it’s not closed, but then we got U.S. government is we don’t care, but you can’t use them until you can determine and prove to…

That’s helpful. Thanks, Jim.

Sure.

Thank you. Our next question will come from Max Smock with William Blair. Your line is open.

Hi, thank you for taking our questions. Maybe one for me on the CDMO business. You mentioned a stronger sales funnel for this part of the company. And just wondering if there’s any more detail you can share around how the sales funnel has grown over the last couple of quarters here, and what you’re seeing in terms of the strength in the cell and gene therapy market more broadly? And then in terms of those potential opportunities that you’ve won so far, I guess, it would be helpful to hear really what has differentiated you or what you think differentiates you from some of your larger competitors in the space. Thank you.

Sure. The market is strong and has remained strong. There’s a plethora of cell and gene therapy drugs that had then quote discovered and need to be developed either to success or failure. So we’re going to be very, very busy. We’ve, as I said earlier, retooled the sales organization. So we’ve got people with great expertise in both cell and gene therapy to understand both the science and the processes for manufacturing and the time frame. As I said earlier, the time frame is longer than we had anticipated. So we’re really pleased with the way we’ve been signing up clients, large and small, the openness to share their anticipated plans with us to wheel what the market size they think the drugs might have. As I said earlier, we have several clients that are on the verge of commercialization. It doesn’t mean the drugs will get to market, but I’m just saying from a regulatory point of view are on the verge of having finished clinicals and will be filing and one that has moved into a commercial zone. So the sales funnel feels solid, consistent, persistent and pretty varied in terms of the scale of the companies. The market itself, the – it’s probably a number we should update, but we – when we quantified it last time, we said they were about 3,000 cell and gene therapy drugs in development, probably two-thirds of which were in the preclinical domain. And obviously, some meaningful portion of these we’ll get to work on. The differentiating factor for us and the reason we went into CDMO space having kind of fleet from a few years ago because it’s kind of a crowded space is that this is kind of an interesting niche. We have a couple of other very…

Thank you.

Sure.

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

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

Yes. Very smart and sophisticated question. Not an easy one to answer. I think that we all particularly given the complexity of NHP availability and by the way, it’s always been complex. It’s just more complex these days because of the sheer numbers. If there was an alternative species that was – yes. Let’s start with your pig question. You could produce them domestically, and they have litters as opposed to one offspring, and you could get significant numbers. The problem is – and by the way, we do a fair amount of swine work right now, mostly for dermatology and cardiovascular work. But it’s not a bad model. Several problems and several which is number one is there are not enough swine either. Number two is if you use sort of farm size one, that’s just too big. And by too big, I mean, at that stage, drug companies have made a very small amount of the drug, which is classic extraordinary amount. So they’d like to put it in small animals. So if you put it in mice or rats, that’s obviously a small amount of drug. And the monkeys that we use are quite small as well. And plus it’s years and years and years of data using NHP. So I would say that swine is theoretically a long-term solution, but you’d have to have lots of elevation work done by our clients, accepted by the FDA and then a massive breeding operation, which we would undertake that. It just – it’s not around the corner. The utilization of NHPs and a small animal model, usually a rat, is required by the FDA and comparable organizations around the world. So that’s unlikely to change. I think the essence of your question as well, that’s really interesting, but…

Thank you for that perspective. And if I could ask a quick follow-up, can you help me better understand the complexity of showing parentage for NHPs? Presumably, this isn’t just a 2023 Ames test. It’s more complicated than that, but I’d love to be able to better understand that.

Yes. It’s – I don’t think it’s all that complicated. You just – you’re proving genetics. And there are also sort of genetic assays that are available. The issue is actually more trivial. It’s just actual scale depending on how many of the animals they want tested. And how do you do that on a large enough scale quickly enough so it doesn’t impede the speed, the velocity of your business. So we’re hopeful. We’re speaking to a few organizations right now. We’re hopeful that we can enhance the technology to be able to do it faster. So that would be good for us, that would be good for our clients. And I think that’s – speed is an issue of the regulatory folks. They just want proof with it.

Appreciate that perspective. Thank you.

Sure.

Thank you. Our next question will come from Casey Woodring with JPMorgan. Your line is open.

Hi, thanks for taking my question. So just curious, is this your max impact from NHPs? Or do you think there’s more downside to that range for 2023? I guess, does that headwind include any pricing offset? Is there any way to go back to the table and renegotiate price for work that you maybe had booked last year pre-supply crunch year? And then just as a follow-up, how much of your existing supply will have run through in 2023? Does that downside case that you laid out assume you’d be entering 2024 with only 40% of your NHP supply available? Thank you.

Yes. So I’m going to stay away from 2024. Just – it’s too far away, and we don’t know how this year is going to unfold in terms of access to new animals. And so the supply will be – yes, it’s hard to call what it will be going to next year, which, of course, is more than 10 months away. We believe based upon everything we know today and based upon our conversations with the Fish and Wildlife and others that the guidance range that we have out and now accommodates for sort of close to the best case and close to the worst case. And so we’re pretty comfortable with that. So we like our shareholder base to just sort of get in that genre. The price points for work in kind of the back half of this year and definitely for 2024 continue to escalate. It might not be quite at the escalating point that we had last year to really cover our inflationary costs but meaningful prices. I don’t know. It feels unclear as to what we do from a pricing point of view to accommodate for this lack of demand. I think we need to be paid well for the complexity of the work we do and for the animals that we have. But we may have a small amount of pricing power only if the costs go up dramatically. But I wouldn’t think that we can make up much of this by significantly increasing the cost to our clients.

Thank you. Our next question will come from Tim Daley with Wells Fargo. Your line is open.

Great. Thanks. First, I wanted to ask on RMS. So within the RMS organic growth guidance for the year, are you assuming any divergence in product versus service above or below the segment average? And then secondly, a few quick yes, no for you, Jim, on DSA. Will you be providing intra-quarter updates to investors regarding developments in the NHP dynamics? Does your guidance assume any resumption of China NHP exports to the U.S.? And just a quick follow on to Dan’s first question on the FDA Modernization Act. Where you sit today, is there any meaningful mid- to long-term risk to the Safety Assessment addressable market due to synthetic models? Thank you.

Wow, four-part. So, I would say that the FDA Modernization Act is well intentioned and is pointing to alternatives to the extent that they are available and viable. And we would be the first company to own those technologies were they available and viable. I think that there’s very limited technologies right now. We try to invest in them when we see them. We bought one company in the last 25 years. It was clearly in vitro or non-animal based to replace an animal technology that the FDA required. It’s done quite well. But I remember when I made the decision to buy it many years ago, I assume by now there’d be 20 other technologies, and there simply aren’t. So while the FDA Modernization Act means well and it’s sort of pointing towards less animals, more sophisticated animal models, early or assays that are in vitro, I think some of that will happen. I think you’re going to see AI and machine learning and utilization data to decide how the trials used potentially more in the early discovery phase to give you an indication of – I don’t know whether the new drug is likely to work as well as an old one and minimally in toxicology. We hear every month – and I totally ignore it, by the way. We hear every month that China is opening up again for exports. I don’t know why we’re hearing it. I don’t know who’s saying it. I don’t believe it. So China is at odds with the U.S. and probably Europe right now. They have lots of animals that would potentially give them, I don’t know, but any edge, but at least access to more monkeys. It’s hard to imagine what the scenario might be that they would open up…

Great. Thanks. And sorry for the multi part there.

All right.

Thank you. Our next question will come from Dave Windley with Jefferies. Your line is open.

Hi good morning. Thanks for taking my questions. Jim, I wanted to ask one on kind of availability. You touched in one of the earlier answers about the test. I wondered if you could give us a framing as to whether you think this is a test that kind of the assay exists, but you need to repurpose it and validate it in your area? Or are you kind of starting from scratch? And then more broadly, in terms of kind of longer-term availability of NHPs. I wonder what consideration you have given to establishing domestic colonies and/or working with U.S. primate research facilities that I think are mostly used for NIH, but is there any opportunity to leverage those for access to primates?

Yes. The domestic colony question is a really good one, Dave. I can’t tell you how many times we’ve discussed it. And I think you know that we did it once. So, we set up a domestic colony in Southern Florida. It’s extraordinarily significant expense and had the bad luck of even though we have built hurricane proof of closures [ph] having a hurricane, which really grew in the bunch of the facility actually a bunch of monkeys got out. The – at the time this was a long time ago, Dave, it was – I remember the project was like cash flow negative for over a decade. It’s just a brutal drop. So you have two problems with it. One is it’s crazy expensive now. I think underlying your question was, could you go to the federal government and say, can you help us with this? It is a critical national resource. And they probably would. So that would take some of the financial sting out of it, but it still would take forever. We’re talking about what can we do between now and the end of this year. And it just would be forever. So it’s just – it’s not a practical approach. On the test, I think it’s both. The answer to your question is both. There are current tests that can be utilized but are set up not on a very large scale. So, we have to scale them up or find a partner to scale them up. So minimally we’ll do that. What we’re really hoping for, particularly with one or two of the collaborators that we began to talk to is that the quality of their science is so sophisticated that they can help us refine the test in a way that we can do more, have more throughput faster with better and unequivocal results. And obviously, you got our own labs. As you know, Dave, we have big labs all around the world in our facilities. So we have really good capacity and really capable people that would know how to do this work. We just would like to get ahead of it. So it’s kind of a work in progress literally as we speak. We’re working on. I’m confident that we will minimally have kind of something relatively new and not yet standard and potentially something better than even something that’s new that would be – care so much about the cost as speed and accuracy. So, we’re all over that, and we’ll update you folks on what our progress is. And if the relevance of the partners and we have an appropriate partner, if we think that’s meaningful to our shareholder base, we’ll share that with you as well.

That’s great. And if I could follow up on kind of the, I guess, the breadth of the effort. Do you see – I mean you mentioned the industry understand that. Certainly makes sense to kind of be collaborative to solve an industry problem. But for your purposes, are you needing to scale this up to kind of validate parentage with your primary supplier in Cambodia? Or is it kind of needs to apply to all of Cambodia and get the U.S. government comfortable with the whole thing as opposed to just KF in your case?

I mean, eventually, I think it’s good for the industry if you can even call what we do an industry and certainly for our clients, if you could – certainly they are an industry. I think it would be good if the whole Cambodian source, and there are a couple of really big players and then some smaller ones if they could use a similar methodology to show who are the moms and who are the offsprings. So if we’re successful, we won’t be selfish about it. I think the way we see the landscape right now, we’re unlikely to work with anybody besides our principal supplier because we just know them so well. We like the scale at which they were again, and they really take our advice and counsel really well. So, we are quite confident that work with us. And so maybe that will be the nice edge. We’ll start with our supplier. We’ll work with them. We’ll show Fish and Wildlife what we’ve accomplished. And then we can offer to share that. I don’t care. We can share that with our competition. We don’t have 100% share. So we just want the biopharmaceutical industry to be well resourced here and have access to companies that can do the work well for them. So – and I do think that the U.S. providers are quite – will be quite reliant on Cambodia for the foreseeable future, just given the genetic similarity between the Cambodian monkeys and the Chinese ones. And it’s much better for the research just sort of background data point of view. So that’s how we see it unfolding. It’s possible that our competition will do something similar. And maybe they get there first. I don’t even care. We’re not going to spend a lot of time, I think, working with them because we just have a different, I think, viewpoints and capabilities and scale and just the way we deal with suppliers and the government. So while we may talk to them and get each other’s support, I think we have to do this alone. And I think we have to do it quite quickly.

All right. Understood. And thanks for the perspective. Good luck with that.

Sure, Dave.

Thank you. Ladies and gentlemen, we have reached our allotted time for questions, and this does conclude today’s Charles River Laboratories Fourth Quarter and Full Year 2022 Earnings Call. Thank you for your participation, and you may now disconnect.